RNS Number : 6964M

Tesco PLC

13 May 2020

13 May 2020

Tesco PLC

Annual Report and Financial Statements and Notice of Annual General Meeting 2020

Further to the release of its preliminary results announcement on 8 April 2020, Tesco PLC (the "Company") announces that it has today published its Annual Report and Financial Statements 2020. In addition, the Company announces that its Notice of Annual General Meeting 2020 (the "Notice") has been sent to shareholders. The 2020 Annual General Meeting will be held at our Heart building, Shire Park, Welwyn Garden City, Herts, AL7 1TW on Friday, 26 June 2020 at 10.30 am (the "AGM").

Given prevailing Government guidance in relation to COVID-19, involving social distancing and prohibiting public gatherings, it is proposed that the AGM be convened with the minimum quorum of shareholders present (which will be facilitated by Tesco) in order to conduct the business of the meeting. In the interests of protecting the health and safety of the Company's shareholders, colleagues and AGM support staff, as well as the public, shareholders will not be admitted to the AGM in line with the latest Government guidance. The Company will continue to closely monitor the rapidly developing impact of COVID-19, including the latest Government guidance, and how this may affect the arrangements for the AGM. Consequently, the AGM is subject to change, possibly at short notice. If it becomes necessary or appropriate to revise the current arrangements for the AGM, further information will be made available on our website at www.tescoplc.com/AGM2020 .

The Company's Annual Report and Financial Statements 2020, Notice of Annual General Meeting 2020 and Little Helps Plan Progress Update can be viewed on the Company's website at www.tescoplc.com .

In accordance with Listing Rule 9.6.1R, copies of the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

   --      Annual Report and Financial Statements 2020; 
   --      Notice of Annual General Meeting 2020; and 
   --      Proxy Form for the 2020 Annual General Meeting. 

The Company's preliminary consolidated financial information and information on important events that have occurred during the year, and their impact on the financial statements were included in the Company's preliminary results announcement on 8 April 2020. That information, together with the information set out below, which is extracted from the Annual Report and Financial Statements 2020, constitute regulated information, which is to be communicated to the media in full unedited text through a Regulatory Information Service in accordance with the FCA's Disclosure Guidance and Transparency Rules ("DTR"), Rule 6.3.5R. This announcement is not a substitute for reading the full Annual Report and Financial Statements 2020. Page and note references in the text below refer to page numbers and note references in the Annual Report and Financial Statements 2020. To view the preliminary results announcement, visit the Company's website: www.tescoplc.com .

   Enquiries:               Robert Welch 

Company Secretary

Tesco PLC

Tesco House

Shire Park

Kestrel Way

Welwyn Garden City



Tel: 07793 222569

LEI Number: 2138002P5RNKC5W2JZ46

Principal risks and uncertainties

We have an established risk management framework to manage and report the risks that we face as a business. A risk that can seriously affect our performance, future prospects or reputation of the Group is termed a principal risk.

To manage our risks effectively we have identified a risk appetite which is driven by the following:

- our performance should be competitive, responsible and focused on creating value for all our stakeholders including customers, colleagues, suppliers and shareholders;

- our behaviours must be in line with our code of business conduct to protect and enhance our reputation;

- we aim to operate our business within the capital allocation framework we have set out; and

   -           we seek to ensure that our principal risks are effectively managed. 

Principal risks are discussed and agreed by Executive management and the Audit Committee and are cascaded to the business units who manage and report on the principal risks and any additional significant business unit risks. Business units also escalate risks as appropriate to the Executive Committee.

The principal risks are discussed and evaluated through regular meetings with senior management. Each principal risk is discussed at least annually by the Board to provide oversight and ensure that they remain well managed and relevant.

The seven steps of the risk, controls and assurance framework on page 13 are embedded within our business as a key element of how we manage our risks and ensure appropriate controls are established.

The risk assessment process relies on our evaluation of the risk likelihood and impact, and on the development and monitoring of appropriate internal controls. We maintain risk registers detailing the risks we face, and this is an important component of how we manage our risks.

Risk Management

We have performed a robust review of our principal risks which includes periodic assessments of the risks we believe could threaten the Group's business model, future performance, solvency or liquidity.

