REG - QinetiQ Group plc - Annual Financial Report
13/06/2022 12:30
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RNS Number : 6725O QinetiQ Group plc 13 June 2022
QINETIQ GROUP PLC
13 June 2022
Availability of Annual Report and Accounts 2022 and Notice of 2022 Annual
General Meeting
QinetiQ Group plc (the 'Company') has today published the following documents:
· QinetiQ 2022 Annual Report and Accounts;
· Notice of 2022 Annual General Meeting;
· Letter from the Group Chair to Shareholders; and
· Form of Proxy
The documents are available to view or download from the Company's website at
www.qinetiq.com/investors (http://www.qinetiq.com/investors) .
In compliance with Listing Rule 9.6.1, copies of the above documents have been
submitted to the National Storage Mechanism and will shortly be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
These documents are today being posted or otherwise made available to
shareholders.
The 2022 Annual General Meeting will be held at 11.00 am on Thursday 21 July
2022 at Ashurst LLP, London Fruit & Wool Exchange 1 Duval Square, London
E1 6PW.
In compliance with paragraph 6.3.5 of the Disclosure Guidance and Transparency
Rules, the information in respect of Principal Risks, Related Party
Transactions and the Directors' Responsibility Statement, contained in the
Appendix, is extracted from the Annual Report and Accounts and should be read
in conjunction with the Group's preliminary results announcement of 19 May
2022 (the 'Preliminary Results') which can be viewed on the Company's website
at www.qinetiq.com/investors (http://www.qinetiq.com/investors) . The
information in the Appendix and the Preliminary Results together constitute
the material required by DTR 6.3.5 to be communicated in unedited full text
through a Regulatory Information Service. This is not a substitute for
reading the full Annual Report and Accounts. Page and note references in the
Appendix refer to page numbers and notes in the 2022 Annual Report and
Accounts.
Enquiries:
Jon Messent - Company Secretary +44 (0) 1252 392000
John Haworth - Group Head of Investor Relations +44 (0) 7920 545841
Press Office +44 (0) 1252 393500
APPENDIX
RISK MANAGEMENT
Our approach to identifying and managing risks
How we protect our business
Effective management of current and emerging risks is critical to achieving
our strategic goals. Our Group Director of Risk and Governance has oversight
and responsibility for risk management across the organisation, providing risk
expertise and support to the businesses and reporting risk information to the
Global Leadership Team, the Board and its Audit and Risk and Security
Committees.
Risk processes cannot operate in isolation and, like safety and security, must
engender a supportive and robust culture to enable effective risk-based
decision making. Our Group-wide risk management framework supports and
develops a positive risk culture that spans the strategic to operational
levels; exploiting both a top-down and bottom-up approach. Our culture and
embedded risk management processes, combined, result in a stronger and more
resilient organisation in the face of challenges. Managing threats and
optimising opportunities to support the long-term success of our organisation
is an established part of the way we conduct business. Continual cycles of
review and improvement of our risk maturity keeps pace with a growing business
in a complex industry; to ensure we are best placed to deliver results, while
simultaneously innovating for our customers' advantage.
Principal risks
The Group Risk Register consists of material risks relating to both the
effective delivery of our strategy and those risks which may have a material
effect on our stakeholders, partners and environment. The Board and Global
Leadership Team assess these principal risks from a number of different
perspectives, both individually and collectively. The Board recognises that
some risks may be affected by factors outside the control of the company and
that despite the robustness of the risk management processes they cannot
provide absolute assurance and unknown risks may manifest without warning. We
have well established processes in place to rapidly deploy appropriate
management in these situations, and utilise lessons learned across the
organisation as part of our ongoing drive for continuous improvement.
Over the past 12 months, we have seen considerable movement in our principal
risks, including the addition of three new risks, which have gained in
materiality, and the decrease of three existing risks. The pandemic has been
the catalyst for fundamental changes in the way employees work, and the
subsequent "Great Resignation" phenomenon, driven by worker's dissatisfaction
with current working conditions and personal reassessments of career and
lifestyle due to the changes and hardships of the pandemic, is likely here to
stay. In light of this, we have escalated our people risk to the principal
risks. In addition, the step-change in the new requirements and evolving
context of our climate risk was met with a significant amount of work
throughout the year to assess and evaluate; resulting in it being moved from
the emerging risks to the principal risks, Finally, given the significant
growth ambitions of the QinetiQ Group, we must ensure that our delivery
organisation can match the increasing size and complexity of programmes we
undertake. Until our project and programme improvement initiative is
completed, the risk of our project management failing to keep pace with our
growth will be held as a principal risk.
