Annual Financial Report

RNS Number : 7598J

Serco Group PLC

04 April 2018

 

Serco Group plc - Annual Financial Report

4 April 2018

The following documents have today been published and are available on the Company's website at www.serco.com:

2017 Annual Report and Accounts

Notice of Annual General Meeting 2018

In accordance with Listing Rule 9.6.1 copies of the above documents, along with the Form of Proxy for the Company's 2018 Annual General Meeting have been uploaded to the National Storage Mechanism and will be available for viewing shortly at www.morningstar.co.uk/uk/NSM 

Compliance with Disclosure and Transparency Rule 6.3.5 ('DTR 6.3.5') - Extracts from the 2017 Annual Report and Accounts

The information below, which is extracted from the 2017 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5. It should be read in conjunction with the Company's Full Year results announcement published on 22 February 2018, which included a condensed set of financial statements and an indication of important events that occurred during the financial year and their impact on the financial statements. Together, these 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 2017 Annual Report and Accounts. All page numbers and cross-references in the extracted information below refer to page numbers in the 2017 Annual Report and Accounts.

Principal Risks and Uncertainties

STRATEGIC RISKS

Failure to grow profitably Failure to win material bids or renew material contracts profitably, or a lack of opportunities in our chosen markets, will restrict growth and may have an adverse impact on Serco's long-term financial viability. Our business is linked to changes in the economy, fiscal and monetary policy, political stability and leadership, budget priorities, and the perception and attitude of governments and the wider public to outsourcing, which could result in decisions not to outsource services or lead to delays in placing work. Strategic objectives impacted: Winning good business, Profitable and sustainable
Key risk drivers: Lack of opportunities in chosen markets - some market sectors may not have a favourable policy of private sector provision of public services, reducing pipeline opportunities. External factors reducing the pipeline of opportunities - political and policy changes in our markets (such as changes in federal or state governments, or decisions such as Brexit) may make it more difficult for us to win in some geographies, or result in fewer opportunities. Failure to be competitive - lack of appropriate references and value proposition for the markets in which we compete, may put us at a disadvantage to our competitors. Inability to meet customer and solution requirements during design, implementation and delivery - executing our bids in an unsatisfactory manner by not understanding the strategic needs of the customer, mispricing bids, developing in efficient or non-innovative solutions, and misunderstanding risks, may prevent us from achieving our growth ambitions. Ineffective business development - poor account management, market shaping, proposition development and visibility of pipeline opportunities will affect our ability to set targets for growth, understand business wins and drive process improvements. Failure to obtain or capitalise on benefits from our Transformation Programme - (see 'Failure to deliver expected benefits from Transformation').	Material controls: · Serco Group Strategy focusing on specific markets and geographies with the greatest growth potential. · Serco Operating Model. · Investment Committee. · Serco Management System (SMS). · Sector-specific Centres of Excellence (CoEs) and Value Propositions. · Business Lifecycle Review Team (BLRT) process. · Pipeline and Business Development spend reviews to ensure efficient deployment of resources. · Divisional Performance Reporting (DPR) process. · Annual Performance Reviews, Talent Reviews and Succession Planning processes.	Mitigation priorities: ·  Review pipeline opportunities to ensure all market activity is accurately captured. ·  Review bid solution processes and SME resources to ensure our propositions remain competitive. ·  Streamline and standardise the Business Development processes. ·  Refinement of BLRT process to ensure lessons learnt and price-to-win competitive analysis are formally embedded in the solution process. ·  Continued focus on account management for major re-bids to ensure existing clients are experiencing good service from Serco and fully understand the value and quality of our services. ·  Continuation of efficiency improvements to Group and Divisional overhead and shared services structures as part of the Transformation Programme to ensure we remain cost competitive.
Failure to manage our reputation Failure to manage our reputation will mean that customers will be less likely to give us new business or renew existing business. It will also impact our ability to attract and retain high-quality people. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable
