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Sainsbury(J) PLC - Annual Report and Notice of AGM 2020

RNS Number : 4028O
Sainsbury(J) PLC
29 May 2020
 

29 May 2020

 

J Sainsbury plc

(the "Company")

 

Annual Report and Financial Statements

AND NOTICE OF ANNUAL GENEral meeting 2020

 

The following documents have today been posted or otherwise made available to shareholders:

 

·    Annual Report and Financial Statements 2020 for the year ended 7 March 2020;

·    Notice of Annual General Meeting to be held on 2 July 2020; and

·    Form of Proxy for the 2020 Annual General Meeting.

 

In accordance with Listing Rule 9.6.1R, a copy of each of these documents will be uploaded to the National Storage Mechanism and will be available for viewing shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

 

The above documents may also be viewed online at www.about.sainsburys.co.uk/ar2020 and www.about.sainsburys.co.uk/agm2020.

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's Preliminary Results Announcement on 30 April 2020. 

 

That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2020 (the "Annual Report 2020") constitute the material required by Disclosure Guidance and Transparency Rule 6.3.5R, which is required to be communicated to the media in full unedited text through a Regulatory Information Service

 

This announcement is not a substitute for reading the full Annual Report 2020.  Page and note references in the text below refer to page numbers in the Annual Report 2020.  To view the preliminary announcement, slides of the results presentation, the transcript of the presentation and the webcast please visit www.about.sainsburys.co.uk/investors/results-reports-and-presentations.

 

 

 Enquiries

Investor Relations

Media

James Collins

Rebecca Reilly

+44 (0) 20 7695 0080

+44 (0) 20 7695 7295

 

 

Our Principal Risks and Uncertainties

 

The COVID-19 pandemic has demonstrated that risk and issue management is an inherent part of doing business and has tested Sainsbury's risk and resilience processes. The short-term impact of COVID-19 on our principal risks was assessed by the Board. The results of this assessment are set out on pages 7 to 9. Below and on the following pages, we set out an overview of the risk management framework, the principal risks at year end, ongoing mitigations and how these align to our strategy. The Board will continue to monitor the principal risks and flex mitigations, in particular, to respond to the medium and longer-term impacts of the pandemic as they become clearer.

 

Risk management framework

The management of risk is based on the balance between risk and reward, determined through a careful assessment of both the potential outcomes and impact as well as risk appetite. Consideration is given to both reputational and financial impact, recognising the significant commercial value of the Sainsbury's brand. The risk management process is aligned to our strategy and each principal risk and uncertainty is considered in the context of how it relates to the achievement of the Group's strategic objectives.

 

The following table provides an overview of the key risk management activities undertaken by leadership that allow the Board to fulfil its obligations under the 2018 Code. Please refer to page 55 for the role and remit of these.

 

Division/function leadership

Bottom-up risk identification

-       Divisional risk maps reviewed and challenged

-       Monitor risk actions

Governance forums

Risk identification and monitoring

-       Divisional risks relevant to forums' area of scope

-       Governance forum risk maps

Operating Board

Bi-annual corporate risk updates and deep dives

-       Corporate risk map and monitor actions

-       Risk deep dives

-       Emerging risk map

Audit Committee

Corporate risk updates, deep dives and approval of the risk framework

-       Corporate risk map

-       Risk deep dives

-       Risk policy and framework

-       Internal audit reporting

plc Board

Review of risk process, corporate risks and approval of risk disclosures

-       Annual internal controls certification by management

-       Principal risk and uncertainty disclosures

 

Our risk management process is designed to identify key risks and to provide assurance that they are fully understood and managed in line with management's risk appetite.

 

The plc Board has overall responsibility for risk management and internal controls, and for reviewing their effectiveness at least annually. Certain responsibilities have been delegated to the Audit Committee as outlined on page 71.

 

The risk management process is embedded at the Operating Board level and is supported by the bottom-up risk process within divisions and governance forums. The Operating Board maintains an overall corporate risk map, which is reviewed four times a year by the Audit Committee and is formally discussed with the Board.

