2018/19 Annual Report and Accounts 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 .............................................................................................................36-51 Statement of Directors’ Responsibilities .........................................................................52 Independent Auditor’s Report to the Members .........................................................53-55 Consolidated Statement of Comprehensive Income ..............................................56 Non-GAAP Income Statement ...........................................................................................57 Consolidated Statement of Financial Position .............................................................58 Consolidated Statement of Changes in Equity............................................................59 Consolidated Statement of Cash Flows .........................................................................60 Accounting Policies .................................................................................................................61-63 Notes to the Financial Statements ....................................................................................64-94 Regional Communities support .........................................................................................95-103 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 Imaginedmid Futurec to inspireou all ourn activityties and all that we strive to achieve: OUR IMAGINED FUTURE midcounties The Midcounties We put We are an inclusive We are an We are a We are creating a Co-operative is membership at the employer where organisation proud commercially ‘better, fairer world’ part of a thriving heart of all we do colleagues are fully of our heritage, our successful, by building strong global co-operative which is reflected engaged and are independence and sustainable, values local communities. movement, a in how we engage our biggest our local roots. driven business leader, role model with members via a champions. which is trusted by and powerful range of the public, loved by influencer interactions. its members and recognised around supportive of its the world. suppliers. 3 What we do We operate a range of businesses in Food, Travel, Healthcare, Funeral, Childcare, Energy, Post Offi ces, Flexible Benefi ts and Telecoms. Our heartlands are in Oxfordshire, Gloucestershire, Buckinghamshire, Shropshire, Staff ordshire, the West Midlands, Wiltshire and Worcestershire. However, we also trade in the surrounding counties and our businesses in Energy, Childcare, Travel, Flexible Benefi ts and Telecoms trade across the UK. Here is a snapshot of our activity from the past year: £11.2m sales from the 338,802 370,000 Best of our Counties range passengers booked customers on supply Funeral Plan £1.6m paid out in community and Over visits to our over 3,000 funeral 400,000 charity giving digital healthcare website plans purchased midcounties £1.3m paid out to members 21 nurseries rated ‘outstanding’ by Ofsted 8,513 colleagues Over 700,000 members HALF BIG PRICE DEALS £2 £1.55 billion 21,500 active customers gross sales 528 trading sites 4 President’s introduction It is once again a privilege to be elected by my fellow directors to represent you as Society President this year. At our Half Year we said farewell and thank you to Ben Reid and welcomed Phil Ponsonby to his new role, leading the Society as Group Chief Executive. In our Half Year update we predicted a challenging second part of the year, particularly for our Energy business. This has been realised. Our Food Retail, Travel, Childcare and Funeral businesses have all turned in good results, strengthening our co-operative brand and external recognition. However, our Energy and Healthcare groups have made losses, Energy in particular, that have impacted the Society’s overall financial performance. The Board, working with the Executive on your behalf, has been focused on reviewing our strategic options in these businesses over a number of months. I am struck by the In spite of these challenges, I am pleased to note that the Society has not enthusiasm of our faltered from its purpose and has continued to deliver its ‘Imagined Future’. colleagues and their In this annual report each trading group has highlighted elements of its activity that show ‘Our Co-operative Difference’ to demonstrate the central ability to articulate the role this work takes in our businesses. difference in working for This year, for the first time, we have a report from The Phone Co-op, as a co-operative and the we welcomed members of The Phone Co-op into the Midcounties family pride they take from this shortly after our AGM in May. We also give well-deserved recognition to our longest serving colleagues, showing a few of their personal journeys Helen Wiseman with the Society. On my visits to sites across the Society I am struck by the enthusiasm of our colleagues and their ability to articulate the difference in working for a co-operative and the pride they take from this. This is a major factor in our award for Leading Co-op of the year for a record third time. Across the year we engaged with over 35,000 members in co-operative activity, including at our AGM, Half Year meetings and Fun Days. Our regional communities continue to thrive and mature, raising over £170,000 for our local charity partners, and we connected 60 community groups through our two Co-operative Difference events held in Cheltenham and Wolverhampton. It is important to recognise the considerable time and effort that colleagues and members contribute to these activities and we should congratulate them on the real difference they help make to our communities. Recruiting our 700,000th member during the year is another Society landmark. Every new member who joins the Society increases our ability to support local communities and champion the issues that we know are important to them. You, as a joint owner of Midcounties, make us different to other businesses, and it is your feedback and participation which continues to drive the Society, whether it’s around the food we source in our stores, the part we play in tackling global environmental challenges, or the support we provide to local community causes. I would like to acknowledge the ongoing hard work of both the Board and the Executive and, on behalf of the Board, I would like to thank all our members and colleagues for their support over the year. We look forward to working on your behalf through the coming year. Helen Wiseman President 5 Group Chief Executive’s overview It is a privilege to present my first annual report as Group Chief Executive since taking on the role last August. Against a backdrop of increased economic uncertainty and declining consumer confidence, the majority of our businesses have continued to perform well. Our Food Retail, Travel and Funeral businesses delivered levels of contribution equivalent to the previous year having absorbed significant increases