Tackling our to do list

Annual Review 2015/16 06 Wilko Annual Review 2015 Wilko Annual Review 2015 03 Contents

04 Who we are The place to come to get stuff done 05 Our highlights

06 Lisa’s message 08 Meet the team – The holding board 12 10 Meet the team – The trading board 04

12 Strategy plan and customers Going global with Wilko Asia 14 W’innovate

15 Wilko Asia

16 Quality, value and choice

17 Stay Low Price 15

18 New stores

19 Existing estate improvements

20 Wilko digital

21 Making the headlines Here, there and everywhere – 22 Training and development more new stores throughout the UK 18

23 Doing our bit

24 Good causes

25 Paying our way

26 Governance and risk management Switched on to the digital 28 Financial review 20 marketplace 04 Wilko Annual Review 2015

The place to 6/10 households Serving over come to get now shop with Wilko 7 million stuff done customers per week

Here for life We’re a family business From kids to grandparents, families keep coming back to Wilko – we’re here for the savvy shoppers, the hardworking families, who More investment, run for families. want and deserve value, quality and convenience. Our customers know they can depend on us, they trust us – and when we’ve asked them, some say they love us. with a plan to open more than stores 100over the next 5 years

Customer satisfaction up 7% year on year to 78% 06 Wilko Annual Review 2015 A great place to own

Family owned private limited companies invariably conduct their business privately. Wilkos rarely discusses ownership save to punctiliously, annually thank family shareholders for their unswerving support.

Our family owners see their role as providing patient About our Boards to get done the jobs they have to do and those (but challenging) capital and stable ownership from We made changes to our Boards, reflecting our new jobs are many and varied. We provide useful which short, medium and long-term growth can group structure. products to help them, with great quality and at be delivered with emphasis placed on the long great prices. SLP promises that these variety of At holding board level during 2014 we welcomed term. The adage that family companies plan in value products offer quality at its best at prices Sean Toal as our Chief Operating Officer. Sean generations is apt for Wilkos. Our owners challenge, that are low and will stay that way joined us after a long and illustrious career at the they are patient and they think long term (often in 15 Co-op. We welcomed back John Jackson for his • W e talked more to our customers through year cycles equating roughly to a generation second stint for us as a Non-Executive Director. press and leaflets and radio. 2014 and 2015 of owners). saw us start to apply the complicated analysis During 2015 we said goodbye to Ian Ellis our long Already an octogenarian, Wilkos is in its third that is econometrics to the ways we talk to our standing Chief Financial Officer and welcomed generation of family owners: from founding owners customers. We did this to find out the best ways Aidan Connolly in his stead. Aidan has worked in JK and Mary Wilkinson, through expansion under the to talk to our customers so that they really do hear many structures and businesses across the globe, sibling partnership of Tony Wilkinson supported by what we say in a way that’s important to them but joined us most recently from Worldpay. his sister Barbara (expanding from 11 to 215) to the • A nd we listened, getting closer to our customers cousins’ confederation. April 2014 saw that change We recognised the need for a new trading board A big by developing our customer insight so we learn for Wilko Retail composed of some existing players thank you with Barbara Wilkinson, Karin Swann and Nicholas more and more about our customers and what Wilkinson ceasing to hold shares, leaving Wilkos joined by some new ones. The existing players they want from us every day We know we couldn’t do anything at all without people so are: Robin Lassiter (Retail Director), Frankie Adams firmly in the hands of Tony Wilkinson and his family. we have a lot of thank yous. (Trading Director) and Cath Fox (Human Resources A great place to work And Wilkos became Wilko Group creating a classic Director). The new directors are: Mark Hale (Supply We have fabulous team members and we are Thank you to our customers but simple holding company structure. The original Chain Director) and Ian Ayling (Marketing Director). thankful to them every day for everything they do week and the 150,000 visits :to the wilko.com 7 million pervisitors day to who store keep per company: Wilkinson Hardware Stores Ltd taking the for our customers and our business. We listened name Wilko Retail Ltd as it rebranded all its activities A great place to shop our business grounded. better to our team members by reinstating our team Wilko: fully embracing the name customers have Retailing in the saturated market that is the UK member engagement survey, which gave us a Thank you to our team members the 20,600 of you whose used for decades; recognising the ranges outside doesn’t get any easier. This year, with our new group respectable 50.8% Net Promoter Score; which we’re daily work keeps Wilkos running and moving forwards. hardware (though this remains at the heart of structure in place and under streamlined ownership, told is good for retail, but it’s not good enough for us. activities); and embracing digital under wilko.com. we made positive steps forward, always with our Thank you to our suppliers We’re working hard to build a better relationship with both branded and own brand Out of respect for our heritage the holding company customers in mind. The financials show that this without whom we wouldn’t be able to deliver great branded our team members. is named after where it all started: Wilkinson delivered growth for us in sales and customers and and own brand products at great prices. that growth has carried into profit. Hardware Stores Ltd. Within the Group, newer Thank you to our advisors activities grow with Wilko Asia Ltd, our global sourcing This annual review covers our big activities during the and narrow. who keep us firmly on the straight business, and W’Innovate Ltd, our macro trend, new year. For me the highlights were many and varied: product design and development business, both Lisa And as always thank you to our shareholders • W e saw customers continue to shop differently making strides forward during the year. across our high street, city centre, retail park and patience, your challenge, your capital and long-term, for your digital offers stable ownership • W e got back into opening new stores in places that we know customers want to shop • W e went back to our roots and worked hard on creating Stay Low Prices or SLP. Wilkos is and has always been focused on helping our customers 08 Wilko Strategic Review 2015 Wilko Strategic Review 2015 09