There has been a reduction in the likelihood of our innovation risk following
a number of successful group-wide initiatives. Our UK growth risk has also
decreased in likelihood as a result of robust mitigation; including increased
collaboration across the Group, paving the way for international
opportunities, and the strong positioning of our abilities and offerings
following the UK Government Spending Reviews. The large contracts risk has
decreased, in part, because the Engineering Delivery Partner (EDP) contract is
now firmly established as the default route for contracted engineering
services for Defence, Equipment and Support (DE&S). In addition, recent
renegotiations of elements of the EDP programme has taken it to the next level
and builds on the success of the first three years.
Emerging risks
We define emerging risks as newly developing or changing risks, where the
extent and implications are not yet fully understood. These risks are
identified and managed using the same established risk management framework as
our principal risks and are included as part of our strategic planning process
to ensure we capitalise on the opportunity and minimise the downsides they
present. Where appropriate, we establish "Working Groups" to monitor and
scrutinise the potential impacts of the emerging risks and ensure relevant
mitigation actions are undertaken at pace. We also consider the wider impact
of emerging external risk; for example, where a risk creates challenges for
our customers it may create an opportunity where we have well-aligned
capability to further support them.
The enduring COVID-19 pandemic has continued to have limited impact on our
operations globally. Our sites and facilities have remained open and the
opportunity to maximise the potential of new ways of working is being
exploited through our transformation programme in order to re-invent our
workspaces to maximise performance and optimise spend whilst simultaneously
providing increased flexibility and productive ways of working for our
employees. We remain cognisant that the pandemic challenges have the potential
to cause future disruption and, therefore, we continue to monitor the
situation in readiness to respond effectively to ensure that our people are
safe and we continue to deliver excellence for our customers.
ESG issues continue to be a focus for our investors and other stakeholders,
and so we are ensuring we provide visibility on our programmes and plans,
including how we are managing the associated risks. We have a well-established
ESG strategy in place, underpinned by robust sponsorship from our Board and
the Global Leadership Team, to ensure we are identifying and managing the ESG
risks to our company, including compliance to legislative and reporting
requirements. The landscape continues to evolve and, through 2021, we saw a
number of topics emerge and develop. Key areas included the focus and outcomes
of COP26, the evolution of the management of COVID-19, Social Value and
Levelling Up (in the UK), new reporting requirements and Defence Ethics. We
carefully track the emerging ESG risks and, where necessary, build in
additional work-streams under the ESG Programme to ensure robust mitigation is
undertaken and opportunities are leveraged. To reflect the importance and
necessary focus of ESG in QinetiQ, our CR&S Director reports on the
programme directly to the Board.
Risk management and assurance activity
Three lines model
Our risk management and assurance activity follows the established Three Lines
Model with the first and second line reporting to Global Leadership Team and
Board, and the third line reporting to the relevant Board Committees. The
first line is performed by operational management, who own and manage the
risks in accordance with the Group Operating Model; the second line is
performed by the compliance, assurance and risk functions; and the third line
is performed by the internal audit team and external assurance providers.
