annual report & l nancial statements · 4 ANNUAL REPORT AND FINANCIAL STATEMENTS r three year...

annual report & nancial statements

for the year ended 23rd January 2016

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1

2

3

4

5

6

14

18

19

20

21

22

23

24

25

44

46

vision/mission statement

directors and

notice of meetings

three year comparative statement

three year period

directors’ report

statement of the directors on corporate governance

statement of the directors’

independent report

income

notes to the

and member

trading area and operations

contents

Heart of Co-operative Society Limited

is registered the Co-operative and

Societies Act 2014. Registered No. 2399R

Registered

22 Abbey Street, CV11 5BU.

024 7638 2331.

VAT Registration No. 328 0789 38.

Solicitors

Bankers

Independent auditors

advisers

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1HEART OF ENGLAND CO-OPERATIVE SOCIETY

we are…an independent, regional co-operativesociety, known as the Heart of England Co-operative Society Limited. Ourorigins go back to 1832, when theLockhurst Lane Industrial Co-operativeSociety was founded, near Coventry.Our current name came into being inJanuary 2000, after more than 160years during which more than twentylocal, independent co-operativesocieties joined together to pool theirresources.

our vision…is to be an innovative regionalbusiness, always seeking opportunitiesfor profitable growth, whilst

demonstrating that a retail co-operativesociety can bring genuine benefits tolocal customers, members andcommunities.

our mission...as a consumer co-operative is toprovide good value for money througha range of shopping facilities andservices. Our trading practices arebased on a combination of sound co-operative business ethics and theneed to trade profitably. We willalways seek ways to share our successwith our members and the localcommunities in which we trade.

Opening of our new Galley Common co-operative food store

vision/mission statement

welcome to the heart of england vision/mission s

directors and

notice of meetings

three

directors’ report


statement of the directors’

independent

notes to the

and member


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ANNUAL REPORT AND FINANCIAL STATEMENTS2

Main Board Audit CommitteeOccupation Attendance Attendance Elected Term 2015

Possible Actual Possible Actual Expires remunerationHANNE HOECK Accountant 15 15 2 2 1996 2016 £2,771PresidentCLIVE MILES retired 15 14 2 2 1996 2018 £1,716Vice PresidentBrIAN BOyD^^ Employee 15 12 2 2 2002 2017 £1,716COLIN BrOWN Facilities Attendant 15 15 2 2 2011 2017 £1,716PAuL ELVErSON Manager 15 15 2 2 1997 2018 £1,716rOGEr FOrrEST# retired 5 4 1 - 2009 2015 £522GAry HAIGH Self Employed 15 13 2 2 2011 2017 £1,716ALAN LEWELL^ retired 15 13 2 2 1998 2016 £2,356NICK MATTHEWS Lecturer 15 13 2 2 2007 2017 £1,716CHrIS NEWMAN Employee 15 15 2 2 1998 2016 £1,716MArK ruMSEy Employee 15 14 2 1 2010 2016 £1,716rOGEr STAIN retired 15 13 2 2 2013 2016 £1,716PAT SuNNEr retired 15 12 2 1 1991 2016 £1,716ANDrEW TAMPION Legal Advisor 15 14 2 1 2013 2017 £1,716LESLEy WOOLCOCK# Employee 5 4 1 1 2009 2015 £522LLOyD WOOLCOCK+ Credit Controller 1 - - - 2012 2015 £131

+ resigned February 2015# Did not seek re-election May 2015

^^resigned February 2016

^ resigned January 2016

directors and officials

COLIN BROWN NICK MATTHEWS

CHRIS NEWMAN ROGER STAIN

PAUL ELVERSON GARY HAIGH

PAT SUNNER ANDREW TAMPION

board of directors

ALI KURJIChief Executive

HANNE HOECKPresident

CLIVE MILESVice President

MARK RUMSEY

management executive

ALI KurJIChief Executive

STEPHEN SLATErSecretary

PETEr FLETCHErGeneral Manager, Food

BryAN WHEATLEy(15th August 2015) General Manager, Non-Food and Travel

DArryL SMITH General Manager, Funeral

MAurEEN EMMSPersonnel Manager

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3. To adopt the Accounts for the yearmiended 23rd January 2016 togethermiwith the Independent Auditor’smireport therein (pages 19 to 43).

4. To approve the followingmirecommendation of the Board ofmiDirectors that the fees for the Boardmiof Directors shall be as follows:-miPresident: £ 2,819 per annummiVice President: £ 2,397 per annummiDirectors: £ 1,746 per annum

5. To appoint Auditors:-miNominated: Grant Thornton uK LLP

6. To receive the report of themiEducation and Member relationsmiCommittees.

7. Declaration of the result of votingmifor Board of Directors and Membermirelations Committees.

By order of the BoardS.G. SlaterSecretary22nd March 2016

to obtain admission to the meetingsIn order to gain admission to meetingsa member must produce their ownpersonal Member Share Pass Book ora receipt in lieu of the Pass Book.

Members are entitled to attend onlyone divisional meeting.

Each member shall only have one voteand must have been accepted as amember for a period of not less thansix months prior to the date of themeeting and must hold at least one £1share.

notice of meetings

Opening of our new Kenpas Highway funeralcare

annual meetings of members,may 2016will be held at:-

Mary Forryan CentreSt Peter’s Catholic Church, Leicesterroad, Hinckley LE10 1LW on Monday, 9th May 2016.

Coventry Central HallWarwick Lane, Coventry, CV1 2HAon Tuesday, 10th May 2016.

The Benn HallNewbold road, rugby, CV21 2LNon Wednesday, 11th May 2016.

Central Hall22 Abbey Street, Nuneaton CV11 5Buon Thursday, 12th May 2016.

Meetings�to�commence�at�6.30�p.m.refreshments will be available prior tothe meetings.

agenda1. To confirm the minutes of themiAnnual General Meetings and SpecialmiMeetings held in May 2015.

2. To receive the Board of Directors’mireport (pages 6 to 13).

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three year comparative statement

January January January2014 2015 2016

53 weeks 52 weeks 52 weeks(as restated) (as restated)

£ 000 £ 000 £ 000REVENUE ACCOUNTGross value of sales 95 439 94 551 92 225Depreciation 1�999 2 161 2 160Other expenses 23 728 27 312 21 695Operating profit/(loss) 5 201 (1 326) 3 870Investment income 236 114 93retained profit/(loss) 1�765 (1 634) 2 751

BALANCE SHEET

Fixed AssetsIntangible assets 308 277 246Property, plant and equipment 23 946 25 141 25 105Investment properties 14�959�� 13 513 15 073Other investments 12�533 15 108 17 403

Current AssetsOther investments 458 572 646Inventories 5 340 5 538 4 148 Trade and other receivables 1 305 1 857 1 807Cash at bank and in hand 10�066 8 929 6 191

Current LiabilitiesCreditors 6�437 7 089 6 542

Long Term LiabilitiesCreditors 12 545 16 204 17 534Pension deficit 7 987 10 979 7 026Deferred tax 2 024 1 826 1 903

Net Assets 39 922 34 837 37 614

Net Assets excluding Pension Deficit 47�909 45 816 44 640

Share capital 2�758 2 757 2 235revaluation reserve 5�449 5 337 5 939revenue reserve 31�715 26 743 29 440

39�922 34 837 37 614

Profit/(loss) after interest 5 017 (1 679) 3 462Capital expenditure 5�109 3 621 4 413Net cash 9 914 8 861 6 191

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Jan 201453 weeks

Jan 201552 weeks

Jan 201652 weeks

m£ tseretni retfa m£ selas fo eulav ssorg

m£ htrow tenm£ hsa ten

94.6

-1.3

£m

-1.7

8.9

34.8

These bar charts represent extracted from the three yearcomparative statement on 4. The Society’s ‘net worth’ is based

the ‘net assets’

3.6

three year period

Jan 201453 weeks

Jan 201552 weeks

Jan 201453 weeks

Jan 201552 weeks

Jan 201453 weeks

Jan 201552 weeks

Jan 201453 weeks

Jan 201552 weeks

Jan 201453 weeks

Jan 201552 weeks

95.4

5.2 5.0

9.9

39.9

5.1

92.2

Jan 201652 weeks

3.9

Jan 201652 weeks

3.5

Jan 201652 weeks

6.2

Jan 201652 weeks

37.6

Jan 201652 weeks

4.4

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ANNUAL REPORT AND FINANCIAL STATEMENTSANNUAL REPORT AND FINANCIAL STATEMENTS6

to the membersWe are pleased to present the Annualreport of the Heart of England Co-operative Society Limited for the52 weeks ended 23rd January 2016.

generalThe year 2015 turned out to be one ofthe most difficult years in recent timeswhich witnessed very challengingtrading conditions and anunprecedented level of competitionfrom the major multiples in generaland the discount stores in particular.retailing continued to remaindepressed and volatile throughout theyear as a result of continued pricereductions by the multiples in order tocompete with the discounters, the likesof Aldi and Lidl and also the singleprice discounters who all saw anincrease in their market share.

Consumer confidence continues toremain low in spite of inflation fallingto its lowest level, driven by thebiggest ever annual fall in groceriesand energy prices. The Bank ofEngland has kept the base rate on holdat a record low of 0.5 per cent sinceMarch 2009 and yet there still remainsuncertainty about the economy and weare currently getting mixed signals onthe wider economy.

We face an extremely tough and veryuncertain 2016 which has started veryslowly in growth terms and all theeconomic indicators are pointingtowards a slowdown in growth acrossthe economy. Inflation has dipped to itslowest level and there is a real dangerthat deflation, particularly in food ishere to stay for some time.

financial reporting standard 102This is the first year that the Society, inline with most business entities, hasbeen required to adopt the newFinancial reporting Standard, FrS 102.The introduction of this standard

represents a major change to the financial reporting within the unitedKingdom. The adoption of FrS 102 has led to significant changes in thefinancial statements and the disclosuresrequired. But more importantly therehave been changes to the criteria ofhow some assets and liabilities arerecognised, the measurement of certainitems, and the treatment of some gainsand losses.

These changes have resulted inrevisions being made to prior yearfinancial statements. The major areasthat have been impacted includeFuneral Prepayment Plans, Goodwill,Pension Obligations, InvestmentProperties and Deferred Taxation.

financial reviewIt is very difficult to draw a meaningfulcomparison this year against last year,as we have had to restate last year’sfigures as required under FrS 102. Our operating profit was £1.4m beforeexceptional items and £3.65m afterexceptional items. The payments toand on behalf of the stakeholders hasbeen reclassified in this and prioryear’s financial statements.

Group turnover for the year was£82.7m which is a decrease of 2.0% ona comparative period. This wasaffected not only by competition anddeflation in food, but also by theclosure of our Travel division inSeptember and non-food store inCoventry in October and the significantdiscounts offered in our other non-foodstores to clear the stock before furtherclosures.

The policies put in place in recentyears are being successfullyimplemented and are helping to createa strong regional co-operative businesswhich will withstand the economicchallenges ahead.

We are delighted to have continued tooperate with no borrowings, indeed weare very well placed to continue withour re-development programmewithout having to rely on externalfunding. The Society continues toinvest substantial sums of money in itsrenewal programme, with a further£4.4m having been utilised on newprojects during 2015. A number offurther projects in food and funeralswhich will involve significant capitalexpenditure, will be looked at in thecoming years.

In line with most final salary pensionschemes which are running in deficit,our pension liability calculated inaccordance with FrS 102 foraccounting purposes only, now standsat £7.0m compared to £10.9m last year,a decrease of 35.8%. The final salaryscheme was closed to all new entrantsin October 2012. All new employeesnow join a defined contribution schemeoperated by NOW Pensions.

directors’ report

-1.3

Jan 201453 weeks

Jan 201552 weeks

5.2

Jan 201652 weeks

3.9

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Our new Alfall Road co-operative food store

trading review food divisionThere can be no doubt there has been asignificant shift in food retailing whichcontinues to be very competitive causedby falling prices and changing customershopping habits. It is a fiercelycontested sector not only by themultinationals but more so by Aldi andLidl who have collectively seen theirmarket share grow in excess of 10 percent. Aldi recently announced itwill open 80 new stores this year in theuK and Amazon have recentlyannounced a tie up with Morrisons inorder to gain access to the food market.