The COVID-19 outbreak has become a global pandemic moving from an emerging risk for the business to a principal risk. The Booker integration and synergy realisation risk has significantly reduced over the year and is now considered to be operating in a business as usual capacity. Consequently it has been retired as a principal risk. Other principal risks remain largely unchanged from last year.

Risks related to climate change and sustainability remain an integral part of a number of our principal risks including brand, reputation and trust, and responsible sourcing and supply chain. We have enhanced our risk descriptions for these two principal risks over the year to further reflect that.

The risks associated with Brexit remain due to there being no clarity on the long-term trading relationship with the EU. Although the UK entered the standstill transition period on 31 January 2020, uncertainty over the longer-term trade issues could remain until 31 December 2020 and potentially beyond. We have amended our Brexit risk description accordingly and continue to monitor this risk.

Liquidity and risks related to our transformation programme have reduced. An improved credit rating, reduction in indebtedness and improving cash flow position has resulted in reduced exposure and the transformation programme is delivering capability with pilot and major releases taking place over the past year.

We have noted a slight increase in our Health and Safety risk primarily driven by a shift in the external regulatory landscape leading to potentially higher penalties and legal action. Our Group-wide injury statistics continue to improve as we identify and implement improvement opportunities to further enhance our controls.

We recognise the potential risk of disruption to activities in view of the proposed sale of our businesses in Thailand and Malaysia. We have appropriate plans in place to monitor and manage these risks.

Emerging risks - This year we have conducted a formal exercise to identify and assess emerging risks. While assessing potential emerging risks we have considered our risk exposure across a number of themes e.g. finance and economics, geopolitical and security, social and humanitarian, technological, climate and sustainability (see TCFD on page 20).

Emerging risk and horizon scanning are integrated as part of regular risk discussions and reported at both business unit and Executive Committee level and we will continue to embed this further going forward. Our subject matter experts supported by our second line of defence teams have been working through the year to deepen our understanding of key risks like climate change, sustainability, cyber, packaging, artificial intelligence, animal welfare and more recently pandemics.

Key focus areas

As part of our focus on continuous improvement we have begun work to refine risk appetite for our principal risks with the Executive and Audit Committee this year and will continue to progress this in the coming year (see risk appetite below). We have also developed our assessment of emerging risks and integrated this into our bi-annual risk review process (see emerging risks and Corporate governance).

Risk appetite - During the year we have initiated work to formalise our approach to develop and report our risk appetite. We have worked with the Executive Committee, Audit Committee and subject matter experts to agree our methodology. We have revised our internal Board reporting guidance to ensure matters presented for approval clearly indicate the risk(s) and as we progress we will also integrate reference to our risk appetite. Next year we will formalise reporting to the Board and improve oversight by further developing and embedding our assessment and reporting against risk appetite.

The table below sets out our principal risks, their movement during the year, and a summary of key controls and mitigating factors. They do not comprise all our risks and are not set out in priority order. Additional risks not presently known, or currently deemed to be less material, may also have adverse effects.