Board
Responsible for effective risk management and internal control across the
QinetiQ Group Group Sets risk appetite and assess principal and emerging risks
Audit Committee and Risk & Security Committee
· Receive reports from second and third line assurance functions
· Monitor and review the principal and emerging risks
· Risk deep dives
· Monitor the effectiveness of internal controls
Global Leadership Team
Identify and monitor the principal and emerging risks, as well as material
risks (including operational) reported from the businesses and Group functions
Management Independent Assurance
1(st) Line 2(nd) Line 3(rd) Line
· Managers identify and evaluate risks in conjunction with Second Line · Risk Management and other oversight functions with limited · Internal Audit and other external independent assurance providers
independence
· Design and operate internal controls and other mitigation measures,
· Review and evaluate risk management activity and provide assurance
in conjunction with Second Line · Provides complementary expertise, support, monitoring, and challenge over the effectiveness of the control environment
related to the management of risk
· Application of risk appetite, delegated authorities, policies,
· Manage the Confidential Reporting process
procedures and codes of practice · Design and facilitate the risk management processes across the Group
· Report to the Board and Global Leadership Team
· Report risks through relevant reporting and escalation processes · Provide risk expertise and support, including analysis and reports on
the adequacy and effectiveness of risk management
· Manage the day to day operational risks
· Responsible for continually improving the risk management process
· Ensures compliance with legal, regulatory, and ethical expectations across the Group
· Monitor compliance with policies and standards
· Report to the Board and Global Leadership Team
QinetiQ risk appetite
The Board identifies and reviews its tolerance to risk by establishing a clear
risk appetite and setting appropriate delegations of authority to the
executive and senior leaders. We focus on those critical risk areas necessary
to achieve our strategic goals. Risk appetite is articulated by defining three
categories which balance scrutiny and mitigation activity against likely
benefit:
Cautious
Avoidance of uncertainty - with negligible or low residual risk. Applying
innovation prudently where the risks are fully understood.
Balanced
Preference for delivery options that have a low or moderate degree of residual
risk. Applying innovation only where successful delivery is likely.
Eager
Willing to consider delivery options with greater inherent risk and eager to
be innovative.
Commercial
Opportunities relating to increased market share where we have proven delivery Eager
into existing markets
Opportunities that translate proven delivery into new markets Balanced to Eager
Opportunities that translate new capability or delivery into existing Balanced
customers.
Opportunities that involve new capability or delivery into new markets. Cautious to Balanced
Operational
Operational delivery Cautious to Balanced
Compliance with legal and regulatory requirements Cautious
Strategic Risks
Execution of our UK growth strategy Execution of our US growth strategy International Strategy
Risk Risk Risk
UK Government budget constraints lead to reduced spending in core markets in There is a risk that the US Business will be unable to establish a robust and Our international business conducts business in a number of regions, including
which we operate. This and the ever increasing pace required to introduce new distinct position in the marketplace and deliver the significant growth Australia, Canada and Germany. Plans to grow these businesses to achieve our
technology to respond to emerging threats results in a risk that our ambition, resulting in impact to the strategic direction of the Group and global leverage may be impacted by external influences outside of our control,
approaches/ offerings for evaluating capability may not remain relevant. potential reputational damage. such as geo-political risks, or specific risks arising from working in new
markets and globalised operation.
The ongoing impact of the Continuing Resolution on the US DoD budgets within
the Federal Government may exacerbate this risk through increased customer Political uncertainties could also impact the availability and focus of
disruptions and constraints. customer budgets.
Elements of this risk exist within QinetiQ's control, including growing the
maturity of our in- country capabilities to deliver our growth ambitions.
Impact Impact Impact
A reduction in revenue and associated profitability from the Group's UK Adverse impact on the Group's financial performance. Unable to realise expected growth in the planned timeframes.
Defence and Security contracts.
Mitigation Mitigation Mitigation
Our strategy is focused on leading and modernising UK test and evaluation in Our US strategy is focused on developing our relationships with the DoD and Our international strategy is focused on growing capability in our home and
support of our UK and overseas customers' objectives and developing our major industry prime contractors through mission-led innovation at pace in priority markets, and leveraging aligned Group products and services to
training and mission rehearsal and data intelligence/cyber businesses. This areas of technology such as robotics and autonomy, sensor solutions and maximise growth. We have developed specific and ambitious growth strategies in
includes ongoing proactive engagement with our major customers to enable us to systems, artificial intelligence and maritime systems where we feel we have our priority markets, including organic and inorganic growth options.
support their objectives through mission-led innovation. strong technology capability and the ability to deliver the most appropriate
products or services. We undertake extensive due diligence, taking the appropriate professional
Our focused investment into contracts enhances our offerings that support our
advice to ensure structural, regulatory, legal and political risks are
customers with their pace and efficiency challenges as well as ensuring that We have created specific and ambitious strategies for the growth US and understood and minimised. In addition, our international businesses are
we provide the right services as the threat environment continues to evolve. are developing our capability to enact those strategies under a new US CEO, included in our Group Audit and Assurance plans, and hold several
We continue to deliver new customer solutions, increasingly utilising and through driving the operational performance through two customer-focused internationally recognised certifications and standards.