On a like-for-like basis, our fooddivision recorded a decrease in sales of2.84% for the 52 week period due tofood deflation and significantcompetition in our trading region,particularly at our Wellesbourne andBalsall Common stores with the recentopening of Sainsbury and Tescorespectively. The margins too cameunder tremendous pressure during theyear due to price reductions by themultinationals, and competition fromthe discount stores. Our overall marginsdropped by 0.74% compared to lastyear.

In April we extended and completelyrefurbished our Long Itchington storewhere we have seen a double digit

increase in sales. In September weopened a brand new purpose built foodstore in Galley Common in Nuneatonwhich is already performing better thanbudget and in January 2016, just beforethe year end date, we opened anothernew food store in Alfall road Coventryby converting an old derelict pub.Although it is early days, the store isperforming better than budget.

We also have plans to further extendour penetration in the food businessand are currently in discussion for twopotential sites. We closed our foodpresence in our department stores inCoventry and Hinckley in October andJanuary respectively as a result of theclosures of our non-food stores.

As a responsible retailer and as part ofour commitment to helping theenvironment, we have installed andwill continue to install energy efficientlighting and refrigeration.

We have continued to review andimprove our product ranges payingparticular attention to our fresh foodrange. This is in direct response to thechanges in the convenience market andwe have also continued to support andextend our Fairtrade product range.

non-food divisionAfter a great deal of deliberationcoupled with numerous special boardmeetings, a full review of our non-fooddivision was undertaken during theyear. It is well recognised thatcustomer shopping habits havechanged dramatically as has thetechnology they are using, creating adilemma in the departmental shoppingenvironment due to the growingimportance of online and digitalchannels.

Our newly refurbished Long Itchington co-operative food store

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8

directors’ report

ANNUAL REPORT AND FINANCIAL STATEMENTS

To be competitive in this newenvironment, retailers need to investsignificant sums in infrastructure fortoday’s customers. Having looked atevery possible scenario to see if wecould keep the stores open even inpart, and having made every possibleeffort to remain competitive againstonline retailers, your directors sadlycame to one of the most difficultdecisions, to exit from the loss makingnon-food division. This decision to exitwas not taken lightly but with asignificant level of losses, the divisionwas unsustainable.

As a business we have been hit veryhard in non-food by online salescoupled with an ever changing retailenvironment. Over the past 10 years,the division has lost in the region of£18m.

Following the Members Specialmeeting held on the 10th of March2016, the Board will commission anindependent report on the Non-FoodDivision.

travel division We closed our two loss making traveloutlets in September 2015 as a result ofthe growth in online bookings.

funeral divisionWe are pleased to report an increase insales of 1.8% on a like-for-like basisalbeit our volumes dropped slightly.The level of pre-paid funeral plans soldduring the year increased by 28%compared to last year.

We continue to take steps to developour standards to the highest possiblelevel, whilst maintaining a verycompetitive pricing policy in ourregion for our client families.

During the year, we opened two newfuneral homes in Kenilworth andKenpas Highway in Coventry, takingthe total number of funeral homes to13.

Our A J Murray funeral home inHinckley was fully refurbished and re-branded during the year.

We also replaced eight ceremonialvehicles in Coventry during the year.

Our client surveys showed a verypositive experience from our clientfamilies with 97% of the familiesstating they would use or recommendour services again when the needarises. Once again, Christmas 2015saw the memorial Christmas treeinitiative rolled out in all our funeralhomes, which was very well receivedby our client families.

membershipTotal Society membership now standsat 260,969 showing an increase of6,559 new members or 2.5%, with 932members having left during the year.The Society continues to activelypromote new membership andencourages existing members to re-register. This drive has resulted in thetotal number of members who haveregistered rising to 139,023, an increaseof 4.2%.

Our new funeralcare home at Kenpas Highway, Coventry

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Society Charity for the past two years

supplier payments policyIt is the Society’s policy to agree andclearly communicate the supplierpayment terms we operate as part of thecommercial arrangements negotiatedwith suppliers, and then pay accordingto those terms based upon the timelyreceipt of accurate invoices.

Trade creditor days of the Group for theyear ended 23rd January 2016 were 22days (2015:25 days). This represents theratio, expressed in days, between theamounts invoiced to the Society by itssuppliers in the year and the amountsdue at the year end, to trade creditorswithin one year.

our employeesThis has been a particularly difficultyear, however, we have placed greatemphasis on training and developmentof our employees at all levelsthroughout the Society. This issupported by our training departmentheaded by Catherine Evans.

We remain committed to realising thepotential of every member of staffwithin our Society.

appreciationWe would like to take this opportunityto thank all our staff for their personalefforts during the year which has trulybeen a very difficult trading year.

society charityThe Society raised £20,000 on behalfof the Myton Hospice. This is inaddition to the £22,000 raised theprevious year making a total sumraised over the two years of £42,000.We wish to thank all the employeeswho took an active part in variousfundraising activities during the year.Our staff have voted to support theGuide Dogs for the Blind for the next12 months during which time they willengage in numerous ideas andinitiatives to raise funds for the charitywhich provides mobility and freedomto blind and partially sighted people.

retired colleagues/longservice awardsIn December, many of our retiredcolleagues were able to join us at theBenn Hall in rugby as our guests fortheir annual Society luncheon.During the event, a number of long

service awards were given out toemployees in recognition of theirservice with the Society ranging from25 to 45 years. We are always pleasedto celebrate our longer-servingcolleagues’ loyalty to the Society.

We would also like to offer our bestwishes for a long, healthy and happyretirement to all our retired formercolleagues.

obituariesSadly, we must record the deaths, overthe past year, of a number of peopleassociated with the Society. To thefamilies involved, we would like toextend our deepest sympathy in theirsad loss. Those who knew them willremember them with affection andgratitude.

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10

corporate governanceAs custodians of the Society, theDirectors are committed and intend tocontinue to work towards meeting thehighest possible standards of corporategovernance.

The Co-operatives Limited issued theCode of Best Practice in July 1995followed by subsequent amendmentsand updates. In May 2005 the Co-operative Congress approved theadoption of the updated and revisedversion of the Corporate GovernanceCode of Best Practice for ConsumerCo-operative Societies, issued by Co-operatives Limited. Thissucceeded the earlier version of theCode following extensive consultationwith member societies. The new Codepresents societies with a significanttask in reviewing current practices andto decide whether change is necessaryto comply or to provide validexplanations for non-compliance.Accordingly the Society providesexplanation in regards to those areas of

the Code where it is non-compliant inthe Statement of the Directors onCorporate Governance.

corporate socialresponsibilityThe Heart of England Co-operativeSociety’s origins are based upon thefundamental principles of co-operationand the Society continues to operatewith these principles in mind. TheSociety genuinely strives to put co-operative values into practice inevery aspect of its business. Whereverpracticable, this co-operation extendsto other co-operative organisations, asit is our belief that the most successfulco-operative businesses are focused onmeeting genuine local communityrequirements, whilst working togetherwith other co-operative organisationsfor mutual benefit.

Those principles of co-operation arefundamental to the Society’s objectives of demonstrating how it differs fromother retailers, and having completed 16years operating as the Heart of England Co-operative Society, along with aheritage of over a 180 years ofcontinuous co-operative trading, wetake great pride in being able todemonstrate that difference.

In order to more clearly measure andmonitor our performance in achievingthis aim, the Society has adopted aseries of Key Social and Co-operativeIndicators building on the Code ofBusiness Conduct. As these developover the coming years they will enableus to measure progress on a range ofsocial and co-operative issues, bymonitoring trends and identifyingopportunities for continuousimprovement. In that way, the co-operative principles and values willremain at the forefront of all that wedo. These are shown in the tables onpages 10, 11 and 12.

directors’ report

Membereconomicinvolvement.

Trade conductedwith members as a proportion of turnover.

One of the key benefits of membership of the Heart of England Co-operative Society is to share in the success of the Society. It is notfeasible to identify a meaningful percentage of trade that distinguishedbetween members and non-members.

1

Memberdemocraticparticipation.

Number ofmembers voting inelections and as apercentage of totalmembership.

There was no requirement for any voting for Director appointments this year.2

Description Measure Performance in 2015/2016


key social & co-operative performance indicators

Participation ofemployees andmembers intraining andeducation.

Hours of trainingundertaken.

During the year the Society provided 6,015 hours of training to ouremployees (2015:6,246 hours), which equates to an average of 9.68 hoursper full-time equivalent employee (2014:9.55 hours).There were 47 hours of training for members.

3

uk

uk

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key social & co-operative performance indicators - (continued)

Staff injury andabsentee rates.

Total number ofaccidents andreportableaccidents. Staffabsentee rates.

During the year the Society has recorded a total of 6 reportable accidents(2015:15) and 102 minor accidents (2015:135).The average number of absence days was 3.21.

4

Staff profile – gender andethnicity.

Gender split and% employeesfrom differentethnic groups.

70% of our employees are female (2015:62%) and 30% male (2015: 38%).We also monitor the diversity of our staff and currently 4% have an ethnicminority background (2015: 6%). Further details are listed on page 12.

5

Customersatisfaction.

% of customersbeing satisfiedwith service.

Customer satisfaction is fundamental to the success of our business. Weregularly seek feedback from our customers to try and gauge levels ofsatisfaction, through the media of surveys, feedback questionnaires andrandom sampling. We actively encourage our customers to feedback theircomments direct to the Chief Executive, both positive and negative, in orderthat we can continue to develop and improve in the area of customerservice. In the funeral division we regularly send out customer feedbackquestionnaires to our clients, and in other divisions we provide point of salecomment cards for customers to fill in there and then or to take away withthem. We monitor all responses. The nature of the customer feedback weseek in other divisions does not provide a percentage satisfaction rating.

6

continued overleaf


Consideration ofethical issues andprocurement andinvestmentdecisions.

Evidence ofethical issues indecision making.

The Heart of England Co-operative Society is a member of the Federalretail & Trading Services (FrTS), which in turn is a member of the EthicalTrading Initiative (ETI) and is working to ETI and International LabourOrganisation (ILO) principles and standards. The Society also sourcesproducts from and maintains links with, wherever practicable, a number ofother uK co-operative businesses and organisations that are committed tothe application of the same co-operative values. Further details are listed onpage 12.

7

Investment incommunity and co-operativeinitiatives

Annual proportionof investment incommunity/co-operativeinitiatives as a %of pre-tax profits.

The Society donates a percentage of its profits to local charitable causes. Assuch since its inception the society has donated £846,000 and a further£55,000 has been committed in the period. The annual commitmentrepresents 1.6 % of our pre-tax profits.

8

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12

directors’ report

key social & co-operative performance indicators - (continued)

CO2 emissionsarising fromoperations.

Tonnes of CO2emissions fromenergy used for allon-site operations.

During the year the Society generated 6,369 tonnes of CO2 (2015:6,883tonnes), which is equivalent to 10.26 tonnes per full-time equivalentemployee (2015: 10.52 tonnes), or alternatively 69.06 tonnes per £1m ofturnover (2015:72.80 tonnes).

9

Waste recycled. % of wasterecycled/re-used as% of total waste.

During the period the Society generated 2,524 tonnes of waste (2015:2,454 tonnes) of which 41.1% was recycled (2015: 42.5%). The Society is always exploring new ways to generate less waste and toincrease the level of recycling we achieve.

