RNS Number : 2724H

Burberry Group PLC

06 June 2017

6 June 2017

Annual Financial Report

Pursuant to Listing Rule 9.6.1, Burberry Group plc (the "Group") has submitted the following documents to the National Storage Mechanism and they will shortly be available for inspection at: www.hemscott.com/nsm.do:

1. Annual Report and Accounts for the year ended 31 March 2017;

2. Notice of Annual General Meeting; and

3. Form of Proxy.

The Annual Report and Notice of Annual General Meeting are also available on the Burberry Group plc website at www.burberryplc.com. The Annual Report will be delivered to the Registrar of Companies in due course.   

The Annual General Meeting ("AGM") will take place on Thursday, 13 July 2017 at the InterContinental Hotel, One Hamilton Place, Park Lane, London W1J 7QY. The total of the votes cast by shareholders for or against or withheld on each resolution to be put to the meeting will be published on www.burberryplc.com as soon as possible after the meeting.

In compliance with The Disclosure and Transparency Rules (DTR) 6.3.5, the information in the Appendix below is extracted from Burberry Group plc's Annual Report and Accounts for the financial year ended 31 March 2017 (the "2016/17 Annual Report and Accounts") and should be read in conjunction with Burberry Group plc's Preliminary Announcement issued on 18 May 2017, both of which can be viewed at www.burberryplc.com. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  This material is not a substitute for reading the 2016/17 Annual Report and Accounts in full and page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2016/17 Annual Report and Accounts.

Enquiries

Investors and analysts
Charlotte Cowley	VP, Investor Relations	020 3367 3524

Media
Andrew Roberts	VP, Corporate Relations	020 3367 3764
Caroline Daniel	Brunswick	020 7404 5959

APPENDIX: ADDITIONAL INFORMATION REQUIRED BY DTR 6.3.5

AUDIT REPORTS

The Preliminary Announcement includes a condensed set of financial statements. Audited financial statements for the financial year ended 31 March 2017 are contained in the 2016/17 Annual Report and Accounts. The Independent Auditor's Report on the Group financial statements is set out in full on pages 119 to 124 of the 2016/17 Annual Report and Accounts and the Independent Auditor's Report on the parent company financial statements is set out in full on pages 179 to 181 of the 2016/17 Annual Report and Accounts.  Both audit reports are unqualified and do not contain any statements under section 498(2) or section 498(3) of the Companies Act 2006.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The following information is extracted from page 118 of the 2016/17 Annual Report and Accounts.

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

Each of the directors, whose names and functions are listed on pages 68 to 69 confirm that, to the best of their knowledge:

-    the Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company;

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

-     the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that it faces.

PRINCIPAL RISKS

The following information is extracted from pages 60 to 65 of the 2016/17 Annual Report and Accounts.

The Board is responsible for the Group's risk management and internal controls system and reviewing its effectiveness. The system is designed to identify and manage, rather than eliminate, the risk of failure to achieve the Group's strategic objectives and to provide reasonable but not absolute assurance against material misstatement or loss. More information on the Group's internal control and risk management systems can be found in the Corporate Governance Report on pages 70 to 86.

The Board has overall responsibility for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives (its risk appetite), and for ensuring that risks are managed effectively. The Board has delegated to the Audit Committee the responsibility for reviewing the effectiveness of the Group's systems of internal control and risk management methodology.

As part of this review, the Audit Committee considers the principal risks facing the Group and the nature and extent of these risks. The Group Risk function facilitates a risk assessment process in each key business area and global support function to review the significant risks facing Group operations and the controls and actions in place to mitigate these. The detailed assessments are then consolidated to provide input into the overall Group risk assessment.

The Board and the executive management team use a combination of different and complementary skills to assess the risks facing the business. In determining its risk appetite the Board considers a variety of information when reviewing the Group operations and in approving key matters reserved for its decision. This information includes:

-     updates provided by senior management on key strategic and operational matters;

-    discussion and approval by the Board of the Group's three-year strategic plan, budget and viability statement (see page 61);

-     information provided for the purposes of deciding whether to approve those significant matters which have been reserved for the Board;

-    Group risk assessments facilitated by the Group Risk function and the reports of the internal and external auditors; and

-     risk appetite guidelines relating to the Group's principal risks.

The risks set out in the table on the following pages represent the principal risks and uncertainties which may adversely impact the performance of the Group and the execution of its key strategies. The Group's key strategies are set out on pages 33 to 44.

