Directors' Report
The Directors have pleasure in presenting the Annual Report and Accounts to the members of HBOS plc in respect of the Group for the year ended 31 December 2007.
Principal Activities
HBOS plc is the holding company of the HBOS Group. The principal activities of the Group are the provision of banking and other financial services in the UK and overseas. A list of the main subsidiary undertakings, and the nature of each company’s business, is given in Note 18 to the Financial Statements on page 183.
HBOS Group Reorganisation Act 2006
On 17 September 2007, the Group’s four banking subsidiaries in the UK were consolidated into a single legal entity holding a single banking licence. On that date, the Governor and Company of the Bank of Scotland registered as a public limited company in the name of Bank of Scotland plc and succeeded to the business, assets and liabilities of Halifax plc, Capital Bank plc and HBOS Treasury Services plc. These changes, which were authorised by the HBOS Group Reorganisation Act 2006, did not have any direct impact on HBOS plc.
Business Review
The Companies Act 1985 requires the Directors’ Report to include a Business Review of the HBOS Group giving a fair review of the business of the Group and a description of the principal risks and uncertainties facing the Group.
The Group’s development and performance during the year, position at the year end and likely future prospects are reviewed by the Chief Executive on pages 8 to 13 and in the Divisional Reviews on pages 15 to 68. Financial aspects are covered in the Group Finance Director’s Report on pages 69 to 84, followed by the Risk Management report on pages 85 to 104 and Corporate Responsibility on pages 105 to 110. The information in each of these sections, which fulfils the requirements of the Business Review, is incorporated into this Directors’ Report by reference.
The Corporate Responsibility report, on pages 105 to 110, sets out the approach of the Group to key stakeholders. In discharging their duties, the Directors have regard to the interests of these stakeholders as well as to any other factors likely to impact on the success of the Company. Consideration of these matters is fully integrated within the Board’s decisionmaking processes.
The Group spends approximately £2bn per annum with external suppliers (excluding rents and rates). HBOS recognises the importance of suppliers as stakeholders in its business and the importance of ensuring that it builds effective, competitive relationships that add value for its customers and shareholders. A dedicated Procurement function operates within the Group and provides oversight to the management of these key relationships, setting policy and ensuring that appropriate risk management processes are put in place in respect of contracts above certain financial thresholds.
The Annual Report and Accounts, including this Directors’ Report, have been prepared solely for the Company’s members as a body. To the extent permitted by law, the Company, its Directors, employees, agents and advisers disclaim liability to any other persons in respect of information contained in the Annual Report and Accounts. By their nature, statements containing risks and uncertainties facing the Group, and any other forward-looking statements, involve uncertainty, since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect the knowledge and information available at the date of preparation of the Annual Report and Accounts and the Company undertakes no obligation to update these forward-looking statements. Nothing in the Annual Report and Accounts shall be construed as a profit forecast.
Results and Dividends
The Group profit attributable to shareholders for the year ended 31 December 2007, as shown in the Consolidated Income Statement, was £4,045m (2006 £3,879m). An interim dividend of 16.6 pence per ordinary share was paid on 8 October 2007. The Directors propose a final dividend of 32.3 pence per ordinary share to be paid on 12 May 2008 to shareholders on the register on 14 March 2008, subject to approval at the 2008 Annual General Meeting (‘AGM’).
Going Concern
The Directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future and consequently the going concern basis continues to be appropriate in preparing the accounts.