Midlands Co-operative Society Limited - Central England Co

Midlands Co-operative
Society Limited
Annual Report and Financial Statements
28 January 2012
Our vision is to be the UK’s best
consumer co-operative society by
making a real difference to our
members and our communities
Contents
01 Board of Directors, Management
37 Executive and Advisors 41 03 Directors’ Report
42 07 Retail 43 11 Travel 13 Funeral 15 Transport
16Property 44 17 Colleagues 45 20 Corporate Matters 23 Corporate Governance 46 26 Remuneration Report 61 27 Social Responsibility
63 30 Social & Co-operative
64 Performance Indicators
65 31 Members
35 Statement of Directors’ Responsibilities 66 36 Report of the Independent Auditors Accounting Policies
Group Revenue Account Group Balance Sheet Note of Historical Cost Profits &
Losses / Group Statement of Total
Recognised Gains & Losses /
Reconciliation of Movement in
Members’ Funds Group Cash Flow Statement Reconciliation of Net Cash Flow
to Movements in Net Cash Notes to the Accounts Five-Year Financial Records Regional Committees Notice of Annual Meeting
Agenda of Annual Meeting
Minutes of Interim Meeting Board of Directors
FRANK CROFT CD R
DIRECTOR AND PRESIDENT
ROD FINDLEY R
DIRECTOR AND
VICE-PRESIDENT
LIZ LOMAS CD #
EMPLOYEE DIRECTOR
MICHAEL ALTHORPE
EMPLOYEE DIRECTOR
PAUL SINGH A R #
DIRECTOR
JOHN MALTBY #
DIRECTOR
STUART UNWIN A
DIRECTOR
MARIA LEE CD #
DIRECTOR
Member of the Audit Committee
Member of the Community Dividend Selection Commitee
R Member of the Remuneration Committee
#Member of the Rules & Practices Committee
A
CD
1
Management Executive
and Advisors
Martyn Cheatle Chief Executive
Tony Carroll Deputy Chief Executive
James Watts Secretary
David Grady Chief Financial Officer
Paul Webb Funeral
Ian Callaghan Property
Tracey Orr Human Resources
Mark Ruttley Information Solutions
Auditors
Registered Office
PricewaterhouseCoopers LLP,
Donington Court, Pegasus Business Park,
Castle Donington, East Midlands. DE74 2UZ
Central House, Hermes Road,
Lichfield, Staffordshire. WS13 6RH
Telephone: 01543 414140
Fax: 01543 415813
www.midlands.coop
Registered No. 10143R
Bankers
Co-operative Bank plc,
118-120 Colmore Row,
Birmingham. B3 3BA
KEVIN HEPWORTH
DIRECTOR
MARTA MAYHEW A
DIRECTOR
KEITH REDFERN R
DIRECTOR
DAVID ELLGOOD
EMPLOYEE DIRECTOR
PETER DEAN A
DIRECTOR
KEITH BOSTOCK A
DIRECTOR
HELEN LEES
DIRECTOR
ROBIN FARRELL
EMPLOYEE DIRECTOR
2
Directors’ Report
“Progress achieved in 2011 has further strengthened the Society’s position as
one of the leading co-operative businesses
in the UK”
To the members
The Board of Directors is pleased to present its report for the
year ended 28 January 2012, which represented a period of
considerable progress across the Society.
Against the background of the longest and deepest recession
for over 60 years the Board is proud to announce another strong
financial performance, with improved trading profit, significant
capital investment and increased payments to stakeholders.
The financial review that follows highlights that trading profit,
before exceptional items, of £26.6 million is slightly ahead of
the previous year and demonstrates the Society’s resilience to
withstand the most demanding and competitive conditions.
Progress achieved in 2011 has further strengthened the Society’s
position as one of the leading co-operative businesses in the UK.
The Society’s ambitious growth strategy has seen investment in
new trading outlets and business acquisitions, the accelerated
roll-out of The Co-operative brand and continued refurbishment
activity across the existing estate. In addition, strategic changes
to the business portfolio and the introduction of new pension
arrangements have been implemented in the long term interests of
the Society, its members, colleagues and customers. The transfer
of the Society’s Travel business into a joint venture with
The Co-operative Group and Thomas Cook, completed on
4 October 2011, represented a major change in the Society’s
business portfolio.
As anticipated in last year’s report, 2011 saw the continuation
of intense pressure on consumer spending as a result of rising
unemployment, falling real incomes, the weak housing market and
uncertainty about the economic outlook. The Eurozone debt crisis
and turmoil in the financial markets have added to concerns over
the prospects of recovery in the UK economy. Rising commodity
prices, particularly increased fuel and energy costs, continue
to erode consumer spending power and dampen demand for
discretionary goods and services. Consumer confidence remains
fragile, especially for larger purchases, and spending in food
categories has seen a shift to ‘value’ product lines as customers
attempt to manage the squeeze on household budgets.
Gross sales in continuing activities increased by £7.2 million to
£650.9 million during the period. The reduction in total gross
sales by 6.8% to £878.8 million is attributable to the impact of
Travel sales no longer being reported in the Society’s financial
statements with effect from the completion of the joint venture in
October 2011.
The Society’s capital expenditure programme continues to be
supported by strong cash flow from operating activities, backed
by the strength of the asset base. This was again evident in 2011
when capital expenditure and investment in business acquisitions
totalled £34.3 million while still leaving positive cash balances of
£40.6 million and a total net asset value of £290.2 million.
3
‘‘Co-op Holidays,
the self packaged holidays has
had another
successful year.”
The Co-operative foodstore in Rugeley
The growth of the Society continues to be underpinned by a robust
strategy that was relaunched in 2011 under the ‘One Vision’
banner ‘to be the UK’s best consumer co-operative society by
making a real difference to our members and our communities’.
The strategy is supported by six core values that reflect the
Society’s co-operative and ethical principles. The One Vision
strategy provides the framework to drive future growth and is
embedded in the business plans of the Society’s trading operations
and support functions.
As a positive indicator of the Society’s commitment to operate by
its values, it is pleasing to report that the Society’s Retail business
received national recognition in 2011. The Retail team won three
major awards in recognition of excellent service and performance
in the Society’s convenience stores, beating off competition from
national food retailers. In addition, the Society was formally
recognised as a finalist at the prestigious annual Grocer Gold
Awards for the successful implementation of its Zero Waste to
Landfill initiative across the whole retail food store estate – a retail
industry first in the UK.
4
“The Society’s drive to encourage a growing, thriving membership has been supported by the full roll-out of the new membership card across the business”
The Society’s drive to encourage a growing, thriving membership
has been supported by the full roll-out of the new membership
card across the business. As part of this strategy, and following
approval at the Interim Meeting in October 2011, the membership
card can now be used to gain admission to Members’ Meetings
and vote in Society elections. The Society’s membership base has
also been strengthened through the transfer of cardholders from
the former food loyalty card scheme and through the enrolment of
all Society colleagues into membership.
Elsewhere, the Society’s commitment to support other
co-operatives was demonstrated through the promotion of
Midcounties Society’s ‘The Co-operative Energy’ business to
Midlands Society members and colleagues. The Society has also
invested in the Energy Saving Co-operative, a newly formed venture
providing advice and services for the installation of energy efficient
improvements to houses and small businesses.
During the year, considerable attention was directed towards
the Society’s pension scheme arrangements. Following detailed
communication and consultation with colleagues, and with the
full support of the Board and the Scheme Trustees, a new defined
contribution pension scheme was introduced at the beginning of
August to replace the previous defined benefit scheme.
The changes received a very positive response with 91% of
colleague pension scheme members voting in favour, ensuring that
Society colleagues have a modern, flexible pension plan to prepare
for their retirement.
Despite the major step to close the defined benefit scheme, the
Board remains fully aware of the costs of funding the significant
outstanding liabilities of the closed scheme. As part of the strategy
to address the scheme deficit over the medium term, an asset
backed funding structure was implemented in January 2012.
The Society’s future obligations under this arrangement of
£108.7 million are included in the Balance Sheet within Creditors,
offset by a deferred tax asset of £21.5 million. As a result of this
arrangement, the net pension liability on an FRS17 basis shows
a significant improvement to £2.9 million from £65.2 million at
January 2011.
Consistent with the trends experienced over the past year, it is
widely anticipated that trading conditions in 2012 will remain
challenging, with minimal growth in household spending and the
5
Funeral colleagues celebrating the
Investors in People (IIP) accreditation
continuation of weak consumer confidence. Recent forecasts
indicate that any recovery in the economy is likely to be long
and slow and will be dependant on a number of unpredictable
factors. The Bank of England expects the economy to ‘zig-zag’
in and out of growth during 2012 and sees the impact of rising
unemployment, and particularly youth unemployment, as a key
area of concern.
Despite the uncertain economic environment, the Board is
confident that in the 2012 International Year of Co-operatives, the
Society remains in a very strong position to trade and grow through
difficult times, with a clear strategy and substantial funds in place
to continue to develop the business for the future.
Business activities
The Society’s principal business activities are Food and Fashion
& Home retailing and Funeral Services. In addition, the Society
has interests in motor dealerships, specialist vehicle construction,
coffin manufacture, florists and farming and manages a significant
investment property portfolio that underpins the returns from
trading activities.
In October 2011, the Society entered into a joint venture
arrangement that brought together all parts of its Travel business
with those of The Co-operative Group and Thomas Cook’s UK
retail shop network. The Board took the strategic decision to enter
into this arrangement in the long term interests of the Society, its
members and Travel colleagues and took full account of the risks
and volatile nature of the travel market. Through the joint venture,
the Society’s continued interest in the travel sector allows it to
maintain the provision of a comprehensive travel offer to members,
customers and colleagues.
Financial review
The financial review covers the 53 week period ended 28 January
2012, consistent with the Society’s policy of drawing up its
accounts to the last Saturday in January.
The trading highlights of the core businesses are covered later
in the report, but their contribution to a most successful year is
evident in these financial headlines which demonstrate the strength
of profit and cash generation.
•
•
•
•
•
•
Gross sales, excluding VAT, in continuing activities increased by 1.1% to £651m
Trading profit, before exceptional items, of £26.6m is ahead of the previous year
Payments to and on behalf of stakeholders increased from
£3.3m to £4.0m, including distributions to members of
£2.3 million - a 12% increase
Significant capital investment of £34.3 million, £11.7m up on the previous year
Cash inflow from operating activities of £40.0m, an increase
of £6.7m
Net Assets of £290.2m, including closing cash balances
of £40.6m
The strength of the financial base places Midlands Co-operative
in a strong position to continue its growth strategy and further
enhance the Society’s profile as a modern, successful
co-operative business.
6
Retail
“The strength of The Co-operative Food
brand remains a
key feature of the
Society’s success”
7
Trading
Retail food stores are the Society’s largest business delivering
growth in turnover, driving cash generation and profitability.
A very strong trading performance has again been achieved in
the most competitive conditions which have seen consumer
spending come under intense pressure. Some of the effects of
the downturn on customer behaviour have been positive for Retail
food stores. Increased local shopping, due to rising fuel costs, has
generated impressive sales growth across the food store estate,
with customers visiting the stores more regularly and increasing
demand for fresh food and produce ranges. The strength of
‘The Co-operative Food’ brand remains a key feature of the
Society’s success, and provides the framework for maintaining
consistently high operating standards to members and customers.
However, positive management initiatives, with the full support of
the Board, have been the main factors behind business growth.
In 2011 these initiatives included:
• the continuation of an aggressive approach to the new store
development and acquisition strategy, with eight stores opened during the year.
• the full implementation of the ‘Zero Waste to Landfill’ initiative across all food stores, achieving national recognition as a finalist in the ‘Green Retailer of the Year’ category at the 2011 annual Grocer Gold Awards. Plans are underway to extend the project to Fashion & Home stores and the Distribution Centres, reflecting the Society’s ongoing commitment to reduce waste and its impact on the environment.
• the full roll-out of ‘The Co-operative’ brand across the food store estate through the programme of refurbishment and rebranding projects.
• continued focus to drive further improvements in standards,
customer service, financial performance and colleague development, supported through the introduction of a new business planning and reporting tool.
• targeted marketing activity to support new store openings,
refurbishments and brand conversions in addition to tactical offers including food and fuel voucher promotions.
New foodstore at Hilltop, West Bromwich
8
Trading was particularly strong over the Christmas period,
supported by an extensive promotion package produced by the
Co-operative Retail Trading Group (CRTG). The importance of
product availability cannot be underestimated, particularly given the
increased preference of customers to shop locally.
The Board takes this opportunity to pay tribute to the efforts of all
store and distribution colleagues who constantly support this key
requirement on a daily basis, providing the range, offer and service
that our customers expect.
Whilst the performance of the Society’s food stores has been
encouraging, trading in the Fashion & Home business was
extremely challenging in a market where purchases are generally
deferrable or discretionary. 2011 saw further decline in this
area, which is directly affected by the subdued housing market,
weak consumer confidence and rising unemployment. The trend
of declining customer footfall on the high street and fierce price
competition from the internet have been further negatives, all
affecting the furniture, beds and electrical areas. In addition,
the tough trading environment has seen the exit of several
concession partners and suppliers, with reduced scope to provide
alternative offers. Efforts to drive sales in the Society’s Fashion
& Home stores have continued including revised floor layouts, the
introduction of new ranges and the rebrand of Stafford Department
Store to ‘The Co-operative’. Positive efforts are also being made
to increase fashion and home ranges in the food stores including
textiles, electrical, gardening and cookshop accessories.
Store Development
The development of the food store estate has again been the main
feature of capital expenditure in 2011, and is a clear reflection of
the Society’s ambitious growth strategy. Eight new stores were
opened during the year at Long Street in Atherstone; Briton Street
in Leicester; Gospel Lane in Acocks Green; West Heath Road in
Northfield; Hill Top in West Bromwich; Queensway in Rugeley;
Shard End Crescent in Birmingham and Overslade Lane in Rugby.
Early trading performance at the new stores has been very positive,
giving confidence for further new store openings planned for the
coming year.
18 store refurbishments were completed, including major projects
at Castle Park in Burton, Glenfield, Melton, Mountsorrel, Oundle,
Ripley and Shepshed. The brand conversion programme was
accelerated during the year, with 101 food stores rebranded.
Five remaining stores will be rebranded in the first quarter of 2012
to complete the programme across all of the Society’s food stores.
A number of new store developments are well underway in 2012,
with several at the planning and assessment stage, as the Board
follows its strategy of investment to extend the Retail estate.
Marketing
The Retail food business is supported by the Society’s buying
arrangements through the Co-operative Retail Trading Group
(CRTG) in which senior Retail management take a proactive role.
A strong programme of offers during the year was underpinned by
national Co-operative television and newspaper advertising.
Product ranges were enhanced during 2011, including the further
expansion of fresh foods and healthy eating categories. The
introduction of new ‘Wholefoods’ and ‘Free From’ products has
been well received whilst the continued development of the
Co-operative brand through the relaunched ‘Simply Value’ and
‘Truly Irresistible’ ranges has improved the overall customer offer.
In addition, a new initiative to support local product ranges was
introduced during the year at a number of Society stores including
68 stores which feature a local bakery offer.
9
The Co-operative Movement continues to be the leading
supermarket supporter of Fairtrade products and the Fairtrade
Fortnight was once again a prominent campaign, underpinned by
the excellent work of the Member Relations team during the year.
2011 saw an 18% increase in the sales of these products during
the Fortnight.
Retail Systems
Members events were held with great success across a number
of stores and followed the positive response to similar events
held in the previous year. The events saw members benefiting
from generous savings on their shopping, in addition to product
sampling and promoting The Co-operative difference.
