42TF Co-op.gp. 25

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RNS Number : 8075U

Co-operative Group Limited

08 April 2021

News release

8 April 2021 FINAL

Annual Results Announcement: 52 Weeks to 02 Jan 2021

Co-operation Works During Covid Crisis

The Co-op plays critical role in supporting members and communities during the pandemic

Group financial highlights

-- Revenue was GBP11.5bn (2019: GBP10.9bn) with Food growth of 3.5% and Funeralcare revenue flat year-on-year

   --    Reported profit after tax and discontinued items was GBP77m (2019: GBP33m) 

o Profit after tax and discontinued items (excluding change in accounting policy for funeral plans) of GBP49m (2019: GBP69m)

-- Reported profit after tax from continuing operations of GBP72m (2019: GBP49m), and is net of a GBP55m tax charge

o Profit after tax from continuing operations (excluding change in accounting policy for funeral plans) of GBP44m (2019: GBP85m)

   --      Reported profit before tax was GBP127m (2019: GBP24m) 

o Excluding change in accounting policy for funeral plans, profit before tax was GBP92m (2019: GBP67m)

   --    Net debt* of GBP550m (2019: GBP695m) 

-- Capex of GBP313m (2019: GBP407m), reflecting reduced investment in the business, due to the pandemic

-- Additional Covid costs during the year of GBP84m**, including additional new colleagues, increased colleague absence linked to the virus, a colleague "Thank You" reward and the purchasing of personal protective equipment

* Excluding the IFRS 16 lease liability

** Support from the Government's emergency economic measures amounted to GBP82m

Co-op highlights

All our Co-op colleagues, including temporary recruits, played an extraordinary role in caring for and feeding the nation during the crisis, enabling over 3,400 of the Co-op's community-based Food stores and funeral homes to remain open and a further 5,000 independent food stores to be supplied through the pandemic. Underpinning all of that, the business continued to drive its Community and Colleague support when it was needed most.

   --    Significant increase in Co-op Community & Campaigning Support 

- Over GBP12m of funds given to charities and community causes, a further GBP15m shared with 4,500 local causes from our Local Community Fund

   -      FareShare had been able to distribute five million meals through our support 

- GBP3.1m in Co-op food vouchers and technology equipment provided to 6,000 pupils at our academies

- Co-operate online volunteering and community platform launched, and 1,000 Co-op Member Pioneers provide dedicated support for the vulnerable during lockdown

- A key member of the Stop Child Food Poverty Taskforce, supporting Marcus Rashford in his successful campaign to extend free school meals

   --    Support of colleagues across the business 
   -      GBP25m given to colleagues in recognition of their hard work and commitment 

- Commitment to improving our hourly pay rates to align with the Real Living Wage in 2021, boosting pay for 33,000 colleagues with an investment of GBP53m per annum

- Commitments to tackle racial inequalities published and new Equality and Inclusion Think Tank mobilised

- Our efforts to ensure colleague safety accelerated through our 'Safer Colleagues, Safer Communities' programme

Operational highlights

   --    Food 

- Another good year for Food business - Food sales of GBP7.8 billion up 3.5% on 2019, like-for-like sales up 6.9%

- Wholesale business achieved sales of GBP1.6 billion compared to GBP1.4 billion in 2019; a further 624 new independent stores signed up by Nisa

- During the pandemic, 56 new Co-op stores were opened, a further 105 were refitted and 13 more were extended

- Our online offer expanded significantly during the year, with 800 Co-op Food stores now providing food to homes via our delivery partners

   --    Funeralcare 

- Increase in the number of funerals arranged, with over 10,000 more funerals than 2019 - an increase of 11.4%, sadly reflecting the excess deaths caused by Covid-19

- Government restrictions meant that only the most basic of arrangements were possible. As a result, and despite the increase in funerals conducted, revenue was flat year on year at GBP272m

- Marked reduction in funeral plan sales as colleagues focused on providing greater at need care

- As we right-sized the branch estate for the future we made the difficult decision to close 164 funeral homes

   --    Insurance and legal services 

- Sales were much reduced during the spring and early summer, particularly for motor and travel insurance policies, as lockdown restrictions impacted trading across the sector

- Legal Services saw case volumes grow by 9% in 2020. The number of probate cases we took on also grew, though external factors impacted our overall performance

- Successful completion of the sale of our insurance underwriting business took place at the end of 2020. The sale enables us to unlock the potential of Co-op Insurance under a new operating model which will provide lower prices and more bespoke products

   --    Power 

- In November we re-launched Co-op Power, our business to business clean energy buying group, with plans to significantly grow its membership in the years ahead. Recent corporate clients include Nationwide Building Society, Roadchef and the RNLI

   --    Health 

- Our Health venture grew significantly during 2020 and responded brilliantly to the challenges presented by Covid, growing to become the 6(th) largest dispensary business by the end of the year

- However, it became clear that the business would require significant additional capital to move it forwards. As such the decision was taken to sell it to Phoenix UK Group, a leading Healthcare provider, a move which was announced in March this year

Outlook

Looking ahead, we see significant uncertainty and must continue to exercise financial prudence. The market remains highly competitive and, against the backdrop of a worsening consumer economy, the Co-op is planning for and dealing with continued lockdowns. We continue to rebuild the Co-op's balance sheet to secure the long-term future of the group.

We are working to respond to the changing needs of our customers, reflected in hyper-localism, further moves towards digitisation in all our businesses and providing value for money across the business.

As a co-operative, our approach and purpose will remain the same: championing a better way of doing business for our customers and members and their communities by offering a range of products and services which create value in its broadest sense.

Steve Murrells, Chief Executive of the Co-op, said:

"In 2020 we lived through a perfect storm, with every part of our lives turned upside down - socially and economically, mentally and physically. Along the way we discovered much about our society, some of it brilliant and inspiring, and some of it quite ugly thanks to the unfairness and inequality Covid-19 has revealed and exacerbated.

"During the last few years, we've created a business that is truly focused on delivering clear value and benefits for our members, customers and their communities. All that work proved to be essential in giving us the ability to respond to the immediate and sustained demands which the pandemic brought with it. Our Vision, Co-operating for a Fairer World, was our guiding light throughout, and our response to Covid-19 demonstrated the power of co-operative enterprise and the relevance of co-operative values."

Allan Leighton, Independent Non-Executive Chair of the Co-op, said:

"Covid-19 presented us with a national emergency and a unique set of business challenges and community needs which showed that co-operation was capable of making a difference during an extraordinary time in the nation's history. I am proud of how we rose to the challenge of the pandemic through our business operations and through our support to local communities. Creating Co-op value for our members has always been at the heart of our endeavours and I believe that reached new heights during 2020.

"On behalf of the Board, I want to acknowledge the incredible commitment shown by Co-op colleagues across all parts and at all levels of the business throughout 2020. It was an outstanding achievement, which epitomised our Co-op way of doing business, throughout a year that none of us will forget."

Ends

Media Enquiries :

For more information, please contact Tom Cooledge (07773 097060, tom.cooledge@coop.co.uk ); Fay Rajaratnam (07810 329390, frajaratnam@headlandconsultancy.com ); Russ Brady (07880 784442, russ.brady@coop.co.uk ); Susanna Voyle (079 8089 4557, svoyle@headlandconsultancy.com )

About the Co-op:

The Co-op is one of the world's largest consumer co-operatives with interests across food, funerals, insurance, legal services and health. Owned by millions of UK consumers, the Co-op operates 2,600 food stores, over 800 funeral homes and provides products to over 5,100 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail Limited.

Employing over 63,000 people, the Co-op has an annual turnover of over GBP11.5 billion. As well as having clear financial and operational objectives, the Co-op is a recognised leader for its social goals and community-led programmes. The Co-op exists to meet members' needs and stand up for the things they believe in.

CHAIR'S INTRODUCTION

"This report is our record of how we rose to the challenge of the pandemic through our business operations and through our support to local communities."

In just one short year, Covid-19 has changed the world.

Even though the national vaccination programme is now well underway, we already know that life in the UK, and around the world, will never quite be the same again.

In some respects, that's to be welcomed. As others have observed, the 'old normal' was not such a great place to live for many in Britain. Covid-19 not only revealed the unfairness and inequalities that stubbornly persist in our society, the virus also exacerbated it. Over the last 12 months, it's become clearer than ever how divided our nation is between the secure and the vulnerable. There's no doubt that we need to 'build back better' and take the opportunity of national recovery to make fundamental changes to how we live and the values we place at the core of society. To achieve that, build back better will also need to mean build back different. As a nation, we need to encourage and promote economic activity that puts people and communities first. As a co-operative business, that's been our way of thinking and working since our earliest days.

When we adopted our new Vision at the start of 2020 - 'Co-operating for a Fairer World' - we had no idea how quickly that commitment would be put to the test. Covid-19 presented us with a national emergency and a unique set of business challenges and community needs, which would show if co-operation was capable of making a difference during an extraordinary time in the nation's history. This report is our record of how we rose to the challenge of the pandemic through our business operations and through our support to local communities. Creating Co-op value for our members has always been at the heart of our endeavours and I believe that reached new heights during 2020.

I doubt we could have achieved all we did last year if it had not been for the extensive investment and modernisation we've undertaken led by Steve over the last four years. Our commerciality has radically improved and so too has our approach to supporting local communities. The changes we'd made meant we were already a robust and resilient business as the pandemic arrived. And within local communities, we already had meaningful relationships and established assets on which to draw upon at a critical moment, as well as ways to connect with our members to understand what mattered to them and how we could support.

As Steve sets out in his introduction, since last summer we've been planning and implementing our longer-term response to the social and economic consequences of the pandemic. How we support our members and communities over the next few years will be just as critical as our response in the early months of the crisis. Our strategy to grow our business and expand the difference that co-operative values can make remains in place. However, we've reset some of our priorities to make sure we can compete strongly across all our markets during a time of recession. We've also looked carefully at how we should focus our community agenda and campaigning to make sure we're directing our support in the most meaningful way in the post-pandemic climate.