 Principal risk               Risk movement                Key controls and mitigating 
 Uncertainties (including     There is continued 
  Brexit) and macroeconomic   volatility and uncertainty    *    We have a value, price, promotions and Clubcard 
  conditions impact           with the need for                  strategy that drives our business priorities with 
  our customers' budgets      customer reassurance               governance and oversight mechanisms. 
  and force customers         on both value and 
  to reappraise the           quality; however 
  concepts of value           we feel that we have          *    We have a consistent approach to building impactful 
  and loyalty in a            the right strategy                 customer propositions, offering high-quality and 
  way in which we are         and processes in                   competitive value while improving the customer 
  unable to respond.          place to monitor                   experience. 
                              this risk. 
                              No risk movement              *    Propositions are being developed across channels and 
                                                                 geographies to ensure consistency in the customer 
                                                            *    Group-wide customer insight analysis is undertaken to 
                                                                 understand and leverage trends around customer 
                                                                 behaviour, expectations and experience across the 
                                                                 different parts of the business to improve our 
                                                            *    We monitor the effectiveness of our processes by 
                                                                 regularly tracking our business and competitors 
                                                                 against measures that customers tell us are important 
                                                                 to their shopping experience. 
                                                            *    We have well-established product development and 
                                                                 quality management processes, which keep the needs of 
                                                                 our customer central to our decision-making. 
                             ---------------------------  ------------------------------------------------------------ 
 Failure to achieve           The risk has decreased 
 our transformation           driven by on-going            *    We have clear market strategies and business plans to 
 objectives due to            delivery of key programmes         address changes to business priorities, strategic 
 poor prioritisation,         to meet our transformation         objectives and external market factors. 
 ineffective change           objectives. 
 management and a 
 failure to understand        Risk decreasing               *    We have executive-level governance and oversight for 
 and deliver the technology                                      all the transformation activities to ensure 
 required, results                                               programmes are adequately resourced, milestones 
 in an inability to                                              achieved and to approve key rollout decisions. 
 progress sufficiently 
 quickly to maintain 
 or increase operating                                      *    Real-time independent assurance activities are 
 margin and generate                                             conducted over the transformation programme. 
 sufficient cash to 
 meet business objectives. 
                             ---------------------------  ------------------------------------------------------------ 
 Failure of our business      The risk has decreased 
  performance to deliver       driven by a reduction        *    We maintain an infrastructure of systems, policies 
  cash as expected;            in our debt levels                and reports to ensure discipline and oversight on 
  access to funding            and improving credit              liquidity matters, including specific treasury and 
  markets or facilities        rating and debt metrics.          debt-related issues. 
  being restricted; 
  failures in operational      Risk decreasing 
  liquidity and currency                                    *    Our treasury policies are communicated across the 
  risk management;                                               Group and are regularly reviewed by the Board, 
  Tesco Bank cash call;                                          Executive Committee and management. 
  or adverse changes 
  to the pension deficit 
  funding requirement;                                      *    The Group's funding strategy is approved annually by 
  create calls on cash                                           the Board and includes maintaining appropriate levels 
  higher than anticipated,                                       of working capital, undrawn committed facilities and 
  leading to impacts                                             access to the capital markets. 
  on financial performance, 
  cash liquidity or 
  the ability to continue                                   *    The Audit Committee reviews and annually approves the 
  to fund operations.                                            viability and going concern statements and reports 
                                                                 into the Board. 
                                                            *    There is a long-term funding framework in place for 
                                                                 the pension deficit and there is ongoing 
                                                                 communication and engagement with the Pension 
                                                            *    Liquidity levels and sources of cash are regularly 
                                                                 reviewed, and the Group maintains access to committed 
                                                                 credit facilities and debt capital markets. 
                                                            *    While recognising that Tesco Bank is financially 
                                                                 separate from Tesco PLC, there is ongoing monitoring 
                                                                 of the activities of Tesco Bank that could give rise 
                                                                 to risks to Tesco PLC. 
                             ---------------------------  ------------------------------------------------------------ 
 Competition and markets 
 Failure to deliver           We continue to face 
  an effective, coherent       the ongoing challenge         *    Our Board develops and regularly challenges the 
  and consistent strategy      of a changing competitive          strategic direction of our business to enhance our 
  to respond to our            landscape and price                ability to remain competitive on price, range and 
  competitors and changes      pressure across most               service. This includes the development of our online 
  in market conditions         of our markets.                    channels and multiple formats to allow us to compete 
  results in a loss                                               in different markets. 
  of market share and          No risk movement 
  failure to improve 
  profitability.                                             *    Our Executive Committee and operational management 
                                                                  regularly review markets, trading opportunities, 
                                                                  competitor strategy and activity. 
                                                             *    We engage in market scanning and competitor analysis 
                                                                  to refine our customer proposition. 
                             ---------------------------  ------------------------------------------------------------ 
 Brand, reputation and trust 
 Failure to create            We continue to implement 
 brand reappraisal             a number of initiatives      *    Our Group policies, procedures and our Code of 
 opportunities to              and activities aligned            Business Conduct sets out detailed expectations and 
 improve quality,              to our strategic                  behaviours around how we can make the right decisions 
 value and service             priorities, thereby               for our customers, colleagues, suppliers, communities 
 perceptions as well           helping reappraise                and investors. 
 as meet climate and           the brand and continue 
