Annual Financial Report

RNS Number : 1353V

Serco Group PLC

04 April 2019

 

Serco Group plc - Annual Financial Report

4 April 2019

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

2018 Annual Report and Accounts

Notice of Annual General Meeting 2019

In accordance with Listing Rule 9.6.1 copies of the above documents, along with the Form of Proxy for the Company's 2019 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 2018 Annual Report and Accounts

The information below, which is extracted from the 2018 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 21 February 2019, 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 2018 Annual Report and Accounts. All page numbers and cross-references in the extracted information below refer to page numbers in the 2018 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. Market conditions continue to be challenging in a number of our sectors and geographies, though our diversity and focus on business development has enabled us to retain important re-bids and gain sufficient new business to stabilise our revenue. With a reasonable pipeline of opportunities ahead, further opportunity for margin improvement and our access to a wide variety of markets, we consider this risk to be stable. Strategic objectives impacted: Winning good business, Profitable and sustainable Risk trend: No change
Key risk drivers: External factors reducing the pipeline of opportunities - political and policy changes in our markets (such as changes in views about the private provision of public services, changes following elections 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 propositions for the markets in which we compete, or an insufficient understanding of our competitive environment 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 inefficient 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 may affect our ability to set and meet targets for growth as well as drive process improvements. Failure to obtain or capitalise on benefits from our Transformation Programme - (See 'Failure of deliver expected benefits from Transformation Programme').	Material controls: ·      Serco Group and Divisional Strategy including annual strategy reviews, ensuring focus on and resource allocation to 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. ●    Newly relaunched Serco Institute to develop thought leadership and innovation for our markets. ●    Business Life cycle Review Team ("BLRT") Process. ●    Pipeline and Business Development ("BD") spend reviews to ensure efficient deployment of resources. ●    Divisional Performance Reporting ("DPR") process. ●    Annual Performance Reviews, Talent Reviews and Succession Planning processes. ·      Ensure that the divisional and business unit BD leadership and resources are appropriate for the delivery of our growth strategy.	Mitigation priorities: ·      Review pipeline opportunities to ensure all market activity is accurately captured and that budgets are allocated accordingly. ●    Review portfolio for new attractive organic expansion areas. ●    Continue to improve leveraging of Serco best practice and innovation, as well as refine bid solution processes and SME resources to ensure our propositions remain competitive. ●    Continue to adopt a robust qualification processes so that Business Development resources are focused on the most attractive opportunities. ●    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 bids, as well as re-bids to ensure existing clients are experiencing good service from Serco and fully understand the value and quality of our services. ●    Continuation of changes to Group and Divisional overhead and Shared Services' structures as part of the Transformation Programme to ensure we remain cost competitive. ·      Review and consider appropriate inorganic growth opportunities as the market continues to develop.
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 and may lead to reduced share price and the related consequences of a reduced valuation of the business. We have maintained a continued focus on Operational Excellence and have made a positive contribution to the debate around public sector outsourcing. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable Risk trend: Decreasing risk
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. Insufficient focus on articulating and evidencing the benefits of private provision of public services - may result in an imbalanced public discourse and a misunderstanding of what Serco contributes to customers and service delivery. Failure to manage incidents appropriately - may result in us not responding in a collaborative manner with our customers or not communicating in an open and ethical manner to key stakeholders.	Material controls: ●    Serco Values clearly defined and understood. ●    Group Reputation, Brand and Communication Standard. ●    Customer and stakeholder relationship, communication and engagement programmes. ●    Proactive engagement with the media and continual media monitoring. ●    Media training and understanding of reputational issues for senior management. ·      Incident management processes and crisis management plans.	Mitigation priorities: ·      Continual refinement and improvement of existing communication and marketing controls and approaches. ·      Continued and heightened efforts to explain and evidence the benefits and innovations that Serco brings to the provision of public services. ·      Recently relaunched Serco Institute to trial and publish innovative thinking in public service delivery.
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. Early momentum on key projects delivery at the end of 2017 (eg. UK divisions consolidation) meant benefits flowed early in 2018, this established momentum for the rest of the year. The full-year target was achieved by July which meant residual risk in-year was minimal. Strategic objectives impacted: Winning good business, Executing brilliantly, Profitable and sustainable Risk trend: Decreasing risk
Key risk drivers: Non-delivery of required benefits - we fail to achieve the expected benefits due to ineffective portfolio management and governance. 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. 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 Target Operating Model and design principles. ●    Portfolio programme management process. ●    Stakeholder engagement and communication plans. ·     Benefits management process.	Mitigation priorities: ·      Key benefits embedded in 2019 budgets to further increase focus on delivery and achievement of benefit outcomes at all levels. ·      Further refinements to benefits tracking and reporting including differentiation between budget supporting and budget enhancing benefits. ·      Additional delivery assurance and supplier management activities built into portfolio and delivery management processes.
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, or an inability to forecast accurately; the failure to create a suitable capital structure, and an inability to make critical financial transactions, leading to financial instability, potential business losses, and negative reputational impact. During 2018, the Finance Transformation Programme has been completed for both our UK and AsPac Divisions. Finance Centres of Excellence were created for both Divisions which are now in a stabilisation phase. Finalising the transformation phase has significantly reduced our financial control risk exposure, and stabilisation will continue to reduce this exposure further. Strategic objectives impacted: Executing brilliantly, A place people are proud to work, Profitable and sustainable Risk trend: Decreasing risk
Key risk drivers: Not setting the right tone from the top - if we do not set the right tone from the top, we may fail to embed 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 Finance 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. ●    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.	Mitigation priorities: ●    Deliver on final components of finance transformation. ●    Embed transformed finance function and monitor delivery and risks of outsourced Finance Centre of Excellence. ●    Continuously improve forecasting and reporting processes and outputs to deliver better insight into contract operations. ●    Deliver global finance process improvement and efficiency through automation and robotics. ●    Establish billing assurance programme. ·      Ensure talent is retained within the finance function through initiatives such as opportunities for personal development and improved training.

