OUR FUTURE PARTNERSHIP JOHN LEWIS PARTNERSHIP PLC ANNUAL REPORT AND ACCOUNTS 2020 JOHN LEWIS PARTNERSHIP PLC STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 2 Annual Report and Accounts 2020 3 What’s inside STRATEGIC REPORT At a glance – What makes us different 4 – Our year 6 Chairman’s statement 8 EIGHT Y How we are different – Our Partnership business model 10 – Our values and culture 12 Section 172(1) statement – Promoting the success of the Partnership 14 ONE Our better way of doing business – Customer 18 – Partner 20 – Producers and suppliers 22 – Communities 24 Market review – Our markets and key trends 26 THOUSAND Strategic Review – Future Partnership 28 Our progress – Delivering more for our customers 30 PARTNERS – Empowering our Partners 34 – Generating more value for our 40 employee-owners – Transforming how power 44 and knowledge is shared Our risks and uncertainties – Effective risk management 46 TWO GOVERNANCE REPORT Our Governance – How governance is shared in the Partnership 52 BRANDS – Governance reviews 54 – Partnership purpose and values 55 – The Trust Company 56 – The Chairman 57 – The Executive Team 58 – The Partnership Board: 59 – Audit and Risk Committee report 63 ONE – Nominations Committee report 72 – Remuneration Committee report 75 – Partnership Council 81 – Democratic vitality 85 VISION FOR – Directors’ report 86 FINANCIAL STATEMENTS Consolidated primary statements 90 OUR FUTURE The world we live in is changing rapidly, Notes to the consolidated financial statements 94 Company primary statements and notes 142 undeniably now more than ever with the recent Statement of Directors’ responsibilities 146 PARTNERSHIP global spread of Coronavirus and its far-reaching Independent auditor’s report 147 and uncertain consequences. But right now, Five-year financial record 157 there’s never been a greater time for us to be Glossary 158 a better and different kind of business. Our Notes 164 Founder, John Spedan Lewis, established the General information Inside back cover Partnership to be a force for good in society and this is what we need to continue. That’s why we are focused on reinvesting most of our profits, Find out more to make a difference to people’s lives and help For more information on the progress we are create positive social change. making on our ethics and sustainability aims and to read our latest Modern Slavery Statement, visit SHARON WHITE www.johnlewispartnership.co.uk/csr More detailed, non-financial performance Partner & Chairman information can also be found at www.johnlewispartnership.co.uk JOHN LEWIS PARTNERSHIP PLC STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 4 Annual Report and Accounts 2020 5 At a glance WHAT MAKES 2013 980+ HERITAGE CENTRE THE GOLDEN JUBILEE TRUST In 2013 we opened our own archive, For the past 20 years we have run a unique documenting the Partnership’s history. Partner volunteering scheme – The Golden Partners and the public can visit the Jubilee Trust. Over 980 Partners have US DIFFERENT Heritage Centre to view photos, business participated, with the Trust covering the documents and unique objects, such as cost of the secondment, for up to six fabric we supplied for the Titanic. months full-time, at a UK charity of the Partner’s choice. Over 100 years ago, our Founder John Spedan Lewis began an experiment 3,000 74,122 into a better way of doing business DEMOCRATIC BED NIGHTS IN by including staff in decision-making REPRESENTATIVES PARTNERSHIP HOTELS We have over 3,000 elected The Partnership owns five on how the business should be run. representatives who feed into Partnership hotels specifically for three governing authorities – Partners and their families and friends He set out operating Principles and the Chairman, to use at a specially subsidised rate. the Partnership Board This year, 74,122 bed nights have produced a written Constitution to help and Partnership Council. been recorded. Partners understand their rights and responsibilities as employee-owners. He also stated that the Partnership 1 1929 85% should make sufficient profit, not RECYCLABLE PACKAGING WAITROSE FARM HEALTH & Our commitment to reducing plastic waste We are the only UK supermarket to WELLBEING SERVICES maximum profit. This vision, so ahead means 85% of all Waitrose own-brand operate our own farm. It supplies We were a pioneer of employee packaging is now widely recyclable and of its time and remains true today, our Waitrose shops with milk, flour, health and wellbeing services, 99% of own-brand black plastic has been cox cider, apple juice, sparkling introducing free in-house health and removed. Loose fruit and vegetable is what makes us different. wine, apples, pears, mushrooms medical services to all Partners bags are now home compostable and and rapeseed oil. in 1929, 19 years before the 5p single-use Waitrose carrier bags NHS was established. have been discontinued. Our commitment to the environment means the year 2050 is 1 2050 the latest we will make our entire TEXTILE FACTORY NET ZERO operations net zero carbon. 