Annual Financial Report

RNS Number : 3986V

Currys PLC

09 August 2022

 

9 August 2022

ANNUAL REPORT 2021/22 AND NOTICE OF ANNUAL GENERAL MEETING 2022

Currys plc (the 'Company') has today published its Annual Report and Accounts 2021/22 and Notice of Annual General Meeting 2022. These documents are available to view on the Company's website at www.currysplc.com/investors . In addition, along with the Proxy Form for the Annual General Meeting 2022, they have been posted or otherwise made available to shareholders depending on their elected method of communication.

In accordance with Listing Rule 9.6.1, the Annual Report and Accounts 2021/22, Notice of Annual General Meeting 2022 and Form of Proxy have been submitted to the National Storage Mechanism, where they will shortly be available for inspection at

https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

The Company's 2022 Annual General Meeting (the 'AGM') will be held at 10.00am on Thursday 8 September 2022 at Hilton London Kensington, 179 - 199 Holland Park Avenue, London SW11 4UL.

Shareholders are encouraged to vote on all resolutions proposed in advance of the AGM, and to submit any questions they may have for any member of the Board to [e-mail] . Please submit your votes and questions before 10.00am on Wednesday 6 September 2022.

The information included in the Appendix to this announcement has been extracted from the Annual Report and Accounts 2021/22 and is reproduced here solely for the purposes of complying with the requirements of Disclosure Guidance and Transparency Rule ('DTR') 6.3.5 in respect of how to make annual financial reports available to the public.

The content of this announcement, including the Appendix, should be read in conjunction with the Company's Preliminary Results announcement, which was released on 7 July 2022 and is available on the Company's website at www.currysplc.com/investors.

Together, these announcements constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report and Accounts 2021/22. Defined terms used in the Appendix refer to terms as defined in the Annual Report and Accounts 2021/22. Page numbers and cross references in the Appendix refer to pages and sections of the Annual Report and Accounts 2021/22.

Appendix

A. Principal risks to achieving the Group's objectives (pages 58 to 64)

The Group recognises that taking risks is an inherent part of doing business and that competitive advantage can be gained through effectively managing risk. The Group has developed and continues to evolve robust risk management processes, and risk management is integrated into business decision-making. The Group's approach to risk management and risk governance framework is set out in the Corporate Governance Report on pages 87 to 99. The risks are linked to the strategic priorities on pages 2 to 11.

Key changes to the Risk Profile

During 2021/22 a number of changes were made to the Group Risk profile, these included:

· following a reduction in the threat from Covid-19, this risk was removed as a standalone risk and subsumed within the existing Group Health and Safety risk;

· our Key Supplier relationship risk was updated to include supply chain related challenges such as reliance on China and factory capacity limitations, chip-set shortages, rising shipping costs, delays at ports and the shortage of HGV drivers. To reflect its wider ambit, the risk was renamed Supply Chain Resilience; and

· the risk relating to the Long Term and Diversification of Funding was removed on completion of the refinancing of the Group's debt.

Our approach to horizon scanning and emerging risks

In order to promote sustainable success, the business continues to analyse the risks likely to emerge in the short, medium and longer term that may impact the delivery of our Strategy. To provide a view over the medium to longer term, a horizon scanning approach is required.

Our approach to undertaking horizon scanning is based on conducting both reviews of external thought leadership and also through obtaining the views of key business stakeholders on emerging risks. The horizon scanning exercise is updated at least semi-annually to ensure that the horizon is consistently scanned for developments and changes that may impact the business, including, for example, how the macro economic environment and inflation could impact the cost of living and consumer spending. The Group Risk and Compliance Committee is asked to review and discuss the horizon risks and to form a view as to whether any of these should be considered in the Principal Risk process or additional actions should be factored into strategic planning for the business.