Key risk drivers: Failure to clearly define what Serco stands for and how we wish to be seen - may result in inconsistent communication and misunderstanding by our key stakeholders. Not understanding our customers' and stakeholders' expectations - may result in a failure to recognise changes in our business environment or our customers' priorities. Failure to manage incidents appropriately - may result in us not responding in a collaborative approach with our customers, or not communicating in an open and ethical manner to key stakeholders.	Material controls: · Serco Values. · Group Reputation Brand and Communication Standard. · Customer and stakeholder relationship and engagement programmes. · Proactive engagement with the media. · Media training and understanding of reputational issues for senior management. · Continual media monitoring. · Incident management processes and crisis management plans.	Mitigation priorities: ·  Maintain momentum of 'Executing Brilliantly'. ·  Review and refine existing controls to ensure maximum effectiveness.
Failure to deliver expected benefits from Transformation If components of the Transformation Programme do not deliver the anticipated benefits, then we will not achieve the efficiency savings needed to become a sufficiently profitable and growing business. Strategic objectives impacted: Winning good business, Executing brilliantly, Profitable and sustainable
Key risk drivers: Non-delivery of required benefits - we fail to achieve the expected benefits due to poor programme management and/or solution design. Severe disruption to the business - we fail to coordinate and prioritise the various programme objectives due to poor integration across activities and inadequate programme management, and we negatively impact on 'Business As Usual' activities. Watering down of value/ambition of Group Operating model - due to a sum of compromises across the organisation and the possible misalignment across the Divisions. Failure of the businesses to understand the imperative to change - due to ineffective communication from the leadership teams. Failure to comply with new operating model - due to ineffective enforcement of the model and changes not embedded into the business. Failure to communicate the change and impact of the change to clients - potentially causing opposing short-term drivers.	Material controls: · Serco Operating Model objectives. · Group Transformation Programme Management Office (PMO) and Programme Governance Boards. · Programme risk management process. · Stakeholder engagement and communication plans. · Serco Management System (SMS). · Divisional Performance Reporting (DPR) process. · Benefits management process. · Embedding benefits within Divisional budgets.	Mitigation priorities: ·  Development of programme benefit cards to facilitate measurement of anticipated benefits. ·  Full alignment of Group, Divisions and Business Units to Operating Model. ·  Refine DPR to capture transformation delivery and performance.
FINANCIAL RISKS
Financial control failure Financial control failure may result in: an inability to accurately report timely financial results and meet contractual financial reporting obligations; a heightened risk of error and fraud; poor quality data leading to poor business decisions; an inability to forecast accurately; the failure to create a suitable capital structure; and an inability to make critical financial transactions; therefore, leading to financial instability, potential business losses and negative reputational impact. Strategic objectives impacted: Executing brilliantly, A place people are proud to work, Profitable and sustainable
Key risk drivers: Not setting the right tone from the top - without which, we may fail to embed the finance policy, processes and controls. Poor financial processes - if processes are poorly designed, then inaccuracies and fraud may occur. Inadequate financial controls within the business - if controls are inadequate we may fail to provide adequate protection from sabotage of systems, fraud and error. Impact of Transformation Programme activities - programme activities may lead to poor change control or an unstable financial control environment due to an increased workload on the finance community. Failure of Finance Transformation Programme - we do not transform the finance processes and controls, and fail to deliver expected benefits.	Material controls: · Group governance and finance strategy. · Finance transformation programme governance. ·  Active monitoring of outsourced partners. ·  Serco Management System (SMS) - finance processes and controls. ·  Standardised reporting, forecasting and financial processes. ·  Standardised financial systems and data structures. · Skilled and adequately trained finance staff. · Financial assurance and second line of defence assurance activities.	Mitigation priorities: · Continued delivery of finance transformation programme. · Complete knowledge transfer process within the UK. · Embedding new forecasting tool, policies and practices. · Continuous improvement of reporting processes as a result of better data capture. · Monitor compliance with billing processes and continuous billing assurance programme. · Standardisation of Integrated Assurance Maps. · Complete gap analysis of benchmark controls and assurance activities across key risk drivers managed by Divisions.