Steve Sinclair Non-Executive Director

Steve joined the Wilko Board as a special advisor in 2009, and was asked to join as a Non-Executive Director in 2011. Steve has a degree in Architecture from UCL, an MBA from London Business School, and a diploma in Finance and International Marketing from New York Meet the team Graduate School. After 2 years with McKinsey, he worked as the Executive Assistant to the Chairman of Royal Worcester Plc, before joining the Board of Allied international designers in 1985. The holding board He set up his own design business with funding from 3i and sold out to WPP after 7 years of successful trading. He was then asked by the CEO to take up the role of Marketing Director in Boots and then subsequently moved as Strategic Marketing Director to WH Smith. Lisa Wilkinson He joined PwC as a Senior Director in consulting in 2007 and led the firm in developing and leading the Customer Experience practice. In 2015 Steve was Director promoted to head up the Sales and Marketing function for the UK and EMEA firm with a budget of over £60m. Lisa, granddaughter of the founder of Wilkinson; JK Wilkinson, became a Family Non-Executive Director of Wilkinson in February 2004. She takes the view that her role is to represent and maintain the values of the family in the Boardroom. Lisa started her working life in the legal profession as a solicitor in private practice, a career she enjoyed for over 10 years. Graduating from Leeds University in English Aidan Connolly and History (joint Hons) and then converting to Law at Polytechnic, she joined Eversheds in Nottingham before moving to Edge Ellison (now part of Hammonds Chief Financial Officer Suddards Edge) in Birmingham and latterly working at DLA (now DLA Piper) in London. Aidan Connolly joined the business as Chief Financial Officer in October 2015. Throughout her legal career, Lisa specialised in Discrimination and Employment Law, Aidan joined Wilko’s from Worldpay, which is the UK’s leading card acquirer and instructed predominantly by large corporate commercial clients. the fifth largest global payment services business. Aidan sits alongside Lisa and While a practising solicitor, Lisa actively took an interest in the Wilkinson business, Sean on the Board and will focus on driving a positive and sustainable future for including taking up the role as trustee to the company pension scheme and in 2004 our customers. she chose to end her formal legal career to become a Director of Wilko. Aidan’s extensive career has seen him as both Chief Financial Officer and Chief Lisa is the daughter of Tony Wilkinson who led the second generation of the Wilkinson Executive for a number of public and private companies in the UK, Europe and family. She too hopes that the fourth generation will continue the legacy of Wilkinson the USA. Aidan’s wide-ranging experience includes several spells in consumer family ownership and will feel the same passion for this privately owned business. goods and retail: from businesses making, selling and fitting window blinds (as the UK’s third largest blinds retailer); to selling high-end wallpaper and fabrics via some of the UK’s top luxury brands; to creating and selling 6 million holidays a year, mostly through the 700+ stores in MyTravel’s high street travel agency. He has worked to make online sales quicker, safer and more enjoyable at several of his previous companies. Sean Toal Aidan originally trained as a Chartered Accountant and holds a law degree, Chief Operating Officer specialising in tax in his early career.

Sean joined Wilko in July 2014 to take on the role of Chief Operating Officer. Sean is a dedicated, results-driven retailer with a long record of success and clear strategic thinking. Sean’s main focus is developing key operational areas including retail, distribution and buying as we continue to drive the John Jackson business forward. Non-Executive Director Sean began his early career in food retailing with Somerfield in 1986. John Jackson has been a Non-Executive Director for 7 years. After 15 years at Somerfield, Sean moved to United Co-operatives as A qualified Chartered Certified Accountant, he is Chairman of the General Manager – Retail Operations. In July 2007, United Co-operatives Audit & Risk Committee. John was Managing Director of Bristol-Myers merged with the Co-operative Group and Sean was appointed Director Pharmaceuticals, CEO of Cheseborough Ponds, Managing Director of Food Retail Operations for the Co-operative Group and played a of The Body Shop International Plc and Virgin Group Board Director key role in the successful integration of the two Co-operative Societies. responsible for Retail & Leisure. Sean also led the operational integration of Somerfield following the acquisition in March 2009. In 2007 John joined Jamie Oliver Group as Group CEO. In 2014 John also became Chairman of the Rick Stein Group. He is currently Senior Sean was appointed Commercial Director in January 2010 and led Non-Executive Director of Game Digital Plc, Non-Executive Director of the combined Marketing and Trading teams up to his appointment Playtech Plc, with previous Non-Executive roles including Thorntons Plc, as Acting Chief Executive Officer in September 2011. In January 2012, Luminar Plc and The Restaurant Group Plc. Sean was promoted to the position of Chief Operating Officer for Food. 10 Wilko Strategic Review 2015 Wilko Strategic Review 2015 11