The impact of the Russian invasion of Ukraine

The business does not operate in Russia, Belarus or Ukraine and we have obtained confirmations from our Brand and Own Brand suppliers that none of the products we sell are produced in these territories. However, there are risks to our business related to the invasion which are being managed, including:

· risks to our supply chain caused by transport disruption, scarcity of raw materials and components which are being mitigated through our Commercial forecasting and planning activities,

· impacts on our colleagues, especially in relation to our operations in Czech Republic, which are being mitigated through practical assistance and advice being offered to

· local colleagues through people management channels, and

· reputational risks which could occur if the Group was perceived to not be doing the right thing in response to emerging sanctions. We are confident that the Group remains fully compliant with all UK sanctions on Russian and Belarussian entities.

Risks and potential impacts

The Group continues to develop its risk management processes, fully integrating risk management into business decision-making. The risk management process mirrors the operating model with each business unit responsible for the ongoing identification, assessment and management of their existing and emerging risks. The output of these assessments is aggregated to compile an overall Group-level view of risk.

The principal risks and uncertainties, together with their potential impacts and changes in net risk since the last report, are set out in the tables below along with an illustration of actions being taken to mitigate them.

Supply Chain Resilience

Risk owner: Chief Commercial Officer

Risk category: Strategic

Risk movement: Increased

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: Yes

What is the risk?

Exposure to disruption to our supply chain that could impede our ability to provide Amazing Technology to our customers and impact our customer satisfaction, profitability, cash flow and market share.

What is the impact?

· Investments by suppliers scaled down

· Pricing and stock availability terms could worsen, leading to deceasing sales/reduced margin

· Reduced revenue and profitability

· Deteriorating cash flow

· Reduced market share

How we manage it

· Ensuring alignment of key suppliers to future strategy; "Project Board Meetings" with strategic suppliers' management

· Continuing to leverage the scale of operations to strengthen relationships with key suppliers and maintain a good supply of scarce products

· Working with suppliers to ensure availability of products through Key Supplier Group engagement program

· Ethical supply chain due diligence over our supplier base

· Control structures to ensure appropriate Supplier Relationship Management for GFR, GNFR and OEM

Changes since last report

This risk has increased over 2021/22.

Business Transformation

Risk owner: Chief Information Officer

Risk category: Strategic

Risk movement: Increased

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: No

What is the risk?

Failure to respond with a business model that enables the business to compete against a broad range of competitors on service, price and / or product range.

Failure to optimise Digital opportunities.

Failure to respond to changes in consumer preferences and behaviours.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Reduced market share

How we manage it

· Continued strengthening of digital expertise as part of omnichannel capability

· Transformation Programme office established and delivering key strategic objectives

· Development of customer credit propositions

· Development of omnichannel capabilities

· Enhancement of data analytics capabilities

· Robust portfolio governance

Changes since last report

This risk has increased over 2021/22. There are a number of critical projects to deliver in support of the business strategy.

Non-compliance with Financial Conduct Authority ('FCA') and other financial services regulation

Risk owner: Chief Commercial Officer

Risk category: Regulatory

Risk movement: Stable

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: Yes

What is the risk?

Failure to manage the business of the Group in compliance with FCA regulation and other financial services regulation to which the Group is subject in a number of areas including the mobile insurance operations and consumer credit activities of Currys Retail Limited.

What is the impact?

· Enforcement action by the regulator

· Loss of authorisation and inability to trade regulated products

· Reputational damage

· Financial penalties

· Reduced revenues and profitability

· Deteriorating cash flow

· Customer compensation

How we manage it

· Board oversight and risk management structures monitor compliance and ensure that the Company's culture puts good customer outcomes first

· Senior Manager and Certification Regime and if required CBI / other regulators certification implemented

· Regulatory Compliance Committee, Product Governance and other internal governance structures

· Control structures to ensure appropriate compliance

· Compliance monitoring and internal audit review of the operation and effectiveness of compliance standards and controls

· Recruitment, remuneration and training competency programmes

· Conduct risk and control framework, including defined minimum control standards

Changes since last report

This risk has remained stable over 2021/22.

Data Protection

Risk owner: Chief Information Officer

Risk category: Regulatory

Risk movement: Decreased

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: Yes

What is the risk?

Major loss of customer, colleague, or business sensitive data.

Adequacy of internal systems, policy, procedures and processes to comply with the requirements of EU General Data Protection Regulation ('GDPR').