 sustainability                to build and maintain 
 expectations                  trust.                       *    We listen to our customers and stakeholders as part 
 results in a negative                                           of our communication and engagement programmes. We 
 impact on the trust           No risk movement                  reflect these needs in our plans including building 
 which our stakeholders                                          upon health, community, sourcing, climate and 
 place in our brand.                                             sustainability initiatives as part of our LHP on 
                                                                 pages 21 to 23. 
                                                            *    We continue to maximise the value and impact of our 
                                                                 brand with the advice of specialist external agencies 
                                                                 and in-house marketing expertise. 
                                                            *    Our Corporate Responsibility Committee oversees all 
                                                                 corporate responsibility activities and initiatives, 
                                                                 including climate and sustainability programmes which 
                                                                 ensures alignment with customer priorities and our 
                                                                 brand strategy. 
                             ---------------------------  ------------------------------------------------------------ 
 Failure of our IT            There continues to 
  infrastructure or            be a growing dependence      *    Our multi-year programme continues to enhance our 
  key IT systems results       on technology throughout          technology infrastructure and resilience 
  in a loss of information,    the Group. We continue            capabilities. This involves significant investment in 
  inability to operate         to make improvements              our hosting strategy, partnering with cloud providers 
  effectively, financial       and invest in disaster            and re-engineering some of our legacy retail systems, 
  or regulatory penalties,     recovery and business             while building redundancy for key business systems. 
  and negative impacts         continuity measures 
  on our reputation.           which are helping 
  Further, failure             to limit exposure            *    Our new data centre facility provides greater 
  to build resilience          to external threats.              resiliency and oversight for our key systems. 
  at the time of investing 
  in and implementing          No risk movement 
  new technology, results                                   *    Our technology security programme continues to 
  in potential loss                                              enhance information security capabilities thereby 
  of operating capability.                                       strengthening our infrastructure and information 
                                                                 technology general controls. 
                                                            *    We have combined governance processes covering both 
                                                                 technology disaster recovery and business continuity 
                                                                 to ensure alignment. 
                             ---------------------------  ------------------------------------------------------------ 
 Data security and data privacy 
 Failure to comply            As a retail organisation 
 with legal or regulatory     we hold a large amount        *    We put our customers and colleagues at the heart of 
 requirements relating        of customer and colleague          all decisions we make in relation to the processing 
 to data security             personal data, and                 of personal data. Our multi-year technology security 
 and data privacy             the threat landscape               programme is driving the enhancement of our data 
 in the course of             has been ever growing.             security capabilities. 
 our business activities,     Since the introduction 
 results in reputational      of General Data Protection 
 damage, fines or             Regulation (GDPR)             *    We have an established team in our security 
 other adverse                we have seen an increase           operations centre to detect, report and respond to 
 consequences.                in individuals' awareness          security incidents. 
 This includes criminal       levels, as well as 
 penalties and                an increase in the 
 consequential                financial penalties           *    We have a third-party supplier assurance programme 
 litigation which             which can be levied                focusing on third-party data security and privacy 
 may result in an             by the data protection             risks. 
 adverse impact on            authorities. 
 our financial performance 
 or unfavourable effects      No risk movement              *    We invest significantly across the Group to help us 
 on our ability to                                               comply with the requirements of GDPR in Europe, and 
 do business.                                                    any other relevant legislation globally. 
                                                            *    We have a privacy compliance programme, which 
                                                                 includes assessment and monitoring of risk across our 
                                                                 global business. 
                                                            *    There is regular reporting on progress and results of 
                                                                 the security and privacy programmes to governance and 
                                                                 oversight committees. 
                                                            *    We recognise the importance of training and 
                                                                 communication to help prevent data security and 
                                                                 privacy-related incidents and have regular induction, 
                                                                 awareness and refresher courses for our colleagues. 
                                                            *    Our data privacy and protection policies clearly set 
                                                                 out how we can protect and appropriately restrict 
                                                                 customer, supplier and colleague data. 
                                                            *    Next generation behaviour-based anti-virus and 
                                                                 malware solutions, data and payment encryption and 
                                                                 threat detection tools help us reduce the likelihood 
                                                                 of being compromised. 
                             ---------------------------  ------------------------------------------------------------ 
 Political, regulatory and compliance 
 Failure to comply            Long-term changes 
 with legal and other          in the global political      *    Wherever we operate, we aim to ensure that the impact 
 requirements as the           environment, including            of political and regulatory changes is incorporated 
 regulatory environment        that in some markets              in our strategic planning and policies. 
 becomes more restrictive,     there is a push towards 
 due to changes in             greater regulation 
 the global political          of foreign ownership         *    We have compliance programmes and committees to 
 landscape, results            of companies resulting            manage our most important risks (e.g. anti-bribery 
 in fines, criminal            in favouring of local             and competition law). 
 penalties for Tesco           companies. 
 or colleagues, 
 consequential                 No risk movement             *    Our compliance programmes ensure that controls are 
 litigation and an                                               implemented to mitigate the risk and we conduct 
 adverse impact on                                               assurance activities for each risk area. 
 our reputation, financial 
 results, and/or our 
 ability to do business.                                    *    Our Code of Business Conduct and various policies 
                                                                 (e.g. gifts and entertainment, conflicts of interest) 
