2nd Aug 2010 09:40
Greene King plc
Report and accounts and AGM circular
Two copies of the annual report and accounts for the year ended 2 May 2010 and of the circular convening the 2010 annual general meeting (AGM) have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:
The Financial Services Authority
25 North Colonnade
Canary Wharf
London E14 5HS
The report and accounts and the AGM circular will also be available on the company's website, www.greeneking.co.uk.
Lindsay Keswick
Company Secretary
2 August 2010
Information required by the Disclosure and Transparency Rule 6.3.5
The principal purpose of this announcement is to notify the submission by the company to the UK Listing Authority of copies of the report and accounts and of the AGM circular. However, the information set out below, which is extracted from the report and accounts, is also included in the announcement for the sole purpose of complying with Disclosure and Transparency Rule 6.3.5 and the requirements it imposes on issues as to how to make annual financial reports public. It should be read in conjunction with the company's preliminary results announcement released on 1 July 2010. This material is not a substitute for reading the full report and accounts. Page numbers and cross- references in the extracted information below refer to page numbers and cross-references in the report and accounts.
Responsibility statement
The following statement is extracted from page 74 of the report and accounts and is not connected to the extracted information presented in this announcement or in the preliminary results announcement.
"Statement of directors' responsibilities in respects of the group financial statements
The directors are responsible for preparing the annual report and the group financial statements, in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union (EU).
Under company law the directors must not approve the group financial statements unless they are satisfied that they present fairly the financial position, the financial performance and cash flows of the group for that period. In preparing those group financial statements the directors are required to:
§ select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
§ present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
§ provide additional disclosures when compliance with the specific requirements in IFRS's is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the group's financial position and financial performance;
§ state that the group has complied with IFRS's, subject to any material departures disclosed and explained in the financial statements; and
§ make judgments and estimates that are reasonable and prudent.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's transactions and disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that the group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of directors' responsibilities in respects of the parent company financial statements
The directors are responsible for preparing the directors' report and the financial statements, in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing those financial statements, the directors are required to:
§ select suitable accounting policies and then apply them consistently;
§ make judgments and estimates that are reasonable and prudent;
§ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
§ prepare the financial statements on the going concern basis unless it is appropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities."
The names of the directors who have given these statements are:
Rooney Anand (chief executive)
Tim Bridge (chairman)
John Brady
Ian Bull
Ian Durant
Norman Murray
Jane Scriven
Principal risks and uncertainties
The following description of the principal risks and uncertainties is extracted from page 18 of the report and accounts.
Greene King is exposed to a variety of economic, regulatory, operational and financial risks and uncertainties. Formal risk management processes are in place to identify and evaluate such risks, whether they are internal or external. The processes take into account the likelihood of their occurrence, the scale of their potential impact on the business and the impact of planned risk mitigation actions, so that risks can be ranked and actions suitably prioritised. Given that some risks are external and not fully within our control, the risk management processes are designed to manage risks which may have a material impact on our business, rather than to fully mitigate all risks.
Each business unit or function area regularly reviews the risks it faces and considers the extent of mitigation plans already in place. Where new risks or gaps in mitigation plans are identified, action plans are drawn up, with costings where appropriate, to ensure that the risks are appropriately managed. The senior management teams of each business unit monitor the progress of these risk implementation plans on a regular basis. A company-wide risk committee reviews in detail and monitors those risk mitigation plans, ensuring that plans work across the group as well as the sharing of best practice.
At executive level, each of the risks has an identified owner to ensure senior management accountability for risk mitigation measures. Each business unit managing director is required to present a report to the audit committee once a year on the risk management processes for which he is responsible. The audit committee also reviews the company's top risks, as set out on the group's risk register, on an annual basis, prior to their submission to the board, which retains ultimate responsibility for the company's risk management framework.
The paragraphs below highlight some of the key risks and uncertainties which affect Greene King but are not intended to be an exhaustive analysis of all risks facing the business.
Economic risks
Risks
The impact of the recession since 2009 and the continuing economic uncertainty and consequential impact on consumer expenditure have the potential to affect our business. Significant cuts in public spending have already been announced and the increase in VAT announced in the budget will have an impact on levels of consumer discretionary spend. Further changes to the inflation and cost environment will remain an ongoing risk to the business. Our licensees are also affected by the current economic climate, leading to the risk of more tenant defaults and business failures.
Property values are also impacted by the economic uncertainty, and with it our ability to continue to make disposals at appropriate values.
Mitigation processes
The board and the senior management team regularly review the impact of the economic conditions on the group's budget and strategic plans, to ensure that we maintain our competitive position in the market. By prioritising excellent quality, service, value for money and up-to-date product offers, we aim to broaden our appeal to customers. We try to foster mutually beneficial and long-term relationships with our suppliers whilst at the same time driving down costs in all areas. We constantly monitor the vital signs of our licensee health, and look to provide our licensees with additional operational and financial support wherever needed and appropriate.
We continue to regularly assess the long term value of each of our sites and make decisions on a site by site basis around further improvements, operational focus for poorer performing sites, appropriate impairments where necessary and the active marketing of sites that no longer have long-term value for Greene King.
We have a diversified business encompassing pubs, restaurants, brewing and drinks distribution, as well as a broad geographic spread.