OPERATIONAL RISKS

Major information security breach A major information security breach resulting in the loss or compromise of sensitive information (including personal or customer) or wilful damage resulting in the loss of service, causing significant reputational damage, financial penalties and loss of customer confidence. Due to the nature of the services we provide, our technology and operational systems will be subject to threats from both internal and external breaches. We implement effective controls proportionate to the level of sensitivity of the information we are protecting, and where 'things go wrong', we act swiftly to minimise the impact of any breach and carry out remedial actions to prevent further breaches immediately. Strategic objectives impacted: Winning good business, Executing brilliantly, Profitable and sustainable
Key risk drivers: Non-compliant systems - if our systems are non-compliant with regulatory requirements for sensitive information, we are susceptible to breaches and penalties. Non-compliance with policies and standards - if staff do not comply with Serco policies and standards, then they may accidentally release sensitive information to third parties. Vulnerability of systems and information - if we do not identify sensitive information and protect and test the vulnerability of our systems, then we are potentially exposed to a breach. Unauthorised use of systems - if we do not implement effective personnel vetting and access restriction processes and controls, then unauthorised use of our systems may occur. Inadequate incident monitoring and response - if we do not monitor our systems and remediate and repel attacks, then we may fail to minimise the impact of any breach.	Material controls: ·  Enterprise Architecture Boards and Solution Review meetings. ·  Serco Management System (SMS). ·  IT security infrastructure, process and controls. ·  Privilege User Management (PUM) process. ·  External accreditation (eg, Cyber Essentials Plus (CES+) in the UK). ·  Third party due diligence checks. ·  Global Security Operations Centre and Computer Security Incident Response Teams. ·  My HR - standardised HR processes and corporate HR system. ·  Serco Essentials training. ·  Cyber security awareness training, including regular Phishing training exercises.	Mitigation priorities: ·  Completion of Cyber Defence and Hardening Programmes in all Divisions. ·  Completion of PUM roll out across all Divisions. ·  Routine vigilance and proactive vulnerability identification coordinated through our Security Operations Centre. ·  Regular controls assurance. ·  Embed third party due diligence checks for key suppliers.

Contract non-compliance, non-performance or misreporting Failure to deliver contractual requirements or failure to meet and report against agreed service performance levels accurately may lead to significant financial penalties, legal notices, onerous contract provisions, or ultimately early termination of contracts. If the misreporting is deliberate, it may constitute fraud, and the Group may be subject to litigation, inquiries or investigations that could divert management time and resources, and result in penalties, sanctions, variation or revocation of permissions and authorisations, suspension or debarment from doing business with government customers. Strategic objectives impacted: Executing brilliantly, Profitable and sustainable
Key risk drivers: Poor leadership and culture -if our leaders do not align with our Values, and staff feel under pressure to meet challenging operational targets and/or performance indicators, then deliberate misreporting may occur. Lack of process and controls -poorly documented or poorly communicated processes may lead to deliberate or unintentional misreporting or contract non-compliance. Ineffective assurance and human error - insufficient oversight and assurance of contract performance, could lead to contract non-compliance, non-performance or a misreporting of performance. Poor understanding of contract obligations - may result in staff failing to acknowledge and act on obligations or a failure to provide adequate resources to deliver against contractual obligations. Poor systems/IT - unreliable or incorrectly configured systems may result in late or incorrect data produced.	Material controls: · Viewpoint checks, communication of Our Values and Code of Conduct. · Contract Management Application (CMA). · Serco Management System (SMS). · Business Lifecycle Review Team (BLRT) process. · Leadership Development Programme and Contract Manager training. · Contract governance including Monthly Contract Reviews, Business Unit reviews and Divisional Performance Reporting (DPR) process. · Speak Up process (EthicsPoint).	Mitigation priorities: · Consistent Contract Management training. · Embed use of the CMA. · Development of additional contract performance Indicators ('health checks').