Distribution
Customer service remains a key priority in differentiating the
Society’s offer, and requires regular monitoring to ensure
consistency. Mystery shopper visits are used for this purpose
and it is pleasing to report the average measure of customer
satisfaction in 2011 was maintained at 97%. Following the
success achieved in 2010, the ‘Perfect Day’ initiative has
continued to support store managers in maintaining consistently
high standards and has been well received by colleagues
throughout the Retail business.
During the year a successful conversion exercise was completed
to transfer cardholders of the former food loyalty card into
Society membership. This provides for a more inclusive provision
of dividend benefit across the Society and was a key stage in
the successful implementation of a single, all purpose card for
members and colleagues.
Efficiencies in the stock, sales and ordering process have been
achieved during the year using the Society’s new Retail System.
The ability to introduce sales-based ordering and perpetual
inventory on selected products has generated benefits in having
full visibility of sales, price reductions and waste trends.
The Society controls its own distribution to Retail stores through
its Food Distribution and Chilled Distribution Centres in Leicester.
The retention of this control is a fundamental aspect of the
Retail business strategy, underpinning availability of range and
freshness of products in the stores. In April, the Society absorbed
the significant impact arising from The Co-operative Group’s
consolidation of its national distribution network and the resultant
loss of distribution to 64 Group stores from the distribution centres
in Leicester. The Distribution Centres continue to provide a
service to the neighbouring Heart of England, Tamworth and
Midcounties Societies. These additional volumes help to ensure
that costs per case are minimised. These costs remain extremely
competitive, fully justifying the continued investment in the
Distribution Centres and control over their operation.
The vast majority of the Society’s distribution fleet have been
rebranded and include a small number of vehicles that have
recently been converted to promote the Society’s support of the
‘International Year of Co-operatives’ in 2012.
“Eight new stores were opened during the
year plus 18 major store refurbishments
and the accelerated roll-out of the brand”
10
Travel
“The joint venture provides the Society
with a stake in the largest travel agency
business in the UK”
In last year’s report, the Board outlined details of the proposed
travel joint venture that would bring together all parts of the
Travel businesses of the Society and The Co-operative Group with
Thomas Cook’s UK retail network. The Board’s decision to join
the joint venture was made in the best long term interests of the
Society, its members and Travel colleagues and took full account of
the risks and volatile nature of the travel market. The joint venture
was completed on 4 October 2011.
Prior to the completion of the joint venture, the Society operated
Travel on a ‘business as usual’ basis. The sales and contribution
of the operation during this period are included in the financial
statements and again highlighted the sensitivity of the travel
market to the economic conditions, with pressure on disposable
incomes impacting on booking volumes and a shift in duration to
shorter length holiday breaks. Foreign exchange sales were also
affected by the trend of lower booking numbers, together with ever
increasing competition on the high street. Business Travel traded
more strongly, supported by growth from new corporate accounts.
Since the completion of the joint venture, the Society has supported
the integration of the joint venture through the provision of
transitional services covering finance, IT, payroll, HR operations,
property services and corporate affairs activities. These
arrangements have primarily focused on maintaining continuity of
service to members and customers, whilst allowing detailed plans
to be formulated covering the handover of these functions to the
joint venture as soon as it is practical to do so.
The joint venture provides the Society with a stake in the largest
travel agency business in the UK, and a continuing presence in
the travel industry, at a much reduced risk, to complement the
Society’s other trading activities.
Colleagues at Ilkeston Co-op Travel
in Wollaton celebrate Cruise Week
11
12
Funeral
“The Society’s professionally trained staff
provide the highest standards of service and
24 hour client care”
This commitment continues to be demonstrated by the Society’s
professionally trained staff providing the highest standards of
service and 24 hour client care on a consistent basis. In addition,
progress during the year included the launch of a new Funeral
Wishes website to allow clients to register their funeral requests
online, the organisation of a number of Christmas memorial
services across the trading area and the provision of assistance
to families with probate and legal matters through the Society’s
established link with Co-operative Legal Services.
A limousine hire service for weddings and civil partnerships,
launched in early 2011, continues to be well received,
operating closely with the wedding department at the Society’s
Chesterfield Department Store.
Trading
The Society’s Funeral homes conducted 12,491 funerals
during the course of the year, representing a slight increase
on the previous year. As 2011 saw the number of registered
deaths across the trading area decline by 2.4%, the Society’s
arrangements represented a modest improvement in market share
and reflected the favourable impact of recent business acquisitions
and new openings. The trend of falling death rates is expected to
continue for at least the next five years as a result of the general
improvement in life expectancy. Pre-payment Funeral Bond sales
were again strong, increasing by 8.8% on the previous year, and
helping to secure future market share.
The higher funeral numbers generated increased sales in funeral
homes whilst the support businesses of masonry, florists and
coffin manufacture also saw consequent sales uplifts. A further
improvement in bad debts has been achieved, reflecting the
continued prompt collection of disbursement costs, which is now
widely accepted as normal practice.
Service
The funeral market has become increasingly competitive as a
consequence of the economic environment, with arrangement
prices being more keenly compared by clients. In this context,
the Society’s Funeral business prides itself on delivering
quality service, without exception.
13
Investment
In April, the Society completed its first acquisition in the crematoria
sector with the purchase of Bretby Crematorium, situated on
the outskirts of Burton on Trent. This significant investment
extends the Funeral business portfolio and represents a key
development for the Society.
Growth through acquisitions is integral to the business
strategy. In 2011, a well-established funeral business
in Leicestershire was secured and a new home was
opened in Dronfield Woodhouse, near Chesterfield
in January 2012.
Substantial investment was made in the Funeral
fleet during the course of the year with four
new hearses and nine limousines purchased.
In addition, the Society has added a unique
funeral service through the acquisition of
‘The Rocket’, a custom-built motorcycle
trike hearse.
The continuing programme of funeral home refurbishments
has included the conversion of 24 homes to ‘The Co-operative
Funeralcare’ brand and the introduction of the new brand at two
of the Society’s masonry outlets. The new brand continues to be
well received and plans are underway to extend the brand to the
Society’s florist operation in 2012. The priority for the business
investment strategy remains unchanged to acquire established
funeral businesses as well as opening new start homes operating
as ‘The Co-operative Funeralcare’.
Integrated Businesses
The strategy of providing a complete, integrated service to clients
is fulfilled through the floral, masonry and coffin manufacture
businesses and now extended through the acquisition of
Bretby Crematorium.
Coffin sales during the year were marginally ahead of the previous
year whilst increased Floral sales include the full year impact of the
business acquired in Stafford in 2010.
Sales trends in Masonry have continued to feel the impact of
the current economic climate, with both new stones and
renovation work becoming a more discretionary element of the
overall package.
14
Transport
“The operation of an efficient, low cost
vehicle fleet remains an integral part
ofthe Society’s trading activities”
The retail motor dealerships at Kettering and Advantage Motors
have continued to face a most difficult trading environment, as
the downturn has affected the motor trade significantly. New car
sales fell further in 2011, with private car registrations particularly
affected by the decline in consumer discretionary spending.
As a result of the continuing adverse market conditions, the Hull
motor dealership site was closed in January 2012.
On a more positive note, the Society’s multi-franchise site in
Lincoln adopted The Co-operative Motor Group brand during the
year and has seen a positive response through improved sales,
market share and customer satisfaction scores in the Citroen and
Harley Davidson dealerships.
Celebrating the launch of The Co-operative
Motor Group brand at Lincoln
15
Leicester Carriage Builders, the Society’s specialist vehicle
building operation, has been impacted by a marked decline in
orders from local authorities resulting from the reduction in public
sector spending.
The Transport fleet operation provides an essential, cost effective
service to maintain the Society’s vehicles to the highest standards.
The importance of the service cannot be underestimated, given the
reliance of Retail on an internal distribution strategy and of Funeral
on a reliable and presentable fleet.
Property
“The drive to secure new profitable sites is a core feature of the Society’s growth strategy”
Investment Property Management
Business Development
The Society’s investment property portfolio consists of 446
commercial lettings and 174 residential flats and houses.
Management is by a dedicated team of property professionals
through the Society’s wholly owned subsidiary, Central Midlands
Estates Limited. The recession continues to impact on the
performance of the portfolio through the slowdown in rental growth
and an increasing number of commercial tenants experiencing
trading difficulties. The demand for empty properties remains
extremely sluggish, with tenants negotiating hard to request more
beneficial terms and shorter, more flexible leases on both new
lettings and lease renewals. The Board take comfort from the fact
that the portfolio is not overexposed to any particular tenant.
The latest valuation of the portfolio of £95.7 million includes a
reduction of £879,000 during the year, reflecting the challenging
market conditions in the commercial property sector.
The drive to secure new profitable sites is a core feature of
the Society’s growth strategy. This approach has targeted
opportunities presented by the economic downturn, where
business failures have led to sites becoming available for
consideration or open to offers. Progress has continued in 2011
with negotiations at an advanced stage at a number of sites and
several new leads being assessed to further extend the
trading estate. The Board is pleased to see the efforts to secure
new sites across the trading area in order to strengthen the
Society’s trading profile and market share in the Midlands.
Development and Facilities
The team provides support and expertise in building, refrigeration,
building services, energy management, petroleum and
maintenance to all areas of the Society. It also undertakes the
project management role for refurbishment of trading outlets
as well as the store planning and merchandising needs of all
stores and shops. Managing the extensive testing, inspection
and planned maintenance regime that is demanded by today’s
legislation is an ongoing challenge. The maintenance help desk
operates 24 hours a day to support the business on any property
or repair issue.
The team have supported all the capital development projects
and refurbishments covered in the Retail, Funeral and Transport
sections of this report as well as the store conversion elements of
the brand roll-out.
The Society’s commitment to reduce energy consumption and
carbon emissions has been demonstrated in the year through the
continued roll-out of high efficiency freezer cabinets in the food
stores, successful trials of LED lighting to sales areas, offices and
warehouses and the installation of combined air conditioning and
refrigeration systems.
16
Colleagues
“The dedication and commitment of
colleagues to outstanding service provision and customer focus differentiates the
Society from its competitors”
17
In the current challenging trading environment, the contribution
and commitment of colleagues has been a key factor in the
Society’s success. Their dedication to outstanding service
provision and customer focus continues to differentiate the Society
from its competitors.
The focus of HR policy has continued to be the provision of
a rewarding and supportive employment environment with
Compensation and Benefits being reviewed and benchmarked
to ensure that employment provision remains competitive.
As part of the Society’s stakeholder strategy, a record distribution
of £1,322,000 was approved by members and made to all
eligible colleagues in June 2011 to recognise their contribution
to the business.
Supportive Culture and Environment
Commitment to encouraging colleague engagement and
involvement continued with the 2011 “Have your Say” attitude
survey. The survey, consisting of 39 questions, elicited a positive
response from colleagues, with the participation rate increasing
from 87% to 93%. This valuable feedback has identified positive
themes such as a strong increase in how the Society is perceived
in terms of change, success, recommendation as a place to work
and a promising increase in the encouragement of family and
friends to purchase from the Society. The research will enable
each business area to respond to specific issues for improvement
and development identified by colleagues.
•
•
•
a series of ‘All you need to know’ self-learning modules
implemented in nine Fashion & Home stores focusing on
leadership and technical skills
the launch of a new vocational qualification in Funeral
Arranging and Administration
a new Colleague Recognition Scheme went live in June 2011 to replace the Service Awards Scheme which had been in place for several years
Risk Management
The Risk Management team are accountable for ensuring the
Society identifies and responds appropriately to the risks it faces.
This is a necessary part of doing business and is particularly
important in the current economic climate.
A revised management system was introduced in 2011 which
enables informed decision-making based on a structured
process for assessing and controlling risk. This includes a Risk
Management Committee whereby the Management Executive
meets on a quarterly basis ‘To achieve clarity on the nature,
scope and degree of risk encountered by the business, assess
management plans to mitigate that risk, and ensure adequate
progress in implementing those plans.’ The results of this activity
are reported to the Audit Committee.
The Risk Management team also has operational accountability for
partnering all aspects of the Society’s business activities in terms
of Health & Safety management and Loss Prevention.
As part of the ongoing commitment to colleague engagement,
the Society’s HR policies and procedures are continually reviewed
to ensure they demonstrate best practice, transparency and
consistency in management, leadership and communication.
This includes maternity, paternity, adoption and flexible working.
Health & Safety
Learning & Development
This year the Society has built on the success of 2010 by utilising
risk assessments to produce revised safe systems of work. This
includes business-specific health & safety manuals which provide
easily accessible user friendly guides to ‘doing your job safely’.
Progress in this area is aimed at achieving further reductions in
the number of accidents. The injury rate (per 100,000 employees)
of 488 for the Society compares favourably with the industry-wide
figure of 900.
During 2011, the Society invested £500,000 in the development
of colleagues, and almost 800 learning events took place with a
complement of 5,042 participants.
A new People Development Manager was appointed in August with
a key responsibility to review how learning and development is
organised to ensure the future development of performance within
the Society. During the year a new performance management and
review process was implemented through a number of manager
briefings and learning events. The new process is designed around
the Society’s vision and values and will provide a framework for the
achievement of our strategic objectives.
Other progress during the year included:
• Effective Manager Programme completed by 12 middle management participants
• the Society was a finalist in the 2011 Customer Service Training Awards
• over 100 colleagues participated in a new Duty Manager Development Programme
The Health & Safety team are accountable for advising the business
on how to ensure that visitors to all of the Society’s premises are
kept safe and well – this covers our colleagues, customers, and
any other visitors to the Society’s sites.
Loss Prevention
The Loss Prevention team are accountable for ensuring that the
Society’s assets and people are adequately protected. Increased
focus is being directed to develop improved management
information tools and ways of cross-functional working to ensure
that the right level of support is provided in the right places at the
right times.
18
“A new flexible retirement plan was implemented in August 2011”
Pension Scheme
Last year’s report outlined the decision to close the Society’s
defined benefit, final salary pension scheme to new entrants and
future accrual and to introduce a new arrangement to provide a
long term, sustainable and affordable solution to pension provision.
This decision reflected the ever increasing costs and financial
risk now widely acknowledged with the operation of final salary
pension schemes due to the increase in life expectancy, together
with other factors such as lower investment returns and increased
regulatory influence. The combined effect of these factors
contributed significantly to the deficit of £120 million revealed at
the Scheme’s last formal valuation in 2008. The latest triennial
actuarial valuation at December 2011 is currently in progress
with the outcome of the exercise expected during the course of
2012. The Society has acted to address the Scheme deficit in the
year by establishing an asset backed funding structure which has
significantly reduced the deficit.
An extensive consultation and communication exercise was
undertaken in early 2011 to inform colleagues of the Scheme
closure and propose a new defined contribution arrangement.
This exercise included presentations involving members of the
Management Executive held in various locations across the Society
to explain the changes to contributing members of the Scheme.
In addition, individual communication packs were provided
to colleagues, supplemented with notice board and intranet
19
publications. Communications were issued to pensioners and
deferred members to confirm that the changes have no impact
on their benefits.
Following the consultation period, a ballot gave overwhelming
support for the Scheme closure, with 91% of colleague pension
scheme members voting in favour of the proposed changes.
The Society’s new flexible retirement plan was implemented on
1 August 2011 and provides colleagues access to a new defined
contribution Group Personal Pension Plan (GPP) provided by
Standard Life. The plan is designed to meet the forthcoming
needs of Auto Enrolment and operates on a two tier basis.
New colleagues are offered membership of the Nursery Scheme
and after three years transfer into the Principal Scheme. This
Scheme provides a generous contribution structure, offers
colleagues a wide range of investment funds and a competitive
charging structure. Additionally the GPP provides greater flexibility
on how and when a colleague can take their pension benefits,
recognising the diverse needs of the Society’s workforce.
In accordance with best practice, the GPP has a Governance
Committee providing oversight on Standard Life’s administration
of the plan and the Society is applying for accreditation under the
new Pensions Quality Mark that recognises high quality defined
contribution pension schemes.