modelling and synthetics, embracing digital transformation. businesses, C5ISR Solutions and Technology Solutions. Additionally, we are
leveraging the broader QinetiQ group to sell our commercial systems The continued exploitation of single routes to market enables our in-country
We are expanding our global test and evaluation business, as evidenced through internationally to expand our market and mitigate reliance on the US teams to leverage the full QinetiQ brand and our
securing the contract to operate and maintain the Queensland Flight Test Range Government procurement cycles.
and, post-Brexit, maintain relationships with the UK Government to support
Group-wide capabilities; maximising the opportunities to cross-sell and offer
bilateral relationships within Europe; where there is increased recognition To encourage business winning, our single routes to market approach enables more comprehensive solutions to the domestic challenges our customers face.
that T&E is an enabler to military capability and prosperity. our in-country team to leverage the full QinetiQ brand and our Group-wide
capabilities; maximising the opportunities to cross-sell and offer We are maturing our global and local processes and systems, as well as the
comprehensive solutions to the domestic challenges our US customers face. approach to the global leverage of capabilities, such that we can deliver
Initial focus is on augmenting US business relationships on the next world-class solutions consistently across all of our home-market countries.
generation of combat vehicle programmes and making a greater selection of
threat representation targets available to US DoD customers.
We continue to mature our global end-to-end processes and business systems
such that we can act with agility and pace in response to our US customer
requirements. Further, the US business is fully embedded in our annual Group
Audit and Assurance planning process.
Metrics Metrics Metrics
Customer satisfaction All financial KPIs All financial KPIs
All financial KPIs US revenue as % of total revenue International revenue as % of total revenue
Responsibility Responsibility Responsibility
Group Function Director Business Development Group Function Director: Business Development Group Finance Director Business Development
Managing Directors A&S, M&L, and C&I President and CEO: US Managing Director: International
Risk appetite Risk appetite Risk appetite
Eager Balanced to Eager Balanced to Eager
Likelihood/Impact Likelihood/Impact Likelihood/Impact
Low / Medium High / High High / High
Proximity/Velocity Proximity/Velocity Proximity/Velocity
1-2 years / Medium 0-1 yrs / Medium 1-2 yrs / Medium
Strategy Strategy Strategy
Global Leverage Global Leverage Global Leverage
Distinctive Offerings Distinctive Offerings Distinctive Offerings
Disruptive Innovation Disruptive Innovation Disruptive Innovation
Innovation Strategy A material change to the UK Government's use of existing large contracts Mergers and acquisitions
Risk Risk Risk
Failure to innovate to enable the realisation of new ideas for our customers The Long Term Partnering Agreement (LTPA) is a 25-year partnering contract M&A activity continues to form a key element of our strategic growth plans
and our organisation in the face of market and environmental changes such as with the UK MOD to provide test, evaluation, and training services. in order to expand our customer offerings within our home markets of the UK,
rapidly evolving customer needs, technological change and increased
the US and Australia, as well as in our priority growth markets. There is a
competition. The Engineering Delivery Partnership (EDP) programme is a 10 year agreement risk that our new acquisition selection and integrations do not realise the
delivered by the Aurora Engineering Partnership and is established as the maximum potential benefits.
Specifically failure to: default route for contracted engineering services for UK MOD Defence Equipment
and Support (DE&S) and the wider UK MOD.
· Create a culture of innovation across the QinetiQ group.
UK Government budget constraints, could lead to a material change in use of
· Develop relevant business models, processes and products/services. these large contracts.
· Attract, retain and nurture the right talent.
Impact Impact Impact
Negative impact on the Group's market position, competitiveness, future growth The LTPA and EDP directly Contribute a material proportion of the Group's Adverse impact on the Group's financial performance.
and profitability. revenue and earnings.
Mitigation Mitigation Mitigation
Global initiatives to ensure innovation and the necessary underlying culture We are investing significantly into the LTPA capabilities to ensure they Robust governance is underpinned by the M&A Committee, which reports to
is embedded across the Group, including: remain relevant and modern. The investment portfolio is agile to changing the Board, and the relevant Integration Steering Committees, for newly
customer needs and technological advances to ensure we remain at the cutting acquired companies.