10



staff profileThe Society operates an equal opportunities policy. During the period the Society recorded staff profiles as follows:-

2016 2015No. % No. %

male and female/full and part-time

Male full-time 141 17 173 18

Female full-time 186 22 158 16

Male part-time 111 13 188 20

Female part-time 409 48 446 46

ethnicity profile

African – Caribbean - - 1 -

African – Other 2 - 2 -

Asian – British 21 2 30 3

Asian – Other 7 1 8 1

British 809 96 912 94

European 7 1 7 1

Other 1 - 5 1

age profile

Between 16 and 18 60 7 58 6

Between 19 and 25 188 22 197 20

Between 26 and 35 93 11 135 14

Between 36 and 45 117 14 130 14

Between 46 and 55 172 20 221 23

Between 56 and 65 192 23 194 20

Over 65 25 3 30 3

procurement and investmentWe currently maintain links of various typeswith the following co-operative organisations:-

• Co-operative Group Limited• Federal retail and Trading Services (FrTS)• Co-operatives• Co-operatives West Midlands• Central England Co-operative• West Midland Co-operatives

Member Education Group

uk

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the heart of england co-operative differenceThe Society believes that thisinformation demonstrates how itconsolidates the principles of co-operation into its everyday activity,both locally and nationally, and how itfurther shows in a tangible way whatis meant by the Heart of England Co-operative difference. Given thatother types of organisations existprimarily to maximise their profits inorder to create wealth for shareholders,with little genuine concern for thelocal community from which theseprofits originate, the Heart of England Co-operative Society believes itsapproach provides tangible evidence ofan alternative model of businesspractice.

The profits we make produce directbenefit for our primary stakeholders,i.e. our customers, our members, ouremployees and our local communities.

for our customers We intend to continue to plough back amajor proportion of our profits intoimproving our shops and otherfacilities, whilst also seeking newsuitable trading opportunities, toexpand our business throughout theheart of England.

for our employees Despite being a difficult year, for thetwentieth successive year we havemaintained our unique staff bonusscheme which has been implemented.This is in keeping with our aim ofmaking the Heart of England Co-operative Society an excellent place towork, by providing employees withcompetitive remuneration packages andgood career opportunities.

for our local communities Our commitment to giving apercentage of our profits to local goodcauses has resulted in more than£846,000 being made available for thispurpose within the first 16 years sincethe introduction of this initiative in2000.

Our locally elected Education/Memberrelations Committees have alreadybeen able to provide much appreciatedassistance to more than 4,300 localgood causes since the inception of thescheme.

Our local communities have alsobenefited from several millions ofpounds worth of local investment inrecent years as we continue to ploughthe greatest part of our profits backinto creating new and modern storesand services for local people followingthe principles of co-operation set outmany generations ago.

to the future Increasing sales levels, whilst carefullycontrolling costs, remains the best wayto achieve a consistent growth inprofits and in the long-term maintainour Society’s outstanding level ofsuccess.

We intend to continue with ourstrategy of renewing and expandingour businesses and the cash reserveswe have built up will enable us tocontinue to do this without the needfor any external financial assistance inthe short-term.

In spite of these pressures, we intendto maintain our unique position in theheart of England by building on ourreputation as one of the uK’s leadingretail co-operatives by continuing to:-

• Develop profitable trading activities.

• Maintain community friendly miinitiatives and policies.

In spite of the uncertain economicoutlook ahead, we remain optimisticabout our Society’s future prospects asone of the leading independentregional co-operative societies.

H. S. Hoeck – President

A. Kurji – Chief Executive

S.G. Slater – Secretary

22nd March 2016

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statement of the directorson corporate governanceThis report is published in accordancewith the Code of Best Practice adoptedby the Co-operative Congress in May 2005. The Code sets out therecommended best practice on issues ofgovernance for organisations in the co-operative sector.

The following statement, authorised bythe Directors, outlines how the Societyhas complied with the principles of theCode and explains in its final statementany provisions the Society does notcomply with and the reasons for non-compliance. The statement relatesto the period 25th January 2015 to 23rdJanuary 2016.

the membersCo-operatives are member owneddemocratic organisations and theBoard has sought to encouragemembers to play their part in thegovernance of the business andimprove membership participation.The Society continues to activelypromote new membership andencourages existing members to re-register. As a result the Societydefines an active member as a memberwho has recently joined or re-registered.

members’ meetingsThe Society operates with a single tierboard structure. The Society activelypromotes the Annual General Meetingsvia posters in branches, through theAnnual report, the Society’s website,the Members’ calendar and throughnewspaper advertisements. The Societyprovides refreshments to encouragemembers to attend the meetings.

the board’s role It is the responsibility of the Board ofDirectors to determine the vision andthe strategy of the Society.

The Board of Directors currentlyconsists of eleven members, directlyelected by the membership, whoappoint the President and VicePresident annually from within theirnumber.

The Board of Directors is charged withensuring that the business of theSociety is conducted in accordancewith the co-operative principles, as setout by the International Co-operativeAlliance and with the interests of theSociety and its members uppermost atall times.

The Board of Directors also has theresponsibility for supervising the workof the Chief Executive and theManagement Executive.

The Board of Directors meet everyfour weeks. They also meet twice ayear as the Audit Committee andwould also meet as a SearchCommittee and remunerationCommittee as required.

The matters reserved to the Board ofDirectors are in accordance withAppendix 5 of the Code except for theappointment and removal of theSecretary. All items of capitalexpenditure over £15,000 in valuemust be approved by the Board ofDirectors.

It is the responsibility of theManagement Executive to meet thestrategic objectives of the Society.Day-to-day management of theSociety’s activities rests with the ChiefExecutive and the ManagementExecutive.

election, renewal of theboard and successionplanningThe Society has amended the age rulefor new Directors in line with theCombined Code. The Board ofDirectors is comprised of employees,retired employees and members, witha broad range of skills and experience.under the new rules, the Society canco-opt professional external directorsand form a Search Committee as andwhere appropriate.

board balance and independenceNo Director or member of theManagement Executive holds anyother significant directorships.

president and vicepresident of the societyThe President and Vice President ofthe Society are elected annually by allthe Directors and the term of office isfor a period of twelve months.

information andprofessional developmentThe Directors receive regularinformation at each board meeting andits accuracy, quality and timing arereviewed on a regular basis.

All new Directors are offered theopportunity to spend time with thePresident and the Chief Executivebefore attending the Board for the firsttime, to outline to them theprocedures, rules, standing orders andconduct required of individualDirectors. In addition, all Directors areoffered the opportunity to undertakefurther formal training to develop theirskills and experience.


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board skills andperformance evaluationThe Board of Directors believe that theexperience gained through their workingcareer and the common sense approachused when making Board decisions isadequate. However, during the year theDirectors did identify training needswhich they undertook. In addition noperformance evaluation of the Board orits individual Directors is undertaken.

remuneration reportThe Society is committed to the higheststandards of good corporate governance.To that end it uses as a guideline for itsdisclosure in relation to remuneration,the disclosure requirements set out in theCo-operatives Corporate GovernanceCode of Best Practice, as endorsed bythe Co-operative Congress in May 2005.

The Society’s Board is entirely non-executive, the Directors beingelected from its membership. The day-to-day management of the Societyfalls to the Management Executive.

The remuneration report is presented bythe Board and contains the followinginformation:-• A description of the role of the

remuneration Committee.• A summary of the Society’smiiremuneration policy.• Details of the terms of the servicemiicontracts and the remuneration ofmiieach Management Executivemiimember for the year ended 23rdmiiJanuary 2016.

role of the remunerationcommitteeThe remuneration Committee is madeup of the full Board of Directors. TheCommittee is responsible for all aspectsof remuneration and contractual termsand conditions of the ManagementExecutive team. The Committee sets theremuneration policy and strategy forthese individuals.

remuneration policyThe current policy is to pay remunerationdetermined and agreed by the Directors.The Committee considers that asuccessful remuneration policy needs tobe sufficiently flexible to take account ofchanges in the Society’s businessenvironment and in remunerationpractice.

elements of remuneration Management Executive remunerationconsists of salary, pension and theprovision of a Society car.

salary Management Executive salaries arereviewed annually with any increasesnormally payable with effect from 1stJuly each year. Salaries paid to theManagement Executive in the financialyear ended 23rd January 2016 are setout in Note 8 in the notes to thefinancial statements.

The Board of Directors is of theopinion that there is no value to begained by disclosing the individualManagement Executive remunerationpackages.

service contracts No member of the ManagementExecutive has a notice period ofgreater than 12 months.

pensionThe Management Executive (excludingthe Secretary, who is a member of the

Defined Contribution Scheme) aremembers of the Society’s DefinedBenefit pension scheme, as at 23rdJanuary 2016. These schemes arefunded, HMrC approved, definedbenefit final salary occupationalpension schemes. Members of the fundcontribute between 6.5% and 8.5%,dependant on age, of their pensionablesalary up to the HMrC maximum.Basic salary is the only element ofremuneration that is pensionable.

directorsThe Directors do not have servicecontracts. The years of their electionare shown on page 2 together with theexpiry of their current term of office.Each Director is subject to re-electionevery three years.

Directors’ fees are approved by theSociety’s members. The current feelevels were recommended to themembership and approved by them inMay 2015.

The total fees received by eachDirector are set out on page 2.

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statement of the directors on corporate governanceaudit committeeThere are clear and consistentprocedures in place for monitoring thesystem of internal financial controls.

The Internal Auditor andAccountant/Assistant Secretary meetregularly within their remit and reviewthe effectiveness of the Society’ssystem of internal financial controls.The Accountant/Assistant Secretaryreceives reports from the Societyinternal audit function andmanagement where appropriate.

A documented whistle-blowingprocedure is in place to enable staff toraise concerns in confidence, in mattersof financial reporting, financial controlor any other issues. These procedures aremade available to staff at their time ofcommencing employment.

The full Board of Directors meet twicea year as the Audit Committee. ThisCommittee is responsible forreviewing the effectiveness of theSociety’s systems of internal control.

The Committee meets to:-

• Consider reports from the miiManagement Executive, internal

audit and external audit on the systems of internal control and any

miimaterial control weaknesses.• Discuss with the Internal Auditor

the actions taken on problem areas miiidentified in these reports or by

the Board.• review the effectiveness of the risk

management process and ensure significant risk issues are referred to the Board for consideration so that appropriate steps can be taken to minimise such risks to the Society.

• Consider the effectiveness of the operation of the internal audit function.

• Consider the appointment of external auditors and in conjunction with management agree the nature and scope of the external audit review.

• review the external audit miifindings report and the managementmiiresponse to the report.• recommend reviews of other areas miiof the business where a more miiintense audit procedure is necessary.

The Audit Committee also has a dutyto discuss problems and reservationsarising from the Society’s audit andany matter the Auditor may wish todiscuss, if necessary, in the absence ofthe Chief Executive.

Accordingly the Board of Directorsconfirms that the effectiveness of thesystem of internal controls for the yearended 23rd January 2016 has beenreviewed in line with the criteria setout in the Corporate Governance Codeof Best Practice.

co-operative and socialresponsibilityThe Society takes seriously itscommitment to the principles of co-operation and social responsibility.It has therefore fully adopted the 10Key Social and Co-operativeIndicators outlined by the Co-operatives. The policies and progress the Societyhas made in relation to the 10 KeySocial and Co-operative PerformanceIndicators are detailed on pages 10 to12 of the Directors' report.

statement of complianceAs custodians of the Society, theDirectors are committed and intend tocontinue to work towards meeting thehighest possible standards of corporategovernance.

The Society provides explanation inregards to those areas of the Codewhere it is non-compliant, as follows:-

The Code prescribes that the Board ofDirectors adopt a code of conduct forDirectors, and sign an acceptance ofthat code of conduct. The Board ofDirectors believe that the signing ofthe code of conduct by individual

Directors is currently not necessaryand accordingly have left the matter onthe table. The Board of Directorsamended Clause 17 of the Society’sstanding orders to reflect the need forongoing confidentiality as well asconfidentiality upon the cessation oftheir term of office.