                                                                 are supported by new starter and annual compliance 
                                                                 training and other tools such as our whistleblowing 
                                                            *    The engagement of leadership and senior management is 
                                                                 critical to the successful management of this risk 
                                                                 area. Structured communication plans are established 
                                                                 to provide a clear tone, from the top, for our 
                             ---------------------------  ------------------------------------------------------------ 
 Health and safety 
 Failure to meet safety       This risk has increased 
 standards in relation         primarily driven             *    We have a business-wide, risk-based safety framework 
 to our workplace,             by a shift in the                 which defines how we implement and report on safety 
 results in death              regulatory landscape              controls to ensure that colleagues, contractors and 
 or injury to our              which may lead to                 customers have a safe place to work and shop. 
 customers, colleagues         an increase in penalties 
 or third parties              and fines. Group-wide 
 and leads to adverse          injury statistics            *    Each business is required to maintain a comprehensive 
 financial and reputational    continue to improve               risk register and a safety improvement plan to 
 consequences.                 alongside identifying             document and track enhancements. 
                               continuous improvement 
                               opportunities to 
                               further embed controls.      *    Governance and oversight is established in the form 
                                                                 of our Group Risk and Compliance Committee and 
                               Risk increasing                   business unit-specific health and safety committees. 
                                                                 These committees review critical metrics and monitor 
                                                                 the effectiveness of related controls. 
                                                            *    Safety audits, whistleblowing arrangements and annual 
                                                                 colleague survey results, informs management on 
                                                                 delivery of targeted safety initiatives including 
                                                                 communication plans. 
                                                            *    Second and third line of defence assurance activities 
                                                                 such as store and distribution compliance reviews, 
                                                                 safety health checks and audits help us assess 
                                                                 compliance with established policies and processes 
                                                                 and continuously seek to identify areas of potential 
                             ---------------------------  ------------------------------------------------------------ 
 Failure to attract,          Market competitiveness 
  retain and develop           continues to affect          *    Our talent planning and people development processes 
  the required capability      our ability to attract            are established across the Group. 
  and continue to evolve       and retain key specialist 
  our culture results          talent. There is 
  in an impact on the          a continued challenge        *    Talent and succession planning are regularly 
  delivery of our purpose      from fast-changing                discussed by line management and the Executive 
  and strategic drivers.       and complex legislation.          Committee with regular oversight by the Nominations 
                                                                 and Governance Committee and the Board. 
                               No risk movement 
                                                            *    We have clear potential and performance criteria and 
                                                                 talent principles which are underpinned by our 
                                                                 employer value proposition and strategy. 
                                                            *    An independent assessment of all promotions and 
                                                                 external hires is conducted at leadership level to 
                                                                 ensure capability, potential, leadership and values. 
                                                            *    The Remuneration Committee agrees objectives and 
                                                                 remuneration arrangements for senior management. 
                                                            *    'How to' and 'when to' speak up has been relaunched 
                                                                 across all areas and our protector line and complaint 
                                                                 process allows colleagues to confidentially raise any 
                                                                 workplace concerns e.g. dishonest activity or 
                                                                 something endangering colleagues, the public or the 
                                                            *    We have a Group Inclusion strategy to ensure we 
                                                                 provide equal opportunities for growth and 
                                                                 development to all our colleagues. 
                             ---------------------------  ------------------------------------------------------------ 
 Responsible sourcing and supply chain 
 Failure to meet product      Given the evolution 
 safety standards              in external standards        *    We have product standards, policies and guidance 
 results in death,             and expectations                  covering both food and non-food, as well as goods and 
 injury or illness             we recognise the                  services not for resale, to help ensure that products 
 to customers.                 importance of sourcing            are safe, legal and of the required quality. 
 Failure to ensure             safe products in 
 that products are             a responsible manner. 
 sourced responsibly           We continue to monitor       *    Assurance, improvement and empowerment are our three 
 across our supply             and improve our controls          human rights pillars in place to appropriately 
 chain (including              to ensure we have                 monitor conditions and progress, tackle endemic 
 fair pay for workers,         a sustainable supply              sector risks and address wider community needs. 
 adhering to human             chain.                            Measures include policies and guidance to help to 
 rights, clean and                                               ensure the rights of workers are respected and 
 safe working environments,    No risk movement                  environmental impacts are managed responsibly. Refer 
 meeting climate change                                          to pages 21 to 23 for specific actions highlighted 
 and sustainability                                              under our LHP. 
 commitments) and 
 that all social and 
 environmental standards                                    *    Supplier audit and product analysis programmes are in 
 are met results in                                              place to monitor product safety, traceability and 
 supply chain disruption,                                        integrity, human rights and environmental standards, 
 regulatory breaches,                                            including unannounced audits of supplier sites and 
 and reputational                                                facilities. 
 impacts of not meeting 
 societal expectations. 
                                                            *    We run colleague training programmes on food and 
                                                                 product safety, responsible sourcing, hygiene 
                                                                 controls, and also provide support for stores. We 
                                                                 also provide targeted training for colleagues and 