 

To support risk discussions, the corporate risk map captures the principal risks to achieving Sainsbury's objectives and identifies the potential impact and likelihood at both a gross and net level. The Operating Board reviews the risk map twice a year to discuss and agree the level of risk that the business is prepared to accept for each key corporate risk. The target risk position is captured to reflect management's risk appetite where this differs to the current net position. This enables the Operating Board to agree and monitor appropriate actions as required.

 

Operating Board members certify annually that they are responsible for managing their business objectives and internal controls to provide reasonable, but not absolute, assurance that the risks in their areas of responsibility are appropriately identified, evaluated and managed. This is reported to the plc Board.

 

Internal Audit and Risk provides the Audit Committee with a risk management update at each meeting, which includes the key risk activities undertaken within functions, governance forums and at divisional and corporate levels.

 

Developments in our risk management process:

 

Emerging risks and opportunities were reviewed formally in the year. Whilst emerging risks are regularly discussed and identified as risks "to watch" through our bottom-up risk assessment process, this year a supplementary review was facilitated by Internal Audit and Risk. The review assessed a range of scenarios to identify emerging risks and opportunities that may impact our business, considering their potential timeframe and degree of certainty. The outcomes were reported to the Operating Board and Audit Committee. Going forward, this assessment will be completed annually and aligned to corporate planning.

 

The business has also continued to monitor and respond to risks and uncertainties relating to the impact on our operations of Brexit, which we continue to disclose as a specific principal risk.

 

Climate change risks were subject to a specific risk review. Risks identified from the bottom-up and emerging risk assessments were reviewed to confirm completeness. Their impact on our overall risk assessment was then considered.

 

Climate change risks identified are considered in the existing principal risks we are disclosing and have been taken into consideration in assessing impact and likelihood, where appropriate.

 

As signatories of the Task Force on Climate-related Financial Disclosures (TCFD), we will implement their recommendations in 2020/21. This will include using scenario modelling to further assess the impact of current and emerging climate change on our business model.

 

 

The annual risk management process is illustrated in the table below.


Quarter 1

March to June

Quarter 2

July to September

Quarter 3

September to December

Quarter 3

December to March

Divisions/

functions

Divisional risk workshops

(bottom-up risk identification)

Divisional risk check-in

(quarterly in 2020/21)

Divisional risk check-in

(risk validation)

Divisional risk check-ins

(quarterly in 2020/21)

Management

annual certification risks are

identified, evaluated and monitored

Governance

forums

Governance forum risk

workshops

(consolidated view of

risks reviewed)

Governance forum risk

check-in

(quarterly in 2020/21)

Governance forum risk

check-in

(consolidated view of

risks validated)

Governance forum risk check-in

(quarterly in 2020/21)

Operating

Board

Emerging risk assessment

move to align with 2020/21

Corporate Planning

Corporate risk map

half-year review

(review consolidated view

of risks/actions)

Emerging risk workshop

to review bottom-up and scenario

based emerging risks (2019/20)

Corporate risk map

year-end review

Risk deep dives aligned to business priorities

Audit

Committee

Review and approve

principal risks and uncertainties

Corporate risk map

half-year review

(review consolidated view

of risks/actions)

Risk management update

Corporate risk map

year-end review

Approve risk framework

Risk deep dives as requested by Audit Committee Chair

plc Board

plc Board

review of risk process, corporate

risks and principal risks

and uncertainties




Internal

Audit and

Risk

Facilitate the risk management process and prepare reporting to all Boards

Internal Audit

risk-based half-year plan


Internal Audit

risk-based half-year plan

Annual review of

risk framework

 

The specific risk management activities undertaken in the financial year to 7 March 2020, and proposed changes for next year, include:

-       The Internal Audit and Risk team facilitated risk workshops with divisional leadership teams to identify the key risks which may prevent the achievement of objectives. A risk map is maintained for each division setting out key risks and their gross, net and target positions. A consolidated view of relevant risks was then discussed at each key governance forum - safety, data governance and operational resilience. In 2020, we will move to quarterly check-ins with all divisions and governance forums.

