Company registration number: 00358949
Annual Report and Financial Statements
for the
52 weeks ended 29 October 2023
2
Contents
Company
information
3
Strategic report
Our principal activities and business model
4
Financial results
and financial key performance indicators 6
Customers
11
Colleagues
12
Suppliers
14
Protecting the environment and supporting communities
17
Managing our
risks 23
Section 172
(1) 30
Governance report
34
Directors’ report
40
Statement of Directors’ responsibilities
43
Financial statements
Independent auditors’ report to the members of Wm Morrison Supermarkets Limited
4
4
Consolidated income statement
53
Consolidated statement of comprehensive income
53
Consolidated statement of financial position
54
Consolidated statement of cash flows
55
Consolidated statement of changes in equity
56
General information
57
Notes to the Group financial statements
60
Company statement of financial position
103
Company statement of changes in equity
104
Company accounting policies
105
Notes to the Company financial statements
107
Related undertakings
124
Supplementary information
Glossary
127
Company
advisors 129
Disclaimer
130
3
Company information
Company registration number
00358949
Directors
Rami Baitiéh
Joanna Goff
Company Secretary
Jonathan Burke
Registered office
Wm Morrison Supermarkets Limited
Hilmore House
Gain Lane
Bradford
BD3 7DL
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Central Square
29 Wellington Street
Leeds
LS1 4DL
4
Strategic report
Our principal activities and business model
Principal activities
Morrisons is a retailer, distributor, wholesaler and food manufacturer. We focus on ensuring that we offer the right price for our
customers; have friendly colleagues in store; invest in our Market Street service counters; and provide a great choice of fresh,
sustainably sourced, high quality produce, with strong links to local British growers and farmers.
The wider Group includes Market Bidco Limited and other subsidiaries of the ultimate parent entity, Market Topco Limited.
Business model
The key principles of our business model and core purpose have remained consistent for some time. Our business model has
customers right at its heart but delivers for all stakeholders. Our aim is ‘to make and provide food we’re all proud of, where everyone's
effort is worthwhile, so more and more people can afford to enjoy eating well and to give customers more reasons to shop at
Morrisons’. Our purpose remains relevant and appropriate.
We have been guided by our ‘Fix, Rebuild, Grow, Sustain’ strategy, and have aimed to build a brand that is broader, stronger, popular
and more accessible. We believe that this has contributed to the delivery of profitable and capital-light growth, particularly through
leveraging further our vertically integrated assets.
We have seven priorities underpinning our strategy and six ways of working to deliver it, as set out below.
Priorities
1. Be more competitive - We help customers make every penny go further, saving them money on the everyday items they
want and need. We continue to invest in price and improve product specification across hundreds of our customers’ favourite
items.
2. Tough on costs and improve free cash flow - Our aim is to develop a lower cost operating model designed to support
positive cultural change to deliver growth, with a focus on what matters most to customers.
3. Simplify and remove wasted effort - We continue to build a culture that speeds up and simplifies the operation, focusses
colleagues on the work that needs doing, provides synergies, removes duplication and reduces wasted effort.
4. Deliver great availability, value & quality for customers - We aim to deliver great on shelf and online availability so that
customers can get the great value, good quality products they want, when they want them.
5. Deliver great service through our Market Street offer - We are continually improving our fresh and market street offer
with helpful and friendly colleagues available whenever and wherever they are needed.
6. Improve brand recognition and accessibility - Our new Loyalty Programme through the Morrisons More Card and app
gives us the capability to target and serve customers better.
7. Give Britain more reasons to shop at Morrisons - We aim to provide “More Reasons to Shop at Morrisons” by offering
good quality fresh food at great value, with friendly and helpful colleagues finding ways to make it easier for customers to
shop with us.
Ways of working
1. Customers first - we care about our customers and do everything we can to meet their needs.
2. Listen and respond - taking the time to talk with and listen to colleagues and customers, and to always do the right thing
for them, is at the heart of our plans.
3. Teamwork - all of our colleagues play their part in the team and recognise that we go further together. The importance of
supportive managers, helping each other, and open and honest communication is recognised.
4. Work freely in a framework - colleagues are trusted to make their own decisions within the Morrisons plan, and are
encouraged to improve things for customers and for themselves. Colleagues are adventurous, curious, remove barriers and
embrace new ideas and ways of working.
5. Care and respect - our care, empathy and respect reflects how we interact with each other and those we work with.
6. Grow sales, low on costs - we will grow sales by starting with our customers. By doing what is right for them, they will
reward us with the decision to shop with us.
5
Strategic report (continued)
Our principal activities and business model (continued)
Customer promises, colleague promises and environmental promises
We recognise the importance of looking after our customers and our colleagues to provide more reasons to shop and work at
Morrisons. We have promises to these groups which outline what we are striving for. The customer promises were created to reflect
what matters most to customers in their shopping trip; good quality fresh food at great value, ensuring the products are available and
easy to shop and friendly and helpful staff. For our colleagues, the commitments reflect what is needed to create a fulfilling and
rewarding working environment, where everyone is welcome, celebrated, treated with respect and has a manager who supports
them. Colleagues also need a fair days pay, tools to do the job and the opportunity to succeed. As a result, our colleagues know what
to expect from working for Morrisons and our leaders have the guidance they need in how best to support their teams. Morrisons is
a responsible business and a commitment has been created to reflect our aspirations given the important role it plays in the
environment.
Our business is different in many ways: we are a diverse team, united by our ways of working and our food maker and shopkeeper
credentials. Every day, our skilled food makers in our manufacturing sites and on Market Street make fresh food for our customers,
with almost half of the fresh food we sell being made by us. Our automated production lines increase productivity and efficiency, and
reduce waste. We also work collaboratively with our suppliers to carefully source, improve and innovate for products that we do not
make ourselves.
By controlling the whole supply chain, we know where our food comes from and we can provide our customers with what they want,
when they want it. Our supermarkets are serviced by eight regional distribution centres and one national distribution centre, which
supports our growth across all channels. Through our 497 supermarkets, our convenience stores, our manufacturing sites, our online
business and our wholesale partners, we can leverage our brand to achieve meaningful and sustainable capital-light growth,
supported by a strong balance sheet, including a nationwide freehold estate and well-funded pension schemes.
The Group operates through our supermarkets and convenience stores complemented by our online and other home delivery
channels, with most customers across Britain having access to several different options available to them to shop with us. We offer
online grocery shopping through our own website, Morrisons.com, fulfilled either by in-store picking by Morrisons colleagues to serve
home delivery and click & collect customers, or via customer fulfilment centres through our partnership with Ocado. The customer
fulfilment centres use a centralised picking model to service a large catchment area, leveraging technology, logistics and distribution
services with Ocado to deliver our products to customers.
In addition, we sell products through our ‘Morrisons on Amazon’ home delivery channel. The same-day delivery service is available
to Prime members on the Amazon website and app. We also supply all Amazon Fresh UK stores with a range of items for customers
to purchase.
Finally, we offer home delivery and takeaway services through our partnerships with Deliveroo and GoPuff. Groceries can be ordered
online, picked up at a Morrisons store and delivered to local customers in as little as 30 minutes.
Since the CMA restrictions were lifted in October 2022, we have successfully integrated the McColl’s business. The conversion
programme for ‘Morrisons Daily’ continues at pace. As at the period end, we have 704 McColl’s convenience stores trading under
the ‘Morrisons Daily’ fascia. These stores as well as our wholesale customers are serviced by a separate logistic network.
Our wholesale business supplies products to the convenience channel via Morrisons Daily convenience stores and supply
agreements with wholesale partners. This presents an opportunity for us to leverage our brand strength and integrated supply chain
to achieve incremental, profitable and sustainable growth with limited capital expenditure requirements.
6
Strategic report (continued)
Financial results and financial key performance indicators
Basis of preparation
The Annual Report and consolidated Financial Statements of the Group represents the 52 week period to 29 October 2023 and the
comparative period the 52 week period to 30 October 2022.
Revenue
2022/23
£m
2021/22
£m
Sale of goods in-store and online
14,361
13,752
Other sales
524
737
Total sales excluding fuel
14,885
1
4,489
Fuel
3,473
3,990
Total revenue
18,358
18,479
Total Group revenue for the period at £18,358m was £121m down compared to the comparative period as a result of several factors.
Fuel was down £517m to £3,473m primarily driven by lower prices. Other sales were down £213m to £524m reflecting the full period
impact of the acquisition of McColl’s, as previously wholesale sales to McColl’s were classified as other sales prior to the Group’s
acquisition of the business. This was offset by store and online sales which were up £609m to £14,361m primarily due to the impact
of the acquisition of McColl’s.
For the period Group like-for-like (‘LFL’) sales excluding fuel was positive 1.8% and Group LFL sales including fuel was negative
1.4%.
Results for the period
2022/23
£m
2021/22
£m
Operating profit
89
18
Operating profit before exceptionals and supply chain disruption
1,2
307
29
0
Underlying EBITDA
970
911
1
Alternative performance measures are defined in the glossary.
2
Supply chain disruption costs for the period was £nil (2021/22: £44m).
17,536
17,598
13,483
1
18,479
18,358
4,500
2019/20 2020/21 2021 2021/22 2022/23
TOTAL GROUP REVENUE
17,983
2
£18,358m
1
39 weeks ended 31 October 2021, as reported
2
39 weeks ended 31 October 2021 prorated to 12 months for LFL
1
39 weeks ended 31 October 2021, as reported
2
Alternative performance measures are defined in the glossary
(0.8)%
8.6%
(1.0)%
(4.2)%
1.8%
2019/20 2020/21 2021 2021/22 2022/23
GROUP LIKE-FOR-LIKE ('LFL')
SALES (EXC. FUEL)
2
1.8%
1
7
Strategic report (continued)
Financial results and financial key performance indicators (continued)
Results for the period (continued)
The reported profit before tax was £51m for the period (2021/22: loss of £38m). Profit before exceptionals and tax was £236m for the
period (2021/22: £181m).
Underlying EBITDA was £970m for the period (2021/22: £911m). There have been no supply chain disruption and direct COVID
costs in the period (2021/22: £44m and £20m respectively).
Exceptional costs are fully analysed and explained in note 1.4 to the Group financial statements. Net exceptional charges for the
period totalled £185m (2021/22: charge of £219m). The most significant exceptional items in the period relate to impairments,
restructuring and store closure costs and credits related to legal cases, which are all consistently reported as exceptional.
Cash flow and borrowings
Cash generated from operations was an inflow of £966m for the period (2021/22: inflow of £735m).
Following the acquisition of the Group by Market Bidco Limited, the Group’s existing external borrowings were largely repaid during
the prior period, funded by an intercompany loan from the new parent company.
Borrowings
Current
£m
Non-current
£m
Total
£m
Cash
£m
Borrowings net of cash
£m
At 30 October 2022
(1,843)
(84)
(1,927)
287
(1,640)
At 29 October 2023
(882) (84) (966) 279 (687)
The Group’s external debt remaining at period end amounted to £84m of bonds (2021/22: £84m). The balance of the intercompany
loan was £882m (2021/22: £1,843m). In addition, the Group had £279m cash and cash equivalents at the end of the period (2021/22:
£287m).
Interest and lease payments in the period were £76m and £97m, respectively (2021/22: £78m and £78m). The loan from the parent
company is interest free. Please see note 6.4 for further details.
The wider Group is funded by external debt held in the immediate parent entity, Market Bidco Limited, and other wider Group entities.
Full details of these borrowings can be found in the Annual Reports and consolidated Financial Statements of the immediate and
ultimate parent entities. The covenants attached to the debt are linked to the consolidated financial performance of the wider Group
and the Company, along with its subsidiaries Safeway Limited, Safeway Stores Limited and Optimisation Investments Limited, are
guarantors to certain facilities held in other wider Group entities.
8
Strategic report (continued)
Financial results and financial key performance indicators (continued)
Capital expenditure
During the period, the Group invested £408m in tangible and intangible assets (2021/22: £509m). Capital investments made in the
period primarily relate to maintaining and updating our stores and sites, including investments on the opening of three new stores,
investments in technology and capital expenditure for the conversion of McColl’s stores to ‘Morrisons Daily’.
The Group continues to hold the majority of its properties as freeholds, with 81% of our supermarket sites being freehold (2021/22:
87%). The reduction is primarily due to the sale and leaseback of a number of the Group’s supermarket sites in the period.
Working capital
Net working capital was an inflow of £124m in the period (2021/22: £185m inflow) driven by a favourable movement on provisions
and inventories, partially offset by an adverse movement on creditors.
Note
2022/23
£m
2021/22
£m
Movement in inventory
5.6
72
(88)
Movement in debtors
5.6
(12
)
1
Movement in creditors
5.6
4
4
284
Movement in provision
s
5.6
20
(12)
Working capital
124
185
Financial risk management
The Group takes actions to mitigate risks arising from credit, foreign exchange and commodity price fluctuations. Details of the
Group’s policies and approach to managing these risks can be found in note 7 to the Group financial statements.
To manage liquidity, the Group manages its underlying operating performance, capital expenditure and working capital, with ongoing
support from its parent and in full consideration of the wider Group’s debt position. The Group has a centralised treasury function
which manages funding, liquidity and other financial risks on behalf of the wider Group, in line with policies set and monitored by the
Board.
1
Excludes acquisition of businesses and investments in joint ventures
2
39 weeks ended 31 October 2021, as reported
2
510
538
360
509
408
2019/20 2020/21 2021 2021/22 2022/23
CAPITAL EXPENDITURE
£408m
1
2
9
Strategic report (continued)
Financial results and financial key performance indicators (continued)
Pensions
The Group operates a number of defined benefit schemes which remain well-funded. The Morrisons and Safeway Schemes (the
‘CARE’ Schemes) are not open to new members and were closed to future accrual in July 2015. The Retirement Saver Plan (‘RSP’)
was closed to future accrual in September 2018. The McColl’s Schemes are not open to new members and are closed to future
accrual in July 2008.
During the period, the Safeway Scheme and the Morrisons Scheme both entered into new buy-in investment policies that provide
insurance for all the remaining members of the schemes in order to reduce the risk of investment, longevity, interest rate changes
and inflation for the members covered by the policy. The Trustees agreed to defer part of the insurance premiums owed to the
insurance companies and the outstanding amount is expected to be paid over the next two years. The deferred premium payments
have been deducted from the total asset value for the current period.
The net pension accounting surplus at the period end was £453m (2021/22: £691m).
The latest agreed full actuarial valuations were carried out in April 2022 for the Safeway Scheme and the Morrisons Scheme. These
valuations indicated that, on the agreed funding basis, the Safeway, Morrisons and RSP Schemes had surpluses of £528m, £214m
and £38m, respectively. The latest agreed full actuarial valuation was carried out in March 2022 for the McColl’s Schemes. The
valuation indicated that, on the agreed funding basis, there was a surplus of £5m for the TM Group Pension Scheme and a deficit of
£6m for the TM Pension Plan.
2022/23
£m
2021/22
£m
CARE Schemes
421
639
RSP
31
50
McColl’s Schemes
1
2
Net retirement benefit surplus
453
691
In addition the Group operates three defined contribution retirement benefit schemes, which means that the Group is not subject to
the same investment, interest rate, inflation or longevity risks as it is for the defined benefit schemes. The benefits that the colleagues
receive are dependent on the contributions paid, investment returns, and the form of benefit chosen at retirement.
Tax
We understand the importance of the tax contribution that we make and we take our responsibility towards the communities in which
we operate, and towards our colleagues, customers, investors and suppliers seriously. We have a tax management framework which
ensures that the needs of all of our stakeholders are considered. The Group is committed to paying all of its taxes in full and on time.
The Group has recognised a tax credit of £1m for the period based on a profit before tax of £51m (effective rate of (1.9)%). Adjusting
for exceptional items, the current period tax becomes a charge of £34m on a profit before exceptionals of £236m (pre-exceptional
normalised rate of 14.5%).
944
718
967
691
453
2019/20
2020/21
2021
2021/22
2022/23
NET RETIREMENT BENEFIT SURPLUS
£453m
1
1
39 weeks ended 31 October 2021, as reported
10
Strategic report (continued)
Financial results and financial key performance indicators (continued)
Incentive plans
Following the completion of the Clayton Dubilier & Rice, LLC (‘CD&R’) acquisition of the Group in 2022, certain employees of the
Group, including Directors and members of key management, were invited to invest in Preference and Ordinary shares of the ultimate
parent company, Market Topco Limited. The share purchases were transacted in September 2022, funded through a combination of
an ex-gratia bonus payment and a proportionate level of personal funds, plus additional voluntary personal investment. The
attributable in-year share-based payment charge on the Ordinary shares was £6m. Further details are in note 9 to the Group financial
statements.
Non-financial key performance indicators
We continue to deliver our ambition of a fair day’s pay for a fair day’s work, with base pay increasing to £10.92 per hour for our front
line colleagues in sites and stores during the period.
We take all available steps to minimise food waste in our stores, and so far have reduced our operational food waste in stores by
5,000 tonnes. By 2030 we aim to have cut it by 50% against a 2016 baseline.
£9.00
£9.20
£10.00
£10.20
£10.92
2019/20 2020/21 2021 2021/22 2022/23
INVESTMENT IN COLLEAGUE PAY
£10.92 Per hour
1
Food waste is calculated as a percentage of tonnes of waste versus tonnes of food products sold during the period
1
2,114,050,531
1,921,732,436
1,849,374,069
2018/19 2021/22 2022/23
TOTAL ENERGY USE (kWh)
1,849,374,069 kWh
16,141
15,253
14,023
13,665
14,366
14,092
11,133
2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23
FOOD WASTE
11,133 tonnes
0.39%
0.38%
0.36%
0.34%
0.37%
0.34%
0.34%
1
2
3
Period covered for the purpose of measuring the energy use is different from the financial period:
1
Period between 1 November 2018 and 31 October 2019
2
Period between 1 November 2021 and 31 October 2022
3
Period between 1 November 2022 and 31 October 2023
11
Strategic report (continued)
Customers
Listening hard and responding to our customers is as important as ever. Our team of colleagues serve more than ten million customers
every week across our 497 conveniently located supermarkets, our online channels and our convenience stores. During the period,
we opened three new supermarkets, in addition to completing 33 ‘Fresh Look’ refits.
Following our acquisition of the McColl’s business during the prior period, we have converted 440 McColl’s to Morrisons Daily as of
the end of this period. This takes the total to 704 stores trading as Morrisons Daily and we have 266 left to convert.
We listen hard to our customers, hearing from nearly 10,000 shoppers every week through our weekly satisfaction surveys with in-
store, online and convenience shoppers. We recognise the competitive market we operate in and use the feedback we receive to
continuously improve the shopping experience we deliver.
Customer behaviours
We have seen consumer confidence and optimism improve over the last year, but we know that the cost of living crisis remains a key
concern for customers. We see this reflected in continued savvy shopping behaviours.
Shoppers have made long term changes to the way they plan, shop for and use groceries. Customers tell us that they continue to
plan their meals and batch cook, reduce how much food they waste, and eat less products that they perceive as expensive, such as
meat and treating items.
We continue to see customers trade more into own brand products, especially ‘Economy Own Brand’ - which has continued to see
double digit growth. Many customers have had to cut back, resulting in smaller baskets across the majority of retailers. We have seen
basket sizes across the market stabilise more recently, after two years of consistent decline, in line with food inflation slowing. We
expect this stabilisation to continue if food inflation continues to slow.
Customer proposition
Value for money remains the most important factor to customers when deciding where to shop. Though we still face significant cost
price inflation across the market and in our supply chain, we continue to work hard to remain competitive for our customers.
Delivering value for customers is a priority for us. We have delivered five significant waves of price cut investments, having launched
our ‘Prices Locked Low’ campaign with over 1,500 items locked low at any one point in time. We have prioritised investment in the
products we know matter most to our customers, including milk, canned soup, bread, butter, easy peeler oranges and carrots. We
have also offered timely fuel promotions, and a strengthened loyalty proposition, to improve our overall value proposition.
After listening hard to our customers, we launched our new and improved ‘Morrisons More’ scheme in May 2023, which saw the
reintroduction of ‘More Points’ and ‘Fivers’. We have continued to grow our ‘More Card Exclusive’ prices on branded and own brand
items, as well as continuing to offer personal rewards to ‘More Card’ customers.
Item availability remains the number one driver of satisfaction for our customers, and we have continued to make improvements
throughout the period, which we see reflected in our customer satisfaction scores.
This period, we launched ‘More Reasons to Shop at Morrisons’, our new brand campaign and communications platform, following in-
depth research with customers. Within this, we have highlighted the distinctive and motivating reasons why our customers shop with
us, including highlighting quality, fresh food at great value.
Our own brand range covers many different customer needs across different budget and dietary requirements and we continue to
focus on improving this for customers. We have strengthened our ‘Savers’ brand, at a time when customers needed us to help them
make their money go further - introducing new, bolder packaging on ‘Savers’ products and adding over 50 new products into this
range. We are also the first retailer to introduce our entry brand into convenience stores. These ‘Savers’ products are available in
over 500 Morrisons Daily stores at the same price as our supermarkets. This has resonated well with customers and has resulted in
‘Savers’ currently being the fastest growing economy own-brand in the market.
We continually monitor trends and innovate, in order to remain relevant for customers, and have launched over 1,000 new products
to form part of everyday ranges, alongside products for specific seasonal events or occasions.
Health and nutrition remains important and we maintain our focus on improving the nutritional content of our own brand ranges, with
the removal of over 14.11 billion calories from our products.
12
Strategic report (continued)
Colleagues
A fair day’s pay for a fair day’s work
Despite a very challenging market we’ve continued to deliver on our promise of a fair day’s pay for a fair day’s work, for everyone. In
April 2023, we made an out of cycle c.£30m investment in pay for our retail and manufacturing colleagues, ensuring all colleagues,
irrespective of age, moved to a minimum of £10.42 per hour and ensuring differentials for all hourly roles were fully maintained.
Then, as part of our regular pay review cycle we made a further annualised investment of c.£70m in pay, including a small
reinvestment from changes to the sickness payment scheme. This meant the majority of our frontline colleagues received a further
50p per hour increase in their hourly pay to £10.92 per hour from October 2023.
Supporting our colleagues
Like everyone, our colleagues continued to feel the impact of the cost of living crisis throughout 2023. To help their money go further,
we continued to offer further support through a market leading 15% colleague discount when they shopped with us. We also ran
increased discount events at the times of year they needed it the most. We ran three 20% off events across the autumn and winter
of 2022 and ran another 20% off event during the Coronation. We also offered a colleague exclusive 25% off our ‘Back to School
Nutmeg’ range.
Our ‘My Perks’ website is an online platform where colleagues can access discounts and savings on everyday purchases including
retailers, insurers, days out and holidays. We continue to partner with Salary Finance to provide colleagues with access to financial
education and loans at very competitive rates compared with high street lenders. Since launching the benefit in January 2023 nearly
3,500 loans have been funded.
Listening and responding
Throughout the period, we’ve further invested in our listening and responding channels to ensure colleagues’ ideas, suggestions and
questions were heard and answered quickly.
As well as our established channels, at the end of 2021/22 we launched a ‘Stop, Start, Continue’ exercise as part of our ‘Be more
competitive’ programme of work. ‘Stop, Start, Continue’ has so far received over 10,000 ideas from colleagues about how we can
save money to reinvest or make improvements directly in the shopping trip for our customers. Ideas generated through this channel
have brought savings of £14m that we have reinvested in sharper retail prices and more colleague hours in our stores. To make sure
colleagues can access the updates and responses to their suggestions we launched a website they can access from any device,
whenever they want.
We have continued to hold monthly colleague forums, in every store and site, regionally, and two ‘National Your Say’ forums, where
we asked representatives from across the business to join a meeting hosted by the Group Operations Director, Group People &
Corporate Services Director and a panel of senior leaders to listen to their ideas and feedback.
‘Your Say’ and ‘Colleague Facebook’, two of our most popular listening channels, have also continued to give colleagues a platform
where they can share their ideas and have their voices heard. This period we’ve seen a number of great ideas put into practice,
including an online app that colleagues can use to order food from our cafes in advance of their shifts and breaks. The app is easy
to use, means colleagues don’t have to wait for their food to be made and allows them to access the colleague discount we provide
in our cafes or on ‘Food to go’ items for their breaks.
In May 2023, we also moved our ‘My Communities’ platform over to ‘Google Spaces’, creating an easier way for front line colleagues
to talk to, and give feedback, to central teams that work on the same departments as them e.g. meat or fish counters. Feedback so
far has been positive as the chat groups are easy to use and provide updates quickly from other stores, colleagues or central head
office.
The opportunity to succeed
We’re proud of our Market Street heritage, and remain the UK’s largest provider of craft apprentices in butchery, bakery and
fishmongery with a further 180 apprentices enrolling on these programmes in September 2023. We currently hold awards for ‘Best
Multiple Retailer Apprentice’ and ‘Best Abattoir Apprentice’ with the Institute of Meat.
We also have a strong focus on leadership development across all business areas, with over 500 colleagues on our internal pathway
programmes. During the period, we launched our new pathway to People Manager programme which is designed for current
managers in retail looking to transition to the People Manager role. Our pre pathways learning is also now fully digital which provides
us with visibility of those working towards joining future cohorts.
13
Strategic report (continued)
Colleagues (continued)
The opportunity to succeed (continued)
We also put a great deal of emphasis on nurturing young talent from a diverse range of backgrounds which is why we give graduates,
degree apprentices, finance apprentices and industrial placements an opportunity to grow and be part of Morrisons’ future. During
the period, we hired 100 colleagues in these areas with 22% from ethnic minorities, and 44% female. In June 2023, we were proud
to be awarded the best overall emerging talent strategy at the Institute of Student Employers award ceremony.
During summer 2023, we also provided an eight week internship for a group of undergraduates from ethnic minorities in our retail
stores and head office in Bradford for the second consecutive year. These undergraduates will be fast tracked to the final interview
stage if they choose to apply for our 2024 graduate schemes and are endorsed by their internship line manager.
We also continue to share our levy funds with other employers and have recently agreed to fund the very first cohort of Fisher
Apprentices in partnership with Supply Train and Devon College, as well as continuing our support of the NHS Ambulance
Apprenticeships.
Everyone is welcome and celebrated at Morrisons
Building an inclusive culture where everyone feels welcome and celebrated is important. That’s why in 2022/23 we’ve continued to
recognise and celebrate events that matter to our colleagues and customers.
We have continued to support local Pride events, and for the first time this year, we also celebrated Disability Pride. These events,
along with delivering autism experience training, help raise awareness for those living with autism. We’ve also offered dementia
training and continue to work to be a dementia friendly organisation.
We’ve partnered with Bradford Council’s Interfaith team to provide upskilling around religious events which involved visiting multiple
places of worship across Bradford. The visits cover the principles of each faith and their practices, and allows us to understand how
better to support our colleagues and customers of different faiths.
In partnership with ‘Show Racism the Red Card’, we have trained our leadership teams on unconscious bias and how to be an
effective ally, and we are also delighted, for the second year running, to have sponsored the ‘Yorkshire Asian Young Achievers
Awards’ in our local community of Bradford.
We have partnered with Smart Works, a charity giving women the confidence they need to secure employment and change the
trajectory of their lives. Working with Smart Works, we have trained and supported 12 colleagues to become active coaches. We
have also supported 514 women through a ‘Women in Morrisons’ mentoring programme.
Gender diversity information
Number of employees split by gender
2022/23 - Wm Morrison Supermarkets Limited and subsidiaries (“the Group”)
Men
Women
Prefer not to say
Total
Employees
45,879
58,039
16
103,934
Managers
567
249
-
816
Executive Leadership
37
26
-
63
Total
46,483
58,314
16
104,813
2021/22 - Wm Morrison Supermarkets Limited and subsidiaries (“the Group”)
1
Men
Women
Prefer not to say
Total
Employees
43,707
55,034
12
98,753
Managers
569
264
-
833
Executive Leadership
38
22
-
60
Total
44,314
55,320
12
99,646
1
The acquisition of McColl’s during the prior period and the CMA’s hold separate order in place until 27 October 2022 has presented reporting challenges for the data for
the 52 weeks ended 29 October 2022. Data presented above relate to the Group, excluding McColl’s.
14
Strategic report (continued)
Suppliers
Strong supplier relationships, based on mutual trust and respect are at the heart of what we do and continue to be a key priority in
our growth and development.
Listening hard to build collaborative relationships
Listening and engaging with our suppliers continues to be a priority in order to maintain strong relationships and unlock growth and
mutually beneficial opportunities for both parties. Throughout the period we communicated regularly with our suppliers, both in person
and virtually, with key business updates.
In the period, we partnered with the Institute of Grocery Distribution (‘IGD’) to deliver the first Morrisons & IGD supplier trade briefing
in October 2023.
During the day, the Morrisons’ leadership team outlined for our suppliers the business’ plans to be a broader, stronger, and more
accessible Morrisons to more than 1,300 delegates in person and virtually.
Our new ‘More Card’ gives suppliers another reason to work with Morrisons, providing data that suppliers will now be able to access
to truly understand the Morrisons customer better.
Our wholesale and convenience channels provide further growth opportunities for our suppliers. The expansion in this area has
largely been driven by the acquisition of the McColl’s estate, with store conversions yielding substantial sales uplifts.
Throughout the period, we engaged with our suppliers to gather feedback and gain information in regards to their experience and
their working relationship with Morrisons. Through listening to the results, we identified three areas of focus and improvement for the
coming year; supply chain systems and forecast accuracy, the cost-price change process, and the shopper marketing programme.
There has been continued pressure on our supply chain, with further inflation and availability challenges. We have worked with our
suppliers on the mutual challenge of keeping prices low for our customers, offering value and having consistent availability to service
all of our stores and customers. We have introduced a new cost-price change process for our suppliers to help govern any cost
change and to support fact-based decision-making from both parties.
Morrisons continues to invest in and develop its supply chain systems. Part of this has involved creating a single integrated supply
chain platform called ‘Morrisons Data Hub’ where our suppliers have access to the same data as the Morrisons business teams, that
is, one source of information in one place. We recognise forecast accuracy and collaborative planning are essential for our suppliers,
and we continue to work hard to keep improving.
The Morrisons Media Group (MMG) is now fully established, a partnership established to support both branded and own brand
suppliers to advertise their products.
‘Sustain’ programme
Over the period, we continued to evolve our ‘Sustain’ programme, streamlining the goals based on customer insight gained through
our own surveys and those performed by IGD and Impact. This resulted in the programme being built around three pillars – the
environment, our communities and British agriculture, and a total of seven headline goals across the three pillars. These cover
climate, waste, plastics, charity, human rights, healthy and sustainable diets and agriculture. A series of milestones exist supporting
these headline goals.
The two key elements, the aims of the programmes, remain in place;
• Delivering sustainable growth with a lower environmental and positive supply chain impact; and
• For us to play our full part in supporting the lives of our colleagues and the communities that we serve.
