2020 Annual Report 2020 Annual
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2020 Annual Report 2020 Annual Report Sustainably feed all Australians to help them lead healthier, happier lives ABN 11 004 089 936 Coles Group Limited ABN 11 004 089 936 Coles Group Limited 2020 Annual Report Coles Group Limited 2020 Annual Report Coles acknowledges the Traditional Custodians of Country Contents throughout Australia and pays its respects to elders past Overview and present. We recognise their rich cultures and continuing connection to land and waters. 2020 performance 4 2020 highlights 5 Aboriginal and Torres Strait Islander peoples are advised Message from the Chairman 6 that this document may contain names and images of people who are deceased. Managing Director and Chief Executive Officer’s report 8 All references to Indigenous people in this document Our vision, purpose and strategy 11 are intended to include Aboriginal and/or Torres Strait Islander people. How we create value 12 Sustainability snapshot 14 Support for customers, suppliers and communities 19 Governance at Coles 24 Operating and Financial Review 30 Board of Directors 65 Directors’ Report 68 Remuneration Report 73 Financial Report 96 Independent Auditor’s Report 150 Shareholder Information 158 DRAFT 21 COL1634_An- nualReport_d31a – Rnd 16 Copy September23, 2020 7:52 PM Forward-looking statements Welcome to the This report contains forward-looking statements in relation to Coles Group Limited (‘the Company’) and its controlled entities (together ‘Coles’ or ‘the Group’), including statements regarding the Group’s intent, belief, goals, objectives, initiatives, commitments or current expectations with respect to the Group’s business and operations, market conditions, results of operations and financial conditions, and risk management Coles Group practices. Forward-looking statementsDRAFT can generally1 be COL1634_identified by the use of words such as ‘forecast’, ‘estimate’, ‘plan’, ‘will’, ‘anticipate’, ‘may’, ‘believe’, ‘should’, ‘expect’, ‘intend’, ‘outlook’, ‘guidance’ and other similar expressions. AnnualReport_ These forward-looking statements are based on the Group’s good-faith assumptions as to the financial, market, risk, regulatory and other relevant environments that will d4a exist and affect Se theptember Group’s23, business2020 7:52 andPM operations in the future. The Group does not give any assurance that 2020 Annual Report the assumptions will prove to be correct. The forward-looking statements involve known and unknown risks, uncertainties and assumptions and other important factors, many of which are beyond the reasonable control of the Group, that could cause the actual results, performances or achievements of the Group to be materially different from future results, performances or achievements expressed or implied by the statements. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements in this report speak only as at the date of issue. Except as required by applicable laws or regulations, the Group does not undertake any obligation to publicly update or revise any of the forward-looking statements or to advise of any change in assumptions on which any such statement is based. Past performance cannot be relied on as a guide to future performance. Our vision is to become the most trusted retailer in Australia and grow long-term shareholder value. Non-IFRS Information This report contains IFRS and non-IFRS financial information. IFRS financial information is financial information that is presented in accordance Customers trust Coles, as part of the fabric of Australian with all relevant accounting standards. Retail or non-IFRS financial information is financial information that is not defined or specified under any society for more than 100 years, to provide great value relevant accounting standards and may not be directly comparable with other companies’ information. food and drinks. Any non-IFRS financial information included in this report has been labelled to differentiate it from statutory or IFRS financial information. Non-IFRS We are known for our value, range and customer service measures are used by management to assess and monitor business performance at the Group and segment level and should be considered in through our extensive store network and for providing addition to, and not as a substitute for, IFRS information. Non-IFRS information is not subject to audit or review. online shopping solutions across Australia. Other Information Photographs in our Annual Report may have been taken before social distancing restrictions were in place. The image of FightMND campaign director Bec Daniher with Coles team members on page 11 of this report was photographed by News Ltd / Newspix. Front cover: In addition to the collection of unsold, edible food from our supermarkets and distribution centres, food and groceries to a retail value of $7.9 million were provided to SecondBite and Foodbank this year in response to increasing demand for food relief as a result of COVID-19. SecondBite CEO Jim Mullan said, ‘It’s incredible to see how our partnership with Coles has grown over the years and the impact this has had on the most vulnerable people in our community. Many shoppers wouldn’t be aware of the work that goes on behind the scenes to ensure edible unsold food ends up on the plates of those in need, rather than in landfill. We are proud to work with an organisation that is a clear leader with respect to both its social and environmental responsibilities.’ 