· Investment in tools to facilitate innovative approaches, such as edge. We are now also working with the MOD on the T&E Futures programme
enhanced exploitation of digital platforms and virtual environments to through the delivery of a number of capability and technology demonstrators. All acquisitions are thoroughly assessed for strong strategic alignment for
collaborate and demonstrate our products/ services globally.
value creation potential and for integration risk. Extensive due diligence
We have achieved excellent customer satisfaction feedback along with very involves internal experts and a variety of external advisory companies, and
· Diversity and Inclusion programme to drive and foster diverse strong performance across all of our KPIs, resulting in strong financial every integration is managed separately to ensure focus. Best practice,
thinking and embraces new ideas. performance on the contract throughout FY22. learned from successful integrations, is rigorously applied to each new
transaction.
· Commercial innovation, including agile approaches to contracting. EDP is a collaborative programme with DE&S and our Aurora partners, that
provides customers with key capacity and capability, focused on long term Portfolio rationalisation is ongoing where appropriate.
· Strategic workforce planning and global Success Factors, utilisation outcomes that maximise efficiencies and operational performance. During FY22
to ensure we identify, attract and retain the right people now and for the we have renegotiated some commercial elements of our agreement to build on the
future. success of the first two years, ensuring that EDP remains competitive,
relevant and continues to form a robust part of the solution to government
Ongoing Group-wide communications, including via the Global Roadshows and spending challenges, delivering the best equipment and support of the UK's
Q-Talks, and training to drive understanding and adoption of our Mission-Led Armed Forces and Front Line Commands.
Innovation philosophy across QinetiQ Group, which is to deliver better
operational outcomes for customers and end-users; working collaboratively to
solve complex problems, at pace.
Metrics Metrics Metrics
Customer satisfaction All financial KPIs except orders Inorganic Growth
Employee engagement Customer satisfaction Revenue & Profit
Responsibility Responsibility Responsibility
Group Function Director Business Development Group Managing Director M&L Group Function Director
Group Function Director Strategy & Planning Group Managing Director A&S Strategy & Planning
Group Function Director Technical LTPA Managing Director Group Managing Directors
Group Function Director Human Resources
Risk appetite Risk appetite Risk appetite
Balanced Balanced Balanced
Likelihood/Impact Likelihood/Impact Likelihood/Impact
Medium / High Medium / Medium High / High
Proximity/Velocity Proximity/Velocity Proximity/Velocity
2 yrs / Low 1 yrs / Low 1-2 yrs / Low
Strategy Strategy Strategy
Global Leverage Global Leverage Global Leverage
Distinctive Offerings Distinctive Offerings Distinctive Offerings
Disruptive Innovation Disruptive Innovation
The transformation and digitisation programme
Risk
The Transformation and Digitisation Programme aims to position QinetiQ for
further growth, by globalising consistently around the customer to deliver
excellence. In order to achieve this we must invest in our processes and
systems to embed a robust Global Operating Model, supported by a Global
Interoperable Infrastructure to enhance our collaboration, and a Digital
Workspace that enables us to leverage our skills globally. This requires
significant alignment and effort across the Group as well as cultural and
behavioural changes.
There is a risk that the investment required to achieve the intended outcomes
is greater than budgeted, that the programme benefits are not fully realised
and our Group ambitions are constrained.
Impact
Failure to realise benefits will challenge our ability to meet our strategic
growth targets and limit our capacity to scale affordably.
Mitigation
Global Leadership Team work stream sponsorship and Group- wide stakeholder
engagement to ensure robust requirement identification and focussed
investment. This is supported by a CEO-led steering group and a Global Digital
and Data Programme Board.
Budget and scope managed through a robust governance model reporting to the
Global Leadership Team and Board that gives sufficient flexibility to respond
to changing customer needs but with the guide-rails in place to identify and
control potential cost overruns.
Benefits realisation is managed through a strong focus on change management,
to drive adoption and the required changes to behaviours. The Digital and Data
Programme acts as an enabler for the overall transformation by providing the
tools and ways of working to more rapidly address the cultural and behavioural
changes required to make the programme a success.