The programme is implemented through eight working groups, each led by a Director acting as a pillar sponsor. A further working
group is in place covering reporting, disclosure and communication. The eight work streams are:
• Climate change
• Food waste
• Sustainable sourcing
• British agriculture
• Charity and community
• Human rights
• Plastic and packaging
• Healthy and sustainable diets
15
Strategic report (continued)
Suppliers (continued)
Backing British farmers
We pride ourselves on being British food makers. As British farming’s biggest direct supermarket customer, we value the efforts of
farmers who work hard all year round. Our fresh meat, milk and eggs are 100% British. We have continued to support our farmers
through our ‘For Farmers’ range partnership with Arla, Lactalis and Ornua which has now donated over £23 million to farmers since
the initiative started in 2017.
In recognition of the climate impact challenge, we set an ambition to be net zero for emissions in our direct UK agriculture supply
chain by 2030. This is a very challenging timescale, but an important part of our Sustain agenda and how we can demonstrate
practical support to lead and work with the farmers who supply us. To support this aim, we were founding partners in setting up the
School of Sustainable Food and Farming at Harper Adams University to help research and train current and future farmers in net
zero and sustainable farming practices. We continue to work closely with over 75 project farms in our beef, lamb, pork, eggs and
produce supply chains to set a baseline carbon footprint and develop roadmaps to improve emissions and sequestration on farms.
Sales from our ‘Better for the Planet Egg’ continue to give customers the chance to buy eggs which have a footprint three times lower
than the standard egg from farms regenerating their landscape and looking after hen welfare.
We continue to sponsor the agricultural industry’s biggest online event, Farm24.
Working with suppliers to fulfil our responsibility to protect the environment
Reducing plastics
We continue to work with the sector, the industry and our suppliers to reduce primary plastic packaging, as well as increase
recyclability and recycled content of packaging. We continue to engage with suppliers of products and packaging to drive positive
change in the packaging space, and have retained our industry leading target of reducing primary plastic by 50% by 2025. By the
end of this period, reductions stood at 17.5% and over 10,000 tonnes.
During 2023, the ban on many single use plastics came into force, and the work done previously to remove over one billion items of
single use plastic came to the fore, making compliance a simple process.
Each of our commercial categories now have a specific plastic and packaging plan, with the duel aim of reducing plastic and achieving
commercial savings. Delivery of these plans will continue to be a key sustainability activity in the coming period.
In the period, we continued our progress on removing problematic plastics and were the first retailer to replace non-recyclable plastic
coffee cup lids with a recyclable paper alternative. The move will save over 14.4 tonnes, which is 4.5 million fewer pieces of single
use plastic going in the bin every year.
In addition we also moved all of our mushroom packaging from being wrapped in non-recyclable PVC plastic, to plastic which our
customers can bring back and recycle in store. At the same time we also removed almost 150 tonnes of plastic a year from the range,
which was more than 20% of the total.
We continued to focus on removing plastic packaging and in 2023 we achieved the milestone of 10,000 tonnes of primary own brand
plastic packaging per year removed versus our baseline year of 2017:
• We reduced plastic packaging on our dips, olives and antipasti range by 228 tonnes;
• We removed over 35 tonnes of non-recyclable plastic packaging from our blocks of cheese; and
• We saved 1.2 tonnes by having completely plastic free own brand Easter eggs in 2023.
Promoting the British fishing industry
We continue to offer the broadest range of fresh British fish of any major retailer, providing customers with a wide range of responsibly,
locally caught seafood that helps reduce pressure on key international stocks.
We continue to work with the wider industry in supporting ‘Fishery Improvement’ programmes through ‘Project UK’, improving
environmental standards for key fisheries like South West (crab, lobster and scallops), North Sea (crab, lemon sole and plaice),
Channel monkfish, and British nephrops.
16
Strategic report (continued)
Suppliers (continued)
Working with suppliers to fulfil our responsibility to protect the environment (continued)
Sustainable sourcing
As one of our eight pillars of activity in ‘Sustain’, sustainable sourcing continues to be an area of focus. Key targets in this area include
a commitment to zero deforestation by 2025, and 100% of the cotton used in Nutmeg to be Better Cotton Initiative (‘BCI’) certified by
2025. Fish sourcing standards, sustainable palm oil and responsible soy are also areas of focus, and good progress has been made
against all these target areas.
As signatories to the WRAP Courtauld 2030 commitment, we are committed to the goal of 50% of UK fresh food being sourced from
areas with sustainable water management. Morrisons has committed multi-year funding to support three projects in the UK working
towards sustainable catchment management in key sourcing regions.
The Groceries Supply Code of Practice (‘GSCOP’ or ‘the Groceries Code’)
GSCOP applies to designated grocery retailers in the UK, adding specific regulations into the trading relationships between retailers
and their suppliers. We take our responsibilities to suppliers seriously and have established ways of working which enable us to build
strong collaborative relationships. For more details, see morrisons-corporate.com/suppliers/supplier-information/. We listen hard to
our suppliers at all times and this has continued to be vital during the challenges of recent years. Working closely and collaboratively
with our suppliers we have sought to minimise the impact of inflationary pressures for both our suppliers and our customers.
During the period, we have continued to make significant investments into our commercial and supply chain systems and processes,
including our ordering and receiving, warehouse management and supplier database systems, to improve the ways in which
we communicate with our suppliers.
We actively engage with the relevant regulatory bodies, the Groceries Code Adjudicator (‘GCA’) and the CMA, to build best practice.
We meet with the GCA regularly and provide updates on our activity and details on specific areas of interest to the Adjudicator.
Effective compliance risk management is critical to delivering on our commitments to all of our stakeholders. We have well-established
governance structures to support GSCOP compliance. This includes a group consisting of senior Leadership team members from all
relevant functions. Routine updates were provided to the Group Executive Directors and to the Risk Committee, including
developments about the operation of the Groceries Code. We formally report details of activity and specific concerns raised with our
Code Compliance Officer (‘CCO’) to the GCA and to the CMA at the period end.
Our legal, compliance and audit teams work closely together to provide colleagues across the business with the support and guidance
needed to comply with the Code. We provide training, guidance and support to all colleagues in our trading teams, together with
bespoke training for relevant colleagues in our supply chain and finance teams through a range of formats. We review and update
all of our training activities and materials to take account of any new learnings, build in current real-life examples and to reflect
additional guidance from the GCA.
In the 2023 GSCOP supplier survey conducted by YouGov on behalf of the GCA, more Morrisons suppliers completed the survey
than those of any other retailer and 90% of suppliers rated Morrisons as complying with the Groceries Code ‘mostly’ or ‘consistently
well’.
GSCOP related enquiries are dealt with in accordance with the regulations. Any matter not resolved directly with a buyer is escalated
to the relevant Category Director and, if requested, to our CCO. During the previous period, we were contacted by suppliers to review
concerns, including in the following areas:
• Questions relating to resolution of goods receipt and invoice queries;
• Requesting review of supplier de-listing decisions; and
• Queries regarding the response to cost price increase requests.
At all stages, we try to resolve the concern by talking to the supplier openly and honestly and this approach is generally successful in
reaching a swift resolution. At the end of the period, there were three direct Groceries Code-related complaints which were yet to
be resolved. Contact details and further up-to-date information can be found at morrisons-corporate.com/suppliers/meet-our-buyers.
17
Strategic report (continued)
Protecting the environment and supporting communities
Our environment
We know our long-term success depends on the sustainable use of the planet’s resources.
Climate change
The food system is a significant contributor to climate change and we recognise the urgent need to develop innovative approaches
to reduce greenhouse gas (‘GHG’) emissions and transform food production and consumption. As a leading retailer, we know we
must play our part, which is why we have been taking action in our own operations and our wider value chain to reduce our carbon
footprint.
We are committed to targets and in our own operations (referred to as Scope 1 & 2) we plan to reach net zero GHG emissions by
2035 and to reduce our value chain emissions for own-brand products by 30% by 2030 (referred to as Scope 3). We are also a
signatory to the British Retail Consortium's Climate Change Roadmap. During the financial period, Morrisons has developed a plan
to deliver the 30% scope 3 reduction including category by category reduction requirements and new ways to engage and work with
our suppliers. Our targets are approved by SBTi and in 2024 we will review these in line with any market or sector changes. On
Scope 1 and 2 emissions, Morrisons is aligned with the highest ambition of the Paris Agreement - to limit temperature rises to 1.5°C
above pre-industrial levels.
We are further integrating climate change into our strategic planning, and for the first time this year we report under the UK Climate
related Financial Disclosures framework (UKCFD) (see pages 20 to 22).
Own operations (Scopes 1 & 2)
To enable growth, whilst considering our impact on the environment, we have continued to invest in energy efficient technology and
generate our own power. A summary of our energy initiatives are outlined below, which have helped us to reduce our carbon
emissions by 7% versus the previous year:
• we have set out a detailed roadmap to achieve our targets across our emissions, focusing on reducing baseline consumption
through colleague behaviour and remote control of assets, installing energy efficient technology and generating our own
power through on site generation where possible;
• we have improved performance across our engagement campaigns in sites and stores to encourage the right energy-saving
behaviours, such as keeping blinds on fridges closed at night;
• challenged all operational usage, and where possible reduced number of spotlights, turned off excess refrigeration and put
some units onto timers;
• upgraded additional sites to LED with improved lighting control and dimming capability;
• over a quarter of the estate now has new HVAC controls - this upgrade helps to reduce gas and electricity consumption
through improved remote heating and ventilation controls;
• we have retrofitted sites with doors on refrigeration;
• we have ensured our existing solar estate is well maintained and we continue to invest in retrofit installations on our sites
and stores - a total of 85 sites with solar panels generating just under 20GWh during the reporting period;
• our replacement of refrigeration systems has continued, moving away from HFC-based refrigerants towards CO2
alternatives wherever possible;
• we have four heat pumps live within our supermarket operation, removing the reliance of gas at these sites, and continue
to work through an expansion of this;
• across our Manufacturing sites we have invested in further resource to drive operational usage reduction. This has been
achieved through incentive schemes and minor engineering upgrades to improve control on key energy using assets;
• successfully trialled electric online delivery vans, with plans to expand our electric fleet tenfold in our next financial year; and
• integrated McColl’s into the group, ensuring efficient operations and identifying a programme of works to reduce energy
consumption via behavioural and capital programmes.
Group greenhouse gas emissions methodology
We have reported for the period from 1 November 2022 to 31 October 2023. Our reporting covers a 365-day period, which is one
day longer than the financial period. We have used the Government’s Environmental Reporting Guidelines (2019) to prepare the
report, and the emissions factors from the UK Government GHG Conversion Factors for Company Reporting.
In-line with Streamlined Energy and Carbon Reporting (‘SECR’) requirements we have also reported on the underlying energy use
used to calculate Group GHG emissions. The reporting boundary has been determined by operational control, which includes
emissions from the operation of the Group’s supermarkets, manufacturing, distribution sites and operation of its fleet where not
controlled by a third party.
18
Strategic report (continued)
Protecting the environment and supporting communities (continued)
Group greenhouse gas emissions methodology (continued)
Within the year we have reviewed operational carbon emissions across our logistics fleet, and restated where emissions have moved
to third party operational control. Despite our logistics fleet change in terms of carbon operation boundary, the team has continued
to undertake a number of activities designed to reduce the distance travelled and fuel consumed while delivering to our stores. This
includes careful scheduling to minimise mileage, longer semi-trailers, and using vehicle telematics systems to encourage drivers to
reduce harsh braking, acceleration and engine idling time.
Group GHG emissions for period ending 31 October 2023 (tC02e)
Emission source
Baseline
1 November 2018 –
31 October 2019
1 November 2021 –
31 October 2022
1 November 2022 –
31 October 2023
4
Total
– Scope 1
1
238,223
218,496 195,846
Total – Scope 2 – Electricity – Location Based
2
345,321
230,369
223,116
Total – Scope 1 and 2
583,543
448,865
418,962
Grey Fleet Travel (Scope 3)
3
1,361
2,656 829
Intensity Ratio: Tonnes of CO
2
e per £m turnover 33
24 23
Underlying Energy Use (kWh)
2,114,050,531
1,921,732,436
1,849,374,070
Electricity
1,328,703,193
1,184,419,432
1,108,158,593
Stationary combustion
759,134,884
661,670,396 665,040,172
Mobile combustion (haulage & company vehicles)
26,212,454
75,642,608
76,175,305
1
Scope 1 includes: Stationary combustion; emissions from the combustion of natural gas, fuel oil, diesel, LPG and gas oil; Refrigerant Gases, Other Gases and Mobile
Combustion within our operational control.
2
Data taken from most recent invoice data which includes subsequent adjustments for rebilling; re-baselining of site inclusions/exclusions; and adjustments to the way
data is apportioned across the year to ensure ongoing consistency.
3
Only partial data available for baseline year. As such the grey fleet consumption and associated emissions have been estimated on a pro-rata basis and unknown fuel
types are assumed to be electric vehicles. Additionally, fuel for rental vehicles has been excluded as immaterial consumption.
4
1st November 2022 to 31st October 2023 include McColl’s operational carbon emissions. Group mobile combustion (company car) data includes hybrid and electric
vehicles.
We transitioned our Haulage emissions from Scope 1 to Scope 3 within the financial year and we have also moved McColl’s portfolio into our overall footprint therefore
triggering a rebaseline as qualification for a significant change.
Gibraltar supermarket's emissions are included in the table above. We have excluded our Hong Kong office and Dutch Bos Brothers site, which together represent less
than 0.1% of the total Group footprint and are therefore deemed immaterial.
Group GHG emissions
Morrisons Scope 1 & Scope 2 GHG emissions and intensity ratio for the period 1
November 2022 to 31 October 2023 are subject to
independent assurance by Challenge Sustainability in accordance with the ISAE 3000 standard. The full assurance statement with
Challenge Sustainability’s scope of work, basis of conclusion and the Group’s basis of calculation will be published online on the
sustainability section of our website in 2024.
Water
We report on our water usage weekly across all operations, using our automated meter read (‘AMR’) data. We also use this data to
identify high consumptions to alert our manufacturing sites to early identification of leaks. We have also reviewed all manufacturing
sites for water-saving opportunities. In the financial year we used 4,929,354 litres of water across the Morrisons and McColl’s portfolio,
a 5% reduction versus previous financial year.
Value chain emissions (Scope 3)
In the period, we have undertaken a significant exercise to engage 400 of our own-brand suppliers in our new environmental
improvement programme. In partnership with ‘Manufacture 2030’, this measures the carbon footprint of our suppliers’ manufacturing
operations.
In addition to, and supporting our overall scope 3 reduction target, as British farming's biggest customer we have an ambition to work
towards net zero agriculture by 2030. This specifically covers products from the 2,700 UK farmers and growers sourced directly for
our own-brand products and relates to the whole lifecycle of farm produce, from germination to leaving the farm gate for a Morrisons
store.
19
Strategic report (continued)
Protecting the environment and supporting communities (continued)
Value chain emissions (Scope 3) (continued)
Farmers are being encouraged to reduce emissions through a range of methods, including breed and variety choice, increasing the
use of renewable energy, and removing or reducing high carbon feedstuffs like soya. Residual carbon emissions will be offset through
a range of measures including planting trees and seeding hedgerows within the farm footprint. Our first net zero product, ‘Planet
Friendly Eggs’, were launched in August 2022, a UK own-brand first and an important milestone in our farming environmental journey.
Footprint and target boundaries
Our scope 3 footprint disclosed in this report relates to our 2021 reporting year (1 January 2021 - 31 December 2021). During this
year our total reported footprint was 15,272,724 tonnes CO2e, representing a reduction of 13% compared to our 2019 baseline year
(2019: 17,571,495). Whilst we continue making efforts to reduce the impact of the products we sell in our stores, a significant portion
of this reduction can be attributed to lower fuel sales during the year.
Our scope 3 footprint relates to purchased goods and services, upstream transportation and distribution and use of sold products
(direct). These three categories account for around two-thirds of the measured emissions from Morrisons value chain and form the
boundary for our scope 3 science-based target, approved by the SBTi, to reduce emissions by 30% by 2030.
Within purchased goods and services our target boundary covers own-brand products. Use of sold products is included in the
boundary for direct emissions (primarily relating to fuel sales), however indirect emissions are excluded as we have significantly less
control over how our products are used by customers after sale. Upstream transportation and distribution relates to own-brand
emissions only. Other categories have been excluded on the basis of not being material to our footprint.
Our scope 3 footprint was prepared using as much direct primary data as possible. In 2021 this included on-farm measurement
covering farms that directly supply us, data from third party manufacturing facilities (via Manufacture 2030) and packaging emission
data. This was combined with life-cycle assessments, industry emission factors provided by The Carbon Trust, and environmentally
extended input and output data.
Table 1 - Scope 3 Footprint (2021 calendar year)
Category
Total Emissions (t CO2e) within SBTi target boundary
1a & 1b Purchased goods and services (product and non-product)
7,821,859
4: Upstream transportation and distribution
545,857
11a: Use of sold products (direct)
6,905,008
Totals (excluding indirect emissions) 15,272,724
20
Strategic report (continued)
Protecting the environment and supporting communities (continued)
Climate-related Financial Disclosures (‘CFD’)
Governance
The Board has the overall responsibility for both risk management and sustainability matters. This includes risks and opportunities
related to climate change. The Board discharges the responsibility of the Group sustainability strategy and governance to the Sustain
Sub-Committee, including the management of climate related issues. The Sustain Sub-Committee meets quarterly to monitor
progress, and ensures that strategy and governance are appropriate and that measures and targets are in place and reported on.
The Sustain Sub-Committee oversees progress against such targets quarterly. Responsibilities related to risk management are
discharged to the Risk Committee. For further information on our Risk Committee please see page 37.
Assessing Risk
The process for identifying climate change risks for our business is the same as other risks and uses our established risk management
framework. The framework incorporates both an approach to identify the Group’s principal risks and to identify operational risks. Our
environmental and sustainability risks are mapped across our functional risk registers, which detail the mitigating actions, as well as
the relevant responsible individuals monitoring the risk. These risks are discussed as part of our regular functional risk register
reviews. The risk registers are formally reviewed annually by the Board, which provides the assurance that risks are appropriately
monitored and managed through the risk management framework.
Specific climate-related risks are included in several functional risk registers and are referenced under existing Group principal risks,
as appropriate. Ownership and management of these risks is assigned according to where the risk arises together with the
responsibility for the implementation of the risk improvement or mitigation plans.
Risks and impacts
Our principal risks and opportunities related to climate change are detailed below. We have used the following definitions of time
periods, aligned with our risk management framework.
• Short term - 0 to 3 years. This is aligned to our business planning processes.
• Medium term - 3 to 10 years. Linked to our current sustain targets and captures both transition risks and opportunities.
• Long term - > 10 years. Linked to our long term net zero targets and captures the physical risks and opportunities.
Risks
1. Changing customer behaviour
Long term
- transition risk
Potential decreased
revenues due to demand for products and services reducing.
2. Heatwaves / Acute physical risks related to heat
Medium term
- physical risk
Temperature rises increasing refrigeration breakdowns across operational sites. Potential disruption to supply chai
n due
to heatwaves
.
3. Carbon pricing
Short term
- transition risk
Cost of climate change levy and increasing energy wholesale prices
.
4. Flooding
Medium
term- physical risk
Increased flooding events impacting operations of all sites.
Potential disruption to our supply chain due to flooding and crop failures.
Opportunities
1. Resource efficiency
Short term
Introducing new technologies to increase energy efficiency of buildings and services, resulting in reduced direct costs.
This
includes the rollout of shelf-edge technology, HVAC upgrades, heat pump trials and solar power installation.
21
Strategic report (continued)
Protecting the environment and supporting communities (continued)
Climate-related Financial Disclosures (‘CFD’) (continued)
Risks and impacts (continued)
Opportunities (continued)
2.
Development of new products and services
Short term
Potential for increased revenues and access to new markets as customer demand for products changes.
Our
‘Naturally Wonky’ range continues to reduce on-farm waste, unlocking surplus where there is customer demand to do so.
3.
Local products and services
Short term
Implementation of local products and solutions, adapting to customer awareness of sustainability in sourcing, s
easonality
and supporting local food systems.
Scenario analysis
This period we reviewed the impacts and potential impacts of our risks on the business jointly with the sustainability, finance and risk
teams. This acts as a useful test for our current business and supply chain operations and wider business strategy. As part of this
review, mitigation actions including programmes already underway were considered as part of the overall potential impacts on our
strategic and financial position under different scenarios. Qualitative analysis was undertaken using two emissions scenarios; a high
emissions 4°C scenario and a 1.5°C limiting global warming scenario. This allowed for us to fully understand the transitional related
risks in a 1.5°C transition, accounting for a rapid shift away from fossil fuels and greater policy changes towards a low carbon
economy. A high emission 4°C scenario allowed for us to fully understand the acute physical risks related to rapid global temperature
rises and weather related extremes. The results were used to inform how we manage identified risks and opportunities going forwards.
In our next period we plan to complete further qualitative scenario analysis against a number of our product categories for both
physical and transitional risks.
Qualitative analysis of our own operations
Under a high emissions scenario potential flooding impacts were considered on our stores, manufacturing facilities and logistics sites,
with several identified as potential high risk. Additionally the impacts of heatwaves on equipment and operational capacity of our sites
were reviewed. As an area of significant potential impact, mitigation actions are already underway to increase the resilience of our
infrastructure, implementing new refrigeration technology across our operations.
Under a low emission scenario considering transitional risks, increased operating costs within our own operations were reviewed,
particularly the impact of potential environmental compliance requirements such as a carbon tax. Increased capital expenditure to
address emissions activities within our own operations was also reviewed. A programme is in place to address several areas of high
emissions through the rollout of lower carbon technologies. For more information please see page 17 to 19.
Qualitative analysis of our own supply chain
Assessing impacts of potential acute physical impacts under a high emissions scenario, we reviewed potential financial impacts of
diminished or lost crop yields within our supply chain. Assuming additional costs are passed to the consumer, demand may decrease
and therefore reduce overall revenue.
Alternatively when considering transitional risks associated with a low emission scenario, the potential financial impact of new
technology requirements within our agricultural supply chain was assessed. Our ongoing work with directly supplying British farms
as part of our ‘Net Zero Agriculture’ programme mitigates a number of the potential impacts.
Targets
To manage our climate related risks, we have a comprehensive carbon reduction programme and strategy in place. Our carbon
reduction strategy includes a goal for net zero emissions in our own operations (scope 1 & 2) by 2035, and to reduce the emissions
in our up and downstream supply chains (scope 3) by 30% by 2030. These reduction targets have been approved by the SBTi. In
our current period our scope 1 and 2 emissions were reduced by 28% compared to the 2019.
We provide an annual update on our progress on climate-related goals, including energy consumption and scope 1 & 2 GHG
emissions in line with our SECR requirements (see page 17 to 18).
22
Strategic report (continued)
Protecting the environment and supporting communities (continued)
Climate-related Financial Disclosures (‘CFD’) (continued)
Targets (continued)
Our scope 3 emissions are the largest GHG impact from our business. This is predominantly emissions related to agriculture and
produce suppliers and downstream from the indirect emissions from fuel sales. In 2024 we plan to recalculate our baseline and scope
3 emissions to include emissions related to McColl’s operations and assess our FLAG (Forest, Land and Agriculture) impacts.
We provide additional comprehensive annual carbon information through our CDP disclosures. We additionally measure and report
progress annually against our food waste and plastic reduction targets, and sustainable sourcing certification coverage for
deforestation and sustainable fishing.
Our community
We are committed to responding to local needs and being a force for good in the communities we serve. Our Community Champions
are at the heart of this. They are a key link between our stores and the local community, working tirelessly to help good causes with
fundraising, product donations and practical support.
Each of our stores and sites has a dedicated Community Champion. Their role
is to support local good causes in their communities through fundraising, product donations and engagement.
Tackling food poverty
We know lots of people in our communities experience food poverty and rising household bills have made life tougher. As a food
maker and shopkeeper we have a responsibility and an opportunity to make a difference.
The school holidays can be particularly challenging for families in hardship and we want to help community partners ease some of
the pressure. Over the summer, we donated thousands of food products and essential items to local organisations and clubs
delivering support for low income families over the school holidays. Building on activity from previous years, Community Champions
partnered with local schools and charities, as well as local authority activities organised as part of the UK Government’s ‘Holiday
Activities and Food’ programme.
Our ‘Pick Up Pack’ scheme continues to resonate with customers, allowing them to contribute by adding a pre-packed donation bag
to their shopping. Working closely with local food banks and community groups, our Community Champions tailor these packs to
address specific needs. This initiative generated food donations equivalent to three million meals during the period and was supported
by in-store ‘food drives’ during the period to boost donations.
Morrisons Foundation
In the period, the Morrisons Foundation donated £1.5m in grants (over £2m including match funding) to registered charities across
England, Scotland and Wales. Since its launch, the Foundation has donated over £40 million in grants and match funding to support
over 3,300 charities which are making a positive difference in local communities.
During the period, the Morrisons Foundation placed particular focus on grant funding to organisations and projects delivering in the
following areas: tackling poverty and social exclusion; enhancing community spaces and facilities; and improving health and
wellbeing. The Morrisons Foundation Christmas Appeal doubled online customer donations which resulted in £137,000 being donated
to the Trussell Trust, a charity which operates a network of food banks across the UK.
Supporting charities
Our colleagues, customers and suppliers raised £4m in the period for our national charity partner, Together for Short Lives. Our
partnership is raising vital funds for children’s hospices across the country and helping families caring for a seriously ill child, treasure
every moment they have together. Our partnership total now stands at over £6.6m and we are on course to achieve our £10m target
by the end of our 2023/24 financial period.
We are proud to support a number of other important national charities. As a strategic partner of the Royal British Legion and Poppy
Scotland we are always pleased to welcome their volunteers into our stores. Poppy Appeal collections in our stores and online raised
over £1.9m during the period of Remembrance in 2022. We also helped to raise £500,000 for Marie Curie’s Great Daffodil Appeal in
March 2023 and were the headline partner for the NHS Big Tea in July 2023, raising £120,000 for NHS Charities Together. In addition,
we supported the Alzheimer’s Society ‘Forget Me Not Appeal’ raising vital funds (£150,000) and standing in solidarity with people
living with dementia. In addition to the amount donated through The Morrisons Foundation Christmas Appeal, over £250,000 has
been donated to The Trussell Trust through customer donations in store and online throughout the period. During Pride month in
June 2023 £35,000 was donated through our ‘Every Pack Gives Back’ event in store for Albert Kennedy Trust, who support LGBTQ+
young people aged 16-25 in the UK who are facing or experiencing homelessness or living in a hostile environment.
Our charitable activity is not limited to British shores. Morrisons is an emergency response partner for the Disasters Emergency
Committee (‘DEC’). We support DEC appeals (which are launched when large-scale disasters hit countries without the capacity to
23
Strategic report (continued)
Our community (continued)
Supporting charities (continued)
respond) with collections and fundraising activity. During the period, we supported the Turkey-Syria Earthquake Appeal following the
devastating earthquakes which killed tens of thousands of people in February 2023 (£215,000).
As an extension of our work with NHS Charities Together in August 2023, we launched a first of its kind partnership with NHS England
to display breast and testicular cancer awareness messaging in our Nutmeg bras and boxers and we continue to work with Bowel
Cancer UK, displaying bowel cancer symptoms on our own brand toilet paper packaging.
Managing our risks
Successful delivery of our priorities depends on our ability to make sound, risk-informed decisions. Managing risk and uncertainty is
an integral part of the Board’s strategic thinking.
Risk management approach
We respond to changes in our industry and the wider political-economic climate by maintaining a business-wide understanding of our
key risks and how to manage them. This helps us deliver our ambitions for all of our stakeholders and means that we are in a better
position to achieve our priorities, respond to emerging risks and to create and take advantage of new opportunities.
The Risk Management process
Our established risk management framework has been built to identify, evaluate, mitigate and monitor those risks which threaten our
ability to deliver on our seven priorities. The framework incorporates both a top-down approach to identify the Group’s principal risks
and a bottom-up approach to identify operational risks.
Risk registers for each business function sit at the heart of this process. These registers detail the main functional risks and are used
to assess the gross level of risk to the business (based on their potential likelihood and impact), the extent of any mitigating controls,
and the resultant net level of risk. They also detail any further plans to mitigate or reduce risks and the associated target level of risk.
The impact assessment of a risk includes considering its potential reputational, financial and operational effects. We assign targets
to each risk based on the risk appetite framework established and agreed with the Board.
The risk registers are owned and managed by operational management, with the head of each function certifying annually that these
have been reviewed and that action plans are in place where required. The risk registers are also formally reviewed and challenged
each year by the Risk Sub-Committee.
The Risk Sub-Committee reviews coverage across the Group’s principal risks, the key controls already in place and any risk mitigation
plans. Their review considers the completeness of risks captured in the detailed functional risk registers, strategic risks, external
factors and any emerging risks. The Risk Committee and the Board review and approve the principal risks annually.
The Group’s principal risks are monitored every month by the Risk Committee using key risk indicator reporting. In addition, the Risk
Committee supports the Group in managing its key risks through a rolling agenda of deep dive reviews of key or emerging risk areas
and approval of key policies.
The Risk and Internal Audit team facilitates the preparation of both the functional and Group risk registers. It also supports the Board
in reviewing the effectiveness of the Group’s risk management and systems of internal control. Where potential weaknesses are
identified, the Risk and Internal Audit team work with the business to agree robust mitigating actions.
The Board maintains this robust risk management framework by approving the risk management process and reviewing the Group’s
principal risks, risk appetite and key risk indicator reporting on a regular basis.
Principal and Emerging Risks
The Directors have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would
threaten its business model, the achievement of our priorities, solvency or liquidity.
Changes to Principal Risks
With the integration of the convenience business progressing well, the Board has opted to broaden the previous Group Principal risk
of ‘McColl’s Integration’ to one on ‘Business Strategy and Change’. This recognises the range of strategic change programmes being
undertaken to build a business that is broader, stronger, popular and more accessible.
The Board has also considered the net risk ratings for each of the Group Principal risks and, although these will remain under review,
believes that these remain appropriate at this time and no changes are required.
24
Strategic report (continued)
Managing our risks (continued)
Business Strategy and Change
Last year the Board recognised the new risks that could have arisen during the integration of the convenience business through the
creation of a Group principal risk of McColl’s Integration. With this work progressing well, the Board has opted to broaden this Group
principal risk to one on Business Strategy and Change, recognising the range of strategic change programmes currently being
undertaken across the business. These programmes, which include the segregation and sale of our petrol forecourts, major changes
to our supply chain systems, improvements to our loyalty programme, as well as the moves to outsource our property maintenance
and central customer service teams, aim to reduce our costs, improve our availability and improve our customer offer. Collectively
these will help to improve the business, but will require careful coordination and oversight to ensure they deliver the required benefits
while not impacting existing operations or our customers.