1 DRAFT 21 COL1634_An- nualReport_d31a – Rnd 16 Copy September23, 2020 7:52 PM DRAFT 1 COL1634_ AnnualReport_ d4a September23, 2020 7:52 PM Our purpose is to sustainably feed all Australians to help them lead healthier, happier lives. The Pergoliti family at Harvey Citrus in Western Australia received a grant from the Coles Nurture Fund in FY20 to extend its supply of WA-grown citrus over the summer and increase local employment by expanding its cool room facility and installing solar panels on its packing shed. Pictured is Andrew Pergoliti with his father Steve and daughter Alyssa. Coles Group Limited 2020 Annual Report Coles Group Limited 2020 Annual Report 2020 2020 performance highlights Highlights for the year spanned our business and store network, our customer base, our team of suppliers and our communities around Australia. DRAFT 21 COL1634_An- nualReport_d31a – Rnd 16 Copy September23, 2020 7:52 PM 6.9% 88.2% 5.0% Sales growth1 Customer satisfaction Supermarkets for Supermarkets2 sales density growth3 Almost DRAFT 1 COL1634_ 1,50 0+ new products $10bn+ AnnualReport_ at everyday low prices doubled in Coles Own Brand sales d4a September23, 2020 7:52 PM capacity of Coles Online $1. 4 bn $362m 111% EBIT1 Net debt4 Cash realisation5 Tailored store format strategy New transport hubs to Progress with Witron & Ocado 70 renewals optimise logistics automation 57.5c 7pp 18.3% Dividends per share6 Improvement in team Improvement in total member engagement recordable injury (percentage points) frequency rate7 1 On a non-IFRS basis. Refer to Non-IFRS Information section on page 39. 4,700+ Direct milk sourcing $139m 2 Q4 FY20, as measured by Tell Coles. Indigenous team members with dairy farmers in VIC & NSW provided in community support 3 Growth in sales per square metre on a moving annual total (MAT), or exit rate calculated on a rolling 12 months of data basis. 4 Calculated as interest-bearing liabilities less cash and cash equivalents. 5 Calculated as operating cash flow excluding interest and tax, divided by EBITDA (excluding the impacts of AASB 16 and Significant items). 6 Comprising an interim dividend of 30.0 cents per share (paid) and a final dividend of 27.5 cents per share. 7 Refer to glossary of terms on page 49 for definition. 5 Coles Group Limited 2020 Annual Report Coles Group Limited 2020 Annual Report supply, logistics and services for the exceptional efforts reducing our electricity needs and increasing our that have been made during a year marked by so many utilisation of renewable energy sources. Full details of extraordinary events. these initiatives are set out in our 2020 Sustainability Report which is accessible at www.colesgroup.com.au. Message from Customers and community Importantly we are continually working with our suppliers Throughout FY20 Coles played its part in supporting our to improve not only our Coles Own Brand and proprietary the Chairman customers and the Australian community as we engaged grocery product offerings but also to seek to ensure we our nearly 2,500 retail outlets and rapidly growing online source product in accordance with our ethical sourcing services. policy and requirements. At the 2019 Annual General In times of community stress, large corporations have the Meeting concerns were raised as to the importance of opportunity, and responsibility, to bring much needed labour standards amongst suppliers and since that time we resources to address special needs. During this last financial have increased our resources and efforts in this important area. Working with suppliers, unions and other stakeholders The 2020 financial year was extraordinary for year we provided special support to the emergency services and the rural fire services both financially and in we are seeking to ensure that all aspects of our supply Coles and the whole Australian community as droughts, food availability at the time of the East Coast bushfires; chain support our dual objectives of trust and sustainability. bushfires and COVID-19 created significant demands to our farmers and the Country Women’s Association Board across our businesses. through our Coles Nurture Fund as we responded to the drought-driven hardships experienced by so many in rural I extend a special thanks to all my fellow directors who have communities; and to the elderly and disabled to whom we greatly contributed to the progress which we have been provided special access to supermarkets and to our Coles able to make during this most unusual year. In particular, I Online Priority Service in response to the restrictions arising express appreciation on behalf of Coles to the contribution Coles strengthened its financial positionDRAFT during 21 the COL1634_Anyear, - from COVID-19.