Throughout 2020 we maintained all aspects of our democratic governance, taking our regular Board and Council meetings online. For the first time in our history we asked our members not to attend our AGM in person and to move online, which attracted a greater 'attendance', through both live and playback viewings, than our normal physical meeting. Our autumn Council-led 'Join In' events were also held virtually. I'd like to thank our Board, Council and members for their flexibility and adaptability as we've all trialled, learned and evolved during these unprecedented times.

I'd like to thank Nick Crofts for all that he has achieved, along with his Council colleagues, as President of our National Members' Council. Nick will step down as Council President in July, when he reaches his maximum term of office and our Council will elect a successor then. I would also like to congratulate him on his appointment as CEO of the Co-op Foundation. Nick has been a key figure in the Co-op for more than a decade and a passionate advocate for co-operation. I'm delighted to see him join our charity as we work together to create a fairer future for all.

Finally, I want to acknowledge the incredible commitment shown by Co-op colleagues across all parts and at all levels of the business throughout 2020. It was an outstanding achievement, which epitomised our Co-op way of doing business, throughout a year that none of us will forget.

Allan Leighton

Chair, The Co-op Group

Chief Executive's overview

"...the impact of the pandemic is far from over, and 2021 brings new challenges, many of them related to the economic downturn and the challenges communities face. I'm confident that the Co-op will rise to those challenges as we continue to Co-operate for a Fairer World."

Over the last 12 months we've lived through a perfect storm, with every part of our lives turned upside down - socially and economically, mentally and physically. Along the way we've discovered much about our society, some of it brilliant and inspiring, and some of it quite ugly thanks to the unfairness and inequality Covid-19 has revealed and exacerbated.

And during the last few years, we've created a business that is operationally strong, commercially successful and which creates value for our members and their communities. All that work proved to be essential in giving us the ability to respond to the immediate and sustained demands which the pandemic brought with it. Our Vision, 'Co-operating for a Fairer World', was our guiding light throughout, and our response to Covid-19 demonstrated the power of co-operative enterprise and the relevance of Co-operative Values.

This year also saw us launch a bold set of commitments to address racial inequalities across our Co-op. When we were developing the commitments it was important to me that we had some independent experts around the room to help guide and challenge us. So we created the Equality and Inclusion Think Tank, bringing together some of the greatest activists with a wealth of experience. Let me take this opportunity to welcome Doyin Atewologun, Baroness Ruth Hunt, John Amaechi, Lord Simon Woolley and Leila McKenzie-Diel to our Co-op family. Our Board Director Lord Victor Adebowale has also joined the think tank. We have had great support from our Members' Council for our ambition in this area and I'd particularly like to thank their Diversity and Inclusion Group chaired by Margaret Casely-Hayford.

Of course, the impact of the pandemic is far from over - 2021 brings new challenges, many of them related to the economic downturn and the challenges communities face. Our response to this new post-pandemic world will be just as important as our response to the initial emergency.

In the pages which follow, we have set out how we responded to the pandemic, through our businesses and the support we gave to our colleagues, as well as local and international communities. We'll also show how we've adapted our commercial strategies, how we're supporting our people and how we're focusing our community and sustainability work as we build back better and play our part in levelling up the country, so that everyone has the same opportunities to get on.

Financial overview

Overall, our Co-op's revenue was up 5.6% to GBP11.5bn, an increase of GBP0.6bn on 2019. Our underlying profit before tax, which excludes the impact of non-trading items and net interest expense from our funeral plans, was up to GBP100m - an increase of GBP65m. Our profit before tax of GBP127m was up GBP103m from GBP24m the previous year.

A tax charge of GBP55m, meant we recorded a profit of GBP77m after tax and discontinued items. The tax charge was particularly high in the context of our profits and is explained in the finance review.

The increases in revenue and underlying profit for our Food business were driven by realising optimisation and efficiency benefits, as well as the shift in consumer spending to more local and online food shopping because of the prolonged impact of the country's response to the pandemic and move to home working. Integral to Co-op Food's success has been its Retail Business Transformation programme (RBT). The system supports Co-op's ambitious growth strategy, introducing new technology to improve ranging, stock holding, availability and more accurate forecasting information. A new cloud-based supplier collaboration portal - Co-op Connect - is in place. We also saw lockdown restrictions leading consumers to shop closer to home, welcoming the ease and convenience of our Co-op stores and their extensive range and ability to fulfil orders online and receive their shopping as quick as in under 30 minutes.

Co -op's retail business, driven by its online expansion and wholesale operation, saw its biggest growth of the whole lockdown period in April 2020 (+42% YoY growth) as customers and members tried to avoid supermarket queues and stayed close to home. During that first four week period, 2.4 million new shoppers (1/3 of our customer base) walked through our doors. Our market share peaked at 7.4% in April, the highest it's been in years, and up from a full year average market share of 6.3% in 2019. The Co-op's market share slipped back to 6% by the close of the year.

Independent retailers supplied by our Nisa wholesale business also grew their sales ahead of the market. In 2020, Nisa signed up 624 new independent stores and reported a sales increase of GBP154m (10.8%).

Our Funeralcare business saw an increase in the number of funerals we arranged, with 10,290 more funerals than 2019 - an increase of 11.4%, sadly reflecting the deaths caused by Covid-19. However, during the first, tighter lockdown, Government restrictions on how funerals could be conducted meant that for many families only the most basic of arrangements were possible or appropriate.

During later lockdowns, we were able to operate within slightly more relaxed restrictions. This allowed us to help more people attend funerals to say their best goodbye to family and loved ones.

Although our Food business has performed exceptionally well through the crisis, our costs across all parts of our Co-op have increased. The additional costs during the year, directly related to Covid-19, have been around GBP84m. These costs included additional new colleagues (targeted from the hospitality sector), the purchasing of personal protective equipment (PPE), rewarding colleagues for their outstanding efforts and increased colleague sickness and absence linked to the virus. In contrast, our support from the Government's emergency economic measures to sustain the economy during the pandemic amounted to GBP82m - covering the business rates 'holiday' for our Food stores and funeral homes and furlough payments to our colleagues.

Our Insurance business saw much reduced sales during the spring and early summer, particularly for motor and travel policies, as lockdown restrictions impacted trading across the sector.

Overall, Legal Services saw case volumes grow by 9% in 2020. The business experienced an early increase in will writing work at the start of the pandemic, and then above average inquiries about divorce as the strains on family relationships created by lockdown began to show themselves. The number of probate cases we took on also grew, though external factors impacted our overall performance. Cancelled house viewings, delayed house sales, reduced interest rates and delays in processing paperwork all impacted our revenue in 2020.

Throughout this pandemic, our Co-op Health business has responded brilliantly. It's grown by over 1000% year on year and moved from being ranked 7,000th in the UK to 6th today, based on volume. At the same time, it has achieved exemplary customer satisfaction feedback, with 4.8 out of 5 stars on both Apple and Google stores as well as Trustpilot.

However, it became clear that the business would require significant additional capital to move it forwards. As such the decision was taken to sell it to Phoenix UK Group, a leading healthcare provider, a move which was announced in March this year.

I'd like to thank Tim Davies, who has been instrumental in leading the health business for the Co-op.

Emergency support for communities

Early in the crisis, it became clear to me that businesses would be judged by how well they responded to the pandemic and whether they put people and communities first. This would matter for many years to come, and long after the pandemic was over. If you ignored your responsibilities, or abandoned the most vulnerable, it would not be forgotten.

We were able to share more than GBP12m of funds with charities and community causes as part of our Covid-19 response, and we celebrated giving back a further GBP15m to 4,500 local causes as part of the annual payout from our Local Community Fund.

The generosity of our members during 2020 was outstanding. Through a variety of channels our members and customers donated GBP900,000 to FareShare, which in turn was distributed to food banks across the UK. This was in addition to the GBP1.5m worth of food we donated to the charity in March 2020. FareShare had been able to distribute five million meals thanks to our Co-op's support.

We also gave our members the opportunity to donate their unspent 5% Co-op member rewards to a new Co-op Coronavirus Members Fund. Our Co-op fund has also enabled us to give emergency donations of GBP500 each to 150 local causes who've been addressing immediate needs in their communities created by the pandemic, as well as families struggling to afford funeral costs.

As the nation's streets became deserted, we began selling copies of the Big Issue in our stores providing up to 2,600 outlets for sales of the magazine, which supports the homeless to lift themselves out of poverty.

In the second half of 2020 we used our summer food campaign to draw attention to the growing number of UK families facing food poverty. Through this we donated GBP1.5m to the National Emergency Trust (NET) to support food charities across the UK.

To help around 6,000 Co-op Academy pupils most in need, we provided over GBP3m in Co-op Food vouchers and technology, including 1,000 Chrome devices. At a national level, we worked both behind the scenes and as a member of the Stop Child Food Poverty Taskforce supporting Marcus Rashford in his successful campaign to persuade the Government to act decisively on tackling food poverty for school children during school holidays.

And our amazing colleagues, even when faced with the personal and professional challenges the pandemic brought, stepped up and raised over GBP3m for our chosen charity partners Mind, SAMH and Inspire.

But it wasn't just financial help that we gave during the first wave. We moved quickly from pilots to a national launch of our new online Co-operate platform, which blends virtual with physical communities and links volunteers to those in need. Between March and December, we had 183,000 visits to the site. Helping those shielding at home with their shopping was immensely important.

The new platform has complemented the work of our Member Pioneer community activists. They've been truly amazing and have together engaged with an estimated 30,000 people a month in our communities.

You can find more detail in responsible business performance in our Co-operate Report.

International response

Although, our immediate priority was to support our colleagues, members and customers in the UK, we are a business which is globally connected through our world-wide supply chain and our responsibilities did not stop at our borders.

At the start of the summer we introduced our Global Wellbeing Charter, specifically designed around the principle of our Future of Food commitment to treat people fairly. The charter lays out our actions to support our producers in the developing world in tackling the impact of Coronavirus on their livelihoods, now and in the future.

In July, we redirected GBP320,000 to support Fairtrade producers through the Coronavirus emergency. We've also increased the visibility of Fairtrade products in our stores to promote stronger sales.

As part of our ongoing support of The One Foundation we redirected GBP647,000 to communities for clean water and sanitation projects and to help tackle the spread and impact of Covid.