Emerging Risks
Our Risk Management process incorporates the formal identification and management of emerging risks and these are reported to
the Risk Committee and the Board alongside our known principal risks.
We employ the following strategies to ensure that our business is adequately prepared for the potential threats or opportunities these
present, and that we have a clear reporting route to the Board when necessary:
• Strategic and operational horizon scanning across the business;
• Working with our key strategic partners to share emerging consumer trends; and
• Using third party experts to assist with the consideration of emerging risks and legislation.
We continue to review and assess the potential impacts of evolving risks including those associated with interest rates and cost of
living pressures, climate change and extreme weather events, labour market changes, innovations in technology and new regulation.
The Risk Management Framework
Top down
Board of Directors
Maintains sound risk management and control systems, assesses principal risks
Risk Committee
Assesses principal, operational and emerging risks and undertakes regular monitoring of
risk
Bottom up
Risk and Internal Audit
Coordinates risk management activity through review of risk registers, agreement of risk
mitigation plans and preparation of risk reporting
Operational Management
Reviews operational risks, operates controls and implements risk mitigation plans
The following keys have been used in the Principal Risks table on pages 25 to 29.
Key
Increase in net risk
No change in net risk
Decrease in net risk
Link to seven priorities
1
Be more competitive
4
Delivery great availability,
value and quality for
customers
7
Give Britain more
reasons to shop at
Morrisons
2
Tough on costs and
improve free cash flow
5
Delivery great service
through our Market Street
offer
#
Links to all seven
priorities
3
Simplify and remove
wasted effort
6
Improve brand recognition
and accessibility
25
Strategic report (continued)
Managing our risks (continued)
Principal Risks
Risk Description Mitigation
Business Interruption
#
There is a risk that a major incident
could cause significant disruption to
business operations.
•
We have recovery plans in place covering our stores,
depots, online operation, manufacturing sites and offices;
•
Business continuity resilience and disaster recovery
exercises are undertaken to test processes and
management’s ability to respond effectively;
• A Crisis Management Group is in place to oversee these
plans and to manage and respond to any major incidents;
•
We conduct supplier risk assessments and have
contingency plans in place, where possible, to manage the
risk of loss of supply;
•
There has been continued investment in cloud
technologies to provide further resilience to our technology;
and
•
We work alongside our strategic third party partners
ensuring our combined continuity plans are robust and
aligned.
Business Strategy and
Change
#
Without appropriate plans and
governance to coordinate the business’
strategic change programmes, there is a
risk that they fail to deliver the desired
benefits or adversely impact existing
operations and/or customers.
• All major investment projects are subject to formal
business case reviews, including expected financial
returns, and are approved by the Board;
• All major change programmes are overseen by formal
Steering Groups which include cross functional
representation as appropriate to ensure changes are
considered, coordinated and well managed;
• Regular reporting to and oversight from the Board is also
in place for all major change programmes; and
• We have a tried and tested methodology for delivering
changes to the business.
Competitiveness
#
The Grocery Sector continues to be
highly competitive with increased price
pressure caused by inflation.
If we do not engage with our suppliers or
effectively manage our prices, trade or
promotional plans there is a risk this will
adversely impact like-for-like sales and
financial performance.
• Our pricing, trade plan and promotional and marketing
campaigns are actively managed using customer insight so
we invest in what matters most to our customers;
• We closely monitor inflationary movements and make
timely decisions with our retail pricing to remain as
competitive as possible;
• Long-term agreements
are established with suppliers,
ensuring a competitive customer offer and to help maintain
security of supply;
• We continue to actively engage our key suppliers, and to
work closely with British growers and farmers; and
• We continually review our range, category plans, product
quality and respond to customer feedback, including
investing heavily in our ‘Savers’ lines and making these
available in our convenience stores.
26
Strategic report (continued)
Managing our risks (continued)
Principal Risks (continued)
Risk Description Mitigation
Customer
#
There is a risk that we do not meet the
needs and expectations of our
customers in respect of price, range,
quality and service across all our sales
channels.
•
We monitor customer satisfaction to understand what is
most important to their shopping trip;
• We actively respond to customer complaints and aim to
continually improve the customer experience;
• We closely monitor and carefully manage the price,
quality and availability of the key products;
•
We have continued to invest in our loyalty scheme
through further improvements to ‘Morrisons More’;
•
We have made our products accessible to more
customers through the ongoing integration of the
McColl’s business, expansion of online and continued
growth with our wholesale partners; and
• Our network of Community Champions actively engage
local communities and support local charities.
Environment and
Sustainability
6,7
There is a risk that we fail to reduce the
environmental impact of the business,
or to meet the expectations of our
customers, colleagues and wider
stakeholders.
•
Developments and progress in our sustainability agenda
are reported to the Sustain Executive Sub-Committee
and to the Board;
• The Sustain Executive Sub-Committee meets regularly
during the year and performs an oversight, monitoring
and advisory role ensuring a focus on key areas which
deliver sustainable growth with a lower environmental
impact;
• Each Sustain workstream has a senior responsible
business owner providing updates to the Sustain Group,
chaired by the Group Corporate Services Director. This
group reports to the Sustain Sub-Committee;
•
We have a clear strategy to reduce our emissions
footprint and expect to achieve net zero emissions by
2035 (scope 1 & 2);
• This includes our ambition to be net zero in our UK
agriculture supply chain by 2030, working with the
farmers who directly supply us to reduce emissions from
livestock and produce, increase carbon sequestration
and improve the use of renewable energy on farms; and
• We have pledged to reduce the plastic we use in our
products by 50%, with 100% of plastic packaging used
on our products to be recyclable, reusable or
compostable by 2025.
27
Strategic report (continued)
Managing our risks (continued)
Principal Risks (continued)
Risk Description Mitigation
Financial
and Treasury
1,2,3
The key financial risks we may be
exposed to include the availability and
cost of funding, cash flow and liquidity
management, fluctuations in interest
rates, commodity, energy costs and
foreign currency rates.
Some suppliers benefit from access to
supply
chain finance facilities. The
withdrawal of these facilities would
lead to some terms being reviewed.
We also have pension funding
commitments that require active
management and monitoring.
•
Treasury operations are managed and monitored in line
with the approved Treasury Policy with reporting to the
Board. The Liquidity policy includes an assumption that
certain supply chain finance facilities are not available for
the benefit of suppliers;
•
The Group’s Treasury function is responsible for the
forward planning and management of funding, interest
rates, foreign currency, exchange rates, energy costs and
certain commodity price risks including hedging risks;
• We manage energy commodity price risks in line with the
Group hedging policy and continuously look to reduce
consumption across the business through additional
energy saving initiatives;
• Governance forums and processes are in place to review
and manage the Group’s cash position and maximise
working capital;
• Credit risk is actively monitored across our wholesale
customers to limit exposure while maintaining trade; and
• A long-
term funding framework and pension strategy
exists with ongoing communication and engagement with
the Pension Trustees.
Food Safety, Product
Integrity and Ethical
Sourcing
4,5,6,7
There is a risk that the products we sell
are unsafe, or not of the integrity or
ethical standards that our customers
expect.
It is also important to us to support
sustainable, ethical and resilient
supply chains.
•
Monitoring processes are in place to manage food safety
and product integrity throughout the Group and supply
chain. Horizon scanning is also in place to anticipate
emerging issues;
•
Regular assessments of our suppliers and our own
manufacturing and store production facilities are
undertaken to ensure adherence to standards;
• Our vertical integration model gives us control over the
integrity of a significant proportion of our fresh food;
• The process is supported by external accreditation and
internal training programmes;
• Systems and processes are in place to ensure ongoing
compliance with allergen labelling under Natasha’s Law;
• Our Ethical Trading Policy and Code establishes key
requirements for all suppliers. We actively monitor
compliance through an extensive third party audit
programme and provide support for suppliers if issues are
identified;
• We work closely with our supply chain to understand food
provenance, sustainable and ethical practices including
animal welfare; and
• Our measures to tackle Modern Slavery are reported
annually in our Modern Slavery Act statement.
28
Strategic report (continued)
Managing our risks (continued)
Principal Risks (continued)
Risk Description Mitigation
Health
and Safety
3,5,7
There is a risk of injury or harm to
customers or colleagues if we do not
have the right controls, policies and
procedures in place to keep people
safe and healthy across all of our
stores and sites.
•
We have clear policies and procedures detailing the
controls required to manage health and safety risks
across the business;
• An ongoing training programme is in place for front line
colleagues and management supported by an ongoing
programme of health and safety audits across the Group;
• Our dedicated health and safety team ensures our risks
are managed effectively; and
• Management regularly monitors health and safety
performance and compliance with electronic accident
reporting across all stores and sites to help identify and
respond to any trends.
Information Security
#
A cyber-attack or security breach could
lead to a loss of customer, colleague or
Group confidential data, business
disruption, reputational damage and
significant fines.
•
Information Security policies, procedures and controls
are in place, including encryption, network security,
systems access and data protection;
• This is supported by ongoing monitoring, reporting and
rectification of vulnerabilities;
• The Information Security Steering group oversee a rolling
programme of work to review and enhance our
information security controls, ensuring these remain
commensurate with our level of risk and the evolving
cyber landscape; and
• The General Data Protecti
on Regulation (‘GDPR’)
Working group has responsibility for overseeing data
management practices, policies, regulatory awareness
and training associated with customer and colleague
data. This includes change management activities and a
review of third parties managing data on our behalf.
People
#
There is a risk that if we fail to attract,
retain or motivate talented colleagues,
we will not provide the quality of service
that our customers expect.
• We have fair employment policies and competitive
remuneration and benefits packages;
• A Group-wide reward framework is in place and roles are
evaluated against an external framework, driving
stronger consistency of rewards;
• Our training and development programmes are designed
to give colleagues the skills they need to do their job and
support their career aspirations;
•
Line managers conduct regular talent reviews and
processes are in place to identify and actively manage
talent;
• We give colleagues visibility and flexibility of their hours
and rotas through the use of technology and modernised
working patterns;
• We continue to monitor the availability of labour across
the Group and we have enacted specific people plans
across our manufacturing and logistics sites;
• Colleague engagement surveys, listening sessions and
networking forums are used to understand and respond
to our colleagues; and
• We take pride in creating an inclusive work environment
where everyone feels welcome and we celebrate our
differences.
29
Strategic report (continued)
Managing our risks (continued)
Principal Risks (continued)
Risk
Description
Mitigation
Regulation
#
The Group operates in an environment
governed by numerous regulations
including GSCOP, GDPR, competition,
employment and regulations over the
Group’s products.
The Board takes its responsibilities very
seriously and recognises that a breach
of regulations can lead to reputational
damage and financial penalties.
•
We have training, policies and legal guidance in place to
support compliance with all applicable regulations;
•
The Group monitors for potential regulatory and
legislative changes and the impact on contractual
arrangements;
• We actively engage with government and regulatory
bodies on policy changes which could impact our
colleagues and customers;
• We have a GSCOP compliance framework in place to
monitor compliance with key regulations so that action
can be taken as necessary; and
• We have an independent whistleblowin
g line for
colleagues and suppliers to provide feedback to
the Group so that action can be taken as necessary.
Climate Change Risk Management
The process for identifying climate change risks for our business is the same as other risks and uses our established risk management
framework. The framework incorporates both a top-down approach to identify the Group’s principal risks and a bottom-up approach
to identify operational risks.
Our Environmental and Sustainability risks are mapped across all our functional risk registers, which detail the mitigations or controls
in place, as well as the relevant responsible individuals monitoring the risk. Specific climate-related risks are included in multiple
functional risk registers and are also included within several other functional risks, as appropriate. Ownership and management of
these risks is assigned according to where the risk arises and the responsibility for implementing risk improvement plans.
Environmental and Sustainability risks are discussed as part of our regular functional risk register reviews and are considered when
reviewing our Group principal risks.
30
Strategic report (continued)
Section 172(1)
The following section serves as our Section 172(1) statement. Section 172(1) requires that Directors act in the way they consider, in
good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole. In doing so the
Directors should have regard (amongst other matters) to: the likely consequences of any decision in the long-term; the interests of
employees; the need to foster relationships with suppliers, customers and others; the impact of the Group’s operations on
the community and the environment; the maintaining of a reputation for high standards of business conduct; and the need to act fairly
as between members of the Company.
Morrisons has identified five main stakeholder groups: customers, colleagues, suppliers, communities and the environment, and debt
holders. The Directors also regularly consider the needs of other stakeholders such as Government, regulatory bodies, charities and
non-governmental organisations (‘NGOs’) when making decisions.
Our business model and operations are focused on delivering long-term benefits for all of our stakeholders while maintaining a high
standard of business conduct. The Directors recognise the need for genuine, well-informed and dynamic engagement with our
stakeholders and believe that the Group has the right representatives formally and informally engaging with a wide and diverse
selection of stakeholders. The Group spends a lot of time listening to and understanding the views of our stakeholders which form
an integral part of any decision making.
Customers
Why we engage
Customers are right at the heart of our business model. By striving to continually improve our offer through competitive pricing, quality
and the overall shopping trip, which makes us accessible to more people, this supports the ongoing success of the business.
Stakeholder priorities
In a year of continued pressure on consumer spending, as a result of the cost of living crisis, our customers are looking for good
quality products at great value prices, available when they want them. They enjoy the wide range of brands on offer, which cater for
all budgets, tastes and dietary requirements. It is important to them that our range is sustainably sourced and that we support local
suppliers and communities. Customers enjoy the distinctive offer of Market Street, the overall experience of our stores and the
accessibility of our online and convenience channels.
How we engage
● Our Insight team receives over 12,000 pieces of feedback every day through a variety of channels, including quantitative
surveys and qualitative focus groups, as well as communication through our contact centre.
• Our store management teams are committed to listening to our customers on a daily basis and receive store specific
customer feedback from our support office or through a customer survey opportunity that is provided to Morrisons customers
after their shopping trip.
• The Directors and senior management visit stores across the country on a regular basis and use the opportunity to speak
both with customers and colleagues on a personal level.
• In the period, there has also been a programme of accompanied shopping trips. Members of senior management accompany
customers on shopping trips to a variety of our store formats to understand shopping habits and preferences.
Outcomes
The Directors considered customers when making the following decisions:
• Launching our ‘More Card’ loyalty scheme in May 2023, giving more value to customers through earning points and gaining
access to exclusive prices and market leading discounts on favourite products. Following feedback, the decision was made
to bring back the popular Morrisons 'Fivers', which can be spent straight away or saved to be used when customers need
them most.
• Continuing to adapt ranges to provide healthier and more environmentally conscious options for customers. In this period
we have removed 14.11 billion calories, 398 tonnes of sugar and 59 tonnes of salt through recipe changes and improvements
across our own-brand ranges.
• Investing in the reduction in price of over 1,500 products through our 'Prices Locked Low' proposition. By communicating in
this way, customers are reassured that we are committed to these lower prices for the longer term.
• Converting 440 McColl's stores to Morrisons Daily in the period, to expand the accessibility of the brand into more local
areas. This takes the total to 704 Morrisons Daily stores.
• Introducing our ‘Savers’ range into over 500 Morrisons Daily stores at the same price as our supermarkets. A number of our
franchise partners have also agreed to stock our ‘Savers’ range to help customers through the cost of living crisis.
• Offering further great value to ‘More Card’ members through various collector schemes, including Christmas, summer and
autumn periods.
31
Strategic report (continued)
Section 172(1) (continued)
Colleagues
Why we engage
Our colleagues are united by their food maker and shopkeeper credentials. Colleagues are key to our business and it is essential
that we have an engaged workforce to deliver for our customers.
Stakeholder priorities
Our colleagues are looking to be trusted to do a fair day's work for a fair day's pay. They want to be supported with their health, safety
and wellbeing. It is important that our colleagues have the right tools and training available to do their job. They want Morrisons to be
an inclusive place to work, where success is celebrated.
How we engage
• There are two ‘National Your Say’ forum meetings held each period. This gives our Directors the opportunity to hear views
and answer questions from our colleagues first hand.
• Colleagues receive weekly business updates from our senior management team through 'Team Talk' live streams, with the
opportunity to ask questions.
• All colleagues are invited to join the Morrisons ‘colleague Facebook’ group, where they can provide direct feedback or
updates on any subject.
• Every colleague was given the chance to share their views in a 'Stop, Start, Continue' initiative. Over 10,000 responses
were shared and each one has been reviewed and considered in order to support our 'simplify and speed up' culture.
Outcomes
The Directors considered colleagues when making the following decisions:
● Allowing colleagues to take home surplus food, free of charge that could have otherwise gone to waste.
● Offering temporary increases to the colleague discount rate around paydays in the run up to the Christmas period, to support
our colleagues through an expensive time of year. These discounts were communicated well in advance, so colleagues
could factor this into their shopping plans.
● Increasing the minimum hourly pay for our store and manufacturing colleagues twice during the period, firstly to £10.42 per
hour in April 2023 and then further to £10.92 in October 2023.
Suppliers
Why we engage
Suppliers are fundamental to the success of the Group as they provide us with the variety and quality of goods and services required
to fulfil customers’ needs.
Stakeholder priorities
Suppliers want a relationship with mutual trust and respect. They want to be able to grow with us in a mutually beneficial
partnership. We are a route to market for many new suppliers and products, and suppliers like the brand presence that we can offer,
especially through a wide variety of different channels.
How we engage
● All commercial business team colleagues are encouraged to work collaboratively with their suppliers, spending time together
in stores, in the central office and in the factories where products are made.
● The commercial team updates all suppliers on a quarterly basis through business team updates. These communications
provide suppliers with an opportunity to understand our business in more depth, including updates on team priorities and
business changes.
● In October 2023, we welcomed 1,300 suppliers and colleagues to our ‘Annual Supplier Conference’. This gave us the
opportunity to engage with our suppliers and set out the Group's strategy for the year ahead. This included breakout sessions
for teams to speak face to face with their suppliers to gather feedback and answer any questions.
● Suppliers are actively encouraged to take part in independent annual surveys, such as the ‘Advantage Group’ survey, to
enable the Group to gain valuable insight into how they feel about Morrisons, and how we benchmark against other retailers.
● The Company's supplier portal offers two way communication and is used both by our commercial business teams and
suppliers.
32
Strategic report (continued)
Section 172(1) (continued)
Suppliers (continued)
Outcomes
The Directors considered suppliers when making the following decisions:
● Continuing to develop and strengthen commercial policies and processes based on feedback from the Groceries Code
Adjudicator.
● Implementing a new cost price change process, which gives suppliers better visibility on the progress of any cost price
changes that they have submitted in the supplier portal.
● Further developing the supply chain system, including a number of technology upgrades which offer improvements to
forecast accuracy, which is extremely important to our suppliers.
Communities and the Environment
Why we engage
It is a key part of our strategy to be locally integrated in the communities that we serve. Communities are our customers and our
neighbours, therefore the Group needs to have respect and generate a positive impact on them. It is important that Morrisons is a
responsible retailer to minimise our impact on the wider environment.
Stakeholder priorities
Communities expect Morrisons to be a socially responsible business and to care about the impact on the surrounding area and
environment in which we operate.
How we engage
● Each of our stores and sites has a dedicated Community Champion. Their role is to support local good causes in their
communities through fundraising, product donations and engagement.
● Our Morrisons Foundation awards grants to registered charities making a positive difference in communities throughout the
country.
● Our annual ‘Sustainability’ survey asks over 3,500 customers every year to rate the key issues that they think a responsible
retailer should consider. Protecting the environment through practical steps including reducing plastic packaging, reducing
food waste and protecting natural habitats, woodlands and forests, remain high on our customer priority list. Whilst
sustainability remains important to customers, for the first time this year they also highlighted the impact of the cost of living
through this survey.
● We are signatories on the WRAP Plastic pact; a series of four targets for the reduction and sustainability of packaging
through reducing plastic use, increasing recycled content and removing problematic plastics.
● We are active members of key industry working groups, including our support as a signatory to the ‘Courtauld Commitment’
for 2030. This is a voluntary agreement that enables collaborative action across the entire UK food chain to deliver farm-to-
fork reductions in food waste, GHG emissions and water stress that will help the UK food and drink sector achieve global
environmental goals.
● Our ‘Net Zero’ agriculture programme has also seen us deliver meaningful carbon reductions for participating farms,
alongside a number of government and self-funded research projects to optimise efficiencies on farm.
● We have started the process of mapping key supply chains to the WWF risk filter for biodiversity and water resources.
Outcomes
The Directors considered communities and/or the environment when making the following decisions:
● Providing over 350,000 hours for dedicated Community Champions and a donation budget of over £500,000.
● Actively tackling food poverty in our communities by donating £100,000 to local community organisations tackling holiday
hunger over the summer and raising over £150,000 for The Trussell Trust's Emergency Appeal.
● Donating over £2m to registered charities through the Morrisons Foundation.
● Maintaining our commitment to ‘Bradford UK City of Culture 2025’ by becoming a major partner.
● Signed up to the 'WRAP net zero collaborative retailers action programme', which accelerates the action in the UK retail
supply chain to achieve a 50% reduction in carbon by 2030.
● Continuing to drive and review the Group's ‘Sustain’ programme to ensure continued progress towards achieving
Environmental, Social and Governance (‘ESG’) targets, and approving additional activities to reduce water use in our own-
brand supply chains in areas of water scarcity, and enhance biodiversity.
33
Strategic report (continued)
Section 172(1) (continued)
Debt holders
Why we engage
It is important to engage regularly with debt holders, including bond holders, term loan counterparties, and other financial institutions,
to ensure that they remain comfortable with their exposure to the Group and to build and maintain long-term relationships. The
majority of the wider Group’s debt is held within the holding companies beneath the Group’s ultimate parent, Market Topco Limited.
Other similar stakeholders to debt holders include ratings agencies and trade credit insurers, and while they do not have a direct
investment in the Group, their understanding and commitment to the Group and its strategy is important to our business.
Stakeholder priorities
Debt holders and other similar financial institutions want to ensure their investments are secure and that our strategy is delivering
long-term growth. Timely dialogue, with honest and open conversations, supports building long-term relationships with these parties.
How we engage
● The Directors present the results and host a Q&A session every quarter for debt holders, with additional meetings throughout
the year.
● Holders of the preference shares issued by Market Holdco 2 Limited (one of the Group’s parent holding companies) are
invited to attend board meetings, with regular dialogue maintained with them throughout the period.
● Debt holders and similar stakeholders have access to a secure part of the corporate website which contains financial
presentations and accounts.
Outcomes
The Directors consider debt holders and similar stakeholders when assessing the financial position of the Group, its use of capital
and its strategic direction.
Walker Guidelines
In preparing the Annual Report, the Directors have complied with the requirements of the Walker Guidelines for Disclosure and
Transparency in Private Equity.
Approval of the Strategic report
Pages 4 to 33 of the report form the Strategic report.
The Strategic report was approved by the Board and signed on its behalf by:
Jonathan Burke, Company Secretary
30 January 2024
34
Governance report
This Corporate Governance report applies to the Group from the ultimate parent company Market Topco Limited to Wm Morrison
Supermarkets Limited and its subsidiaries. All references to 'Group' within this section are in relation to Market Topco Limited and its
subsidiaries and all references to 'Company' relate to Wm Morrison Supermarkets Limited.
Corporate Governance Update
The Group’s current corporate governance framework is summarised within this Governance report. We expect to continue to develop
and adapt our corporate governance framework in accordance with the changing demands of our business and stakeholders.
Adoption of the ‘Wates Principles’ by Wm Morrison Supermarkets Limited
The Companies (Miscellaneous Reporting) Regulations 2018 require all companies of a significant size to disclose their corporate
governance arrangements. For 2022/23 and to the date of the signing of this Annual Report and Financial Statements, the Company
has applied the Wates Corporate Governance Principles for Large Private Companies (‘Wates Principles’). The principles were
published by the Financial Reporting Council (FRC) in December 2018 and comprise six key principles: Purpose & Leadership; Board
Composition; Director Responsibilities; Opportunity & Risk; Remuneration; and Stakeholder Relationships & Engagement. The
following section summarises how the Company has applied the principles.
The Directors consider that the corporate governance policies and procedures are appropriate for the Group.
Principle 1 - Purpose and Leadership
As the shareholder in the Company, CD&R plays an active role in its strategic development. CD&R has regular interaction with the
Directors and other senior managers within the Company and its subsidiaries. CD&R and the Directors meet formally on a monthly
basis to discuss the operations and performance of the business. CD&R provides an important contribution through the expertise,
knowledge and experience of its team.
As is consistent with previous years, the Directors continue to balance the interests of our various stakeholder groups in a way that
promotes the long term success of the Company.
Our purpose continues to be: "To make and provide food we're all proud of, where everyone's effort is worthwhile, so more and more
people can afford to enjoy eating well." For further information on purpose, see our Strategic report on pages 4 to 5.
The Directors assess and monitor the culture of the Company in line with the Company’s purpose, ways of working and the needs of
its various stakeholder groups. More information on this can be found on pages 4 to 5 and 11 to 33.
The Directors have a good understanding of the views of Company colleagues and culture, facilitated by the ‘National Your Say’
forums, formal and informal discussions with the senior managers of the Company and its subsidiaries, and day-to-day interactions
with our colleagues in store. From these various sources, the Directors are able to confirm that the culture of our business is aligned
to the purpose, values and strategy that the Directors have set.
The Company’s approach to investing in and rewarding our colleagues is set out on page 12 and 13.
The Company is committed to ensuring that all colleagues have the ability to raise genuine concerns in good faith, without fear of
victimisation, subsequent discrimination or disadvantage, even if they turn out to be mistaken. More information on our whistleblowing
policy can be found on our website: https://www.morrisons-corporate.com/about-us/whistleblowing-policy/.
The Directors assess the basis on which the Company generates and preserves value over the long-term, and the opportunities for
the Company going forward, through a formal strategy and long-term planning process. More information on this can be found on
pages 4 to 5 and 11 to 33.
35
Governance report (continued)
Principle 2 - Board Composition
The Company is an indirect subsidiary of Market Topco Limited, which was the ultimate parent company of the Group throughout the
period.
Market Topco Limited
The statutory Directors of Market Topco Limited are:
• Sir Terry Leahy
• Rami Baitiéh
• Manvinder Banga
• Joanna Goff
• Marco Herbst
• Gregory Lai
• David Novak
The role of Chair in Market Topco Limited is fulfilled by Sir Terry Leahy. As Chair, Sir Terry ensures that appropriate information is
provided and that sufficient time is available for each of the discussion points during the Market Topco Limited Board meetings.
Wm Morrison Supermarkets Limited
As at the date of approval of the Annual Report and Financial Statements, the two Directors of the Company were:
Rami Baitiéh
Joanna Goff
David Potts resigned as Director and Chief Executive Officer of the Company and Director of Market Topco Limited on 1 November
2023.
Rami Baitiéh
Appointment
Rami joined the Group as Chief Executive Officer ('CEO') in October 2023, and was appointed a Director of the Company on 30
October 2023.
Experience
Rami was the CEO of Carrefour France between July 2020 and Sep 2023, Spain from May 2019 to July 2020, Argentina from January
2018 to May 2019 and Taiwan from February 2015 to January 2018.
External roles
None
Joanna Goff
Appointment
Joanna joined the Group in 2011 and has held a number of positions including Group Finance Director, and most recently Operations
Development Director, with responsibilities that included Productivity, Procurement, Group Strategy, Loss Prevention and Fuel.
Joanna joined the Board on 4 April 2022 as Chief Financial Officer (‘CFO’).
Experience
Prior to joining Morrisons, Joanna was at PricewaterhouseCoopers LLP (‘PwC’) for 11 years and is a member of the Institute of
Chartered Accountants in England and Wales.
External roles
None
Certain key business matters relevant to the Company are formally reserved for approval by CD&R. These include, for example, the
approval of the overall commercial and operating strategy; and annual financial plans and budgets.
The Directors regard the current structure of the Board as appropriate for the Company. The structure of the Board will continue to
be reviewed in the context of the Company's ownership by CD&R going forward.
36
Governance report (continued)
Principle 2 - Board Composition (continued)
Wm Morrison Supermarkets Limited (continued)
Board Diversity, Skills and Experience
The Board's diversity is monitored and driven by the CEO and the Group People Director. The Directors understand the importance
of having diversity with regard to skills, length of service, experience, ethnicity, gender and knowledge among the Directors and
senior management team.
The Directors of the Group, together with the wider management team, are considered to have an appropriate combination of
background, skills and experience to make considered and effective decisions. The performance, experience, balance of skills,
independence and knowledge of the Directors and wider management team is monitored by the CEO and CD&R.
Principle 3 - Director Responsibilities
Wm Morrison Supermarkets Limited
As referred to above, CD&R plays an active role in the Company’s strategic development. Board meetings, in the form of Operating
Review meetings, are held with CD&R on a monthly basis. These meetings are attended by the Directors, the Company Secretary,
and senior members of the CD&R team. The meetings are chaired by Sir Terry Leahy. The key responsibilities of the Operating
Review meeting include, for example, determining the strategy and financial plans for the Company, setting the operational and
capital budgets; reviewing ongoing financial performance against the budget; assessing the Company’s risk profile and risk appetite;
and considering the governance arrangements of the Company.
In advance of each Operating Review meeting, papers are circulated to the attendees, allowing them sufficient time for meeting
preparation. The papers include, for example, updates on financial and operating performance (including a review against key
performance indicators), customer insight information; updates on strategic projects; and updates on governance matters.
Activities of the Operating Review meeting have included monitoring, considering, reviewing and approving the following matters:
• Audited Annual Report and Financial Statements for the Company, including assessing whether the report is fair,
balanced and understandable, and that a going concern basis of accounting is appropriate;
• Financial performance of the Company for each accounting period;
• Current trading and market environment;
• Performance of the Company’s ‘More Card’ loyalty programme;
• Detailed review of key business functions, including, online, wholesale, convenience, manufacturing and logistics;
• Energy management and hedging strategy within the business;
• Environmental, Social and Governance matters, including sustainability targets;
• Company principal and emerging risks and agreement of risk appetite;
• Property strategy, including new store developments; and
• Current strategy with regard to the Group’s pension schemes.
Audit Committee
On 12 January 2023, the Audit Committee was formally reconstituted for Market Topco Limited and its subsidiaries.
Initial members of the Committee are as follows:
• Marco Herbst
• Gregory Lai
Other Board members and senior managers attend as required.
It is intended that, going forward, the Audit Committee will include a majority of independent members (within the terms defined in
the UK Corporate Governance Code). At least one of the independent members will have recent and relevant experience with
financial accounting or auditing matters.
The Audit Committee's role is to assist the Board in fulfilling its oversight responsibilities by reviewing and monitoring:
• The integrity of audited financial information provided to investors;
• The Group’s system of internal controls and risk management;
• The internal and external audit process and auditors;
• The Group’s attitude to and appetite for risk and its future risk strategy; and
• How risk is reported internally and externally.
