REG-FirstGroup PLC: Annual Report 2016 and Notice of AGM <Origin Href="QuoteRef">FGP.L</Origin> - Part 1
20/06/2016 16:45
FIRSTGROUP PLC (the ‘Company’) 2016 ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING In compliance with Listing Rule 9.6.1, the Company has today submitted a copy of the following documents to the UK Listing Authority, which will shortly be available for inspection via the National Storage Mechanism which can be viewed at www.hemscott.com/nsm.do : * 2016 Annual Report and Financial Statements; and * The Notice of Annual General Meeting of the Company which will be held at Norwood Hall Hotel, Garthdee Road, Aberdeen AB15 9FX at 1.30pm on Tuesday 19 July 2016. In accordance with DTR 6.3.5(3) the 2016 Annual Report and Financial Statements and the Notice of Meeting will also be available to view on the Company website: www.firstgroupplc.com . A condensed set of FirstGroup plc financial statements and information on important events that have occurred during the year and their impact on the financial statements were included in the Company's preliminary announcement on 14 June 2016. That information together with the information set out below which is extracted from the 2016 Annual Report and Financial Statements constitute the requirements of DTR 6.3.5 which is to be communicated via an RIS in unedited full text. This announcement is not a substitute for reading the full 2016 Annual Report and Financial Statements. Page and note references in the text below refer to page numbers in the 2016 Annual Report and Financial Statements. To view the preliminary announcement, visit the Company website: firstgroupplc.com. STATEMENT OF DIRECTORS' RESPONSIBILITIES The following responsibility statement is extracted from the Statement of Directors' responsibilities in respect of the annual report and financial statements on page 104 of the 2016 Annual Report and Financial Statements and is repeated here solely for the purpose of complying with DTR 6.3.5. The statement relates to the full 2016 Annual Report and Financial Statements and not the extracted information presented in this announcement or the Final Results announcement. The Directors are responsible for preparing the Annual Report and the Group and parent company 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 are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have chosen to prepare the parent company financial statements in accordance with applicable UK Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101) 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 the parent company financial statements, the Directors are required to: * select suitable accounting policies and then apply them consistently; * make judgements and accounting estimates that are reasonable and prudent; * state whether applicable UK Accounting Standards, including FRS 101, 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 inappropriate to presume that the Company will continue in business. In preparing the Group financial statements, International Accounting Standard 1 requires that Directors: * properly select and apply accounting policies; * 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 IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and * make an assessment of the Company’s ability to continue as a going concern. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the 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, and have adopted a control framework across the Group. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement Each Director confirms to the best of his or her knowledge that: * the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; * the Strategic report and Governance section include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and * the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s and the Group’s position and performance, business model and strategy. The Strategic report comprising pages 2 to 46 and the Governance section comprising pages 48 to 104, and including the sections of the Annual Report and Accounts referred to in these pages, have been approved by the Board and signed on its behalf by: Robert Welch Company Secretary PRINCIPAL RISKS AND UNCERTAINTIES The risks set out below are extracted from the pages 37 to 40 of the 2016 Annual Report and Financial Statements and are repeated here solely for the purpose of complying with DTR 6.3.5. These risks have been assessed taking into account their potential impact (both financial and reputational), the likelihood of occurrence and any change to this compared to the prior year and the residual risk after the implementation of controls. Further information on our risk management processes is contained in the Corporate governance report on pages 50, 51, 58, 59, 65 and 66. Risk and potential impact Mitigation Comment and movement during the year Economic conditions Changing economic conditions affect our different businesses in different ways. A less positive economic outlook could have a negative impact on our To an extent, our First Bus and Greyhound operating companies are able to modify services to react to economic impacts. All of our businesses focus on controlling costs to ensure they remain competitive. Continued low oil prices have adversely affected our Greyhound business. A vote to exit the EU in the UK referendum on 23 June 2016 may adversely impact the UK’s economic position which in turn may have an adverse impact on the Group’s UK operations. businesses in terms of reduced demand and reduced opportunities for growth or to retain or secure new business. Our First Rail businesses are particularly sensitive to movements in key economic indicators. The same factors could also affect our key suppliers. An improving economic climate, particularly when combined with lower fuel prices, may result in reduced demand for public transportation in our Greyhound and First Bus businesses as alternative modes of transport become relatively more affordable. Lower oil prices can also lead to reduced oil activity in the Canadian oil sands region which may affect demand for First Transit services in this region. Improving economic conditions may also result in a tightening of labour markets resulting in employee shortages, pressure to increase pay, or affect the availability of public funding for transport services. Political and regulatory The political landscape within which the Group operates is constantly changing. Changes to government policy, funding regimes, or the legal and The Group has dedicated legal teams in the UK and North America who advise on emerging issues. The Group actively engages with the relevant government and transport bodies and policy makers to help ensure that we are properly positioned to respond to any proposed changes. Our continued focus on service quality and delivery helps to mitigate calls for structural market change. The UK Government has recently published a Bus Services Bill which includes devolved powers to regulate bus services in local areas, subject to certain tests being met. regulatory framework may result in structural market changes or impact the Group’s operations in terms of reduced profitability, increased costs and/or a reduction in operational flexibility or efficiency. Contract businesses including rail franchising The Group’s First Student, First Transit and First Rail divisions are contract businesses dependent on the ability to The relevant divisions have experienced and dedicated bid teams who undertake careful economic modelling of contract bids and, where possible, seek to negotiate risk sharing arrangements with the relevant customer or contracting authority. The Group also has a comprehensive review process for rail bids as they are developed and finalised involving a number of divisional and Group functions as well as final Board sign off. Compliance with our rail franchise agreements is closely managed and monitored on a monthly basis by senior management and procedures are in place to minimise the risk of non?compliance. No material change during the year. renew and secure new contract wins on