The Code prescribes that the Directorsshould give consideration to holdingan Interim General Meeting. TheDirectors considered the requirementto hold members’ interim meetings.However, the Directors are currentlyof the opinion that such a meeting isnot necessary and would not serve auseful purpose for the Society.

The Code prescribes that the term ofoffice of the Chair should be no longerthan three years and that the Chairshould serve for a maximum of sixyears before standing down. The Chairwould not normally be eligible for theoffice again. Further, the Code statesthat a mechanism should be in place toremove a poorly performing Chair andthat the Chair should not be a currentemployee or recently retiredsuperannuated employee. ThePresident of the Society is electedannually by all the Directors and theterm of office is for a period of twelvemonths. The Board of Directorsbelieve that this annual election of thePresident, coupled with the rulesallowing for the removal of anyDirector under given circumstances,means that there is no further need fora mechanism to remove a poorlyperforming incumbent. The Board ofDirectors believe that the individualelected annually should be judged onmerit and should not be restricted to apre-set maximum term.

The Code prescribes that there shouldbe a Chief Executive succession planin place and that this should bereviewed annually. The Board does notmaintain a standing SearchCommittee; as such a Committeewould comprise the full Board. A

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Search Committee is formed of the fullBoard of Directors when the existingChief Executive announces theirresignation or retirement.

The Code prescribes that a minimumof three Directors or a third of theBoard, whichever is the greater, besufficient for independent professionaladvice to be accessed at the Society’sexpense. The Board of Directors arecurrently able to seek independentprofessional advice, at the Society’sexpense, subject to the request beingsupported by Directors making up notless than one third of the full Board.

The Code prescribes that the Directorsshould undertake a periodic skills auditin order to identify appropriate trainingneeds. The Board should alsoundertake a formal and rigorousannual evaluation of its ownperformance and that of itsCommittees and individual Directors.Further, the Chair should be subject toan annual appraisal in their absence.The Board of Directors believe thatthey are fully accountable to themembership and that the ultimate testof its performance and that ofindividual Directors is at election time.The membership has the opportunity atthe Annual General Meetings to fullyquestion the Board of Directors and intotal can express their satisfaction orotherwise by casting their ballot.

The Code prescribes that no Directorwho is also a current employee of theSociety should serve on theremuneration Committee. The agendaof the remuneration Committee is anintegral part of the main Board agenda.As a result the full Board of Directorswill be present when these matters arediscussed, including employeeDirectors. However, where an issuearises that directly impacts upon anemployee Director they are precludedfrom voting. No member of theManagement Executive is a Director.

The Code prescribes that neither the

Chair, nor a current employee orsuperannuated recently retiredemployee, should serve on the AuditCommittee. The full Board ofDirectors, including the President andcurrent and superannuated ex employees, meets as the AuditCommittee twice a year without theChief Executive present. The InternalAuditor attends the meeting and isquestioned as such in the absence ofthe Chief Executive. The Board,having considered the aspect of theAudit Committee function, believesthat there are major benefits for all theDirectors to be actively involved in theaudit process.

internal controlThe Board is ultimately responsible forthe Society’s system of internal controland for reviewing its effectiveness.However, such a system is designed tomanage rather than eliminate the riskof failure to achieve businessobjectives and can provide onlyreasonable and not absolute assuranceagainst material misstatement or loss.

The Co-operatives revised (May 2005) Corporate GovernanceCode of Best Practice maintains arequirement that the Directors reviewthe effectiveness of the Society’ssystem of internal controls. Thisextends the existing requirement inrespect of internal financial controls tocover all controls including financial,operational, compliance and riskmanagement.The Internal Auditor has continued toreview and report upon internalfinancial controls.

Key elements of the Society’s system ofinternal financial controls are as follows:-

risk identificationSociety Managers are responsible forthe identification and evaluation of keyrisks applicable to their areas ofbusiness. These risks are assessed on acontinual basis and may be associatedwith a variety of internal or external

sources including control breakdowns,disruption in information systems,competition, natural catastrophe andregulatory requirements.

control environmentThe Society is committed to the higheststandards of business conduct and seeksto maintain these standards across all ofits operations, which provide practicalguidance for all staff. Also in place aresupporting Society policies andemployee procedures for the reportingand resolution of suspected fraudulentactivities.

The Society has an appropriateorganisational structure for planning,executing, controlling and monitoringbusiness operations in order to achieveSociety objectives. Lines ofresponsibility and delegations ofauthority are documented.

information and communicationSociety divisions participate in periodicstrategic reviews, which includeconsideration of long-term financialprojections and the evaluation ofbusiness alternatives. Operating unitsprepare annual budgets andperformance against budget is activelymonitored at the Board and divisionallevel supported by regular forecasts. Forecasts and results are consolidatedand presented to the Board on a regularbasis.

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statement of the directors on corporate governanceThrough the above mechanisms,Society performance is continuallymonitored, risks identified in a timelymanner, their financial implicationsassessed, control procedures re-evaluated and corrective actionsagreed and implemented.

control procedures The Society and its operating units haveimplemented control proceduresdesigned to ensure complete andaccurate accounting for financialtransactions and to limit the potentialexposure to loss of assets or fraud.Measures taken include physicalcontrols, segregation of duties, reviewsby management and internal audit andexternal audit to the extent necessary toarrive at their audit opinions.

statement of thedirectors’ responsibilitiesThe Board are required to preparefinancial statements, which give a trueand fair view of the state of affairs ofthe Group at the end of each financialyear and of the income andexpenditure of the Group for the yearto that date. The financial statementsmust be prepared in compliance with the required format anddisclosures of the Co-operative andCommunity Benefit Societies Act2014.

The Board confirm that:-Suitable accounting policies,consistently applied and supported byreasonable and prudent judgementsand estimates, have been used in thepreparation of the Group’s financialstatements and applicable accountingstandards have been followed.

The Board are responsible for keepingproper accounting records, whichdisclose with reasonable accuracy atany time the financial position of theGroup.

The Board have general responsibilityfor taking such steps as are reasonablyopen to them to safeguard the assets of

the Group and to prevent and detectfraud and any other irregularities.

In so far as the Board are aware:-

• There is no relevant audit miiinformation of which the Group’s

auditors are unaware; and• The Board have taken all steps

that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

going concernAfter making all appropriate enquiriesthe Board have a reasonableexpectation that the Group hasadequate resources to continue inoperational existence for theforeseeable future. For this reason,they continue to adopt the goingconcern basis in preparing the Group’sfinancial statements.

Board certification:-

The financial statements and notes onpages 25 to 43 are hereby signed onbehalf of the Board pursuant to Co-operative and Community BenefitSocieties Act 2014.

H.S. Hoeck - President

C.E.Miles - Vice President

A. Kurji – Chief Executive

22nd March 2016

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independent auditor’s report

independent auditor'sreport to the members ofthe heart of england co-operative society limitedWe have audited the financialstatements of the Heart of England Co-operative Society Limited (theSociety) for the year ended 23 January2016 which comprise the consolidatedincome statement, the consolidatedstatement of comprehensive income,the consolidated statement of financialposition, the consolidated statement ofchanges in equity, the consolidatedstatement of cash flows and the relatednotes. The financial reportingframework that has been applied intheir preparation is applicable law andunited Kingdom Accounting Standards(united Kingdom Generally AcceptedAccounting Practice), including FrS102 The Financial reporting Standardapplicable in the uK and republic ofIreland.

This report is made solely to theSociety, as a body, in accordance withsections 87(2) and 98(7) of the Co-operative and Community BenefitSocieties Act 2014. Our audit work hasbeen undertaken so that we might stateto the Society those matters we arerequired to state to it in an auditor’sreport and for no other purpose. To thefullest extent permitted by law, we donot accept or assume responsibility toanyone other than the Society as abody, for our audit work, for thisreport, or for the opinions we haveformed.

respective responsibilitiesof the board and theauditorAs explained more fully in theStatement of Directors’ responsibilitiesset out on page 18, the directors areresponsible for the preparation offinancial statements which give a trueand fair view. Our responsibility is toaudit and express an opinion on thefinancial statements in accordance withapplicable law and InternationalStandards on Auditing (uK and Ireland).

Those standards require us to complywith the Auditing Practices Board’sEthical Standards for Auditors.

scope of the audit of thefinancial statementsA description of the scope of an auditof financial statements is provided onthe Financial reporting Council’swebsite atwww.frc.org.uk/auditscopeukprivate.

opinion on financialstatementsIn our opinion the financial statements:

• give a true and fair view of themiistate of the group's and the parentmiisociety's affairs as at 23 Januarymii2016 and of the group's and themiiparent society's income andmiiexpenditure for the year thenmiiended;• have been properly prepared inmiiaccordance with united KingdommiiGenerally Accepted AccountingmiiPractice; and• comply with the requirements ofmiithe Co-operative and CommunitymiiBenefit Societies Act 2014.

matters on which we arerequired to report byexceptionWe have nothing to report in respectof the following matters where the Co-operative and Community BenefitSocieties Act 2014 requires us toreport to you if, in our opinion:

• the parent society has not keptmiiproper books of account, or amiisatisfactory system of control overmiiits transactions has not beenmiimaintained; or• the parent society financialmiistatements are not in agreementmiiwith the books of account; or• we have not received all themiiinformation and explanations wemiineed for our audit.

Martin ramseySenior Statutory Auditorfor and on behalf ofGrant Thornton uK LLPStatutory Auditor, Chartered AccountantsBirmingham

6th April 2016

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2016 2015Note £000 £000

(as restated)

TURNOVER 5 82 738 84 470

Cost of sales (55 230) (56 391)

GROSS PROFIT 27 508 28 079

Administrative expenses (27 151) (26 696) Fair value adjustment 14 1 016 (1 218)

OPERATING PROFIT BEFORE 6 1 373 165EXCEPTIONAL ITEMSExceptional items 7 2 280 (1 559)

OPERATING PROFIT/(LOSS) 3 653 (1 394)

Surplus on sale of fixed assets 217 68

PROFIT/(LOSS) BEFORE INTEREST 3 870 (1 326)AND TAXATIONInterest receivable and similar income 93 114

Interest payable and similar charges 9� (501) (467)

PROFIT/(LOSS) ON ORDINARY ACTIVITIES 3 462 (1 679)BEFORE TAXATIONTax on profit/(loss) on ordinary activities 10 (1 079) 45

PROFIT/(LOSS) FOR THE FINANCIAL YEAR 2 383 (1 634)


consolidated income statement

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consolidated statement of comprehensive income

2016 2015£ 000 £ 000

(as restated)

PROFIT FOR THE FINANCIAL YEAR 2 383 (1 634)

revaluation of investment properties 714 -

Actuarial gain/(loss) on defined benefit pension plans 260 (4 303)

Deferred tax movement relating to actuarial gains/(losses) (52) 861

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3 305 (5 076)


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consolidated statement of financial position

Note 2016 2015 £ 000 £ 000

(as restated)FIXED ASSETS Intangible assets 11 246 277Property, plant and equipment 12 25 105 25 141 Investment property 13 15 073 13 513 Other investments 14 17 403 15 108

57 827 54 039

CURRENT ASSETSOther investments 14 646 572Inventories 15 4 148 5 538Trade and other receivables 16 1 807 1 857Cash and cash equivalents 6 191 8 929

12 792 16 896

Creditors:amounts falling due within one year 17 (6 542) (7 089)

NET CURRENT ASSETS 6 250 9 807

TOTAL�ASSETS�LESS�CURRENT�LIABILITIES 64 077 63 846

Creditors:�amount�falling�due�after�one�year 18 (17 534) (16 204)

Pension�obligations 19 (7 026) (10 979)

Provision�for�liabilities 20 (1 903) (1 826)

