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2017/18 Annual Report and Accounts We’re owned by you www.midcounties.coop Contents Who we are ................................................................................................3 What we do ................................................................................................4 President’s introduction ................................................................................5 Group Chief Executive’s overview ...................................................................6 Key achievements ........................................................................................7 Trading Group overviews ...............................................................................8-16 Reporting our Steering Wheel ........................................................................17-19 Managing risk .............................................................................................20-21 The Board of Directors .................................................................................22 The Executive .............................................................................................23 Service Recognition Awards ..........................................................................24-25 Governance Report ......................................................................................26-35 Remuneration Report ...................................................................................36-55 Statement of Directors’ Responsibilities ...........................................................56 Independent Auditor’s Report to the Members .................................................57 Consolidated Statement of Comprehensive Income ...........................................58 Consolidated Statement of Financial Position ....................................................59 Consolidated Statement of Changes in Equity ...................................................60 Consolidated Statement of Cash Flows ............................................................61 Accounting Policies ......................................................................................62-64 Notes to the Financial Statements ..................................................................65-96 Regional Communities support ......................................................................97-105 2 Who we are Midcounties is a consumer co-operative owned and controlled by its members. We are part of the global co-operative movement, and subscribe to co-operative values and principles that govern all co-operatives around the world. Our Purpose is simple but ambitious with co-operative values at its heart: “To be a successful consumer co-operative working towards creating a better, fairer world and to enhance the lives of our colleagues, members, customers, and the communities we serve.” We have four core values that underpin our Purpose and guide the way we work. We live these values every day, every week, every month, every year. Ensuring the views Being open, honest Recognising the Reflecting our of our members and fair in our contribution that responsibilities to the are reflected in the dealings with everyone can make wider community in way the Society everyone we come to develop the the way we conduct is run into contact with Society our business To bring our Purpose to life we have created an Imagined Future to inspire all our activity and all that we strive to achieve: OUR IMAGINED FUTURE The Midcounties We put membership We are an inclusive We are an We are a We are creating a Co-operative is part at the heart of all we employer where organisation proud commercially ‘better, fairer world’ of a thriving global do which is reflected colleagues are fully of our heritage, our successful, by building strong co-operative in how we engage engaged and are our independence and sustainable, values local communities. movement, a leader, with members via a biggest champions. our local roots. driven business role model and range of which is trusted by powerful influencer interactions. the public, loved by recognised around its members and the world. supportive of its suppliers. 3 What we do We operate a range of businesses in Food, Travel, Healthcare, Funeral, Childcare, Energy, Post Offi ces and Flexible Benefi ts. Our heartlands are in Oxfordshire, Gloucestershire, Buckinghamshire, Shropshire, Staffordshire, the West Midlands, Wiltshire and Worcestershire. However, we also trade in the surrounding counties and our Energy, Childcare, Travel and Flexible Benefi ts businesses trade across the UK. Here is a snapshot of our activity from the past year: over 2,500 locally over 322,000 more than 333,000 sourced lines passengers booked customers on supply Funeral Plan 15,000 childcare 3,272,500 voucher users over 7,300 prescriptions dispensed funerals delivered almost 520,500 bills paid almost 3,420 children attend our nurseries 667,000 members 8,404 colleagues HALF BIG PRICE DEALS £2 £1.48 billion gross sales 518 trading sites 4 President’s introduction It is a real honour and privilege to have been elected by my fellow directors to represent you, our members, as President this year. Reading through the Annual Report and reflecting on the achievements of the Society, it is easy to see why Midcounties’ members can rightly be proud of the co-operative they own. You will see that three of our businesses have had record years – Travel, Funeral and Childcare – and our new supermarket at Bourton-on-the-Water has received international recognition. On top of this strong business performance, we have been awarded, for the second year in a row, a 5-star accreditation by Business in the Community in its Reflecting on the achievements Corporate Responsibility Index, just one example of the recognition the Society’s of the Society, it is easy to see co-operative activity has achieved, and a clear demonstration that the why Midcounties’ members can co-operative model can produce real success. rightly be proud of the A key component of this success comes from our colleagues who have given co-operative they own. their time and energy to serving our members and customers, and delivering community projects and events. The reach of our Regional Communities has Helen Wiseman meant we engaged with over 21,000 members in Regional Community events last year, forging many local partnerships in the heart of the communities where we trade – right where we belong. As well as this significant impact locally, we have looked to contribute to the thriving global co-operative movement, welcoming fellow co-operators from across the world and sharing ideas at events and conferences. In addition, Ben Reid, our Group Chief Executive, was re-elected to the board of the International Co-operative Alliance, the global voice of the co-operative movement which represents you and a further 1.2 billion members in over 2.6 million co-operatives around the world. As part of this global family of co-operatives, we believe we can work together towards our mission of “creating a better, fairer world” both through our local communities and our national and international influence. On behalf of the Board, I would like to thank our fantastic colleagues for their hard work, dedication and enthusiasm, without which we would not have had such a strong year, and also personally to thank my colleagues on the Board and the Executive team for their commitment, constructive challenge and co-operation. Helen Wiseman President 5 Group Chief Executive’s overview I am delighted to report that the Society has delivered another excellent trading performance. Our operating profit before significant items rose by 16.5% to £13.3 million, well ahead of both last year and our three year plan, and our revenues have increased with gross sales up by 10.2% to £1.48 billion. There were exceptional performances by our Childcare, Funeral and Travel groups, each of which declared record levels of profit, increasing profits by 30% between them. Our Food business continued its strong performance with positive like-for-like sales performances in each quarter. Flexible Benefits also performed strongly with profits ahead of plan by nearly 70%. However, neither Healthcare nor Energy achieved their budgets due to external factors which impacted their ability to deliver their anticipated profit. There were exceptional performances by Childcare, Healthcare continues to be adversely affected by the reduction in funding for prescriptions as Funeral and Travel groups, each the government tries to balance the NHS budget. This has had a considerable impact on the profits generated by the group. The Energy sector remains very competitive with new of which declared record levels entrants to the market offering heavily discounted tariffs creating considerable customer churn. of profit, increasing profits by 30% between them. As an indication of our confidence in the Energy sector we have recently made an offer for Flow Energy, a domestic electricity and gas supplier with around 130,000 customers, Ben Reid OBE reflecting our belief in the long term future of the Energy business. In addition, the cost of gas to companies supplying the domestic market has increased significantly following the introduction of a new gas settlement system during the summer. The impact of this unexpected increase in costs was approximately £2.1 million in the year. Without this additional charge our Energy business would have achieved its forecasted profit. This situation is currently