-       Divisional management and governance forums reviewed key risks and the effectiveness and robustness of the mitigating controls as part of their normal business activities.

-       Emerging risks and opportunities were formally assessed. Emerging risks and opportunities will continue to be monitored, with this assessment aligned to corporate planning in 2020.

-       The Operating Board reviewed and challenged the output of the bottom-up risk process including new risks, risk movements and key themes. The corporate risk map was updated as appropriate.

-       The plc Board reviewed the risk management process and corporate risks at the year end and approved the Company's principal risks and uncertainties disclosure, including the disclosure relating to the impact of COVID-19 on principal risks (as set out on pages 38 to 45 and on pages 7 to 9).

-       Internal Audit provided independent assurance to management and the Audit Committee over specific risk areas as part of their audit plan.

-       As set out over the following pages, risk deep dives were undertaken with the Operating Board and/or Audit Committee for seven of our 12 principal risks. Deep dives will continue, with focus on assessing whether we are within our risk appetite.

 

The most significant principal risks identified by the Board and the mitigations are set out below in no order of priority.

 

The net risk movement from the prior year for each principal risk and uncertainty has been assessed.

 

Mitigations in place, supporting the management of the risk to a net risk position, are also described for each principal risk and uncertainty.

 

Where principal risks have been included in the risk modelling, undertaken as part of the preparation of the viability statement (see page 46), this has been indicated with the following symbol: *.

 

Key risk movements

As noted, the principal and emerging risks are discussed and monitored throughout the year to identify changes to the risk landscape. Risks are reviewed in line with the Company's strategic objectives.

 

The key risk movement disclosed relates to the net risk impact for data security increasing to reflect the level of fines being imposed in the UK market for data breaches.

 

Brand perception

Risk

We are a multi brand, multi channel business incorporating Sainsbury's, Argos, Habitat, Tu, Nectar and Sainsbury's Bank. Our business must continue to evolve to meet customer needs and maintain customer loyalty. Customer lifestyles, behaviours and expectations are changing and we need to continue to differentiate our offer to retain and attract customers. We also need to protect our brand so that customers, suppliers and stakeholders continue to trust us.

Direct oversight

Operating Board, Customer Trading Forum and Sainsbury's Bank Management Board

Link to strategy

-       Be competitive on price

-       Offer distinctive products and new categories

-       Fast, friendly and convenient

Movement

No change to net risk exposure

Mitigations

-       We continually focus on evolving our ways of working to ensure we continue to meet our customers' needs so that our brands continue to remain relevant

-       We have a wide, differentiated product offer, which gives our customers more reasons to shop with us

-       We change and evolve to meet the needs of our customers through our digital strategy and technology developments, so that we are there for them whenever and wherever they want to shop with us, with great products and services at fair prices. To deliver this, we will continue to listen to and understand our customers

-       Nectar supports our strategy of knowing our customers better than anyone else. The acquisition has given us more control over how we reward and recognise our customers and we have since launched digital Nectar to give customers offers which are personalised to them

-       In terms of brand protection, many of the mitigation activities set out against the risks above also help prevent or reduce the risk of losing the trust and loyalty of customers, suppliers and broader stakeholders

-       We launched an all-encompassing target to become a Net Zero business by 2040, as we know this is a material concern and motivation for our customers both now and in the future

 

Brexit*                                                                           

RISK DEEP DIVE

Risk

There remains economic and regulatory uncertainty in the UK following leaving the EU in January 2020 and a lack of clarity around future trading arrangements following the transition period. These uncertainties could have an adverse effect on customers, supply chains and colleagues, potentially impacting trading performance across the sector.