NET ASSETS 37 614 34 837

CAPITAL AND RESERVESShare capital 22 2 235 2 757revaluation reserves 23 5 939 5 337revenue reserves 23 29 440 26 743

MEMBERS’ FUNDS 37 614 34 837

as at 23rd January 2016

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Balance as 26th January 2014 2 758 5 449 33 392 41 599 (as�previously�reported)

Profit for the financial year -� - (1 634) (1 634)Prior period adjustment - FrS 102 -� - (1 677) (1 677)

As�restated 2�758�� 5�449 30 081 38 288

Other comprehensive income:realised on disposal of investment properties -�� (112)�� 112 -

Actuarial loss on defined benefit pension plans -�� -� (4 303) (4 303)Deferred tax movement relating to actuarial losses -��- 861 861Total other comprehensive income -� (112)�� (3 330) (3 442)

2�758�� 5�337 26 751 34 846

Movement in share capital (1)�� - - (1)

Share interest less related taxation deduction - - (8) (8)

Balance at 24th January 2015 2 757 5 337 26 743 34 837

Profit for the financial year -�� - 2 383 2 383

Other comprehensive income:revaluation of investment properties - 714 - 714realised on disposal of investment properties - (112)�� 112 -

Actuarial loss on defined benefit pension plans - - 260 260 Deferred tax movement relating to actuarial losses -�� - (52) (52)Total other comprehensive income -�� 602 320 922

2 757 5�939 29 446 38 142

Movement in share capital (522) - - (522)

Share interest less related taxation deduction - - (6) (6)

Balance at 23rd January 2016 2 235 5 939 29 440 37 614

consolidated statement of changes in equity

Sharecapital£000

Revaluationreserve£000

Revenuereserves£000

Total

£000


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consolidated statement of cash flows

2016 2015£ 000 £ 000

(as restated)

CASH FLOWS FROM OPERATING ACTIVITIESProfit for the financial year 3 653 (1 394)Adjustments for : Amortisation of intangible assets 31 31Depreciation of tangible assets 3 389 3 720Fair value adjustment (1 016) 1 218 Decrease/(increase) in trade and other receivables 381 (137)Decrease/(increase) in stocks 1 390 (198)(Decrease)/increase in trade payables (181) 525

Cash from operations 7 647 3 765

Taxation paid (394) (584)

NET CASH GENERATED FROM OPERATING ACTIVITIES 7 253 3 181

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from the sale of tangible assets 420 220Purchase of tangible assets (4 413) (3 621)Pension scheme special contributions (935) (936) Exceptional pension credit (4 560) -Interest received 93 114

NET CASH FROM INVESTING ACTIVITIES (9 395) (4 223)

CASH FLOWS FROM FINANCING ACTIVITIESMovement in share capital (522) (1)repayment of finance lease obligations (68) (84)Share interest paid (6) (10)

NET CASH USED IN FINANCING ACTIVITIES (596) (95)

NET CASH DECREASE IN CASH (2 738) (1 137)AND CASH EQUIVALENTS

Cash and cash equivalents at the beginning of the year 8 929 10 066

CASH AND CASH EQUIVALENTS AT THE 6 191 8 929END OF THE YEAR

COMPONENTS OF CASH AND CASH EQUIVALENTSCash 6 191 8 929Cash equivalents - -

6 191 8 929

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notes to the financial statements

1. STATUTORY INFORMATIONHeart�of�England�Co-operative�Society�Limited�is�a�co-operative�society�domiciled�in�England�and�Wales,�registration�number2399R.�The�Society�is�registered�under�the�Co-operative�and�Community�Benefits�Societies�Act�2014.�The�registered�office�is�22Abbey�Street,�Nuneaton,�Warwickshire,�CV11�5BU.

2. BASIS OF PREPARATIONStatement�of�complianceThe�financial�statements�have�been�prepared�in�accordance�with�Financial�Reporting�Standard�102�–�‘The�Financial�ReportingStandard�applicable�in�the�United�Kingdom�and�Republic�of�Ireland’�(‘FRS�102’ ).�There�were�no�material�departures�from�thatstandard.

Basis�of�preparation�of�financial�statementsThe�principal�accounting�policies�adopted�in�the�preparation�of�the�financial�statements�are�set�out�below�and�have�remainedunchanged�from�the�previous�year,�with�the�exception�of�the�adoption�of�FRS�102�which�is�mentioned�below,�and�also�have�beenconsistently�applied�within�the�same�accounts.

These�financial�statements�for�the�year�ended�23rd�January�2016�are�the�first�financial�statements�that�comply�with�FRS�102.�Thedate�of�transition�is�26th�January�2014.

The�transition�to�FRS�102�has�resulted�in�a�small�number�of�changes�in�accounting�policies�to�those�used�previously.

The�nature�of�these�changes�and�their�impact�on�the�opening�equity�and�profit�for�the�comparable�period�are�explained�in�notes�andbelow.

The�financial�statements�have�been�prepared�under�the�historical�cost�convention�as�modified�by�the�revaluation�of�certain�fixedassets�and�the�fair�value�treatment�as�required�by�FRS�102�of�certain�other�assets�and�liabilities.�The�presentation�currency�is�£�sterling.

Use�of�estimates�and�judgementsThe�preparation�of�the�financial�statements�requires�management�to�make�significant�judgements�and�estimates.�The�items�in�thefinancial�statements�where�these�judgements�and�estimates�have�been�made�include:

NoteValuation�of�trading�properties��12Valuation�of�investment�properties�� 13Valuation�of�assets�held�for�sale��12Measurement�of�pension�obligations�� 19Valuation�of�insurance�contract��14

Property�valuations�–�the�valuation�and�potential�impairment�of�property�assets�is�an�area�of�estimation.�Management�control�thisrisk�through�the�use�of�qualified�property�professionals�to�support�their�decision�making.Insurance�contracts�–�the�assumptions�used�in�the�valuation�of�funeral�plan�liabilities�represent�a�key�area�of�estimation�in�thefinancial�statements.�Management�have�commissioned�a�qualified�actuary�to�assist�their�decision�making�in�this�area.Pension�scheme�–�the�variables�used�in�the�valuation�of�the�pension�scheme�are�inherently�uncertain.�Management�utilise�aqualified�actuary�to�support�their�calculations�in�this�area.Management�make�other�judgements�in�the�course�of�their�preparation�of�the�financial�statements�including�stock�provisions,supplier�rebates,�debtor�impairments,�accruals�for�costs�and�so�on.�These�are�considered�of�low�estimation�uncertainty�or�are�oflower�value�and�hence�have�a�lower�impact�on�the�financial�statements.


-

-

-

-

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Basis�of�consolidationThe consolidated financial statements include the Society and its subsidiary undertaking, Chartridge Properties Limited, a companyregistered in England and Wales. Chartridge Properties Limited is now dormant.

Exceptional�itemsExceptional items are material items of income and expenditure which by virtue of their size and nature are separately disclosed toassist in the better understanding of the Society’s performance. The following items are considered to be exceptional in thesefinancial statements, all costs related to the closure of the Non Food and Travel divisions and the one off pension cost credit due tothe change in the discretionary benefit structure of the defined benefit pension schemes.

Going�concernAfter reviewing the group’s forecasts and projections, the directors have a reasonable expectation that the group has adequateresources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concernbasis for preparing its consolidated financial statements.

3. ACCOUNTING REFERENCE DATESThe financial statements of the Society are for the 52 weeks ended 23rd January 2016 and are compared with a 52 week period to24th January 2015.

4. ACCOUNTING POLICIESGoodwill�and�intangiblesIntangible�assets�are�measured�at�cost�less�accumulated�amortisation�and�any�accumulated�impairment�losses.

Goodwill,�being�the�excess�of�the�consideration�paid�for�a�business�over�the�fair�value�of�its�net�assets,�capitalised�and�amortisedevenly�over�its�useful�economic�life.

The�intangible�assets�are�amortised�over�the�following�useful�economic�lives:

Goodwill��10�years

Proper ty,�plant�and�equipmentAfter�initial�recognition,�classes�of�asset�valued�under�the�cost�model�are�carried�at�cost�less�any�accumulated�depreciation�and�anyaccumulated�impairment�losses.�Classes�of�asset�valued�under�the�revaluation�model�are�carried�at�a�revalued�amount,�being�theirfair�value�at�the�date�of�the�revaluation,�less�any�subsequent�accumulated�depreciation�and�subsequent�accumulated�impairmentlosses.

Depreciation�is�calculated�to�write�off�the�cost�or�valuation,�less�estimated�residual�value,�in�the�income�statement�on�a�straight�linebasis�over�the�estimated�useful�lives�of�each�part�of�an�item�of�property,�plant�and�equipment.�Land�is�not�depreciated.�Depreciationmethods,�useful�lives�and�residual�values�are�reviewed�at�each�reporting�date.

Depreciation�rates�used�are�as�follows:

Freehold�buildings��Leasehold�buildings��Plant,�fixtures�and�fittings��Vehicles��

Impairment�of�assetsAt�each�reporting�date�assets�are�reviewed�to�determine�whether�there�is�any�indication�that�those�assets�have�suffered�an�impairmentloss.�If�there�is�an�indication�of�possible�impairment,�the�recoverable�amount�of�any�affected�asset�is�estimated�and�compared�withits�carrying�amount.�If�the�estimated�recoverable�amount�is�lower,�the�carrying�amount�is�reduced�to�its�estimated�recoverableamount,�and�an�impairment�loss�is�recognised�immediately�in�the�income�statement.

If�an�impairment�loss�subsequently�reverses,�the�carrying�amount�of�the�asset�is�increased�to�the�revised�estimate�of�its�recoverableamount,�but�not�in�excess�of�the�amount�that�would�have�been�determined�had�no�impairment�loss�been�recognised�for�the�asset�inprior�years.�A�reversal�of�an�impairment�loss�is�recognised�immediately�in�the�income�statement.


2%�per�annumOver�the�unexpired�term�of�the�leases10%�to�20%�per�annum14.3%�to�20%�per�annum

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notes to the financial statementsInvestment�proper tyInvestment property is carried at fair value. revaluation surpluses are recognised in the income statement. Deferred taxation isprovided on these gains at the rate expected to apply when the property is sold.

Other�investmentsInvestments in unquoted shares are carried at cost with any impairment recognised immediately in the income statement.

Funeral prepayment plans under which the Society accepts risk from another party (the policyholder) by agreeing to compensatethe policyholder in respect of an uncertain future event are classified as insurance contracts under FrS 103. A contract thatqualifies as an insurance contract remains an insurance contract until all the risks and obligations are extinguished or expire. Theyare carried at fair value, which is based on the ‘at need’ price discounted over the average life of a plan at the risk free rate over acomparable period. Any movements in the fair value are recognised in the income statement as they arise.

Inventor iesInventories are stated at the lower of cost and estimated selling price less costs to sell, less provision for any obsolete or slowmoving items.

Trade�and�other�receivablesShort term receivables are measured at transaction price.

CreditorsShort term payables are measured at transaction price.

LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownershipof the leased assets to the group. All other leases are classified as operating leases.

Assets held under finance lease are recognised initially at cost, with the corresponding liability to the lessor being included in thestatement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges andreduction of the lease obligation using the straight line method. Finance charges are deducted in measuring profit or loss. Assetsheld under finance leases are included in property, plant and equipment, and depreciated and assessed for impairment losses in thesame way as owned assets.

rental payments under operating leases are charged to the income statement on a straight line basis over the lease term, unlessrental payments are structured to increase in line with expected general inflation, in which case the group recognises annual rentexpense equal to the amount owed to the lessor.

The aggregate benefit of lease incentives are recognised as a reduction to the expense recognised over the lease term on a straightline basis.

Pension�costsThe�Society�operates�defined�contribution�schemes�for�certain�employees.�All�costs�relating�to�the�defined�contribution�schemesare�charged�to�the�income�statement�as�incurred.