37
Governance report (continued)
Principle 3 - Director Responsibilities (continued)
Wm Morrison Supermarkets Limited (continued)
Audit Committee (continued)
Since it has been reconstituted, the Committee has met twice; once to discuss the external audit plan for the period, and once to
review and recommend that the Board approve and sign the Annual Report and Financial Statements of the Company.
Remuneration Committee
The Remuneration Committee was reconstituted on 22 February 2023. Its members are:
• Sir Terry Leahy
• Marco Herbst
• Gregory Lai
• Rami Baitiéh
The role of the Remuneration Committee includes:
• Determining and agreeing with the Board the framework and policy for the remuneration of Directors and other members of
the executive management;
• Reviewing the ongoing appropriateness and relevance of the remuneration framework and policy;
• Approving the design of, and determining the targets for, any performance-related pay schemes operated by the Group and
approving the total annual payments made under such schemes;
• Reviewing the design of all share incentive plans;
• Determining the total individual remuneration package of each Director and other members of the executive management;
and
• Overseeing the management of The Market Topco Employee Benefit Trust.
Since it has been reconstituted, the Committee has met on four occasions.
Other Committees
At below Board level, formal committees were in place during the period for the following areas of the business:
• Capital Approvals
• Convenience
• GSCOP
• Manufacturing
• Online and Wholesale
• Operations
• Risk
• Sustainability
• Talent
• Treasury
Each of the committees, with the exception of GSCOP, is attended by at least one of the Directors (the GSCOP Committee formally
reports into the Risk Committee). In addition to the Directors, committee membership also comprises the relevant subject matter
experts and senior managers within the business. Terms of reference have been agreed upon and set out for each individual
committee, including the authorities delegated to it.
Responsibilities and activities of the various committees named above include:
• Developing plans to implement the Group's strategy;
• Driving trading performance;
• Reviewing financial performance throughout the period;
• Periodically reviewing performance against strategic objectives;
• Approving requests for capital expenditure;
• Reducing the cost base of the organisation through productivity and procurement improvement;
• Discussing progress updates of key projects and growth opportunities;
• Reviewing the talent, capabilities and capacity within the Company;
38
Governance report (continued)
Wm Morrison Supermarkets Limited (continued)
Principle 3 - Director Responsibilities (continued)
● Monitoring the Company’s risk management and internal control systems; and
● Reviewing compliance matters including but not limited to; health & safety, carbon reduction measures, corporate
responsibility, cyber & technology security, ethical trading and GSCOP.
Throughout the period, the Directors of the Company held a weekly Approvals and Governance meeting to formally discuss, review
and approve various matters and regulatory requirements from across the business. These included the following:
• Financial performance of the business;
• Key corporate statements, such as the Modern Slavery Statement;
• Annual approval of the Company's Health and safety policy;
• Risk and Internal audit updates;
• GSCOP compliance reviews;
• Risk reviews;
• Significant commercial contracts and licence renewals;
• Any changes to the Company's subsidiary structure;
• Sustainability initiatives; and
• Charity updates.
Market Topco Limited
The activities of Market Topco Limited board, include monitoring, considering, and reviewing the following:
• Audited Annual Report and Financial Statements for the Group and regulatory announcements, including assessing whether
the report is fair, balanced and understandable, and that a going concern basis of accounting is appropriate;
• Operating and capital expenditure budgets;
• Current trading performance;
• Market updates;
• Overview and tracking of current commercial initiatives;
• Scope 1 and 2 emissions targets;
• McColl's acquisition and integration;
• Property strategy;
• Financing arrangements; and
• Tax strategy.
The Directors of the Group have access to the services and advice of the Company Secretary, who is responsible, in conjunction
with the Chair, for ensuring that Board procedures are followed and applicable rules and regulations are complied with. The Directors
of the Group also have access to independent professional advice, at the expense of the Company, if required.
Any conflicts or potential conflicts of interest are recorded and carefully managed, within the ordinary activities of the Board and
committees, in the way that they consider would be most likely to promote the success of the Company.
The structure and activities as set out above enable the Directors of both the Group and the Company to sufficiently discharge their
statutory directors’ duties and responsibilities as appropriate.
Principle 4 - Opportunity and Risk
Opportunities for the Group to create and preserve value are considered in the ordinary course of business, within each of the
committee meetings described above. The Directors also consider recommendations for future opportunities during the relevant
committees and decide whether they align to the overall strategy and intentions of the Group.
Managing risk and uncertainty is an integral part of strategic thinking for the Directors of the Group.
There are 11 principal risks that have been identified within the Company and its subsidiaries:
• Business interruption
• Business strategy and change
• Competitiveness
• Customer
• Environment and sustainability
• Information security
39
Governance report (continued)
Principle 4 - Opportunity and Risk (continued)
• Financial and treasury
• Food safety, product integrity and ethical sourcing
• Health & safety
• People
• Regulation
More detailed information on the principal risks, approach to risk and the risk management process is found on pages 23 to 29.
The Risk Committee is responsible for risk management and internal control systems within the Group. The Committee meets every
month and its remit includes, for example, the following matters:
• Principal risks of the Company and its subsidiaries;
• Risk appetite;
• Risk management systems;
• Whistleblowing and fraud;
• Property governance;
• Employee listening;
• Corporate compliance policies (such as GSCOP, Loss Prevention, Modern Slavery and Data & Information Security);
• Health and safety, food safety and technical compliance; and
• GDPR compliance.
Principle 5 - Remuneration
There are three main remuneration mechanisms across the Company: base pay, annual bonus, and the Morrisons Incentive Plan.
Base pay is set taking into account the Company’s pay frameworks, bands and the need to remain competitive in an aggressive
labour market, and this is the same at all levels within the Group. The Annual Bonus Plan is available for all front line managers up
to Director level. The performance conditions and targets are the same across all levels, creating alignment across the business to
deliver the shareholder's long-term priorities. Finally, the Morrisons Incentive Plan is offered to all colleagues at store manager level
and above. This creates alignment between all our leaders to the strategic direction and priorities of the Company.
Directors are not remunerated for directorships of subsidiaries.
Principle 6 - Stakeholder Relationships and Engagement
The principal stakeholders of the Group have been identified as the following:
• Customers
• Colleagues
• Suppliers
• Communities and the environment
• Debt holders
More information on how stakeholders are considered by the business, including the types of dialogue the Company has with these
stakeholders, can be found in the Section 172(1) statement on pages 30 to 33.
Dialogue with stakeholders helps the Group to understand, and cater for their needs, and supports towards achieving its purpose.
The following activities have been covered during the year:
• ensuring that the strategy is aligned to long-term success for all stakeholders;
• considering feedback received from customers, colleagues, suppliers, our shareholder and other stakeholders; and
• overseeing the Group’s commitment to Corporate Social Responsibility, in particular the targets around carbon and plastic
reduction, as well as its support for the Group’s charity partner Together for Short Lives, and for the charitable Morrisons
Foundation.
40
Directors’ report
Statutory disclosures
The following disclosures have been included elsewhere within the Annual Report and Audited Consolidated Financial Statements
and are incorporated into the Directors’ report by reference.
Disclosure
Future developments
pages 4 to 33
Shareholder
pages 6 to 10
Customers
page 11
Colleagues
page 12 and 13
Suppliers
pages 14 to 16
Environment and supporting the community
pages 17 to 23
Greenhouse gas emissions
page 17 and 18
Statement of engagement with suppliers, customers and others
page 30 to 33
Governance report
pages 34 to 39
Directors of the Group
page 35
Dividends
page 66
Financial instruments
page 91
Financial risk management
page 91 and 92
Post-balance sheet events
page 102
Political donations
No political donations were made in the financial period, in line with the Group’s policy (30 October 2022: £nil).
Going concern
The Directors’ assessment of the Group and the Company’s ability to continue as a going concern is based on cash flow forecasts
and the committed borrowing and debt facilities of the wider Group. These forecasts include consideration of future trading
performance, working capital requirements, changes to financing arrangements, retail market conditions and the wider economy.
The Group has negotiated and has available to it committed and uncommitted facilities that will meet the Group’s needs in the short
and medium term. In addition, Market Topco Limited (the ultimate parent of Market Bidco Limited) has provided a letter stating its
intentions to support the Group for at least the period of the going concern assessment.
Having assessed the principal and emerging risks as set out on pages 23 to 29, the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the financial statements. Further information can be found on page 57.
Forward-looking statements
The Strategic report and Directors’ report are prepared for the members of the Group and should not be relied upon by any other
party or for any other purpose. Where the Strategic report and Directors’ report include forward-looking statements, these are made
by the Directors in good faith based on the information available to them at the time of their approval of the Annual Report and
Financial Statements.
Consequently, such statements should be treated with caution due to the inherent uncertainties, including both economic and
business risk factors, underlying such forward-looking statements and information.
The liabilities of the Directors in connection with the Strategic report and the Directors’ report shall be subject to the limitations and
restrictions provided by the Companies Act 2006.
41
Directors’ report (continued)
Directors’ indemnities and Directors’ and Officers’ liability insurance
Qualifying third-party indemnity provisions (as defined by section 234 of the Companies Act 2006) were in force during the course of
the financial period ended 29 October 2023, and up to the date of signing the financial statements, for the benefit of the Directors of
the Company and Directors of the Company's subsidiaries in relation to certain losses and liabilities that they may incur or may have
incurred in connection with their duties and powers of office.
The Group also maintains insurance cover for the protection of Directors and senior management from personal liabilities and costs
which may arise in the course of fulfilling their duties.
Articles of Association
The Company’s Articles of Association may only be amended by a special resolution at a general meeting of shareholders.
Share capital
The authorised and called-up share capital of the Company, together with details of shares allotted and cancelled during the financial
period, are shown in note 6.7 of the financial statements.
During the period, there were no ordinary shares in the Company issued.
Equal opportunities for all
We have five people ambitions, which include being a business where everyone feels welcome and celebrated. This is promoted
through a safe and supportive environment free from racism, discrimination, harassment, bullying and victimisation.
We strive towards an environment where full and fair consideration is given to all applicants and where all colleagues regardless of
race, colour, nationality, ethnic origin, age, sex, marital or civil partnership status, disability, religion or belief, sexual orientation,
gender re-assignment or trade union membership have access to training and the opportunity to develop and progress. We also
encourage employment from anyone who wants to make a positive impact, with every application given full and fair consideration.
Dignity and respect underpins our behaviour towards all customers, colleagues and candidates. To ensure individual needs are
considered, including colleagues becoming disabled, we will make reasonable adjustments, where required, to the selection process,
work environment or practices to support those who need it.
We are more mindful than ever of mental health and wellbeing; and through our practices we should ensure the same respect and
support is provided to every candidate and colleague, and to treat them equally in respect of recruitment, promotion, training, pay and
other employment policies and conditions. Decisions are made based on relevant merits and abilities, and are made free from bias.
Like most businesses, we know we are on a journey around diversity, inclusion, belonging and wellbeing; however we are committed
to improving and remaining responsive to customers, colleagues and the wider communities we serve, and truly being a business
where everyone is welcome and celebrated.
Human rights policy
At Morrisons, as both a major retailer and manufacturer, we recognise the responsibility that we share with our suppliers to buy,
produce and sell our products in an ethical manner. We are committed to ensuring that everyone who helps to make our products is
treated with dignity and respect, in safe and fair workplaces.
We strongly believe that when ethical standards are consistently upheld, this can improve worker wellbeing, productivity and quality,
which benefits our suppliers, their workers and our customers. Only suppliers that share our standards and values will be considered
appropriate to trade with Morrisons, and we seek to develop long-term and beneficial trading relationships based on the principles of
fairness and transparency at all times.
Our approach is informed by the United Nations Guiding Principles on Business and Human Rights (UNGPs) and underpinned by
the principles of the Universal Declaration of Human Rights and core International Labour Organisation standards. We are members
of the Ethical Trading Initiative (ETI) and use their internationally recognised Base Code to address risk in areas including, but not
limited to, child labour, discrimination, safe working conditions, wages, freedom of association and forced labour.
We utilise the Supplier Ethical Data Exchange (Sedex) to map, understand and assess key areas of risk in our own-brand supply
chain, and monitor compliance with our requirements through an extensive third-party audit programme.
42
Directors’ report (continued)
Human rights policy (continued)
Collaboration is a key enabler of our approach, and we work with multi-stakeholder initiatives including the ETI, Food Network for
Ethical Trade (FNET), Modern Slavery Intelligence Network (MSIN) and Seafood Ethics Action Alliance to understand where impacts
could occur and identify opportunities for improvement. This approach enables us to join forces with other businesses, trade unions,
and civil society organisations to support wider advocacy and drive positive change in our supply chains.
We are committed to increasing transparency in our supply chains and share full details of our tier-one, own brand manufacturing
sites in the public domain. We also support several transparency initiatives including the Open Supply Hub and Ocean Disclosure
Project to increase visibility of a wider range of products.
Whistleblowing policy
The Group is committed to ensuring that all individuals have the ability to raise genuine concerns in good faith without fear of
victimisation, subsequent discrimination or disadvantage, even if they turn out to be mistaken. More information on our whistleblowing
policy can be found on our website: morrisons-corporate.com/about-us/whistleblowing-policy. The Risk Committee reviews the
whistleblowing policy on an annual basis and receives reports which include an analysis of whistleblowing trends.
Anti-bribery and anti-corruption policy
The Risk Committee has considered the Company's anti-bribery and anti-corruption framework, which is based on our zero-tolerance
approach to bribery and corruption and the conduct expected of everyone who works for or with the Company. The Company's gifts
and hospitality policy, which defines the process which must be followed before any gifts or hospitality are offered or accepted, has
also been considered. Regular training is provided to all colleagues to maintain awareness of these policies and processes.
Health and safety policy
It is the Group’s intention, so far as is reasonably practicable, to ensure the health, safety and welfare of all its employees, customers
and visitors to its premises. To deliver our policy, each division and subsidiary company has a comprehensive health and safety
management system, which contains the policy and procedures for complying with the Health and Safety at Work Act 1974, including
the provision, based on risk assessment, of safe working practices for all activities across the Group. To drive continuous
improvement in performance and practices, each division is monitored through health & safety KPIs, has a schedule of checks and
audits completed by our Health & Safety and Compliance team as well as continuous improvement plans for each division, which are
site and store-specific.
Auditors’ reappointment
The auditors have expressed their willingness to continue in office, and a resolution that they be reappointed will be proposed and
put forward to the board.
Non-financial information statement
In order to comply with the requirements of the Companies Act 2006, sections 414CA and 414CB, we have set out the following
information in the places referenced below:
• information on social matters is shown in the Strategic report on pages 22 to 23;
• information on environmental matters is shown in the Strategic report on pages 17 to 22;
• information on our colleagues is shown in the Strategic report on page 12 and 13;
• our respect for human rights is set out in the Directors’ report on page 41 to 42;
• our approach to anti-corruption and anti-bribery matters is set out in the Directors’ report on page 42;
• our business model is described on pages 4 to 5;
• our principal and emerging risks, and how we manage them, are described on pages 23 to 29; and
• other non-financial key performance indicators are shown on page 10.
Auditors
In the case of each Director in office at the date the Directors’ report is approved:
• so far as the Director is aware, there is no relevant audit information of which the Group’s and Company’s auditors are
unaware; and
• they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group’s and Company’s auditors are aware of that information.
By order of the Board
Jonathan Burke, Company Secretary
30 January 2024
43
Statement of Directors’ responsibilities
in respect of the Report and Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
prepared the Group financial statements in accordance with UK-adopted international accounting standards and the Company
financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law).
Under company law, 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 Group and Company and of the profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting standards have been followed for the Group financial
statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Company financial
statements, subject to any material departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and
enable them to ensure that the financial statements comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial stat
ements may differ from legislation in other jurisdictions.
Directors’ confirmations
Each of the Directors, whose names and functions are listed in the Governance Report confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group;
• the Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets, liabilities and financial position of the Company; and
• the Annual report and financial statements includes a fair review of the development and performance of the business and
the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
By order of the Board
Jonathan Burke, Company Secretary
30 January 2024
44
Independent auditors’ report to the members of Wm
Morrison Supermarkets Limited
Report on the audit of the financial statements
Opinion
In our opinion, Wm Morrison Supermarkets Limited’s Group financial statements and Company financial statements (the “financial
statements”):
• give a true and fair view of the state of the Group’s and of the Company’s affairs as at 29 October 2023 and of the Group’s
profit and the Group’s cash flows for the 52 week period then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance
with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which
comprise: the consolidated statement of financial position and company statement of financial position as at 29 October 2023; the
consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows,
consolidated statement of changes in equity, and company statement of changes in equity for the period then ended; and the general
information and notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Directors.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided.
Other than those disclosed in Note 1.5, we have provided no non-audit services to the company or its controlled undertakings in the
period under audit.
Our audit approach
Overview
Audit scope
• We identified two reporting units, Wm Morrison Supermarkets Limited and Safeway Stores Limited, which in our view,
required a full scope audit based on their size and risk.
• Certain McColl's Retail Group account balances, alongside consolidation adjustments were determined as being in the
scope of our Group audit to address specific risk characteristics or to provide sufficient overall Group coverage of particular
financial statement line items.
Key audit matters
• Impairment of property, plant & equipment and right-of-use assets (group and parent)
• Exceptional items (group)
• Valuation of retirement benefits (group and parent)
45
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited
(continued)
Materiality
• Overall group materiality: £24,250,000 (prior period: £23,500,000) based on 2.5% of EBITDA before exceptionals.
• Overall company materiality: £21,825,000 (prior period: £21,000,000) based on the company allocation of Group materiality.
• Performance materiality: £18,187,500 (prior period: £17,500,000) (Group) and £16,368,750 (prior period: £15,500,000)
(Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our
procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Commercial income, which was a key audit matter last year, is no longer included because of the continued management focus over
controls in this area and a number of years where we have not noted significant judgements or misstatements. Otherwise, the key
audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Impairment of property, plant and equi
pment and right-of-use assets (Group and parent)
Refer to page
58 and 59
(sources of estimation uncertainty), note
3.1 (accounting policies), notes 3.3 and 11.7 (property, plant and
equipment) and notes 3.4 and 11.8 (Right
-of-use assets).
The Group has a large freehold store estate recognised within
property, pl
ant and equipment (Group: £5,132
m, Company:
£1,319m) and right of use assets representing leasehold land and
buildings (Group: £1,178m, Company: £1,012m) at 29 October
2023.
Our significant risk is focussed on the store estate within the
Morrisons & Safeway trading entities, rather than the McColl’s
convenience business
. The McColl’s convenience
business has
a much smaller estate portfolio, with the carrying value of
property,
plant & equipment being £101m. Further, having onl
y
been acquired during FY22, we are satisfied impairment would
be limited with a clear plan inspected as part of our work over
goodwill to grow and expand the McColl’s/Morrisons Daily
business offering.
Given the challenging trading conditions in the UK grocery retail
market in recent years and the subsequent adverse impact on
the market value of traditional supermarket stores, the possibility
of impairment of these assets and the related trading assets is
an
area of focus for management, as is the possibility that previously
charged impairments may need reversing where store trading
conditions have improved.
We focused on this area because of the judgement required in
applying various estimations when testing for impairment and
impairment write
-
backs and the significant carrying value of
freehold and leasehold property.
Management considers each store location to be a cash
generating unit (‘CGU’) and has calculated the recoverable
amount of each CGU as the
higher of value-in-
use and fair value
less costs of disposal.
Value
-in-use
In relation to the value
-in-use assessment we have:
•
Obtained the Group's and the Company’s board
approved financial plan covering the next financial
period and reviewed the
projections covering the
subsequent two financial periods;
•
Challenged management’s forecasts by seeking
evidence over the key assumptions and compared
future cash flow performance to historical levels to
ensure that the planned performance is considered
reasonable;
•
Assessed the accuracy of management’s discounted
cash flow model including testing the mathematical
accuracy of the calculations included within the model
and the application of the requirements of IAS 36
‘Impairment of assets’ and impact of IFRS
16 ‘Leases’;
•
Assessed the discount rate applied, with the support of
our internal valuations specialists; and
•
Considered and assessed the sensitivity of the model
to changes in these key assumptions.
We found, based on our audit work, that the key assumptions
and calculations used by management were supportable and
appropriate.
46
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited (continued)
Key audit matter
How our audit addressed the key audit matter
Impairment of property, plant and equipment and right-of-use assets (Group and parent) (continued)
Value
-in-use
Value
-in-
use is based on discounted, future cash flow forecasts,
requiring management to make judgements relating to certain
key inputs including, for example, discount rates and future
growth rates.
Fair value less costs of disposal
Fair value less costs of disposal is estimated by the Directors
based upon store level valuations prepared by independent
valuers. This assessment takes into account the continued low
demand from major grocery retailers for supermarket space,
when assessing rent and yield assumptions on a store by store
basis. The key judgements made relate to the estimated rental
values and yields for these stores.
The Group has recognised a net impairment charge of £167m on
tangible assets (£181m impairment charge offset by £14m
impairment write back). The £181m impairment charge includes
£149m in relation to property, plant and equipment, £14m in
relation to right
-of-use assets and £18m in relatio
n to lease
investment property. The £14m impairment write back is solely in
relation to property, plant and equipment.
The Company has recognised a net impairment charge of £105m
(£112m impairment charge offset by £7m impairment write back).
The £112m impairment charge includes £59m in relation to
property, plant and equipment, £53m in relation to right
-of-
use
assets. The £7m impairment write back is solely in relation to
property, plant and equipment.
Fair value less costs of disposal
We evaluated and challenged the estimates of store rental
values and yields used in the valuations prepared by
independent valuers which were used by the Directors in their
assessment of fair value less costs of disposal. This involved
using our own internal valuation experts, with a particular focus
on the assumptions and methodology used, obtaining third party
evidence and market data to corroborate the assumptions.
We determined that the valuations performed by management
were reasonable.
In addition, we evaluated the adequacy of the disclosures made
in notes 3.3 and 3.4 (Group) and notes 11.7 and 11.8
(Company) of the financial statements, including disclosures
regarding the key assumptions and sensitivities as required by
IAS 36 ‘Impairment of assets’ and found them to be appropriate.
Exceptional items (Group)
Refer to page
58 and 59
(critical accounting judgements) and
note 1.4 (profit before exceptionals).
Two of the Group's Alternative Performance Measures are ‘Profit
before tax and exceptionals’ and 'Earnings before Interest, Tax,
Depreciation and Amortisation (EBITDA) before exceptionals'.
Management uses these measures to improve the transparency
and cla
rity of the Group's financial performance.
The Group's profit before tax and exceptional items of £236m is
stated before £28m of net retirement benefit credit and a net
charge from exceptional items of £213m. EBITDA before
exceptionals is £941
m. The £213m
net charge from exceptional
items is comprised of the following:
• £50m charge for restructuring and store closure costs;
• £218m charge for net impairment and provision for
onerous contracts;
• £1m credit for profit arising on disposal and closure;
and
• £54m credit for other exceptional items.
The determination of which items are to be excluded from
EBITDA before exceptionals and profit before exceptional is
subject to judgement and therefore users of the Group financial
statements could be misled if amounts are not classified and
disclosed in a transparent manner and consistently with the
Group's accounting policy.
We considered whether the presentation of these Alternative
Performance Measures was appropriate. We performed the
following procedures:
• Reviewed
management’s definition and classification
of exceptional items, including the sub-
categorisation
of these items;
•
Obtained supporting evidence to corroborate the
accuracy and completeness of exceptional items;
• Where estimation uncertainty exists, we challe
nged
the key assumptions in light of information available
and historical assessments made for similar
circumstances;
•
Challenged management on the classification of
exceptional items through consideration of the
application of the accounting policy includi
ng those
items classified as ‘other exceptional costs’; and
•
Challenged management over disclosures relating to
exceptional items to ensure that these were
appropriate and consistent with the individual
exceptional items and the work performed.
No significa
nt issues were identified as a result of this work.
47
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited (continued)
Key audit matter
How our audit addressed the key audit matter
Valuation of Retirement benefits (Group and
Company)
Refer to page
58 and 59
(critical accounting judgements and
sources of estimation uncertainty), notes 8 and 11.21 (pensions).
The Group operates a number of defined benefit pension
schemes, all of which are closed to future accrual. The schemes
are in a net surplus position (Group: £453m, Company: £103m)
with material gross assets (Group: £3,170m and Company:
£981m) and liabiliti
es (Group: £2,717m and Company £878m).
We have focused on the valuation of the Group and Company’s
defined benefit pension schemes because of the level of
estimation required in determining the year end valuation. In
addition, given the size of the gross assets and liabilities, the
schemes are significant and material.
There have been buy
-
ins during the current year (insurance
agreements signed December 2022 and February 2023) covering
almost 10,000 pensioners across both the Morrisons and
Safeway schemes
.
Where a defined benefit scheme is in a surplus position,
management needs to consider whether the Group and Company
has the right to recognise a surplus,
or whether it is necessary to
restrict the amount of surplus recognised. This requires
judgement as
to the rights of the Group, Company and Trustees
in each of the Group's schemes.
We performed the following procedures:
•
Obtained the IAS 19 valuation reports produced by the
Group's independent actuaries;
• Used our internal pensions experts to assess
the
judgemental assumptions used in calculating the
valuation of the pension schemes’ liabilities, including
discount rates, inflation and mortality rates;
•
Obtained the detailed reports relating to the valuation of
the schemes’ assets and agreed the valuat
ions to third
party confirmations;
•
Assessed the membership data used in valuing the
schemes’ liabilities and tested any significant changes
since the last valuation;
•
Agreed a sample of contributions made by the Group to
bank statements; and
• Used our
pension experts to assess the value of the
insurance annuity policies relating to the in year buy-
ins.
Based on our work performed, the actuarial assumptions used in
calculating the pension surplus were within an acceptable range.
We considered management’s assessment of the Group's right to
recognise the net surplus in the CARE and RSP schemes by
reference to the requirements of IFRIC 14 ‘Limit on defined benefit
asset’, including reviewing legal advice provided to management,
and satisfied ourselves that
it is appropriate to recognise the net
surplus on the balance sheet.
48
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited
(continued)
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry
in which they operate.
The Group's accounting process is structured around a Group finance function at its head office in Bradford which is responsible for
the Group's reporting units.
For each reporting unit we determined whether we required an audit of its reported financial information (‘full scope’), or whether
certain account balances of reporting units were required to be in the scope of our Group audit to address specific risk characteristics
or to provide sufficient overall Group coverage of particular financial statement line items.
A full scope audit was required for two components, being Wm Morrison Supermarkets Limited and Safeway Stores Limited, which
were determined as financially significant because they individually contribute more than 15% of the Group's EBITDA before
exceptionals. In addition, we determined that unusual journal postings and certain account balances (Revenue and Pensions), in one
further reporting unit (McColl’s Retail Group) were in the scope of our Group audit to address specific risk characteristics or to provide
sufficient overall Group coverage of particular financial statement line items.
All of the audit procedures have been performed by the Group audit engagement team.
In aggregate, our audit procedures accounted for 94% of Group Revenues and 91% of Group EBITDA before exceptionals.
In addition, we have performed analytical review procedures over a number of smaller reporting units. This included an analysis of
year-on-year movements, at a level of disaggregation to enable a focus on higher risk balances and unusual movements. Those not
subject to analytical review procedures were individually, and in aggregate, immaterial. This gave us the evidence we needed for our
opinion on the financial statements as a whole.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the process they have adopted to assess the extent of the
potential impact of climate change risk on the Group's financial statements. Management consider that the impact of climate change
does not give rise to a material financial statement impact. We used our knowledge of the Group to evaluate management’s
assessment. We particularly considered how climate change risks would impact the assumptions made in the forecasts prepared by
management used in their impairment analyses and going concern. We discussed with management the ways in which climate
change disclosures should continue to evolve as the Group continues to develop its response to the impact of climate change. We
also considered the consistency of the disclosures in relation to climate change made in the other information within the Annual
Report with the financial statements and our knowledge from our audit
.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group
Financial statements - Company
Overall materiality
£24,250,000 (prior period: £23,500,000).
£21,825,000 (prior period: £21,000,000).
How we determined it
2.5% of
EBITDA before exceptionals
The company allocation of Group materiality
Rationale for benchmark
applied
We applied the benchmark of EBITDA before
exceptionals as the most relevant metric
against which the performance of the Group is
most commonly measured
.
In our view, users focus on the consolidated
results of the Group rather than the individual
results of the Company, therefore we determined
our materiality in the overall context of the Group.
49
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited
(continued)
Materiality (continued)
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
range of materiality allocated across components was £16,000,000 to £21,825,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (prior period: 75%) of overall materiality, amounting to £18,187,500 (prior period:
£17,500,000) for the Group financial statements and £16,368,750 (prior period: £15,500,000) for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Directors that we would report to them misstatements identified during our audit above £1,212,500 (Group audit)
(prior period: £1,175,000) and £1,091,250 (Company audit) (prior period: £1,050,000) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going concern basis of
accounting included:
• We obtained from management their latest assessments that support the Board’s conclusions with respect to the going
concern basis of preparation of the financial statements;
• We evaluated management’s base case forecast and severe but plausible downside scenarios and challenged the adequacy
and appropriateness of the underlying assumptions, including a decrease in like-for-like sales;
• We have evaluated the Group's access to debt facilities throughout the period, including the intercompany funding provided
by the Group's parent company, Market Bidco Limited;
• In conjunction with the above we have also reviewed management’s analysis of both liquidity and covenant compliance to
satisfy ourselves that no breaches are anticipated over the period of assessment; and
• We have obtained and evaluated Market Topco Limited's letter of support to satisfy ourselves of its intention and ability to
continue to support the Group for at least 12 months from the date of signing this audit opinion.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and the Company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's and the
Company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
50
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited
(continued)
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information, which includes reporting based on the Climate-related
Financial Disclosure (CFD) regulations. Our opinion on the financial statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors' Report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors'
Report for the period ended 29 October 2023 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors' Responsibilities in respect of the Report and Financial Statements, the Directors
are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but
to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
51
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited
(continued)
Responsibilities for the financial statements and the audit (continued)
Auditors’ responsibilities for the audit of the financial statements (continued)
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to employment law and health and safety legislation, and we considered the extent to which non-compliance might
have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the
financial statements such as UK tax legislation including Income, Sales and Payroll taxes and the Companies Act 2006. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of
controls), and determined that the principal risks were related to management bias in key accounting estimates and posting of
inappropriate journals entries to manipulate the Group's results for the period. The Group engagement team shared this risk
assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their
work. Audit procedures performed by the Group engagement team and/or component auditors included:
• Holding discussions with management, including consideration of known or suspected instances of non-compliance with
laws and regulation and fraud;
• Reviewing board minutes and inquiring with management over any non-compliance with laws and regulations, including
discussions with the internal audit function and the in-house legal team;
• Making enquiries of management and reviewing internal audit reports in so far as they related to the financial statements;
• Challenging assumptions and judgements made by management in their significant accounting estimates, to address the
risk of management bias in making such estimates;
• Identifying and testing journal entries on a sample basis, in particular journal entries posted with unusual account
combinations or posted by unexpected users. Specifically we tested journal entries which we deemed unusual with credits
to revenue, or which manipulate EBITDA.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 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.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Company financial statements are not in agreement with the accounting records and returns
We have no exceptions to report arising from this responsibility.