The trading board

Robin Lassiter Cath Fox Retail Director HR & Talent Director

Robin is the Retail Director for Wilko, and has held a number of senior roles at Cath joined Wilko’s in 1990 and has 26 years of HR experience with Wilko’s. Wilko since 2006, including Multichannel and Business Transformation as well Cath leads the HR and Talent teams to deliver effective solutions to meet as Retail Operations. Robin is responsible for all of the 381 stores, our online our strategic business objectives. business and Central Operations in Worksop. Cath’s background in HR covers areas such as strategic planning, cultural Robin has worked in the UK and the US, including a long period at Sainsbury’s change management and participation in corporate governance. covering a number of Commercial, Operations and Online roles. Cath also has overseas experience working on a secondment basis as Head Robin is a Non-Executive Director of Enactus UK and sits on the BITC East of HR for Wilko Asia, and has undertaken other commercial secondments Midlands Advisory Board and the Healthy High Streets Steering Committee. including a project management role for the stationery major category review. These experiences have given Cath valuable knowledge and an understanding of the retail end to end general commercial process.

Mark Hale Ian Ayling Supply Chain Director Strategic Marketing Director

Mark joined Wilko in March 2015 to take on the role of Supply Chain Director. Ian joined Wilko as Strategic Marketing Director in October 2015. He started his career in FMCG Mark’s key focus is on driving efficiencies across the operation while developing marketing and managed a variety of well known British brands, from Pot Noodle to Mr. Kipling the Supply Chain to support the strategy of the business. – eventually operating as Marketing Director for Rank Hovis McDougall’s cake division. Mark began his early career in heavy chemical companies ICI and Shell In 2005 Ian joined Dunnhumby to lead the marketing and customer development programme before moving to the Co-operative Group in 1992. At the Co-operative he with Tesco. Then in 2011 he joined the Co-op as Customer Change Director to rebuild and worked in numerous roles across four of the businesses – Food, Travel, grow their food business as a convenience retailer. Pharmacy and Funerals. Mark held a number of Director roles before Ian has also joined our Board of Directors for W’innovate, our product design and becoming the Supply Chain Director for the Food business. development company. Mark has a masters degree in ‘Managing IT in business’ which he obtained through a part learning programme with Salford University. Additional support to the Wilko Group

Frankie Adams Haroon Rasool Trading Director Wilko Asia Managing Director Haroon started his career in pharmaceutical research as an auditor and Frankie joined Wilko in 2009 to head up FMCG trading and was subsequently quickly progressed onto heading up technical for an international food promoted to Trading Director a year later. manufacturer. He joined Sainsbury’s in 2002 where he held various roles Frankie has a degree from Oxford University and a masters degree from culminating in heading up Quality in Asia. Haroon was a key leader in Bath University and began his career with Nestle UK on the graduate scheme. establishing Sainsbury’s Global Sourcing Division in Hong Kong in 2005. After 6 years at Nestle, Frankie moved to Asda where he successfully led Haroon holds a PGCE from the University of Cambridge, MSc in Food Science several different buying areas. from the University of Leeds and BSc (Hons) in Biotechnology from University Since he has been at Wilko, Frankie has led a major review programme College London. across all our ranges and products, driven commercial results with passion Haroon joined Wilko Asia in August 2008 to lead Global Sourcing Quality and focus and created a strong emphasis on cross-functional working to & Social Compliance. Haroon is the co-founder of Wilko Asia and has been deliver excellent results. integral in establishing our global sourcing operations. Haroon was appointed Managing Director of Wilko Asia in March 2015. 12 Wilko Strategic Review 2015 Customer satisfaction up 7% year on year to Helping our 78% customers get their to dos done We understand our customers “ We’re here to help because we’re just like them – we’re keen gardeners, pet families to run, repair, Team member lovers, eager bakers and handy maintain, improve friendliness decorators. We have busy lives improved by 1% and families, so we understand and live in their year on year to the importance of good quality products at the right price. homes and gardens.” Lisa Wilkinson Director Part of the family We consider our customers part of the Wilko family and we know 78% what matters to them when they shop with us. With busy families 6/10 and lots of to dos we need to keep ahead of our competition and truly understand the needs of our customers all year round. Whether it’s looking for value in January, refreshing the home in March and April, garden and outdoor furniture throughout the households summer, getting the kids back to school and college in September to looking for inspiration at Christmas – we’ve got the stuff our customers need to get the job done. shop with Wilko

Team member helpfulness improved by 2% year on year to 79% 14 Wilko Operational Review 2015 Wilko Operational Review 2015 15 W’innovate Going gl bal Thoughtful creativity – designing and making purposeful products that make everyday life easier or better with Wilko Asia We’re a design consultancy that specialises in own brand, domestic, consumer-led products. Our ethos is that well designed products shouldn’t cost the earth and should be available to the masses – From its offices in Hong Kong and Delhi, Wilko Asia is responsible everyday products for everyday people. To do this we have to be both commercially savvy and resourceful in our design approach. for sourcing products from China, South East Asia and the Indian We take time to understand the needs of the end user, considering how, when and where the products will be put to use. subcontinent. Its 57 team members work hard to ensure we can

From our ideology of having graduate designers at the heart of our offer our customers the best products at the right price. business, to the methods we use to approach design, right through to the ideas that we create, we make small but continual changes to Quality assured improve our design process and the products we produce. Quality is a top priority for the team. Using over 300 factories throughout Asia, they now ship over 4,000 different products The team to the UK – each of which has been rigorously sampled and Talent is our most valuable asset. We recruit commercially savvy tested to make sure they meet our exacting high standards. individuals with all levels of experience.