Regulatory risks
Risks
The last few years have seen an increased focus on alcohol consumption, in regard to both its impact on the health of drinkers and law and order issues. There is a risk of further legislation in these areas which may adversely impact our business.
We also have to deal with increasing regulatory requirements and the costs that these bring with them across many parts of our business. We strive to comply with legislative requirements in areas such as licensing and health & safety, any or all of which may adversely affect our business or cause harm to employees, customers or our licensees if not attended to.
Notwithstanding that the European Union has renewed the block exemption with regard to the beer tie for a further ten years, uncertainty remains as to the UK government's intentions in this regard, following the pronouncements of the previous UK government and of the Business Innovation and Skills Committee during the early part of 2010.
Mitigation processes
Our strategy continues to address the need to diversify our business, with increasing emphasis on food within our pubs. We are committed to acting as a responsible retailer and are actively engaging with government to ensure that it recognises our belief that the safest and most responsible place to consume alcohol is in well-managed licensed on-trade premises.
We have a range of policies and procedures in place, including training, improved reporting and regular monitoring, to ensure compliance with existing regulatory requirements, including in relation to health & safety, fire safety and food safety. We offer training and support to our licensees in many of these areas. We work closely with licensing authorities across the country to ensure licensing requirements are dealt with whenever appropriate.
We remain committed to the tied pub model and firmly believe that abolition of the tie would lead to accelerated pub closures due to the higher costs of entry and ongoing overheads for licensees. Whilst we are working hard to improve transparency in relations with our tenants we also intend to engage with the new government to ensure the benefits of the tied model are fully appreciated by it.
Supply chain risks
Risks
Alongside the production and distribution of our own beers, we work with a number of key suppliers (particularly in relation to food, lager and wines, spirits and minerals) and third party distributors to supply our pubs and restaurants. There is therefore a risk of interruption of supply and of failure of such key suppliers or distributors.
Mitigation processes
We have detailed risk mitigation and risk management plans in our internal production and distribution activities, and are always looking to improve and learn from other best-in-class operators. We have an on-going programme of testing our disaster-recovery systems relating to our own brewing and distribution operations.
We work closely with our third-party suppliers, producers and supply chain partners to ensure that our relationships with them are positive and constructive at all times. We regularly review the financial position of our major suppliers to assess the risk of them ceasing to be able to trade and with the help of external consultants we monitor the financial stability of those we regard as of highest risk. As well as reviewing the disaster recovery plans of key suppliers, we also continuously review our own back-up plans which are designed to ensure that we can cope in the event of the failure by or loss of a key supplier.
Reputational risks
Risks
We are a consumer facing business with some well known national brands. Our reputation could be damaged by a failure to properly execute our branded models, litigation, regulatory intervention, major health and safety failures or poor handling of customer complaints. This in turn could lead to a loss of trade and a reduction in our perceived valuation by key stakeholders.
Mitigation processes
We endeavour to maintain tight controls to protect and enhance our reputation and brand values. We focus constantly on consistency and quality, with staff training, targeted investment programmes and mystery guest visits all designed to help maintain standards, and have systems in place to escalate and respond to relevant incidents. Our health and safety policies and procedures are explained above.
Financial and systems control risks
Risks
It is vital to the business that we continue to meet our financial covenants and to ensure that there is sufficient short term financing to meet our business needs. We are exposed to interest rate risk on the variable and floating rate components of our financing.
We are also reliant on maintaining sound systems of internal control and on our information systems and technology to ensure the smooth operation of our business without risk of fraud or material error.
Mitigation processes
We constantly monitor our performance against our financial covenants and undertake detailed stress-testing of our performance against those covenants on a regular basis. Working capital is closely managed and carefully forecast. At the year end 100% of our securitised floating rate debt was hedged through the use of derivative financial instruments, more details of which can be found in note 23 to the financial statements.
We have during the last two years devoted considerable resources to the introduction of a new single platform financial accounting system which has unified the systems, processes and organisation of our finance teams, thereby enhancing our systems of internal control. A business continuity plan is in place to regularly review our critical business processes and ensure that we can continue to operate in the event of a major incident affecting our systems or technology.
People risks
Risks
We recognise the importance across all our managed and tenanted pubs, our brewing operations and our head office of attracting, retaining, developing and motivating the best people to help take our business forward and to ensure that we can deliver our operational and strategic objectives.
Mitigation processes
We aim for an environment where we can recruit the best people and then through training, development and progression ensure that we retain them. Our licensee recruitment and training programmes, and the variety of rental agreements on offer, are designed to attract and retain the best quality licensees.
Related party transactions
The following description of related party transactions is extracted from page 63 of the report and accounts.
"30 Related party disclosures
No transactions have been entered into with related parties during the period.
Greene King Finance plc is a special purpose entity set up to raise bond finance for the group, and as such is deemed a related party. The results of this entity have been consolidated.
Compensation of directors and other key management personnel of the group
|
|
2010 £m |
2009 £m |
|
Short term employee benefits (including National Insurance contributions) Post - employment pension and medical benefits Share based payments |
4.4 0.5 0.6 |
3.7 0.4 0.1 |
|
Amount of exceptional credit relating to key management share based payment schemes (note 5) |
5.5
- |
4.2
(1.3) |
|
|
5.5 |
2.9 |
Directors' interests in an employee share incentive plan
Details of the options held by executive members of the board of directors are included in the remuneration report. No options have been granted to the non-executive members of the board under this scheme."
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