Corporate
Matters
Stakeholder Distributions
The distributions from trading profit recognise and reward the
three key groups of members, colleagues and the community for
their contribution to the Society. The Membership Card records
points for purchases from the Society and, based on the trading in
the second half year, the Board is pleased to propose an increased
dividend of £1.10 per 1,000 points collected up to 28 January
2012. This will be paid in Co-operative vouchers shortly after
approval at the Annual Members’ Meeting in May 2012.
The colleague dividend recognises their contribution and rewards
them in line with trading success at 5% of the trading profit, before
exceptional items. The Board proposes a dividend of £1,327,000,
also to be paid in Co-operative vouchers once approved.
The ‘Making a Difference Community Dividend’ scheme has been
allocated £1,483,000 since its launch in 2004. The proposed
dividend of 1% of trading profit before exceptional items, of
£266,000, will be awarded by the Board’s Community Dividend
Selection Committee and the Regional Committees to a wide
range of community groups and good causes across the Society’s
trading area.
Membership
As at 28 January 2012, the Society had 992,865 members.
The movement in the year was:
At 22 January 2011 New members Closed accounts
At 28 January 2012
938,683
55,350
(1,168)
992,865
The core membership database of existing members, included
in the total above, has increased from 176,000 to 231,000
during the year. This increase includes the transfer into
Society membership of 44,000 former food loyalty card holders
following the cessation of that scheme in 2011. As part of this
arrangement, the £1 member share contributions were
deducted from the Interim Members Dividend that was paid in
November 2011.
The Society has adopted a Code of Practice on withdrawable
share capital. Under the Code, all those joining the Society or
members investing through their share accounts are reminded in
written documentation that share capital is risk capital. A copy of
the full Code can be obtained from the Secretary and the Board
takes this opportunity to state that, at present, the risk associated
with members’ withdrawable share capital is extremely low, given
the strength of the Balance Sheet published with this report.
Colleagues at Midlands Co-op Travel Derby,
fundraising for the MND Assocation
20
Through the Regional Member Relations structure a wide range
of events and community activities are organised for members
focused on the three themes of member development, education
and co-operative, ethical and environmental trade. Details can be
found later in this report.
Political Donations
Grants of £112,000 (£108,000 in 2010/11) were paid to The
Co-operative Party during the year. This includes support at
national level and grants to the three Society Party Councils.
Corporate Governance
Corporate Governance refers to the manner in which organisations
are governed and powers are distributed and exercised by different
groups. It is concerned with the practices and procedures that
try to ensure that an organisation achieves its objectives. As an
Industrial and Provident Society, Midlands Co-operative is not
required to comply with the provisions of the Combined Code,
which applies to listed companies. However, Co-operatives UK
has published a Code of Best Practice for consumer co-operatives,
which is based on the Combined Code, but applicable to the
particular governance circumstances of a co-operative society.
Under the terms of the Code’s compliance assessment, the Board
has a responsibility to ensure that the Society complies with
those recommendations that are appropriate to its circumstances,
or to explain its reasons where this is not the case. The Board
considers this approach of ‘comply or explain’ to be a practical
means of assessment, which recognises the diversity within the
Oundle primary school celebrate receiving
a community dividend grant at Oundle foodstore
21
“The Society strives
to put co-operative
values into practice”
Movement. The annual statement on Corporate Governance
includes on page 25 a section covering the Society’s explanations
and by providing this the Board believes that it has complied with
the Code.
The Society has a Code of Business Conduct, explaining its
relationship with members, colleagues, suppliers and the wider
community. It is also the Society’s policy to agree and clearly
communicate the terms of payment to suppliers and then pay
according to those terms, based on the timely receipt of an
accurate invoice. Trade creditor days of the Group for the financial
year 2011/12 were 26.9 days (20.5 days in 2010/11).
Corporate Social Responsibility
The Society genuinely strives to put co-operative values into
practice in all aspects of its activity. The Social Accountability
Policy, endorsed by the Board, builds on the Code of Business
Conduct. Full details of the progress on the Social and
Co-operative Performance Indicators can be found on page 30.
Director and Regional
Committee Retirements
Robin Bennett and Keith Bostock retire under the age rule at
the Annual Meeting and the Vice President, Rod Findley has
also announced his intention to retire in April. On behalf of the
members the Board takes this opportunity to record appreciation
for their valued contribution and service to the Society.
Robin Bennett was first elected by the members in Leicester in
1974, serving on the Area Board and subsequently the Eastern
Regional Committee for over 35 years. Robin was a Director of
the Society for 16 years and a member of the Leicestershire (now
Eastern & Southern Regions) Member Relations Committee for
25 years. He has also been a member of the Midlands Eastern
& Southern Region Society Party Council for many years.
The Society’s Vice-President, Rod Findley, resigns from the
Eastern Regional Committee in April, having Chaired the Committee
for the last five years. Prior to that, he was Chair of the Leicester
Area Board for eight years. Rod has been a Director of the Society
since May 2005, and for the last year has been Vice-President.
He has been a member of the Audit and Remuneration Committees
and a former Trustee of the Society’s Pension Scheme.
The Directors, as always, extend their sincere appreciation to all
Society colleagues for their efforts in contributing to the Society’s
success, and to all members and customers for their loyal support.
Frank Croft President
Martyn Cheatle Chief Executive
James Watts Secretary
22 March 2012
Keith Bostock was first elected to the NEMCO Area Board in 1998
and subsequently the Northern Regional Committee, serving for
a total of 14 years, the last eight as a Director of the Society and
was a member of the Audit Committee and a former Trustee of the
Society’s Pension Scheme.
22
Corporate Governance
Internal Controls and Audit Committee
The Co-operatives UK Corporate Governance Code of Best Practice
requires the Board of Directors to review the effectiveness of the
Society’s system of internal controls. This review covers all controls
including financial, operational, compliance and risk management.
The Board of Directors is ultimately responsible for the Society’s
system of internal control and for reviewing its effectiveness. Such a
system is designed to manage rather than eliminate the risk of failure
to achieve business objectives, and can only provide reasonable and
not absolute assurance against material misstatement or loss. The
Management Executive are responsible for the implementation, day
to day operation and management of the Society’s system of
internal control.
The Board of Directors has an established Audit Committee,
which operates as a sub-committee of the Board and is
responsible for reviewing the effectiveness of the Society’s system
of internal control.
23
The Audit Committee meets three times a year to:
• consider reports from the Management Executive, internal audit and external audit on the systems of internal control and any material control weaknesses
• discuss with the Management Executive the actions taken in response to matters raised in these reports or by the Board
• review the effectiveness of the risk management process and ensure significant risk issues are referred to the Board for consideration so that appropriate steps can be taken to minimise such risks to the Society
• consider the effectiveness of the operation of the internal
audit function
• consider the appointment of external auditors and in conjunction with management agree the nature and scope of the external audit review
• review the external audit management letter and the management response to the report
• recommend reviews of other areas of the business where a more intense audit procedure is necessary
The Audit Committee also has a duty to discuss problems and
reservations arising from the Society’s audit and any matter the
auditor may wish to discuss, if necessary in the absence of
any management.
In addition, the Audit Committee carries out periodic self-evaluation
to ensure that the remit set by the Board of Directors is being fully
satisfied. In accordance with its terms of reference, the remit of
the Audit Committee is reviewed by the Board at least every three
years, so as to ensure that it fully meets best practice in corporate
governance. The Board most recently carried out this review in
August 2010 and no amendments were considered to be necessary.
The Board and the
Management Executive
The Society strives for the highest professional standards and
business performance and seeks to maintain these standards
across all of its operations. The Society has an appropriate
organisational structure for planning, executing, controlling
and monitoring business operations in order to achieve Society
objectives. The organisational structure has clearly defined lines
of responsibility and of delegated authority.
The Board, elected by members, and the Management Executive
have primary responsibility for setting the Society’s strategy and
monitoring delivery of that strategy by management, identifying
key business risks facing the Society and for the development of
policies and procedures to manage those risks. The Society operates
a risk management process, which identifies the key risks facing
each business and reports to the Management Executive and Audit
Committee on how these risks are being managed. Regular
self-assessment audits are carried out across the business and
these self assessments are validated on a sample basis.
The Society’s Internal Audit department performs independent
reviews of operational and financial control procedures across the
business. The Risk Management team is accountable for ensuring
the Society identifies and responds appropriately to the risks it
faces, reporting formally to the Society’s Risk Management
Committee which in turn is accountable to the Board for the
appropriate management of risk. There is a continuous process
for identifying, evaluating and managing the significant risks faced
by the Society, which operated during the year under review and
up to the date of approval of the Annual Report and Financial
Statements. This process, which includes the prioritisation of key
risks, is regularly reviewed by the Board of Directors.
The Risk Management team also has operational responsibility
for Health & Safety management and Loss Prevention. The Risk
Management department works closely with the Internal Audit
function in order to provide an integrated approach to the prevention,
detection and reduction in losses arising from identified risks.
Progress against management action plans to overcome internal
control weaknesses and business risks, is monitored and reported to
the Audit Committee.
Society management recognise the risks attendant on all areas of
business resulting from operating in increasingly competitive market
places and continue to review processes and procedures with the
objective of ensuring effective controls are maintained, overcoming
any identified weaknesses and achieving business efficiencies.
Where problems do arise positive action is taken to implement
appropriate control mechanisms.
Accordingly the Board of Directors confirm that the effectiveness of
the system of control for the year commencing 23 January 2011
and ending on 28 January 2012 has been reviewed in line with the
criteria set out in Corporate Governance Code of Best Practice.
“The Society strives
for the highest
professional standards and business
performance across
all of its operations”
24
Code of Best Practice 2005
The Code represents a significant expansion and updating of its
previous version with which the Society had a 98% compliance
rating. The Code and its Appendices are comprehensive in scope.
However, Co-operatives UK have recognised that co-operative
societies differ in scale, size, trading profile and resources and that
it is inevitable that levels of compliance will differ for acceptable
reasons. The approach to assessing compliance is that societies
should review their rules, practices and policies, in the context of
what is appropriate for their circumstances, and provide explanations
where these do not comply strictly with the Code.
The following explanations are, therefore, provided:
25
•
Remuneration Report
The report confirms that the disclosure in the notes to the accounts complies with accounting standards and is at a level and in a format deemed appropriate by the Board.
•
Board Size
The Board believes that size should relate to the democratic structure of a particular co-operative and that under the Society’s
structure, 16 Directors is sufficiently close to the recommendation of 7 to 15.
•
Refreshing the Board
The Society imposes an age rule of 70, in preference to mandatory breaks in service, given the Code’s understandable emphasis on Director training, competence and continuity.
•
Search Committee
The Board has not considered it necessary to establish such a Committee, as it believes the designated issues are
sufficiently important and capable of being dealt with by the Board as a whole.
•
Independent Professional Advice
The Code prescribes that one third of the Board should be sufficient to access such advice in order to meet their responsibilities, however, the Board believes that a simple majority is the appropriate criterion for all of its decisions.
•
Appraisal of the Board and Individual Directors
The Board does not undertake a formal annual evaluation of its own performance or that of individual Directors. It does,
however, continue to identify the need for specific training and has undertaken such training during 2011 on management executive remuneration issues.
•
Board Meeting independent of Executives
The Board does not meet independently on a scheduled basis,
but recognises that it has the authority to do so, should circumstances arise.
Remuneration Report
The Remuneration Committee
Salary
The Remuneration Committee is a Sub-Committee of the Board of
Directors and is responsible for all aspects of remuneration and
contractual terms and conditions of the members of the Society’s
Management Executive. The Committee sets the remuneration
policy and strategy for these individuals and determines appropriate
levels of reward which are subject to confirmation by the Board.
The Committee’s terms of reference do not include consideration
of Directors’ fees and expenses. The Board directly formulates any
proposals on these issues for the approval of Members.
The Committee’s objective is that base salaries for the Management
Executive should be at the median level for the relevant sector,
having regard for job scope, function and the size and complexity of
the business. The Committee reviews the base salaries annually or
when a material change in responsibility or scope occurs.
The Remuneration Committee is composed entirely of non-employee
Directors who have no day-to-day involvement in the management
of the business. The membership of the Remuneration Committee
during the financial year was Frank Croft, President, Rod Findley,
Paul Singh and Keith Redfern.
The Committee is chaired by the President. The Chief Executive
attends meetings of the Committee to make recommendations
relating to the remuneration of the Management Executive. The
General Manager, Human Resources provides advice and guidance
to the Committee and the Society Secretary is Secretary of the
Committee. The Chief Executive is not in attendance when his own
remuneration is considered.
The Remuneration Committee has access to an external specialist
consultancy to provide independent, professional advice to them
on remuneration policy, salary ranges and other elements of
remuneration, when required. The Committee has met twice during
the year.
Remuneration Policy
The Society’s remuneration policy for the Management Executive
is to apply the median of market base salaries once the individual
has become fully established in post and performance is viewed as
fully acceptable.
Elements of Remuneration
Pension
The Management Executive are eligible to join the Society’s defined
contribution Group Personal Pension Plan and all but one were
members at January 2012.
Incentive Scheme
In June 2011 the Board approved the implementation of a revised
Management Executive Incentive Scheme. The revised Scheme is set
below the market base for comparable schemes, incorporating long
term and short term targets based on both financial and non financial
measures. Any payments due under the Management Executive
Incentive Scheme are non-pensionable. The revised Scheme will
reward performance over a rolling three year period and incorporate
long term targets covering cumulative trading profit, customer service
and colleague engagement. The Scheme replaced the previous
Management Incentive Plan that had operated since 2003/04. For
the year ended January 2012 incentive costs of £321,000
(2011: £305,000) are recognised in the financial statements of which
£271,000 is payable in respect of performance in 2011/12, with a
further £50,000 potentially payable in 2014 subject to performance
of the business during the three year period ending January 2014.
Other Benefits
Other benefits provided to the Management Executive include
permanent health insurance; private medical insurance; medical
examinations; and the provision of a car or a non-pensionable
cash alternative.
Service Contracts
All members of the Management Executive, including the Chief
Executive, are entitled to 12 months’ notice.
Management Executive total remuneration consists of Salary,
Pension, a performance related Incentive Scheme and other benefits.
Details of the remuneration of the Management Executive are
provided in note 4 to the Accounts in a format deemed appropriate
by the Board.
26
Social Responsibility
The Community
The Society’s ‘Making a Difference Community Dividend fund’,
continues to be a huge success. The scheme sees the distribution
of 1% of the Society’s trading profits in the form of grants to local
community groups and projects across the region. To date 731
grants have been awarded, totalling over £1.3 million to initiatives
ranging from church hall restoration, improving school playgrounds,
special needs equipment, new kitchen facilities, educational
resources, IT equipment, disabled access and much more. In addition
to benefiting the individual projects, the scheme has generated
considerable goodwill for Midlands Co-operative as well as positive
media coverage.
Charity Donations
The Motor Neurone Disease (MND) Association continues to be the
Midlands Co-operative Corporate Charity until May 2012, when
the charity Newlife Foundation, elected by our colleagues, will be
supported by the Society.
Society colleagues have raised over £400,000 for the MND
Association since it was elected as the Corporate Charity at the start
of 2010.
The new colleague elected charity, Newlife Foundation, provide
disabled or terminally ill children with essential equipment and
specialist aids to help them do the things that most take for granted.
Through fundraising and awareness campaigns, colleagues at the
Society will be able to make a real difference to the lives of
disabled children.
The Board would like to take this opportunity to thank colleagues
and members for their support and enthusiasm in raising money for
the Motor Neurone Disease Association and wish the charity well in
continuing to raise funds for those living with this incurable disease.
A further £12,600 was distributed during the year covering donations
in support of raffles, tombolas and similar activities.
Energy Efficiency
The Society continues to reduce overall energy consumption through
investment in energy efficient technologies in store refurbishments
and new developments.