Direct oversight

Operating Board

Link to strategy

-       Be competitive on price

-       Personalised and seamless physical and digital

-       Be a place where we all love to work

Movement

No change to net risk exposure

Mitigations

-       The Brexit Response team has been in place during the last year to actively prepare for a no deal scenario. The Brexit Response team co-ordinates activities across the Trading, Retail, HR, Legal and Finance teams to help ensure that, in the event of no-deal at the end of the transition period, appropriate mitigations are in place to reduce the impact on customers, supply chains and colleagues

-       These activities continued to focus on three key areas of risk in the event of a no deal:

-       Delays at borders, reducing fresh product availability and choice

-       Cost impact associated with tariffs, loss of trade and currency fluctuations

-       Impact of changes in EU migration throughout our supply chains

-       We will continue to engage actively with the Government, industry and regulatory bodies to assess the specific impact on our business as and when their focus returns to this matter

 

Business continuity, operational resilience and major incident response 

RISK DEEP DIVE

Risk

A major incident or catastrophic event could affect the business or its individual brands' ability to trade. Sainsbury's exposure to operational resilience and major incident risks may be greater following the acquisition of Argos and Nectar given the increased size and complexity of the business.

Direct oversight

Group Operational Resilience Committee

Link to strategy

-       Fast, friendly and convenient

-       Personalised and seamless physical and digital

Movement

No change to net risk exposure

Mitigations

-       The Group Operational Resilience Committee (GORC) meets quarterly and is chaired by the Chief Financial Officer, with support from our Company Secretary and Corporate Services Director and Chief Information Officer. The GORC sets the operational resilience strategy for the Group and monitors progress against this

-       To support this, the Operational Resilience Committee, which includes representatives from operational functions across Sainsbury's, including the Bank, meets regularly to ensure that the operational resilience policy and strategy is implemented

-       Business-wide resilience exercises are undertaken to imitate real life business continuity scenarios and test our ability to respond effectively

-       Key strategic locations have secondary backup sites that would be made available within pre-defined timescales and are regularly tested

-       All key business processes are assessed for operational resilience against a set of minimum standards and contingency measures are regularly tested

-       In the event of any unplanned or unforeseen events, the Incident Response team is convened to manage the response and any associated risk to the business

-       The business has plans in place, supported by senior representatives who have the experience and the authority levels to make decisions in the event of a potentially disruptive incident

-       Key strategic locations have an automated emergency call cascade solution implemented which allows for emergency communications to be made to all colleagues and for responses to be received back when required

 

Business strategy and change*

Risk

If the Board adopts the wrong business strategy or does not communicate or implement its strategies effectively, the business may be negatively impacted. Risks to delivering the strategy, change initiatives forming part of the strategy and other significant supporting change activities need to be properly understood and managed to deliver long-term growth for the benefit of all stakeholders alongside management of business as usual.

Direct oversight

Operating Board

Link to strategy

-     Drive efficiency to reinvest

Movement

No change to net risk exposure

Mitigations

Our business strategy, as set out in this Strategic Report, is focussed on:

• Be competitive on price

• Offer distinctive products and new categories

• Fast, friendly and convenient

• Personalised and seamless physical and digital

• Drive efficiency to reinvest

• Be a place where we all love to work

• Net Zero by 2040

-     The Board regularly reviews progress against strategic programmes and any risks to delivery, such as the ability to implement and deliver change and new business initiatives. The overall strategy is reviewed at the annual two-day Strategy Conference and a Capital Markets Day was held in September 2019 to give investors greater insight into business priorities

-     The Operating Board has regular sessions to discuss strategy; supported by a dedicated strategy team. The strategy is communicated and the business continually engages with a wide range of stakeholders, including shareholders, colleagues, customers and suppliers

-     Management performs ongoing reviews of our market, as explained on pages 12 to 13 and monitors business as usual performance to determine indicators of potential negative performance because of change initiatives

 

Colleague engagement, retention and capability

Risk

The business employs over 172,000 colleagues who are critical to the success of our business. Attracting talented colleagues, investing in training and development, maintaining good relations, and rewarding colleagues fairly are essential to the efficiency and sustainability of business operations. An inability to attract, motivate and retain talent, specific skill sets and capability impacts our ability to deliver strategic objectives, including the integration with Argos. In addition, the challenging trading environment requires a focus on efficient operations, which may include change initiatives affecting colleagues, therefore presenting a risk of loss of colleague trust or engagement.