Failure of business critical partner, sub-contractor or supplier As a result of the failure of a business critical partner, sub-contractor or supplier1 to deliver and/or perform to the required standard, Serco may be unable to meet its customer obligations or perform critical business operations which could result in a financial, operational or reputational impact. 1A partner, sub-contractor or supplier on whom Serco depends to deliver customer critical services or perform critical Serco business operations and therefore ability to earn revenue. Strategic objectives impacted: Executing brilliantly, Profitable and sustainable
Key risk drivers: Ineffective procurement and supply chain governance - no Group functional owner for procurement resulting in inconsistencies in implementation of standards, potential non-compliance to those standards and lack of consequence management for non-compliance. Identification of significant suppliers - a failure to identify who are our critical suppliers may result in lack of focused oversight, and understanding of the impacts on Serco should they fail to deliver our customer critical service. Limited oversight - resulting in poor sourcing, contracting and monitoring of business critical partners, sub-contractors and suppliers as well as the potential for engaging in ineffective or onerous contracts with suppliers or sub-contractors. Lack of resilience in the supply chain - exposing us to potential service provision or financial losses should they have ineffective Business Continuity and Disaster Recovery plans.	Material controls: · Serco Management System (SMS) - procurement policy, standards and procedures. · Sourcing Standard Operating Procedure. · Supplier Management Standard Operating Procedure. · Maintenance of business critical partner, sub-contractor and supplier list. · Compliance Assurance Testing. · Consequence management. · Financial health checks and monitoring. · Supplier performance and risk reviews. · Supplier Business Continuity Plan audits.	Mitigation priorities: · Consistent understanding and management of the risk across all Divisions. · Establish Divisional compliance assurance testing. · Supplier Relationship Management (SRM) Pilot and development of future approach to SRM. · Audit business critical sub-contractor and supplier business continuity plans.

PEOPLE RISKS

Failure to act with integrity Being found to have engaged in a significant corrupt or dishonest act (bribery, fraud, misreporting, cheating, and lying) leads to customers being reluctant to do business with such organisations. Such behaviour might arise through the actions of rogue employees or as a result of pressures individuals feel they are being placed under (culture). Such acts might lead to the loss of existing business; restrictions on our ability to bid or win new business; our ability to attract high-quality people or partners; and an adverse impact on shareholder, investor and financial institutions' confidence in Serco. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable
Key risk drivers: Failure to communicate - if we do not define and communicate our Values and expected standards adequately, our staff and third parties will fail to understand these, which may result in inappropriate leadership actions and low engagement with our Values. Our ways of working do not align with our Values - staff or third parties being unaware of and/or not reflecting our Values may result in poor decision-making, unacceptable business conduct, and unethical or illegal behaviour bringing our operations into disrepute. Direct or indirect contribution to human rights abuse - staff either directly or indirectly contributing to human rights (including slavery and forced labour) abuses may result in a breach of laws/regulations.	Material controls: · Top level commitment/tone from top. ·  Strong, meaningful and understood Values. ·  Code of Conduct. ·  Corporate Governance with oversight by the Corporate Responsibility Committee (CRC). ·  Delegated Authority Register (DAR). ·  Serco Management System (SMS). ·  Financial controls and processes, with segregation of duties for core financial controls. ·  Gifts and Hospitality process and registers. ·  Risk management procedures. ·  Third party due diligence. ·  Leadership Academy. ·  People development and remuneration. ·  Speak Up process (EthicsPoint).	Mitigation priorities: ·  Implementation of on-line Conflict of Interest registers. ·  Refinement of divisional compliance risk assessment. ·  Clarification of ethics roles and investigation responsibilities. ·  Embed the new third party due diligence tool. ·  Refresh Serco Essentials Plus training. ·  Continue with divisional Anti-bribery and Corruption reviews.