Metrics
Customer satisfaction
Employee Engagement
All financial KPIs
Responsibility
Group Function Director Business Transformation & Services
Risk appetite
Balanced
Likelihood/Impact
High / High
Proximity/Velocity
0-1 yrs / Medium
Strategy
Global Leverage
Distinctive Offerings
Disruptive Innovation
Operational Risks
Significant breach of relevant laws and regulations Security and IT systems
Risk Risk
We operate in highly regulated environments across many jurisdictions. A breach of physical or data security, cyber-attacks or IT systems failure,
Non-compliance to existing and new requirements presents risks to people, leading to loss of customer or company information could have an adverse
property and the environment as well as having the potential to compromise our impact on our reputation, customer confidence and operational delivery.
ability to conduct business in certain markets, potentially having an impact
on a variety of stakeholders.
Impact Impact
Failure to comply with particular regulations could result in serious Significant reputational damage, as well as service interruptions and the
detriment to people, property and the environment, and/or a combination of possibility of withdrawal of our accredited status (our "licence to operate")
fines, penalties, civil or criminal action, suspension or debarment from resulting in exclusion from some types of government contracts and subsequent
government contracts, as well as significant reputational damage to QinetiQ. impact on orders, revenue.
Mitigation Mitigation
Maintaining and strengthening a proactive safety and regulatory compliance As a key supplier in the National Security supply chain, we must ensure that
culture across the Group is a key part in minimising the risk of a failure. the organisation's security meets governments' and other relevant requirements
worldwide. We employ a holistic security threat approach through four
The Global Operating Model clearly defines lines of responsibility through the interlocking pillars: Physical, Information, Cyber and Personnel Security. Our
organisation. In addition we have robust policy, procedures and mandatory changing and increasingly sophisticated threat environment is continuously
training in place. The QinetiQ Code of Conduct sets out clear expectations for reviewed, using appropriate tools and techniques, as part of our over-arching
the Group and its employees; and in areas such as bribery and corruption the Security Strategy such that new
company adopts a zero-tolerance approach.
and emerging threats are removed or mitigated, ensuring our strategy
We drive continuous improvement using a range of approaches such as audit and appropriately balances the security, cost and flexibility required for any
evaluation, focused training, strategic improvement programmes, and business given solution.
objectives. One example is the launch of our Group-wide Health and Safety
Improvement Programme; partnering with industry safety experts to further Our programme of continuous security improvement includes:
enhance our safety culture.
· A Group Cyber Security Standard.
The effectiveness of our internal control environment continues to be assessed
annually with the Board, and a board assurance map is increasingly used to · Targeted Cyber Security Training for key IT staff, and mandatory
identify any potential gaps in assurance over key risks. awareness training for all staff and contractors.
ESG risks are robustly managed under the ESG programmes. · Deployment and continual upgrade of cyber security detection and
protective technologies.
· Annual strategic security reviews.
· Continuous employee communications and engagement, including an
annual Security Culture survey.
The introduction of a group-wide common IT infrastructure through the Digital
and Data Transformation Programme will strengthen our overall cyber security
capability through the adoption of common security tooling. This will also
facilitate greater global inter- operability through technology controlled
information sharing while still protecting National and Sovereign data and
information.
Metrics Metrics
Health, Safety and Environment Cyber dashboard
Mandatory training compliance Security dashboard
Commercial intermediary monitoring
Responsibility Responsibility
Director of Group Safety Improvement Programme Group Director Transformation & Business Services
Company Secretary/ Group General Counsel
Group Function Director Technical
Group Managing Directors
Risk Appetite Risk Appetite
Cautious Cautious
Likelihood/Impact Likelihood/Impact
Medium / High High / High
Proximity/Velocity Proximity/Velocity
0-1 yr / High 0-1 yr / High
Strategy Strategy
Global Leverage Global Leverage
Distinctive Offerings Distinctive Offerings
LONGER-TERM VIABILITY ASSESSMENT
Assessing the prospects of the Group
The Group's corporate planning processes involve the following individual
processes covering differing time frames:
1. An annual Integrated Strategic Business Plan (ISBP) process that looks
at the financial outlook for the following five years. This process commences
with an assessment of the orders pipeline producing an order intake scenario.
A review of the phased delivery profile and the cost base required to support
this enables generation of low-case, base-case and high-case profit forecasts.