We also have an altruistic agenda to provide opportunities for Playing fair with everyone recently qualified designers. We demonstrate our commitment to this As part of an ethically ran family business, Wilko Asia has through our sponsorship of New Designers each year. It allows us to undertaken a social compliance initiative throughout all meet the next generation of commercial designers and keeps us up its suppliers to ensure the products they supply are sourced to date with emerging talent and the quality of projects that degrees and produced ethically. Our suppliers and their factories are producing. are regularly assessed by independent auditors to ensure their ongoing compliance.

57 team members We source from over Victoria Bradley Design Manager, W’innovate “In 2013, I recruited a team, created a strategy and a business plan and set Over off to develop the concept of W’innovate. We knew 3 things from the outset. 300 We wanted to offer design services. We wanted to create a graduate centre factories across Asia of excellence. We wanted to potentially become a product brand. All of this I believe in, it excites me greatly and we’re on a journey. We’ve grown the team from 3 to 10 designers and have taken the number of 4,000 products we’ve designed from 0 to over 2,000 lines. different products The final piece that gives this start up company the edge of infinite potential is the strength, backing and infrastructure of belonging to large company.” 16 Wilko Operational Review 2015 Wilko Operational Review 2015 17 Quality, value Hello Stay and choice Low Price

Our ‘Stay Low Price’ focuses on stuff our customers need at prices At the heart of everything we do is In March 2015, we launched that’ll stay low all year round. We keep an eye locally to make sure helping our customers get their to our new value proposition we bring customers the best prices and are always competitive, our prices will beat or at least match our competitors. dos done and making sure they have ‘Stay Low Price’ – a multi-million As part of the launch, we extended our range from 250 to over 4,000 products and we made our promotional offers stronger and everything they need to run, repair, pound investment in thousands more focused for our customers – with 50 of our offers being market leading! We also focused on making sure our pricing was simple and maintain, improve and live in their Over of everyday low prices to drive 1,000 easy to understand and that the products were easy to find in store. products in our homes and gardens. Home and Kitchen our competitive edge in an Here are some key facts about stay low price: aggressive marketplace. • Stay low price means our prices will stay low for To achieve this we need to make sure we always supply them with the right ranges have 12 months. Guaranteed products at the right price. That’s why as well as providing the right range a customer 5 star • 4,000 lines of our customers’ most important to do products of products, we also constantly strive to improve their quality and value were introduced in 2015 for money. rating on wilko.com • Our stay low prices will match or beat our competitors

“Does the job! What a fab little Just some of the improvements toaster this is. Not too small, we’ve made to our Home and fits perfectly in my kitchen” Garden range… • We’ve increased the thread count to 144 on all our printed duvets • Added depth and strength to our woven storage baskets • Improved the design of our stainless steel bathroom cabinet – making it less likely to scratch • We’ve improved the spec of our plastic handled cutlery • Wilko Ultra kitchen towel now outperforms the brand leader for strength • Increased the size of garden bulbs to give better plant yield • Our Wilko Tomato Feed now matches the performance of the leading brand 18 Wilko Operational Review 2015 Wilko Operational Review 2015 19 Putting our stores Evolving our where our customers want to shop existing estate

in all different shapes and sizes. We ensure sure that every store’s product range, use of Last year we revamped, resized and refitted 87 of our existing Our 8 new stores we check out what our customers want and language and photography is appropriate As well as opening 8 new stores stores – helping to stimulate sales and drive brand loyalty, to generated an need wherever we lay down our space to for the customers who live and work locally. this year, we’ve also put a enhance our customers’ shopping experience. Improved fixtures, ensure we get the right product and range better adjacencies, local relevance and optimal use of space We’re really excited about the opportunities in store for our customers’ needs. We also have all been used to make our customers’ shopping experience additional £6.6 million, that opening more stores in London great deal of time and effort into ensure our stores are accessible for everyone the best it can possibly be. generates for Wilko. We’re delighted to bring – whether that’s creating or checking the serving nearly our value, quality and ranges to our capital keeping all our existing stores up And we’re not done – we’ll keep constantly evolving and improving availability of public transport links and and we’re looking at the many interesting our stores, looking for new and better ways to help our customers parking spaces. 750,000 customers. locations that London has to offer. to date and in line with our high get their to dos done.