 HAZARD RISKS

Catastrophic incident An incident or accident as a result of Serco's actions or failure to effectively respond to an event that results in multiple fatalities, severe property/asset damage/loss or very serious long term environmental damage. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable
Key risk drivers: Lack of capability and experience - if our chosen market sectors are not aligned to our capability and experience, then a failure to operate optimally may result in a serious event. Lack of safety cultural alignment - a safety culture which does not reflect our Values and fails to engage our staff and work safely may result in a serious event. Ineffective or inadequate policies, standards and procedures - if procedures/systems are not aligned with industry standard or customer expectations, an unacceptable level of safety management may occur. Insufficient safety management oversight - devolved compliance of regulations to sector-specific SMEs without appropriate safety management oversight may result in safety management systems which are not fit for purpose. Factors resulting in unsafe conditions - a lack of identification and assessment of risks, sudden equipment failure or inadequate security may result in poor mitigation of and/or response to a serious event. Inadequate response to a catastrophic event - if our contingency plans do not provide an adequate response to an event then escalation of an event or prolonged disruption may occur.	Material controls: ·  Serco Health, Safety and Environmental (HSE) Strategy. ·  Effective and engaged safety culture. ·  Regular safety communications and maintenance of safety awareness. ·  Competency based recruitment programme. ·  Role description and competency definition. ·  Serco Essentials training. ·  Access to subject matter expertise. ·  Serco Management System (SMS). ·  Business Lifecycle Review Team (BLRT) process. ·  Planned and preventative inspections, maintenance and repair programmes. ·  Third party ethical due diligence procedure. ·  Assure - Serco's incident and compliance reporting system. ·  Incident/near miss investigations. ·  Divisional Performance Reporting (DPR) process. ·  Crisis and incident emergency response plans and testing. ·  Business Continuity plans and testing. ·  Compliance assurance and audit programmes. ·  Adequate insurance policies.	Mitigation priorities: ·   Refinement of controls following effectiveness review. ·   Testing of Crisis Management, Disaster Recovery and Business Continuity plans. ·   Review of contractual risk allocation and insurance.

LEGAL AND COMPLIANCE RISKS

Material legal and regulatory compliance failure Serco is subject to numerous laws and regulations as a result of the complexity and breadth of the sectors and jurisdictions in which it operates. Failure to comply with laws and regulations may cause significant loss and damage to the Group including exposure to regulatory prosecution and fines, reputational damage and the potential loss of licences and authorisations, all of which may prejudice the prospects for future bids and the retention of existing business. Defending legal proceedings may be costly and may also divert management attention away from running the business for a prolonged period. Uninsured losses or financial penalties resulting from any current or threatened legal actions may also have a material adverse effect on the Group. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable
Key risk drivers: Lack of governance and oversight - may result in a failure to identify potential or actual breaches to legal requirements and result in a failure to respond appropriately, or weaken our ability to confirm compliance with legal and regulatory requirements. Failure to comply with the SMS and contractual obligations - may result in compliance failures for Group-wide material legal and regulatory requirements. Failure to identify and respond to material changes in legal and regulatory requirements - may result in key subject matter experts within the business not remaining up to date and we then fail to comply with material legal and regulatory obligations. Lack of awareness by employees of the legal and regulatory requirements placed upon them - may result in lack of identification and subsequent compliance to requirements. Inadequate provision of systems and tools - may result in ineffective methods to support the management of legal and regulatory compliance.	Material controls: · Automated alerts on material legal and regulatory obligations and changes. · Investment Committee process and governance. · Third party due diligence. · Serco Management System (SMS). · Legal Tracker case management software. · Gift and Hospitality process and registers. · Legal training. · Serco Essentials training. · Compliance Assurance Programme (CAP) reviews. · Business Lifecycle Review Team (BLRT) process and governance. · External regulatory audit. · Bi-annual reporting to Board and Executive Committee on new laws across the Group. · Speak up process and case management system (EthicsPoint).	Mitigation priorities: ·  Use of trend analysis and analytics from Legal Tracker software. ·  Launch of revised Code of Conduct and Supplier Code of Conduct. ·  Complete and embed General Data Protection Regulation (GDPR) readiness programme. ·  Refresh Serco Essentials training programmes. ·  Implement revised Group Standard Operating Procedures (GSOP). ·  Develop and implement new GSOPs including export controls, parental guarantees and conflicts of interest. ·  Continue with contract and compliance assurance reviews. ·  Embedding and sustaining the Corporate Renewal Program.