Energy efficiency replacement programmes and store refurbishments
completed in 2011 provided an annual energy reduction of
£230,000. This is an average annual reduction of 24% per store,
equivalent to 1,380 tonnes of CO2 emissions.
Successful trials of LED lighting within Retail sales, refrigeration,
office and warehouse areas demonstrating high performance have
been adopted as standard specification. Trials of energy efficient
warehouse lighting are ongoing within Distribution Centres.
Specifications for refrigerants have been standardised with a
lower global warming potential (GWP) giving the Society the
opportunity to reduce CO2 emissions by 50% when compared to
previous specifications.
“Over £400,000
has been raised by
colleagues for the
MND Association”
Children from local schools taking part in the Zero to Landfill
challenge at Melton Mowbray and Oakham Foodstores
27
28
Recycling
Waste Disposal
Plastic, Polythene, Paper and Cardboard
During 2011 the Society recycled an average of 335 tonnes of
cardboard per month and 25 tonnes of plastic, which is a decrease
of 18% recycling of cardboard and 18% increase of soft plastics. The
reduction in cardboard was a result of the Society improving waste
control and suppliers actively driving a reduction in packaging.
In June 2011 a cost effective, landfill-free, total food waste
solution was rolled out to all food stores using industrial Anaerobic
Digestion plant located within the trading area, for the regeneration
of food waste into green energy. The remaining non-food waste is
compacted and, using a system of Pyrolosis, transformed into green
energy with residue from the process being used as fuel for the
furnaces used in the production of cement. To reduce our carbon
footprint collections are made on a weekly basis from Society stores.
The recycling of rigid plastics, such as yogurt and cream displays,
flower buckets and mushroom cartons, has again eliminated waste to
landfill and has created increased revenue during 2011.
Green Plan-it continues to collect all types of paper waste from the
Food Distribution Centre and Business Support Centre, Lichfield
via the existing recycling infrastructure. All paper is shredded and
certificates of destruction and waste transferred notes issued,
ensuring the Society is legally compliant. During 2011, 85 tonnes
of paper was diverted from landfill and was broadly in line with the
previous year.
Electrical Waste
The Society is fully compliant with the Waste Electrical and Electronic
Equipment (WEEE) Directive 2007 and is continuing to recycle
all waste equipment returned to stores by customers, via its own
registered private collection centre in Leicester.
The Society continues to support the Government Battery Take
Back Scheme for all domestic batteries, complying with the
current legislative requirement for all retailers who sell batteries
to offer a safe recycling option to the public. The scheme has
been well received with all stores and the Business Support
Centre participating.
Local children learn about the Zero to Landfill
project at Melton Mowbray foodstore
29
In November 2011 the Society’s Distribution network implemented
Zero to Landfill. The initiative will be rolled out to the Society’s
Department Stores in March 2012 and will result in the entire Retail
business being ‘Zero to Landfill’.
Carrier Bag Reduction
In January 2009 the Government planned to reduce the amount of
carrier bags used by retailers within the UK by 50%. The Society has
achieved this target and in 2011/2012 has further reduced carrier
bag usage by 4%.
Colleague awareness, training and a move from consumer to
colleague allocation of bags has resulted in a reduction in the usage
of plastic carrier bags. All stores are equipped with recycling
facilities for customers to place their unwanted bags. Sales of
re-usable cotton bags and ‘bags for life’ continue to be supported by
the Society.
Social & Co-operative
Performance Indicators
AREA
MEASUREMENT
OUTCOME 2011/12 (COMPARISONS 2010/11)
Member Economic
Involvement:
Trade (£) conducted with members
as a proportion of turnover (%).
In 2011, £123.9m of sales were made to members. These sales represented 15.6% of
turnover (gross sales net of VAT) compared to £101.9m of sales in 2010 representing
11.8% of turnover.
Member Democratic
Participation:
Number of members voting
in elections and as a % of
total membership.
In April / May 2011 voting for Regional Committees was necessary in one out of four
Regions and for one Regional Member Relations Committee. A total of 361 members
voted, representing 0.2% of active membership. (In April 2010 voting for Regional
Committees was necessary in two out of four Regions and a total of 422 members
voted, representing 0.2% of active membership).
Participation of
employees and
members in training
and education
schemes:
All types of training (induction,
Health and Safety, IiP etc), Member
training of all types including
Committees.
A total of 721 learning events (excluding Travel) have taken place during 2011 with a
complement of 4,576 employee participants in attendance. Learning events launched
in 2011 included a new Duty Manager programme aimed at developing both leadership
competencies and technical skills, Gold till training for Fashion & Home stores and Brand
Briefings to improve colleague engagement.
1,208 training hours were delivered to members and Directors/Committee members in
2011 compared to 1,228 hours in 2010.
Staff Injury and
absentee rates:
Staff injury rates (full/part-time)
broken down by RIDDOR
regulations and others.
Reportable accidents in 2011 totalled 55 as compared to 104 in 2010 and routine
accidents of 1,147 in 2011 compared to 1,159 in 2010.
Staff Profile - gender
and ethnicity:
% Male/female employees.
Of the Society’s workforce, 66% are female and 34% are male (2010: 68% female,
32% male), with the change in profile reflecting the loss of the Travel business. Ethnicity
data is held for 84% of employees with a detailed record held for every employee joining
since 2001.
Customer
Satisfaction %:
Number of customers satisfied as %.
All trading businesses continue to successfully implement their Customer Promise.
The Retail business has again achieved high customer satisfaction ratings.
Food stores achieved 96.2% compared to 97% in 2010, reflecting the introduction of
more challenging measures to drive further improvements in this area.
Considerations of
ethical issues in
procurement and
investment decisions:
Qualitative description of how these
factors are considered in the course
of business.
The Society has a Code of Business Conduct covering relationships with customers
and suppliers. This, together with the Society’s responsible approach to environmental
matters, is an increasing requirement as a part of competitive tendering.
£ Fair Trade Products sold.
£6.7m representing a 26% increase on 2010.
Investment in
community
and co-operative
affairs:
Annual proportion of pre-tax profit
invested in community as proportion
of profit before tax %.
The Society Community Dividend Scheme distributed £204,000 across the Society’s
trading area in 2011, compared to £189,000 in 2010. In addition, £12,600 of smaller
donations were made.
Annual proportion of pre-tax profit
invested in other co-operatives.
A further £20,000 was provided to other co-operatives in the form of grants in 2011,
compared to £25,000 in 2010.
By December 2011 the Society had raised £398,000 in the two year partnership for the
corporate charity, Motor Neurone Disease Association.
Net Carbon Dioxide
(CO2 ) emissions
arising from
operations (tonnes):
Annual CO2 emissions associated
with energy used for all on-site
operations i.e. offices/shops.
At this stage it excludes transport.
The Society produced 51,131 tonnes of CO2 from 374 premises compared to our base data
(average three years 2002-2004) of 49,600 tonnes of CO2 from 368 premises. This is a
2.6% reduction in CO2 on the previous year.
Waste recycled /
reused as % of waste
arising
% of recycled/reused.
This includes scrap/effluent waste.
By June 2011 the Society became the first food retailer to stop sending any waste
to landfill; this resulted in 8,339 tonnes of waste being diverted from landfill
(1,484 tonnes of which was food waste). All of this waste will be recycled.
30
Members
“Coming together to share an interest
can be the start of members’ deeper
engagement with the Society”
The Society’s three regional Member Relations Committees had
a very busy and productive year. Their programme is structured
around a strategy of three themes covering Member Development,
Co-operative, Ethical and Environmental Trade, and Education,
as agreed at their Joint Conference and approved by the Board.
Detailed regional highlights will be given at the Annual Members’
Meetings. This report seeks to give an overarching picture across
the whole Society.
Co-operative Member Development
The programme delivering this strategic theme aims to improve
opportunities for members to play an active part in their Society
and to increase the diversity of members participating. This cannot
be delivered in a “one size fits all” way, so this year we have
carried out surveys to seek members’ views, held ‘Get to Know
Your Co-op’ events and community partnership meetings, worked
with our member groups, provided access to formal and informal
courses and contributed to a major event to raise awareness of and
celebrate the gamut of co-operation.
Coming together to share an interest or fun activity can be the
start of members’ deeper engagement with the Society. By Rule,
Member Relations provides educational, cultural and recreational
activities for members and their families. This may be getting
together socially, combined with talks on topics of interest at the
Café Clubs held in Chesterfield and Ilkeston Department Stores,
Coffee Morning gatherings in Birmingham, the Co-op Friendly
Club in Stafford or the Friendship Group in Leicester. Members’
special interest groups and classes include amateur drama, with
the highly acclaimed MCS Repertory Company in Birmingham and
the Ratae Players in Leicester, art and a variety of crafts, films
and photography, wine appreciation and languages, several types
of dancing, indoor bowls, keep fit, tai chi and yoga. A number of
bands and choirs are also supported.
Outings to places of educational interest are well supported.
Members have visited the Sir Thomas Boughey Co-operative
High School in Stoke on Trent, the People’s History Museum
in Manchester, the Tarnished Earth Exhibition in Sheffield, the
National Memorial Arboretum and, together with teachers and
students from the Sathya Sai School in Leicester, stayed at New
Lanark, the model industrial town established by the father of
co-operation, Robert Owen, which is now a World Heritage Site.
The Northern Committee has linked with the Workers’ Educational
Association to provide computer taster sessions in our stores at
Ripley and Chesterfield, so that members could learn internet skills,
for example setting up e-mails or secure online banking.
The Eastern & Southern Committee joined in Leicestershire’s Older
Persons’ Month, supporting a number of events, and members
from right across the Society got together for a tea dance at Burton
Town Hall, hosted by the Western Region.
The Co-operative Women’s Guild held their national conference in
Chesterfield in 2011 and local branches received financial support
to send delegates. It was pleasing to note that a new Guild branch
opened in Thringstone during the year. Woodcraft Folk groups also
receive support from all three Committees and the Western Region
holds an annual Water Party for the young people, which always
attracts a lively crowd.
Member Relations encourages elected members - and those
thinking of standing for election - to attend courses provided by
the Co-operative College, to acquire the skills and information that
give the confidence to participate fully. Briefing sessions were held
for newly elected Committee members in July to help them get a
full picture of the work of Member Relations and for all Committee
Member Relations showing teenagers
the importance of healthy eating
31
members in November, when they were updated on the Society
five-year plan, the noteworthy Zero to Landfill programme and the
development of the Society’s websites.
Officers and committee members attended a disability awareness
and equality training day, and the Co-operative Group’s Values
and Principles Conference in November, which provided an
excellent opportunity to share knowledge of member programmes
and network with fellow co-operators working in the same field.
Regionally, Member Relations participates in the two Co-operative
Education Groups and Co-operatives East and West Midlands,
which seek to highlight the economic contribution of the
co-operative and mutual sector.
Co-operative Congress was held in the Society’s trading area in
2011, at the Hilton Metropole Hotel at the NEC. This coincided
with the launch of the 2011 Co-operatives Fortnight and the
opportunity was seized to showcase both the Society’s businesses
and the work of Member Relations at stands in the Congress
Exhibition. This was opened up on the final day for all members
to visit and, together with other Societies in the Midlands, Member
Relations co-ordinated a programme of additional demonstrations,
competitions and fun activities for visiting members to enjoy, plus
displays and presentations by many different types of co-operative
organisations and enterprises, all with the serious purpose of
highlighting the achievements of co-operation.
Co-operative, Ethical and
Environmental Trade
Member Relations works to promote the Society as a leading
ethical retailer, encouraging members and the wider community
to trade with it. This involves working with our businesses, to
highlight Co-operative products, local sourcing, honest labelling,
healthy eating and the Society’s recycling, energy saving and other
environmentally concerned practices.
Community events of all sorts can provide the vehicle for drawing
attention to the Society’s standing in these areas, from Eastwood
Arts and Stafford Music Festivals to Kettering Conference Centre
Students Open Day, from Chesterfield Eco Day and the Justice &
Peace Network to the Whittington and Fisherwick Environmental
Fair. Tastings of Co-operative products were offered at a number
of food and drink festivals - the Derbyshire at Hardwick Hall, and
local events at Wolseley Bridge, Belper and Stone. The Society
and its place in the community was promoted at the Birmingham
Sustainability Forum and at the Heart of England NHS Trust
community health fair. Member Relations was asked to present
the Sustainability Award to students at Leicester University and talk
about the Society’s initiatives in this regard.
Member Relations in the Western Region has supported new
store launches, sometimes on the opening day itself, explaining
membership to new customers, but also in advance by making
links in the community around the new enterprise, for example at
Shard End and Acocks Green in Birmingham and in Rugeley and
Rugby. Member Relations has also supported store fundays,
re-launches after new branding plus open days and Meet and
Greet events at Funeral homes. Northern Member Relations works
hard to support the Society’s department stores in their Region,
contributing to in-store, charity and community events, ranging
from quizzes to fashion shows.
Events demonstrating the Co-operative Principle 7, Concern for
the Community, initiated in Birmingham and Chesterfield, have
been further developed in Ilkeston, Melton Mowbray and Kettering.
This involves Member Relations bringing together Society business
Chernobyl children learning more about healthy
eating with the Member Relations team
32
representatives and like-minded community organisations, to
explore ways of working together in mutually supportive ways.
This leads to many exciting and sometimes unexpected results,
such as the record-breaking Bollywood event in Ilkeston and even
bicycle recycling, where people were asked to bring redundant
bikes to our Melton store to be reconditioned and sold on at
affordable prices to less fortunate members of the community by
Groundwork Leicester & Leicestershire. The Bicycle Doctor was
also on hand to give some tips on safety and maintenance and 19
bikes ended up heading for new homes.
Activities promoting Fairtrade take place throughout the year,
highlighting the longstanding Co-operative support for this
campaign. Member Relations contributes to the programmes of a
number of local Fairtrade groups and, as well as the well-known
product tasting sessions – chocolate and wine being particularly
well received – the Committees have also supported fairtrade
fashion shows, a fairtrade tea dance for members at Birmingham’s
Tower Ballroom, and many workshops and assemblies in schools.
Fairtrade hampers and other goodies have been contributed in
support of other community events: bananas for the Stafford Fun
Run, lunch packs for 500 children at a Sustainable Treasure Hunt,
a fairtrade meal at Chesterfield College plus helping Leicester
achieve the longest length of Fairtrade cotton bunting, displayed
around St Martin’s Square.
Member Relations show their support for the
Ilkeston Bollywood record-breaking attempt
Member Relations has developed partnerships with community
dieticians and local authority healthy eating teams. At the launch
of Derby Heart City, fruit kebabs were offered to highlight the joint
working. The “Five A Day Get On Your Way” programme of health
advice and activities aimed at adults with learning disabilities in
Shepshed and Syston, has also produced a recipe book and
step-by-step cooking guide, illustrated with many co-operative
products. Chernobyl children staying with local families in
Leicester were provided with fresh fruit throughout their visit and
those staying in Derbyshire were treated, together with their host
families, to a visit to the Chesterfield FC B2net stadium with its
Midlands Co-operative Community stand.
The Luncheon Club programme in the Eastern and Southern
Regions has been extended to the cafes in the Glenfield and
Melton Mowbray stores. In conjunction with local social
services, people who are isolated in their own homes are brought
to the Society’s cafes for a nourishing meal, in a welcoming and
sociable atmosphere.
Education
Member Relations aims to deliver co-operative learning
experiences to all levels of the education system, highlighting
co-operative values and principles, illustrated through our support
of fairtrade, ethical trade and healthy lifestyles, plus co-operation
as a business form and the history of the co-operative movement,
linked to its relevance today. The Member Relations Officers make
many visits to schools, delivering workshops and presentations
in classrooms and at assemblies, but sometimes they gain wider
reach by linking with community projects and multi-school events.