A capital idea And we’re still at the heart of the high street brand standards. Expanding our space For decades, we’ve been right at the heart Although we’re now opening stores beyond In recent years we’ve noticed that although of retail in the UK. So it makes sense that the traditional high street, it’s here where we our customers love our local high street we’d have stores in our capital city. began and it’s here that we intend to stay. stores, they want the option to drop into Wilko So far we have 7 stores in the capital – Our customers love the fact they can ‘pop when they’re out shopping on a retail park. 11 revamps at Tottenham Hale, Kensington High Street, down to Wilko’ and get everything they need We’re putting our stores where our customers Tooting, Fulham, Stratford, Wood Green and for their homes and gardens, all under want to shop, on high streets and retail parks – most recently – Hammersmith. We make one roof. Our 8 new stores

CYBER BLACK MONDAY FRIDAY

Order & Collect Order by 2pm, collect from 2pm tomorrow generated £6.6 million OUR in additional sales serving 381 nearly 750,000 STORES SERVE additional MILLION CUSTOMERS customers 7EVERY WEEK 20 Wilko Operational Review 2015 Wilko Operational Review 2015 21

We love talking, it connects us to our We get customers. And when we’re not talking through the radio, press, Facebook and Our customers Twitter, we’re helping our customers on people our Wilko life blog too. 10,000 shop with us 24/7 – talking 140,000

facebook Twitter online and in store followers Instagram followers 60,000 followers Order and collect Our online business is As part of our 5 year strategy plan, we’re constantly looking for ways to improve our convenience to make it easier for customers to shop growing fast and has never with us. One way we’re doing this is by focusing on our order and collect service and our wilko.com service which not only makes us more convenient to shop with but also provides customers with been more important to an increased range and choice of products at great value! Making the Bringing it to life us in delivering convenience Not only do we work hard to make sure our customers’ online shopping experience is as simple and enjoyable as possible, for our customers. It’s an we also put a great deal of effort into providing them with 85%of shoppers surveyed all the help and inspiration they need. Our blog aims to give said they loved us area we’re really excited our customers up-to-the-minute advice on how to do everything headlines from unblocking a plughole to creating their perfect look for less. to invest in! If it needs doing, our online team can help them do it. And it’s not just our customers who love us, in 2015 we also received some great media coverage too… “‘ hisT place is amazing,’ I beam

Top of the shops Super brand news at the smiling checkout girl as We did well in a recent We appeared alongside she rings up my items” satisfaction survey run by treasured names like Marks & consumer champions Which? Spencer in a list of alternative Alice Smellie, The Daily Mail They asked 1,000s of customers super brands published by retail which of the big high street data consultancy Ikano Insight. IMRG rated stores had the best service and It recognised brands with the warmest welcome – and we best understanding of their came in the top 20, beating big customers, long-term loyalty wilko.com within the names like Tesco and Ikea. and engagement. When people talk to us and about As seen on TV We also had great feedback on The place to be seen – the best for “Leading” websites us on social media, it drives traffic the moneysavingexpert.com An article in the Daily Mail bathroom paint website, with 85% of shoppers to wilko.com. In 2015, describes us as the latest go-to asked saying they loved us ‘Shop well for less’ on brand for middle class shoppers – again beating brands like BBC1, featured 5 well looking for a good deal. nearly 56 million visits to Morrisons and Homebase. known paint brands Top 28/500 Comparing the quality of our and put them to the products and service with the our website came via social media* test. In a blind test a likes of John Lewis and House of in their 2015 Fraser – but with far better value customer picked our for money. Wilko Bathroom paint annual report as the best for quality, coverage and colour. We saw an 80% sales uplift after the programme aired. *Information correct as of 31/01/16 22 Wilko Operational Review 2015 Wilko Operational Review 2015 23 Training and Doing our bit development locally and In October 2015, we ran our annual engagement survey, “I understand asking team members what it’s like to work at Wilko. how my work contributes to 18,492 team members took part, that’s To save energy, the success we’ll move all lighting of Wilko.” to LED in due course, globally 25% has already been completed 74 Being a fair, responsible % and ethical retailer.

Since 1930 we’ve been selling products at a fair and honest price to millions of people. In that time we have always taken responsibility for our actions and have committed to minimising any negative impact on people and the environment. We have a strict Corporate Responsibility We do 88 Strategy, which is embedded in every team member. not test any of our products or their ingredients on animals % We’re ensuring, of our team Within our distribution centres with regular audits, intelligent systems switch off power that none of our to rooms that aren’t being used products are Our net promoter score was manufactured in factories that Our team members are crucial to making the customer shopping have unsafe or experience memorable and repeatable – so it’s reassuring that our unacceptable team members have scored this question highly. working We’re working with The practices Woodland Trust to use sustainable sources of On average timber in all our wood 50.8% and paper products Well above average for our sector

“I understand who my customer is and what Our transport policy has received I need to do to put my 5-star Ecostar accreditation customer first.” 83% 66 of responses were% positive 24 Wilko Operational Review 2015 Wilko Operational Review 2015 25 Helping the Paying peop e our way UK taxes paid We continue to make a significant contribution in terms of taxes/levies £134 m around us paid, primarily in the UK but also through our sourcing operations Collected by Wilko Bags of money for good causes Helping good causes and doing our In the first six months of the Government’s 5p carrier bag in Hong Kong and India. During on behalf of HMRC bit for charity is a key part of our business. charge, we sold over 18 million bags and raised £133,461 for charities based across England, Wales and . 2015/16 we paid or recorded