It's vital that as we repair and rebuild our economy, we take the opportunity to tackle climate change. We've joined the United Nations' 'Recover Better' campaign to support the call for governments across the world to prioritise a recovery from Covid-19 that's consistent with a sustainable world for future generations. We've set science-based targets to decarbonise our business and the products we sell, and we've pledged to further reduce absolute greenhouse gas emissions from our own operations by 50% by 2025 as well as to reduce product-related emissions by 11% by 2050.

Evolving our post pandemic commercial strategy

Our aim is to help the nation and our own Co-op to build back better, and I hope, different. In developing our thinking, we wanted to build on the good work of the last few years and the experience, since March 2020. We also looked at available data on how the national and global economy was changing.

In our commercial thinking, there were some very significant trends emerging that we needed to take full account of such as hyper-localism, value for money and the surge in online. We have a clear plan to deliver our Vision and strategy over the coming years. See the 'How are we building back better and different' section.

Our post pandemic social agenda

As we developed our plans and began to put in place our revised social agenda, we were guided by our new Vision, 'Co-operating for a Fairer World.' We've chosen to focus our efforts on making things fairer in three key areas and will join forces with others because together, we can make an even bigger difference:

-- We're going to make things fairer for our colleagues - making sure they get a fair deal, have a safe place to work and support for their mental wellbeing - ensuring they can fulfil their potential.

-- We're going to make life fairer for our members and communities - focused on social mobility including access to food, mental wellbeing and education, skills & employment for young people whilst maintaining our commitments to diversity and inclusion.

-- And we're going to make things fairer for our planet - focused on delivering our sustainability plan, which in particular faces into the challenges and opportunities in tackling carbon reduction.

We've always valued the work of our colleagues on the frontline and Covid-19 has demonstrated just how important their role is in feeding the nation, caring for the deceased and bereaved, and delivering our Vision to create a fairer world. Pay levels for our frontline colleagues have increased by 25% over the last five years, but now we want to go further.

So, in 2021 we're working with our trade union partners, USDAW, to improve our hourly pay rates so that they align to the Real Living Wage. This will boost the pay for 33,000 of our colleagues and give their families greater financial resilience through a testing time in the UK's economy.

We'll also continue to prioritise colleague safety and wellbeing through our 'Safer Colleagues, Safer Communities' programme and through our colleague mental wellbeing initiatives.

In September as part of the relaunch of our Co-op membership rewards, we doubled the amount of money that goes to local communities and community organisations who are tackling the inequalities facing our society, supporting those communities that need it most. We estimate that in 2021 our members will help generate around GBP21m to support fairer access to food, mental wellbeing and education & employment for young people.

The pandemic and months in lockdown have taken a big toll on people's wellbeing. That's why our partnership with Mind, SAMH and Inspire is so important to bring communities together to improve mental wellbeing. Pilot services are currently being run in communities across the UK to test the role of community and resilience in mental wellbeing. These will continue to be rolled out to more communities in the coming months.

During 2020 we were also proud to partner with the Damilola Taylor Trust and the Rio Ferdinand Foundation to provide young people, from our most marginalised communities, an opportunity to take part in a youth voice project. Our work to support young people have a voice, learn new skills and access opportunities continues along with our pre-apprentice and apprentice programmes.

In 2021, to address ongoing food poverty, we'll continue our work to help more people to access the food they need, gradually moving away from emergency response towards more sustainable activity, such as increased food distribution through our local stores' Foodshare programme and support for a community fridges initiative through Hubbub.

In the autumn we launched new commitments, targets and ways of working to address racial inequalities within our workplace and our other key stakeholder relationships including our wider membership, the communities we support, our suppliers and other partnerships. We are focused on delivering against these commitments and on what more we should be doing in the inclusion space. You can read more about these in the Co-operate Report.

Our commitments to the environment and tackling climate change are long standing. In November we re-launched Co-op Power, our business-to-business clean energy buying group. Co-op Power already enjoys a collective buying power of GBP200 million a year and is now on a recruitment drive to bring more corporates onboard. Co-op Power has recently attracted Roadchef, Nationwide Building Society and The Royal National Lifeboat Institution to join the joint-buying operation. National Trust, PA Media Group and Emirates Airlines are already members. GBP100m in energy costs have been saved by members of Co-op Power so far, and the Co-op alone saved more than 143,000 tonnes of carbon in 2020, through the purchasing of renewable energy.

Amongst our other current key commitments:

-- We've set science-based targets to reduce carbon emissions from our operations (compared to 2016) 50% by 2025 and from our products and services, 11% by 2050.

-- We have aligned with the British Retail Consortium Climate Roadmap to be net zero by 2040 from both our operations and products.

   --      100% of soy in Co-op products, including that embedded in animal feed, will be 

deforestation-free and sustainable by 2025.

-- We will reduce food waste generated in our stores and depots by 50% by 2030, compared to 2015.

   --      All Co-op own brand packaging will be easy to recycle by Q2 in 2021. 

We know all of these areas are close to the hearts of our members and their representatives on our Council. We'll continue to listen to them as we move our agenda forward.

Improving operational efficiency

In order to deliver on our commitments to help our members, customers, colleagues and our local communities, we'll need to be even more efficient and cost conscious in how we run the business during 2021 and beyond.

During 2020 we worked on our new operating model across many parts of our Manchester Support Centre, merging some teams, removing duplication of roles and tasks and bringing together shared areas of skills and capability. In 2021 this work will continue to drive efficiency and effectiveness, along with a shift in our ways of working. We're improving our cost base in Food through our 'Better Buying' activity and through the implementation and rollout of the Retail Business Transformation programme, which is delivering efficiencies in stores and logistics as well as removing costs.

We're also developing more cross-trading opportunities so that our members and customers understand how our business areas complement each other and can address their needs.

We expect 2021 to be another very challenging year but one where our Co-op will continue to thrive and deliver clear value for our members and their communities.

It will present the opportunity to show the importance of co-operation as the UK looks to build back better and, we hope, different. If we are to avoid falling back into old ways that tolerate inequality and unfairness, then we must develop economic planning, at every level, which puts the wellbeing of people and communities first.

I'd like to finish by once again saying how proud I am of my Co-op colleagues. The last 12 months have been intensely demanding for us, as individuals, as family members and as employees. I have witnessed incredible dedication and passion towards our Co-op by colleagues, often juggling additional home and work demands.

This includes my six colleagues, including a Nisa partner, who were recognised in the Queen's New Year and Birthday Honours this year. I want to congratulate Joanne Gates BEM, Liz Mclean BEM, Jo Whitfield CBE, Abdul Majid MBE, Jean Marie Hughes MBE and Nick Speight MBE for their awards.

Each of our business units have been essential in keeping the country running this year and it's great that the efforts of several colleagues have been recognised at this highest level.

A huge 'thank you' to everyone for all you've done during this exceptional time.

Steve Murrells

CEO, The Co-op Group

How we responded to the pandemic - our commercial response

No part of our business operations was left untouched by the pandemic. Our aim was to adapt as quickly as necessary to the new conditions and ensure we could continue to serve our members and customers while keeping them and our colleagues safe.

Food response

Overnight, our Co-op responded to the need to feed the nation by collaborating with the Government and adopting new ways of working, not only in our Food stores but across our logistics network depots. The dedication, resilience and strong community values of our colleagues was instrumental in responding to the pandemic and we thank them for their hard work.

For our stores we set out new cleaning regimes, one-way systems, social distancing, priority shopping times, staffing at entrances to regulate customer numbers and new store layouts. We also temporarily adjusted our trading hours, so we could replenish shelves and carry out additional cleaning. To help our customers understand the changes, we put in place strong and clear point of sale messaging and used in-store radio to guide people and thank them for their co-operation. Importantly, we empowered our store managers to make the right decisions locally to keep their colleagues, our customers and our members safe. In depots, we introduced social distancing and PPE kit to aid working. We have kept guidance from Government under constant review in order to enable us to continue to improve the measures we have in place in store as the evidence has evolved, guided throughout by keeping our members, customers and colleagues safe as our utmost priority.

In the early days of the emergency we lobbied the Government for our store colleagues to be given 'key worker' status along with Funeralcare colleagues. Throughout this time, the safety of our colleagues was our key goal and our procurement teams rose to the challenge of securing sufficient PPE. We swiftly put in place plastic screens at our tills and between self-service check-outs. We continued to innovate to keep customers safe by trialling a traffic light queuing system at a number of stores to make it easier for customers to observe social distancing when shopping. We also collaborate with Government to make sure we have a voice in the things that matter most for our colleagues, customers, members and our Co-op.

With pubs, restaurants and cafes closed and many office workers moving entirely to home based working, many extra meals were being prepared and eaten in the home. As a direct consequence, we saw double digit sales growth across many of our categories. To cope with the extraordinary demand for food and other household products, we recruited 5,000 additional colleagues, many of them within a single week in late March/early April. We targeted our recruitment to the hospitality sector where we knew thousands were losing their jobs.

We also accelerated our online and home delivery plans to address the new needs and demand. Our online same-day delivery service is now available in over 100 towns and cities and, by the end of the year, our online on-demand convenience offer was serviced through 800 stores, through our own online shop - coop.co.uk/shop - the Deliveroo app and as a click and collect service. Orders are fulfilled through the Co-op online shop and through partnerships with Starship Technologies and Deliveroo in as little as under one hour and up to seven days in advance.

Our approach sees stores act as micro distribution hubs locally, with orders picked from local Co-op stores - so high street stores benefit from any increase in online demand. We rolled-out our online offer at pace during 2020 through our own online shop - which first launched in 2019 - and our partners. Orders topped 3.25m during 2020.

Co-op's product offering was also adapted to meet the crisis and respond to the shift to at-home eating and the need to offer value. Honest Value was launched to provide shoppers with the ethical sourcing standards that they have come to expect from Co-op, along with keen prices. Co-op launched its new EverGround hot drinks offer with all tea, coffee, hot chocolate and sugar used in the range sourced to Fairtrade standards.

At the Co-op, we had to pause our programme of new store openings at the start of the crisis, but this got back on track in early July with the opening of a new store in Pilton, the home of the world-famous Glastonbury festival. Over the last five years, we've opened around 500 new shops across the country, which is more than any other UK retailer. Despite the pandemic, during 2020 we opened 56 new stores, refitted a further 105 and extended 13 stores.