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. Whilst our ongoing mitigation measures continue to deliver clear benefits, the external threats continue to evolve in complexity and sophistication, resulting in a steady state view of the overall risk. Strategic objectives impacted: Winning good business, Executing brilliantly, Profitable and sustainable Risk trend: No change
Key risk drivers: Non-compliant systems - if our systems are non-compliant with Serco policies and standards and regulatory requirements for the protection of 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 & Solution Review meetings. ●    Serco Management System ("SMS"). ●    IT security infrastructure, processes and controls. ●    Privileged User Management and Two Factor Authentication for our centralised managed systems. ●    External assessments. ●    Third-party due diligence checks for key suppliers. ●    Active monitoring by our Security Operations Centres and Computer Security Incident Response Team processes. ●    Standardised HR processes. ●    Cyber security awareness training part of our Serco Essentials training programme. ·      Regular Phishing training exercises.	Mitigation priorities: ●    Routine vigilance and proactive vulnerability identification coordinated through our Security Operations Centres. ●    Embed third-party due diligence checks for key suppliers. ·      Embed the use of global key security risk indicators to support mitigation priorities.

Contract non-compliance, non-performance or misreporting Failure to deliver contractural requirements or to meet agreed service performance levels and report against these accurately may lead to significant financial penalties, legal notices, onerous contract provisions or ultimately, early termination of contracts. The reporting structure, the systems and the monthly business performance review which is conducted at contract, Business Unit and Division level across our business provides a rigour that allows senior management visibility of contract performance or compliance issues early. We have seen no major failures in 2018. Strategic objectives impacted: Executing brilliantly, Profitable and sustainable Risk trend: No change
Key risk drivers: 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 being produced. 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 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.	Material controls: ●    Contract Management Application ("CMA"). ●    Contract governance including Monthly Contract Reviews, Business Unit reviews and Divisional Performance Reporting ("DPR") process. ●    Business Life cycle Review Team ("BLRT") process. ●    Serco Management System ("SMS"). ●    Leadership Development Programme and Contract Manager training. ●    Communication of Our Values and Code of Conduct. ·      Speak Up process ("Ethicspoint").	Mitigation priorities: ●    Contract Management training (Global and Divisional). ●    Development and global roll-out of contract performance dashboard ("Gauge"). ●    Improve consistency of approach to risk assessment and controls across all divisions. ·      Divisional operational excellence improvement plans.

Failure of business critical partner, sub-contractor or supplier As a result of the failure of a business-critical1 partner, sub-contractor or supplier 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 on Serco. An extensive exercise to identify business-critical suppliers across all divisions was concluded in Q3, and the trend is steady while controls are implemented and systematically tested. This trend will remain the case while we focus on our highest risk suppliers and test the effectiveness of controls implemented. Strategic objectives impacted: Executing brilliantly, Profitable and sustainable Risk trend: No change
Key risk drivers: Ineffective procurement and supply chain governance - resulting from non-compliance to standards and lack of consequence management. Identification of significant suppliers - a failure to identify 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 services. Limited oversight - resulting in poor sourcing, contracting and monitoring of business-critical business 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 standards and procedures in each region. ●    Identification and maintenance of business-critical partner, sub-contractor and supplier list. ●    Contracts with appropriate KPIs/ SLAs etc. ·     Financial health checks and monitoring in the UK, North America and AsPac.	Mitigation priorities: ●    Focus on highest-rated business-critical suppliers for roll-out and testing of controls. ●    Develop proposition for formal supplier and contract management framework. ●    Audit business-critical sub-contractor and supplier business continuity plans. ·      Risk assessment and mitigation of business-critical suppliers through the Sales and Bidding cycle.

¹ A 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.

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; or may impact shareholder, investor and financial institutions' confidence in Serco. We have continued to entrench our values through explicit leadership behaviours and communications and celebration through the Pulse Awards. Our key controls have been further embedded, including those for our due diligence processes and ethical risk assessment. We have strengthened and further clarified our expected behaviours through updates of Code of Conduct and associated training. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable Risk trend: Decreasing risk
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 the top. ●    Strong, meaningful and understood Values. ●    Code of Conduct. ●    Corporate Governance with oversight by the Corporate Responsibility Committee ("CRC"). ●    Delegated Authority Matrix ("DAM"). ●    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. ●    Corporate investigations. ·      Speak Up process ("Ethicspoint").	Mitigation priorities: ●    Adoption of online Conflict of Interest registers. ●    Refinement of divisional ethics and compliance risk assessments. ●    Review of due diligence processes. ●    Continued refresh of Serco Essentials training. ·      Evaluate effectiveness of internal culture assessment processes.

