We’re owned by you - midcounties.coop

1 2017/18 Annual Report and AccountsWe re owned by 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.

2 65-96 Regional Communities support ..97-105 Contents3 Who we areMidcounties 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 the views of our members are reflected in the way the Society is runBeing open, honest and fair in our dealings with everyone we come into contact withRecognising the contribution that everyone can make to develop the SocietyReflecting our responsibilities to the wider community in the way we conduct our businessThe Midcounties Co-operative is part of a thriving global co-operative movement, a leader.

3 Role model and powerful influencer recognised around the put membership at the heart of all we do which is reflected in how we engage with members via a range of are an inclusive employer where colleagues are fully engaged and are our biggest are an organisation proud of our heritage, our independence and our local are a commercially successful, sustainable, values driven business which is trusted by the public, loved by its members and supportive of its are creating a better, fairer world by building strong local IMAGINED FUTURETo bring our Purpose to life we have created an Imagined Future to inspire all our activity and all that we strive to achieve:4over 2,500 locally sourced linesover 322,000 passengers bookedmore than 333,000 customers on supply15,000 childcare voucher users 8,404 colleagues 667,000 members 518trading sites billiongross salesover 7,300funerals deliveredalmost 520,500 bills paid3,272,500prescriptions dispensedBIGDEALSHALFPRICE 2 Funeral Planalmost 3,420 children attend our nurseriesWhat we doWe operate a range of businesses in Food, Travel, Healthcare, Funeral, Childcare, Energy, Post Offi ces and Flexible Benefi ts.

4 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:5 President s introductionHelen WisemanIt is a real honour and privilege to have been elected by my fellow directors to represent you, our members, as President this 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.

5 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 Corporate Responsibility Index, just one example of the recognition the Society s co-operative activity has achieved, and a clear demonstration that the co-operative model can produce real success. A key component of this success comes from our colleagues who have given their time and energy to serving our members and customers, and delivering community projects and events. The reach of our Regional Communities has 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 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.

6 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 billion members in over 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 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.

7 Helen Wiseman PresidentReflecting on the achievements of the Society, it is easy to see why Midcounties members can rightly be proud of the co-operative they own. 6 Group Chief Executive s overviewBen Reid OBET here were exceptional performances by Childcare, Funeral and Travel groups, each of which declared record levels of profit, increasing profits by 30% between them. Ben Reid OBE, Group Chief ExecutiveI am delighted to report that the Society has delivered another excellent trading performance. Our operating profit before significant items rose by to million, well ahead of both last year and our three year plan, and our revenues have increased with gross sales up by to 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.

8 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. Healthcare continues to be adversely affected by the reduction in funding for prescriptions as 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 entrants to the market offering heavily discounted tariffs creating considerable customer churn. 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, reflecting our belief in the long term future of the Energy 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.

9 The impact of this unexpected increase in costs was approximately million in the year. Without this additional charge our Energy business would have achieved its forecasted profit. This situation is currently under review by the regulator Ofgem and we await their findings with interest. We continued to plan for the future by investing million on site acquisitions, branch refurbishments and our IT infrastructure. The Society saw an increase in its net debt to million at the year end, in line with our cash flow projections and comfortably within agreed facilities. Looking ahead, the UK s decision to leave the EU continues as the backdrop to a challenging economic environment. This is reflected in our need to absorb additional cost pressures, such as the continued above inflation increases in the national living wage and further inflation within the food sector.

10 However, our strong trading performance and the Board s continued commitment to invest in our businesses ensures that we are in a good position to face these challenges. It is also pleasing to be able to report that our performance in promoting and developing our co-operative agenda has been strong. We now have over 667,000 members. The Regional Community programme continues to thrive, raising nearly 150,000 for local charity partners within our 20 Regional Community areas and we have assisted over 9,000 young people at our 50 partner schools. We have explored innovative ways to engage with our members. This year we have developed a Members App, and broadcast our AGM live on the internet. We also increased the number of Members Days held to improve engagement with members.