8/10 However, all our transport fleet will Since 1953 we have operated our own LOYAL CUSTOMERS CARBON EMISSIONS textile factory. Over 250 Partners at achieve this by 2045 and our heavy Eight out of ten of our most Herbert Parkinson make John Lewis goods vehicles will be switched to loyal customers shop in own-brand soft furnishings, duvets low-carbon biomethane by 2028, both John Lewis and and pillows, and all Made to Measure cutting emissions by over 80%. Waitrose. 7-day service curtains, and roman and roller blinds. 6 102 ANIMAL WELFARE GAZETTE 2001 Waitrose is one of the We have the UK’s longest-standing ONLINE SHOPPING top five companies in the weekly internal publication that has not John Lewis became one of the first world for farm animal welfare changed its name since launch. Running retailers in the UK to start selling standards, as confirmed for the for 102 years, the Gazette is written our broad range of products sixth time by the Global by Partners, for Partners, and sets its online in 2001. Business Benchmark. own editorial agenda, operating separately from management. JOHN LEWIS PARTNERSHIP PLC STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 6 Annual Report and Accounts 2020 7 At a glance OUR YEAR As expected, trading remained challenging Our Annual Report and Accounts includes BORROWINGS £m EXCEPTIONAL ITEMS £m alternative performance measures (APMs) which we believe provide readers with important throughout the year. At full year, profit before 1,031.8 966.9 936.8 1,047.2 762.6 129.3 171.2 (111.3) 2.1 107.4 additional information on the Partnership. A Partnership Bonus, tax, exceptional items glossary of terms is included on pages 158 to 163. and IFRS 16 was 23% lower than last year. £762.6m £107.4m However, our balance sheet and liquidity NET INCOME We have reduced our position remained strong and we improved borrowings by over £200m in Exceptional income totalled £107.4m our Debt Ratio. We continue to review our the year, which allowed us to with £30.6m charge in Waitrose, improve our Debt Ratio to £101.0m charge in John Lewis and plans to secure our long-term future. 3.9 times. £239.0m income in Group. Read more about our exceptional items on pages 104 to 106. 16 17 18 19 20 16 17 18 19 20 PROFIT BEFORE TAX £m PROFIT BEFORE PARTNERSHIP BONUS, TAX, PROFIT PER AVERAGE FULL-TIME EQUIVALENT PARTNER £ RETURN ON INVESTED CAPITAL (ROIC) % EXCEPTIONAL ITEMS AND IFRS 16 £m 289.8 452.2 107.5 117.4 146.4 305.5 370.4 292.8 160.0 122.6 7,300 6,900 6,900 5,000 3,500 10.1 10.1 9.1 7.3 5.8 £146.4m £122.6m £3,500 5.8% Our overall profit before tax has Our Partnership profit before Bonus, In line with the reduced Partnership The Partnership’s ROIC declined by increased to £146.4m. This is due tax, exceptional items and IFRS 16 profit, our profit per average FTE 1.5 percentage points, with 0.8 of to an increase in exceptional profits was £122.6m, a weaker performance has also reduced to £3,500. this due to the impact of adopting driven by the reduction in pension than we had hoped for, driven by However, last year’s number has not IFRS 16, the latest accounting obligations following the decision to significant operating profit decline in been restated to include the effect standard for leases, with the close the defined benefit section of John Lewis, which was partly offset of IFRS 16, which accounts for £900 remaining 0.7 being driven by the fall the pension scheme. by operating profit growth in of the £1,500 decline. in the Partnership’s operating profit. Waitrose, and lower Group costs. 16 17 18 19 20 16 17 18 19 20 16 17 18 19 20 16 17 18 19 20 REVENUE £bn DEBT RATIO LIQUIDITY £bn PARTNERSHIP BONUS % 9.7 10.0 10.2 10.3 10.2 4.4x 4.0x 4.3x 4.3x 3.9x 1.0 1.2 1.3 1.5 1.4 10 6 5 3 2 £10.2bn 3.9x £1.4bn 2% Due to the challenging retail Our Debt Ratio improved to We have maintained a strong Profits in 2019/20 were at the environment, we have seen a 3.9 times, the lowest level since liquidity position at over £1.4bn, lower end of what we had forecast. slight drop in revenue. This drop January 2014, and we continue despite repaying our £275m bond The Partnership Board therefore was more pronounced in John to review our plans to reduce it in April 2019.