Direct oversight

Operating Board

Link to strategy

-     Be a place where we all love to work

Movement

No change to net risk exposure

Mitigations

-     Employment policies and remuneration and benefits packages are regularly reviewed and are designed to be competitive, with other companies, fair and consistent, as well as providing colleagues with fulfilling career opportunities

-     In addition to strong leadership and nurturing of talent by line managers, formal processes are also in place to identify talent and actively manage succession planning throughout the business

-     Reviews are performed to help develop the skills colleagues need to deliver objectives and this is supported by embracing new ways of attracting talent

-     Our business priority 'Be a place where we all love to work' reinforces our commitment to giving people the opportunity to be the best they can be

-     Colleague surveys, performance reviews, listening groups, communications with trade unions, regular communication of business activities and colleague networking forums such as Yammer, the updated colleague portal (Our Sainsbury's) and the colleague learning portal are some of the methods the business uses to understand and respond to colleagues' needs

-     As change initiatives are implemented, the methods described above will continue to be employed to understand and maintain colleague trust and engagement

 

Data security*                                                                         

RISK DEEP DIVE

Risk

It is essential that the security of customer, colleague and company confidential data be maintained. A major breach of information security could have a significant negative financial and reputational impact on the business. The risk landscape is increasingly challenging with deliberate acts of cybercrime on the rise, targeting all markets and heightening the risk exposure to broader business disruption as well as to data breaches. We continue to invest in improving our data governance and information security defences, however, we recognised the net risk increased during the year. This was primarily driven by the value of fines levied in the UK market for data breaches.

Direct oversight

Data Governance Committee

Link to strategy

-     Fast, friendly and convenient

-     Personalised and seamless physical and digital

Movement

Increased net risk exposure

Mitigations

-     A Group Data Governance Committee is established and is supported by focused working groups looking at the management of colleague data, customer data, information security, commercial data and awareness and training

-     We have combined our Data Governance and Information Security functions and the Head of Data Governance and Chief Information Security Officer continues to develop information security strategies and to build the necessary capability to deliver against those strategies alongside focusing on improving how we handle data across the organisation

-     Various information security policies and standards are in place, which focus on encryption, network security, access controls, system security, data protection and information handling

-     All colleagues are required to complete mandatory training on how to keep our information safe. This is supplemented by regular awareness campaigns, focusing on specific aspects of data and information security

-     Reviews of key third parties who hold sensitive customer or colleague data continue to take place and progress is monitored by the Data Governance Committee

-     A risk-based security testing approach across IT infrastructure and applications is in place to identify ongoing vulnerabilities

-     Reflecting the importance of data security, two deep-dive reviews of this risk have been performed with the Operating Board and Audit Committee in the year. These have covered mitigating controls and activities to manage this risk. These discussions are conveyed to the Board as part of our normal governance processes. We have also conducted a review of risk appetite in this area which has been reported to the plc Board

 

Environment and sustainability                           

RISK DEEP DIVE

Risk

The environment and sustainability are core to Sainsbury's values. The key risk facing the business in this area relates to reducing the environmental impact of the business, which could result in a financial and/or reputational risk.

Direct oversight

Operating Board, Corporate Responsibility and Sustainability Committee

Link to strategy

-     Net Zero by 2040

Movement

No change to net risk exposure

Mitigations

-     The Corporate Responsibility and Sustainability Committee met twice during the year. The Committee assesses the impact of Sainsbury's corporate responsibility and sustainability strategy on how we help customers live well for less and in terms of building customer trust

-     In January 2020 we committed to investing £1 billion over 20 years towards becoming Net Zero across our own operations by 2040. This is in line with the highest ambition of the Paris Climate Change Agreement to limit global temperature rise to 1.5 degrees. We have refreshed our sustainability governance structure with the creation of the Net Zero Steering Group, along with specific working groups, who will be responsible for driving and executing this strategy