Co-operative support for healthy eating has long been
demonstrated by the Eastern & Southern Committee and in a wide
variety of ways. They sponsored two performances by Trifle as
part of the Leicester Comedy Festival, putting over healthy food
messages in an entertaining way, much appreciated by the children
at Mowacre Hill and John Wycliffe Primary Schools in Leicester and
Lutterworth. Fruit was donated for the Food for Thought Project,
linking Leicester with Masaya in Nicaragua. The Soft Touch
Arts Co-operative was supported in its healthy eating project in
New Parks. Young people were invited into their local Society store
to learn about food labelling and ingredients were provided for
cookery sessions in New Parks and Braunstone, the latter as part
of the National Food Routes Project. Support was given to health
professionals working with families and young people struggling
with weight problems in New Parks and for the healthy lunchbox
project in Syston. A smoothie-making bike provided healthy
exercise and a delicious fruit drink at Dunton Bassett School,
delivering the message in a fun way. The Committee donated
voucher prizes for the Let’s Get Cooking project in Groby and for
the Leicester Student Chef of the Year.
All the Committees work with Young Enterprise, a charity linking
schools with the world of work. The Co-operative Masterclass
for secondary students, for which the Officer for the Eastern &
Southern Regions received the Society’s Innovations Award, has
Cubs from the First Eccleshall Scout Group
find out more about food and recycling
33
been delivered in schools in Oundle, Enderby, Oadby,
South Charnwood and Anstey Martin, and has now been rolled
out in Chesterfield. Modules for primary level pupils have been
delivered in Overseal, Dronfield, Ilkeston and Eastwood.
The Western Region Officer delivered workshops on co-operative
enterprise at a multi-school event in Solihull in February and
supported a Basic 21 event for ten Birmingham schools, examining
sustainability issues. Healthy snack bars rewarded 100 children
taking part in a Green Day near Stafford, whereas Fairtrade was
the subject of the presentation at the College for International
Citizenship and at Lakeside and Chase View Primary Schools.
Tidbury Green School was supported during their Fairtrade
Day. Corporate Social Responsibility and the Third Sector was
debated at a conference in Yardley, Birmingham, with the Officer
representing the Society, and co-operative history the subject for a
talk to 140 members of the Tamworth History Group.
In the Northern Region, the Officer has developed a partnership
with Health 4 Life, delivering a Healthy Breakfast and Shopping
Challenge for secondary students. The Café in the Chesterfield
store provides examples of the healthy way to start the day and the
students discuss the issues around this. They are then challenged
to shop for four adults for three meals on a limited budget, taking
account of health and ethical factors. This has successfully
developed a range of skills from maths to communication – and all
the students enjoy getting to scan their selection at the tills to see
if they are on budget. The project has been further developed for
adults with learning or mental health difficulties.
Melton library, Melton Mowbray foodstore and Member
Relations encouraging people to get on their bikes
The Northern Committee has supported a number of Healthy
Eating Roadshows held around Derby and has provided the
opportunity for local schools to take part in the Farm to Fork
project at the Co-operative Farm at Stoughton. The children see
the wheat being grown and bees making honey, plus the part that
wildlife plays on the farm, before making their own pizza using
Co-operative ingredients. A number of primary schools have
undertaken the Ethical Challenge, developed by Member Relations
and taken up now by our Retail business, inviting the children
to visit their local store to find examples of the “Co-operative
Difference”, be it naked cucumbers or Braille on medicines.
The Society’s Member Relations Committees have now further
developed their programme for 2012; they thank members for
their support and look forward to their continuing participation.
Member Relations celebrating Chellaston
foodstore refurbishment
“Member Relations works to promote
Midlands Co-operative as a leading ethical retailer, encouraging members and the
wider community to trade with the Society”
34
Statement of Directors’
Responsibilities
The directors are responsible for preparing the Directors’ Report and
the Society’s financial statements in accordance with applicable law
and regulations.
Industrial and Provident Society law requires the directors to
prepare financial statements for each financial year. Under that law
the directors have elected to prepare the financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law).
Under Industrial and Provident Society law the directors must not
approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the company and
of the profit or loss of the Society for that period. In preparing these
financial statements, the directors are required to:
•
•
•
•
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Society will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Society’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Society and enable them to ensure that the
financial statements comply with the Industrial and Provident Society
Acts. They are also responsible for safeguarding the assets of the
Society and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of
the Society’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
So far as the director is aware, there is no relevant audit information
of which the Society’s auditors are unaware; and he/she has taken
all the steps that he/she ought to have taken as a director in order
to make himself aware of any relevant audit information and to
establish that the Society’s auditors are aware of that information.
PRESIDENT
VICE-PRESIDENT
CHIEF EXECUTIVE
SECRETARY
L-R: Martyn Cheatle Chief Executive, Frank Croft President,
Rod Findley Vice-President, James Watts Secretary
35
Report of the Independent
Auditors
Independent auditors’ report to the
members of Midlands Co-operative
Society Limited
We have audited the financial statements of Midlands Co-operative
Society Limited for the 53 weeks ended 28 January 2012 which
comprise the group revenue account, the group balance sheet, the
group cash flow statement, the group statement of total recognised
gains and losses, the note of historical cost profits and losses, the
reconciliation of movements in members’ funds, the accounting
policies and the related notes. The financial reporting framework
that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of the
directors and auditors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 35, the directors are responsible
for the preparation of financial statements which give a true and
fair view. Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law and
International Standards on Auditing (ISAs) (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only
for the Society’s members as a body in accordance with Section
9 and 13 of the Friendly and Industrial and Provident Societies Act
1968 and for no other purpose. We do not, in giving these opinions,
accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent
in writing.
Scope of the audit of the financial
statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Society’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the Board; and the overall presentation of
the financial statements. In addition, we read all the financial
and non-financial information in the Annual Report and Financial
Statements to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Group’s affairs as at
28 January 2012 and of its profit and cash flows for the year
then ended; and
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice and the
Friendly and Industrial and Provident Societies Acts 1965 to
2002 and the Industrial and Provident Societies (Group
Accounts) Regulations 1969.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following matters where
the Industrial and Provident Societies Acts, 1965 to 2002 require us
to report to you if, in our opinion:
• a satisfactory system of control over transactions has not been
maintained; or
• the Society has not kept proper accounting records; or
• the Society’s financial statements are not in agreement with the
books of account; or
• we have not received all the information and explanations we
need for our audit.
Opinion on Voluntary Disclosures –
Corporate Governance Statement
The Society prepares a Corporate Governance Statement including
details of the Society’s compliance with the Co-operatives UK
Limited’s Corporate Governance Code of Best Practice issued in
May 2005. The Directors have requested that we review whether
the statement on pages 23 to 25 reflects the Society’s compliance
with paragraph D1.1 (paragraph 5), D2.1, D2.4, D3.1 (paragraph 3)
and D3.2 of the Co-operatives UK Limited’s Corporate Governance
Code of Best Practice. We have nothing to report in respect of
this review.
Christopher Hibbs
Senior Statutory Auditor
For and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
East Midlands
22 March 2012
36
Accounting Policies
Accounting Basis
The following accounting policies have been applied consistently in dealing with the items which are considered material in relation to the
Group financial statements. The Group financial statements are prepared in accordance with applicable UK accounting standards, using the
historical cost convention modified to include the revaluation of certain land and buildings.
Accounting Date
The Group financial statements are made up to the fourth Saturday in the year ended 31 January. The current period is for the 53 weeks
ended 28 January 2012 (2011: 52 weeks ended 22 January 2011). Central Midlands Estates Limited and Oakwell Stores Society Limited
make up their financial statements to 31 January each year. Advantage Motor Group Limited makes up its financial statements to
31 December each year.
Basis of Consolidation
The Group financial statements consolidate the financial statements of Midlands Co-operative Society Limited and all its subsidiaries.
The results of businesses acquired during the year are included in the Group financial statements from the dates of their acquisition using
acquisition accounting standards. Midlands Co-operative Society Limited has not presented its own financial statements as part of these
Group accounts as these are filed separately.
Turnover
Turnover, as disclosed in accordance with Application Note G to FRS5 includes cash sales, goods sold on credit, commissions and property
rental income. It is stated net of VAT, discounts and incentives. Travel commissions are recognised at the point of sale, with appropriate
provision for anticipated cancellations.
Gross Sales
Gross sales is a memorandum disclosure and represents the total transaction value of all our services and hence includes the total amount
paid by customers, as opposed to the commission earned using the Group’s turnover definition.
Investment Income
Interest receivable is accounted for on an accruals basis. Dividends are accounted for when received.
Goodwill
Goodwill, being the excess of the consideration paid for a business over the fair value of its net assets, is capitalised and amortised evenly
over its useful economic life. The useful economic life is assessed individually for each acquisition with a maximum useful life of 20 years. In
accordance with FRS11, an impairment review is undertaken after the first full year of acquisition, or if an event occurs which would impact
the carrying value of the goodwill.
Depreciation
Depreciation is provided on all tangible fixed assets, other than investment properties, properties under development, assets in the course of
construction and freehold land, at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their expected
useful lives on the following bases:
Freehold buildings
2% per annum
Leasehold properties
Over the unexpired part of the lease
Building infrastructure & plant
6.7% per annum
Information technology software & hardware
12.5% - 33.3% per annum
Other plant & machinery and fixtures & fittings
12.5% per annum
Funeral fleet vehicles
12.5% per annum
Other transport20% per annum
Additional depreciation may be charged where Directors consider there has been an impairment in the underlying value of an asset.
37
Repairs
Repair expenditure is charged to the revenue account in the year that the cost is incurred.
Investment Properties
Certain of the Group’s properties are held for long–term investment and, in accordance with SSAP19:
(i) investment properties are revalued at least once every five years at open market values by external valuers. In all other years, all investment property valuations are reviewed on a ‘desktop’ basis. All surpluses and deficits arising are taken directly to the revaluation reserve except that any permanent diminution in value of an investment property is taken to the revenue account for the year; and
(ii) no depreciation or amortisation is provided in respect of freehold investment properties and leasehold investment properties with over 20 years remaining on the lease.
Investments
Investments in shares are stated at the lower of cost and net realisable value. Net realisable value is based on the discounted cash flows
expected to arise from the investment, using an appropriate discount rate relevant to the investment. Provision for any impairment in value is
considered appropriately.
Stocks and Long-Term Contracts
Stocks are stated at the lower of cost and net realisable value. Cost of manufactured goods comprises materials, direct labour and appropriate
overheads incurred in the normal course of business in bringing the product to its current location and condition. Consignment vehicles are
regarded as being effectively under the control of the Group and are included in stocks on the balance sheet as the Group has the significant risk
and rewards of ownership even though legal title has not passed. The corresponding liability is included in trade creditors. Net realisable value is
the price at which stocks can be sold in the normal course of business after allowing for the costs of realisation.
Some of the Group’s Transport contracts are considered to be long-term contracts and, in accordance with SSAP9, where they are considered to
be profitable the Group recognises profit up to the year end date.
Travel Debtors and Creditors
Amounts owed by customers to the Group in respect of travel holidays booked and amounts owed by the Group to tour operators have been
disclosed separately within note 13 and note 14 to the financial statements. This is in accordance with their legal form and industry practice.
Deferred Taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions
or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded
as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future
reversal of underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse
based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a
non-discounted basis.
38
Pension Costs
The Group operates a defined benefit pension scheme. The contributions are assessed in accordance with the advice of a qualified actuary
based on actuarial valuations normally conducted every three years using the projected unit credit method. The assets of the schemes are held
in separate trustee administered funds. The Society closed this defined benefit pension scheme to future accrual and new entrants on 30 July
2011 and curtailment gains were calculated in accordance with FRS17.
The deficit on the defined benefit scheme is recognised in full on the balance sheet and represents the difference between the fair value of the
plan assets and the present value of the defined benefit obligation at the balance sheet date.
The pension charge recognised in the revenue account consists of current and past service costs. In addition, finance income is recognised
based on the expected return on pension assets less the interest on pension scheme liabilities.
Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included
directly in the statement of total recognised gains and losses.
The Group also operates defined contribution schemes. The contributions payable to the scheme in respect of the accounting period are
charged to the revenue account.
Assets Leased to the Group
Assets held under finance leases are capitalised in the balance sheet at cost value and are depreciated in accordance with the Group’s normal
accounting policy. The interest element of the rental obligation is charged to the revenue account over the period of the lease based on the
balance of the outstanding commitment. The outstanding commitment is analysed between current and long term liabilities. Rentals due under
operating leases are charged to the revenue account in the year that the cost accrues.
Onerous Lease Provision
Where the Group is committed to future rental payments on a property that are in excess of rental incomes received, an onerous lease provision
is made. The provision is discounted based on the Group’s current cost of borrowing and the interest factor unwinds on an annual basis through
the interest payable line in the revenue account. Provision is also made where the cash flow of the trading outlet is not expected to cover the
lease commitments.
Funeral Plans
Amounts received in advance for funeral plans are recorded as liabilities on the balance sheet. The liability has been apportioned between
current and long term liabilities based upon the Group’s experience of funerals carried out under its pre payment plans over the last five years.
All money received for funeral plans taken out since 1 January 2002 is paid into a contract for whole life insurance on the life of the customer
for the purpose of providing the funeral and disclosed within fixed asset investments at cost. This investment strategy complies with the
provisions of the Financial Services and Markets Act 2000. All money received for funeral plans taken out before 2002 is held in a separate
trustee administered bank account and disclosed within current assets. Interest income earned on the cash deposit in the year is not recognised
in the revenue account, but is held on the balance sheet in funeral plan debtors and released to profits on performance of the related funeral.
Holiday Pay
For employees who commenced employment on or before 1 April 1998, the Group accrues for the cost of outstanding holiday entitlement.
These employees were required to accrue one year of their annual holiday entitlement before taking any holiday. The required accrual is
calculated by multiplying one year of their annual holiday entitlement for each employee by their current daily pay rate.
Share Interest
The Society’s members’ share capital maintains a fixed nominal value and attracts interest. Share interest is disclosed as a movement in equity
and within the reconciliation of movements in members’ funds.
39
Payments to and on Behalf of Stakeholders
The surplus shown in the revenue account is not considered to be attributable solely to the members, but also to various stakeholders including
the Group’s employees, charitable institutions or other organisations with objectives or purposes consistent with those of the Group.
Payments to and on behalf of stakeholders are recognised in accordance with the Group’s rules to include approved dividends, member only
vouchers, member relations costs and donations to the Co-operative Party. Payments to and on behalf of stakeholders are recognised in the
revenue account in the period in which they are approved by the members.
Management Executive Incentive Scheme (MEIS)
The Group has a long-term scheme (MEIS) in place to incentivise the Management Executive within the Society. An expense is recognised over
the vesting period of 3 years based upon meeting specific targets and objectives.
40
Group Revenue Account
For the 53 weeks ended 28 January 2012
January
January
January
January
2012
2012
2012
2011
53 Weeks
53 Weeks
53 Weeks
52 Weeks
Total
Continuing
Discontinued
Total
­
£'000 £'000
£'000
£'000
Note
GROSS SALES (including VAT)
937,636 992,743
709,468
228,168
Less Value Added Tax
(58,854) (49,853)
(58,559)
(295)
GROSS SALES (excluding VAT)
878,782 942,890
1
650,909
227,873
TURNOVER
675,939 669,669
1
643,698
32,241
Cost of sales
(458,985) (451,730)
(445,272)
(13,713)
GROSS PROFIT
216,954 217,939
198,426
18,528
FRS17 current service costs
17
(3,138)
(252)
Other expenses
(171,776)
(15,238)
Expenses
(190,404) (191,505)
3
(174,914)
(15,490)
(3,390) (7,293)
(187,014) (184,212)
TRADING PROFIT BEFORE EXCEPTIONAL ITEMS
26,550 26,434
23,512
3,038
Exceptional gain / (expense)
5,558 (7,581)
5
5,719
(161)
TRADING PROFIT
32,108 18,853
2
29,231
2,877
(Loss) / gain on disposal of fixed assets (106)
14,051
(106)
Profit on disposal of businesses
21
816
5,061
5,877
PROFIT BEFORE INTEREST AND TAXATION
37,879
32,904
29,941
7,938
Net interest receivable 956
601
6
Other finance income / (costs) 377 (2,457)
17
PROFIT BEFORE PAYMENTS TO AND ON BEHALF OF STAKEHOLDERS
39,212 31,048
Payment to and on behalf of stakeholders
(4,001) (3,321)
7
PROFIT BEFORE TAXATION
3 5,211
Taxation
(8,936)
8
­
RETAINED PROFIT FOR THE YEAR
19
Discontinued activities relate to the disposal on 4 October 2011 of the Group’s travel business (note 21).