Within the table is a summary of how each risk is defined, its context, potential impact, mitigating activities and the Group's assessment of the change in risk during 2016/17. This assessment is based on the external environment in which the Group operates, its business operations and the impact of the Group's internal controls on the severity of the risk in the period. The Group's risk exposure is continually reviewed by senior management and is therefore subject to change as a result of internal and external factors, future events or otherwise. It is not possible for the Group to implement controls to respond to all the risks it may face and the steps the Group has taken to address certain risks (including those listed) may not manage these risks effectively.

The principal risks are not listed in order of significance and each of the risks should be considered independently. If more than one of the events contemplated by the risks set out occurs, it is possible that the combined overall impact of such events may be compounded. The Group Risk function examines these risks for correlation impacts. Other factors could also adversely affect Group performance and so the risks set out should not be considered to be a complete set of all potential risks and uncertainties the Group may face.

The key changes in the principal risks during the year include the following:

-   Following the outcome of the UK referendum to leave the EU and the invoking of Article 50, uncertainties remain about the impact of Brexit on the Group's operations and financial performance. The Group has considered the possible consequences that Brexit could have upon the business and has concluded that it does not raise any new principal risks. However, it does have the potential to impact a number of the Group's existing risks at an individual risk level including: outlook for the luxury sector remains uncertain, volatility of exchange rates, loss of key management personnel and regulatory requirements. The Group has established a Brexit Steering Committee to monitor developments arising from Brexit, headed by the Chief People and Corporate Affairs Officer, who will provide regular updates on this to the Board.

-    The previous risk relating to the failure to realign the organisational resource capability to deliver the productivity and efficiency agenda announced last May, has been reclassified as one relating more generally to the loss of key management personnel or the inability to attract and retain key employees. This shift reflects that the implementation of the Group's growth and productivity and efficiency programme is well under way.

Risk                                       Business impact                                      Mitigation

