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Fix, Rebuild and Grow Wm Morrison Supermarkets PLC Annual Report and Financial Statements 2016/17 Overview Wm Morrison Supermarkets PLC Annual Report and Financial Statements 2016/17 Fix, Rebuild and Grow We have a plan to Fix, Rebuild and Grow our business for all of our stakeholders. We have six priorities which we will deliver through our five ways of working to fulfil our ambitions for our four sets of stakeholders. priorities ways of sets of 6 5 working 4 ambitions We have six priorities to guide us Our colleagues know our Creating value for all key and shape our ambition to Fix, customers better than anyone stakeholders in a fair, Rebuild and Grow Morrisons. and are listening hard. We responsible, capital light have five ways of working that and sustainable way. underpin our approach and enable colleagues to make the best decisions for customers and each other. • To be more competitive • Customers first Customers Colleagues • To serve customers better • Teamwork • Find local solutions • Freedom in the framework Read more on Read more on • Develop popular and useful • Listening and responding page 10 page 12 services • Selling, controlling costs, Suppliers Shareholders • To simplify and speed up the growing profits, removing organisation waste • To make the core supermarkets Read more on Read more on strong again page 13 page 14 Read more about our progress on page 6 Read more about our progress on page 12 Read more on pages 10 to 14 Throughout the Directors’ report and Strategic report: (1) Unless otherwise stated, 2016/17 refers to the 52 week period ended 29 January 2017 and 2015/16 refers to the 52 week period ended 31 January 2016. 2016 and 2017 refer to calendar years. (2) Underlying profit is defined as reported profit before impairment, provision for onerous contracts and other items that do not relate to the Group’s principal activities on an ongoing basis, profit/loss arising on disposal and exit of properties and sale of businesses and investments, and the impact of pension volatility, at a normalised tax rate, as reconciled in note 1.4 of the Group financial statements. Underlying operating profit is reported operating profit before impairment, provision for onerous contracts, profit/loss arising on disposal and exit of properties and sale of businesses and investments, and other items that do not relate to the Group’s principal activities. (3) Like-for-like (LFL) sales reflects the percentage change in year-on-year store sales (excluding VAT and fuel), stripping out the impact of new store openings and closures in the current or previous financial year. Wm Morrison Supermarkets PLC Annual Report and Financial Statements 2016/17 Improving the shopping trip A turnaround led for customers by colleagues The shopping trip is improving with more customers buying more The turnaround is being led by our colleagues and our ambition from Morrisons more often. is for our motivated and highly valued team of colleagues to increasingly share in the success of Morrisons. Like-for-like transactions up 4% Colleague bonus equivalent to around 9% of underlying profit Read about our ambitions for our customers on page 10 Read about our colleague ambitions on page 12 Building long term relationships Creating value with suppliers for shareholders We are building long term partnerships with suppliers, growing and We are creating value for shareholders and aim to demonstrate serving customers better together. sustained growth in total shareholder returns. Like-for-like volumes up 2% Total dividend 5.43p, up 8.6% Underlying profit before tax £337m, up 11.6% Read about our progress for our suppliers on page 13 Read about our progress for shareholders on page 14 Strategic report Financial statements Investor information Chairman’s statement 2 Independent auditors’ report 50 Five year summary 119 Chief Executive’s statement 4 Consolidated statement of Supplementary information 121 Our six priorities 6 comprehensive income 59 Glossary 122 Our business model 8 Consolidated balance sheet 60 Investor relations and financial calendar 123 Performance review 10 Consolidated cash flow statement 61 Information at your fingertips 125 Chief Financial Officer’s review 14 Consolidated statement of changes in equity 62 Risk 17 General information 63 Corporate responsibility 20 Notes to the Group financial statements 65 Online annual report Company balance sheet 102 Read how we are creating value for all Governance Company statement of changes in equity 103 our stakeholders: Company accounting policies 104 www.morrisons-corporate.com/ Corporate governance report 23 Notes to the Company financial statements 107 annual-report-2017 Directors’ remuneration report 33 Related undertakings 117 Directors’ report 47 1 Strategic report Wm Morrison Supermarkets PLC Annual Report and Financial Statements 2016/17 Chairman’s statement Building a business for all our stakeholders Our mission is a modest one, but we can contribute widely to society