HAZARD RISKS

Catastrophic incident An event (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. Significant activity completed - frontline operational controls collated and self-assessed. Second line (insurance and contractual risk allocation) under review and improved. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable Risk trend: No change
Key risk drivers: 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. 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. Lack of capability and experience - if resources lack current competency in specialist/regulatory requirements this 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. Insufficient safety management oversight - devolved compliance of regulations to sector-specific Subject Matter Experts without appropriate safety management oversight may result in safety management systems which are not fit for purpose. 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. ●    Safety training and individual development plans and process based on role and operational risk. ●    Access to subject matter expertise. ●    Safety Management System (policy and procedures). ●    Planned and preventative inspections, maintenance and repair programmes. ●    Third-party ethical due diligence process. ●    Assure - Serco's incident and compliance reporting system. ●    Incident/Near-miss investigations. ●    Business Life cycle Review Team ("BLRT") process. ●    Divisional Performance Reporting ("DPR") process. ●    Crisis and incident emergency response plans and testing. ●    Business Continuity plans and testing. ·      Adequate risk transfer via contract, insurance.	Mitigation priorities: ●    Adoption of updated health and safety strategy. ●    Ensure strategy workplans have specific focus on Catastrophic risk. ●    Improve understanding through training in insurance and contractual risk management. ●    Complete second line controls review and alignment of insurance. ·      Review levels and adequacy of compliance assurance.

LEGAL AND COMPLIANCE RISKS

Material legal and regulatory compliance failure 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. 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. Various laws and regulations that apply across the business continue to be subject to increased focus and attention, including anti-bribery and corruption laws, Market Abuse Regulations, data and privacy laws, modern slavery, trade compliance and human rights. Our GDPR implementation programme continues to support the business and help drive increased focus on data protection laws. Strategic objectives impacted: Winning good business, Executing brilliantly, A place people are proud to work, Profitable and sustainable Risk trend: No change
Key risk drivers: Lack of governance and oversight - may result in a failure to identify potential or actual legal or regulatory breaches resulting in a failure to respond appropriately or 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 failure to comply with material legal and regulatory obligations. Lack of awareness by employees of the legal and regulatory requirements placed upon them and the business - 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 and reporting of legal and regulatory compliance. Legal or regulatory compliance failure by a third-party supplier/agent/partner - may result in Serco being held responsible for their failure under customer contracts.	Material controls:  ●   Automated alerts on material legal and regulatory obligations and changes. ●    Legal and contracts experts aligned to various specialist areas across the business. ●    Investment Committee and Business Life cycle Review Team ("BLRT") bid process and governance. ●    Third-party ethical and general due diligence on all suppliers. ●    Serco Management System ("SMS") including various policies and operating procedures guiding and regulating conduct. ●    Case management software and analytics. ●    Legal training. ●    Serco Essentials training. ●    External and Internal audits. ●    Regular reporting to Board and Executive Committee on legal issues and new laws across the Group. ●    Speak Up process and case management system ("Ethicspoint"). ·      Serco Trading Principles promoting consistency across the Group on bid risk.	Mitigation priorities: ·      Horizon scanning on key potential new laws and regulations, including Brexit. ●    Greater use of data and trend analysis to inform Key Risk Indicators. ●    Launch of new Conflicts Group Standard Operating Procedure. ●    Ongoing compliance activity. ●    Refreshing Serco Essentials training programmes. ●    Continuing key contract and compliance assurance reviews on legal compliance. ·      Developing and embedding Serco Trading Principles.

Related Party Transactions (note 36 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 2018  £m	Current outstanding at 31 December 2018  £m	Non-current outstanding at 31 December 2018  £m
Sale of goods and services
Joint ventures	0.4	0.1	-
Associates	7.3	0.6	-
Other
Dividends received - joint ventures	9.7	-	-
Dividends received - associates	20.0	-	-
Receivable from consortium for tax - joint ventures	4.8	5.3	-
Total	42.2	6.0	-

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 6).

	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	-

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:

	2018  £m	2017 £m
Short-term employee benefits	9.5	12.5
Share based payment expense	5.3	6.2
	14.8	18.7

The key management personnel comprise the Executive Directors, Non-Executive Directors and members of the Executive Committee (2018: 17 individuals, 2017: 23 individuals).

Aggregate directors' remuneration

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

	2018 £m	2017 £m
Salaries, fees, bonuses and benefits in kind Amounts receivable under long-term incentive schemes	4.0 3.1	5.5 6.3
Gains on exercise of share options	1.8	0.1
	8.9	11.9

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 116 to 131.

Directors' Responsibility Statement (page 138)

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 (IFRSs) as adopted by the European Union 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 European Union;

●       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's 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 are 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

 

END

 

 

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