-     We will use the £1 billion investment to support seven commitments focused on reducing carbon emissions, food waste, plastic packaging and water usage and increasing recycling, biodiversity and sustainable diets in order to improve our climate change resilience

-     As part of our Net Zero by 2040 strategy, we will provide clear, frequent disclosures on our progress. As signatories of Task Force on Climate-related Financial Disclosures (TCFD), we will use scenario modelling to further assess the impact of current and emerging climate change on our business model and strategy

 

Financial and treasury*                                         

RISK DEEP DIVE

Risk

The main financial risks are the availability of short and long-term funding to meet business needs and fluctuations in interest, commodity and foreign currency rates.

Direct oversight

The Board of J Sainsbury plc

Link to strategy

-     Drive efficiency to reinvest

Movement

No change to net risk exposure

Mitigations

-     plc Board approved Treasury policies are in place to address liquidity risk, refinancing risk, financial markets risk and counterparty credit risk

-     The Treasury function is responsible for managing the liquid resources, funding requirements, commodity, interest rate and currency exposures as set out in line with the Treasury policy and is overseen by the Treasury Committee

-     The Treasury function has clear operating procedures, which are regularly reviewed and audited

-     A long-term funding plan is formed as part of the annual corporate plan process, which includes an assessment of short and long-term core funding requirements and contingent funding requirements

-     A short-term funding plan is formalised as part of the annual budget process, which includes an assessment of the core and contingent funding requirements for the following year and the market conditions for each of the debt markets accessible to the business

-     The business funding strategy and Treasury policies are approved annually by the plc Board

-     Annually, the Audit Committee reviews and approves the viability and going concern statements and reports into the plc Board

-     Finance Commercial review sessions are held each period, chaired by the Chief Financial Officer to review the Company balance sheet, P&L, and net debt in detail with relevant actions and mitigations agreed

-     There is a long-term funding framework in place for the pension deficit and there is ongoing communication and engagement with the Pension Trustees

-     Financial and Treasury risk in respect of Sainsbury's Bank are detailed separately

 

Health and safety - people and product*                       

RISK DEEP DIVE 

Risk

Prevention of injury or loss of life for both colleagues and customers is of utmost importance and is paramount to maintaining the confidence our customers have in our business.

Direct oversight

Group Safety Committee

Link to strategy

-     Offer distinctive products and new categories

-     Fast, friendly and convenient

-     Personalised and seamless physical and digital

Movement

No change to net risk exposure

Mitigations

-     Clear policies and procedures are in place detailing the controls required to manage health and safety, and product safety risks across the business and to comply with all applicable regulations

-     These cover the end-to-end operations, including the auditing and vetting of construction contractors, the health and safety processes in place in our depots, stores and offices and the controls in place to ensure people and product safety and integrity

-     In addition, established product testing programmes are in place to support rigorous monitoring of product traceability and provide assurance over product safety and integrity

-     Supplier terms, conditions and product specifications set clear standards for product/raw material safety and quality with which suppliers are expected to comply

-     Process compliance is supported by external accreditation and internal training programmes, which align to both health and safety laws and Sainsbury's internal policies

-     Resource is dedicated to manage the risk effectively, in the form of the Group Safety Committee and specialist safety teams

-     The Board receives quarterly reports on safety, including a deep dive facilitated by the Head of Group Safety and the Head of Technical Operations

 

Political and regulatory environment* 

Risk

There is an increasing trend of regulation, together with enforcement action, across all areas of our business. This adds additional cost as we respond to the regulations and drives complexity into our business processes.

