REG - Tesco PLC - Annual Report 2017 and Notice of Meeting 2017 <Origin Href="QuoteRef">TSCO.L</Origin> - Part 2
12/05/2017 07:05
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met. Global Product Safety Standards are communicated to our suppliers and tested through our audit programmes.
People
Failure to attract, motivate and retain the most talented colleagues and develop the required culture, leadership and behaviours to meet our purpose, resulting in an inability to achieve our business objectives. Strategic drivers: 1. A differentiated brand 6. Innovation Our people are our most valuable asset. We continue to advance diversity and inclusion and see a strong improvement in colleague engagement. Risk decreasing The Executive Committee meets regularly to review and monitor people policies and procedures and talent development. Objectives and remuneration arrangements for senior
management are approved by this Committee. Objectives and remuneration arrangements form part of a coherent and consistent remuneration framework and have been redesigned
to promote appropriate behaviours as well as the delivery of results. Talent planning, training and people development processes are embedded across the Group. We seek to
understand and respond to colleagues' needs by listening to their feedback from open conversations, social media, colleague surveys and performance reviews. We have
implemented ethical rules, guidelines, policies and procedures in line with our values. Training around our Code of Business Conduct has been recently updated and
relaunched across the Group.
Tesco Bank
Tesco Bank is exposed to a number of risks, the most significant of which are credit risk, operational risk, liquidity and funding risk, market risk, and legal and regulatory compliance risk. Strategic drivers: 1. A differentiated brand The Bank continues to actively manage the risks to which it is exposed. No risk movement The Bank has a defined risk appetite which is approved and reviewed regularly by both the Bank's Board and the Tesco PLC Board. The risk appetite defines the type and
amount of risk that the Group is prepared to accept to achieve its objectives and forms a key link between the day-to-day risk management of the business, its strategic
priorities, long-term plan, capital planning, liquidity management and stress testing. Adherence to risk appetite is monitored through a series of ratios and limits. The
Bank operates a risk management framework that is underpinned by governance, policies, processes and controls, reporting, assurance and stress testing. There is Bank
Board risk reporting throughout the year, with updates to the Tesco PLC Audit Committee by the Bank CFO/Audit Committee Chairman. A member of the Tesco PLC Board is also
a member of the Bank's Board. In November 2016, Tesco Bank's debit cards were the subject of an online fraudulent attack. The Group's priority throughout was to ensure
customers' accounts were protected and that it communicated with customers immediately and transparently, reassuring customers that there was no data loss or breach of
systems. The Group has undertaken immediate remedial action and an independent review of the issue and continues to work closely with the authorities and regulators on
this incident.
Booker merger
In January 2017, the boards of Tesco PLC and Booker Group PLC, announced their
agreement, subject to regulatory approval, shareholder approval and other
conditions to a merger. As well as the risk of conditions to closing not being
met, the ability to realise the expected strategic and financial objectives is
subject to a successful and timely integration process.
Brexit
The result of the referendum on the United Kingdom's membership of the
European Union leading to the departure of the UK from the EU (Brexit), could
cause disruptions to and create uncertainty around our business, including
affecting our relationships with our existing and future customers, suppliers
and colleagues. These disruptions and uncertainties could have an adverse
effect on our business, financial results and operations. As further details
of the Brexit terms emerge, the management will continue to assess the
potential risks and impacts of these on Tesco stakeholders.
Related Party Transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Group and its joint ventures and associates are
disclosed below:
Transactions
Joint ventures Associates
2017£m 2016£m 2017£m 2016£m
Sales to related parties 418 408 - -
Purchases from related parties 416 496 16 14
Dividends received 17 32 11 9
Sales to related parties consists of services/management fees and loan
interest.
Purchases from related parties include £286m (2016: £379m) of rentals payable
to the Group's joint ventures (including those joint ventures formed as part
of the sale and leaseback programme).
Transactions between the Group and the Group's pension plans are disclosed in
Note 27.
Balances
Joint ventures Associates
2017£m 2016£m 2017£m 2016£m
Amounts owed to related parties 17 13 - 1
Amounts owed by related parties 16 28 - 3
Loans to related parties (net of deferred profits)* 137 149 - -
Loans from related parties (Note 21) 6 6 - -
* Loans to related parties of £137m (2016: £149m) are presented net of
deferred profits of £54m (2016: £57m) historically arising from the sale of
property assets to joint ventures.
A number of the Group's subsidiaries are members of one or more partnerships
to whom the provisions of the Partnerships (Accounts) Regulations 2008
(Regulations) apply. The financial statements for those partnerships have been
consolidated into these financial accounts pursuant to Regulation 7 of the
Regulations.
Transactions with key management personnel
Members of the Board of Directors and Executive Committee of Tesco PLC are
deemed to be key management personnel.
Key management personnel compensation for the financial year was as follows:
2017£m 2016£m
Salaries and short-term benefits 13 20
Pensions and cash in lieu of pensions 2 3
Share-based payments 17 9
Joining costs and loss of office costs 1 5
33 37
Attributable to:
The Board of Directors (including Non-executive Directors) 12 11
Executive Committee (members not on the Board of Directors) 21 26
33 37
Of the key management personnel who had transactions with Tesco Bank during
the financial year, the following are the balances at the year end:
Credit card, mortgage and personal loan balances Current and saving deposit accounts
Number of key management personnel £m Number of key management personnel £m
At 25 February 2017 6 1 4 -
At 27 February 2016 11 1 8 -
Statement of Directors' responsibilities
In compliance with DTR 4.1.12R, the Annual Report and Financial Statements
2017 contains a Directors' responsibility statement. This is reproduced below,
in line with DTR 6.3.5R. The statement relates to and is extracted from the
Annual Report and Financial Statements 2017 and does not attach to the
extracted information presented in this announcement or the preliminary
results announcement released on 12 April 2017.
The Directors are required by the Companies Act 2006 to prepare financial
statements for each financial year that give a true and fair view of the state
of affairs of the Group and the Company as at the end of the financial year,
and of the profit or loss of the Group for the financial year. Under that law,
the Directors are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union (EU) and have elected to prepare the Parent Company
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 101 'Reduced Disclosure Framework' (UK
Accounting Standards and applicable law).
In preparing these 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 IFRSs as adopted by the EU and applicable UK Accounting
Standards have been followed, subject to any material departures disclosed and
explained in the Group and Parent Company financial statements respectively;
· 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 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
· prepare the financial statements on the going concern basis, unless
it is inappropriate to presume that the Group and 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 Group and the
Company, and which enable them to ensure that the financial statements and the
Directors' remuneration report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation. They
also have general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and the Company, and to prevent
and detect fraud and other irregularities.
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.
The Directors consider that the Annual Report and Financial Statements, taken
as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's and the Company's
performance, business model and priorities.
Each of the Directors, whose names and functions are set out on pages 34 and
35 confirm that, to the best of their knowledge:
· the financial statements, which have been 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 Group and
the undertakings included in the consolidation taken as a whole; and
· the Strategic report contained within this document includes a fair
review of the development and performance of the business and the position of
the Group and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that the
Group faces.
This information is provided by RNS
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