The�Society�also�operates�two�defined�benefit�final�salary�pension�schemes�covering�a�large�number�of�employees.�The�Society’snet�obligation�in�respect�of�its�defined�benefit�pension�plan�is�calculated�by�estimating�the�amount�of�future�benefit�that�employeeshave�earned�in�return�for�their�service�in�the�current�and�prior�periods.�That�benefit�is�discounted�to�determine�its�present�value.Any�unrecognised�past�service�costs�and�the�fair�value�of�any�plan�assets�are�deducted.�The�discount�rate�is�the�yield�at�thereporting�date�on�a�high�quality�corporate�bond�that�has�a�maturity�date�approximating�to�the�terms�of�the�Society’s�obligations.The�calculation�is�performed�annually�by�a�qualified�actuary�using�the�projected�unit�credit�method.�The�Society�recognises�allactuarial�gains�and�losses�arising�from�the�defined�benefit�plans�directly�in�other�comprehensive�income�immediately.


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notes to the financial statementsTaxationCurrent tax is recognised for the amount of corporation tax payable in respect of the taxable profit for the current or past reportingperiods using the tax rates and laws that that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferredtax liabilities or other future taxable profits.

If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is reversed.

Deferred tax is recognised when income or expenses from a subsidiary or associate have been recognised, and will be assessed fortax in a future period, except where:- the group is able to control the reversal of the timing difference; and- it is probable that the timing difference will not reverse in the foreseeable future.

A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and liabilitiesthat are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of deferred taxrecognised.

Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by the reporting datethat are expected to apply to the reversal of the timing difference.

With the exception of changes arising on the initial recognition of a business combination, the tax expense (income) is presentedeither in the income statement, other comprehensive income or equity depending on the transaction that resulted in the tax expense(income).

Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. Deferred tax assets anddeferred tax liabilities are offset only if:- the group has a legally enforceable right to set off current tax assets against current tax liabilities, and- the deferred tax assets and deferred tax liabilities relate to corporate taxes levied by the same taxation authority on either thesame taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or torealise the assets and settle the liabilities simultaneously.

Gross�salesGross sales is a memorandum disclosure and represents the total transaction value of all the Society’s services. The gross value ofsales includes amounts recognised in respect of sales made on an agency basis, principally relating to travel agency services.

TurnoverTurnover includes cash sales, goods sold on credit, commissions and property rental income. It is stated net of VAT, discounts andincentives. Sales of goods are recognised in the financial statements at the point of sale. Travel commissions are recognised atpoint of sale, with appropriate provision for anticipated cancellations. rental income is recognised on an accruals basis.

Supplier�rebatesThe Society receives supplier rebate income from the buying group, Federal retail Trading Services (FrTS) it operates within. Atyear end, the Society is required to estimate supplier income due from annual agreements for marketing costs and volume rebateswhich span across the year end date.

Estimates are required due to the fact that final confirmation of some amounts due are often only received after the year end date.All rebate income is received from third parties via the supplier agreements with FrTS. The estimates for this income are preparedfollowing discussions with FrTS throughout the year and are regularly reviewed by senior management.

Share�interestThe Society’s members’ share capital maintains a fixed nominal value and attracts interest. Share interest is disclosed as amovement in equity and within the statement of changes in equity.


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5. TURNOVER

£ 000 £ 000 £ 000 £ 000

Food 65 739 60 453 67 488 62 170Non-food 15 739 13 396 16 205 13 794Travel Commission 1 924 168 2 463 209Funeral 7 812 7 710 7 385 7 287Post office 136 136 186 186Property 875 875 824 824

92 225 82 738 94�551 84�470

6. PROFIT BEFORE TAXThe profit on ordinary activities before taxation is stated after charging/ (crediting):

2016 2015£ 000 £ 000

Auditor’s remuneration:Fees payable in respect of audit services 29 17Fees payable in respect of tax services 14 10Operating lease rentals:In respect of property 38 26In respect of plant and machinery 206 157Changes in fair value of insurance contracts (1 016) 1 218

7. EXCEPTIONAL ITEMS

2016 2015£ 000 £ 000

Impairment of fixed assets 1 229 1 559redundancy costs relating to closures 894 -Other closure costs 157 -Past service costs pension credit (4 560) -

(2 280) 1 559

During the year the Society took the decision to close its Non Food, Travel and Post Office divisions. The costs above are thoseincurred in all store closures that occurred prior to the year end.

The impairment costs are related to both the closures as previously mentioned and also to Investment properties following a reviewby an external valuer.

The pension credit is due to the change in the method of calculating discretionary pension increases, this is disclosed further innote 19.

Grosssales

Turnover


Grosssales

Turnover

2016 2015

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8. DIRECTORS AND EMPLOYEESDirectors’�remuneration

2016 2015£ 000 £ 000

The total remuneration of the directors for their board duties was as follows:

Fees 38 44

The number of directors whose remuneration fell in each £5,000 bracket was as follows:

Number Number£0 - £ 5 000 16 17

Staff costs during the year were as follows:2016 2015£ 000 £ 000

Wages and salaries 12 119 12�191

Social security costs 796 813

Other pension costs 1 228 856

14 143 13�860

The average number of employees of the Society during the year was:

2016 2015

Number Number

Full-time 303 340

Part-time 636 629

939 969

Management�executive�remuneration

2016 2015£ 000 £ 000

The�total�remuneration�of�the�management�executive�was�as�follows:

Salaries 552 565

Taxable benefits 42 43

Pension contributions 39 42

633 650


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£ 55 001 - £ 60 000 £ 60 001 - £ 65 000£ 70 001 - £ 75 000£ 75 001 - £ 80 000£ 80 001 - £ 85 000£ 90 001 - £ 95 000£ 105 001 - £ 110 000£ 110 001 - £ 115 000£ 185 001 - £ 190 000£ 195 001 - £ 205 000

8. DIRECTORS AND EMPLOYEES (CONTINUED)Chief executive remuneration

2016 2015£ 000 £ 000

The remuneration of the Chief executive (who is also the highest paid employee) included above was as follows:

Salary 180 176

Bonus - 15

Taxable benefits 9 8

189 199

The following number of management executive employees received remuneration including taxable benefits (excluding pension contributions) falling within the following ranges:

2016 2015Number Number

- 11 -1 11 11 -- 1- 11 -1 -- 1

9. INTEREST PAYABLE AND SIMILAR CHARGES2016 2015£ 000 £ 000

Bank interest 60 50

Finance lease interest 11 13

Net interest costs on pension scheme 430 404

501 467


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32

notes to the financial statementsfor the year ended 23rd January 2016

10. TAX ON PROFIT ON ORDINARY ACTIVITIESThe tax charge/(credit) is based on the profit for the year and represents:

2016 2015£000 £ 000

a) Analysis of charge in the yearuK Corporation tax (247) 263

Adjustment in respect of prior periods (27) (79)

Total�current�tax (274) 184

Deferred�taxation:�origination�and�reversal�of�timing�differences 1 353 33

Tax�expense�(income)�arising�from�changes�in�accounting�policies - (262)

Tax�on�results�on�ordinary�activities 1 079 (45)

b)�The�tax�assessed�for�the�year�is�higher�than�the�standard�rate�of�

corporation�tax�in�the�United�Kingdom�at�20.18%�(2015:�21.36%).�

The�difference�are�explained�as�follows:

Profit�on�ordinary�activities�before�tax 3 462 (1�679)

Profit�on�ordinary�activities�multiplied�by�the�standard�rate�of� 699 (359)

corporation�tax�in�the�United�Kingdom�of�20.18%�(2015:�21.36%)

Expenses�not�deductible�for�tax�purposes 304 (22)

Losses carried back (247) -

Effect of change in accounting policies 368 345

Prior year adjustments (45) (9)

Tax on result on ordinary activities 1 079 (45)

The aggregate current and deferred tax relating to items that are recognised as items of other comprehensive income is a credit of £52,000 (2015: a charge of £ 861,000).

11. INTANGIBLE FIXED ASSETSGoodwill

£�000

Cost as 23rd January 2016 and 24th January 2015 417

AMORTISATION

At�24th�January�2015 140

Provided�in�the�year 31

At�23rd�January�2016 171

NET�BOOK�VALUE

2016 2462015 277


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12. PROPERTY PLANT AND EQUIPMENT

£ 000 £ 000 £ 000 £ 000 £ 000CostAt 24th January 2015 19 116 - 25 575 1 433 46 124Additions 2 019 - 1 381 20 3 420Disposals - - - (549) (549)Write Off - - (2 642) (39) (2 681)Transfers (2 293) 2 045 - - (248)

At 23rd January 2016 18 842 2 045 24 314 865 46 066

Depreciation and impairmentAt 24th January 2015 2 887 - 17 430 666 20 983Provided in the year 187 - 1 750 223 2 160Impairment - - 979 - 979Disposals - - - (480) (480)Write Off - - (2 642) (39) (2 681)Transfers (694) 694 - - -

At 23rd January 2016 2 380 694 17 517 370 20 961

NET BOOK VALUE

2016 16 462 1 351 6 797 495 25 105

2015 16 229 - 8 145 767 25 141

Trade properties held by the Society were valued by Bruton Knowles, as at 24th January 2015 on the basis of open market valuefor existing use. This valuation shows an excess over book value of some £11m before taxation, which is not reflected in thefinancial statements.

Trade properties with a carrying value of £ 8,533,196 (2015: £ 8,582,849) are pledged as security against the Society’s definedbenefit pension schemes.

Included in the net book value of Transport are £ Nil of assets held under finance leases (2015: £ 68,229). The related depreciationcharge is £68,229 (2015: £ 83,663).

Tradeproperties

Assets held for resale

Fixtures, fittings & plant

Transport Total


� �

� � � � � � � � � � � � � � �

� � � � �

� � � � � � � � � � � � � �

� � � � � � � � � �

� � � � �

� � � � � �

� � � � � � � � � �

� � � � � � � � �

� � � � �

�

� � �

� � �

� � �

� �

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13. INVESTMENT PROPERTY

Total

£�000

Fair value at 24th January 2015 13�513

Additions 993

Disposals (145)

Transfers�from�property,�plant�and�equipment 248

Revaluations 714

Impairment (250)

Fair �value�at�23rd�January�2016 15 073

Investment properties were revalued by Bruton Knowles, as at 24th January 2015.

14. OTHER INVESTMENTS

2016 2015£ 000 £ 000

Non-current�investments

Financial�assets 481 481

Financial�assets�designated�at�fair�value�through�the�income�statement 16 922 14�627

17 403 15�108

Are held as follows:

Co-operative Group shares 476 476

Other I & P Societies shares 5 5

Total�financial�assets 481 481

Funeral�prepayment�plans�� 16 922 14�627

17 403 15�108

Current�investments: 2016 2015

£000 £000

Financial�assets�designated�at�fair�value�through�the�income�statement 646 572

646 572

Moneys�received�in�respect�of�funeral�prepayment�plans�are�invested�under�the�terms�of�custodian�arrangements�with�State�StreetTrustees�Limited�and�in�individual�whole�of�life�insured�arrangements�with�Royal�London�Mutual�Insurance�Society�Limited.Interest�earned�on�such�investments�is�reinvested.�An�appropriate�proportion�of�the�investments�(including�accrued�interest)�iswithdrawn�when�each�funeral�plan�is�redeemed�by�the�client�representative.�Financial�assets�are�held�at�cost.

The�Society’s�exposure�to�credit�risk�and�interest�rate�risks�related�to�other�investments�is�disclosed�in�Note�26.

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15. INVENTORIES

2016 2015£ 000 £ 000

Finished�goods 4 148 5�538

Finished�goods�recognised�as�a�cost�of�sale�amounted�to�amounted�to�

£�52,475,078�(2015:�£�54,188,532).