This year team members across the Helping Hands charges of over £134m in taxes/ business nominated 25 local charities As part of our Helping Hands fund, Wilko gave £300 to levies in the UK alone. each store to help their local community. That’s a total donation of £76,200 to local charities and community £29m they were passionate about or had a groups in need of support. 19 stores near the Bristol area We believe in acting responsibly and pay our fair share of taxes in connection with – and after a lot of hard pooled their Helping Hands budget together and paid each jurisdiction in which we operate. We don’t and never will use for over 250 senior citizens to have a day at the cinema questionable structures to evade taxes. Overseas tax paid work (and fun) ended up raising over £1 to watch Dad’s Army. We also give team members one day per year million for our 25 regional chosen charities. to volunteer in their local community – that’s over half a million hours! £ m regional Total tax remitted 25 charities

Final amount raised £16 4 m over £1m 26 Wilko Operational Review 2015 Wilko Operational Review 2015 27 Governance and risk management

Risk identification and management As a private company we are not required to demonstrate compliance ARC carries responsibility for risk management and internal This consists of Trading Directors who are required to present control. Meeting five times a year, ARC maintains a strategic risk risk reports and mitigation plans for their department. ARC also with the UK corporate governance code or to disclose our corporate register covering a wide range of business risks; the register is a approves the annual internal audit plan and receives key internal governance arrangements. The code represents best practice and we dynamic document and is formally reviewed at least annually. audit findings at each ARC meeting. ARC is supported in the management and monitoring of business Principal strategic risks identified are as follows: are moving towards compliance with most of its elements. Though not risks by the Risk Executive Committee (REC). fully compliant, we believe we have robust governance in place and wish to be open and transparent with stakeholders about our approach Risk Mitigation to effective control and stewardship. IT resilience and infrastructure – under-investment, outdated The Board has approved significant investment in this area. technology, increasing data volumes stretching capacity and additional IT transformation plan has been delivered to board with Overall control of the Group is through the Holding Board: Summary of Key Boards and Committees IT support for the strategic projects all present risks. monthly updates, and focuses on addressing priority risks. Recruitment of additional resources needed to deliver the • The Holding Board delegates authority in specific areas to other Holding Board plan is already under way. sub-committees Holding Board is a unitary board chaired by Lisa Wilkinson, Family Director. Other Directors are Sean Toal, Chief Operating Officer (COO), • Audit and Risk Management – Audit and Risk Committee Business strategy – ability to absorb change – as we continue Work is ongoing on the re-sequencing of the strategic Aidan Connolly, Chief Financial Officer (CFO), John Jackson and • Remuneration and nominations – Remuneration and our strategic programme, considerations are currently being given to our project portfolio and this involves driving an understanding Steve Sinclair (non-executive directors). It provides oversight and Nominations Committee ability to absorb change over the next 12 months. of the implications of significant planned IT change to the challenge to the Trading Board over its day to day running of the wider business. • Executive management of subsidiary trading businesses – Trading business. It also is the ultimate level of approval for significant board and other executive boards for W’innovate and Wilko Asia strategic changes, particularly those affecting the Wilko brand and Managing the talent pool – the strategic objectives will only be A number of key activities are already under way including: The current arrangements are under review, in the future we will move adherence to shareholders’ principles. Holding Board delegates achieved if executed well by team members. Without alignment of • Relaunch of internal future executive development to a more transparent structure. authority in specific areas to the following committees. values and skill-sets to the strategy there is a risk of non-delivery. programmes • Business objectives cascade Audit and Risk Holding board Remuneration • New retail talent strategy including graduates Committee (ARC) Wilkinson Hardware Stores Limited and Nominations and apprentices Meets 4 weekly • Engagement survey actions ARC’s objective is to RNC’s objective is to establish formal, robust and WHSL board meets 13 times a year/4 weekly establish formal, robust Digital strategy – a digital mindset needs to be embedded across A clear Digital strategy is being finalised to emphasise the transparent arrangements arrangements to create, all areas of the business. We need to be responsive to changes in importance throughout the business. to apply the corporate recommend changes technology and customer behaviours to achieve our goals. reporting, risk management to, and oversee the Weekly meetings between the core digital team and integrated and internal control application of remuneration departments are already in place with particular emphasis on IT, as a key enabler of delivery of the Digital strategy. principles and to maintain ARC* RNC* and nominations policies. an appropriate relationship RNC is given authority to with the Company’s oversee and review Health and safety culture – during 2015, for the first time in the Group’s We will invest in our culture, communications and leadership auditors. The committee remuneration arrangements history, we were prosecuted and pleaded guilty to a health and safety to ensure that health and safety is always front of mind. We have is chaired by John Jackson Trading board for the group, recommend offence. We received a fine, reduced by 33% as a result of the risk approved a substantial increase in resources to support this. and attended by Lisa Wilko Retail Limited new positions and structural improvements we have made since the accident. The health and safety Wilkinson and Steve Sinclair. changes required to support of our employees and customers is a paramount consideration. Meets weekly The COO, CFO, Head strategic aims. RNC (Week 4 meeting Change Board) of Finance and Internal members consist of the Crisis management – in the event of a disaster scenario There is a core crisis team in place. External specialists have audit manager assist the non-executive Directors and we need to ensure business continuity. Plans that encompass robust been engaged to support effectiveness of crisis process through committee in carrying out Family Director assisted by crisis and incident management, mitigation and communication scenario testing. W’innovate Limited Wilko Asia Limited its objectives. executive members CFO, responses are currently being prepared to address such situations. Product design & Sourcing company COO, rewards and pensions development company Full board meets twice manager and HR Director. Full W’innovate board a year in Hong Kong Summary Long-term viability meets once/Q W’innovate Directors: LW, FA, HR, The governance structures provide effective lines of leadership With a robust governance framework and a strong strategic plan Showcase in other months David Wei and accountability for the ongoing management and stewardship which is driving improvement in key performance indicators we Directors: LW, FA, CU, IA of the group. Non-executive directors and the Family Director are confident that the group has a strong future and is viable. hold executive directors to account through the Board and *LW, SS and JJ are members of ARC and RNC its committees. 28 Wilko Operational Review 2015 Wilko Operational Review 2015 29