­
41
27,727
(4,494)
26,275 23,233
­Group Balance Sheet
As at 28 January 2012
2012 2011
£’000£’000
£’000£’000
Note
FIXED ASSETS
Intangible assets
9
27,584
23,645
Tangible assets
Investments
10
307,639
300,927
11
39,635 28,360
374,858
352,932
CURRENT ASSETS
Stocks 12
36,281
34,396
Debtors 13
49,921
70,509
Cash at bank and in hand
41,283
45,899
127,485
150,804
CREDITORS
Amounts falling due within one year
Creditors
14
15
Borrowings
(62,417)
(76)
(100,629)
(100,672)
(62,493)
(43)
NET CURRENT ASSETS 64,992
50,132
TOTAL ASSETS LESS CURRENT LIABILITIES
439,850403,064
CREDITORS
Amounts falling due in more than one year
Creditors
14
(138,296)
Borrowings
15
(628)
(545)
(138,924)
(32,101)
(7,854) (10,695)
Provisions for liabilities and charges
16
(31,556)
NET ASSETS EXCLUDING PENSION LIABILITY
293,072 360,268
Net pension liability
(2,894)
(65,185)
290,178 NET ASSETS INCLUDING PENSION LIABILITY
17
295,083
CAPITAL AND RESERVES
Share capital
18
16,50216,534
Revaluation reserve
19
35,88336,788
Revenue reserve
19
237,793241,761
290,178
295,083
MEMBERS’ FUNDS
42
Note of Historical Cost Profits & Losses
For the 53 weeks ended 28 January 2012
2012
2011
53 weeks52 weeks
£'000
£'000
Profit before taxation
35,211 27,727
Realisation of property revaluation gains / (losses) of previous years
26
(92)
Historical cost profit before taxation 35,237 27,635
Historical cost retained profit for year 26,301 23,141
Group Statement of Total
Recognised Gains & Losses
For the 53 weeks ended 28 January 2012
2012
53 weeks
£'000
Note
2011
52 weeks
£'000
26,275 23,233
(41,665) 24,045
11,572 (7,637)
(879)
624
Retained profit for the year
Actuarial (losses) / gains on pension scheme Movement on deferred tax relating to pension scheme
17
Unrealised (loss) / gain from investment property revaluation
10
Total recognised (losses) / gains in the year
(4,697)
40,265
Reconciliation of Movements
in Members’ Funds
For the 53 weeks ended 28 January 2012
Note
2012
53 weeks
£'000
2011
52 weeks
£'000
Retained profit for the year
26,275 23,233
Other recognised (losses) / gains for year (as above)
(30,972)
17,032
Share interest (176)
(176)
18
Decrease in share capital (32)
(70)
18
Net (reduction in) / increase to members’ funds (4,905) 40,019
Opening members’ funds
295,083 255,064
Closing members’ funds 290,178 295,083
43
Group Cash Flow Statement
For the 53 weeks ended 28 January 2012
2012 2011
53 weeks
52 weeks
Note
NET CASH INFLOW FROM OPERATING ACTIVITIES
£’000£’000
£’000£’000
20
39,983
33,264
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest and dividends received
1,119
662
Interest paid (26)
(40)
Net cash inflow from returns on investments and servicing of finance1,093 622
CORPORATION TAX RECEIVED / (PAID)
1,553
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets
(25,233)
Purchase of fixed asset investments
(5,277)
(4,558)
Disposal of tangible fixed assets
1,085
18,887
Net cash outflow from capital expenditure and financial investments
(29,425)
-
(21,076)
(6,747)
ACQUISITIONS
Purchase of businesses
Net cash outflow for acquisitions
DISPOSALS
Sale of business
21
Cash disposed
21
Net cash outflow for disposals
CASH (OUTFLOW) / INFLOW BEFORE USE OF LIQUID RESOURCES
AND FINANCING
(4,351)25,638
FINANCING22
(265)
(288)
(DECREASE) / INCREASE IN CASH IN THE YEAR
(4,616)
25,350
21
(8,883)
(1,501)
(8,883)
(260)
(8,412)
(1,501)
-
(8,672)
-
44
Reconciliation of Net Cash Flow to
Movements in Net Cash
For the 53 weeks ended 28 January 2012
Note
2012
53 weeks
£'000
2011
52 weeks
£'000
(Decrease) / increase in cash in the year
Cash inflow from movement in debt and lease financing
22
Non-cash movement
23
(4,616)
57
(173)
25,350
42
-
Change in net cash resulting from cash flows
(4,732)
25,392
Opening net cash
45,311
19,919
Closing net cash 23
40,579
45,311
45
Notes to the Accounts
1. GROSS SALES AND TURNOVER
Gross sales
(excluding VAT)
Turnover
2012201120122011
53 weeks
52 weeks
53 weeks
52 weeks
£’000£’000£’000
£’000
Retail
516,022
492,986
508,811
485,926
Wholesale
72,342
70,369
72,342
70,369
Travel - Joint venture
1,089-
1,089Funeral
28,03226,27028,03226,270
Transport
24,408
33,437
24,408
33,437
Other 648423648423
Rent received from investment properties
8,3688,2498,3688,249
Total Continuing activities
650,909631,734643,698624,674
Discontinued activities - Travel
227,873311,156 32,24144,995
Total
878,782942,890675,939669,669
Turnover consists entirely of sales made in the United Kingdom.
2012
53 Weeks
2. TRADING PROFIT
Turnover
Trading Profit Continuing
£'000
Discontinued
£'000
2011
52 Weeks
Total
£'000
Continuing
£'000
Discontinued
£'000
Total
£'000
643,69832,241675,939624,674 44,995 669,669
29,2312,87732,10817,242 1,611 18,853
3. Expenses
Note
2012
2011
53 weeks
52 weeks
£'000
£'000
Personnel costs 4
Occupancy costs
Depreciation:
– Owned assets 10
– Assets held under finance leases 10
Amortisation of intangible assets 9
Operating lease rentals – plant & machinery
Operating lease rentals – land & buildings
Directors’ fees 4
Other expenses
Other income
110,615110,673
25,064
25,769
Exceptional (gain) / expense 5
Total expenses
190,404191,505
(5,558)
7,581
184,846199,086
15,461
8
1,774 335
6,884
134
30,341
(212)
15,495
1,540
655
6,773
130
30,837
(367)
Other income consists entirely of compensation received for business interruption and insurance recoveries in respect of stock losses following a fire at Oakham Superstore
in 2008.
46
Notes to the Accounts
3. EXPENSES (CONTINUED)
Services provided by the Group’s auditor 2012
During the year the Group obtained the following services from the Group’s auditor at costs detailed below: 53 weeks
£'000
Audit fees:
Fees payable for the audit of consolidated accounts
25
Fees payable for the audit of the Society and its subsidiaries pursuant to legislation
104
Fees payable to Groups auditors for other services:
Other services pursuant to legislation
5
All other services 48
182
2011
52 weeks
£'000
25
103
4
35
167
4. EMPLOYEES
The average number employed by the Group was:
Note
2012
Number
Full-time
Part-time
Aggregate amounts paid in respect of:
3,767
4,314
8,081
2012
53 weeks
£'000
Wages and salaries
99,686
Social secruity costs
6,159
Defined contribution pension scheme costs
1,380
17
Defined benefit pension scheme current year service costs
3,390
17
110,615
2011
Number
3,860
4,289
8,149
2011
52 weeks
£'000
97,302
5,990
107
7,293
110,692
These figures include exceptional closure costs of £nil (2011: £19,000).
2012
Directors’ emoluments
53 weeks
The total remuneration of the Directors for their Board duties was:
£'000
Fees The average number of Directors whose emoluments fell into each £2,500 bracket was:
£0 - £2,500
£2,501 - £5,000
£5,001 - £7,500
£7,501 - £10,000
£10,001 - £12,500
£15,001 - £17,500
47
17
134
2011
52 weeks
£'000
130
2012
Number
2011
Number
-
4
6
2
2
5
6
1
1
7
1
1
Notes to the Accounts
4. EMPLOYEES (CONTINUED)
MANAGEMENT EXECUTIVE EMOLUMENTS 2012
53 weeks
The total remuneration excluding pension contributions of the Management Executive was:
£'000
Wages and salaries
Taxable benefits
Performance related
HIGHEST PAID EXECUTIVE
The total remuneration of the highest paid executive included above was:
Wages and salaries
Taxable benefits
Performance related
2011
52 weeks
£'000
1,630
1,474
98
123
321
305
2,049
1,902
386
1
96
340
1
75
483
416
2012
53 weeks
Number
2011
52 weeks
Number
1
1
1
1
1
1
-
The Group has paid £26,500 (2011: £22,800) into the Group pension scheme for the future pension provision of the highest paid executive.
The number of members of the Management Executive whose emoluments, excluding pension contributions, fell in each £10,000 bracket were:
2012
53 weeks
Number
2011
52 weeks
Number
1
£30,001 - £40,000
1
£80,001 - £90,000
1
1
£100,001 - £110,000
1
4
£130,001 - £140,000
2
£140,001 - £150,000
2
£170,001 - £180,000
2
£180,001 - £190,000
£190,001 - £200,000
£200,001 - £210,000
£280,001 - £290,000
£330,001 - £340,000
£410,001 - £420,000
£480,001 - £490,000
During the year, the Society introduced changes to its Management Executive Incentive Scheme. The previous short term incentive scheme was altered, in line with
best practice recommendations, to include a long-term incentive component. The revised scheme will reward performance over a rolling three year period and incorporates
long-term targets covering cumulative trading profit, customer service and colleague engagement. The first long-term award was recognised during the year ended
28 January 2012 and will be paid in cash after the January 2014 year end providing the three year targets are met.
48
Notes to the Accounts
2012
5. EXCEPTIONAL (GAIN) / EXPENSE
53 weeks
Note
£'000
(10,593)
Gains arising from the closure of the Group defined benefit pension scheme
Contribution towards CRTG efficiencies3,893
Impairment of goodwill, fixed assets and onerous lease provision
9,10
Costs arising from the proposed Travel re-organisation247
Costs arising from the closure and re-organisation of Transport businesses
895
Other exceptional costs
(5,558)
­
2011
52 weeks
£'000
6,313
564
290
(83)
497
7,581
During the year the Group closed its defined benefit pension scheme to future accrual and completed a pension increase exchange arrangement with eligible current pensioners.
These changes resulted in a one-off gain net of associated costs of £10,593,000.
In the previous year the Group paid £6.3m to The Co-operative Group Limited as a contribution towards the cost of implementing efficiencies within the Co-operative Retail Trading
Group (CRTG) following the integration of Somerfield.
The carrying value of fixed assets and goodwill relating to a number of acquisitions and loss making sites was reviewed leading to an exceptional impairment charge of £2,070,000
(2011: £564,000) and the provision for two onerous leases of £1,823,000 (2011: £nil).
During the year the Group took the decision to close the Hull motor dealership site. Costs of closure amounted to £247,000 and included stock provisions, redundancy and other
closure costs.
Other exceptional costs during 2012 include litigation costs, costs associated with the implementation of the Central Asset Reserve and costs of implementing the single card
membership scheme. Prior year other exceptional costs include litigation costs and stock write downs.
2012
6. NET INTEREST Receivable 53 weeks
£'000
Note
Interest payable (25)
15
Interest and dividends receivable
1,114 11
1,089
Unwinding of a discounted provision
(133)
16
Net interest receivable
956
2011
52 weeks
£'000
(28)
763
735
(134)
601
2012
7. Payments to and on behalf of stakeholders
53 weeks
£'000
2011
52 weeks
£'000
Member benefits
Member relations
Members’ dividend
Unredeemed expired members’ dividend vouchers
697
673
950
-
585
701
811
(26)
Total members’ distributions
Co-operative Party
Community dividend
Employee dividend
Over provision for taxation on employee dividend
2,320
112
264
1,322
(17)
4,001
2,071
108
219
944
(21)
3,321
49
Notes to the Accounts
­
2012
53 weeks
£'000
8. Taxation
2011
52 weeks
£'000
Current tax:
Provided on chargeable income and gains of the year
(10,715) Adjustments in respect of prior years
30
(10,715) 30
Deferred taxation:
Origination and reversal of timing differences
1,566
(4,737)
Adjustments in respect of prior years
213
213
(8,936)
(4,494)
As a result of the change in the UK main corporation tax rate from 26% to 25% that was substantively enacted on 5 July 2011 and that will be effective from 1 April 2012,
the relevant deferred tax balances have been re-measured.
Further reductions to the UK corporation tax rate were announced in the March 2011 Budget. The changes, which are expected to be enacted separately each year, propose
to reduce the rate by 1% per annum to 23% by 1 April 2014. The change had not been substantively enacted at the balance sheet date and, therefore, is not recognised in
these financial statements.
Factors affecting the tax charge for the current year
The current tax charge for 2012 is higher (2011: lower) than the standard rate of corporation tax in the UK of 26.36% (2011: 28%).
The differences are explained below:
2012
53 weeks
£'000
2011
52 weeks
£'000
35,211 27,727
Profit before taxation
Current tax at 26.36% (2011: 28%)
(9,282)
(7,764)
Effects of:
Expenses not deductible for tax purposes
(1,956) (1,294)
151
Capital allowances for the year in excess of / (less than) depreciation
(469)
Short term timing differences
333
(69)
Profit on disposal of assets not subject to corporation tax
1,742 3,998
128
(4)
Expenses allowable not in revenue account­
Adjustments in respect of prior years
-
30
Pension expenses allowable
2,602
326
(581)
Losses (created) / utilised 5,293
Income taxable not in revenue account
(3,852)
(17)
Total current tax (charge) / credit
(10,715)
30
50
Notes to the Accounts
9. INTANGIBLE FIXED ASSETS - GOODWILL
2012
2011
Note
£’000
£’000
Cost
Total brought forward
40,490 39,565
Additions 6,414
925
21
Disposals (2,261)
Total
carried
forward
44,643
40,490
Amortisation
Total brought forward
16,845 15,305
Charge for the year
1,774 1,540
5
Impairment
171
Disposals (1,731)
Total carried forward
17,059 16,845
Net book value
27,584 23,645
The Group has performed a review of the carrying value of goodwill as at 28 January 2012. Cash flows for loss making stores have been discounted using a discount rate of
8% (2011: 6%).