52
Independent auditors’ report to the members of Wm Morrison
Supermarkets Limited
(continued)
Appointment
Following the recommendation of the Directors, we were appointed by the directors on 5 June 2014 to audit the financial statements
for the year ended 1 February 2015 and subsequent financial periods. The period of total uninterrupted engagement is nine years,
covering the years ended 1 February 2015 to 29 October 2023.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements will form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no
assurance over whether the annual financial report will be prepared using the single electronic format specified in the ESEF RTS.
John Ellis (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
30-01-2024
53
Consolidated income statement
52 weeks ended 29 October 2023
2022/23 | 2021/22 | ||||||
Before | Exceptionals | Before | Exceptionals | ||||
exceptionals 1 | (note 1.4) | Total | exceptionals 1 | (note 1.4) | Total | ||
Note | £m | £m | £m | £m | £m | £m | |
Revenue | 1.2 | ||||||
Cost of sales | ( | ( | ( | ( | ( | ( | |
Cost of sales before supply chain disruption | ( | ( | ( | ( | ( | ( | |
Supply chain disruption 2 | ( | ( | |||||
Gross profit | ( | ( | |||||
Other operating income | |||||||
Profit on disposal and closure | |||||||
Administrative expenses | ( | ( | ( | ( | ( | ( | |
Operating profit | 1.5 | ( | ( | ||||
Operating profit before supply chain | ( | ( | |||||
disruption 1 | |||||||
Supply chain disruption 2 | ( | ( | |||||
Finance costs | 6.2 | ( | ( | ( | ( | ( | |
Finance income | 6.2 | ||||||
Share of loss of joint venture (net of taxation) | 4.2 | ( | ( | ( | ( | ||
Profit/(loss) before taxation | ( | ( | ( | ||||
Taxation | 2.2 | ( | ( | ||||
Profit/(loss) for the period | ( | ( | ( |
Consolidated statement of comprehensive income
52 weeks ended 29 October 2023
2022/23 | 2021/22 | ||
Other comprehensive (expense)/income | Note | £m | £m |
Items that will not be reclassified to profit or loss | |||
Remeasurement of defined benefit schemes | 8.2 | ( | ( |
Tax on defined benefit schemes | 2.3 | ||
( | ( | ||
Items that may be reclassified subsequently to profit or loss | |||
Cash flow hedging movement | ( | ||
Exchange differences on translation of foreign operations | ( | ||
Tax on items that may be reclassified subsequently to profit or loss | 2.3 | ( | |
( | |||
Other comprehensive (expense)/income for the period, net of tax | ( | ||
Profit/(loss) for the period | ( | ||
Total comprehensive expense for the period | ( | ( |
1
Alternative performance measures are defined in the glossary (see pages 127 to 128)
2
Supply chain disruption costs in the period amounted to £nil (2021/22: £44 m) and are included in arriving at gross profit. These costs relate to the mitigating
actions and impact on the Group’s operations arising from the unprecedented nationwide disruption in the supply chain and lack of availability in the labour
market, including warehouse, transport and manufacturing costs. These costs began to be incurred during August 2021 and returned to a stable level during
March 2022. These costs have been disclosed separately to provide additional information to users of the financial statements.
All of the results shown above relate to continuing operations.
54
Consolidated statement of financial position
As at 29 October 2023
2023 | 2022 | ||
Note | £m | £m | |
Assets | |||
Non-current assets | |||
Goodwill and intangible assets | 3.2 | ||
Property, plant and equipment | 3.3 | ||
Right-of-use assets | 3.4 | ||
Investment property | 3.6 | ||
Retirement benefit surplus | 8.2 | ||
Investments in joint ventures | 4.2 | ||
Trade and other receivables | 3.7 | ||
Derivative financial assets | 7.3 | ||
Current assets | |||
Inventories | 5.2 | ||
Trade and other receivables | 5.3 | ||
Current tax asset | |||
Derivative financial assets | 7.3 | ||
Cash and cash equivalents | 6.6 | ||
Total assets | |||
Liabilities | |||
Current liabilities | |||
Trade and other payables | 5.4 | ( | ( |
Loan from parent undertaking | 6.4 | ( | ( |
Lease liabilities | 6.5 | ( | ( |
Derivative financial liabilities | 7.3 | ( | ( |
Current tax liability | ( | ||
( | ( | ||
Non-current liabilities | |||
Borrowings | 6.3 | ( | ( |
Lease liabilities | 6.5 | ( | ( |
Derivative financial liabilities | 7.3 | ( | |
Deferred tax liabilities | 2.3 | ( | ( |
Provisions | 5.5 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | |||
Shareholders’ equity | |||
Share capital | 6.7 | ||
Share premium | 6.7 | ||
Capital redemption reserve | 6.8 | ||
Merger reserve | 6.8 | ||
Hedging reserve | 6.8 | ||
Retained earnings | 6.8 | ||
Total equity attributable to the owners of the Company |
Company registration number: 00358949
gee
55
Consolidated statement of cash flows
52 weeks ended 29 October 2023
2023 | 2022 | ||
| Note | £m | £m | |
Cash flows from operating activities | |||
Cash generated from operations | 5.6 | ||
Interest paid | ( | ( | |
Taxation received | |||
Net cash inflow from operating activities | |||
Cash flows from investing activities | |||
Interest received | |||
Dividends received from joint ventures | 4.2 | ||
Proceeds from disposal of property, plant and equipment, investment property and assets | |||
held-for-sale | |||
Purchase of property, plant and equipment and investment property | ( | ( | |
Purchase of intangible assets | ( | ( | |
Acquisition of business (net of cash received) | 4.3 | ( | |
Investments in joint ventures | ( | ||
Net cash inflow/(outflow) from investing activities | ( | ||
Cash flows from financing activities | |||
Proceeds from trust shares | 6.7 | ||
Proceeds from exercise of employee share options | 6.7 | ||
Proceeds from settlement of derivative contracts | |||
Costs incurred on repayment of borrowings | ( | ||
Repayment of borrowings | ( | ||
(Repayment)/loan from parent undertaking | 6.4 | ( | |
Repayment of lease obligations | ( | ( | |
Net cash outflow from financing activities | ( | ( | |
Net decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at start of period | |||
Cash and cash equivalents at end of period | 6.6 |
56
Consolidated statement of changes in equity
52 weeks ended 29 October 2023
Capital | ||||||||
Share | Share | redemption | Merger | Hedging | Retained | Total | ||
capital | premium | reserve | reserve | reserve | earnings | equity | ||
Note | £m | £m | £m | £m | £m | £m | £m | |
Current period | ||||||||
At 31 October 2022 | ||||||||
Profit for the period | ||||||||
Other comprehensive (expense)/income: | ||||||||
Cash flow hedging movement | ( | ( | ||||||
Exchange differences on translation of foreign | ||||||||
operations | ||||||||
Remeasurement of defined benefit schemes | 8.2 | ( | ( | |||||
Tax in relation to components of other comprehensive income | 2.3 | |||||||
Total comprehensive expense for the period | ( | ( | ( | |||||
At 29 October 2023 | ||||||||
Capital | ||||||||
Share | Share | redemption | Merger | Hedging | Retained | Total | ||
capital | premium | reserve | reserve | reserve | earnings | equity | ||
Note | £m | £m | £m | £m | £m | £m | £m | |
Prior period | ||||||||
At 1 November 2021 | ||||||||
Loss for the period | ( ) | ( ) | ||||||
Other comprehensive income/(expense): | ||||||||
Cash flow hedging movement | ||||||||
Exchange differences on translation of foreign | ( | ( | ||||||
operations | ||||||||
Remeasurement of defined benefit schemes | 8.2 | ( | ( | |||||
Tax in relation to components of other comprehensive income | 2.3 | ( | ( | |||||
Total comprehensive income/(expense) for the period | ( ) | ( ) | ||||||
Employee share option schemes: | ||||||||
Share options exercised | 6.7 | |||||||
Total transactions with owners | ||||||||
At 30 October 2022 |
57
General information
Company information
Wm Morrison Supermarkets Limited is a private company incorporated in the United Kingdom and registered in England and Wales,
limited by shares, under the Companies Act 2006 (Registration number 00358949). The Company is domiciled in the United Kingdom
and its registered address is Hilmore House, Gain Lane, Bradford, BD3 7DL . See principal activity in the Strategic Report on page 4.
Basis of preparation
historical cost basis of accounting, except as disclosed in the accounting policies set out within these consolidated financial
statements.
The Group’s accounting policies have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.
Accounting reference date
These consolidated financial statements of the Group represent the 52 week period to 29 October 2023. The accounting period of
the Group ends on a Sunday not more than seven days before or after the accounting reference date of 31 October.
Going concern
The consolidated financial statements have been prepared on the going concern basis as the Directors have a reasonable expectation
that the Group has adequate resources for a period of at least 12 months from the date of approval, having reassessed the principal
risks facing the Group and determined that there are no material uncertainties to disclose. In making their assessment of the Group’s
ability to continue as a going concern, the Directors have considered the projected performance of the Group and its financial
resources.
The Directors’ assessment of the Group’s ability to continue as a going concern includes consideration of cash flow forecasts and
the committed borrowing facilities in place of the Group and its parent entities. These forecasts include consideration of future trading
performance, working capital requirements, and the wider Group’s current financing arrangements, along with wider economic
conditions, and include the modelling of a number of downside scenarios. The scenarios considered take account of a number of
severe, but plausible, downsides that the Group might experience by flexing the forecasts for a number of financial assumptions,
such as reductions in like-for-like (‘LFL’) sales, fuel price and volumes, profit sensitivities, and a reduction in the level of available
supply chain finance facilities. The Directors’ have included in their assessment a scenario to take account of the sale of the petrol
forecourts business announced in January 2024.
The Group continues to maintain a robust financial position providing it with sufficient access to liquidity, through a combination of
cash, intercompany loans, committed facilities and supply chain finance facilities to meet its needs in the short and medium term.
The Group has a centralised treasury function which manages funding, liquidity and other financial risk in accordance with the Board
approved Treasury Policy, as detailed on page 91.
As at 29 October 2023, the Group (including its parent entities) had total committed revolving credit facilities of £1,000m and a supply
chain finance facility of £763m. In respect of financial covenants in relation to the wider Group’s financing structure at 29 October
2023, the base and downside scenarios modelled, which include mitigating actions available, demonstrate sufficient financial
covenant headroom being available. In addition, Market Topco Limited (the ultimate parent of Wm Morrison Supermarkets Limited)
has provided a letter stating its intentions to support the Group for at least the period of the going concern assessment.
As a result, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the consolidated
financial statements, with the wider Group remaining well-funded, profitable and cash generative for a period of at least 12 months
from the date of approval of these consolidated financial statements.
58
General information (continued)
Alternative Performance Measures
The Directors measure the performance of the Group based on a range of financial measures, including measures not recognised
by IFRS. These Alternative Performance Measures may not be directly comparable with other companies’ Alternative Performance
Measures and the Directors do not intend these to be a substitute for, or superior to IFRS measures. For definitions of the Alternative
Performance Measures used, see the Glossary on pages 127 to 128.
59
General information (continued)
Critical accounting judgements (continued)
Profit before exceptionals (continued)
60
Notes to the Group financial statements
1 Performance in the period
1.1 Accounting policies
Type of commercial income | Description | Recognition | ||||||||||
Marketing and | Examples include income in respect | Income is recognised dependent on the terms of the specific | ||||||||||
advertising funding | of in -store and online marketing and | supplier agreement in line with when performance obligations | ||||||||||
point of sale, as well as funding for | in the | agreement are | met. | Income | is | invoiced | once | the | ||||
advertising. | performance conditions in the supplier agreement have been | |||||||||||
| achieved. | ||||||||||||
Volume -based rebates | Income earned by achieving volume | Income is | recognised through the | financial | period | based on | ||||||
or spend targets set by the supplier | forecasts for expected sales or purchase volumes, informed by | |||||||||||
for | specific | products over | specific | current performance, trends and the terms of the supplier | ||||||||
periods. | agreement. Income is invoiced throughout the financial period | |||||||||||
| in accordance with the specific supplier terms. |
61
Notes to the Group financial statements (continued)
1 Performance in the period (continued)
1.1 Accounting policies (continued)
Commercial income (continued)
2022/23 | 2021/22 | |
£m | £m | |
Sale of goods in-store and online 1 | 14,361 | 13, 752 |
Other sales 1 | 524 | 737 |
Total sales excluding fuel | 14,885 | 14,489 |
Fuel | 3,473 | 3,990 |
Total revenue | 18,358 | 18,479 |
62
Notes to the Group financial statements (continued)
1 Performance in the period (continued)
| 2022/ | 23 | 2021/ | 22 | |
£m | £m | |||
Profit/(loss) after tax | 52 | (30 ) | ||
Add back: tax credit for the period | (1) | (8) | ||
Profit/(loss) before tax | 51 | (38 ) | ||
Adjustments for: | ||||
Net impairment and provision for onerous contracts | 218 | 105 | ||
Profit on disposal and closure | (1) | (10) | ||
Restructuring and store closure costs | 50 | 18 | ||
| Net finance costs relating to repayment of borrowings (note 6.2) | - | 9 | ||
Net retirement benefit credit (note 8.2) 1 | (28) | (10) | ||
Other exceptional (credit)/charge | (54) | 15 | ||
| Transaction costs | - | 92 | ||
Profit before tax and exceptionals 2 | 236 | 18 1 | ||
Tax charge before exceptionals 2 | (34) | (33) | ||
Profit before exceptionals after tax | 202 | 148 |
63
Notes to the Group financial statements (continued)
1 Performance in the period (continued)
1.4 Profit before exceptionals (continued)
Restructuring and store closure costs
Restructuring and store closure costs totalled £50m and includes:
• £23m of restructuring costs related to McColl’s
;
• £15m of costs related to closure and reorganisation of stores; and
• £12m of costs related to smaller restructuring projects and business closure programmes.
Restructuring and stores closure costs of £18m for the prior period included £6m, £7m and £5m for reorganisations within logistics,
retail and central functions, respectively.
Net finance costs relating to repayment of borrowing
Net finance costs amounted to £nil. Net finance costs of £9m for the prior period related to costs associated with the early repayment
of borrowings of £21m, offset by an interest rate swap credit of £12m, linked to the repaid borrowings.
Transaction costs
In the prior period, transaction costs of £92m were recognised, comprising of £7m of professional fees in connection with the McColl's
transaction, £3m of post-acquisition property and other one-off costs and an £81m write-off of trade and other receivable balances,
mainly as a direct result of the McColl's business entering into administration pre-acquisition, with a further £1m relating to the Market
Bidco Limited acquisition.
Other exceptional items
Other exceptional credit totals £54m (2021/22: a charge of £15m), and this principally relates to legal cases in respect of historical
events, and comprise settlements net of costs incurred.
Taxation
The total tax credit of £1m (2021/22: £8m) includes an exceptional tax credit of £35m largely relating to tax deductible exceptional
costs (2021/22: £41m credit). Tax charge before exceptionals is £34m (2021/22: £33m) which implies a normalised tax rate of 14.5%
(2021/22: 17.5%).
64
Notes to the Group financial statements (continued)
1 Performance in the period (continued)
3 | 2021/ | 22 | |
£m | £m | ||
The following items have been included in arriving at operating profit: | |||
Employee costs (note 1.6) | 2,005 | 2,018 | |
Depreciation and impairment: | |||
Property, plant and equipment (note 3.3) | 463 | 452 | |
Right-of-use assets (note 3.4) | 73 | 66 | |
Investment property (note 3.6) | 3 | 2 | |
Net impairment charge (notes 3.3, 3.4, 3.6 and 4.2) | 171 | 88 | |
Amortisation and impairment: | |||
Intangible assets (note 3.2) | 96 | 89 | |
Net impairment charge (note 3.2) | 5 | 7 | |
Other lease expenses: | |||
Short-term leases longer than one month | 31 | 19 | |
Leases of low-value assets, excluding short-term | 2 | 2 | |
Value of inventories expensed | 13,949 | 14,214 |
2022/23 | 2021/22 | |
£m | £m | |
Marketing and advertising funding | 204 | 169 |
Volume-based rebates | 136 | 116 |
Total commercial income | 340 | 285 |
2022/2023 | 2021/2022 | |
£m | £m | |
Audit services | ||
Fees payable to the Group’s auditor s for the audit of the Group and the Company financial statements 1 | 1.2 | 1. 3 |
Fees payable to the Group’s auditors for the audit of the Group’s subsidiaries pursuant to legislation | 0.9 | 0.8 |
Non-audit services | ||
Other services | 0.5 | 0.1 |
2.6 | 2.2 |
65
Notes to the Group financial statements (continued)
1 Performance in the period (continued)
1.6 Employees and Directors
2022/23 | 2021/22 | |
£m | £m | |
Employee benefit expense for the Group during the period | ||
Wages and salaries | 1,766 | 1,781 |
Social security costs | 132 | 136 |
Share -based payments | 6 | - |
Retirement benefit costs | 101 | 101 |
2,005 | 2,0 18 |
In addition to the amounts disclosed in the table above, there was a £20m exceptional charge relating to restructuring costs (2021/22:
£14m exceptional charge for restructuring costs).
2022/23 | 2021/22 | |
Average monthly number of people, including Directors | ||
Stores | 88,258 | 95,200 |
Manufacturing | 7,865 | 8,599 |
Distribution | 5,783 | 6,570 |
Centre | 2,907 | 3,292 |
104,813 | 113,661 |
Directors’ remuneration
2022/23 | 2021/22 | |
£m | £m | |
Aggregate emoluments, excluding pension contributions | 2. 3 | 3.2 |
Contributions in lieu of pension schemes’ supplements | 0.3 | 0.4 |
Share -based payments | 1. 3 | - |
3.9 | 3.6 |
In addition to the amounts disclosed in the table above, there was
no charge included in exceptional costs for the period
relating to
compensation for loss of office
(2021/22: £2m charge included in exceptional costs for the period
relating to compensation for loss
of office
).
No
Directors are accruing retirement benefits under defined benefit contribution personal pension schemes (2021/22
: none).
Contributions in lieu of pension schemes
’ supplements have been received by two directors over the period (2021/22: four).
Highest paid Director
The highest paid
Director emoluments attributable to the same Director in both periods presented below were as follows:
| 2022/ | 23 | 2021/ | 22 | |
£m | £m | |||
Total amount of emoluments and amounts receivable under long-term incentive schemes | 1.5 | 1.5 | ||
Company contributions in lieu of pension schemes’ supplements | 0.2 | 0.2 | ||
Share-based payments | 1.1 | - | ||
2. 8 | 1.7 |
In addition to the amounts disclosed in the table above, there was no charge included in exceptional costs for the period relating to
compensation for loss of office (2021/22: no charge included in exceptional costs).
66
Notes to the Group financial statements (continued)
1 Performance in the period (continued)
1.6 Employees and Directors (continued)
2022/23 | 2021/22 | |
£m | £m | |
Senior managers | ||
Wages and salaries | 17 | 16 |
Social security costs | 2 | 2 |
Share-based payments | 3 | - |
Retirement benefit costs | 2 | 2 |
24 | 20 |
1.7 Dividends
There have been no dividends paid or declared in this financial period (2021/22: nil).
67
Notes to the Group financial statements (continued)
2022/23 | 2021/22 | |
£m | £m | |
Current tax | ||
UK corporation tax | - | - |
Foreign tax | 1 | 1 |
Adjustments in respect of prior periods | (1) | (9) |
- | (8) | |
Deferred tax | ||
Origination and reversal of timing differences | (1) | (6) |
Adjustments in respect of prior periods | (1) | 11 |
Impact of change in tax rate | 1 | (5) |
(1) | - | |
Tax credit for the period | (1) | (8) |
68
Notes to the Group financial statements (continued)
2 Taxation (continued)
2022/23 | 2021/22 | |
£m | £m | |
Remeasurements of defined benefit retirement schemes and impact of rate change | (68) | (77) |
Cash flow hedges | (114) | 84 |
Total tax (credit)/charge on items included in other comprehensive income and equity (note 2.3) | (182) | 7 |
2022/23 | 2021/22 | |
£m | £m | |
Profit/(loss) before taxation | 51 | (38) |
Profit/(loss) before taxation at 22.5% (30 October 2022: 19%) | 11 | (7) |
Effects of: | ||
Recurring items: | ||
Expenses not deductible for tax purposes | 3 | 4 |
Disallowed depreciation on UK properties | 28 | 21 |
Group relief claimed | (38) | (5) |
Deferred tax related to assets on acquisition | (10) | (25) |
Non-recurring items: | ||
(Profit)/loss on property transactions | (13) | 1 |
Exceptional costs | 19 | 6 |
Adjustments in respect of prior periods | (2) | 2 |
Effect of change in tax rate | 1 | (5) |
Tax credit for the period | (1) | (8) |
2023 | 2022 | |
£m | £m | |
Deferred tax liability | (653) | (832) |
Deferred tax asset | 96 | 92 |
Net deferred tax liability | (557) | (740) |
69
Notes to the Group financial statements (continued)
2 Taxation (continued)
2.3 Deferred tax liabilities (continued)
2022/23 | 2021/22 | |
£m | £m | |
Deferred tax liability to be settled within 12 months | (17) | (10) |
Deferred tax liability to be settled after more than 12 months | (540) | (730) |
(557) | (740) |
70
Notes to the Group financial statements (continued)
3 Operating assets
3.1 Accounting policies
71
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.1 Accounting policies (continued)
72
Notes to the Group financial statements (continued)
3 Operating assets (continued)
Goodwill | Other intangibles | Total | |
Current period | £m | £m | £m |
Cost | |||
At 31 October 2022 | 105 | 601 | 706 |
Additions | - | 8 1 | 8 1 |
Interest capitalised | - | 2 | 2 |
Disposals | - | (4) | (4) |
Fully written down assets | - | (88 ) | (88 ) |
At 29 October 2023 | 105 | 592 | 697 |
Accumulated amortisation and accumulated impairment losses | |||
At 31 October 2022 | - | 290 | 290 |
Amortisation charge for the period | - | 96 | 96 |
Impairment | - | 5 | 5 |
Disposals | - | (4) | (4) |
Fully written down assets | - | (88 ) | (88 ) |
At 29 October 2023 | - | 299 | 299 |
Net book amount at 29 October 2023 | 105 | 2 93 | 398 |
Assets under construction included above | - | 31 | 31 |
73
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.2 Goodwill and intangible assets (continued)
Goodwill | Other intangibles | Total | ||
Prior period | Note | £m | £m | £m |
Cost | ||||
At 1 November 2021 | 10 | 589 | 599 | |
On acquisition of business | 4.3 | 95 | 17 | 112 |
Additions | - | 79 | 79 | |
Interest capitalised | - | 1 | 1 | |
Disposals | - | (15) | (15) | |
Fully written down assets | - | (70) | (70) | |
At 30 October 2022 | 105 | 601 | 706 | |
Accumulated amortisation and accumulated impairment losses | ||||
At 1 November 2021 | - | 279 | 279 | |
Amortisation charge for the period | - | 89 | 89 | |
Impairment | - | 7 | 7 | |
Disposals | - | (15) | (15) | |
Fully written down assets | - | (70) | (70) | |
At 30 October 2022 | - | 290 | 290 | |
Net book amount at 30 October 2022 | 105 | 311 | 416 | |
Assets under construction included above | - | 35 | 35 |
Plant, | |||||
Leasehold | equipment, | ||||
Freehold | Freehold | property | fixtures and | ||
land | buildings | improvements | vehicles | Total | |
Current period | £m | £m | £m | £m | £m |
Cost | |||||
At 31 October 2022 | 3,849 | 4,219 | 592 | 2,734 | 11,394 |
Additions | 12 | 12 | - | 249 | 273 |
Disposals | (283 ) | (350 ) | - | (34 ) | (667) |
Fully written down assets | - | (2) | (10) | (834 ) | (846 ) |
At 29 October 2023 | 3,57 8 | 3,879 | 582 | 2,115 | 10,154 |
Accumulated depreciation and accumulated impairment losses | |||||
At 31 October 2022 | 363 | 2,021 | 374 | 1,299 | 4,057 |
Depreciation charge for the period | - | 10 4 | 14 | 345 | 46 3 |
Impairment | 49 | 26 | 6 | 68 | 149 |
Impairment write back | (9) | (3) | - | (2) | (14) |
Disposals | (24) | (200) | - | (30) | (254) |
Fully written down assets | - | (2) | (10) | (834 ) | (846) |
At 29 October 2023 | 37 9 | 1,9 46 | 384 | 846 | 3,555 |
Net book amount at 29 October 2023 | 3,199 | 1,933 | 198 | 1,269 | 6,599 |
Assets under construction included above | 19 | - | - | 5 | 24 |
74
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.3 Property, plant and equipment (continued)
75
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.3 Property, plant and equipment (continued)
Plant, | ||||||
Leasehold | equipment, | |||||
Freehold | Freehold | property | fixtures and | |||
land | buildings | improvements | vehicles | Total | ||
Prior period | Note | £m | £m | £m | £m | £m |
Cost | ||||||
At 1 November 2021 | 3,848 | 4,215 | 634 | 2,461 | 11,158 | |
On acquisition of business | 4.3 | - | 2 | - | 70 | 72 |
Additions | 11 | 14 | 1 | 437 | 463 | |
Interest capitalised | - | - | - | 1 | 1 | |
Disposals | (10) | (6) | (1) | (4) | (21) | |
Fully written down assets | - | (6) | (42) | (231) | (279) | |
At 30 October 2022 | 3,849 | 4,219 | 592 | 2,734 | 11,394 | |
Accumulated depreciation and accumulated impairment | ||||||
losses | ||||||
At 1 November 2021 | 331 | 1,968 | 400 | 1,132 | 3,831 | |
Depreciation charge for the period | - | 110 | 16 | 326 | 452 | |
Impairment | 138 | 44 | 12 | 82 | 276 | |
Impairment write back | (100) | (90) | (12) | (6) | (208) | |
Disposals | (6) | (5) | - | (4) | (15) | |
Fully written down assets | - | (6) | (42) | (231) | (279) | |
At 30 October 2022 | 363 | 2,021 | 374 | 1,299 | 4,057 | |
Net book amount at 30 October 2022 | 3,486 | 2,198 | 218 | 1,435 | 7,337 | |
Assets under construction included above | 10 | - | - | 37 | 47 |
Leased plant, | |||
equipment, | |||
| Leasehold land | fixtures and | ||
| and buildings | vehicles | Total | |
Current period | £m | £m | £m |
Cost | |||
At 31 October 2022 | 1,85 3 | 9 7 | 1,950 |
Additions | 401 | 4 | 405 |
Fully written down assets | (59) | (26) | (8 5) |
At 29 October 2023 | 2,195 | 75 | 2,270 |
Accumulated depreciation and accumulated impairment losses | |||
At 31 October 2022 | 1,006 | 55 | 1,061 |
Depreciation charge for the period | 56 | 17 | 73 |
Impairment | 14 | - | 14 |
Fully written down assets | (59) | (26) | (8 5) |
At 29 October 2023 | 1,01 7 | 46 | 1,063 |
Net book amount at 29 October 2023 | 1,178 | 29 | 1,2 07 |
76
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.4 Right-of-use assets (continued)
Leased plant, | |||
equipment, | |||
Leasehold land | fixtures and | ||
and buildings | vehicles | Total | |
Prior period | £m | £m | £m |
Cost | |||
At 1 November 2021 | 1,841 | 102 | 1,943 |
Additions | 29 | 4 | 33 |
Disposals | - | (1) | (1) |
Fully written down assets | (17) | (8) | (25) |
At 30 October 2022 | 1,853 | 97 | 1,950 |
Accumulated depreciation and accumulated impairment losses | |||
At 1 November 2021 | 956 | 47 | 1,003 |
Depreciation charge for the period | 50 | 16 | 66 |
Impairment | 51 | - | 51 |
Impairment write back | (34) | - | (34) |
Fully written down assets | (17) | (8) | (25) |
At 30 October 2022 | 1,006 | 55 | 1,061 |
Net book amount at 30 October 2022 | 847 | 42 | 889 |
| 2022/ | 23 | 2021/ | 22 | |
£m | £m | |||
At start of period | - | 1 | ||
Disposals | - | (1) | ||
At the end of the period | - | - |
77
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.6 Investment property
Freehold | Leasehold | Total | |
Current period | £m | £m | £m |
Cost | |||
At 31 October 2022 | 42 | 119 | 161 |
Additions | - | 2 | 2 |
Disposals | (1) | - | (1) |
Fully written down assets | - | (1) | (1) |
At 29 October 2023 | 4 1 | 12 0 | 161 |
Accumulated depreciation and accumulated impairment losses | |||
At 31 October 2022 | 24 | 79 | 103 |
Depreciation charge for the period | 1 | 2 | 3 |
Impairment charge | - | 1 8 | 1 8 |
Disposals | - | - | - |
Fully written down assets | - | (1) | (1) |
At 29 October 2023 | 25 | 9 8 | 123 |
Net book amount at 29 October 2023 | 16 | 2 2 | 38 |
Included in other operating income is £12m (2021/22: £9m) of rental income generated from investment properties. At the end of the
period the fair value of freehold investment properties was £35m (2022: £25m), with leasehold investment properties supported by
their value-in-use. Freehold investment properties are valued by independent surveyors on a vacant possession basis using
observable inputs (fair value hierarchy level 2).
