2020 Annual Report

1 2020 Annual Report 2020 Annual Report Sustainably feed all Australians to help them lead healthier, happier lives ABN 11 004 089 936. Coles Group Limited ABN 11 004 089 936. Coles Group Limited 2020 Annual Report Coles Group Limited 2020 Annual Report Coles acknowledges the Traditional Custodians of Country Contents throughout Australia and pays its respects to elders past and present. We recognise their rich cultures and continuing Overview connection to land and waters. 2020 performance 4. 2020 highlights 5. Aboriginal and Torres Strait Islander peoples are advised that this document may contain names and images of Message from the Chairman 6. people who are deceased. Managing Director and Chief Executive Officer's Report 8.

2 Overview All references to Indigenous people in this document Our vision, purpose and strategy 11. are intended to include Aboriginal and/or Torres Strait Islander people. How we create value 12. Sustainability snapshot 14. Support for customers, suppliers and communities 19. Operating and Financial Review Governance at Coles 24. Operating and Financial Review 30. Board of Directors 65. Directors' Report 68. Remuneration Report 73. Financial Report 96. Independent Auditor's Report 150. Shareholder Information 158. DRAFT 21 COL1634_An- nualReport_d31a Rnd 16. Directors' Report Copy September23,20207:52PM. Forward-looking statements Welcome to the Coles Group This Report contains forward-looking statements in relation to Coles Group Limited ( the Company') and its controlled entities (together Coles'.)

3 Or the Group'), including statements regarding the Group's intent, belief, goals, objectives, initiatives, commitments or current expectations Remuneration Report with respect to the Group's business and operations, market conditions, results of operations and financial conditions, and risk management DRAFT 1 COL1634_. 2020 Annual Report practices. Forward-looking statements can generally be identified by the use of words such as forecast', estimate', plan', will', anticipate', AnnualReport_. may', believe', should', expect', intend', outlook', guidance' and other similar expressions. d4a September These forward-looking statements are based 23,2020. on the Group's 7:52 PMassumptions as to the financial, market, risk, regulatory and other good-faith relevant environments that will exist and affect the Group's business and operations in the future.

4 The Group does not give any assurance that the assumptions will prove to be correct. The forward-looking statements involve known and unknown risks, uncertainties and assumptions and other important factors, many of which are beyond the reasonable control of the Group, that could cause the actual results, performances or achievements of the Group to be materially different from future results, performances or achievements expressed or implied by the statements. Financial Report Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements in this Report speak only as at the date of issue. Except as required by applicable laws or regulations, the Group does not undertake any obligation to publicly update or revise any of the forward-looking statements or to advise of any change in assumptions on which any such statement is based.

5 Past performance cannot be relied on as a guide to future performance. Our vision is to become the most trusted retailer in Australia and grow long-term shareholder value. Non-IFRS Information Customers trust Coles, as part of the fabric of Australian Shareholder information This Report contains IFRS and non-IFRS financial information. IFRS financial information is financial information that is presented in accordance with all relevant accounting standards. Retail or non-IFRS financial information is financial information that is not defined or specified under any society for more than 100 years, to provide great value relevant accounting standards and may not be directly comparable with other companies' information. food and drinks.

6 Any non-IFRS financial information included in this Report has been labelled to differentiate it from statutory or IFRS financial information. Non-IFRS We are known for our value, range and customer service measures are used by management to assess and monitor business performance at the Group and segment level and should be considered in through our extensive store network and for providing addition to, and not as a substitute for, IFRS information. Non-IFRS information is not subject to audit or review. online shopping solutions across Australia. Other Information Photographs in our Annual Report may have been taken before social distancing restrictions were in place. The image of FightMND campaign director Bec Daniher with Coles team members on page 11 of this Report was photographed by News Ltd / Newspix.

7 Front cover: In addition to the collection of unsold, edible food from our supermarkets and distribution centres, food and groceries to a retail value of $ million were provided to SecondBite and Foodbank this year in response to increasing demand for food relief as a result of COVID-19. SecondBite CEO Jim Mullan said, It's incredible to see how our partnership with Coles has grown over the years and the impact this has had on the most vulnerable people in our community. Many shoppers wouldn't be aware of the work that goes on behind the scenes to ensure edible unsold food ends up on the plates of those in need, rather than in landfill. We are proud to work with an organisation that is a clear leader with respect to both its social and environmental responsibilities.

8 '. 1. DRAFT 21 COL1634_An- nualReport_d31a Rnd 16. Copy September23,20207:52PM. DRAFT 1 COL1634_. AnnualReport_. d4a September23,20207:52PM. Our purpose is to sustainably feed all Australians to help them lead healthier, happier lives. The Pergoliti family at Harvey Citrus in Western Australia received a grant from the Coles Nurture Fund in FY20 to extend its supply of WA-grown citrus over the summer and increase local employment by expanding its cool room facility and installing solar panels on its packing shed. Pictured is Andrew Pergoliti with his father Steve and daughter Alyssa. Coles Group Limited 2020 Annual Report Coles Group Limited 2020 Annual Report 2020 2020. performance highlights Overview Operating and Financial Review Highlights for the year spanned our business and store network, our customer base, our team of suppliers and our communities around Australia.

9 DRAFT 21 COL1634_An- nualReport_d31a Rnd 16. Directors' Report Copy September23,20207:52PM. Sales growth1. Customer satisfaction Supermarkets Remuneration Report DRAFT 1 COL1634_. 1,500+ new products $10bn+. for Supermarkets2 sales density growth3 Almost AnnualReport_ at everyday low prices doubled in Coles Own Brand sales d4a September23,20207:52PM capacity of Coles Online $ bn $362m 111%. Financial Report EBIT 1. Net debt 4. Cash realisation5. Tailored store format strategy New transport hubs to Progress with Witron & Ocado 70 renewals optimise logistics automation Shareholder information Dividends per share 6. 7pp Improvement in team Improvement in total member engagement recordable injury (percentage points) frequency rate7.

10 1 On a non-IFRS basis. Refer to Non-IFRS Information section on page 39. 4,700+ Direct milk sourcing $139m 2 Q4 FY20, as measured by Tell Coles. Indigenous team members with dairy farmers in VIC & NSW provided in community support 3 Growth in sales per square metre on a moving Annual total (MAT), or exit rate calculated on a rolling 12 months of data basis. 4 Calculated as interest-bearing liabilities less cash and cash equivalents. 5 Calculated as operating cash flow excluding interest and tax, divided by EBITDA (excluding the impacts of AASB 16 and Significant items). 6 Comprising an interim dividend of cents per share (paid) and a final dividend of cents per share. 7 Refer to glossary of terms on page 49 for definition.