What is the impact?

· Reputational damage

· Financial penalties

· Reduced revenue and profitability

· Deteriorating cash flow

· Loss of competitive advantage

· Customer compensation

How we manage it

· The operation of a Data Management Function to ensure compliance with GDPR compliant operational processes and controls

· The operation of a Data Protection Office to ensure appropriate governance and oversight on the Group's data protection activities

· Control activities operate over management of customer and employee data in accordance with the Group's data protection policy and processes

· Investment in information security safeguards and IT security controls and monitoring

Changes since last report

The risk has reduced over 2021/22 due to increased levels of assurance over the strength of the data protection control environment.

IT systems and infrastructure

Risk owner: Chief Information Officer

Risk category: Technology

Risk movement: Stable

Link to strategy: Omnichannel, Customers for life

Considered in the Viability Statement: No

What is the risk?

A key system becomes unavailable for a period of time.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Loss of competitive advantage

· Restricted growth and adaptability

· Reputational damage

How we manage it

· Ongoing IT transformation to align IT infrastructure to future strategy

· PEAK planning and preparation to ensure system stability and availability over high-demand periods

· Individual system recovery plans in place in the event of failure which are tested in line with an annual plan, with full recovery infrastructure available for critical systems

· Long-term partnerships with 'tier 1' application and infrastructure providers established

· Strengthening of Technology leadership team

· A mature IT Service Design & Transition process controls and manages the transition of new and changed services into production

Changes since last report

The risk has remained stable over 2021/22.

Information security

Risk owner: Chief Information Officer

Risk category: Operational

Risk movement: Stable

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: Yes

What is the risk?

Inadequate governance and control around information security could result in an information security breach compromising the confidentiality, integrity and/ or availability of customer, colleague or supplier data.

What is the impact?

· Reputational damage

· Financial penalties

· Reduced revenue and profitability

· Deteriorating cash flow

· Customer compensation

· Loss of competitive advantage

How we manage it

· Significant investment in information security safeguards, IT security controls, monitoring, in-house expertise and resources as part of a managed information security improvement plan

· Information security policy and standards defined and communicated

· Information Security and Data Protection Committee and Technology Risk forum set up, with responsibility for oversight, co-ordination and monitoring of information security policy and risk

· Infosec training and awareness programmes for employees

· Audit programme over key suppliers' information security standards

· Introduction of enhanced security tooling and operations

· Ongoing programme of penetration testing

· Future Security Operations Centre implemented

Changes since last report

This risk has remained stable over 2021/22.

Health and Safety

Risk owner: Chief Operating Officer

Risk category: Operational

Risk movement: Decreased

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: Yes

What is the risk?

Failure to prevent injury or loss of life to customers, colleagues, contractors, franchise partners, agency staff and the public which may have serious financial and reputational consequences.

What is the impact?

· Employee / customer illness, injury or loss of life

· Reputational damage

· Financial penalties

· Legal action

· Ongoing repercussions of Covid-19

How we manage it

· Implementation of Covid-19 controls to protect colleague in the workplace and customers in the retail estate, including continuous monitoring of changing government regulation in all jurisdictions

· Group Health and Safety strategy

· Comprehensive Health and Safety policies and standards supporting continued improvement

· Health and Safety governance committee

· Operational Health and Safety teams located across business units

· Risk assessment programme covering retail, support centres, distribution and home services

· Incident reporting tool and process

· Health and Safety training and development framework

· Health and Safety inspection programme

· Audit programme including factory audits for own brand products and third-party supply chains

Changes since last report

This risk has decreased over 2021/22, largely attributable to the suppression of Covid-19.

Business Continuity

Risk owner: Chief Information Officer

Risk category: Operational

Risk movement: Stable

Link to strategy: Omnichannel, Customers for life

Considered in the Viability Statement: No

What is the risk?