Freehold | Leasehold | Total | |
Prior period | £m | £m | £m |
Cost | |||
At 1 November 2021 | 43 | 124 | 167 |
Additions | - | 2 | 2 |
Disposals | (1) | - | (1) |
Fully written down assets | - | (7) | (7) |
At 30 October 2022 | 42 | 119 | 161 |
Accumulated depreciation and accumulated impairment losses | |||
At 1 November 2021 | 21 | 85 | 106 |
Depreciation charge for the period | 1 | 1 | 2 |
Impairment charge | 3 | - | 3 |
Disposals | (1) | - | (1) |
Fully written down assets | - | (7) | (7) |
At 30 October 2022 | 24 | 79 | 103 |
Net book amount at 30 October 2022 | 18 | 40 | 58 |
2023 | 2022 | |
£m | £m | |
Finance leases – Group is lessor | 8 | 7 |
Other receivables | 8 4 | 79 |
92 | 86 |
78
Notes to the Group financial statements (continued)
3 Operating assets (continued)
3.7 Trade and other receivables – non-current (continued)
2022/23 | 2021/22 | |
£m | £m | |
Less than one year | 1 | 1 |
After one year but not more than five years | 4 | 4 |
More than five years | 5 | 5 |
Total undiscounted lease payments | 10 | 10 |
Unearned finance income | (2) | (3 ) |
Net investment in the lease | 8 | 7 |
2022/23 | 2021/22 | |
£m | £m | |
Less than one year | 11 | 7 |
One to two years | 8 | 5 |
Two to three years | 5 | 5 |
Three to four years | 5 | 4 |
Four to five years | 3 | 3 |
More than five years | 21 | 16 |
Total undiscounted lease payments receivable | 53 | 40 |
2023 | 2022 | |
£m | £m | |
Contracts placed for future capital expenditure not provided in the financial statements | ||
(property, plant and equipment, right -of-use assets and intangible assets) | 1 08 | 47 |
Contracts placed for future leases not provided in the financial statements | 12 | 19 |
79
Notes to the Group financial statements (continued)
2023 | 2022 | |
£m | £m | |
At start of period | 27 | 31 |
Additions | - | 4 |
Impairment | (4) | - |
Share of movement in retained earnings | (9) | (8) |
At end of period | 14 | 27 |
80
Notes to the Group financial statements (continued)
4 Interests in other entities (continued)
4.2 Investments in joint ventures (continued)
Yes Recycling Ltd | MHE JVCo Limited | Yes Recycling Ltd | MHE JVCo Limited | |
2023 | 2023 | 2022 | 2022 | |
£m | £m | £m | £m | |
Non -current assets | - | 11 | 5 | 15 |
Current assets | - | 21 | - | 33 |
Non-current liabilities | - | - | (5) | - |
Current liabilities | - | (5) | (2) | (2) |
Net assets/(liabilities) | - | 27 | (2) | 46 |
Group’s share of net assets/(liabilities) | - | 14 | (1) | 23 |
Loss after tax | - | (2) | (2) | - |
Group’s share of loss after tax | - | (1) | (1) | - |
| 202 | 2 | ||
£m | |||
Cash | 4 | ||
Inventory | 9 | ||
Other debtors | 4 | ||
Property, plant and equipment | 72 | ||
Software intangible assets | 11 | ||
Defined benefit pension assets | 11 | ||
Vehicle finance leases | (1) | ||
Provisions | (7) | ||
Franchise asset / reacquired rights | 6 | ||
Deferred tax liability | (3) | ||
Net identifiable assets acquired | 106 | ||
Goodwill | 95 | ||
Net assets acquired | 201 | ||
Purchase consideration | 2 |
£m | |
Cash paid | 191 |
Deferred consideration | 1 |
Additional cost of acquiring the business | 9 |
Total purchase consideration 1 | 201 |
81
Notes to the Group financial statements (continued)
4 Interests in other entities (continued)
4.3 Business combinations (continued)
82
Notes to the Group financial statements (continued)
5 Working capital and provisions
5.1 Accounting policies
83
Notes to the Group financial statements (continued)
5 Working capital and provisions (continued)
2023 | 2022 | |
£m | £m | |
Raw materials | 50 | 57 |
Finished goods | 868 | 933 |
918 | 990 |
2023 | 2022 | |
£m | £m | |
Commercial income trade receivables | 33 | 4 |
Accrued commercial income | 38 | 46 |
Other trade receivables | 108 | 116 |
Less: provision for impairment of trade receivables | (3) | (8) |
Trade receivables | 176 | 1 58 |
Prepayments and accrued income | 187 | 191 |
Other receivables | 17 | 25 |
380 | 374 |
1 to 30 days | 31 to 60 days | 61 to 90 days | 91 days plus | |||
Current | past due | past due | past due | past due | Total | |
Current period | %/£m | %/£m | %/£m | %/£m | %/£m | £m |
Expected credit loss rate | 0% | 1% | 2% | 81% | 100% | |
Gross carrying amount – trade receivables | 172 | 3 | 1 | 1 | 2 | 179 |
Provision for impairment of trade receivables | - | - | - | (1) | (2) | (3) |
1 to 30 days | 31 to 60 days | 61 to 90 days | 91 days plus | |||
Current | past due | past due | past due | past due | Total | |
Prior period | %/£m | %/£m | %/£m | %/£m | %/£m | £m |
Expected credit loss rate | 0.20% | 4% | 13% | 50% | 100% | |
Gross carrying amount – trade receivables | 152 | 11 | 1 | 1 | 1 | 166 |
Provision for impairment of trade receivables | (6 ) | (1) | - | - | (1) | (8) |
2023 | 2022 | |
£m | £m | |
Trade payables | (2,919) | (3,018) |
Less: commercial income due, offset against amounts owed | 55 | 26 |
(2,864 ) | (2,992) | |
Other taxes and social security payable | (87) | (45) |
Other payables | (111 ) | (169) |
Accruals and deferred income | (379 ) | (246) |
(3,441) | (3,452) |
84
Notes to the Group financial statements (continued)
5 Working capital and provisions (continued)
Onerous | Other | ||
| contracts | provisions | Total | |
£m | £m | £m | |
At 31 October 2022 | (38) | (5) | (43) |
Charged for the period | (41) | (5 ) | (46 ) |
Utilised during the period | 22 | 3 | 25 |
Released during the period | - | 1 | 1 |
At 29 October 2023 | (57) | (6 ) | (63) |
5.6 Cash generated from operations
2023 | 2022 | |
£m | £m | |
Operating profit | 89 | 18 |
Adjustments for: | ||
Depreciation and amortisation | 635 | 609 |
Impairment | 190 | 337 |
Impairment write back | (14) | (242) |
Management Incentive Plan (MIP) | 6 | - |
Profit arising on disposal and exit of properties | (13) | (13) |
Defined benefit scheme contributions paid less operating expenses | (6) | (6) |
Derivatives settlement unwind | (45) | (105) |
Settlement of share awards | - | (48) |
Decrease/(increase) in inventories | 72 | (88) |
(Increase)/decrease in trade and other receivables | (12) | 1 |
Increase in trade and other payables | 44 | 284 |
Increase/(decrease) in provisions | 20 | (12) |
Cash generated from operations | 96 6 | 735 |
Cash generated from operations of £966m (2022: £735m) is stated after paying £58m in relation to exceptional items (2022: £97m).
85
Notes to the Group financial statements (continued)
6 Capital and borrowings
6.1 Accounting policies
86
Notes to the Group financial statements (continued)
6 Capital and borrowings (continued)
2022/23 | 2021/22 | |
Finance costs | £m | £m |
Interest payable on short -term loans and bank overdrafts | (1) | (2) |
Interest payable on bonds | (4) | (10) |
Interest on lease liabilities | (74) | (57) |
Interest capitalised | 2 | 2 |
Total interest payable | (77) | (67) |
Finance costs before exceptionals 1 | (77) | (67) |
Costs associated with the repayment of borrowings | - | (21) |
Finance costs | (77) | (88) |
Finance income | ||
Bank interest and other finance income | 4 | 1 |
Other receivables: unwinding of discount | 3 | 2 |
Finance income before exceptionals 1 | 7 | 3 |
Credit associated with the repayment of borrowings | - | 12 |
Net retirement benefit interest (note 8.2) | 33 | 18 |
Finance income | 40 | 33 |
Net finance costs | (37) | (55) |
2023 | 202 | 2 | |
Non-current | £m | £m | |
£400m sterling bonds 3.50% July 2026 | (39) | (39) | |
£300m sterling bonds 4.75% July 2029 | (45) | (45) | |
(84) | (84) |
87
Notes to the Group financial statements (continued)
6 Capital and borrowings
(continued)
6.3 External borrowings (continued)
2023 | 2022 | |
£m | £m | |
Less than one year | (3) | (3 ) |
One to two years | (3) | (3 ) |
Two to three years | (40) | (3 ) |
Three to four years | (2) | (40 ) |
Four to five years | (2) | (2 ) |
More than five years | (47) | (49 ) |
2023 | 2022 | |||
Amortised cost | Fair value | Amortised cost | Fair value | |
£m | £m | £m | £m | |
Total external borrowings: non-current and current | (84) | (54) | (84) | (64) |
2023 | 2022 | |
£m | £m | |
Loan from parent undertaking | (882) | (1,843) |
6.5 Lease liabilities
2023 | 2022 | |
£m | £m | |
Current lease liabilities | (82) | (73) |
Non-current lease liabilities | (1,593) | (1,239) |
(1,675 ) | (1,312) |
Maturity of lease liabilities
The table below summarises the maturity profile of the Group’s lease liabilities based on contractual, undiscounted payments.
2023 | 2022 | |
£m | £m | |
Less than one year | (168) | (129 ) |
One to two years | (164) | (121 ) |
Two to three years | (160) | (118 ) |
Three to four years | (153) | (115) |
Four to five years | (150) | (108) |
More than five years | (1,940) | (1,420) |
88
Notes to the Group financial statements (continued)
6 Capital and borrowings
(continued)
6.5 Lease liabilities (continued)
Maturity of lease liabilities (continued)
2023 | 2022 | ||
Note | £m | £m | |
Fuel and energy price contracts | 7.3 | - | 128 |
Non-current financial assets | - | 128 | |
Foreign exchange forward contracts | 7.3 | 5 | 17 |
Fuel and energy price contracts | 7.3 | 2 6 | 342 |
Current financial assets | 31 | 359 | |
Lease liabilities 1 | 6. 5 | (82) | (73) |
Foreign exchange forward contracts | 7.3 | (2) | (3) |
Fuel and energy price contracts | 7.3 | (11 ) | - |
Current financial liabilities | (95) | (76) | |
Bonds 1 | 6.3 | (84) | (84) |
Loans from group undertakings 1 | 6. 4 | (882) | (1,843 ) |
Lease liabilities 1 | 6. 5 | (1, 593) | (1,239) |
Fuel and energy price contracts | 7.3 | (2) | - |
Non-current financial liabilities | (2,561) | (3,166 ) | |
Cash and cash equivalents | 279 | 287 | |
Net debt 1 | (2,346) | (2,468) |
89
Notes to the Group financial statements (continued)
6 Capital and borrowings (continued)
6.6 Analysis of net debt
1
(continued)
2023 | 2022 | |
£m | £m | |
Financing activities: | ||
| Cash outflow from repayment of borrowings | - | 1,859 |
| Cash outflow/(inflow) on loan from parent undertaking | 961 | (1,843) |
| Cash outflow from repayment of lease liabilities | 97 | 78 |
Non-cash movements on lease liabilities 2 | (460 ) | (33 ) |
Other financing non-cash movements | (10 ) | 4 |
Net decrease from financing activities | 588 | 65 |
Other non -cash movements 3 | (458 ) | 430 |
Net decrease in cash and cash equivalents | (8) | (9) |
Opening net debt 1 | (2,468) | (2,954) |
Closing net debt 1 | (2,346 ) | (2,468) |
Number of | ||||
shares | Share capital | Share premium | Total | |
millions | £m | £m | £m | |
At 30 October 2022 and 29 October 2023 | 2,451 | 245 | 253 | 498 |
90
Notes to the Group financial statements (continued)
6 Capital and borrowings (continued)
2023 | 2022 | |
£m | £m | |
Capital redemption reserve | 39 | 39 |
Merger reserve | 2,578 | 2,578 |
Hedging reserve | 33 | 373 |
Retained earnings 1 | 535 | 685 |
Total | 3,185 | 3,675 |
6.9 Capital management
The Group defines the capital that it manages as the Group’s total equity and net debt balances.
The Group's capital management objective is to safeguard its viability taking into consideration the risks that it faces. During the
financial period, the Group did this by maintaining adequate liquidity headroom, along with managing the capital structure and debt
outstanding. The Group has secured and unsecured debt, maintaining significant assets that do not hold a fixed charge over them.
Managing the Group's credit rating, maintaining liquidity headroom and monitoring cash generation continue to be key elements of
the Group's capital management activity.
91
Notes to the Group financial statements (continued)
7 Financial risk and hedging
92
Notes to the Group financial statements (continued)
7 Financial risk and hedging (continued)
7.2 Financial risk management (continued)
Cash and committed facilities (continued)
93
Notes to the Group financial statements (continued)
7 Financial risk and hedging (continued)
2023 | 2023 | 2022 | 2022 | |
Fair Value | Notional Value | Fair Value | Notional Value | |
Derivative financial assets | £m | £m | £m | £m |
Current | ||||
Foreign exchange forward contracts | 5 | 377 | 17 | 304 |
Fuel and energy price contracts | 2 6 | 58 | 342 | 107 |
31 | 435 | 359 | 411 | |
Non-current | ||||
Foreign exchange forward contracts | - | 2 | - | - |
Fuel and energy price contracts | - | 14 | 128 | 38 |
- | 16 | 128 | 38 |
2023 | 2023 | 2022 | 2022 | |
Fair Value | Notional Value | Fair Value | Notional Value | |
Derivative financial liabilities | £m | £m | £m | £m |
Current | ||||
Foreign exchange forward contracts | (2) | (172) | (3) | (105) |
Fuel and energy price contracts | (11) | (63) | - | (3) |
(13 ) | (235) | (3) | (108) | |
Non-current | ||||
Foreign exchange forward contracts | - | (8) | - | - |
Fuel and energy price contracts | (2) | (26) | - | - |
(2) | (34) | - | - |
2023 | 2022 | |||
£m | £m | |||
Maturity analysis of derivatives | < 1 year | 1-5 years | < 1 year | 1-5 years |
Derivatives settled on a gross basis | ||||
Forward contracts – cash flow hedges: | ||||
Outflow | (383) | (4) | (397) | - |
Inflow | 385 | 4 | 411 | - |
Derivatives settled on a net basis | ||||
Fuel and energy price contracts – cash flow hedges: | ||||
Inflow | 17 | (2) | 368 | 102 |
94
Notes to the Group financial statements (continued)
8 Retirement benefits
2023 | 2022 | |
£m | £m | |
CARE Schemes | 421 | 639 |
RSP | 31 | 50 |
McColl’s Schemes | 1 | 2 |
Net retirement benefit surplus | 453 | 691 |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |
CARE | RSP | McColl’s | CARE | RSP | McColl’s | |
Statement of financial position | £m | £m | £m | £m | £m | £m |
Fair value of scheme assets | 2,815 | 270 | 85 | 3,344 | 323 | 95 |
Present value of obligations | (2,394) | (239) | (84) | (2,705) | (273) | (93) |
Net retirement benefit surplus | 421 | 31 | 1 | 639 | 50 | 2 |
95
Notes to the Group financial statements (continued)
8 Retirement benefits
(continued)
8.2 Defined benefit schemes: summary and description (continued)
2022/23 | 2022/23 | 2022/23 | 2021/22 | 2021/22 | 2021/22 | |
CARE | RSP | McColl’s | CARE | RSP | McColl’s | |
Consolidated income statement: | £m | £m | £m | £m | £m | £m |
Administrative costs paid by the Schemes 1 | 3 | 1 | 1 | 5 | 2 | 1 |
Net interest on net retirement benefit surplus 1 | (31) | (2) | - | (18) | - | - |
Total expense (credited)/charged to income statement | (28) | (1) | 1 | (13) | 2 | 1 |
Consolidated statement of other comprehensive income: | ||||||
Remeasurements in other comprehensive income – | ||||||
charged/(credited) | 246 | 24 | 2 | 372 | (72) | 9 |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |
CARE | RSP | McColl’s | CARE | RSP | McColl’s | |
£m | £m | £m | £m | £m | £m | |
Equities (quoted) | 2 | - | - | 3 | - | - |
Corporate bonds (quoted) | 2 | 126 | 38 | 995 | 149 | 32 |
Infrastructure (unquoted) | - | - | 4 | - | - | 8 |
Credit funds (unquoted) | 356 | - | 8 | 361 | - | 13 |
Liability driven investments (unquoted) 1 | 48 | 139 | 32 | 1,268 | 107 | 40 |
Annuity policies (unquoted) | 2,391 | - | - | 685 | - | - |
Cash (quoted) | 152 | 5 | 3 | 32 | 67 | 2 |
Premium due to insurers (unquoted) | (136) | - | - | - | - | - |
2,815 | 270 | 85 | 3,344 | 323 | 95 |
96
Notes to the Group financial statements (continued)
8 Retirement benefits (continued)
8.3 Scheme assets (continued)
Liability driven investments (‘LDI’) (continued)
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |
CARE | RSP | McColl’s | CARE | RSP | McColl’s | |
£m | £m | £m | £m | £m | £m | |
Fair value of scheme assets at start of period | 3,34 4 | 323 | 95 | 5,259 | 417 | - |
Transfer of McColl’s pension schemes | - | - | - | - | - | 121 |
Interest income | 155 | 15 | 4 | 96 | 8 | 2 |
Return on scheme assets excluding interest | (568) | (58) | (9) | (1,878 ) | (97) | (25) |
Employer contributions | 1 | 4 | 2 | 3 | 8 | 1 |
Benefits paid | (114) | (13) | (6) | (131) | (11) | (3) |
Administrative expenses | (3) | (1) | (1) | (5) | (2) | (1) |
Fair value of scheme assets at end of period | 2,815 | 270 | 85 | 3,34 4 | 323 | 95 |
97
Notes to the Group financial statements (continued)
8 Retirement benefits (continued)
8.3 Scheme assets (continued)
Scottish Limited Partnership (continued)
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |
CARE | RSP | McColl’s | CARE | RSP | McColl’s | |
£m | £m | £m | £m | £m | £m | |
Defined benefit obligation at start of period | (2,705) | (273) | (93) | (4,264) | (445) | - |
Transfer of McColl’s pension schemes | - | - | - | - | - | (110) |
Interest expense | (125) | (13) | (4) | (78) | (8) | (2) |
Actuarial gain/(loss)– demographic assumptions | 53 | - | 2 | (5) | - | - |
Actuarial gain – financial assumptions | 346 | 34 | 7 | 1,591 | 162 | 18 |
Actuarial (loss)/gain – experience | (77) | - | (2) | (80) | 7 | (2) |
Benefits paid | 114 | 13 | 6 | 131 | 11 | 3 |
Defined benefit obligation at end of period | (2,394) | (239) | (84) | (2,705) | (273) | (93) |
Financial assumptions | 2023 | 2022 |
Discount rate applied to scheme liabilities (% p.a.) | ||
Safeway CARE Scheme | 5.7% | 4.7% |
Morrisons CARE Scheme | 5.7% | 4.7% |
RSP | 5.7% | 4.7% |
McColl’s | 5.7% | 4.8% |
Inflation assumption (RPI) (% p.a.) | ||
Safeway CARE Scheme | 3.4% | 3.5% |
Morrisons CARE Scheme | 3.4% | 3.5% |
RSP | 3.4% | 3.4% |
McColl’s | 3.5% | 3.5% |
Life expectancies (CARE) | 2023 | 2022 | ||
Longevity in years from age 65 for current pensioners | CARE | CARE | ||
Safeway | Morrisons Safeway | Morrisons | ||
Male | 20.1 | 19.7 | 20.6 | 20.3 |
Female | 22.4 | 23.1 | 22.9 | 23.6 |
Longevity in years from age 65 for current members aged 45 | ||||
Male | 21.8 | 21.4 | 22.4 | 22.0 |
Female | 24.2 | 24.9 | 24.8 | 25.4 |
98
Notes to the Group financial statements (continued)
8 Retirement benefits
(continued)
8.4 Present value of obligations (continued)
8.4.1 Significant actuarial assumptions (continued)
Life expectancies (McColl’s) | 2023 | 2022 |
Longevity in years from age 65 for current pensioners | ||
Male | 20.8 | 21.3 |
Female | 23.1 | 23.6 |
Longevity in years from age 65 for current members aged 45 | ||
Male | 22.4 | 22.9 |
Female | 24.8 | 25.3 |
2023 | 2022 | |
Rate of increase of retirement benefits in payment: RPI inflation | ||
capped at either 2.5% p.a. or 5% p.a. (% p.a.) | ||
Safeway CARE Scheme | 2.2%/3.2% | 2.2%/3.3% |
Morrison s CARE Scheme | 2.2%/3.2% | 2.2%/3.3% |
RSP | - | - |
McColl’s | 2.2%/3.3% | 2.2%/3.3% |
Rate of increase of retirement benefits in deferment: CPI inflation | ||
capped at either 2.5% p.a. or 5% p.a. (% p.a.) | ||
Safeway CARE Scheme | - /2.8% | - /2.9% |
Morrison s CARE Scheme | -/2.8% | - /2.9% |
RSP | 2.5%/- | 2.5%/ - |
McColl’s | - /2.9% | - /2.9% |
CPI inflation (% p.a.) | ||
Safeway CARE Scheme | 2.8% | 2.9% |
Morrison s CARE Scheme | 2.8% | 2.9% |
RSP | 2.8% | 2.8% |
McColl’s | 2.9% | 2.9% |
99
Notes to the Group financial statements (continued)
8 Retirement benefits (continued)
8.4 Present value of obligations (continued)
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | ||
CARE | RSP | McColl’s’ | CARE | RSP | McColl’s’ | ||
Discount rate applied to Scheme | -/+3 0 | - /+5 | -/+ 1 | - /+35 | - /+5 | - /+2 | |
obligations | +/- 0.1% p.a. | ||||||
Inflation assumption (RPI and associated assumptions) | +/- 0.1% p.a. | +/- 20 | +/- 0 | +/- 0 | +/- 20 | +/- 0 | +/- 0 |
Longe vity | + one year | +55 | n/a | + 2 | +60 | n/a | +3 |
100
Notes to the Group financial statements (continued)
9 Share-based payments
Management Incentive Plan (‘MIP’)
Following the completion of CD&R acquisition of the Group in 2022, certain employees of the Group, including Directors and members
of key management, were invited to invest in Preference and Ordinary shares of the ultimate parent company, Market Topco Limited.
The share purchases were transacted in September 2022, funded through a combination of an ex-gratia bonus payment and a
proportionate level of personal funds, plus additional voluntary personal investment.
Under the terms of the MIP, a total £17m of shares were purchased, of which £7m were funded via the ex-gratia bonus payment.
The acquired shares comprised £15m of Preference Shares and £2m of Ordinary shares across different classes. £5m of the ex-
gratia bonus payments were made to Directors and senior management, who purchased £11m of shares in total.
The B Preference and B Ordinary shares have the same rights as the equivalent A shares held by the principal investor shareholders
of Market Topco Limited. The B Preference shares accrue dividends at 10% which compound annually and are redeemable at the
discretion of the Company or on completion of an exit.
In all cases the shares are assessed as equity settled and will vest in full on completion of an exit, such as a listing or sale, with
management’s estimate of the vesting period being five years.
The cost of the Preference shares has been assessed as a reasonable proxy for fair value and, to the extent those shares were
funded by the ex-gratia bonus, this amount will be charged to the income statement over the estimated vesting period. This gave rise
to an immaterial in-year charge for the current period, given the short period of time elapsing between the effective grant/acquisition
date and the period end.
The attributable in-year share-based payment charge on the Ordinary shares was £6m, of which £2m is attributable to Directors and
Senior Management.
101
Notes to the Group financial statements (continued)
10 Other
102
Notes to the Group financial statements (continued)
10 Other (continued)
10.3 Post-balance sheet events
Directors resignation and appointment
David Potts resigned as Director and Chief Executive Officer of the Company on 1 November 2023 and Rami Baitiéh joined the
Group as Chief Executive Officer ('CEO') in October 2023, appointed as Director on 30 October 2023.
Sale of petrol forecourt business
On 30 January 2024, the Group agreed the sale of its petrol forecourt business to Motor Fuel Group (“MFG”) for £2.5bn. This
consideration includes a 20% equity stake in MFG. The transaction also forms a new strategic partnership between MFG and the
Group which will see Ultra-Rapid EV charging infrastructure rolled out across the Morrisons estate. The forecourts will continue to be
branded Morrisons and food and groceries will be supplied by the Group. This represents a non-adjusting post-balance sheet event
under IAS 8.
As part of the takeover by CD&R in 2021, a Memorandum of Understanding committed the Group to providing additional property
security to the CARE Schemes and the RSP in a new arrangement, taking the total value of property security supporting these
Schemes to at least £660m. In January 2024, an additional Memorandum of Understanding has been agreed releasing all the
additional property assets agreed in 2021, except for four properties. Properties not returned have been substituted into an existing
arrangement.
10.4 Ultimate parent undertaking controlling party
The ultimate parent undertaking and controlling party of the Wm Morrison Supermarkets Limited Group is Market Topco Limited . The
immediate parent undertaking is Market Bidco Limited . Market Topco Limited and Market Bidco Limited were incorporated by Clayton,
Dubilier and Rice's Fund XI for the purposes of acquiring Wm Morrison Supermarkets Limited. The investment into Market Topco
Limited was made by a vehicle owned by Clayton, Dubilier & Rice Fund XI, L.P. and certain commonly-managed parallel and related
investment vehicles thereof.
In addition to Market Bidco Limited and Market Topco Limited, the following five entities are controlled by Market Topco Limited and
form part of the corporate structure above Wm Morrison Supermarkets Limited: Market Holdco 1 Limited; Market Holdco 2 Limited;
Market Holdco 3 Limited; Market Bidco Finco Plc; Market Parent Finco Plc.
The smallest group at which consolidated financial statements are prepared is Market Bidco Limited, a company incorporated in
England and Wales. The largest group at which consolidated financial statements are prepared is Market Topco Limited, a company
incorporated in England and Wales. The registered office address of these companies is the same as that of Wm Morrison
Supermarkets Limited. The consolidated Financial Statements of these groups are available to the public and may be obtained from
the Company Secretary, Wm Morrison Supermarkets Limited, Hilmore House, Gain Lane, Bradford, West Yorkshire, United Kingdom,
BD3 7DL.
103
Wm Morrison Supermarkets Limited
Company statement of financial position
As at 29 October 2023
Note
2023
£m
2022 (restated)
2
£m
Fixed assets
Intangible assets
11.6
276
290
Property, plant and equipment
11.7
2,047
2,385
Right-of-use assets
11.8
1,040
1,003
Investment property
11.9
24
26
Investment
in subsidiaries
11.10
718
718
Investments – loans from group undertakings falling due after more than one year
11.10
201
201
Investments in joint ventures
11.11
14
27
4,320
4,650
Current assets
Inventories
495
581
Debtors – amounts falling due within one year
11.12
6,801
8,361
Debtors – amounts falling due after more than one year
11.13
12
7
Pension asset due after more than one year
11.2
1
103
298
Derivative financial assets due within one year
11.17
34
359
Derivative financial assets due after more than one year
11.17
-
128
Current tax asset
2
16
Cash and cash equivalents
214
224
7,661
9,974
Creditors – amounts falling due within one year
11.14
(6,210)
(7,441)
Lease liabilities
due within one year
11.16
(79)
(74)
Derivative financial liabilities due within one year
11.17
(16)
(3)
Loan from parent undertaking
11.18
(882)
(1,843)
(7,187)
(9,361)
Net current assets
474
613
Total assets less current liabilities
4,794
5,263
Creditors – amounts falling due after more than one year
11.15
(84)
(84)
Lease liabilities due after more than one year
11.16
(1,579)
(1,424)
Derivative financial liabilities due after more than one year
11.17
(2)
-
Deferred tax liabilities
11.19
(151)
(313)
Provisions for liabilities
11.20
(63)
(43)
(1,879)
(1,864)
Net assets
2,915
3,399
Shareholders’ equity
Share capital
11.2
2
245
245
Share premium
11.2
2
253
253
Capital redemption reserve
11.2
3
39
39
Merger reserve
11.23
940
940
Hedging reserve
11.23
33
373
Retained earnings
1
11.2
3
1,405
1,549
Total shareholders’ funds
2,915
3,399
1 Included within retained earnings is profit after tax of £24m (2022: £123m loss). After adjusting for exceptionals, profit before exceptionals after tax is £136m (2022:
£14m). 2 See note 11.10 for details of the restatement.
The accounting policies on pages 105 to 107 and the notes on pages 107 to 123 form part of these financial statements. The financial
statements on pages 103 to 123 were approved by the Board of Directors and authorised for issue on 30 January 2024. They were
signed on its behalf by:
Joanna Goff, Chief Financial Officer
Company registration number: 00358949
104
Wm Morrison Supermarkets Limited
Company statement of changes in equity
52 weeks ended 29 October 2023
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
Total
shareholders’
funds
£m
Current period
At 31 October 2022
245
253
39
940
373
1,549
3,399
Loss for the
period
-
-
-
-
-
24
24
Other
comprehensive (expense)/ income:
Cash flow hedging movement
-
-
-
-
(454)
-
(454)
Remeasurement of defined benefit schemes
11.2
1
-
-
-
-
-
(207)
(207)
Tax in relation to components of other
comprehensive income
11.1
9
-
-
-
-
114
39
1
53
Total comprehensive (expense)
/ income for
the period
-
-
-
-
(340)
(144
)
(484
)
Employee share option schemes:
Share options exercised 6.
7
-
-
-
-
-
-
-
Total transactions with owners
-
-
-
-
-
-
-
At 29 October 2023
245
253
39
940
33
1,405
2,915
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
Total
shareholders’
funds
£m
Prior period
At
1 November 2021
245
252
39
940
122
1,729
3,327
Loss for the period
-
-
-
-
-
(123)
(123)
Other comprehensive income/(expense):
Cash flow hedging movement
-
-
-
-
335
-
335
Remeasurement of defined benefit schemes
11.2
1
-
-
-
-
-
(73)
(73)
Tax in relation to components of other
comprehensive income
11.1
9
-
-
-
-
(84)
1
6
(68
)
Total comprehensive income/(expense) for
the period
-
-
-
-
251
(180
)
71
Employee share option schemes:
Share options exercised
6.
7
-
1
-
-
-
-
1
Total transactions with owners
-
1
-
-
-
-
1
At 30 October 2022
245
253
39
940
373
1,549
3,399
The accounting policies on pages 105 to 107 and the notes on pages 107 to 123 form part of these financial statements.
105
Wm Morrison Supermarkets Limited
General Information
11 Company financial statements
11.1 Company information
The principal activity of Wm Morrison Supermarkets Limited (the ‘Company’) is the operation of retail supermarket stores
and associated activities under the Morrisons brand. The Company is a private company limited by shares, incorporated and
domiciled in the United Kingdom. The address of its registered office is Hilmore House, Gain Lane, Bradford, BD3 7DL, United
Kingdom.