Our colleagues have done a fantastic job in adapting throughout the crisis and have remained focused on our customers and members. It's through their commitment and dedication that we've received the highest ever satisfaction scores.

Playing our part in supporting families access food throughout the crisis has been a key focus for us. We amplified the support that we gave FareShare throughout 2020, donating all of our Easter marketing campaign's TV airtime to the charity, to raise awareness and leverage over GBP650k in funds to help their work. We also ran a summer campaign to highlight the challenge of food poverty among families - we launched a promotion for our 3 for 2 Picnic Food range, through which we donated 20p from each purchase to the National Emergencies Trust (NET). It had raised GBP1.5m by the end of the summer.

Our everyday ambition is that no good food goes to waste. Any surplus food at our depots is shared with those in need through our partnership with FareShare, and surplus food from our stores goes directly to local charities and community groups. Our support of food banks and other forms of emergency help continues.

We've seen significant sales growth for our Nisa partners, who've benefited from the broader range of products we're able to supply them, particularly within the fresh categories. Nisa trading has been strong with sales up 10.8% to GBP1.6 billion. During 2020, Nisa signed up 624 new stores, marking a 19.1% increase against budget and building on strong recruitment figures in 2019.

Franchising is a critical part of our strategy to extend the reach of our Co-op by entering new markets and communities. This year, we have been upgraded to an Associated Member of the British Franchise Association (BFA), reinforcing our partnership credentials. We were operating 14 franchise stores by the end of 2020 and around 25 more franchise stores are expected to open by the end of 2021.

Our strong relationships with our supply partners have been critical throughout the crisis and in many ways these relationships have strengthened. We worked closely to help suppliers during the early stages of the Covid crisis when manufacturers experienced issues in sourcing key ingredients and meeting the significant increased demand or loss of traditional markets, brought about by pub and restaurant closures. We temporarily changed product specifications and focused our range on a core customer offer while beer packs usually provided to pubs were sold through stores to aid small beer producers. For more information on how we work with our suppliers, please see our Co-operate Report.

Funeralcare response

In Funeralcare we moved quickly to follow new and radical Government restrictions and led the sector in terms of our response to making funerals safe for our clients and our colleagues. In response to the impact of UK lockdown, we adapted our funeral service options to help ensure that bereaved families could still say their best possible goodbye. Whilst there have been significant funeral restrictions in place, that doesn't mean that families haven't able to pay tribute to their loved ones.

In the early stages of the pandemic, the type of funerals we were able to offer were simpler and more pared back due to the severe restrictions. As the Government realised the importance of the grieving process in later lockdowns, more people were allowed to attend services.

We delivered much higher numbers of funerals during 2020, helping 100,920 families to say their very best goodbye to a loved one. At the same time we experienced much higher operational and internal costs, along with reductions in planned change and investments, affecting both revenue and profits.

As a consequence of higher funeral volumes in the first half of the year, we saw a marked reduction in our funeral plan sales as our colleagues focused on providing funeral services. As restrictions lifted, we saw plan performance recover and sales across the full year were 13.4% down on 2019.

Despite the challenges of 2020, we are proud to have also delivered a large amount of strategic change for our business:

-- We refreshed our Funeralcare brand, to become more appealing, modern, diverse and inclusive.

-- We delivered a new website and improved core journeys for our clients across both Funerals and Funeral Planning.

-- We grew and consolidated our position as the market leaders in Direct Cremation. We launched new Funeral Service propositions in October, providing clients with greater personalisation options and better value for money.

In terms of regulation, we have welcomed confirmation that the Government has legislated to bring the pre-paid funeral planning market within the remit of the Financial Conduct Authority (FCA) and provide protection to consumers. We have been outspoken for many years in calling for greater direct regulation of this market. We've worked closely with HM Treasury to share our expertise as a reputable provider and outline why the best model for funeral plans is under the remit of the FCA.

Fulfilling the needs and interests of our clients will always be our priority, so we have proactively called for increased transparency, enhanced financial protection and a ban on aggressive sales.

In December, the Competition and Markets Authority (CMA) published its final report into the at-need funeral and crematoria industries.

Our funerals business cares deeply about providing the very best service and care for clients and families, and has been leading the way in improving standards, quality and transparency across the market for a number of years and will continue to do so.

We have been working through the full detail of the CMA's final report, having engaged fully with them throughout the investigation. We are encouraged by many of the measures put forward by the watchdog as they are a step forward in improving quality of care and price transparency, both of which are in the best interest of bereaved families and are measures we have always advocated for. We'll continue working with the CMA as the remedies which they have outlined are developed.

Insurance response

As the pandemic took hold in the UK we took measures to reflect in our insurance policies the restrictions which were introduced by the Government as well as the efforts people were making to support their local communities. For anyone who needed to work from home or were self-isolating, their home insurance cover was not affected as we automatically relaxed our policy terms without the need for customers to contact us. And this remains the case today. If our customers had to drive to work instead of getting public transport because of the impact of Covid-19, increasing their mileage, their car insurance policies also remained valid. And if customers were using their car for voluntary purposes in any capacity to support others who are impacted by Covid-19, their cover was not affected. Additionally, key workers needing to use their own car to drive to different places of work because of the impact of Covid-19 were not affected. We have kept all these changes in place for the time being.

During the lockdown we saw a sharp drop in sales of car, travel and new home insurance reflecting the Government restrictions on work and movement. However, there were also far fewer claims being made as people remained at home. Sales picked up in the second half as the economy opened up again, with motor claims increasing by 35% in the weeks following travel restrictions being lifted.

In September we also led a campaign to raise awareness of the pressures facing new young drivers from other motorists and launched a T-plate to indicate those using telematics technology.

   --      Decline in neighbourliness 

Our Co-op works with its members to act in the best interests of their communities, the ones we serve. In December, Co-op Insurance, as a home insurance provider, commissioned new research along with Neighbourhood Watch as part of our joint annual Neighbour of the Year Awards. It showed that the surge in neighbourliness seen in the spring had not been sustained as pandemic fatigue set in across the UK.

During the peak of the first national lockdown in April, our research showed a spike in neighbourliness, with almost three quarters (72%) of UK adults saying they knew which of their neighbours were classed as high risk. However, after seven months of pandemic restrictions, the figure saw a dramatic fall, with only a quarter (26%) of a sample of 2,000 UK adults revealing they know which of their neighbours are at risk.

During the first national lockdown, 31% of UK adults said they had checked in with a neighbour who lived alone as a way to help combat loneliness. Months later, this figure declined by a third, with only one in five saying they have done the same.

Legal response

When the pandemic arrived, our Legal Services business was ready thanks to the ongoing investment in digital technology we've been making over the last few years to make services more convenient. The transition to remote working was fast and effective.

Having developed digital legal advice technologies for estate planning, which makes sorting out wills easier and more effective, we developed a suite of digital legal advice services in 2020 that covers probate, personal injury, employment and family law. These tools put us in a good position to build new partnerships and reach more customers. In 2020 we partnered with over ten new organisations and we saw case volumes rise by 9%. Our customers are making the most of the free legal advice and guidance offered by our new range of services. At the start of the lockdown we saw an increase in demand for will writing services, while after the first lockdown was lifted we saw a 250% increase in divorce related enquiries, reflecting the tremendous stress many relationships have suffered during this time.

Online consultations with our legal advisors were already growing before the pandemic, but the experience and effects of the pandemic itself increased that trend. As Covid death rates began to soar, we introduced a Bereavement Notification and Advice Service to help people deal with a late loved one's affairs. The new service gives bereaved families help informing financial institutions, stopping junk mail and closing social media accounts. Typically, bereaved families are left to deal with an average of twelve organisations, ranging from the Government's 'Tell Us Once' service to pension providers, insurers and utility providers and corresponding with the Coroner. This new service enables us to help bereaved families by providing a single point of contact.

Supporting our colleagues through the pandemic

Our colleagues right across the business have been outstanding in how they've responded to the challenges of 2020. As the scale of the emergency became clear, and new patterns of working were put in place, we implemented a new approach to colleague communications making sure that all of colleagues had the latest health guidance and operational information they need each day.

Throughout the first lockdown and beyond, we issued a regular 'Co-op Care' email to all colleagues focused specifically on mental and physical wellbeing. We covered many issues we knew were highly relevant at this time, including: coping with fear and anxiety; bereavement; personal resilience and staying fit and motivated when working from home.

We knew it was important for there to be more frequent communications to our colleagues and for our most senior leadership to be visible. Our CEO, Steve Murrells, recorded short, weekly video updates messages from the end of March through to the end of July reinforcing our daily messaging, highlighting significant changes and thanking colleagues for their work. To monitor and track how our colleagues were doing, we carried out two special Talkback surveys which measured individual wellbeing including levels of personal anxiety and concern for family members.

We also developed new ways to recognise and thank the efforts of our colleagues. For colleagues working from home we introduced digital 'You're Incredible' and 'Not all heroes wear capes' thank you cards to celebrate their achievements. We added a new way to recognise exceptional colleague work during the pandemic by giving our Co-op members and colleagues the opportunity to nominate an individual for a 'local hero' award. More than 1,000 nominations were received. We shared stories about the work of our colleagues on our external social media platforms during May, June and July to publicly celebrate their work. Our Covid related acts of thanks and recognition were in addition to our annual Being Co-op awards, which received more than a thousand nominations across thirteen categories.

In addition, to recognise their commitment during the first lockdown period, 56,000 frontline colleagues received a 'Thank You' package which included a GBP100 cash payment, a GBP50 Co-op gift card and an extra day's holiday.

We also increased our colleague discount to 20% on own brand goods at all times and 20% on branded goods at 13 pay day events a year, to further improve what was already a valued colleague benefit and to provide a meaningful 'everyday' financial uplift.

And before Christmas we ran a '12 days of Togetherness' campaign with a different initiative launched each day. All colleagues were connected to this with themes of saying thank you, providing support and demonstrating kindness. This included colleagues receiving GBP50 on their membership card and an exclusive discount day of 50% off all Co-op branded goods.