A major incident impacts the Group's ability to trade and business continuity plans are not effective, resulting in an inadequate incident response.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Reputational damage

· Loss of competitive advantage

How we manage it

· Business continuity and crisis management plans in place and tested for key business locations

· Enablement of home working for office-based and contact centre colleagues

· Disaster recovery plans in place and tested for key IT systems and data centres

· Cross functional Crisis team appointed to manage response to significant events

· Major risks insured

· Group Business Continuity strategy

Changes since last report

This risk has remained unchanged over 2021/22.

Tax liabilities

Risk owner: Chief Financial Officer

Risk category: Financial

Risk movement: Stable

Link to strategy: Omnichannel, Customers for life

Considered in the Viability Statement: Yes

What is the risk?

Crystallisation of potential tax exposures resulting from legacy corporate transactions, employee and sales taxes arising from periodic tax audits and investigations across the various jurisdictions in which the Group operates.

What is the impact?

· Financial penalties

· Reduced cash flow

· Reputational damage

How we manage it

· Board and internal committee oversight actively monitors tax strategy and tax disputes

· Appropriate engagement of third-party specialists to provide independent advice where deemed appropriate

· The Group remains committed to achieving a resolution with HMRC in relation to open tax enquiries

Changes since last report

The risk has remained unchanged over 2021/22.

Product Safety

Risk owner: Chief Operating Officer

Risk category: Operational

Risk movement: Stable

Link to strategy: Customers for life

Considered in the Viability Statement: No

What is the risk?

Unsuitable procedures and due diligence regarding product safety, particularly in relation to OEM sourced product, may result in poor quality or unsafe products provided to customers which pose risk to customer health and safety.

What is the impact?

· Financial penalties

· Reduced cash flow

· Reputational damage

How we manage it

· Factory Audits conducted over OEM suppliers

· Technical Evaluation of OEM products prior to production

· Product inspection of OEM products prior to shipment

· Monitoring of reported incidents

· Safety Governance reviews conducted by Technical and Business Standards teams

· Establish protocols and procedures to manage product recalls

Changes since last report

This risk has remained unchanged over 2021/22.

Our commitment to Sustainability

Risk owner: Chief People, Communications & Sustainability Officer

Risk category: Operational

Risk movement: Decreased

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: No

What is the risk?

Our commitment to sustainability and being a good corporate citizen is either not delivered or not adequately communicated to or recognised by customers and investors.

What is the impact?

· Reduced cash flow as customers shop elsewhere

· Reputational damage

· Loss of competitive advantage

How we manage it

· Roadmap to Net Zero by 2040

· Commitment to EV100

· Oversight from ESG Committee, ExCo and the Board

· Group ESG strategy regularly reviewed

· Maintenance of a brand tracker

· Commitment to TCFD

· Independent reviews on environmental practices e.g. CDP

Changes since last report

This risk has decreased over 2021/22 reflecting the progress made advancing our ESG initiatives.

People

Risk owner: Chief People, Communications & Sustainability Officer

Risk category: People

Risk movement: Stable

Link to strategy: Colleagues, Omnichannel, Customers for life

Considered in the Viability Statement: No

What is the risk?

Not having the right workforce capacity, capability, and colleague commitment necessary to deliver on our strategy.

What is the impact?

· Reduced revenue and profitability

· Failure to achieve strategic objectives without strong leadership and capable and committed colleagues

How we manage it

· Strengthening leadership capability and succession

· Increasing colleague capability and engagement to deliver against customer promise

· Approach for remuneration and incentives that supports a high-performance culture, reinforces the right behaviours aligned to our values and supports selling responsibility to customers

· Frequent Pulse Engagement surveys

· Perform and Transform Forum

Changes since last report

This risk remains unchanged over 2021/22.

B. Responsibility Statement (page 130)

We confirm that to the best of our knowledge:

· 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 includes 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, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group and the Company's performance, business model and strategy.

By Order of the Board

Alex Baldock, Group Chief Executive

Bruce Marsh, Group Chief Financial Officer

9 August 2022

* The directors of Currys plc as at 9 August 2022 are listed on pages 82 and 83 of the Annual Report and Accounts 2021/22.

ENDS

For further information:

Dan Homan   Investor Relations   [phone]

Sarah Thomas    Deputy Company Secretary    [phone]

 

END

 

 

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