Financial review Taxation Return On Capital Employed (ROCE) The tax charge of £6.9m this year represents an effective tax rate of ROCE for 2016 increased to 13.0% against last year’s 1.7% reflecting 26.3%, predominantly due to depreciation being higher than capital improved utilisation of existing assets driven by the increased allowances as a result of fixed asset spends which do not qualify profitability in the current year. for capital allowances. The tax does include a charge of £0.2m in respect of earlier years (2015: £0.8m credit). Pension In addition to the defined contribution schemes provided by the Cash Flow and Net Debt Group, the business also operates a defined benefit scheme which Liquidity remains very strong with cash and cash equivalents was closed to future accrual post 31 July 2013. The estimate of the Improved trading in the financial year resulted in turnover increasing to £1,464m (2015 – £1,445m) increasing £27.3m to £96.0m at the end of 2016. Operating activities deficit on the scheme at the end of the year is £14.2m pre taxation driven by additional customer footfall, new stores and like for like growth. Combined with better generated an inflow of £75.4m, predominantly as a result of £56.8m (2015: £33.8m deficit). The reduction in deficit is mainly due to EBITDA (2015: £39.1m). Investing activities contributed to an outflow of increases in corporate bond yields over the year leading to a rise margin control that saw gross profit percent increase to 40.3% (2015: 40.0%), overall gross profit £23.4m, largely due to spend on capital additions of £24.3m, whilst in the discount rate from 3.2% to 3.75% p.a. Mortality assumptions rose to £590.1m (2015: £578.4m). Operating expenses fell £9.1m to £566.5m (2015: £575.6m), financing activities generated an outflow of £24.7m. £22.1m of this have been updated to take account of latest scheme specific culminating in an operating profit increase of £20.7m to £23.6m (2015: £2.9m). was early repayment of the loan taken out in 2015. The £96.0m cash research. These factors caused a large decrease in liabilities which balance and zero debt means the Group has access to significant was only partially offset by a rise in long-term inflation expectations. resources to deliver its strategic priorities in the coming year. The Group made additional contributions of £1.2m during the year Profit on ordinary activities before movements on derivative financial instruments and tax for the to the defined benefit scheme and has committed to make a similar year was £22.8m compared to £2.5m last year. Capital spending contribution in 2016/17. Capital additions for the year rose to £24.3m (2015: £13.3m), predominantly as a result of new stores and relocations in 2016. Key Performance Indicators Operating Margin Spending of £24.3m on a proportional basis remains low for the Alongside absolute profit and debt measures, the business uses Operating profit increased by £20.7m year on year to £23.6m (2015: size of our group and under investment in the business has been several key performance indicators (KPIs) to measure progress. £2.9m). This consisted of an increase in gross profit of £11.7m and highlighted as a key strategic risk by the board – particularly in our a reduction in operating expenses of £9.1m. The £11.7m gross profit IT infrastructure. increase was driven by £8.0m as a result of the additional sales and KPI 2016 2015 £3.7m through trading rate improvement to 40.3% (2015: 40.0%). A key trading initiative this year was the launch of our Stay Low Pricing Total revenue campaign, in which we committed to selling 4,000 lines at the lowest 1.4% (1.3%) growth / (decline) price on the high street. This generated 14% volume growth and 3% sales increase for the lines changed as part of the campaign. Consolidated profit and loss account Like for like revenue Rate dilution from the Stay Low Pricing campaign was offset by 0.6% (2.0%) growth / (decline) improved discount management and sourcing effectiveness. In terms of category performance the biggest areas of profit EBITDA £m £56.8m £39.1m growth came from DIY, Cleaners and Christmas. 2016 2015 The £9.1m overhead savings materialised across a number £’000 £’000 Customer growth / of different areas. Team member costs reduced by £1.9m (after 0.8% (2.3%) Turnover 1,464,475 1,444,563 (decline) paying team member bonus) following the headcount restructure that commenced at the back end of 2015 for our head office, supply Operating return chain and retail departments. Marketing spend reduced in Q1 and Cost of sales (874,350) (86 6,114) 1.6% 0.2% (“pence in the £”) Q2 as a result of not repeating the TV advertising that took place in 2015. Additional marketing investment was however injected into the Gross profit 590,125 578,449 Return on Capital Christmas campaign in Q4, helping drive the strongest quarter 13% 1.7% Employed* of comparative sales growth all year at 1.7%. Other savings year Operating expenses (566,487) (575,574) on year were generated in transport, contract maintenance, card *Calculated as EBIT** / (Shareholder Equity + Debt finance) handling and utilities. The utilities saving were the result of significant Operating profit 23,638 2,875 **EBIT is also before movements on unrealised gains / losses capital investment in LED lighting across a quarter of the estate on financial instruments in 2015. Plans are in place to extend LED lighting to the remainder Interest receivable and similar income 909 393 of the estate over the next two years. Within the year we embarked on a five year strategic programme encompassing projects across Revenue Interest payable and similar charges (1,796) (743) Improved trading performance resulted in turnover growth of £19.9m IT, Supply Chain, Marketing, Customer Experience and Product. year on year, with key metrics across the board all contributing. £4.1m of additional spend was attributable to these projects in year. Profit on ordinary activities before movements on Like for like store performance was an improvement, posting a growth 22,751 2,525 of 0.6% in 2016 compared to a 2.0% decline in 2015. We increased Finance Income and Costs derivative financial instruments our estate from 373 stores to 381 and wilko.com sales increased 13.8% Net finance costs of £0.9m increased by £0.5m year on year. increasing our overall basket spend for the year too. This compares We operated with more cash in the bank throughout 2016, generating Unrealised gain on derivative financial instruments 3,204 19,954 favourably with the overall market trend for non-food online sales, additional interest receivable of £0.5m. Due to the high liquidity which showed growth of 12.7% during the same time. However, the position we repaid the outstanding balance on the £25m loan in full Profit on ordinary activities before taxation 25,955 22,479 percentage of online sales as a proportion of total sales is significantly in January 2016. Additional repayments prior to repaying the loan in full contributed an additional £0.2m of bank interest paid. The interest lower than the non-food market average of 18.5% meaning we need Tax on profit on ordinary activities (6,841) (6,613) to continue to focus on growth in this area. charge on the net pension liability also increased by £0.9m year on year to £1.1m in 2016 (2015: £0.2m). Profit on ordinary activities after taxation 19,114 15,866 30 Wilko Annual Review 2015 Wilko Annual Review 2015 31 Financial review Consolidated balance sheet 2016 2015 £’000 £’000