Direct oversight

Operating Board

Link to strategy

-     Be competitive on price

-     Offer distinctive products and new categories

-     Fast, friendly and convenient

-     Personalised and seamless physical and digital

-     Drive efficiency to reinvest

-     Be a place where we all love to work

-     Net Zero by 2040

Movement

No change to net risk exposure

Mitigations

-     We complete a bi-annual regulatory risk assessment with key areas of the business to identify current and emerging regulation affecting the business, so that we can respond appropriately

-     Regulatory updates are regularly presented to our oversight boards and committees, including the Regulatory Pay Forum, which was established in 2019 to oversee National Living Wage/National Minimum Wage compliance across the business, with flexibility to support other areas of reward compliance if necessary

-     To influence current and emerging regulatory requirements, we continue to engage actively with Government, industry and regulatory bodies

-     We publicly communicate matters where we believe industry change is required, with a view to enabling fair competition that is beneficial to our customers

-     We communicate our views, and those of our customers and colleagues, regarding geopolitical issues with the aim of informing the debate and ensuring our opinions are represented in the policy and decision-making processes

 

Sainsbury's Bank* 

Risk

Sainsbury's Bank is exposed to a number of risks. These include operational risk, regulatory risk, credit risk, capital risk, funding risk, liquidity risk, and market risk.

Direct oversight

The Boards of J Sainsbury plc and Sainsbury's Bank plc

Link to strategy

-     Be competitive on price

-     Offer distinctive products and new categories

-     Fast, friendly and convenient

-     Personalised and seamless physical and digital

-     Drive efficiency to reinvest

-     Be a place where we all love to work

-     Net Zero by 2040

Movement

No change to net risk exposure

Mitigations

-     The Bank is managed through defined governance structures that include the Board of Sainsbury's Bank plc, its Risk Committee and Audit Committee. The Board of Sainsbury's Bank plc is comprised of Executive Directors, Non-Executive Directors and a J Sainsbury plc Operating Board member

-     The Bank has a defined risk appetite aligned to delivery of strategic objectives and has implemented a risk management framework that is overseen by its Risk Committee. This Committee monitors the effectiveness of risk management activities against strategic, operational, compliance and financial risks and is updated on and discusses emerging risk areas. In particular, the Risk Committee reviews the results of stress testing including the internal liquidity and capital adequacy assessments

-     The actual management of risks is through an executive governance structure, which manages the day-to-day operations of the business. This includes the Sainsbury's Bank Management Board, an Executive Risk Committee and an Asset and Liability Committee

-     Oversight by J Sainsbury plc is provided through:

-     Membership of the Board of Sainsbury's Bank plc - one J Sainsbury plc Operating Board member is on the Board of Sainsbury's Bank plc and provides updates to the Board of J Sainsbury plc on Bank matters

-     Updates on key matters arising from meetings of the Risk Committee and Audit Committee are reported to the J Sainsbury plc Audit Committee

-     There are a number of reserved matters where Sainsbury's Bank plc needs to obtain permission from J Sainsbury plc

 

Trading environment and competitive landscape*

RISK DEEP DIVE

Risk

Effective management of the trading account is key to the achievement of performance targets. The sector outlook has been and is set to remain very competitive. The trading environment, driven by ongoing competitive retail pricing combined with growing inflationary cost pressures, may adversely affect our performance. There is also an ongoing risk of supplier failure, with possible operational or financial consequences for the business.

Direct oversight

Customer Trading Forum, Operating Board

Link to strategy

-     Be competitive on price

-     Drive efficiency to reinvest

Movement

No change to net risk exposure

Mitigations

-     We adopt a differentiated strategy with a continued focus on delivering quality products and services with universal appeal, at fair prices, helping our customers Live Well for Less

-     This is achieved through the continuous review of our product quality, key customer metrics, monitoring of current market trends and price points across competitors, active management of price positions, development of sales propositions and increased promotional and marketing activity

-     We continue with our commitment to offer customers even better value with lower regular prices

-     In delivering our strategic plan, including our price investment, we will maintain the strength of our balance sheet and have identified a series of measures to conserve cash in the business

-     Concerning supplier continuity, Sainsbury's maintains regular, open dialogue with key suppliers concerning their ability to trade

 

Examples of risk deep dives in the last year

 

A programme of risk deep dives has continued, with half of the principal risks being reviewed by the Operating Board or Audit Committee in year. We have set out some examples.