11.2 Basis of preparation
The financial statements have been prepared for the 52 weeks ended 29 October 2023 (52 weeks ended 30 October 2022). In
preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
International Financial Reporting Standards (‘IFRS’) as adopted by the UK (UK-adopted international accounting standards), but
makes amendments where necessary in order to comply with the Companies Act 2006 and to take advantage of FRS 101 disclosure
exemptions. The disclosure exemptions adopted by are as follows:
a) IFRS 2 ‘Share-based payment’ (paragraphs 45(b) and 46 to 52) – details of the number and weighted-average exercis
e
prices of share options, and how the fair value of goods or services received was determined;
b) IFRS 7 ‘Financial Instruments: Disclosures’;
c) IFRS 13 ‘Fair value measurement’ (paragraphs 91 to 99) – disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities;
d) IFRS 16 ‘Leases’:
(i) paragraph 52 (single lease disclosure note);
(ii
) paragraph 58 (maturity analysis); and
(iii) the second sentence of paragraph 89, paragraphs 90-91, 93 (lessor disclosures);
e) IAS 1 ‘Presentation of financial statements’ (paragraph 38) – comparative information requirements in respect of:
(i) paragraph 79(a)(iv) of IAS 1;
(ii) paragraph 73(e) of IAS 16 ‘Property, plant and equipment’;
(iii
) paragraph 118(e) of IAS 38 ‘Intangible assets’ – reconciliations between the carrying amount at the beginning and end of the
period; and
(iv) paragraphs 76 and 79(d) of IAS 40 ‘Investment property’;
f) The following paragraphs of IAS 1 ‘Presentation of financial statements’:
(i) 10(d) (statement of cash flows);
(ii) 111 (cash flow statement information); and
(iii) 134-136 (capital management disclosures);
g) IAS 7 ‘Statement of cash flows’;
h) IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (paragraphs 30 and 31) – requirement for the
disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective;
i) The following requirements of IAS 24 ‘Related party disclosures’:
(i) paragraph 17 – key management compensation; and
(ii) the requirements to disclose related party transactions entered into with two or more wholly owned members of a group.
In addition to the FRS 101 exemptions above, the Company has taken advantage of the exemption available under section 408 of
the Act and not presented a profit and loss account for the Company.
The financial statements have been prepared on a going concern basis under the historical cost convention except as disclosed in
the Summary of accounting policies in note 11.3. The Company’s accounting policies have, unless otherwise stated, been applied
consistently to all periods presented in these financial statements.
106
Wm Morrison Supermarkets Limited
Company accounting policies (continued)
11 Company financial statements
(continued)
11.2 Basis of preparation (continued)
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are
the same for the Company as they are for the Group. For further details, see page 57 to 59.
New accounting standards, amendments and interpretations adopted by the Company
There have been no new standards, interpretations and amendments to standards which are mandatory for the Company for the first
time for the 52 weeks ended 29 October 2023, which have a material impact on the Company’s financial statements.
New accounting standards, amendments and interpretations in issue but not yet effective
There are a number of standards and interpretations issued by the IASB that are effective for financial statements after this reporting
period. None of these new standards, amendments and interpretations, are expected to have a material impact on the Company’s
financial statements.
Accounting reference date
These financial statements cover the 52 week period to 29 October 2023. The accounting period of the Company ends on a Sunday
not more than seven days before or after the accounting reference date of 31 October.
11.3 Summary of accounting policies
The accounting policies listed below are the same for the Company as for the Group, and are detailed in the following notes:
a) Revenue recognition (1.1);
b) Cost of sales (1.1);
c) Promotional funding and commercial income (1.1);
d) Other operating income (1.1);
e) Taxation (2.1);
f) Intangible assets (3.1);
g) Property, plant and equipment (3.1);
h) Right-of-use assets (3.1);
i) Investment property (3.1);
j) Impairment of non-financial assets (3.1);
k) Lease – Group is the lessor (3.1);
l) Investments in joint ventures (4.1)
m) Inventories (5.1);
n) Trade and other receivables (5.1);
o) Cash and cash equivalents (5.1);
p) Trade and other payables (5.1);
q) Provisions (5.1);
r) Borrowings and borrowing costs (6.1);
s) Lease liabilities (6.1);
t) Share capital (6.1);
u) Derivative financial instruments and hedge accounting (7.1);
v) Pensions (8.1); and
w) Share-based payments (9.1).
The following accounting policies are those policies which are specific, and which deal with items considered material in relation to
the Company’s financial statements.
Investments
Investments in subsidiary undertakings are stated at cost less provision for impairment.
All other equity instruments are held for long-term investment and are measured at fair value. Gains or losses arising from changes
in the fair value are presented in the profit and loss account within finance income or expenses in the period in which they arise.
Impairment losses or write backs of previous impairment losses are presented in the profit and loss account in the period in which
they arise.
107
Wm Morrison Supermarkets Limited
Company accounting policies (continued)
11 Company financial statements (continued)
11.3 Summary of accounting policies (continued)
Amounts owed to/by Group undertakings
Amounts owed to/by Group undertakings are initially recorded at fair value, which is generally the proceeds received. They are
subsequently carried at amortised cost. The amounts are non-interest bearing and repayable on demand unless otherwise stated.
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only on the occurrence or non-occurrence of uncertain
future events outside the Company’s control, or present obligations that are not recognised because it is not probable that an outflow
of economic benefits will be required to settle the obligation or the amount cannot be measured reliably. The Company does not
recognise contingent liabilities but does disclose any such balances (see note 11.25). The disclosure includes an estimate of their
potential financial effect and any uncertainties relating to the amount or timing of any outflow, unless the possibility of settlement is
remote.
Financial guarantees
Where the Company enters into financial contracts to guarantee the indebtedness of other companies within its Group, the Company
considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee
contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under
the guarantee.
Notes to the Company financial statements
11.4 Profit and loss account
The profit after tax for the Company for the period was £24m (2021/22: loss after tax of £123m). After adjusting for exceptional items,
profit before exceptionals after tax is £136m (2021/22: £14m).
2022/23
£m
2021/22
£
m
Employee benefit expense for the Company during the period
Wages and salaries
835
902
Social security costs
69
76
Retirement benefit costs
55
57
Share-based payments
3
2
962
1,037
In addition to the amounts disclosed in the table above, there was an £5m exceptional charge relating to restructuring costs. (2021/22:
£11m exceptional charge relating to restructuring costs).
The average monthly number of people, including Directors, employed by the Company was 48,411 (2022: 52,965).
The Company’s auditors, PricewaterhouseCoopers LLP charged £0.9m (2021/22: £1m) for audit services in the period and £0.5m
(2021/22: £0.1m) for other services. In addition to the fees noted above for the prior year, a further £0.3m was charged in relation to
costs incurred within the group after the date of the accounts.
11.5 Share-based payments
During the period, certain employees of the Company, including Directors and members of key management, were invited to invest
in the Morrisons Incentive Plan. Further details are disclosed in note 9.
108
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.6 Intangible assets
Current period
£m
Cost
At 31 October 2022
567
Additions
77
Interest capitalised
1
Disposals
(4)
Fully written down assets
(82)
At 29 October 2023
559
Accumulated amortisation and impairment
At 31 October 2022
277
Amortisation charge
88
Impairment charge
4
Disposals
(4)
Fully written down assets
(82)
At 29 October 2023
283
Net book amount at 29 October 2023
276
Assets under construction included
above
29
Intangibles include software development costs and licences. The net book amount of licences at 29 October 2023 is £10m (2022:
£9m).
The Company has assessed amortisation policies and asset lives and deemed them to be appropriate. As in previous years, fully
amortised assets have been retained in the Company’s fixed asset register. In order to provide greater understanding of the
Company’s annual amortisation charge, assets which have become fully amortised in the period have been removed from both cost
and accumulated amortisation.
The cost of financing asset developments prior to them being ready for use is included in the cost of the project. Interest is capitalised
at the effective interest rate of 5.7% (2022: 4%).
Prior period
£m
Cost
At
1 November 2021
576
Additions
74
Interest capitalised
1
Disposals
(15)
Fully written down assets
(69)
At 30 October 2022
567
Accumulated amortisation and impairment
At
1 November 2021
272
Amortisation charge
83
Impairment
charge
6
Disposals
(15)
Fully written down assets
(69)
At 30 October 2022
277
Net book amount at 30 October 2022
290
Assets under construction included above
34
109
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.7 Property, plant and equipment
Current period
Freehold
land
£m
Freehold
buildings
£m
Leasehold
property
improvements
£m
Plant,
equipment,
fixtures and
vehicles
£m
Total
£m
Cost
At 31 October 2022
83
6
1,48
6
522
1,3
43
4,187
Additions
39
39
-
42
120
Interest capitalised
-
-
-
1
1
Disposals
(100
)
(164)
(5)
(18)
(287)
Fully written down assets
-
(5)
(3)
(187)
(195)
At 29 October 2023
775
1,356
514
1,
181
3,8
26
Accumulated depreciation and impairment
At 31 October 2022
84
742
322
654
1,802
Depreciation charge
-
36
12
159
207
Impairment
charge
13
12
3
31
59
Impairment write back
(3)
(2)
-
(2)
(7)
Disposals
-
(65)
(5)
(17)
(87)
Fully written down assets
-
(5)
(3)
(187
)
(195
)
At 29 October 2023
94
718
329
6
38
1,779
Net book amount at 29 October 2023
681
638
185
543
2,047
Assets under construction included
above
19
-
-
2
21
The Company has assessed depreciation policies and asset lives and deemed them to be appropriate. As in previous periods, fully
depreciated assets are retained in the Company’s fixed asset register. In order to provide greater understanding of the Company’s
depreciation charge, assets which have been fully depreciated in the period have been removed from both cost and accumulated
depreciation. The cost of financing property developments prior to their opening date has been included in the cost of the asset.
During the period, a number of properties were sold to another Group entity, and were subsequently leased back by the Company.
Impairment
At each reporting date, in line with IAS 36 ‘Impairment of assets,’ the Company reviews the carrying amount of its property, plant and
equipment, right-of-use assets, investment property and intangible assets to determine whether there is an indication that those
assets have suffered an impairment loss or write back. In addition, it is Company policy to consider specific indicators of impairment
for certain assets on an ongoing basis.
The Company considers each store location as a separate CGU. The Company calculates each location’s recoverable amount and
compares this amount to its book value. The recoverable amount is determined as the higher of ‘value-in-use’ and ‘market value’. If
the recoverable amount is less than the net book value, an impairment charge is recognised based on the following methodology:
‘Value-in-use’ is calculated by projecting an individual location’s pre-tax cash flows over the life of the store, based on forecasting
assumptions. The methodology used for calculating future cash flows is to:
• use the actual cash flows for each location;
• allocate a proportion of the Company’s central costs to each location on an appropriate basis;
• allocate online store pick cash flows to locations where a reliable store pick trading history has been established;
• allocate an element of future capital cost, including energy efficiency spend required as part of environmental strategy;
project cash flows over the preceding years by applying forecast sales and cost growth assumptions in line with the
Company budget;
• project cash flows beyond the five year plan by applying a long-term growth rate;
• discount the cash flows using a pre-tax rate of 11.5% (2022: 11.5%). The Company takes into account a number of factors
when assessing the discount rate, including the Company’s WACC and other wider market factors. A small increase in the
Group’s WACC has been noted since 30 October 2022, but this is considered insufficient to require a change in the discount
rate; and
110
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.7 Property, plant and equipment (continued)
Impairment (continued)
• consideration is given to any significant one-off factors impacting the locations and any strategic, climate-related or market
factors which may impact future performance.
‘Fair value less costs of disposal’ is estimated by the Directors based on store level valuations prepared by independent valuers,
aided by their knowledge of individual stores, the markets they serve and likely demand from grocers or other retailers. This
assessment takes into account the continued low demand from major grocery retailers for supermarket space, when assessing rent
and yield assumptions on a store by store basis.
The Company also considers its corporate assets for impairment at each reporting date. The Company calculates the recoverable
amount of its corporate assets and compares this amount to its book value. The recoverable amount is based on the ‘value-in-use’
calculation undertaken for the store location CGU assessment, less the carrying value of the location CGUs. As at 29 October 2023,
there was no indication of impairment of the corporate assets as part of this assessment. In addition to this assessment, the Company
undertakes an obsolescence review to identify any specific corporate assets which require impairment on an ongoing basis.
Having applied the methodology and assumptions, the Company has recognised a net impairment charge of £52m (£59m impairment
charge offset by £7m impairment write-back) during the period in respect of property, plant and equipment (2021/22: £nil impairment
charge; (£85m impairment charge offset by £85m impairment write-back). This movement reflects fluctuations from store level trading
performance and the valuation assessment of the properties.
At 29 October 2023, the assumptions to which the value in use calculation is most sensitive are the discount and cash flow growth
rates. The Company has estimated a possible change of +1% discount rate or -1% growth rate would result in a c.£4m increase in
impairment and a -1% discount rate or +1% growth rate would result in a c.£4m decrease in impairment.
Prior period
Freehold
land
£m
Freehold
buildings
£m
Leasehold
property
improvements
£m
Plant,
equipment,
fixtures and
vehicles
£m
Total
£m
Cost
At 1 November 2021
879
1,578
522
1,192
4,171
Additions
9
-
-
25
5
264
Interest capitalised
-
-
-
1
1
Transfers from right
-of-use assets
-
-
-
1
1
11
Transfers to other group companies
(49)
(82)
-
-
(131)
Disposals
(3)
(5)
-
(4)
(12)
Fully written down assets
-
(5)
-
(112
)
(117)
At 30 October 2022
83
6
1,48
6
522
1,3
43
4,187
Accumulated depreciation and impairment
At 1 November 2021
105
783
296
573
1,757
Depreciation charge
-
37
15
15
7
209
Impairment charge
21
15
13
36
85
Impairment write back
(41)
(39)
(2)
(3)
(85)
Transfers from right-of-use assets
-
-
-
7
7
Transfers to other group companies
-
(44)
-
-
(44)
Disposals
(1)
(5)
-
(4)
(10)
Fully written down assets
-
(5)
-
(112
)
(117)
At 30 October 2022
84
742
322
654
1,802
Net book amount at 30 October 2022
75
2
74
4
200
6
89
2,385
Assets under construction included above
10
-
-
19
29
111
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.8 Right-of-use assets
Leasehold land
and buildings
£m
Leased plant,
equipment,
fixtures and
vehicles
£m
Total
£m
Cost
At
31 October 2022
2,193
95
2,288
Additions
181
4
185
Disposals
(24)
-
(24)
Fully
written down assets (9
)
(26)
(35
)
At 29 October 2023
2,34
1
73
2,414
Accumulated depreciation and impairment
At
31 October 2022
1,231
54
1,285
Depreciation charge
75
17
92
Impairment
charge
53
-
53
Disposals
(21)
-
(21)
Fully written down assets
(9
)
(26)
(35
)
At 29 October 2023
1,3
29
45
1,374
Net book amount at 29 October 2023
1,012
28
1,040
The Company has assessed depreciation policies and asset lives and deemed them to be appropriate. Fully depreciated assets are
retained in the Company’s fixed asset register. In order to provide greater understanding of the Company’s annual depreciation
charge, assets which have been fully depreciated in the period have been removed from both cost and accumulated depreciation.
Impairment
Having applied the methodology and assumptions set out in note 11.7, the Company has recognised a net impairment charge of
£53m (£53m impairment charge offset by £nil impairment write back) during the period in respect of right-of-use assets (2021/22: net
£48m impairment charge; £62m impairment charge offset by £14m impairment write back). This movement reflects fluctuations from
store level trading performance and the valuation assessment of the properties.
At 29 October 2023, the assumptions to which the value in use calculation is most sensitive to are the discount and cash flow growth
rates. The Company has estimated a change of +1% discount rate or -1% growth rate would result in a c.£4m increase in impairment
and a -1% discount rate or +1% growth rate would result in a c.£5m decrease in impairment.
112
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.8 Right-of-use assets (continued)
Prior period
Leasehold land
and buildings
£m
Leased plant,
equipment,
fixtures and
vehicles
£m
Total
£m
Cost
At
1 November 2021 2,103
119
2,222
Additions
170
2
172
Transfer to property, plant and equipment
-
(11)
(11)
Disposals
(69)
-
(69)
Fully written down assets
(11)
(15)
(26)
At 30 October 2022
2,193
95
2,288
Accumulated depreciation and impairment
At 1 November 2021
1,144
59
1,203
Depreciation charge
74
17
91
Impairment charge
62
-
62
Impairment write back
(14)
-
(14)
Transfer to property, plant and equipment
-
(7)
(7)
Disposals
(24)
-
(24)
Fully written down assets
(11)
(15)
(26)
At 30 October 2022
1,231
54
1,285
Net book
amount at 30 October 2022 962
41
1,003
11.9 Investment property
Freehold
£m
Leasehold
£m
Total
£m
Cost
At 31 October 2022
21
76
97
Disposals
(1)
-
(1)
At 29 October 2023
20
76
96
Accumulated depreciation and impairment
At 31 October 2022
11
60
71
Depreciation charge
-
1
1
At 29 October 2023
11
61
72
Net book amount at end of period
9
15
24
Included in other operating income is £8m (2021/22: £5m) of rental income generated from investment properties. At the end of the
period the fair value of freehold investment properties was £13m (2022: £13m), with leasehold investment properties supported by
their value in use. Freehold investment properties are valued by independent surveyors on a vacant possession basis using
observable inputs (fair value hierarchy level 2).
113
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.9 Investment property (continued)
Prior period
Freehold
£m
Leasehold
£m
Total
£m
Cost
At 1 November 2021
23
74
97
Additions
-
2
2
Disposals
(2
)
-
(2)
At 30 October 2022
21
76
97
Accumulated depreciation and impairment
At 1 November 2021
13
59
72
Depreciation charge
-
1
1
Disposals
(2)
-
(2)
At 30 October 2022
11
60
71
Net book amount at end of period
10
16
26
11.10 Investment in subsidiaries
2023
£m
2022 (restated)
£m
Net book amount
At start of period
718
307
Additions
-
411
At end of period
1
718
718
1
All the subsidiaries have the same period end as the Group, with the exception of Wm Morrison At Source Limited, Wm Morrison Property Partnership 4 LP and Wm Morrison Property Partnership
LP that have the period end of 52 weeks ended 28 January 2024.
The Company holds an investment of £708m in Wm Morrison Property Partnership 4 LP as its Capital partner as part of the Scottish
Limited Partnership arrangement, as detailed on page 126. During the period ended 29 October 2023, it was identified that an
investment made in the prior year had been misclassified within the 30 October 2022 balance sheet. This resulted in an
understatement of investments in subsidiaries of £411m and an understatement of Amounts owed to Group undertakings of £411m.
This has been corrected by restating each of the affected line items retrospectively. This restatement does not impact the results or
the net assets of the prior period.
In addition to the above, the Company continues to hold a £6m investment in Chippindale Foods Limited, a £4m investment in
Lowlands Nursery Limited, and investments in other related undertakings, which in aggregate are less than £1m as at 29 October
2023. The Company additionally holds an investment of £201m (2021/22: £201m) in one of its indirect subsidiaries, for an amount
invested to facilitate the acquisition of the trade and majority of assets of McColl’s Retail Group plc in 2022, see note 11.12.
The Directors believe that the carrying value of these investments is supported by their underlying net assets. A list of all of the
Company’s related undertakings at the reporting date is shown on page 124 to 126.
11.11 Investments in joint ventures
The Company has two investments in joint ventures.
The Company has an interest in MHE JVCo Limited, which is jointly owned and controlled with a third party, Ocado Operating Limited.
During the period, the Company received £5m (2022: £8m) of dividend income from its investment.
During the period, Yes Recycling (Fife) Ltd entered administration and as a result the investment of £4m has been fully impaired.
The carrying value of the Company’s investment in MHE JVCo Limited at 29 October 2023 is £14m (2022: £27m).
114
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.12 Debtors – amounts falling due within one year
2023
£m
2022
£m
Trade debtors
96
133
Amounts owed by Group undertakings
6,540
8,013
Prepayments and accrued income
139
126
Other receivables
26
89
6,801
8,361
Amounts owed by Group undertakings are unsecured, bear no interest and repayable on demand.
11.13 Debtors – amounts falling due after more than one year
2023
£m
2022
£m
Finance leases – Company is lessor
12
7
The Company is the lessor on a diverse portfolio of leases for property, such as retail units adjacent to trading stores. Most property
leases contain rent review terms that require rents to be adjusted upwards on a periodic basis. The rent reassessments are normally
based on changes in market rate or capped increase in measures of inflation.
Finance leases
The table below summarises the maturity profile of undiscounted finance lease payments that are due to the Company.
2023
£m
2022
£m
Less than one year
1
1
After one year but not more than five years
4
4
More than five years
5
5
Total undiscounted lease payments receivable
10
10
Unearned finance income
2
3
Net investment in the lease
12
13
Finance lease income of £nil has been recognised in the period (2021/22: £1m).
Operating leases
The table below summarises the maturity profile of undiscounted operating lease payments due to the Company.
2023
£m
2022
£m
Less than one year
3
7
One to two years
3
5
Two to three years
2
5
Three to four years
2
4
Four to five years
2
3
More than five years
11
16
Total undiscounted lease payments receivable
23
40
Operating lease income of £6m has been recognised in the period (2021/22: £13m).
11.14 Creditors – amounts falling due within one year
2023
£m
2022 (restated)
1
£m
Trade creditors
(2,798
)
(3,067)
Amounts owed to Group undertakings
(2,436)
(3,651)
Other taxation and social security
(98)
(16)
Other creditors
(384
)
(399)
Accruals and deferred income
(494)
(308)
(6,210
)
(7,441
)
1
See note 11.10 for further details
Amounts owed to Group undertakings within one year are unsecured, bear no interest and repayable on demand.
115
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.15 Creditors – amounts falling due after more than one year
2023
£m
2022
£m
£250m sterling
bonds 3.50% July 2026
(39)
(39)
£250m sterling bonds 4.75% July 2029
(45)
(45)
(84)
(84)
The aggregate principal amount of the existing notes outstanding is £82m at 29 October 2023. (2022: £82m)
11.16 Lease liabilities
2023
£m
2022
£m
Current lease
liabilities
(79)
(74)
Non
-current lease liabilities
(1,579)
(1,424)
(1,658)
(1,498)
The Company is the lessee on a diverse portfolio of leases for property and equipment, with the vast majority of lease liabilities
relating to property (see notes 11.7 and 11.8). Certain property leases contain rent review terms that require rents to be adjusted on
a periodic basis which may be subject to market rent or capped increases in inflation measurements. In addition, certain property
leases contain break clauses that would allow the Company to exit leases early.
2022/2023
£m
2021/2022
£m
Total cash outflow for lessee leases
(176)
(167
)
Interest expense on lease liabilities
(79)
(64
)
Expense for short
-term leases longer than one month
(6)
(5
)
Expense for
leases of low-value assets, excluding short-term
(2)
(2
)
11.17 Derivative financial assets and liabilities
Derivative financial assets
2023
Fair Value
£m
2023
Notional Value
£m
2022
Fair Value
£m
2022
Notional Value
£m
Current
Foreign exchange
forward contracts
5
377
17
304
Fuel and energy price contracts
2
6
5
8
342
107
31
435
359
411
Non-current
Foreign exchange forward contracts
-
2
-
-
Fuel and energy price contracts
-
14
128
38
-
16
128
38
Derivative financial liabilities
Current
Foreign exchange forward contracts
(2)
(172)
(3)
(105)
Fuel and energy price contracts
(11)
(63)
-
(3)
(13
)
(
235)
(3)
(108)
Non-current
Foreign exchange forward contracts
-
(8)
-
-
Fuel and energy price contracts
(2)
(26)
-
-
(2)
(34)
-
-
Further details of the derivative financial instruments are provided in note 7, including significant assumptions underlying the valuation
and the amounts recognised in profit and loss.
116
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.18 Loan from parent undertaking
2023
£m
2022
£m
Loan from
parent undertaking
(882)
(1,843)
On 8 November 2021, intercompany funding was provided by Market Bidco Limited (the immediate parent) to the Company. The
loan is unsecured, bear no interest and is repayable on demand.
11.19 Deferred tax liabilities
2023
£m
2022
£m
Deferred tax liability
(232)
(397)
Deferred tax asset
81
84
Net deferred tax liability
(151)
(313)
IAS 12 ‘Income taxes’ requires the offsetting of balances within the same tax jurisdiction where there is a legally enforceable right to
offset. All of the deferred tax assets are available for offset against deferred tax liabilities.
The movements in deferred tax (liabilities)/assets during the period are shown below:
Property, plant
and
equipment
£m
Pensions
£m
Other
short-
term
temporary
differences
£m
Total
£m
Current period
At 31 October 2022
(195)
(76)
(42)
(313)
Credited/(charged) to profit for the period
14
(3)
(2)
9
Credited to other comprehensive income and equity
-
39
114
153
At 29 October 2023
(181)
(40)
70
(151)
Prior period
At 1
November 2022
(183)
(90)
68
(205)
C
harged to profit for the period
(12)
(2)
(26)
(40)
Credited/(charged)
to other comprehensive income and equity
-
16
(84)
(68)
At 30 October 2022
(195)
(76)
(42)
(313)
11.20 Provisions for liabilities
Onerous
contracts
£m
Other property
provisions
£m
Total
£m
At 31 October 2022
(38)
(5)
(43)
Charged to profit for the period
(41)
(5)
(46)
Utilised during the period
22
3
25
Released during the period
-
1
1
At 29 October 2023
(57)
(6)
(63)
Included within the above balance at 29 October 2023 is £11m (2022: £7m) relating to a balance due within one year. The provision
is reviewed regularly in response to market conditions.
117
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.21 Pensions
11.21.1 Defined benefit schemes: summary and description
The Company operates two defined benefit retirement schemes (together ‘the Schemes’) providing benefits based on a benefit
formula that depends on factors including the employee’s age and number of years of service.
The Morrison Scheme (the ‘CARE Scheme’) provides retirement benefits based on either the employee’s compensation package or
career average revalued earnings (CARE). The CARE Scheme is not open to new members and was closed to future accrual in July
2015.
The Retirement Saver Plan (RSP) is a cash balance scheme, which provides a lump sum benefit based upon a defined proportion
of an employee’s annual earnings, which is revalued each year in line with inflation subject to a cap. The RSP is not open to new
members and was closed to future accrual in September 2018.
The position of each scheme at the reporting date is as follows:
2023
£m
2022
£m
CARE Scheme
72
195
RSP
31
103
Net pension asset
103
298
Statement of financial position:
2023
CARE
£m
2023
RSP
£m
2022
CARE
£m
2022
RSP
£m
Fair value of scheme assets
711
270
933
376
Present value of obligations
(639)
(239)
(738)
(273)
Net pension asset
72
31
195
103
Income statement
2022/
23
CARE
£m
2022/23
RSP
£m
2021/22
CARE
£m
2021/22
RSP
£m
Administrative costs
2
1
1
3
Net interest
income on net pension asset
(9)
(5)
(6)
(1)
Total expense (credited)/charged to income statement
(7)
(4)
(5)
2
Statement of other comprehensive income:
Remeasurements in other comprehensive income – charged/(credited)
130
77
138
(65)
The Schemes are registered schemes under the provisions of Schedule 36 of the Finance Act 2004 and the assets are held in legally
separate, trustee-administered funds. The Trustees of each Scheme are required by law to act in the best interests of the Scheme
participants within the context of administering the Scheme in accordance with the purpose for which the trust was created, and they
are responsible for setting the investment, funding and governance policies of the fund. A representative of the Company attends
Trustee Investment Committee meetings in order to provide the Company’s view on investment strategy, but the ultimate power lies
with the Trustees. The Deed and Rules of the Morrison Scheme gives the Trustees the power to set contributions, while in the RSP
this power is given to the Company, subject to regulatory override.
11.21.2 Scheme assets
Assets of the Schemes generate returns and ultimately cash that is used to satisfy the Schemes’ obligations. They are not necessarily
intended to be realised in the short term. The Trustees of each Scheme invest in different categories of asset and with different
allocations amongst those categories, according to the investment principles of that Scheme.
Currently, the investment strategy of the Schemes is to maintain a balance of income assets (including credit investments and
corporate bonds) and protection assets (comprising liability driven investment (LDI) portfolios and buy-in annuity policies), with a
weighting towards protection assets. There are no direct investments in the Company’s own shares or property occupied by any
member of the Company.
118
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.21 Pensions (continued)
11.21.2 Scheme assets (continued)
Fair value of Scheme assets:
2023
CARE
£m
2023
RSP
£m
2022
CARE
£m
2022
RSP
£m
Corporate bonds (quoted)
-
126
205
149
Credit funds (unquoted)
134
-
140
-
Liability driven investments (unquoted)
-
139
472
107
Scottish Limited Partnership (unquoted)
-
-
-
53
Annuity policies (unquoted)
639
-
106
-
Cash (quoted)
19
5
10
67
Premium due to insurers (unquoted)
(81)
-
-
-
711
270
933
376
For definitions of the liability driven investments, annuity policies, and credit funds, see note 8.3.
The movement in the fair value of the Schemes’ assets over the period was as follows:
2023
CARE
£m
2023
RSP
£m
2022
CARE
£m
2022
RSP
£m
Fair value of scheme assets at start of period
933
376
1,525
484
Interest income
43
18
28
9
Return on scheme assets excluding interest
(235)
(111)
(591)
(104)
Employer contributions
-
1
-
1
Benefits paid
(28)
(13)
(28)
(11)
Administrative expenses
(2)
(1)
(1)
(3)
Fair value of scheme assets at end of period
711
270
933
376
Scottish Limited Partnership
The Company has previously entered into a pension funding partnership structure with the CARE Scheme whereby the partnership
structure holds properties which are leased back to the Company in return for rental income payments. The Company retains control
over these properties, including the flexibility to substitute alternative properties. The CARE Scheme was entitled to receive fixed
distributions of £2.2m p.a. until 2033 subject to certain conditions.
During the 52 weeks ended 31 January 2021, the Company and the Schemes’ Trustees agreed to reorganise the limited partnership
structure, so that future distributions are made to the RSP. The pension funding partnership structure was amended to permanently
cease fixed distributions to both the Company and Safeway Stores Limited’s CARE Schemes. On the same day, the Company and
the RSP entered into a new pension funding partnership. As a partner, the RSP is entitled to receive a fixed distribution of £6.9m p.a.
from the profits of the SLP for 13 years from 2020, subject to certain conditions. The fixed distribution is comparable to the distributions
that would have been made to the Group’s CARE Schemes under the previous partnership structure.
The RSP Scheme’s interests in the Scottish Limited Partnership can increase the net pension asset on the FRS 101 accounting basis
because the investments held by the Scheme qualify as an asset for Company FRS 101 purposes. Given recent improvements in
the RSP’s funding position, the contributions from the partnership to the RSP have now been paused. No further contributions are
expected to be paid from the partnership and its value as at 29 October 2023 is assumed to be £nil.
119
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.21 Pensions (continued)
11.21.3 Present value of obligations
The movement in the defined benefit obligation over the period was as follows:
2023
CARE
£m
2023
RSP
£m
2022
CARE
£m
2022
RSP
£m
Defined benefit obligation at start of period
(738)
(273)
(1,197)
(445)
Interest expense
(34)
(13)
(22)
(8)
Actuarial gain/(loss)
– demographic assumptions
13
-
(6)
-
Actuarial
gain – financial assumptions
115
34
478
162
Actuarial (loss)
/gain – experience
(23)
-
(19)
7
Benefits paid
28
13
28
11
Defined benefit obligation at end of period
(639)
(239)
(738)
(273)
The durations of the defined benefit obligations at 29 October 2023 are: RSP 13 years; CARE 15 years (2022: RSP: 15 years CARE:
17 years). The weighted average duration of the Schemes is 14 years (2022: 16 years).