A major breach in cyber systems or information security could adversely impact the Group's business operations and/ or result in a major data loss adversely impacting the Group's reputation. Change in level of risk No material change		The Group's customer and employee data, Burberry.com business, digital strategy and operations mean that it is critical that the Group's technology is robust, its systems are secure and data protected. Sensitive data faces the threat of misappropriation and a breach of cyber-security on key business systems could also affect business operations. Strategic link All key strategies		Information systems and cyber-security continued to receive substantial Audit Committee focus during the year to ensure that the Group's response to this developing risk is appropriate. Investment in the ongoing cyber-security programme continued and a four-year security strategy was reviewed and approved by the Audit Committee. A new Information and IT security team was put in place. Ongoing activities to detect and investigate threats and incidents including with the support of key technology partners and suppliers. Evaluation and testing of cyber-security using specialist third parties and of the crisis management and wider business continuity plans.
The outlook for the luxury sector remains uncertain. Change in level of risk No material change		Changes and events in the external market or environment could impact the Group's performance and the delivery of its strategies. These changes or events could include: (i) a sustained economic slowdown, which adversely impacts the Group's customers, suppliers and operations; (ii) a change in consumer behaviour or other events, which adversely impact consumer demand particularly in relation to key consumer groups who make a significant contribution to Group revenues; and (iii) increasing global economic uncertainty including matters such as Brexit which could have an impact on economic growth and adversely impact the Group or give rise to additional costs relating to movements of inventory within the supply chain. Strategic link Productive Space, E-Commerce Leadership		With the outlook for demand in the luxury sector remaining uncertain and underlying cost pressures persisting for the sector, in May 2016 the Group outlined its productivity and efficiency agenda and its plans to optimise future organic revenue growth opportunities. The global reach of the Group helps to mitigate local economic and geopolitical risks. The Group focuses on engaging consumers through the Brand and realising its opportunities among key consumer groups and geographic markets. The Group's financial reporting and review processes are designed to highlight any change in ongoing sales performance to enable action planning to address underperformance. Counterparty credit checks are in place for all key customers and suppliers and flexible payment terms are used to assist suppliers as required. Group Treasury monitors the credit ratings of financial institutions which hold Group deposits to enable the Group to take appropriate action should there be a downgrade in their credit ratings. The Group would seek to mitigate any adverse cost impacts arising as a result of Brexit, through optimisation of operations within the supply chain.
Inability of the		The growth and productivity and efficiency		The Senior Leadership Team is accountable for the conduct of
organisation to		programme is being implemented to optimise		this programme and the delivery of the outcomes in accordance
successfully deliver		future organic revenue growth opportunities		with the plan approved by the Board.
the growth and productivity and efficiency programme without compromising business as usual.		and to deliver productivity and efficiencies, particularly through ways of working. The failure to effectively manage this programme could adversely impact the delivery of the Group's strategies, the anticipated productivity and efficiency improvements, and its operations and return		A Transformation Management Office ('TMO') has been established to drive and coordinate delivery and to monitor risks of each of the major programmes underway. Progress of the delivery of the programme is subject to regular review by the Board. The Board also approves the Group's strategies, its three-year plan and annual budget.
		on investments. The Group's systems of
		internal control will need to be maintained.
Change in level of risk		Strategic link
Decreased risk		All key strategies
Loss of key management	Insufficient capability and capacity in senior		The Inspired People strategy has been established to oversee
or the inability to	management and insufficient employees		the Group's organisational capability requirements, culture
attract and retain	with the right skills may limit the Group's		and engagement, equality and wellbeing, talent development,
key employees.	ability to execute the Group's strategies		training and reward and recognition.
	and change programme.		The Board and Audit Committee regularly review key talent
	The period of change may result in a loss of		and resource risks.
	key individuals or the inability to recruit and retain individuals with the relevant talent and experience, which could disrupt the operation of the business and adversely impact the Group's ability to deliver its strategies.		There is a programme of clear and open engagement with employees to promote an environment of trust and honesty. Competitive incentive arrangements currently exist, with specific initiatives in place designed to retain key individuals.
	Brexit may have an adverse impact on the Group's UK workforce which includes EU nationals, including within senior		Recruitment is ongoing and talent review and succession planning programmes are in place and are regularly reviewed and updated.
	management.		The Group would seek to mitigate any adverse impacts on its
			UK workforce arising from Brexit. The Group's Brexit Steering
Change in level of risk	Strategic link		Committee will keep this under review.
Amended risk	All key strategies
Sustained breaches of	Trade marks and other intellectual property		The Group's global Brand Protection team is responsible for
the Group's intellectual	('IP') rights are fundamentally important to the		the Group's brand protection efforts globally, including in the
property rights and	Group's reputation, success and competitive		digital environment. Where infringements are identified these are
unauthorised sale of	position. Unauthorised use of these, as		addressed through a mixture of criminal and civil legal action and
Burberry products.	well as the unauthorised sale of Burberry		negotiated settlement. IP rights are driven largely by national laws
	products and distribution of counterfeit		which afford varying degrees of protection and enforcement
	products, damages the Burberry brand		priorities depending on the country.
	image and profits.
Change in level of risk	Strategic link
No material change	Product Focus, Productive Space, E-Commerce
	Leadership
Chinese consumer	A significant proportion  of the Group's		The global reach  of the  Group  helps  to  mitigate  reliance on
spending patterns	sales are to Chinese consumers globally.		particular consumers. In addition, the Group continues to
significantly change	Consequently, any change to Chinese		focus on engaging with the Chinese luxury consumer, both