16. TRADE AND OTHER RECEIVABLES

2016 2015£ 000 £ 000

Trade debtors 382 557

Corporation tax 746 415

Other debtors 192 30Prepayments�and�accrued�income 487 855

1 807 1 857

The�Society’s�exposure�to�credit�risk�and�impairment�losses�related�to�trade�and�other�receivables�is�disclosed�in�Note�26.

17. CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR

2016 2015£ 000 £ 000

Trade payables 3 306 3�779

Obligations under finance leases - 68

Holiday pay 354 405

VAT 102 192

Funeral prepayment plans 743 720

Other taxes and social security 219 215

Share interest 8 10

Accruals and deferred income 1 810 1�700

6 542 7�089

18. CREDITORS – AMOUNTS FALLING DUE AFTER ONE YEAR

2016 2015£ 000 £ 000

Funeral prepayment plans 17 534 16�204

17 534 16�204


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SAPS based onyear of birth

with anallowance for

CMI 2013improvements

and 1% longterm trend

85% takemaximum

allowable cashon retirement

19. PENSION OBLIGATIONS

The Society operates two defined benefit final salary pension schemes, covering a large number of employees, which are fundedby payment of contributions to separately administered funds.

The contributions to the funds are determined with the advice of an independent qualified Actuary on the basis of triennialvaluations using the aggregate and projected unit methods of funding as appropriate.

The Coventry & District Co-operative Society Limited Employees’ Superannuation Fund was closed to new entrants following thetransfer of engagements to East Mercia Co-operative Society Limited in September 1991. The Heart of England Co-operativeSociety Limited Employees’ Superannuation Fund was closed to new entrants in October 2012. The assets continue to beadministered by Trustees and the investments are managed by Schroder Investment Management.

Costs and liabilities of the scheme are based on actuarial valuations. The latest full actuarial valuation was carried out at 5th April2015 and updated to 23rd January 2016 by a qualified independent Actuary employed by KPMG LLP (uK). The followingdisclosure shows the position of the combined funds. The Actuary has used the same assumptions for each fund.

The main assumptions used by the Actuary were: 2016 2015% %

rate of increase in salaries 3.05 2.90

rate of increase in pensions in payment 3.05 2.90

Discount rate 3.75 3.20

Future pension increases – post 97 pension 3.05 2.90

Future pension increases – pre 97 pension 1.55 2.90

Mortality – actuarial tables used

Male life expectancy at age 65 for current 65 year old 22.2 22.2Male life expectancy at age 65 for current 45 year old 23.6 23.5Female life expectancy at age 65 for current 65 year old 24.4 24.4Female life expectancy at age 65 for current 45 year old 25.9 25.9Cash commutation

SAPS based onyear of birth

with anallowance for

CMI 2013improvementsand 1% longterm trend

85% takemaximumallowablecash on

retirement


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19. PENSION OBLIGATIONS (CONTINUED)

Where investments are held in bonds and cash, the expected long term rate of return is taken to be the yields generally prevailingon such assets at the balance sheet date. A higher rate of return is expected on equity investments, which is based more on realisticfuture expectations than on the returns that have been available historically.

The�amounts�recognised�in�the�statement� 2016 2015of�financial�position�are�as�follows:- £ 000 £ 000

Present value of funded obligations (53 826) (61�603)

Fair value of scheme asset 45 044 47�880

Deficit (8 782) (13 723)

Related�deferred�tax�asset 1 756 2 744

Net liability (7 026) (10 979)

The�amounts�charged�in�the�income�statement�are�as�follows:-

Current service cost 1 043 703

Net�interest�costs 430 404

Past�service�costs (4 560) -

(3 087) 1�107

During�the�year�the�Trustees�discussed�and�agreed�a�number�of�measures�for�the�operation�of�the�schemes�going�forward�and�this

included�their�decision,�(in�accordance�with�their�powers�under�the�terms�of�the�respective�schemes)�to�reduce�the�level�of�pension

increase�awarded�in�respect�of�pension�earned�before�6th�April�1997�to�a�rate�of�RPI�x�50%.�This�has�been�accounted�for�as�a�past

service�credit�in�line�with�our�understanding�of�FRS�102.

Changes in the fair value of the scheme assets are as follows: 2016 2015£000 £000

Opening�fair�value�of�scheme�assets 47 880 42 095Interest�income 1 526 1 787 Actuarial�(losses)/gains (3 940) 4 112Contributions by employer 1 594 1 670Contributions by scheme participants 385 432Benefits�paid (2 401) (2 216)

Closing�fair�value�of�scheme�assets 45 044 47 880

The Society expects to contribute £ 1,735,000 to its pension scheme in 2016.

The main categories of scheme assets as a percentage of 2016 2015total scheme assets are as follows: % %

Schroder Life Diversified Growth Fund 58.9 59.6Schroder Life Indexed Linked Bond Fund 29.6 29.1Schroder All Maturities Corporate Bond Fund 11.5 11.3


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19. PENSION OBLIGATIONS (CONTINUED)

The pension scheme assets include no assets from the Society’s own financial instruments.

The pension scheme assets include no property occupied by, or other assets used by, the Society.

The Society has pledged various properties to the pension scheme.

The actual return on scheme assets were as follows: 2016 2015£000 £000

Actual�return�on�scheme�assets (2 414) 5 899

Changes in the present value of defined 2016 2015benefit obligations are as follows: £ 000 £ 000

Opening�scheme�liabilities (61 603) (52 078)Service�cost (1 043) (703) Past�service�cost�(credit) 4 560 -Interest cost (1 956) (2 191)Actuarial gains/(losses) on assumptions 4 338 (7 018)Actuarial�losses�on�experiences (138) (1 397)Contributions by employees (385) (432)Benefits�paid 2 401 2 216

Closing�scheme�liabilities (53 826) (61 603)

20. PROVISION FOR LIABILITIESDeferred�

taxation

£000

At�24th�January�2015 1 826Origination�and�reversal�of�timing�differences 77

At�23rd�January�2016 1 903

21. DEFERRED TAXATION

Deferred�taxation�provided�for�at�20%�(2015:�20%)

in�the�financial�statements�is�set�out�below:

2016 2015£000 £000

Accelerated�capital�allowances 912 816Other�timing�differences (17) (16)revaluation adjustments 1 035 1 026 Losses carried forward (27) -

Accelerated�capital�allowances 1 903 1 826


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notes to the financial statements22. SHARE CAPITAL

2016 2015£000 £000

At�24th�January�2015 2 757 2 758Contributions 309 393Interest 8 10

3 074 3 161

Withdrawals (839) (404)

Balance�at�23rd�January�2016 2 235 2 757

The whole of the share capital comprises of non-equity shares of £1 each attracting interest between 0% & 1% per annumdepending on the amounts. Shares are withdrawable by giving one week’s notice to the Society. However, this requirement may bewaived by the Directors in accordance with rule 28(b), and therefore the share capital has been classified as equity in accordancewith FrS 102. Every member who maybe a member of the Society for not less than six months and holds a minimum of one £1share is entitled to one vote.

23. RESERVES

Share capital – represents the nominal value of shares that have been fully paid.

revaluation reserve – represents the difference between the revalued amount and the cost value of certain financial assets.

revenue reserves – includes all current, prior period retained profits and losses.

24. CAPITAL COMMITMENTSThe Society had capital commitments relating to property, plant and equipment of £6,732,311 (2015: £6,607,991).

25. LEASING COMMITMENTS

The Society had total commitments under non-cancellable operating leases as detailed below:

2016 2015£000 £000

Within one year 13 54Within two to five years 917 338After more than five years 226 263

1 156 655

The Society’s future minimum finance lease payments are: 2016 2015£000 £000

Within one year - 68


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notes to the financial statements26. FINANCIAL RISK MANAGEMENT

The Society has exposure to two main areas of risk – customer credit exposure and funeral plan risk. To a lesser extent the Societyis exposed to interest rate risk.

Customer�credit�exposure

The Society may offer credit terms to its customers which allow the payment of the debt after delivery of the goods or services.The Society is at risk to the extent that a customer may be unable to pay the debt on the specified due date. This risk is mitigatedby the strong on going customer relationships.

Funeral�plan�r isk

The society operates prepaid funeral plan arrangements. There is a risk that inflationary pressures may increase the cost of deliveryof funerals resulting in contracts becoming loss making in the long term. There are also actuarial risks surrounding the lifeexpectancies of policy holders. The society manages these risks by regularly reviewing the policies in place and the cost ofdelivery of funerals to ensure that the portfolio is managed in a sustainable and profitable way.

27. FINANCIAL ASSETS AND LIABILITIES2016 2015£000 £000

Financial assets measured at fair value through the income statement 32 641 28 712

Financial assets measured at amortised cost 30 308 31 747

Financial�liabilities�measured�at�fair�value�through�the�income�statement 25 303 27 903

Financial�liabilities�measured�at�amortised�cost 3 887 4 447

28 TRANSITION TO FRS 102

The�Society�has�adopted�Financial�Reporting�Standard�102�(“FRS�102”)�for�the�year�ended�23rd�January�2016�and�has�restated�the

comparative�prior�year�financial�statements.

The�date�of�transition�to�FRS�102�was�25th�January�2014.�Set�out�below�are�the�changes�in�accounting�policies�which�reconcile

profit�for�the�financial�year�ended�24th�January�2015�and�the�total�equity�as�at�25th�January�2014�and�24th�January�2015�between

UK�GAAP�as�previously�reported�and�FRS�102.


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a) Statement of Financial Position

Fixed�assets

Intangible assets 308 - 308 287 (10) 277Property, plant & equipment 38,905 (14 959) 23 946 38,654 (13 513) 25 141Investment properties - 14 959 14 959 - 13 513 13 513Other investments 481 12 052 12 533 481 14 627 15 108

39 694 12 052 51 746 39 422 14 617 54 039

Current�assets

Other investments - 458 458 - 572 572Inventories 5 340 - 5 340 5 538 - 5 538Trade and other receivables 10 300 (8 995) 1 305 12 130 (10 273) 1 857Cash and cash equivalents 10 066 - 10 066 8 929 - 8 929

25 706 (8 537) 17 169 26 597 (9 701) 16 896

Creditors: amounts falling due within one year (8 264) 1 827 (6 437) (9 022) 1 933 (7 089)Net�current�assets�� 17 442 (6 710) 10 732 17,575 (7 768) 9 807

Total�assets�less�current�liabilities 57 136 5 342 62 478 56 997 6 849 63 846Creditors: amounts falling due (6 814) (5 731) (12 545) (7 959) (8 245) (16 204) after one year

Pension obligations (7 987) - (7 987) (10 979) - (10 979)Provision for liabilities (736) (1 288) (2 024) (829) (997) (1 826)Net�assets� 41 599 (1 677) 39 922 37 230 (2 393) 34 837

Capital�and�reserves

Share capital 2 758 - 2 758 2,757 - 2 757revaluation reserves 5 449 - 5 449 3 943 1 394 5 337revenue reserves 33 392 (1 677) 31 715 30 530 (3 787) 26 743Members’�funds� 41 599 (1 677) 39 922 37 230 (2 393) 34 837

FRS�102�(as�restated)