Fixed assets Tangible assets 147,626 157,428

Current assets Consolidated cash flow statement Stocks 150,349 153,302 Debtors 51,209 56,408 Cash at bank and in hand 96,012 68,690

2016 2015 297,570 278,400 £’000 £’000 Creditors: amounts falling (210,572) (197,104) Cash flow from operating activities due within one year Operating profit 23,638 2,875 Current pension service costs 7 8 Net current assets 86,998 81,296 Pension administration costs (1,250) (1,250) Depreciation of tangible fixed assets 33,183 36,190 Total assets less current liabilities 234,624 238,724 Loss/(gain) on disposal of tangible fixed assets 885 (365) Decrease/(increase) in stocks 2,953 (13,211) Creditors: amounts falling (31,723) (48,500) Decrease in debtors 205 8,606 due after one year Increase in creditors and provisions 17,728 6,434 Taxation (1,990) (6,771) Provisions for liabilities (6,328) (6,302)

Net cash inflow from operating activities 73,359 32,516 Net assets excluding pension liability 196,573 183,922

Cash flows from investing activities Pension liability (14,175) (33,829) Interest received 909 393 Purchase of tangible fixed assets (24,343) (13,343) Net assets including pension liability 182,398 150,093 Disposal of tangible fixed assets 75 395 Cash transferred pursuant to Demerger – (39,504) Capital and reserves Called up share capital 19 19 Net cash flows from investing activities (23,359) (52,059) Other reserves 171 171 Cash flows from financing activities Profit and loss account 182,208 149,903 Dividends paid (1,874) – New bank loans raised – 24,750 Shareholders’ funds 182,398 150,093 Interest paid (733) (537) Repayments of borrowings (22,071) (2,679) Continuing operations None of the Group’s activities were acquired or discontinued during the current or previous period. Net cash flows from finance activities (24,678) 21,534 Company Secretary Auditors The figures and financial information for the financial period 2015/16 Mary Edgerton PKF Cooper Parry Group and comparatives do not constitute the statutory financial statements Net increase in cash and cash equivalents 27,322 1,991 Limited for those periods. The financial statements for the financial period ended 1st Registered Office Sky View February 2016. This includes the auditors report which was unqualified and neither Cash and cash equivalents at beginning of year 68,690 66,699 JK House Argosy Road drew attention to any matters by way of emphasis nor contained a statement Roebuck Way Airport under section 498 (2) or (3) of the Companies Act 2006. Cash and cash equivalents at end of year 96,012 68,690 Manton Wood Castle Donington On 11 June 2014 our trading company Wilkinson Hardware Stores Limited changed Worksop Derby its name to Wilko Retail Limited (still company number 0365335) and our new DE74 2SA S80 3EG holding company (company number 08856837) changed its name to Wilkinson Bankers Hardware Stores Limited. Wilko Retail Limited remains a wholly owned subsidiary Registered number 08856837 Lloyds Bank PLC of the renamed holding company Wilkinson Hardware Stores Limited (company (England and Wales) number 08856837).