How we responded to the pandemic - our community response

Our ability during the pandemic to support the local communities in which we trade was helped enormously by the fact that we already had established relationships, good understanding of local needs and a network of colleagues dedicated to creating stronger communities.

Co-operate and Member Pioneers

We've long been committed to expanding local, grassroots, co-operative action to meet local needs - we've worked closely with a committed group of individuals from our Members' Council on this area. As the lockdown began, we increased our efforts.

Last year we began testing a new online platform called 'Co-operate' which can link local projects to local resources. Our trials in Greater Manchester and parts of Leeds were already proving successful and in April we scaled up the platform to make it available across the country.

Between March and December 2020, more than 183,000 visits have been made to the Co-operate platform to access services including:

-- A matching service that connected volunteers to help the vulnerable with their shopping or signposted them to organisations that need help.

-- Sharing online events to help bring people together in virtual communities, during a time of physical isolation.

-- 'How to' guides and digital content to support people in connecting with one another through lockdown.

So far - 4,000 community groups have registered with the Co-operate platform, which complements the physical network of our Member Pioneers. By September, we had 1,000 Member Pioneers in place, which means we now have a Member Pioneer covering all parts of the United Kingdom. They are a key way in which we connect members and their communities at a local level. During the lockdown our Pioneer colleagues concentrated their efforts on supporting vulnerable people, keeping people connected, finding volunteers and securing funding for urgent projects. They played a key role in community response to the pandemic by either establishing local support groups themselves, signposting others to existing groups or individually supporting food and medicine deliveries and face-mask production. Through these efforts Member Pioneers engaged with an estimated 30,000 people per month in communities.

Financial help

We recognised that local fundraising would become very difficult during social distancing restrictions, so we chose to bring forward the distribution of funds for 4,500 local causes currently being supported by our Co-op members. This would normally have taken place in November, but we released GBP4.5 million during the spring to help make sure immediate needs were met. In November we then distributed further funds, making a total of GBP15m shared from our Local Community Fund in 2020.

The themes we had identified in 2019, through local research and the national data we consolidate to create our Community Wellbeing Index, led us to focus our community support on three interconnected areas: public spaces, mental wellbeing and skills. We have seen how these have taken on even greater relevance during 2020. How we use public spaces - indoors, outdoors, and online - is interwoven through all of these areas, and how that relates to our individual and collective wellbeing has become much better appreciated during lockdown; mental health for many people has been damaged through an intense period of isolation and restricted movement; and the hit to the economy will make skills and training, especially for a younger generation, a matter of urgency. We have also played a key role in the growing campaign against food poverty led by Marcus Rashford.

Free school meals for Co-op Academy pupils

In March, as schools began to close because of the virus, we knew that the 6,000 students who have free school meals across our 26 Co-op Academy schools would need our help. The Co-op Academies Trust has chosen to work in areas of high deprivation in the north of England which means the number of children eligible for free meals is on average around 32% in our schools, compared to the national average of 13%. In one of our Co-op Academy schools it reaches 67% of students. Before the Government had responded to this issue, we organised a scheme to give eligible Academy Trust pupils a weekly GBP20 Co-op Food voucher card - GBP5 higher than the normal value of free school meals. We also extended this to children identified as being from financially vulnerable families and to refugee children who were not yet eligible for Government support.

Several hundred other schools chose to make use of our Co-op voucher cards to support their own pupils rather than use the Government provider. We committed to providing our Co-op support during term time and school holidays, including through the summer months. We also provided support to children forced to self isolate during the autumn term.

To help with home study during the lockdown, the Academies Trust provided 1,000 laptops to students who needed them.

Co-op Foundation

At the outset of the pandemic, our Co-op charity, the Co-op Foundation, signed a statement co-ordinated by London Funders in which it committed to being flexible with its funding during Covid-19. It also agreed repayment breaks for 16 community spaces partners in England, Wales and Scotland supported through its interest-free loans programme.

The Foundation adapted its 'Space to Connect' follow-on funding plans so all 'Explore' partners supported with GBP10k grants in 2019 could apply for a further GBP10k to build on their work in 2020. Funding was uncompleted so all suitable proposals were awarded funds. By mid-January 2021, the team had awarded GBP430k of follow-on grants to 44 organisations. Space to Connect supports organisations to improve spaces where people can connect and co-operate.

Co-op Foundation agreed a three-month extension offer to partners funded to tackle youth loneliness through its Building Connections Fund youth strand. In addition, social enterprises supported via its Luminate programme were invited to apply for emergency grants to address short-term impacts on their organisation caused by lockdown. The Foundation gave out GBP45k of grants to 18 organisations.

In response to its own research, that revealed a rise in youth loneliness during the March - July 2020 lockdown, Co-op Foundation launched the second phase of its 'Lonely Not Alone' campaign in October to tackle the stigma of youth loneliness. In total, 57 young people helped to develop the campaign, which asked everyone to wear yellow socks and share their Outfit of the Day to show young people they're not alone.

Campaigning through the pandemic

Campaigning on issues which matter most to our members is a key part of being a co-operative. In mid-March as the scale of the coming emergency began to emerge, we pressed Government for 'key worker' status to be given to our Food and Funeralcare colleagues. We also provided guidance to Government on safety measures for caring for the deceased and on the social distancing measures for funeral services. Where we saw inconsistencies of practice over burial arrangements, we also lobbied local authorities.

In early July the Government finally published its response to its call for evidence from shop workers who've been the victims of verbal and physical abuse in the workplace. We welcomed the response and there are positive measures in it, but overall, we believe more should be done to protect our colleagues and reset expectations of what is acceptable in society - we do not believe it should be part of the job to be abused and attacked, and that only new legislation across the UK will provide this protection.

Last September, Jo Whitfield brought together the CEOs of 22 other major retailers and industry bodies to write to UK Prime Minister Boris Johnson asking him to give staff greater protection in the workplace and back Alex Norris MP's Private Members Bill to achieve that. Following the evidence the Co-op provided to the Scottish Parliament's Committee in March 2020, the Co-op's managing director for Scotland, Derek Furnival, wrote to members of the Scottish Parliament in January to ask for their support of a new bill which will provide greater protection for shopworkers in the face of ever increasing levels of abuse and violence.

Also, the impact of the launch of the Nation in Mourning report led to it being tabled at a Cabinet meeting in July with the All-Party Group in Westminster and the Cross-Party Group in the Welsh Assembly are exploring a session on bereavement as a result. It has continued to be used in conversations to help ensure restrictions on funerals during Covid remain proportionate and provide families with the opportunity to say their best goodbye.

How are we building back better and different?

The events of the past 12 months have clearly evidenced that our Vision of 'Co-operating for a Fairer World' is the most compelling way in which we can deliver our Co-op Purpose of 'championing a better way of doing business for our members and their communities.' In a nation ravaged by the social and economic scars of the pandemic, we take extremely seriously the role the world's oldest Co-op can play in helping Britain build back better and different.

We have a clear plan to deliver our Vision and strategy over the coming years and many of our planned initiatives were accelerated during 2020 in a direct response to the challenge presented by the pandemic. Despite the uncertainties and challenges which lie ahead, our Co-op remains well placed to deliver value and values for all our stakeholders. Our forward looking strategy is underpinned by six strategic pillars and characterised by a number of key areas of focus and development:

Succeeding as a Co-op

- We continue to invest heavily into our price and service propositions in Food and Funeralcare. In Food, our Honest Value range and major GBP50m price investment programme cut the cost of everyday food at our stores. More than 600 products dropped in price, helping our customers save almost GBP120 a year on their food bills.

- In December, we sold our insurance underwriting business, which will enable us to deliver a broader range of products and meet more of our members' insurance needs more of the time. We're already in talks with potential new partners on new products and are working to be even more competitive. We are investing in our online capability, to make things easier for customers.

- In Funeralcare we trialled new ways to help clients say their best goodbye in six locations, before using these learnings to roll out our new funeral service options nationally in October.

   -     We continue to build further partnership arrangements within Legal Services. 

Being convenient

- In Food, we're rolling out new stores where appropriate, and at the same time significantly increasing our online and digital capabilities. In 2021, 85 new stores, 20 extensions and 122 refits will be unveiled as part of a GBP183m investment. Online services will expand to more than 1,000 stores.

- We are accelerating the digital transformation and capabilities of our Funeralcare, Legal Services and Insurance business areas. Funeralcare launched a new website with a market leading customer journey, showcasing all the services we offer and making it easier for clients to find the information they need and locate their nearest branch.

- We are working with Co-op members and customers to expand our offer, developing new Insurance products based on their needs.

Encouraging co-operation

- As a conscientious business and co-operative, sustainability means many different things and is part of everything we do. Whether in the context of climate change or the resilience of our communities, 2021 requires co-operation and collaboration with our members and business partners as we seek to weather Covid and continue in our mission for a greener future.

- Co-op Power launched its first ever proactive recruitment drive in the winter to encourage others to join its buying group and do the right thing, as the pandemic continues and green targets remain. It also worked to draw attention to those businesses obliged to pay premiums for unused energy at premises that were closed or not consuming as usual during the pandemic; an injustice Co-op Power fought hard to negotiate out of its own framework agreement and replace with a disruptive 'No Take No Pay' policy which protected its members from GBP1 million additional cost.

- In September we led a campaign to raise awareness of the pressures facing new young drivers from other motorists and launched a T-plate to indicate those using telematics technology. Our aim is to create safer drivers, safer roads and safer communities and this will continue in 2021.

- Co-operate, our online community centre, allows members to engage with each other and lists ways users can connect and support their community through joining online activities and groups; volunteering and donating equipment. Users can also start their own group or run an activity post lockdown that brings the community together.

- Membership, through the Co-op app and online, means that Co-op members can choose which local cause they want to support every time they buy Co-op branded products, find personalised weekly offers for money off the things they buy in our Food stores and donate part of their personal reward to help us tackle the big issues facing communities.

- Members can also help shape the products and services we sell, the work we do and how we're run by getting involved in regular 'Join In' activities; by putting themselves forward for our Members' Council and by voting at our AGM and in our elections.

- In November, we partnered with the 'Make My Money Matter' initiative and committed to further align our pension investment with the values of the Co-op and its members, and to engage with colleagues on where their pension is invested.