 

We reconfirmed risk appetite for all corporate risks with the plc and Operating Boards in the year. A programme of deep dive reviews, focussed on risk appetite, will continue.

 

Data security

plc Board and Audit Committee

Biannual risk deep dives are presented by the Head of Data Governance and Chief Information Security Officer to the Operating Board and Audit Committee. The Operating Board also receives reports from the Data Governance Committee.

This year, a risk deep dive with the plc Board was held in March 2020. The plc Board reviewed our risk appetite across data and information security risks.

 

Health and safety - people and product

Audit Committee

The plc Board receives quarterly updates on safety and a risk deep dive is facilitated annually.

In addition, the Director of Retail and Operations presented a paper to the March 2020 Audit Committee on how relevant safety and legal risks are managed in the retail estate.

 

Financial and treasury

plc Board and Audit Committee

An annual funding deep dive covers going concern considerations, our diversified portfolio of secured and unsecured borrowings and core elements of the Group's financing arrangement in place to maintain funding headroom.

In addition, the business funding strategy and Treasury policies are approved annually by the plc Board.

 

Business continuity

Operating Board

The Operating Board performed a deep dive review of our approach to business continuity, operational resilience and major incident management, presented by the Director of Audit, Risk and Resilience in March 2020.

The Group Operational Resilience Committee also actively reviews this risk during the year. Quarterly updates are also provided to the Audit Committee.

 

Environment and sustainability

Operating Board

The Net Zero by 2040 strategy was reviewed in detail by the Operating Board, including an evaluation of risks, and was approved by the plc Board and CR&S Committee.

The Sainsbury's Net Zero Steering Group and Value Management Groups actively reviewed this risk during the year and presented reports to the Corporate Responsibility and Sustainability Committee.

 

 

 

Related party transactions

 

a) Key management personnel

The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board. The key management personnel compensation is as follows:


2020

£m

2019

£m

Short-term employee benefits

12

11

Post-employment employee benefits

1

1

Share-based payments

6

10


19

22

 

Two key management personnel had credit card balances with Financial Services (2019: five). These arose in the normal course of business and were immaterial to the Group and the individuals. One key management personnel held saving deposit accounts with Financial Services (2019: three). These balances arose in the normal course of business and were immaterial to the Group and the individuals.

 

b) Joint ventures and associates

Transactions with joint ventures and associates

For the 52 weeks to 7 March 2020, the Group entered into various transactions with joint ventures and associates as set out below:


2020

£m

2019

£m

Dividends and distributions received

141

18

Repayment of loans from joint venture

-

(5)

Disposals of joint ventures

(21)

-

Rental expenses paid

(14)

(38)




 

Year-end balances arising from transactions with joint ventures and associates


2020

£m

2019

£m

Payables



Other payables

18

(5)

 

c) Retirement benefit obligations

As discussed in note 35, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in the Scheme. Full details of this arrangement are set out in note 35 to these financial statements.

 

 

Statement of Directors' responsibilities

 

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year, and of the profit or loss of the Group for the financial year. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 'Reduced Disclosure Framework' (UK Accounting Standards and applicable law). 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 the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

-     select suitable accounting policies and then apply them consistently;

-     make judgements and accounting estimates that are reasonable and prudent;

-     state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Company financial statements respectively; and

-     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

Having taken all the matters considered by the Board and brought to the attention of the Board during the year into account, we are satisfied that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable.

 

The Board believes that the disclosures set out in this Annual Report provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

 

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

 

Each of the Directors, whose names and functions are listed on pages 48 to 51, confirms that, to the best of their knowledge:

-     the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

-     the Strategic Report and Directors' Report contained in the Annual Report and Financial Statements include a fair review of the development and performance of the business and the position of the Group, together with a description of the emerging and principal risks and uncertainties that it faces.

 

By order of the Board

 

Tim Fallowfield

Company Secretary and Corporate Services Director

29 April 2020


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
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Quick facts: J Sainsbury PLC

Price: 187.4

Market: LSE
Market Cap: £41.69 m
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