adversely impacting	consumer tastes or the economic, regulatory,		in China and while travelling abroad.
the Group's revenues.	social and/or political environment in China
	could adversely impact this consumer group's
	disposable income, confidence and travel,
	which  could impact  the   Group's revenue
	and profits.
Change in level of risk	Strategic link
No material change	Product Focus, Productive Space, E-Commerce
	Leadership, Operational Excellence
Volatility in foreign	The Group operates on a global basis and		The Group seeks to hedge anticipated foreign currency
exchange rates could	earns revenues, incurs costs and makes		transactional cash flows using financial instruments. These are
have a significant	investments in a number of currencies.		mainly in the Group's centralised supply chain and wholesale
impact on the Group's	The Group's financial results are reported in		and Beauty businesses. The Group does not hedge intra-group
reported results.	Sterling. The majority of reported revenues		foreign currency transactions at present. The Group monitors the
	are earned in non-Sterling currencies, with		desirability of hedging the net assets of non-Sterling subsidiaries
	a significant proportion of costs in Sterling.		when translated into Sterling for reporting purposes, but the
	Therefore, changes in exchange rates which		Group has not entered into any material transactions for this
	are driven by a number of factors, such as		purpose in the current or previous year.
	global economic trends, Brexit or other
	developments, can impact the Group's
	revenues, margins, profits and cash flows.
Change in level of risk	Strategic link
No material change	All key strategies
Major incidents such as natural catastrophes, global pandemics or terrorist attacks affecting one or more of the Group's key locations could   significantly impact its operations. Change in level of risk Decreased risk	A major incident at a key location could significantly impact business operations, with the impact clearly varying depending on the location and its nature. The impact of the loss of a distribution hub would clearly differ from a global pandemic, but both would impact revenue and profits. Strategic link All key strategies		Business continuity plans are in place to mitigate operational risks, but cannot ensure the uninterrupted operation of the business, particularly in the short term. The regional spread of the Group's key distribution hubs helps to mitigate this risk. A Group incident management framework is in place that addresses the reporting and management of major incidents, and is tested each year using third-party specialists. Tailored plans have been produced for a number of high-impact events. These plans are regularly reviewed and updated.
The Group's operations	Failure to comply with these requirements		The Group monitors and seeks to continuously improve
are subject to a broad	could leave the Group open to civil and/or		its processes to gain assurance that its licensees, suppliers,
spectrum of regulatory	criminal legal challenge, significant penalties		franchisees, distributors and agents comply with the Group's
requirements in the	and reputational damage.		contractual terms and conditions, its ethical and business
various jurisdictions			policies and relevant legislation.
in which the Group operates. The pace of change and the consistency of application of legislation can vary significantly across these jurisdictions, particularly			Specialist teams at corporate and regional level, supported by third-party specialists where required, are responsible for ensuring employees are aware of regulations relevant to their roles. Assurance processes are in place to monitor compliance in a number of key risk areas, with results being reported to the management Risk Committee and Board Audit Committee.
in an environment			The Group's Brexit Steering Committee will keep under
where public sector			review any regulatory requirements arising from Brexit.
debt is often high and
tax revenues are falling.
Change in level of risk	Strategic link
No material change	All key strategies
Failure by the Group or	A failure to act appropriately could result		A number of initiatives are in place, led by the Corporate
associated third parties	in penalties, adverse press coverage and		Responsibility function. These include the continuing
to act in accordance	reputational damage with a resulting impact		activities set out in the Responsibility section on pages
with ethical and	on revenue and profits.		47 to 51.
environmental standards.
Change in level of risk	Strategic link
No material change	All key strategies
Over-reliance	The Group relies on a number of vendors		The Group continues to evolve its supply chain organisational
on key vendors.	in key product categories. Failure of these		design to develop its manufacturing base to reduce
	businesses to deliver products or services		dependence on key vendors. The Group is extending its
	would have a significant impact on		business continuity planning framework to key vendors in
	business operations.		specific business operations to minimise the impact of an
			incident affecting those vendors.
Change in level of risk	Strategic link
No material change	Product Focus, Productive Space, E-Commerce
	Leadership
The Group's IT systems and operational infrastructure are critical to its operation and the delivery of products, services and market communications to its consumers. Change in level of risk No material change	A failure in these systems could have a significant impact on the Group's operations and reputation. The Group also relies on a small number of vendors of specialist digital and IT services, thereby concentrating the impact of this risk. Strategic link All key strategies		The Group's IT systems and infrastructure continue to receive substantial Audit Committee focus. A number of controls to maintain the integrity and efficiency of the Group's IT systems are in place, including recovery plans which would be implemented in the event of a major failure. These recovery plans are tested on a regular basis. The Group has continued to strengthen its internal Digital and IT teams and actively manages dependency on external specialist services.
The Group operates in	Typical potential risks faced in these markets		The Group uses the services of professional consultants to
a number of emerging	include: seizure of assets or staff, business		advise on legal and regulatory issues when entering new markets,
markets which are	associate practices that are inconsistent		to undertake due diligence and to monitor ongoing developments.
typically more volatile	with the Group's ethical standards and the		Where appropriate, the Group seeks to work with franchisees
than developed markets,	UK regulatory environment, and increased		or partners who compensate for its relative lack of experience
and are subject to	operational costs due to country-specific		in a number of these markets.
changing economic,	processes driven by the operating or
regulatory, social and	regulatory environment.
political developments
that are beyond the
Group's control.
Infrastructure and
services also tend
to be less developed.
Change in level of risk	Strategic link
No material change	Productive Space, E-Commerce Leadership,
	Operational Excellence

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