Andrew Higginson I am writing this statement with the business in It is no coincidence that Morrisons much Chairman good heart after a year of profit and dividend improved performance coincides with the growth, further debt reduction, and five appointment of David and his new senior quarters of positive like-for-like sales. team. Morrisons skilled food makers and Uncertain times are ahead. Although the shopkeepers are loyal, passionate and UK consumer remains resilient so far, the dedicated, and virtually all are unchanged since consequences of Brexit and significant currency David started. Whilst all have contributed to movements are not yet clear. Morrisons has the improved performance, it is the leadership planned and prepared for Brexit but, in truth, that has changed. no one knows exactly what is to come. This is pertinent to the discussions and AGM By listening hard to customers – something resolutions relating to our proposals for the David Potts and his team do from shop floor next three year Executive remuneration to Board room – Morrisons will not allow policy. In construct it is similar to our existing itself to become victims of that uncertainty. policy that expires this year, however we have The Board and the senior team will work tweaked the performance measures to reflect tirelessly whatever the trading conditions to the challenges ahead enabling the Executive build a successful business for the millions of team to earn up to the maximum bonus customers that shop with us every week. potential if outstanding long term performance is delivered. So, we face the uncertainties with a positive mind-set, and there will be no excuses from us. Our mission is a modest one – to provide our We strive to be a place customers with good quality food, great service Take scale as an example. Morrisons is often and prices – but our contribution to society where our colleagues accused of being structurally disadvantaged can be very wide. We strive to be a place where can get on and unable to compete with bigger rivals. our colleagues can get on – a meritocracy That is nonsense. Morrisons has always been where good, hard-working people can succeed relatively small, but for decades competed whatever their background, and everyone brilliantly and drove terrific returns for shares in success. That is exactly what happened shareholders. Scale rarely defines retail to David and many of the senior team at Dividend winners and losers. Morrisons who have worked their way up from Most often it is outstanding execution that the shop floor. results in a great shopping trip. Customers have We provide training and apprenticeships for a vast choice of retailers and it is they who thousands of food makers and shopkeepers. 5.43p decide the winners and losers, quite literally, We pay the best we can, well above the by ‘voting with their feet’. National Living Wage, and offer bonuses in line with policy Food retail is an ordinary business, touching to colleagues in all our stores, factories and most consumers’ lives almost every day. It is depots. Over a thousand colleagues participate fiercely competitive. To execute ‘the ordinary’ in our Long Term Incentive Plan, including all our consistently well is far from easy and relies on store managers. outstanding leadership. 2 Wm Morrison Supermarkets PLC Annual Report and Financial Statements 2016/17 With over 110,000 colleagues and over 11 million customers per week, Morrisons sits at the Governance highlights heart of, and must reflect, the society we serve Board composition and membership in Britain. With plenty of choice available to • The Board comprises five independent them, our customers are our toughest and Non-Executive Directors and two best regulator. It is right and proper that our Executive Directors. business is scrutinised, and that our customers • All Directors stand for re-election annually can see that we behave well. Be it in our at the AGM. values, our actions, the impact we have on • Rooney Anand is the Board’s Senior the environment, our suppliers, or in the quality Independent Director and and safety of the food we sell. We take all a Non-Executive. our responsibilities seriously, knowing that if • The Board is satisfied that Belinda Richards has we fall short, our customers may choose to recent and relevant experience appropriate to shop elsewhere. her position as Audit Committee Chair. • There is clear division of responsibilities With all these demands on the business, we between the roles of Chairman and the must also remember that our reason to exist Chief Executive. is to make a return for our shareholders. Sir Ken Morrison CBE As we build a sustainable recovery, we intend Board effectiveness to also build a track record of returns for our Everyone at Morrisons was very sad to hear • The Directors have all attended an acceptable shareholders. 2016/17 was the first for our new recently of the passing of Life President, and number of Board and Committee meetings.

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