                                                                 suppliers dealing with specific challenges such as 
                                                                 modern slavery. 
                                                            *    Crisis management procedures are embedded within 
                                                                 operations to quickly resolve issues if non-compliant 
                                                                 products are produced or sold with clear escalation 
                                                            *    Our LHP pages 21 to 23 references the creation of a 
                                                                 fourth pillar, Planet, and the steps being 
                                                                 implemented to cover climate and sustainability. 
                             ---------------------------  ------------------------------------------------------------ 
 Failure to prepare           The UK entered the 
 for the UK's future           standstill transition        *    With the UK's future trading relationship with the EU 
 trading relationship          period on 31 January              (and others) still to be determined, we continue to 
 with the EU (whatever         2020 and uncertainty              contribute to important public policy discussions and 
 form that may take)           over the longer-term              engage with government, regulatory bodies and 
 results in disruption         trade issues could                industry e.g. sharing of analysis and data, to aid 
 to and creates uncertainty    remain until 31 December          policy makers' understanding of food and product 
 around our business           2020 and potentially              supply chains. 
 and our ability to            beyond. The risk 
 supply our customers.         of business disruption 
 Any disruption or             and cost increases           *    We continue to assess and monitor the potential risks 
 uncertainty could             therefore remain                  and impacts on our customers, colleagues and 
 have an adverse effect        unchanged.                        shareholders, while taking appropriate mitigation 
 on our business,                                                measures to address challenges including logistics, 
 financial results             No risk movement                  resourcing and supply. 
 and operations. 
                                                            *    We have developed a detailed Brexit contingency plan 
                                                                 for any political and macroeconomic changes that 
                                                                 could have a material impact on our market and 
                                                                 customer proposition with clear oversight by our 
                                                                 senior leaders through the Brexit Governance Group. 
                             ---------------------------  ------------------------------------------------------------ 
 Tesco Bank 
 Tesco Bank is exposed        The Bank continues 
  to a number of risks,        to actively manage           *    The Bank has a formal structure for reporting, 
  the most significant         the risks to which                monitoring and managing risks. This comprises, at its 
  of which are operational     it is exposed.                    highest level, the Bank's risk appetite, approved by 
  risk, regulatory                                               the Bank Board and supported by the risk management 
  risk, credit risk,           No risk movement                  framework. 
  funding and liquidity 
  risk, market risk 
  and business risk.                                        *    The Tesco PLC Board also reviews and approves the 
                                                                 financial risk appetite. Risk appetite defines the 
                                                                 type and amount of risk that the Bank is prepared to 
                                                                 accept in order to meet its strategic objectives. It 
                                                                 forms a link between day-to-day risk management of 
                                                                 the business and its strategic priorities, long-term 
                                                                 plan, capital planning and stress testing. Adherence 
                                                                 to risk appetite is monitored monthly. 
                                                            *    The risk management framework brings together 
                                                                 governance, risk appetite, the three lines of defence 
                                                                 the policy framework and the risk management tools to 
                                                                 support the business in managing risk as part of 
                                                                 day-to-day activities. 
                                                            *    There is Bank Board risk reporting throughout the 
                                                                 year, with updates to the Tesco PLC Audit Committee 
                                                                 provided by the Bank's Chief Financial Officer, and 
                                                                 Audit Committee Chairman. A member of the Tesco PLC 
                                                                 Board is also a member of the Bank's Board to enhance 
                                                                 visibility and knowledge sharing. 
                             ---------------------------  ------------------------------------------------------------ 
 The recent outbreak          The COVID-19 outbreak 
 and global spread             has become a global          *    The safety and wellbeing of our colleagues and 
 of the COVID-19 may           pandemic moving from              customers has been and continues to be our overriding 
 have a significant            an emerging risk                  priority. Our Executive Committee are monitoring 
 and prolonged impact          to becoming a principal           events closely with regular Board oversight 
 on global economic            risk for the business.            evaluating the impacts and designing appropriate 
 conditions, disrupt                                             response strategies. 
 our supply chain              New risk 
 (including our supplier 
 base, specifically                                         *    The availability of cash resources and committed 
 regarding business                                              facilities together with strong cash flow, support 
 closure and consolidation,                                      Tesco's liquidity and longer-term viability. 
 labour shortage, 
 raw material supply 
 and potential cost                                         *    Our teams are working tirelessly to implement 
 inflation), increase                                            specific actions to minimise disruption faced by our 
 employee absenteeism                                            customers in these challenging times. Our business 
 and adversely impact                                            continuity and crisis management plans have been 
 our operations.                                                 mobilised in all parts of the Group and additional 
 Governments and public                                          measures have been implemented including increasing 
 bodies in affected                                              our retail store colleague headcount (with 
 countries have introduced                                       redeployment of colleagues where possible), securing 
 temporary emergency                                             additional supply chain capacity to meet changes in 
 public measures such                                            demand (including measures to prevent customer 
 as travel bans,                                                 stockpiling), implementing changes to stores 
 quarantines                                                     (including hours, additional security, hygiene and 
 and public lockdowns                                            social distancing measures), and extending support to 
 (also impacting our                                             colleagues and customers at increased risk. 
 mall operations). 
 Should these continue 
 for an extended period 
 of time, they would 
 increase pressure 
 on our supply chain 
 and operations (including 
 Tesco Bank due to 
 an economic downturn). 
                             ---------------------------  ------------------------------------------------------------ 