10. TANGIBLE FIXED ASSETS
Note
Investment
Trade Machinery Transport
Total
properties
properties
& plant
£’000£’000£’000£’000
£’000
Cost or valuation
Total brought forward
95,390
201,137
145,144
13,523
455,194
Additions
-9,05717,1091,709
27,875
Transfers 1,744
(1,866)
122
-
Disposals
(231)(1,992)(13,185)(1,203)
(16,611)
Revaluation adjustment
(1,244)---
(1,244)
Total carried forward
95,659
206,336
149,190
14,029
465,214
Depreciation
Total brought forward
Provided this year
Impairment
Transfers
Disposals
Revaluation adjustment
Total carried forward 5
-
41,757
103,824
8,686
154,267
2
3,232
10,762
1,473
15,469
-
898 1,001 -
1,899
363(354) (9) - -
(881) (11,797) (1,017)(13,695)
(365)---
(365)
-
44,652
103,781
9,142
157,575
Net book value
At 28 January 2012
95,659 161,684
45,409
4,887307,639
At 22 January 2011
95,390
41,320
4,837
159,380
300,927
BNP Paribas Real Estate, independent qualified valuers, (Andrew Oliver MRICS, Peter Fletcher BSc MRICS and Andrew Price BSc MRICS) have inspected and revalued
approximately one fifth of investment properties as at 28 January 2012. The remainder have been valued by BNP Paribas Real Estate at 28 January 2012 on a ‘desk top’ basis
and will be inspected and revalued over the course of the next four years. All valuations were carried out at a market value basis in accordance with the RICS Appraisal and
Valuation Manual.
These valuations have been incorporated into the financial statements and the resulting revaluation adjustments have been taken to the revaluation reserve. The revaluations
during the year resulted in a revaluation loss of £879,000 (2011: revaluation gain of £624,000).
No deferred tax is provided on timing differences arising from the revaluation of fixed assets unless, by the balance sheet date, a binding commitment to sell the assets has been
entered into and it is unlikely that any gain will be rolled over.
51
Notes to the Accounts
10. Tangible fixed assets (continued)
The cumulative value of finance costs included within fixed assets (cost or valuation) amounts to £1,397,000 (2011: £1,397,000).
Included within fixed assets are assets with a net book value of £166,000 (2011: £nil) relating to items held under finance lease. Depreciation charged on these assets
amounted to £8,000 (2011: £nil) during the year.
Assets in the course of construction included within trade properties amounts to £4,609,000 (2011: £2,909,000).
2012
£’000
2011
£’000
The net book value of land and building comprises:
Investment properties:
Freehold
91,847 91,664
Leasehold over 50 years
749
757
Leasehold under 50 years
3,063 2,969
95,659 95,390
Trade properties:
Freehold 153,750 152,139
Leasehold over 50 years
3,700 3,700
Leasehold under 50 years
4,234 3,541
161,684 159,380
Total properties:
Freehold 245,597
243,803
Leasehold over 50 years
4,449 4,457
Leasehold under 50 years
7,297 6,510
257,343 254,770
The historical cost of investment properties now included at valuation:
Cost
Accumulated depreciation
63,516 62,228
(3,740) (3,626)
Net book value
59,776 58,602
11.
INVESTMENTS
Fixed assets
Dividends/interest
2012
2011
2012
2011
53 weeks
52 weeks
£’000
£’000
£'000
£'000
The Co-operative Group Limited – shares
Other I&P societies – shares
Other I&P societies – loans
Companies – quoted
Companies – not quoted
2,340
25
53
789
6,010
British Government - quoted
Funeral plans
26
30,392
39,635
2,340
25
53
782
-
143149
--
11
10 -
-
26
25,134
1
1
--
28,360
Interest earned on cash balances
Other Interest
Market values of quoted investments 862
154
161
578
602
3821,114
763
882
52
Notes to the Accounts
12. STOCKS
2012
£’000
2011
£’000
Goods for resale
Consignment stock
35,558
723
36,281
33,701
695
34,396
Note
13. Debtors
2012
£’000
2011
£’000
8,296 -
9,622
297
23,246
1,353
7,107
12,505
37,839
9,270
1,850
1,271
1,966
5,808
49,921
70,509
Trade debtors
Travel trade debtors
Funeral plans
Corporation tax
Deferred tax
16
Other debtors
Prepayments and accrued income
14. Creditors
Trade creditors
Travel trade creditors
Central asset reserve liability
Funeral plans
Other taxation and social security
Other creditors
Accruals and deferred income
Payments to and on behalf of stakeholders
Within one year
2012
£’000
After one year
2011
£’000
2012
£’000
2011
£’000
25,844 23,309
-
47,141
6,400
4,000
3,462
3,839
3,691
6,009
7,610
15,435
15,014
890
402
62,417 100,629
-
-
102,300
35,996
-
400
31,156
138,296 31,556
Trade creditors includes £723,000 (2011: £695,000) in respect of commitments to purchase vehicles on consignment and obligations. The corresponding assets are included in stocks.
53
Notes to the Accounts
15. BORROWINGS
Bank overdraft
Bank loan - unsecured (a) Finance leases Within one year
After one year
2012
£'000
44
32
76
Interest payable
2011
£'000
2012
£'000
2011
£'000
2012
53
weeks
£'000
2011
52 weeks
£'000
-
43
-
43
503
125
628
-
545
-
545
9
14
2
25
15
13
-
28
Terms of bank loan:
(a) The loan is wholly repayable in instalments within fifteen years and bears an interest rate of 2.15% (2011: 2.15 %).
Borrowings falling due within:
2012
£’000
2011
£’000
One year
Between one and two years
Between two and five years
Over five years
76
77
233
318
43
44
138
363
704
588
16. Provisions for liabilities and charges
Travel Deferred
provision taxation
£’000 £’000
Onerous
leases
£’000
Other
provision
£’000
Total
£’000
Opening balance
Charged to the revenue account
Unwinding of a discounted provision
Sale of business
Utilised this year
Released this year
Closing balance
The travel provision represented an assessment of the future costs to complete the booking of all future holidays for which a deposit had already been paid and an assessment of the cost of anticipated cancellations. The remaining provision was released on disposal of the Group’s travel business.
891
6,454
3,200
150
10,695
1632,059
- -1,896
- -133 -133
(522) - - -(522)
(3,806)
(174)
(150)
(4,499)
(369)
-
(12)
-
(12)
-2,648 5,043 163 7,854
Note
The deferred taxation provision comprises:
2012 2011
£’000 £’000
Accelerated capital allowances
(2,648)
Other timing differences
-
(2,648)
16
Spread pension contributions
21,483
13
13
Other timing differences
63
Unutilised losses
13 1,700
20,598
(2,947)
(3,507)
(6,454)
1,271
(5,183)
As a result of the Central Asset Reserve, the Society will receive a deduction against current tax of £85.9m over the course of the next 3 years. Consequently a deferred tax
asset of £21.5m has been recognised at January 2012. No provision has been made for deferred taxation relating to revalued investment properties for which the potential
liability has not been quantified, because of the availability of indexation and other reliefs. No provision has been made for deferred tax assets of £3.5m (2011: £3.6m)
relating to capital losses that are currently carried forward of £14.1m (2011: £13.8m). These amounts will be utilised should the Group have any chargeable gains in the
future. There are no other unrecognised deferred tax assets and liabilities.
The onerous lease provision represents an assessment of the costs to cover dilapidations and rent and rates for vacant leasehold premises, taking account of the anticipated
period until the leases are assigned or reassigned. The assessment, which is undertaken at the end of each accounting period, is made on a property by property basis.
The provision is expected to be utilised within the next 15 years (2011: 16 years).
The other provision represents an assessment of the future committed costs associated with the closure of the Hull motor dealership. The provision is expected to be utilised
within the next 12 months.
54
­
Notes to the Accounts
17. PENSION COMMITMENTS
The Group operates a defined benefit scheme, the Midlands Co-operative Society Limited Employees’ Pension Scheme.
The contributions to the scheme are determined with the advice of an independent qualified actuary on the basis of triennial valuations.
During the year the Group made normal contributions to the scheme amounting to £2,351,000 (2011: £5,376,000) and special contributions of £6,000,000
(2011: £5,538,000).
The Society closed the defined benefit scheme to future accrual and new entrants on 30 July 2011 and a new defined contribution arrangement was introduced to provide
both new and existing employees with flexible pension arrangements. A curtailment gain of £10.9m has been recognised as an exceptional gain on the closure of the
scheme (note 5).
The Society has also amended the scheme rules to allow for a pension increase exchange whereby pensioners have been offered a one-off increase in annual pension
entitlement instead of future increases linked to the retail price index (RPI). A curtailment gain of £2.1m has been recognised as an exceptional gain on the completion of
this exercise (note 5).
The Society implemented a pension deficit reduction arrangement (Central Asset Reserve) during the year which has resulted in additional scheme assets of £108.7m being
recognised within the FRS17 valuation at January 2012. The scheme assets are underpinned by way of subordinated pledges given by Central Midlands Estates Limited,
a subsidiary of the Society.
The latest full actuarial valuation for the Midlands Co-operative Society Limited Employees’ Pension Scheme was carried out at 31 December 2008 using the projected unit
basis and was updated for FRS17 purposes to 28 January 2012 by a qualified independent actuary. The principal assumptions used by the actuary were:
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation assumption
2012
2011
-
2.9%
4.8%
3.0%
3.9%
3.3%
5.6%
3.4%
The mortality assumptions used are based on the "PA 92" standard tables with an allowance for future mortality improvements using the “medium cohort” projections. The
assumptions are such that a current 45 year old non-pensioner member who later retires at age 65 will live on average a further 22 years after retirement if they are male
and a further 24 years if they are female. A current pensioner member aged 65 will live on average a further 20 years if they are male and for a further 23 years if they are
female.
The assumptions used by the actuary are the best estimates chosen in accordance with FRS17 requirements from a range of possible actuarial assumptions which, due to
the timescale covered, may not necessarily be borne out in practice.
The fair value of the scheme’s assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the
present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain were:
Fair value of scheme assets
Present value of funded obligations
Deficit in the scheme
Related deferred tax asset
Net pension liability
2012
£’000
2011
£’000
413,608
308,400
(417,465)(397,693)
(3,857)(89,293)
963
24,108
(2,894)(65,185)
Scheme assets do not include any property occupied by the Group.
The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields
on fixed interest investments are based on gross redemption yields as at the balance sheet date. Expected returns on equity investments reflect long term real rates of
return experienced in the respective markets.
55
Notes to the Accounts
­
17. PENSION COMMITMENTS (CONTINUED)
Changes in the fair value of scheme assets
2012
£’000
Opening obligation
397,693
Service cost
3,390
Interest cost
21,468
Employees contributions
395
Actuarial losses / (gains) 27,770
Plan Curtailments
(10,917)
Recognition of pensioner increase exchange(2,146)
Benefits paid
(20,188)
Closing obligation
417,465
Analysis of other pension cost charged in arriving at trading profit:
Current service cost
2012 £'000 2011
£’000
393,617
7,293
21,725
870
(6,312)
(19,500)
397,693
2011
£'000
(3,390)
(7,293)
2 012
£’000
2011
£’000
21,845
(21,468)
19,268
(21,725)
377
(2,457)
2012
£’000
2011
£’000
Analysis of amount included in other finance income / (costs):
2011
£’000
Opening fair value of scheme assets
308,400 279,115
Expected return
21,845
19,268
Actuarial (losses) / gains
(13,895) 17,733
Contributions by employer
117,051
10,914
Contributions by members
395
870
Benefits paid
(20,188) (19,500)
Closing fair value of scheme assets 413,608 308,400
Changes in the present value of scheme obligations:
2012
£’000
Expected return on pensions scheme assets
Interest on pension scheme liabilities
­
Analysis of amounts recognised in statement of total recognised gains and losses:
Cumulative at beginning of year
Recognised during the year
(85,226)
(41,665)
(109,271)
24,045
Cumulative at end of year
(126,891)
(85,226)
56
Notes to the Accounts
17. PENSION COMMITMENTS (CONTINUED)
Assets in the plan as a percentage of total plan assets:
2012
Bonds
51%
Equities
43%
Other
6%
2011
33%
58%
9%
The scheme holds quoted securities and these have been valued at current bid-price.
2011
2012
History of experienced gains and losses
£’000
£’000
Benefit obligation at end of year
(417,465)
Fair value of plan assets at end of year
413,608
Deficit(3,857)
Actual return less expected return on pension scheme assets
Experience gains and (losses) arising on the scheme liabilities
2008
£’000
(397,693)
308,400
(89,293)
(393,617)
279,115
(114,502)
(285,561)
223,060
(62,501)
(316,062)
288,037
(28,025)
(13,895)
17,733
45,126
(79,633)
(15,212)
(2,880)
(1,021)
(7,451)
Defined Contribution Scheme
The costs of contributions to the defined contribution scheme amounted to £1,380,000 (2011: £107,000).
57
2010
2009 £’000
£’000
231 (2,661)
Notes to the Accounts
2012
18. Share capital 53 weeks
£'000
2011
52 weeks
£'000
Contributions
1,407
1,674
Withdrawals
(1,615)(1,920)
(208)(246)
Interest
176 176
Movement in year
(32)
(70)
Opening balance
16,534 16,604
Closing balance
16,502
16,534
At 28 January 2012 the Society had 992,865 (2011: 938,683) members who are each entitled to one vote. At the balance sheet date the whole of the share capital
comprises non-equity shares of £1 each attracting interest at rates between nil and 2.25%.
Share capital is generally withdrawable on demand; however, in accordance with the Society rules, the Board may suspend the right of withdrawal for a limited time and
may impose a notice period for withdrawals should they consider it to be in the best interests of the Society. The Society rules for the distribution of the final surplus in the
event of winding-up after repayment of the paid-up, share capital state that such assets shall not be paid to or distributed among the members of the Society but shall be:
(a) transferred to one or more other societies in membership of the Co-operatives UK Limited having the same or similar rule provisions as regards surplus distribution
as this rule, as may be determined by the members at an ordinary or special meeting; or
(b) if not so transferred shall be paid or transferred to the Co-operatives UK Limited.
Dividends to members are paid by way of vouchers redeemable against purchases.
The Group operates a Share Incentive Plan (SIP) to benefit employees. Employees can invest a proportion of their salary which may not exceed the lower of £1,495 or
10% of an employees take home pay, on which they earn a return of 2.25% in that period. Interest earned is recognised in the share capital note. At the end of five years
an employee may withdraw their shares.
The Society is allowed to allocate matching shares under rules governed by HMRC. As an incentive to colleagues to join and remain in the SIP, the Society will match the
first £10 paid in by each colleague for the purchase of partnership shares in the first year of the scheme by awarding £10 in matching shares. Each year colleagues who
continue to contribute will receive a further £10 in matching shares for the first £10 of partnership shares acquired in later years. A year for the purposes of matching
shares will be the Society’s financial year.
As long as the matching shares are held for at least five years, they can be redeemed with the Society free of income tax and National Insurance Contributions. If they are
redeemed before this date, income tax and National Insurance Contributions will normally be payable.
The issue of matching shares is discretionary. The Society therefore reserves the right to amend or withdraw the issuing of matching shares at its discretion.