11.21.4 Significant actuarial assumptions
The following are the principal actuarial assumptions at the reporting date (expressed as weighted averages):
Financial assumptions
2023
CARE
2023
RSP
2022
CARE
2022
RSP
Discount rate applied to scheme liabilities
5.7%
5.7%
4.7%
4.7%
Inflation assumption (RPI)
3.4%
3.4%
3.5%
3.4%
Life expectancies
2022/2023
CARE
2022/2023
RSP
2021/2022
CARE
2021/2022
RSP
Longevity in years from age 65 for current pensioners
Male
19.7
n/a
20.3
n/a
Female
23.1
n/a
23.6
n/a
Longevity in years from age 65 for current members aged 45
Male
21.4
n/a
22.0
n/a
Female
24.9
n/a
25.4
n/a
The Company estimates the discount rates with reference to high quality corporate bonds. At very long durations, where there are
no high quality corporate bonds, the yield curve is extrapolated based on available corporate bond yields of mid to long duration. The
Company believes that this approach appropriately reflects expected yields on high quality corporate bonds over the duration of the
Company’s pension schemes, as required by FRS 101.
Assumptions regarding future mortality experience are set based on actuarial advice and in accordance with published statistics.
The mortality tables used for the 52 weeks ended 29 October 2023 are the S3PMA-Heavy/S3PFA-Heavy tables (males/females)
based on year of birth with a scaling factor of 95% applied to the mortality rates, with CMI 2022 core projections and a long-term rate
of improvement of 1.5% pa.
The mortality tables used for the 52 weeks ended 30 October 2022 were consistent with 2023, other than use of the CMI2021
projections.
120
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.21 Pensions (continued)
11.21.4 Significant actuarial assumptions (continued)
Related actuarial assumptions
2023
CARE
2023
RSP
2022
CARE
2022
RSP
Rate of increase of pensions in payment: RPI inflation capped at either
2.5% p.a. or 5% p.a
2.2%/3.2%
-
2.2%/3.3%
-
Rate of increase of pensions in deferment: CPI inflation capped at
either 2.5% p.a. or 5% p.a.
-
/2.8%
2.5%/
-
-
/2.9%
2.5%/
-
CPI inflation
(% p.a.)
2.8%
2.8%
2.9%
2.8%
Sensitivity analysis on significant actuarial assumptions
The following table summarises the impact on the defined benefit obligation at the end of the reporting period if each of the significant
actuarial assumptions listed above were changed, in isolation, assuming no other changes in market conditions at the accounting
date. In practice, given the CARE Scheme is fully insured, any movement in assumptions could be accompanied by an offsetting
change in asset values, and the corresponding overall impact on the net asset/(liability) is broadly nil. For the RSP, any movement
in assumptions would be accompanied by a partially offsetting change in asset values, and therefore the corresponding overall impact
of the net asset/(liability) is likely to be lower than the amounts below in a number of scenarios. Extrapolation of the sensitivities
shown may not be appropriate.
2023
CARE
2023
RSP
2022
CARE
2022
RSP
Discount rate applied to Scheme obligations
+/-0.1% p.a.
-/+10
-/+5
-/+10
-/+5
Inflation assumption (RPI and associated assumptions)
+/-0.1% p.a.
+/-5
+/-
+/-5
+/-0
Longevity
+one year
+15
n/a
+15
-
11.21.5 Funding
The CARE Scheme is entirely funded by the Company. The Company along with other subsidiaries of the Company participated in
the RSP. There is no contractual agreement or stated policy for charging the net defined benefit cost between the Company and its
subsidiaries. The contribution of each participating subsidiary to the RSP is currently calculated in proportion to the number of
employees that are members of the RSP.
The latest full actuarial valuations were carried out as at 5 April 2022 for the CARE Scheme and the RSP. The valuations indicated
that, on the agreed funding basis, the CARE and RSP Schemes had surpluses of £214m and £38m respectively. As a result of these
funding positions there are currently no deficit contributions payable. As such there is no “minimum funding requirement” in force.
These results have been used and updated for FRS 101 purposes for the period to 29 October 2023 by a qualified independent
actuary. The Schemes expose the Company to inflation risk, interest rate risk and market investment risk where benefits are not
insured.
At 29 October 2023, schemes in surplus have been disclosed within the assets in the Statement of financial position. The Company
continues to follow legal advice with regard to the recognition of a pension surplus and also recognition of a minimum funding
requirement under IFRIC 14 ‘IAS19 – The limit on a defined benefit asset, minimum funding requirement and their interaction’. This
advice concluded that recognition of a surplus is appropriate on the basis that the Company has an unconditional right to a refund of
a surplus. In respect of the RSP this is on the basis that IFRIC 14 applies enabling a refund of surplus of the RSP. In respect of the
CARE Scheme, this is on the basis that paragraph 11(b) or 11(c) of IFRIC 14 applies enabling a refund of surplus assuming the
gradual settlement of the scheme liabilities over time until all members have left the scheme or the full settlement of the Scheme's
liabilities in a single event (i.e. as a scheme wind up).
The current best estimate of Company contributions to be paid to the defined benefit schemes for the accounting period commencing
29 October 2023 is £nil (52 weeks to 29 October 2023: £7m).
121
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.21 Pensions (continued)
11.21.6 Defined contribution scheme
The Group opened a defined contribution retirement benefit scheme called the Morrisons Personal Retirement Scheme (‘MPRS’) for
employees during the 53 weeks ended 4 February 2018. The MPRS has become the auto enrolment scheme for the Company. As
the MPRS is a defined contribution scheme, the Company is not subject to the same investment, interest rate, inflation or longevity
risks as it is for the defined benefit schemes. The benefits that employees receive are dependent on the contributions paid, investment
returns, and the form of benefit chosen at retirement.
During the 52 weeks ended 29 October 2023, the Company paid contributions of £30m to the MPRS (52 weeks to 30 October 2022:
£54m) and expects to contribute £33m for the following period.
11.22 Share capital
Number of
shares
millions
Called up s
hare
capital
£m
Share premium
account
£m
Total
£m
At 31 October 2022 and 29 October 2023
2,451
245
253
498
All issued shares are fully paid and have a par value of 10p per share (2022: 10p per share).
For further details on called up share capital and share premium accounts, see note 6.7.
11.23 Reserves
2023
£m
2022
£m
Capital redemption reserve
39
39
Merger reserve
940
940
Hedging reserve
3
3
373
Retained earnings
1
1,
405
1,549
Total
2,417
2,901
1
Included in retained earnings is £nil relating to a gain on trust shares (2022: £28m gain)
Capital redemption reserve
The capital redemption reserve at the start of the period related to 389,631,561 of the Company’s own shares which it purchased on
the open market for cancellation between 31 March 2008 and 8 March 2013 at a total cost of £1,081m.
Merger reserve
The merger reserve represents the reserve arising on the acquisition in 2004 of Safeway Limited. This merger reserve was initially
considered unrealised on the basis it was represented by investments held by the Company, which is not qualifying consideration in
accordance with Tech 02/17 issued by the Institute of Chartered Accountants in England and Wales (ICAEW).
During the 53 weeks ended 4 February 2018, the majority of the Company’s investments were transferred to another Group company,
Wm Morrison Supermarkets Holdings Limited, in exchange for an intercompany loan. To the extent that this intercompany balance
is settled in qualifying consideration, the same proportion of the merger reserve becomes realised. During the 52 weeks ended 29
October 2023 and 30 October 2022 none of the intercompany loan balance was settled through a qualifying consideration. As a
result, none of the merger reserve balance was realised in the period (2022: £nil).
Hedging reserve
This represents the gains and losses arising on derivatives used for cash flow hedging.
11.24 Capital commitments
2023
£m
2022
£m
Contracts placed for future capital expenditure not provided
in the financial statements
(property, plant and equipment, right-of-use assets and intangible assets)
72
44
Contracts placed for future leases not provided in the financial statements
4
19
122
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
11.25 Guarantees, contingent liabilities and contingent assets
Guarantees
Senior Facilities Agreement
A condition of the Market Bidco Limited Senior Facilities Agreement was that ‘material entities’ needed to become guarantors to the
facilities. ‘Material entities’ are ones which hold 5% or more of the consolidated Group’s gross assets or generate 5% or more of the
consolidated Group’s EBITDA, or those which hold real property of greater than £75m. As such, on 23 March 2022 Wm Morrison
Supermarkets Limited (along with its subsidiaries Safeway Limited, Safeway Stores Limited and Optimisation Investments Limited)
acceded as guarantors to each of the new Facilities Agreements. The Company granted a guarantee and indemnity in respect of
the obligations of the Obligors under each of the Facilities Agreements and provided security over its assets, pursuant to the Common
Transaction Security Agreement.
The terms and conditions of Wm Morrison Supermarkets Limited’s listed bonds are such that, if Group entities act as guarantors to
finance facilities, they must also act as guarantors to the bonds. Wm Morrison Supermarkets Limited and Safeway Limited already
guaranteed these bonds, so Safeway Stores Limited and Optimisation Investments Limited were required to accede as guarantors
in addition.
The Company has also given an unlimited guarantee in respect of the overdraft of all the subsidiary undertakings within the Group’s
banking offset agreement. The overdraft position at 29 October 2023 was £nil (30 October 2022: £nil).
Where the Company enters into financial contracts to guarantee the indebtedness of other companies within its Group, the Company
considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee
contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under
the guarantee.
Dordon and Equal pay claim
See note 10.2.
Other
The Company and various of its subsidiaries are, from time to time, parties to legal proceedings, including certain tax matters, and
claims which arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings, actions
and claims, either individually or in aggregate, will have a material adverse effect upon the Group’s financial position.
11.26 Post-balance sheet events
Directors resignation and appointment
David Potts resigned as Director and Chief Executive Officer of the Company on 1 November 2023 and Rami Baitiéh joined the
Group as Chief Executive Officer ('CEO') in October 2023, appointed as Director on 30 October 2023.
Sale of petrol forecourt business
On 30 January 2023, the Group agreed the sale of its petrol forecourt business to Motor Fuel Group (“MFG”) for £2.5bn. This
consideration includes a 20% equity stake in MFG. The transaction also forms a new strategic partnership between MFG and the
Group which will see Ultra-Rapid EV charging infrastructure rolled out across the Morrisons estate. The forecourts will continue to be
branded Morrisons and food and groceries will be supplied by the Group. This represents a non-adjusting post-balance sheet event
under IAS 8.
As part of the takeover by CD&R in 2021, a Memorandum of Understanding committed the Group to providing additional property
security to the CARE Schemes and the RSP in a new arrangement, taking the total value of property security supporting these
Schemes to at least £660m. In January 2024, an additional Memorandum of Understanding has been agreed releasing all the
additional property assets agreed in 2021, except for four properties. Properties not returned have been substituted into an existing
arrangement.
11.27 Ultimate parent undertaking
The ultimate parent undertaking and controlling party of the Company is Market Topco Limited. The immediate parent company is
Market Bidco Limited. Market Bidco Limited and Market Topco Limited were incorporated by Clayton, Dubilier and Rice's Fund XI
for the purposes of acquiring the Company. The investment into Market Topco Limited was made by a vehicle owned by Clayton,
Dubilier & Rice Fund XI, L.P. and certain commonly-managed parallel and related investment vehicles thereof.
123
Wm Morrison Supermarkets Limited
Notes to the Company financial statements (continued)
11 Company financial statements (continued)
In addition to Market Bidco Limited, the following five entities are controlled by Market Topco Limited and form part of the corporate
structure above Wm Morrison Supermarkets Limited;
• Market Holdco 1 Limited;
• Market Holdco 2 Limited;
• Market Holdco 3 Limited;
• Market Bidco Finco Plc; and
• Market Parent Finco Plc.
The smallest group at which consolidated financial statements are prepared is Market Bidco Limited, a company incorporated in
England and Wales. The largest group at which consolidated financial statements are prepared is Market Topco Limited, a company
incorporated in England and Wales. The registered office address of these companies is the same as that of Wm Morrison
Supermarkets Limited. The consolidated Financial Statements of these groups are available to the public and may be obtained from
the Company Secretary, Wm Morrison Supermarkets Limited, Hilmore House, Gain Lane, Bradford, West Yorkshire, United Kingdom,
BD3 7DL.
124
Wm Morrison Supermarkets Limited
Related undertakings
In accordance with section 409 of the Companies Act 2006, a full list of related undertakings including the country of incorporation,
the principal activity and the effective percentage of equity owned as at 29 October 2023 is disclosed below. The registered address
of all undertakings is Hilmore House, Gain Lane, Bradford, BD3 7DL unless otherwise stated.
Related undertakings of Wm Morrison Supermarkets Limited
Name
Country of incorporation
Principal activity
Interest
Bos Brothers Fruit and Vegetables
B.V.
1
Netherlands
Acquirer of food products
100%
Chippindale Foods Limited
England and Wales
Supplier of eggs
100%
De Mandeville Gate Management Limited
England and Wales
Dormant
51%
Dordon SPV Limited
2
England and Wales
Lease company
100%
Flower World
Limited
England and Wales
Dormant
100%
Lowlands Nursery Limited
England and Wales
Wholesale of flowers and plants
100%
MHE JVCo Limited
3
England and Wales
Joint venture with Ocado
51%
Neerock Farming Limited
4
Scotland
Dormant
100%
Perimeter Holdings
Limited
England and Wales
Dormant
100%
Wm Morrison (HK) Limited
5
Hong Kong
Acquirer of non
-food products 100%
Wm Morrison Nominee 1 Limited
England and Wales
Dormant
100%
Wm Morrison Nominee 2 Limited
England and Wales
Dormant
100%
Wm Morrison Nominee 3 Limited
England and Wales
Dormant
100%
Wm Morrison Pension Trustee Limited
England and Wales
Dormant
100%
Wm Morrison Property Investments Limited
6
Scotland
General partner in a partnership
100%
Wm Morrison Supermarkets Holdings
Limited
England and Wales
Holding company
100%
Yes Recycling (Fife) Ltd
7
Scotland
In administration
50%
Registered address
:
1.
3151, ZJ Hoek van Holland, the Netherlands, Amersgat 17
2
. 1 Ashley Road, 3rd Floor, Altrincham, WA14 2DT
3
. Buildings 1 & 2, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL
4
. Market Hill, Market Hill Road, Turriff, Aberdeenshire, Scotland, AB53 4PA
5
. 19/F Millenium City 2, No 378 Kwun Tong Road, Kowloon, Hong Kong
6
. Capella Building (Tenth Floor), 60 York Street, Glasgow, G2 8JX
7. Lomond House Westlaw Road, Whitehill Industrial Estate, Glenrothes, Fife, Scotland, KY6 2QZ
Related undertakings of other Group companies
Name
Country of incorporation
Principal activity
Interest
Alliance Property Holdings Limited
England and Wales
R
etailer 100%
Amos Hinton & Sons Ltd
England and Wales
Dormant
100%
Argyle Securities Limited
1
Scotland
Dormant
100%
Argyll Foods Limited
England and Wales
Dormant
100%
Argyll Stores (Holdings) Limited
England and Wales
Dormant
100%
Ascot Road Watford Limited
England and Wales
Dormant
100%
Cancede Limited
England and Wales
Property investment
100%
Cordon Bleu Freezer Food Centres Limited
England and Wales
Dormant
100%
Divertigo Limited
England and Wales
Dormant
100%
English Real
Estates Limited
England and Wales
Dormant
100%
Erith Pier Company Limited
England and Wales
Property maintenance
100%
Evermere Limited
England and Wales
Dormant
100%
Falfish (Holdings) Limited
England and Wales
Preparation and supply of seafood
100%
125
Wm Morrison Supermarkets Limited
Related undertakings
(continued)
Related undertakings of other Group companies (continued)
Falfish Limited
England and Wales
Preparation and supply of seafood
100%
Farmers Boy Limited
England and Wales
Manufacturer and
distributor of fresh food
products
100%
Farmers Boy (Deeside) Limited
England and Wales
Dormant
100%
Federated Properties Limited
England and Wales
Dormant
100%
Firsdell Ltd
England and Wales
Dormant
100%
Fisherdale Properties Limited
England and Wales
Dormant
100%
Freehold Investments Limited
2
Jersey
Dormant
100%
International Seafoods Limited
England and Wales
Preparation and supply of seafood
100%
Ipsolus Limited
England and Wales
Dormant
100%
J3 Property Limited
1
Scotland
Dormant
100%
Kiddicare
Properties Limited
England and Wales
Dormant
100%
Lease Securities Limited
2
Jersey
Dormant
100%
MDW (Eastbourne) Limited
England and Wales
Dormant
100%
MoClo Limited
England and Wales
Property management
100%
Myton Food Group Limited
England and
Wales
Dormant
100%
Monument Hill Properties Limited
England and Wales
Dormant
100%
Neerock Limited
England and Wales
Fresh meat processor
100%
Newincco 1072 Limited
England and Wales
Dormant
100%
Oldwest Limited
2
Scotland
Dormant
100%
Optimisation
Developments Limited
England and Wales
Property development
100%
Optimisation Investments Limited
England and Wales
Property investment
100%
Presto Stores (LC) Limited
England and Wales
Dormant
100%
Presto Stores Limited
England and Wales
Dormant
100%
Rathbone Kear Limited
England and Wales
Manufacturer and distributor of morning goods
and bread
100%
Rathbones Bakeries Limited
England and Wales
Dormant
100%
RP (No. 37) Limited
25
Jersey
Dormant
100%
Safeway (Overseas) Limited
England and
Gibraltar
Grocery retailer (overseas)
100%
Safeway Development Limited
England and Wales
Dormant
100%
Safeway Food Stores Limited
England and Wales
Holding company
100%
Safeway Grocery (Ireland) Limited
5
Ireland
Dormant
100%
Safeway Limited
England and Wales
Holding company
100%
Safeway Pensions Trustees Company Limited
England and Wales
Dormant
100%
Safeway Pension Trustees Limited
England and Wales
Dormant
100%
Safeway Properties Limited
England and Wales
Property investment
100%
Safeway QUEST Trustees
Limited
England and Wales
Dormant
100%
Safeway Stores (Gibraltar) Pension Trustees
Limited
4
Gibraltar
Dormant
100%
Safeway Stores (Ireland) Limited
England and Wales
Dormant
100%
126
Wm Morrison Supermarkets
Limited
Related undertakings
(continued)
Related
undertakings of other Group companies (continued)
Safeway Stores Limited
England and Wales
Grocery retailer
100%
Safeway Trustee (FURB) Limited
England and Wales
Dormant
100%
Safeway Wholesale Limited
England and Wales
Holding company
100%
Simply Fresh
Foods Holdings Limited
England and Wales
Dormant
100%
Stalwart Investments Limited
2
Jersey
Dormant
100%
Stores
Group Limited
England and Wales
Holding company
100%
The Home & Colonial Stores Limited
England and Wales
Dormant
100%
The Medical Hall
Limited
4
Gibraltar
Pharmaceutical licence holder (Gibraltar)
100%
The Morrisons Foundation
England and Wales
Charity
100%
Tower Centre Hoddesdon Limited
England and Wales
Dormant
100%
Trilogy (Leamington Spa) Limited
England and Wales
Property
development 100%
Velligrist Limited
England and Wales
Dormant
100%
Wm Morrison (Ireland) Limited
5
Ireland
Dormant
100%
Wm Morrison At Source Limited
England and Wales
Technical testing and analysis
100%
Wm Morrison Bananas Limited
England and Wales
Dormant
100%
Wm Morrison GP 1 Limited
England and Wales
Dormant
100%
Wm Morrison GP 2 Limited
England and Wales
Dormant
100%
Wm Morrison GP 3 Limited
England and Wales
Dormant
100%
Wm Morrison Growers Limited
England and Wales
Acquirer of fresh produce
100%
Wm Morrison LP 1 Limited
England and Wales
Dormant
100%
Wm Morrison LP 2 Limited
England and Wales
Dormant
100%
Wm Morrison LP 3 Limited
England and Wales
Dormant
100%
Wm Morrison Produce Limited
England and Wales
Produce packer and purchaser
100%
Wm Morrison Property Partnership LP
1
Scotland
Scottish Limited Property Partnership
100%
Wm Morrison Property Partnership 1 Limited
Partnership
England and Wales
Dormant
100%
Wm Morrison Property Partnership 2 Limited
Partnership
England and Wales
Dormant
100%
Wm Morrison Property Partnership 3 Limited
Partnership
England and Wales
Property partnership
100%
Wm Morrison Property Partnership 4 LP
1
Scotland
Property partnership
100%
Wm Morrison Supermarket Stores Ltd
England and Wales
Dormant
100%
Registered address
:
1.
Capella Building (Tenth Floor), 60 York Street, Glasgow, G2 8JX
2.
IFC1, Esplanade, St Helier, Jersey, JE1 3BX
3.
1st & 2nd floors, Elizabeth House, Les Ruettes Brayes, St Peter Port, Guernsey, GY1 1EW
4.
1st Floor, 5 Secretary’s Lane, Gibraltar GX11 1AA
5. 25
-2, North Wall Quay, Dublin 1, Ireland, D01 H104
127
Glossary
Alternative Performance Measures
In response to the Guidelines on Alternative Performance Measures (‘APMs’) issued by the European Securities and Markets
Authority (‘ESMA’), we have provided additional information on the APMs used by the Group. The Directors use the APMs listed
below as they are critical to understanding the financial performance and financial health of the Group. As they are not defined by
IFRS, they may not be directly comparable with other companies who use similar measures.
Measures
Closest
equivalent
IFRS
measure
Definition and purpose
Reconciliation for
Group measures
Profit measures
Like
-for-like
(
‘LFL’) sales growth
Revenue
Percentage change in year
-on-year sales (excluding
VAT), removing the impact of new store openings and
closures in the current or previous financial
period.
The measure is used widely in the retail industry as
an indicator of ongoing sales performance. It
is also a
key measure for Director and management
remuneration.
2022/2023
%
Group LFL (exc. fuel)
1.8%
Group LFL (inc. fuel)
(1.4)%
Total sales growth
Revenue
Including fuel:
Percentage change in year
-on-year total reported
revenue.
Excluding fuel:
Percentage change in year
-on-
year total sales
excluding fuel.
This measure illustrates the total year
-on-year sales
growt
h and
is a key measure for Director and
management remuneration.
A reconciliation
of total sales including
and excluding fuel is
provided in note 1.2 of
the financial statements.
Profit before tax and
exceptionals
Profit
before tax
Profit before tax and exceptionals is defined as profit
before tax, exceptional items and net retirement benefit
credit. This excludes exceptional items which are
significant in size and/or nature and net retirement
benefit
credit.
This measure is a key measure used by the Directors.
It provides key information on ongoing trends and
performance of the Group
.
A reconciliati
on of this measure is provided in
note 1.4 of the financial statements.
Profit before
exceptionals
after tax
Profit
after tax
Profit before tax and exceptionals after a normalised
tax charge.
This measure is used by the Directors as it provides
key
information on ongoing trends and performance of
the Group, including a normalised tax charge.
£
202m being profit
before tax and
exceptionals (£236m
) less a normalised tax
charge
(£34m) (see note 1.4 of the financial
statements
).
Operating
profit before
exceptionals
Operating
profit
1
Reported operating profit before exceptional items,
which are significant in size and/or nature.
This measure is used by the Directors as it provides
key information on ongoing trends and performance of
the Group.
£307
m being reported operating
profit of
£
89m, adjusted for
impairment and
prov
isions for onerous contracts (£218m),
restructuring
and store closure costs (£50m),
profit on disposal and closure (£
1m), pension
administrative
costs (£5m)
and other
exceptional
credit items (£54m).
Net finance
costs before
exceptionals
Finance
costs
Reported net finance costs excluding the impact of net
retirement benefit interest and other exceptional items,
which are significant in size and/or nature.
This measure is used by the
Directors as it provides
key information on ongoing cost of financing excluding
the impact of exceptional items.
A reconciliation of this measure is provided in
note 6.2 of the financial statements.
1 Operating profit is not defined under IFRS. However, it is a generally accepted profit measure.
128
Glossary
(continued)
Alternative Performance Measures (continued)
Measures
Closest
equivalent
IFRS
measure
Definition and purpose
Reconciliation for Group measures
Profit measures (continued)
Underlying EBITDA
Operating
profit
1
Operating profit before exceptional items and after
loss from joint ventures. Plus depreciation and
amortisation, McColl’s rent
al costs
2
and Management
Incentive Plan (MIP)
3
.
This measure is used by the Directors as it
provides
key information on ongoing trends and the
performance of the Group before capital investment
and financing costs.
£
970m
being operating profit before
exceptionals (£307
m), plus depreciation
(£
539m) and amortisation (£96m), McColl’s
rent
al costs (£24m), MIP (£5m) less share of
loss from joint venture (£1
m).
Statutory EBITDA
Operating
profit
1
Operating profit after exceptional items including
share of profit
/loss
from joint venture, before
depreciation and amortisation.
£
723m being operating profit (£89m), less
share of
loss from joint venture (£1m), plus
depreciation (£
539
m) and amortisation
(£
96m).
Tax measures
Normalised tax
Effective tax
Normalised tax is the tax rate applied to the Group’s
principal activities on an ongoing basis. This is
calculated by adjusting the effective tax rate for the
period to exclude the impact of exceptional items and
net retirement benefit credit.
This measure is used by the Directors as it provides a
better reflection of the normalised tax charge for
the
Group.
A reconciliation of the tax charge is found in
note 2.2.3 of the financial statements.
Cash flows and net debt measures
Net
debt
No direct
equivalent
Net debt is current and non
-current: borrowings, lease
liabilities and derivative financial a
ssets and liabilities;
net of cash and cash equivalents.
A reconciliation of this measure is provided in
note 6.
6 of the financial statements.
Working capital
movement
No direct
equivalent
Movement in inventories, trade and other receivables,
trade and
other payables and provisions.
£124m increase relating to movement in
inventories (inflow
of £72m), debtors (outflow
of £12m), creditors (inflow of £44m) and
provisions (
inflow of £20m).
1 Operating profit is not defined under IFRS. However, it is a generally accepted profit measure.
2 Rental costs for the majority of McColl’s properties are recorded within operating profit/(loss) as full IFRS 16 leases agreements have yet to be finalised. This adjustment
treats them as if IFRS 16 had been applied.
3 Management Incentive Plan includes release of prepaid charges.
129
Company advisors
Corporate responsibility enquiries
Telephone: 0345 611 5000
Solicitors
Ashurst LLP
London Fruit & Wool Exchange
1 Duval Square
London E1 6PW
Eversheds Sutherland (International) LLP
1 Wood Street
London EC2V 7WS
Squire Patton Boggs (UK) LLP
No.1 Spinningfields
1 Hardman Square
Manchester M3 3EB
DWF LLP
1 Scott Place `
2 Hardman Street
Manchester M3 3AA
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Central Square
29 Wellington Street
Leeds LS1 4DL
130
DISCLAIMER
This Annual Report has been prepared by Wm Morrison Supermarkets Limited (“Morrisons”) solely for informational purposes.
Morrisons has prepared this Annual Report on the basis of information in its possession, as well as from sources believed to be
reliable. To the extent available, the industry, market and competitive-position data contained in this Annual Report come from official
or third-party sources. Third-party industry publications, studies and surveys generally state that the data contained therein have
been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data.
Although Morrisons believes that each of these publications, studies and surveys has been prepared by a reputable source, Morrisons
has not independently verified the data contained therein. In addition, certain of the industry, market and competitive position data
contained in this Annual Report come from Morrisons own internal estimates based on the knowledge and experience of Morrisons
management in the markets in which it operates. Although Morrisons believes that such estimates are reasonable and reliable, such
estimates, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or
completeness and are subject to change without notice. Accordingly, no undue reliance should be placed on any of the industry,
market or competitive position data contained in this Annual Report. In connection with any investment decision, the recipient should
conduct its own evaluation and assessment of the information contained in this Annual Report, and the economic, financial,
regulatory, legal, taxation, stamp duty and accounting implications of that information. Morrisons is not providing legal, accounting or
tax advice, and you are strongly advised to consult your own independent advisers on any legal, tax or accounting issues relating to
this Annual Report in connection with any investment decision.
This Annual Report contains financial information regarding the businesses and assets of Morrisons. Unless indicated otherwise, the
financial information presented herein is for Morrisons on a consolidated basis.
Certain financial data included in this Annual Report consists of “non-IFRS financial measures.” These non-IFRS financial measures
may not be comparable to similarly-titled measures as presented by other companies, nor should they be considered to be
alternatives to the historical financial results or other indicators of Morrisons income or cash flow based on IFRS. Morrisons believes
that presenting certain non-IFRS financial measures provides meaningful information to investors in understanding operating results
and may enhance investors’ ability to analyse financial and business trends. In addition, Morrisons believes that these non-IFRS
financial measures allow investors to compare period to period more easily by excluding items that could have a disproportionately
negative or positive impact on results in any particular period. Even though the non-IFRS financial measures are used by
management to assess Morrisons financial position, financial results and liquidity and these types of measures are commonly used
by investors, they have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for
analysis of Morrisons financial position or results of operations as reported under IFRS. The definitions, calculations and
reconciliations of such non-IFRS measures to the applicable IFRS measures are set forth in the glossary to this Annual Report.
Neither Morrisons nor its advisers are under any duty to update or inform any recipient of any changes to information in
this Annual Report, provide any recipient with access to any additional information or to correct any inaccuracies in any such
information which may become apparent. As such, the information in this Annual Report should not be assumed to have been
updated at any time subsequent to the date hereof.
This Annual Report may contain forward-looking statements. All statements other than statements of historical fact included in
this Annual Report are forward-looking statements. Forward-looking statements express Morrisons current expectations and
projections relating to Morrisons financial condition, results of operations, plans, objectives, future performance and business. These
statements may include, without limitation, any statements preceded by, followed by, or including words such as “aim,” “anticipate,”
“believe,” “can,” “have,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “guide,” “intend,” “likely,” “may,” “ongoing,”
“plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” and other words and terms of similar meaning or the
negative thereof. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could
cause Morrisons actual results, performance or achievements to be materially different from the expected results, performance or
achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous
assumptions regarding Morrisons present and future business strategies and the environment in which it will operate in the future.
Past performance is not a guarantee of future results and there can be no assurance that Morrisons or its subsidiaries will achieve
comparable results or be able to implement a desired strategy or objective. This Annual Report and any forward-looking statements
herein speak only as of the date of this Annual Report and Morrisons expressly disclaims to the fullest extent permitted by applicable
law any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements or other information
contained herein to reflect any change in expectations with regard thereto or any new information or change in events, conditions or
circumstances on which any such statement is based. The recipient acknowledges that circumstances may change without notice
and the contents of this Annual Report may become outdated as a result. Comparisons of results for current and any prior periods
are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be
viewed as historical data.