Improving our operational effectiveness

- During 2020 we brought together our Funeralcare, Insurance and Legal Services businesses into one Life Services function, under the single, executive leadership of Shirine Khoury-Haq. Our ambition is two-fold. Having three individually successful, profitable, competitive businesses that operate in distinct but complementary markets; and deliver outstanding value to our customers.

- Collectively, this brings natural opportunity to create more efficient ways of working. Our strategic focus will be on commercial, product and digital opportunities where we can join up our products and services to serve our customers and members in a way that is uniquely Co-op.

   -     Our Food and emerging Power businesses further strengthen this. 
   -     We will continue to reduce central costs and improve frontline service support. 
   -     We will improve our Funeralcare operation by focusing on three main areas: 

o Transforming our core systems; replacing our legacy and outdated systems to create a sustainable platform for us to expand our digital capabilities and create the omni channel experience and access to services that we know our clients want.

o We'll be reviewing our end-to-end operational processes, removing duplication and inefficiency and creating processes that are fit for 2021 and beyond.

o We'll improve our ability to plan and resource our teams, and in turn increase efficiency and client experience in homes and care centres by introducing MyTime, a time and attendance management and scheduling system for our frontline teams.

- We will improve Retail Food operations through our Retail Business Transformation programme (RBT), the biggest transformation programme we've ever undertaken. This will accelerate in 2021 to improve ranging, stock holding, availability and more accurate forecasting information.

- We will improve Wholesale through a radical overhaul of partner terms and conditions, expansion of the wholesale offer and range and recruitment of more independent stores and greater Co-op franchise opportunities.

- To build on its record number of new stores recruited last year, Nisa is overhauling its partner terms to make them simpler and more rewarding of loyalty.

- Nisa will continue to add value to our partners through the newly launched brand proposition, Fresh Thinking, which will provide its partners with the insight, tools, support and product innovation needed to grow their businesses.

- Co-op has enhanced its position as a credible franchise partner in the UK having been upgraded to an Associated Member of the British Franchise Association. We will continue to reach new locations through our successful franchise model, generating mutual value with like-minded partners.

- Franchising is a critical part of our convenience strategy to extend the reach of our brand and reach new markets. We were operating 14 franchise stores in cities, university campuses and communities all across the UK by the end of 2020; we are attracting new partners, customers and members every day and will double the estate this year.

Evolving our Co-op culture

- 2020 opened our eyes to the gross inequalities that still exist around us. We've set ourselves a bold Vision to 'Co-operate for a Fairer World', which requires all of our colleagues and leaders to bring their diverse talents and expertise to the table to make change happen.

- Creating an inclusive culture, where all our colleagues can come to work to be their best selves is key to helping deliver this vision. Our strategy remained focused on designing and developing the foundations that enable us to create, sustain and embed an inclusive culture as we set out in 2018.

- The wellbeing of our colleagues has long been a top priority for us, and this last year more so than ever. At the start of the pandemic, we established a Wellbeing Steering Committee representing all areas of the business which allowed us to understand in real time where our colleagues needed our support, enabling us to swiftly evolve our plans.

- We know our colleagues have different needs at different times, and so we continue to look at wellbeing holistically and across a number of areas including physical, financial and mental health. We look to provide a host of services that our colleagues need, that they can get involved in co-creating and can access when and where helps them.

- As a result, we launched 'Co-op Care': a regular communication to all colleagues covering guidance and advice on how to cope with the impact of Covid-19 on their health and financial wellbeing.

- We also provided free flu jabs to all our colleagues, which were taken up by over 10,000 colleagues.

- Underpinning this, we continued to extend the range of initiatives to support colleagues, including the rollout of mental health training to all our managers, creating a wellbeing hub for leaders to access content and the introduction of 'Better Together': a colleague recognition programme focused on wellbeing.

- This work is closely connected to our partnership with Mind, SamH and Inspire, enabling colleagues to fundraise and support others in their wellbeing as well as gain personal benefit from the charities' knowledge and expertise. More on how we're supporting the wellbeing of colleagues can be found in our Co-operate Report.

- Our focus on fair pay and reward continues. Fair reward includes pay, wider benefits (holiday, pension, paid breaks and flexibility) and our colleague wellbeing support. Our commitment to and focus on aligning to the Real Living Wage for our frontline colleagues is important, and sits alongside maintaining appropriate differentials between role grades.

- We became a member of the Ban The Box collective in September, as an employer that doesn't require any candidate to disclose any criminal records until after interview, during the pre-employment screening stage and only for certain roles.

Growing our Co-op

- Our Co-op will continue to grow through our finding innovative and compelling ways to engage the millions of new customers who came to us during the crisis and whose needs we can serve going forwards.

- Our wider social Co-op influence and impact will also continue to grow via our compelling community and campaigns agenda which will focus on a number of key priorities and programmes:

o During 2020, we worked closely with the British Retail Consortium (BRC) to agree a roadmap not just for ourselves to achieve stretching new carbon commitments, but for the whole retail sector to co-operate to do so. There are now 62 retailers who have joined the Roadmap to reach net zero GHG emissions by 2040, across their business operations as well as their products and services, 10 years ahead of international agreements. This is a global first for the UK retail sector.

o At the Co-op, our members are at the heart of our business and the decisions we make. And that's more than just joining in on developing our products and services, although these are obviously important. It's also about the issues we champion, the causes we highlight, the injustices we tackle - the things our members want us to use our voice to help make a difference with. We want to build stronger, more resilient and adaptable communities by offering fair access to food; fair access to mental wellbeing services and fair access to education & employment for young people.

Our financial performance

We have made two key changes to the way that we show our financial results this year and these changes have required that we change (or 'restate') the results which we showed last year. A brief overview of the changes is noted below with full details given in our accounting policies and within note 19.

Funeral plans - revenue recognition

The Group adopted the new accounting standard for revenue recognition (IFRS 15) in 2018 and at that time we applied a judgement that the revenue to be recognised for a funeral plan was variable and so changed over time. When a customer takes out a plan, the monies are invested in whole of life insurance policies whose value changes over time until redemption. The key judgement we took was that on redemption of a policy, the monies received from the policy was 'consideration' receivable for the funeral. Therefore, investment gains from the policy were deferred on the balance sheet and only recognised as revenue at the point the funeral is performed. Our external auditors disagreed with this accounting treatment in our 2019 accounts which led to a qualified audit opinion.

During the second half of 2020 we have continued to review our revenue recognition accounting policy in respect of funeral plans and we have also had discussions with the Financial Reporting Council (FRC) regarding the merits of our accounting policy. As a result of this review, we have changed this judgement in 2020 and now the amount we receive when a plan is initially taken out is judged to be 'consideration' for the funeral, being the monies received from the customer rather than the return of the redemption of the policy. This adds two complexities to the accounting and how we report our numbers for our Funeralcare business.

Firstly, there is often a significant time difference between the date we receive monies from a customer and the date of delivering the funeral; under the accounting standards this is seen as a financing transaction whereby the customer is seen to be financing the Group. The accounting for this means that we recognise an effective interest charge on the monies received from a customer in each year until the plan is redeemed at which point the revenue recognised is the total of the monies received from the customer and the effective interest charged. The second complexity relates to our funeral plan investments, the majority of which are invested in whole of life policies. The gains or losses on these investments are now recognised within our finance income or finance costs each year. These investments are revalued each year based on their fair values, being their market value, and are impacted by external factors in the economy. This brings significant volatility to our income statement each year, despite our investments being held for the longer term and not accessible until the point each funeral is performed. As a reminder, under the previous accounting policy investment gains or losses were deferred on the balance sheet until a plan matured.

This change in judgement requires us to update our 2019 numbers to reflect the new treatment as if it had always been the case. The changes impact the Group's 2019 consolidated income statement, 2019 consolidated balance sheet, 2019 consolidated cashflow and 2019 statement of changes in equity. Consequently, the audit report qualification has been removed in 2020.

Reclaim Fund

In the past, our Co-op has included the assets and liabilities of the Reclaim Fund in our consolidated balance sheet. This was based on a judgement that we controlled the Reclaim Fund.

We have reassessed the facts and changed our judgement such that we no longer think we meet the accounting definition of control which requires us to include the results of the Reclaim Fund on our balance sheet. This is because we have no rights to any returns from the Reclaim Fund, be they positive or negative, with the Reclaim Fund only being permitted to distribute monies to good causes. This judgement has also been discussed with the FRC during the year.

Following this change in view, we no longer include the assets and liabilities of the Reclaim Fund on our balance sheet. This results in a reduction in our net assets of GBP74m and an equal reduction in other reserves. This is regarded as a prior year error and so we have updated our 2019 numbers to reflect the new treatment as if it had always been the case. There is no impact on our Income statement of this restatement.

Summary of financial performance

 
                                         2020           2019   2020 (excluding   2019 (excluding 
                                                 (restated*)            change            change 
                                                                     in policy         in policy 
                                                                    on Funeral        on Funeral 
                                                                      plans**)            plans) 
 
                                         GBPm           GBPm              GBPm              GBPm 
 
 Revenue                               11,472         10,864            11,465            10,860 
 
 Underlying operating profit: 
 Food                                     350            283               350               283 
 Wholesale                                  6           (10)                 6              (10) 
 Funerals                                  16             12                 9                 8 
 Legal                                      4              6                 4                 6 
 Costs of supporting functions          (130)          (110)             (139)             (110) 
 Other                                   (11)            (8)               (2)               (8) 
                                      -------  -------------  ----------------  ---------------- 
 Total underlying profit (a)              235            173               228               169 
 
 Property revaluations, disposals 
  and one-off items                      (28)              -              (28)                 - 
                                      -------  -------------  ----------------  ---------------- 
 Operating profit                         207            173               200               169 
 
 Underlying interest (b)                 (63)           (64)              (63)              (64) 
 Net underlying lease interest 
  (c)                                    (72)           (74)              (72)              (74) 
 Net finance income / (cost) income 
  on funeral plans                         28           (47)                 -                 - 
 Other non-underlying interest             27             36                27                36 
                                      -------  -------------  ----------------  ---------------- 
 Profit before tax                        127             24                92                67 
 
 Tax                                     (55)             25              (48)                18 
 Discontinued operations                    5           (16)                 5              (16) 
                                      -------  -------------  ----------------  ---------------- 
 Profit for the year                       77             33                49                69 
                                      -------  -------------  ----------------  ---------------- 
 
 Underlying profit before tax 
  (a)-(b)-(c)***                          100             35                93                31 
                                      -------  -------------  ----------------  ---------------- 
 
 * As noted above our 2019 numbers have been restated as we 
  have changed the way we recognise revenue on funeral plans. 
  To help illustrate the impact of this change then we have 
  also included 2020 and 2019 figures excluding this change 
  (so under our old method). 
 ** Figures are unaudited. 
 ***Refer to note 1 of our financial statements for a definition 
  of underlying profit before tax. Further details on the Group's 
  alternative performance measures (APM's) is given in the Jargon 
  Buster section. 
 