As�previously�

stated

Effect�oftransition



£�000

Notes

£�000 £�000 £�000 £�000 £�000

iiiiiiii

iii

iii

iii

iv

v

As�at�25th�January�2014 As�at�24th�January�2015


As�previously�

stated


HOE�2016�FINAL�2_1��07/04/2016��15:47��Page�41


b) Consolidated Income Statement

Notes

Turnover 84 470 - 84 470 Cost of sales (56 391) - (56 391) Gross�profit 28 079 - 28 079 Administrative expenses i (26 686) (10) ( 26 696)Fair value adjustment iii - (1 218) (1 218)Operating�profit�before�exceptional�items 1 393 (1 228) 165 Exceptional items v (165) (1 394) (1 559) Operating�profit 1 228 (2 622) (1 394) Surplus on sale of fixed assets 68 - 68 Profit/(loss)�before�interest�and�taxation 1 296 (2 622) (1 326) Interest receivable and similar income 114 - 114 Interest payable and similar charges vi (82) (385) (467)Profit/(loss)�on�ordinary�activities�before�taxation 1 328 (3 007) (1 679) Tax on profit/(loss) on ordinary activities vi (544) 589 45Profit/(loss)�for�the�financial�year 784 (2 418) (1 634)

c) Statement of other comprehensive incomeNotes

Profit�for�the�financial�year i,iii,v,vi 784 (2,418) (1 634) Actuarial loss on defined benefit pension plans vi (4 688) 385 (4 303) Deferred tax movement relating to actuarial losses 938 (77) 861 Other�comprehensive�income�for�the�year,�net�of�tax vi (3 750) 308 (3 442) Total�comprehensive�income�for�the�year (2 966) (2 110) (5 076)

d) Statement of changes in equityNotes

Balance�at�25th�January�2014 i,ii,iii,iv,v 41 599 (1 677) 39 922 Profit for the year 784 (2,418) (1 634) Other comprehensive income vi (3 750) 308 (3 442) Total�comprehensive�income�for�the�year (2 966) (2,110) (5 076) Movement in revaluation reserve v (1 394) 1 394 -Share interest less related taxation deduction (8) - (8)Movement in share capital (1) - (1) Balance�at�24th�January�2015 37 230 (2 393) 34 837



£�000 £�000 £�000

For�the�year�ended�24th�January�2015

As�previously�

stated



£�000 £�000 £�000

As�previously�

stated



£�000 £�000 £�000

As�previously�

stated


For�the�year�ended�24th�January�2015

As�at�24th�January�2015

HOE�2016�FINAL�2_1��07/04/2016��15:47��Page�42


Notes�on�transition

under FrS 102 the maximum available economic useful life of goodwill is 10 years as opposed to the previous 20 years. Theadjustment reflects the change in the amortisation.

The heading of Tangible Fixed assets has now been split into two components, Property, Plant & Equipment and InvestmentProperties. This adjustment reflects the changes.

One of the major changes that affects the Society under FrS 102, is the treatment of Funeral Prepayment Plans. These are nowshown at fair value within the financial statements with all changes being reflected through the Consolidated Income Statementas a fair value adjustment.

There is a change in deferred taxation calculations as now all Investment Properties carried at fair value need to have a deferredtax liability or asset attached to it. This is completed by a full Capital Gains Tax review of each individual property.

In the prior year the Society revalued certain Investment Property which was charged against the revaluation reserve. underFrS 102 this is not permitted therefore the adjustment has been restated and charged through the Consolidated IncomeStatement.

under previous uK GAAP the Society recognised expected return on defined benefit pension plan assets in the profit and lossaccount. under FrS 102 a net interest expense, based on the net defined benefit liability, is recognised in the Income Statement.There has been no change to the defined benefit liability at either 24th January 2015 or 23rd January 2016. The effect of thechange has been to reduce the credit to the Income Statement by £385,000 and increase the credit in other comprehensiveincome by an equivalent amount.

29. CONTINGENT LIABILITIES

The Society operates a deposit protection scheme to protect Members’ Share Capital by securing a charge on the Society’sHinckley store and the rugby funeral home properties.

The Society has a contingent liability of £1.225m in respect of the Swan Centre development in rugby. However, the Board ofDirectors do not consider this justified and have therefore not provided the amount in the financial statements.

30. RELATED PARTY TRANSACTIONS

There were no related party transactions to report.

i

ii

iii

iv

v

vi


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44

community support and member relations

community supportThe Society is committed to making adifference in the local community pledging inexcess of £846,000, which has helped over4,300 groups since its inception in 2000.

Last year we donated in the region of £52,000to around 300 charities and groups with diverseneeds which included improving health andwellbeing, sporting activities, arts and dramagroups and voluntary emergency services.

Brownsover Community School were helpedwith their Food revolution Day and gardeningproject which helped increase their knowledgeof food cycles and healthy eating.

Following the Nepal Earthquake the Societyhelped the Nepalese Community of Nuneatonand contributed £5,000 to their disaster fundwhich will contribute to a school buildingproject in the village of Baluwa, Katmandu.

496 Kenilworth & Balsall Common SquadronAir Cadets purchased essential uniforms tohelp their activities and Warwickshire &Solihull Blood Bikes were helped to continuetheir vital voluntary transportation of blood andvaccines.

members’ charity giveaway

Members were invited to vote for a £5,000giveaway, by nominating one of three localcharities, which were; National rheumatoidArthritis Society, the Trussell Trust andNSPCC.

Our members chose the National rheumatoidArthritis Society to receive £3,000. Thedonation helped towards supporting JuvenileIdiopathic Arthritis which is dedicated tosupporting, educating and informing youngpeople living with the condition. The othertwo charities each received £1,000.

christmas card competition

The Society invited Primary School childrenfrom across the trading region to design ourcorporate Christmas card incorporating thetheme “What Christmas means to you”. Thewinner for 2015 was Sam Tarratt from StPeter’s Primary Academy School in MarketBosworth who was presented with a prize anda cheque of £500 to help towards schoolequipment.

pride of coventry & warwickshire

awards

The Society was delighted to jointly sponsorthe ‘Child of Courage’ Award at the Pride ofCoventry & Warwickshire Awards, whichrecognises the special contribution peoplehave made in the local community.The Award winner for 2015 was rosieAbbott, who although suffering from cancerhas raised more than £18,000 for charities thathave helped her. Her fundraising effortsincluded the Coventry Half Marathon and hersale of knitted roses.

The Society donated to the Nepal earthquake appeal

496 Kenilworth Balsall Common Squadron Air Cadets


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heart of england

community foundation

The Society would like to thank the Heart ofEngland Community Foundation, whoadministers the Helping Hearts Awardscheme.

pamper with a hamper

The Society once again ran the popular‘Pamper with a Hamper’ campaign askingnewspaper readers to nominate a specialperson over the age of 65 to receive aChristmas hamper. By teaming up with TNTExpress, Coventry Telegraph and HinckleyTimes, 250 Christmas hampers weredistributed during the festive season.Volunteering employees helped pack thehampers full of Christmas treats and fairtradeitems.

member relationsThe three regional Member relationsCommittees, consisting of members andemployees, continue to support our auxiliarygroups, consider Helping Hearts applicationsreceived and review activities for members.

co-operative women’s guild

The Co-operative Women’s Guild met fortheir regular meetings and social activitiesduring the year with members attending theAnnual Guild Congress in Coventry. It is sadto report that the National Women’s Guildwill discontinue in June 2016.

heart of england

co-operative orchestra

The Orchestra continues to be popular withgroups requesting their services around theregion to play at various venues. Theorchestra performed five concerts which hashelped raise funds for various charities whichincluded Mencap and the Society’s corporatecharity Myton Hospice.

co-operative ladies choir

The Ladies Choir continued to entertain manyaudiences during the year at different venuesincluding the War Memorial Park inCoventry. They always enjoy their weeklyrehearsals.

woodcraft folk

The Woodcraft Folk is a voluntary co-operative organisation for children and youngpeople and in 2015 celebrated their 90thAnniversary. The Society is delighted tosupport the West Coventry group whosethemes for the year consisted of Peace &Children around the world, Food andCooking and Creative Nature.

During the summer months, the group visitedthe Lockerbrook Outdoor Centre in the PeakDistrict enjoying lots of activities includingweaseling, rambling, and night-lining.

wheatsheaf theatre

The Wheatsheaf Players, the amateurdramatics group have provided regularentertainment to many members of thecommunity. They performed a variety ofproductions including murder mystery andtransforming the theatre into a 1950’s radiostation presenting tales of suspicion andintrigue.

the west midland co-operative’s

member education group

The West Midland Co-operative’s MemberEducation Group links up with neighbouringco-operative societies to promote educationand co-operation in the West Midlands area.The group supported and attended theWarwick Folk Festival inviting other co-operators which included revolver Coffee,The Phone Coop and Co-operative Energy.The Society also contributed to the danceacademy workshops which included French,Irish Set, Appellation and Cajun dance.

Pamper with a Hamper Winner

Brownsover Community School

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46


Balsall Common - Kenilworth Road ....................................01676 535006Barwell - Malt Mill Bank......................................................01455 846200Bishops Itchington - Chapel Street ....................................01926 612180 Coventry - Alfall Road, Wyken ..........................................024 7644 5916Coventry - Allesley Old Road, Allesley ................................024 7667 2783Coventry - Ansty Road, Wyken ..........................................024 7644 5616Coventry - Earlsdon Street, Earlsdon ..................................024 7671 3377Coventry - Norman Place Road, Coundon..........................024 7633 2548Coventry - Tile Hill Lane, Tile Hill........................................024 7646 6170Crick - High Street ...............................................................01788 822277Fenny Compton - High Street.............................................01295 770246Harbury - High Street..........................................................01926 612252Long Itchington - Church Road..........................................01926 812411Market Bosworth - Main Street .........................................01455 290231Meriden - The Green...........................................................01676 522378New Arley - Gun Hill ..........................................................01676 540480Nuneaton - Coniston Way, St Nicolas Park .........................024 7632 9974Nuneaton - Copper Beech Road, Camp Hill .......................024 7639 2438Nuneaton - Galley Common, Chesterton Drive .................024 7639 3962Nuneaton - Kem Street, Attleborough ................................024 7634 4938Nuneaton - New Century Way and Queens Road ..............024 7638 2331Nuneaton - School Road, Bulkington .................................024 7631 2146Royal Leamington Spa - Warwick Gates, Cressida Close.........01926 426506Rugby - High Street, Hillmorton ..........................................01788 543567Rugby - Lawford Road, New Bilton ................................... 01788 536248Rugby - The Green, Old Bilton.............................................01788 811774Ryton-On-Dunsmore - High Street....................................024 7630 2691Sapcote - Church Street ......................................................01455 272257Southam - Coventry Road...................................................01926 812308Stoney Stanton - Long Street.............................................01455 273813Warwick - Woodloes Avenue South ....................................01926 493281Wellesbourne - Loxley Close ..............................................01789 840861

Coventry - Remembrance Road, Willenhall ........................024 7630 3034

Long Lawford - Townsend Lane .........................................01788 565066

Barlestone - ‘Gilliver’s’, Church Road.................................01455 290356Bedworth - High Street ....................................................024 7631 4823Coventry - Ansty Road, Wyken.........................................024 7665 0619Coventry - Foleshill Road, Foleshill ....................................024 7666 5676Coventry - Kenpas Highway .............................................024 7641 1806Coventry - Lower Holyhead Road .....................................024 7622 5826Daventry - High Street.......................................................01327 707905Earl Shilton - Kings Walk...................................................01455 844400Hinckley - ‘A J Murray’ Lower Bond Street.........................01455 233974Kenilworth - Warwick Road ..............................................01926 856699Nuneaton - Park House, Riversley Road ............................024 7638 2535Royal Leamington Spa - The Parade ................................01926 428665Rugby - Bilton Road ...........................................................01788 576099

Co-operative Property ServicesNuneaton - Oaston Road ...............................................024 7635 3419

Community & Membership OfficeNuneaton - Abbey Street ..............................................024 7638 2331


HOE�2016�FINAL�2_1��07/04/2016��15:47��Page�46


Co-operative Food Stores

Co-operative Funeralcare Homes

BARLESTONE

Co-operative Department Store

HOE�2016�FINAL�2_1��07/04/2016��15:47��Page�47

ANNUAL REPORT AND FINANCIAL STATEMENTS48 ANNUAL REPORT AND FINANCIAL STATEMENTS

notes

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notes

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HOE�2016�FINAL�2_1��07/04/2016��15:47��Page�50

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