Related Party Transactions (note 38 to the consolidated financial statements)

Transactions between the Company and its wholly owned subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint venture undertakings and associates are disclosed below.

Transactions

During the year, Group companies entered into the following transactions with joint ventures and associates:

	Transactions 2017  £m	Current outstanding at 31 December 2017  £m	Non-current outstanding at 31 December 2017  £m
Sale of goods and services
Joint ventures	0.5	0.1	-
Associates	7.1	0.5	-
Other
Dividends received - joint ventures	11.1	-	-
Dividends received - associates	17.1	-	-
Receivable from consortium for tax - joint ventures	2.4	5.3	-
Total	38.2	5.9	-

Joint venture receivable and loan amounts outstanding have arisen from transactions undertaken during the general course of trading, are unsecured, and will be settled in cash. Interest arising on loans is based on LIBOR, or its equivalent, with an appropriate margin.

No guarantee has been given or received. The only loan amounts owed by joint ventures or associates related to a single entity which have been provided for in full (see Note 11).

	Transactions 2016  £m	Current outstanding at 31 December 2016  £m	Non-current outstanding at 31 December 2016  £m
Sale of goods and services
Joint ventures	0.5	0.1	-
Associates	6.2	0.5	-
Other
Dividends received - joint ventures	20.4	-	-
Dividends received - associates	19.6	-	-
Receivable from consortium for tax - joint ventures	3.2	7.7	-
Total	49.9	8.3	-

Remuneration of key management personnel

The Directors of Serco Group plc had no material transactions with the Group during the year other than service contracts and Directors' liability insurance.

The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS24 Related Party Disclosures:

	2017  £m	2016 £m
Short-term employee benefits	12.5	11.9
Share based payment expense	6.2	4.7
	18.7	16.6

The key management personnel comprise the Executive Directors, Non-Executive Directors and members of the Executive Committee (2017: 23 individuals, 2016: 20 individuals).

Aggregate directors' remuneration

The total amounts for directors' remuneration in accordance with Schedule 5 to the Accounting Regulations were as follows:

	2017 £m	2016 £m
Salaries, fees, bonuses and benefits in kind Amounts receivable under long-term incentive schemes	5.5 6.3	5.6 5.6
Gains on exercise of share options	0.1	-
	11.9	11.2

None of the Directors are members of the company's defined benefit pension scheme.

One director is a member of the money purchase scheme.

Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration Report on pages 110 to 112.

Directors' Responsibility Statement (page 150)

The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Company 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 as adopted by the European Union ('IFRSs as adopted by the EU') and applicable law, and have elected to prepare the Company financial statements in accordance with UK accounting standards, including FRS 101, Reduced Disclosure Framework. 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 Group and Company and of their profit or loss for that period.

In preparing each of the Group and Company financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable, relevant, reliable and prudent;

·      for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;

·      for the Company financial statements, state whether applicable UK accounting statements have been followed, subject to any material departures disclosed and explained in the Company financial statements;

·      assess the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

·      use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

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 its financial statements comply with the Companies Act 2006. They are responsible for such internal controls as they determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the Annual Report and Accounts

We confirm that to the best of our knowledge:

·      the financial statements, prepared in accordance with the applicable set of accounting standards, 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; and

·      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.

We consider, the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

By order of the Board

Rupert Soames, Group Chief Executive

Angus Cockburn, Group Chief Financial Officer

 

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