profitable terms. Failure to do so would result in reduced revenue and profitability and incorrect modelling or bid assumptions could lead to greater than anticipated costs or losses. Failure to comply with contract terms could result in termination, litigation and financial penalties and failure to win new contracts or non-renewal of existing contracts. Competition for new rail franchises is intense. We bid against rail operators from both the UK and other countries, principally from within the European Union (EU). Failure to win franchises in the future will result in a lower First Rail division contribution and profitability. The new GWR and TPE franchises cover a period during which there will be significant change including major infrastructure work, electrification and resignalling as well as the introduction of new trains, which require careful planning and management. Failure to manage these risks adequately in accordance with our plans could result in financial and reputational risk to the Group. Competition and emerging technologies All of the Group’s businesses (both contract and non-contract) compete in the areas of pricing and service and face competition The Group continues to focus on service quality and delivery as priorities in making our services attractive to passengers and other customers, across our portfolio of businesses. In the UK, we have established a dedicated cross-divisional Retail Services Committee focused on improving our service to customers and improving access to our services. In our contract businesses, a competitive bidding strategy and a strong bidding team are key. In addition, wherever possible, the Group works with local and national bodies to promote measures aimed at increasing demand for public transport and the other services that we offer. No material change during the year. from a number of sources. Our main competitors include the private car and existing and new public and private transport operators across all our markets. Emerging technologies such as Uber, ride sharing apps and price comparison websites make access to alternative transport solutions easier. Increased competition could result in lost business, reduced revenue and reduced profitability. Information technology The Group relies on information technology (IT) in all aspects of our businesses. Any significant disruption or failure, caused by external As a result of the continuing threat of cyber attacks, our operations are implementing new threat detection systems. The Group has also increased its focus on asset management and further enhanced its IT security processes and procedures during the year. The Group has further strengthened its IT project management capability during the year, particularly within Greyhound. Web and mobile sales channels remain of increasing importance across many of our businesses. Cyber security remains a growing risk. factors, denial of service, computer viruses or human error could result in a service interruption, accident or misappropriation of confidential information (including credit card and personal data). Process failure, security breach or other operational difficulties may also lead to revenue loss or increased costs, fines, penalties or additional insurance requirements. Prolonged failure of our sales websites could also adversely affect revenues. Continued successful delivery and implementation of the Greyhound IT transformation plan is required to improve yield management and drive future growth. Failure to manage properly the implementation of new IT systems may result in increased costs and/or lost revenue. Treasury and credit rating As set out in further detail in note 24 to the financial statements on pages 133 to 136, treasury risks include liquidity risks, risks arising The Group’s Treasury Committee manages treasury policy, and delegated authorities are reviewed periodically to ensure compliance with best practice and to control and monitor these risks appropriately. The Group is continuously focused on improving operating and financial performance as part of our strategic objectives as outlined on page 31. No change in the year. from changes to foreign exchange and interest rates and fuel price risk. Foreign currency and interest rate movements may impact the profits, balance sheet and cash flows of the Group. Ineffective hedging arrangements may not fully mitigate losses or may increase them. The Group is credit rated by Standard & Poor’s and Fitch. A downgrade in the Group’s credit ratings to below investment grade may lead to increased financing costs and other consequences and affect the Group’s ability to invest in its operations. Pension scheme funding The Group sponsors or participates in a number of significant defined benefit pension schemes, primarily in the UK. Future cash contribution Diversification of investments, hedging of liabilities, amendment of the defined benefit promises and the introduction of defined contribution benefits for new starters in First Bus, Group, and our Canadian businesses, has reduced these risks. The Group also seeks to remove liabilities from the balance sheet where it can be achieved cost effectively. Under the First Rail franchise arrangements, the Group’s train operating companies are not responsible for any residual deficit at the end of a franchise so there is only short term cash flow risk within a particular franchise. No material change during the year. requirements may increase or decrease based upon financial markets, notably investment returns and valuations, the rates used to value the liabilities and through changes to life expectancy and could result in material changes in the accounting cost and cash contributions required. Compliance, litigation and claims, health and safety The Group’s operations are subject to a wide range of legislation and regulation. Failure to comply can lead to Compliance with Group and divisional policies and procedures. The Group has a very strong focus on safety and it is one of our five values. The Group self-insures third party and employee injury claims up to a certain level commensurate with the historical risk profile. We purchase insurance above these limits from reputable global insurance firms. Claims are managed by experienced claims handlers. Non-insured claims are managed by the Group’s dedicated in-house legal teams with external assistance as appropriate. The claims environment, particularly in our North American businesses, remains a challenge. litigation, claims, damages, fines and penalties. The Group has three main insurable risks: third party injury and other claims arising from vehicle and general operations, employee injuries and property damage. The Group is also subject to other litigation, which is not insured, particularly in North America, including contractual claims and those relating to employee wage and hour and meal and break matters. A higher volume of litigation and claims can lead to increased costs, reduced availability of insurance cover, and/or reputational impact. A large single claim or a large number of smaller claims may negatively affect profitability and cash flow. Labour costs, employee relations, recruitment and retention Employee costs represent the largest component of the Group’s operating costs, and political or trade union The Group seeks to mitigate these risks via its recruitment and retention policies, training schemes and working practices. An applicant tracking system has been introduced into First Bus and our North American divisions to streamline the recruitment process and assist in providing a suitable pool of drivers to help manage any shortages in an efficient and cost-effective way. Our working practices include building communication and engagement with trade unions and the wider workforce. Examples of this engagement include regular leadership conferences, employee surveys and the presence of Employee Directors (Directors voted for by employees to represent them) on many of the Group’s UK divisional - More to follow, for following part double click ID:nPRrK84E2b
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