Our headline performance

Revenue rose by GBP0.6 billion to GBP11.5 billion, a 5.6% increase compared to 2019. This growth reflects a strong trading performance in our Food business with revenue up GBP0.3 billion or 3.5% driven by 6.9% like-for-like sales growth that once again exceeded the market as measured by IGD. A strong performance was also seen in our Wholesale business with revenue up by GBP0.2 billion with like-for-likes of 16%.

Profit before tax (PBT) was GBP127 million compared to GBP24 million in 2019. The main driver for this is an increase in underlying performance of GBP62m and an increase of GBP75m on net income and interest on funeral plans. These increases and a further GBP3m reduction in underlying interest are offset by a net increase of GBP37 million from the impact of non-trading items such as disposals, impairments, one-off items and market valuation changes on our swaps and debt. These are discussed in more detail below.

Our underlying profit before tax comprises core trading profits less underlying interest expense (essentially interest on borrowings). This was up by GBP65 million with strong profit growth in our Food and Wholesale businesses partly offset by an increase in support function costs following some favourable gains in 2019. Our support from the Government's emergency economic measures to sustain the economy during the pandemic amounted to GBP82m - covering the business rates 'holiday' for our Food stores and funeral homes and furlough payments to our colleagues. Trading performance is discussed in more detail below.

We show how we adjust profit before tax to get to our underlying profit before tax in note 1 of our financial statements. Our jargon buster also explains the accounting terms we have to use.

Our profits are reported after deducting the amount our members have earned through the 2% community and member rewards which totalled GBP58 million in the year (2019: GBP70 million; prior to October 2020 rewards were earned at 1% (community) and 5% (members)).

The sale of our insurance underwriting business (CIS General Insurance Limited ('CISGIL')) completed in early December. The results of that business and the loss on disposal have been reported as a discontinued operation in our consolidated income statement (this is consistent with last year). Co-op will continue to market and distribute insurance products through a long term arrangement with Markerstudy.

How our businesses have performed

Food sales of GBP7.8 billion were up 3.5% on 2019, with like-for-like sales up 6.9% beating the market as measured by IGD by 0.5% main market and 2.6% convenience market. This sales performance has clearly been impacted by the pandemic and the associated impact on our customers' shopping habits, but the continued market-beating like-for-like sales growth reflects also the investments we have made in our estate, in our product ranges and accelerating our online and home delivery services.

Underlying profit in Food was GBP350 million in 2020 compared to GBP283 million in 2019. The increase reflects the strong sales performance but also our continued transformation of our cost base and significant change programme.

Our Wholesale business achieved sales of GBP1.6 billion in the year compared to GBP1.4 billion in 2019. The business recorded a profit of GBP6 million in 2020 against a GBP10 million loss in 2019. Whilst this significant growth has been driven by the pandemic, it also reflects the competitiveness of our broader range of products, supported by our own brand proposition. This has helped to deliver strong recruitment in the year.

Revenue in our Funeralcare business was flat year on year at GBP272 million. The tragic increase in funeral volumes as a result of the pandemic has been largely offset by reduced sales price and margins following restrictions on customer choice and growing demand for lower cost funeral options such as cremation without ceremony. We conducted 100,920 funerals in 2020 compared to 90,630 in 2019, an increase of 11%.

These challenges saw underlying profit (excluding the impact from the change in accounting treatment for funeral plans) consistent with last year at GBP9m (2019: GBP8m). Revenue in our Legal Services business has also been adversely impacted by the Coronavirus pandemic with revenue down GBP2m on the prior year to GBP37m with profits down GBP2m to GBP4m (2019: GBP6m).

Supporting functions costs were GBP130 million an increase of GBP20 million. This reflects some favourable gains in 2019 but we also invested more in 2020 in membership initiatives, increasing our share of voice to raise awareness of Our Co-op Values and Purpose; IT systems and more flexible cloud based solutions. This additional investment was partially funded by our ongoing organisational design work as we continue to ensure colleague structures across Co-op are set up to deliver our Purpose.

As noted above, CISGIL is classified as a 'discontinued operation' which means its results are included at the foot of the income statement, below profit before tax. The profit on discontinued operations this year of GBP5 million largely relates to the finalisation of the estimate of the costs associated with selling the business.

Property revaluations, disposals and one-off items

The table below shows one-off items, disposals and property valuation gains in the year (losses are shown in brackets):

 
                                             2020   2019 
                                             GBPm   GBPm 
 Change in value of investment properties       1     27 
 Property and business disposals             (41)   (22) 
 One-off items                                 12    (5) 
                                            -----  ----- 
 Total                                       (28)      - 
                                            -----  ----- 
 

We have a significant property estate including Food stores, funeral homes, investment properties and vacant former trading properties. This can lead to significant property related items such as disposal profits and losses, closure costs and vacant property holding costs, impairment of carrying values of assets and revaluation gains on investment properties. We also have some one-off gains this year relating to largely non-recurring items. These are discussed in more detail below.

The GBP1 million increase in the value of our investment properties relates to gains from obtaining planning permission and market value uplifts across our investment property estate. The prior year figure included a gain of GBP21 million on one site.

 
 One-off items:                     2020    2019 
                                    GBPm    GBPm 
 ATMs business rate refund            15       - 
 Pensions GMP equalisation           (3)       - 
 Reduction in Nisa consideration       -      11 
 Bank IT Separation                    -      13 
 Impairment of Nisa intangible         -    (29) 
                                   -----  ------ 
 Total                                12     (5) 
                                   -----  ------ 
 

One-off items includes a GBP15 million gain following a legal ruling which has seen the repayment of business rates we had previously paid over many years on external facing ATMs. This is offset by a GBP3m charge in relation to changes to historic pension liabilities.

Property and business disposals

 
                                        2020   2019 
                                        GBPm   GBPm 
 
 Write-down of assets on loss making 
  properties                            (36)   (44) 
 Sale or closure of properties           (5)     22 
                                       -----  ----- 
 Total                                  (41)   (22) 
                                       -----  ----- 
 

The write-down of assets of GBP36 million in 2020 relates to goodwill, right of use assets and fixtures and fittings on stores, branches and other properties that are not generating enough cash to support the value of those assets. These often relate to loss making sites.

The loss on sale of property mainly relates to the sale of a tranche of non-profitable funeral homes as well as several Food stores.

Financing

Our financing costs and income are shown in the table below (costs are shown in brackets):

 
                                              2020   2019* 
                                              GBPm    GBPm 
 Underlying interest payable                  (63)    (64) 
 Net underlying lease interest                (72)    (74) 
                                            ------  ------ 
 Underlying interest                         (135)   (138) 
                                            ------  ------ 
 Net pension finance income                     37      57 
 Net finance income / (costs) on funeral 
  plans                                         28    (47) 
 Fair value movement on quoted debt 
  and swaps                                    (6)     (8) 
 Non-underlying finance interest               (4)    (13) 
                                            ------  ------ 
 Non underlying interest income / (costs)       55    (11) 
                                            ------  ------ 
 

* As noted above our 2019 numbers have been restated as we have changed the way we recognise revenue on funeral plans.

The underlying interest on our borrowings and lease liabilities is in line with the prior year.

Pensions finance income is based on the pension scheme surplus on an accounting basis at the start of each year and the GBP20 million decrease mainly reflects a 1% fall in the discount rate that is used to calculate the net interest charge.

Following the change in accounting treatment for revenue then we now see a net interest income or charge on funeral plans on the face of our income statement. In 2020 the gains on funeral plan investments outweighed the interest we accrued so we show net finance income of GBP28 million. Equivalent returns in 2019 were GBP70m lower and were outweighed by the interest we accrued such that we showed a net finance cost on funeral plans of GBP47m.

Our total net debt at the year-end was GBP2.2 billion including the IFRS 16 lease liability of GBP1.4 billion. Excluding the lease liability, net debt was GBP550 million, a reduction of GBP145 million from the GBP695 million at 2019 year-end (details of what is included in net debt are provided in note 14).

In line with our plans and as part of our ongoing Treasury management processes we repaid GBP176m of the principal balance of the 6.875% 2020 Eurobond in July 2020 and we remain comfortably within the ratios of debt and interest agreed with our banks and our funding position is strong.

We invested GBP313 million of capital expenditure in 2020 principally on refits and new stores in Food and refurbishing funeral branches as well GBP60m in technology to upgrade IT systems to improve supply chain and service to Food stores. We also made deferred payments of GBP31 million relating to the acquisition of Nisa where consideration is payable over several years. This capital spend was partly funded by GBP35 million of cash from disposals, mainly property sales and net proceeds on disposal of CISGIL of GBP56m.

Tax

We won't be paying corporation tax in respect of the year because we've brought forward tax losses and capital allowances. In 2020 we paid GBP150 million (2019: GBP207 million) to the government in respect of VAT, business rates, Stamp Duty Land Taxes and Employers' National Insurance.

The total tax charge of GBP55m is made up of a GBP16m current tax charge and a GBP39m deferred tax charge. The GBP16m reflects the impact from the change in tax rate from 17% to 19% on the liability we hold in relation to tax losses previously surrendered to the Group by The Co-operative Bank. The current year deferred tax charge relates to deferred tax arising on movements on our pension assets and fixed assets.

See note 6 for more detail on Tax.

We retained the Fair Tax Mark accreditation in 2020 showing that we put our Purpose, Co-operative Values and Principles into action in the way we do business. Our tax policy can be found here: www.co-operative.coop/ethics/tax-policy .