Indicates that the principal risk has been included as part of the longer-term viability scenarios as detailed on page 19.

Internal control.

The key elements of the Group's internal control framework are monitored throughout the year and the Audit Committee has conducted a review of the effectiveness of the Group's risk management and internal control systems on behalf of the Board. To support the Board's annual assessment, Group Audit and Advisory prepared a report on the Group's principal risks and internal controls. This describes the risk management systems and key internal controls, as well as the work conducted in the year to improve the risk and control environment including the level of assurance undertaken. The internal control framework is intended to effectively manage rather than eliminate the risk of failure to achieve business objectives. It can only provide reasonable, but not absolute, assurance against the risk of material misstatement or financial loss.

Statement of Directors' responsibilities

In compliance with DTR 4.1.12R, the Annual Report and Financial Statements 2020 contains a Directors' responsibility statement. This is reproduced below, in line with DTR 6.3.5R. The statement relates to and is extracted from the Annual Report and Financial Statements 2020 and does not attach to the extracted information presented in this announcement or the preliminary results announcement released on 8 April 2020.

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

Company law requires the Directors to prepare 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 (IFRS) as adopted by the European Union and Article 4 of the International Accounting Standard (IAS) Regulation and have also chosen to prepare the Parent Company financial statements in accordance with Financial Reporting Standard (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 Company and of the profit or loss of the Company for that period.

In preparing the Parent Company 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 FRS 101 Reduced Disclosure Framework has been followed, subject to any material departures disclosed and explained in the financial statements; and

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

In preparing the Parent Company financial statements, the Directors are required to:

   --      properly select and apply accounting policies; 

-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

-- provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

   --      make an assessment of the Company's ability to continue as a going concern. 

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 the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on 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 set out on pages 27 to 30, confirm that, to the best of their knowledge:

-- the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

-- the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

-- the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

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 rns@lseg.com or visit www.rns.com.



(END) Dow Jones Newswires

May 13, 2020 02:00 ET (06:00 GMT)

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