Capex and working capital requirements are also collected, reviewed, approved
and a cash flow produced for the Plan period;
2. An annual budget process that covers the first year of the five-year
planning horizon in detail;
3. A bi-annual forecast process to update the view of the first budget
year (the year which would be in progress).
4. A rolling monthly "latest best estimate" process to assess significant
changes to the budget/forecast for the year in progress.
The corporate planning process is underpinned by assessing scenarios and risks
that encompass a wide spectrum of potential outcomes, both favourable and
adverse. The sensitivity analysis undertaken by management explores the
resilience of the Group to the potential impact of all the significant risks
set out on pages 64 to 70, or a combination of those risks.
The scenarios are designed to be severe but plausible, and take full account
of the availability and likely effectiveness of the mitigating actions (as
described on pages 64-70) that could be taken to avoid or reduce the impact or
occurrence of the underlying risks, and that realistically would be open to
them in the circumstances. In considering the likely effectiveness of such
actions, the conclusions of the Board's regular monitoring and review of risk
and internal control systems, as discussed on page 108, is taken into account.
Alongside the annual review of risk scenarios applied to the strategic plan,
performance is rigorously monitored to alert the Board and Global Leadership
Team to the potential crystallisation of a key risk.
We consider that this stress-testing based assessment of the Group's prospects
is reasonable in the circumstances of the inherent uncertainty involved.
The period over which we confirm longer-term viability
The period over which the Directors consider it possible to form a reasonable
expectation as to the Group's longer-term viability is the five-year period to
31 March 2027. This is the period covered by our strategic planning process
and is subject to stress-testing and scenario planning around potential risks.
It has been selected because it presents the Board and readers of the Annual
Report with a reasonable degree of confidence while still providing an
appropriate longer-term outlook.
Confirmation of longer-term viability
As noted on page 111, the Directors confirm that their assessment of the
principal risks facing the Group was robust. Based upon the robust assessment
of the principal risks facing the Group and their stress-testing based
assessment of the Group's prospects, all of which are described in this
statement, the Directors have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall due over
the period to 31 March 2027.
RELATED PARTIES
During the year ended 31 March 2022 there were sales to associates and joint
ventures of £5.2m (2021: £6.0m). At the year-end there were outstanding
receivables from associates and joint ventures of £1.0m (2021: £1.4m).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and the company financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced
Disclosure Framework", and applicable law). Additionally, the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules require the
Directors to prepare the Group Financial Statements in accordance with
UK-adopted International Accounting Standards.
Under company law, 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 Group and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors are required to:
· Select suitable accounting policies and then apply them
consistently
· State whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006 and UK-adopted
International Accounting Standards have been followed for the Group financial
statements and United Kingdom Accounting Standards, comprising FRS 101 have
been followed for the company financial statements, subject to any material
departures disclosed and explained in the financial statements
· Make judgements and accounting estimates that are reasonable and
prudent
· Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and company will continue
in business
The Directors are also responsible for safeguarding the assets of the Group
and company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and company and enable them to ensure that the financial statements and
the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
DIRECTORS' CONFIRMATIONS
Each of the Directors, whose names and functions are listed on pages 82 and 84
confirm that, to the best of their knowledge:
· The Group financial statements, which have been prepared in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial reporting
standards adopted pursuant to UK-adopted International Accounting Standards,
give a true and fair view of the assets, liabilities, financial position and
profit of the Group
· The Company Financial Statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 101, give
a true and fair view of the assets, liabilities, financial position and profit
of the company
· The Going concern statement on page 71 includes a fair review of
the development and performance of the business and the position of the Group
and company, together with a description of the principal risks and
uncertainties that it faces
In the case of each Director in office at the date the Directors' report is
approved.
SCOPE OF THE REPORTING IN THIS ANNUAL REPORT
The Board has prepared a Strategic report which provides an overview of the
development and performance of the Group's business in the year ended 31 March
2022.
For the purposes of DTR 4.1.5R(2) and DTR 4.1.8 the Directors' report, the
Directors confirm that, so far as they are aware, there is no relevant audit
information of which the company's auditor is unaware, and that they have
taken all steps that they ought to have taken as Directors to make themselves
aware of any relevant audit information and to establish that the company's
auditor is aware of that information.
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