19. Movement in reserves
1
RevaluationRevenue
reserve
reserve
£’000
£’000
1
At 23 January 2011
Retained profit for the year
Actuarial loss on pension scheme (net of deferred tax) Transfer of realised gains
(Deficit) on revaluation of property
Share interest 36,788
-
-
(26)
(879)
-
241,761
26,275
(30,093)
26
-
(176)
At 28 January 2012
35,883
237,793
58
Notes to the Accounts
2012
2011
53 weeks
52 weeks
20. Reconciliation of TRADING profit to trading cash flows
£'000
£'000
Trading profit
32,10818,853
Non-cash pension (gains) / costs (12,024) 1,918
Depreciation17,36816,059
Amortisation of goodwill
1,945
1,540
Payments to and on behalf of stakeholders
(3,513) (3,224)
Decrease in debtors
9,957
1,088
Increase / (decrease) in creditors
673
(1,375)
(Increase) / decrease in stocks
(1,885) 4,396
Increase / (decrease) in provisions
1,354 (453)
Special contribution to pension scheme
(6,000)(5,538)
39,98333,264
21. Acquisition & Disposal of business
During the year the Group acquired a number of businesses. An analysis of the assets and liabilities acquired at book value which equated to the provisional fair value is:
2012
£’000
Net assets acquired (all fixed assets)
Goodwill
Consideration Satisfied by: cash 2,469
6,414
8,883
8,883
On 4 October 2011, the Society sold its travel business through the disposal of two principal subsidiaries, Midlands Co-operative Travel Limited and Midlands Co-op Travel Group
Limited for a 3.5% shareholding in TCCT Holdings UK Limited. The assets and liabilities of the disposed business are as follows:
2012
£’000
Intangible assets
433
Tangible assets
1,826
Debtors 3,772
Cash 8,412
Creditors (13,242)
Provisions (522)
Net assets disposed 679
Shareholding received in TCCT Holdings UK Limited 6,000
Costs of disposal
Net assets disposed Gain on disposal of travel business - discontinued operations
(260)
(679)
5,061
2012
2011
22. Financing
53 weeks
52 weeks
£'000
£'000
Capital element of finance lease rentals repaid
Debt due beyond one year:
Decrease in utilisation in bank loans
Increase / (decrease) in debt
Decrease in share capital
59
(16)
-
(41)
(42)
(57) (42)
(208) (246)
(265) (288)
Notes to the Accounts
23. Analysis of net CASH
2011
£'000
Non cash
movement
£'000
Cash flow
Disposal
2012
£'000
£'000
£'000
Cash at bank and in hand
Debt due within one year Debt due after one year
Finance leases due within one year
Finance leases due after one year
45,899
(43)
(545)
-
-
-
42
(42)
(32)
(141)
3,796
(41)
-
-
16
(8,412)
-
-
-
-
41,283
(44)
(503)
(32)
(125)
45,311
(173)
3,853
(8,412)
40,579
24. Commitments
Finance leases
The minimum finance lease payments to which the Group is committed in future years are:
Within one year
In the second to fifth years inclusive
2012
£'000
2011
£'000
32
125
-
157
-
Obligations under finance leases are shown as part of loans in note 15.
Operating leases
At 28 January 2012 the Group had the following annual commitments under non-cancellable operating leases, excluding onerous lease commitments of £687,000 per annum (2011: £338,000) which are fully provided for as described in Note 16.
Land &
Other
Land &
Other
buildings
buildings 2012 2012
2011
2011
£’000 £’000
£’000
£’000
Operating leases expiring:
Within one year
In the second to fifth years inclusive
Over five years
351
654
2,068
3,073
147
98
-
245
1,124
2,270
3,194
6,588
91
141
232
As part of the disposal of the travel business Thomas Cook Travel (TCT) took occupation under licence of the Society’s former leased travel branches. The terms of the
licence are that as from 4 October 2011 TCT are wholly responsible for all outgoings and costs associated with these properties. At January 2012 the lease commitments
on these operating leases expiring within one year, in the second to fifth years and over five years are as follows; £865,000, £1,046,000 and £933,000.
Capital commitments
Amounts contracted for but not provided for in the financial statements were £18.0 million (2011: £7.2 million).
25. Subsidiaries
% of Equity
Principal
owned
activity
100
Central Midlands Estates Limited
Property Management
Terry Smith Limited 100
Coffin Manufacturer
M.C.S. Funeral Services Limited 100
Funeral Services
Oakwell Stores Society Limited 100
Corporate Trustee
Midlands Co-op Scottish Limited Partnership 83
Investment in Corporate Bonds
Midlands Co-op General Partner Limited 100
Partnership Administration
Advantage Motor Group Limited 100
Motor Dealership
Leicester Carriage Builders 2002 Limited 100
Non-Trading
Metro Discount Stores (Midlands) Limited 100
Non-Trading
Ilkeston Travel Services Limited 100
Non-Trading
Ken Ives Motors (Derby) Limited 100
Non-Trading
Ilkeston Motor Finance Limited 100
Non-Trading
Ilkeston Consumer Co-operative Society Pension Trustees Limited 100
Non-Trading
All subsidiaries are registered within the United Kingdom.
60
Five-Year Financial Record
Gross Sales (excluding VAT)
2008200920102011 2012
52 weeks
52 weeks
52 weeks
52 weeks 53 weeks
£’000£’000£’000£’000£’000
800,883847,592918,420942,890878,782
Turnover
567,468603,360670,566669,669675,939
Depreciation and Amortisation (excluding exceptional items)
17,87617,42916,98217,03517,243
Trading Profit
11,17924,83717,35518,85332,108
Trading Profit before Exceptional Items
12,99316,99622,34326,43426,550
Profit before Taxation
13,422 4,76417,73727,72735,211
Retained profit for the year
10,14623,79210,68423,23326,275
Share Interest
Payments to and on Behalf of Stakeholders
Tangible Fixed Assets
329325182176176
2,8473,1873,0983,3214,001
294,705286,191299,538300,927307,639
Net Cash
17,21745,47419,91945,31140,579
Share Capital
16,69616,27916,60416,53416,502
Revaluation Reserve
49,73339,45136,07236,78835,883
Revenue Reserve
230,231228,412202,388241,761237,793
Members’­Funds (Net Assets)
296,660284,142255,064295,083290,178
Net Assets excluding Pension Liability
316,453329,143337,506360,268293,072
Cash Flow from Operating Activities
Cash Flow from Sale of Tangible Fixed Assets
29,86841,495 8,73033,26439,983
3,6158,8728,33918,8871,085
Capital Expenditure
27,62219,46540,05822,57734,289
Number of Members
914,522921,911931,246938,683992,865
Trading Profit (before Exceptional Items) /Turnover Ratio
2.3%
2.8%
3.3%
3.9%
3.9%
nilnilnilnilnil
Gearing Ratio (Net Borrowings/Net Assets)
61
Five-Year Comparison
Trading Profit
Turnover
£ million
£ million
0
100
200
300
400
500
600
700
0
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
Cash Flow from Operating Activities
£ million
0
5
10
15
20
25
30
35
10
15
20
25
10
20
30
40
50
30
35
Net Cash
£ million
0
40
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
Capital Expenditure
5
Members’ Funds
£ million
£ million
0
5
10
15
20
25
30
35
0
40
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
50
100
150
200
250
300
62
Regional Committees
Attendance at Board / Regional Committee Meetings
for the year ended 28 January 2012
The attendance record of Directors and Regional Committee members during the year under review is provided below. The number of
meetings attended is the bold figure, which is compared to the number of meetings that each person was eligible to attend (in brackets).
Eastern Region:
Board
RC
Northern Region:
Chair: Rod Findley
11 (12)
12 (12)
Chair: Elaine Dean
3 (3)
12 (12)
Vice-Chair: Kevin Hepworth
Sean Clothier
11 (12)
Tina Allen
11 (12)
Paul Dawswell
10 (12)
David Beeston
10 (12)
11 (12)
Keith Bostock
12 (12)
12 (12)
9 (9)
Peter Dean
12 (12)
12 (12)
Max Hunt
9 (12)
David Elliott
12 (12)
Ray King
11 (12)
Philip Fee
12 (12)
12 (12)
Patricia Goodwin
11 (12)
11(12)
Mark Grayling
Vice-Chair: Robin Bennett
Robin Farrell
12 (12)
John Howells
John Maltby
8 (9)
John McGlade
3 (3)
Doreen Statham
Stuart Unwin
12 (12)
Barry Walne
Southern Region:
Board
12 (12)
9 (9)
Liz Lomas
12 (12)
Dave Roberts
10 (12)
9 (9)
11 (12)
John Kenney
12 (12)
RC
10 (12)
10 (12)
3 (3)
3 (3)
RC
Western Region:
Board
RC
Chair: Maria Lee
12 (12)
11 (12)
Chair: Paul Singh
12 (12)
12 (12)
Vice-Chair: Marta Mayhew
11 (12)
11 (12)
Vice-Chair: Frank Croft
12 (12)
12 (12)
Michael Althorpe
11 (12)
11 (12)
Simone Comelio
11 (12)
12 (12)
11 (12)
David Brown
8 (9)
Joanne Dack
11 (12)
Mark Foley
Gaye Duncombe
12 (12)
Neil Franklin
John Kibble
11 (12)
Richard Hughes
9 (12)
Bill Pringle
8 (12)
Angela Loughran
11 (12)
Phil Sawford
9 (12)
Bernard Parry
12 (12)
Dave Ellgood
8 (8)
11 (12)
Helen Lees
12 (12)
11 (12)
9 (12)
Keith Redfern
12 (12)
12 (12)
Glenda Weston
7 (9)
Sue Rushton
Peter Weston
2 (3)
Nathan Shepherd
Peter Smith
6 (9)
Board = Attendance at Board meetings (Directors)
63
Board
RC = Attendance at Regional Committee Meetings
11 (12)
Notice of Annual Meeting
The Annual Meeting of Members will be held as follows:
Eastern Region - Tuesday 24 April 2012 at 7.00 p.m.
COALVILLE • Snibston Discovery Museum, Ashby Road, Coalville. LE67 3LN
LEICESTER • The Grand Hall, St Martin’s House, 7 Peacock Lane, Leicester. LE1 5PZ
Southern Region - Wednesday 25 April 2012 at 7.00 p.m.
Kettering • The Rutland Suite, Kettering Park Hotel, Kettering Parkway, Kettering. NN15 6XT
Market Harborough • The Conference Centre, Three Swans Hotel, High Street, Market Harborough. LE16 7NJ
Melton Mowbray • The Conference Hall, Pera Conference Centre, Nottingham Road, Melton Mowbray. LE13 0PB
Northern Region - Tuesday 1 May 2012 at 7.00 p.m.
Chesterfield • The Legends Lounge, the b2net Stadium, Chesterfield Football Club, Sheffield Road, Chesterfield. S41 8NZ
Derby • The Carriage Shop Theatre, Derby College, The Roundhouse, Roundhouse Road, Pride Park, Derby. DE24 8JE
Eastwood • The Lawrence Suite, Eastwood Hall, Hayley Conference Centre, Mansfield Road, Eastwood. NG16 3SS
Western Region - Wednesday 2 May 2012 at 7.00 p.m.
Birmingham • The Lakeside Centre, Aston University, Aston Triangle, Birmingham. B4 7ET (Use Car Park 12)
Burton on Trent • The Albion Suite, Burton Albion Football Club, The Pirelli Stadium, Princess Way, Burton on Trent. DE13 0AR
Stafford • The Royal Suite, Tillington Hall Hotel, Eccleshall Road, Stafford. ST16 1JJ
Members are requested to note the following:
• ELECTIONS: Details of the Elections are available from the Registered Office at Lichfield (telephone 01543 414140) and online
www.midlands.coop/elections
• To gain admission members must present their valid share book or valid membership card and have held at least £1 in their share account for at least six months prior to the date of the meeting.
• At the conclusion of the meeting members are invited to remain for tastings of Co-operative food products, including cheese
and wine, and take the opportunity to talk to Directors and Regional Committee members on an informal basis.
­­
64
­­­Agenda of Annual Meeting
1.Minutes of the Interim Meeting of Members held 11, 12, 18 and 19 October 2011.
2. Report of the Board of Directors and Financial Statements, together with the Annual Report of the Remuneration Committee.
3. Appointment of Auditors: PricewaterhouseCoopers LLP, Donington Court, Pegasus Business Park,
Castle Donington, East Midlands. DE74 2UZ
4. Distribution of Trading Surplus. The Board of Directors proposes the following distributions from
trading surplus:
Members’ Dividend – 2nd Half Year*
£’000
*697
Colleagues’ Dividend 2011/12
Community Dividend 2011/12
1,327
266
2,290
* Based on a dividend rate of £1.10 per 1000 points
(Changes to points on Travel purchases were made from 4 October 2011)
5. Member Relations Annual Report.
6. Annual Report & Accounts of the Society Co-operative Party Councils (Midlands Northern, Midlands Eastern & Southern and Midlands Western Regions).
7. Elections - declaration of results:
• Election of Members and Employee Members to Regional Committees
• Election of Members to Regional Member Relations Committees
• Election of Members to Society Co-operative Party Councils (Midlands Northern,
Midlands Eastern & Southern and Midlands Western Regions)
• Election of Members' Delegates to Co-operative Congress 2012
J. Watts, Secretary
30 March 2012
65
Minutes
of the Interim Meeting of Members held in 2011:
Eastern Region - Tuesday 11 October 2011 at 7.00 p.m.
Coalville • The Conference Room, The Marlene Reid Centre, 85 Belvoir Road, Coalville • 90 members present • Robin Farrell in the Chair
Leicester • The Grand Hall, St Martin’s House, 7 Peacock Lane, Leicester • 121 members present • Rod Findley in the Chair
Southern Region - Wednesday 12 October 2011 at 7.00 p.m.
Kettering • The Kettering Park Hotel, Kettering Parkway, Kettering • 71 members present • Marta Mayhew in the Chair
Market Harborough • The Conference Centre, Three Swans Hotel, High Street, Market Harborough • 42 members present
• Maria Lee in the Chair
Melton Mowbray • The Royal British Legion Club, Thorpe End, Melton Mowbray • 58 members present • Michael Althorpe in the Chair
northern Region - Tuesday 18 October 2011 at 7.00 p.m.
Chesterfield •­The Club Lounge, the b2net Stadium, Chesterfield Football Club, Sheffield Road • 62 members present • Peter Dean in the Chair
Derby • The Carriage Shop Theatre, Derby College, The Roundhouse, Roundhouse Road, Pride Park, Derby • 88 members present
• Elaine Dean in the Chair
Ripley • Ripley Junior School, Poplar Avenue • 52 members present • Kevin Hepworth in the Chair
Western Region - Wednesday 19 October 2011 at 7.00 p.m.
BIRMINGHAM – The Lakeside Centre, Aston University, Aston Triangle, Birmingham • 124 members present • Frank Croft in the Chair
BURTON - The Tom Bradbury Lounge, Burton Albion Football Club, The Pirelli Stadium, Princess Way, Burton on Trent • 82 members present
• Dave Ellgood in the Chair
STAFFORD - The Royal Suite, Tillington Hall Hotel, Eccleshall Road, Stafford • 88 members present • Paul Singh in the Chair
1.Apologies received were read to the meetings at respective venues.
2.Minutes of the Annual Meeting of Members held 26 & 27 April; and 3 & 4 May 2011, including Results of Elections, were approved as a
correct record.
3. Interim Report of the Board of Directors - Resolved: "That the Interim Directors' Report for the 28 weeks ended 6 August 2011
be adopted".
4. Member Relations Interim Reports - Verbal reports of the Northern, Eastern & Southern and Western Regional Member Relations Committees for the half year ended July 2011 were received and adopted.
5.
Rule Amendments - The following amendments to Rules 11 and 17 were proposed by the Board of Directors (amendments shown in bold; words crossed through to be deleted):
Rule 17 – Elections:
17.11 The scrutineers shall have power to reject spoiled or improperly filled up papers. Only members who produce their share book or
Society membership card shall vote. and the The scrutineer shall stamp the share book with the date of the election or record that
the membership card has been used, prior to issuing a ballot paper.
Rule 11 – Members’ Meetings:
11.19 Only members of the Society who produce their valid share book or valid Society membership card shall be admitted to a
members’ meeting.
On being put to the Meeting, this proposal received the necessary two-thirds majority and was declared carried.
6. Distribution of Trading Surplus - Members’ Card Interim Dividend. The interim dividend of £1 per 1000 points was approved by
a show of hands.
7. Written reports of the Members' Delegates to Co operatives Congress 2011 were received.
66
Notes
A big thank you!
The Directors would like to thank members and colleagues
for their contribution to the Society’s success in 2011.
Many thanks also to members and colleagues whose
photographs appear in this annual report.
Registered Office
Central House, Hermes Road, Lichfield, Staffordshire, WS13 6RH
Registered under the Industrial and Provident Societies Acts 1965 to 2002. Registered
­­
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