Our balance sheet

Following the disposal of CISGIL, our insurance underwriting business, in early December, our balance sheet no longer includes the GBP1bn assets and GBP1bn liabilities of that business which were separately shown in 2019 within held for sale.

As noted above we also no longer include the assets and liabilities of the Reclaim Fund in our consolidated balance sheet with a net asset reduction of GBP74m applied through the prior year restatement.

Property, plant and equipment has decreased by GBP46m which mainly reflects the net impact of GBP263 million of additions, disposals of GBP29 million, depreciation of GBP250 million, impairment of GBP21m and GBP9m moved to held for sale.

The net retirement benefit surplus on Co-op pension schemes remains significant and in line with last year at GBP1.9bn. Whilst the overall surplus was largely unchanged, there were some significant movements that netted off with a GBP0.5 billion increase in liabilities offset by a corresponding GBP0.5 billion increase in assets.

The liability increase largely reflected a change in the interest rate used to value pension liabilities which decreased from 1.97% to 1.47%. The accounting under IAS 19 is largely prescriptive and the interest rate we select is based on advice from our actuaries and is driven by corporate bond rates at year-end. The increase in assets reflects that the scheme mainly invests in gilts and credit assets which increased in value (c. GBP1bn) which was offset by a reduction of GBP400m resulting from the Pace pensioner buy-in transaction during the year (the buyout liability was greater than the liability on an accounting basis).

Non-current Trade and other receivables have increased by GBP92m reflecting new instalment plan debtors of GBP67m and GBP25m of deferred consideration due following the sale of CISGIL.

The value of the funeral plan investments that the Group holds has increased by GBP60m. This reflects net movements from an increase of GBP86m for new plans, a reduction of GBP107m from redeemed plans and favourable market returns in relation to the value of those investments held. Contract liabilities relating to funeral plans have increased by GBP95m in the year reflecting GBP96m of new plans sold in the year with amounts recognised as revenue during the year (which reduces the liability) broadly offset by an increase in deferred revenue (which increases the liability) from the interest we accrue on plan liabilities.

Loans and borrowings (due within one year) have decreased by GBP184m which is mainly driven by the repayment of the final tranche (GBP176m) of the 2020 Eurobond debt in July.

Post balance sheet events

   --      Sale of Co-op Health 

On 12 March 2021 Co-op announced the sale of its Health business for an undisclosed sum and the sale was completed on 6 April 2021. Both the consideration from the transaction and the net assets disposed were immaterial to the Group - the sale is treated as a post balance sheet event. As the sale was assessed as highly probable at the balance sheet date then the assets of our Health businesses were classified as held for sale (see note 19 to the financial statements).

   --      Group Relief Creditor owed to The Co-operative Bank 

At the year-end date the Co-op held a liability on its balance sheet of GBP147m due to The Co-operative Bank (the 'Bank'). This balance arose in 2015 when we agreed with the Bank that they would surrender their tax losses as group relief to Co-op. In order to claim these tax losses from the Bank, Co-op deferred the reliefs and capital allowances available to it. It was agreed that Co-op would pay the Bank for its losses surrendered when these previously deferred reliefs and capital allowances were used in future tax periods. An equivalent deferred tax asset of GBP147m is held at the balance sheet date representing the future benefit of those losses and capital allowances which were previously disclaimed.

In February 2021 the Bank agreed a full and final settlement of GBP48m as payment for the losses it had group relieved to Co-op Group. The settlement of the liability is a non-adjusting post balance sheet event (as it does not represent conditions at the balance sheet date) and as such does not impact our 2020 results. Instead the gain of GBP99m that arises on extinguishing a liability of GBP147m for GBP48m will be shown in our 2021 results. Due to its size and nature then the gain will be treated as a one-off item in 2021 (and so won't be included within our underlying trading results). Co-op retains the full value of the deferred tax assets.

   --      The Reclaim Fund 

On 30 March 2021, the entire issued share capital of Reclaim Fund Limited was sold to HM Treasury for nominal consideration. The sale has no material impact on the Group's financial statements since the Reclaim Fund Limited is no longer consolidated within the Group (see Note 35 for further information on the de-consolidation of Reclaim Fund Limited).

   --      Litigation 

On 19 February 2021, the Technology and Construction Court handed down judgment in a claim brought by CISGIL against IBM United Kingdom Limited, relating to a failed programme to implement an IT platform. CISGIL was awarded damages of approximately GBP13m subject to any applicable VAT deduction and excluding interest, with the final amount of damages plus interest and costs to be determined. During 2019, CISGIL assigned in equity the proceeds of the litigation with IBM to Co-operative Group Limited for GBP14.1m. Following the sale of CISGIL (since renamed Soteria Insurance Limited) in 2020, any income relating to the claim will be reported through discontinued operations within the income statement in 2021.

   --      Government support 

Subsequent to the year end, the Board of our Co-op has decided to repay GBP15.5m of the money it received in Government support during the Covid-19 pandemic; this equates to the amount it claimed in furlough payments.

 
 Consolidated income statement 
                                                    ------------------------------- 
 for the period ended 2 January 2021 
                                                    ------  ---------  ------------ 
 
 What does this show? Our income statement shows our income for the 
  year less our costs. The result is the profit that we've made. 
 
                                                                 2020          2019 
                                                                        (restated*) 
----------------------------------------------      ------  ---------  ------------ 
 Continuing Operations                               Notes       GBPm          GBPm 
----------------------------------------------      ------  ---------  ------------ 
 Revenue                                                       11,472        10,864 
 Operating expenses                                      2   (11,277)      (10,700) 
 Other income                                                      12             9 
--------------------------------------------------  ------  ---------  ------------ 
 Operating profit                                        1        207           173 
--------------------------------------------------  ------  ---------  ------------ 
 Net finance costs (excluding                           4, 
  funeral plans)                                         5      (108)         (102) 
 Net finance income / (costs)                           4, 
  on funeral plans                                       5         28          (47) 
 Profit before tax                                       1        127            24 
--------------------------------------------------  ------  ---------  ------------ 
 Taxation                                                6       (55)            25 
 Profit from continuing operations                                 72            49 
-----------------------------------------------     ------  ---------  ------------ 
 
 Discontinued Operation 
-----------------------------------------------     ------  ---------  ------------ 
 Profit / (loss) on discontinued operation, 
  net of tax                                             7          5          (16) 
 Profit for the period (all attributable to 
  members of the Society)                                          77            33 
-------------------------------------------------   ------  ---------  ------------ 
 
 Non-GAAP measure: underlying profit 
  before tax** 
 
 What does this show? The table below adjusts the operating profit 
  figure shown in the consolidated income statement above by taking 
  out items that are not generated by our day-to-day trading. This makes 
  it easier to see how our business is performing. We also take off 
  the underlying interest we pay (being the day-to-day interest on our 
  bank borrowings and lease liabilities). 
 
                                                                 2020          2019 
                                                                        (restated*) 
-----------------------------------------------     ------  ---------  ------------ 
 Continuing Operations                               Notes       GBPm          GBPm 
-----------------------------------------------     ------  ---------  ------------ 
 Operating profit (as above)                                      207           173 
 Add back / (deduct): 
    One-off items                                        1       (12)             5 
    Property, business disposals 
     and closures                                        1         41            22 
    Change in value of investment 
     properties                                                   (1)          (27) 
 Underlying operating profit                             1        235           173 
-----------------------------------------------     ------  ---------  ------------ 
 Less underlying loan interest 
  payable                                                5       (63)          (64) 
 Less underlying net interest                           4, 
  expense on lease liabilities                           5       (72)          (74) 
-------------------------------------------------- 
 Underlying profit before 
  tax                                                             100            35 
--------------------------------------------------  ------  ---------  ------------ 
 
 *We have restated our 2019 results as we have changed the way that 
  we account for revenue on funeral plans. See Note 19 for details of 
  the restatement. 
 **Refer to Note 1 for a definition of underlying profit before tax. 
 
 
 
 Consolidated statement of comprehensive income 
 for the period ended 2 January 2021 
 
 What does this show? Our statement of comprehensive income includes 
  other income and costs that are not included in the consolidated income 
  statement above. These are usually revaluations of pension schemes 
  and some of our financial investments. 
 
                                                                      2020          2019 
                                                                             (restated*) 
-------------------------------------------------------      ------  -----  ------------ 
                                                              Notes   GBPm          GBPm 
-------------------------------------------------------      ------  -----  ------------ 
 Profit for the 
  period                                                                77            33 
 
 Items that will never be reclassified 
  to the income statement: 
 Remeasurement losses on employee pension 
  schemes                                                        15   (83)          (99) 
 Related tax 
  on items above                                                  6      -            17 
                                                                      (83)          (82) 
    -------------------------------------------------------  ------  -----  ------------ 
 Items that are or may be reclassified 
  to the income statement: 
 Gains less losses on fair value of insurance assets**                   6             8 
 Fair value losses on insurance assets transferred 
  to the income statement**                                            (2)           (2) 
 Fair value losses on insurance assets transferred 
  to the income statement on disposal of subsidiary**                 (18)             - 
 Related tax 
  on items above                                                  6      3           (1) 
                                                                      (11)             5 
    -------------------------------------------------------  ------  -----  ------------ 
 Other comprehensive losses for 

  the period net of tax                                               (94)          (77) 
                                                                     =====  ============ 
 Total comprehensive loss for the period (all attributable 
  to members of the Society)                                          (17)          (44) 
===================================================================  =====  ============ 
 
 *We have restated our 2019 results as we have changed the way that 
  we account for revenue on funeral plans. See Note 19 for details of 
  the restatement. 
 **The sale of our Insurance underwriting business completed on 3 December 
  2020. The business has been classified as a discontinued operation 
  in the Consolidated income statement in both 2019 and 2020 with assets 
  and liabilities transferred to held for sale in the 2019 Consolidated 
  balance sheet. Further details of the disposal are given in Note 7 
  (Profit / (Loss) on discontinued operations, net of tax). 
 
 
 Consolidated balance sheet 
 as at 2 January 2021 
 
 What does this show? Our balance sheet is a snapshot of our 
  financial position as at 2 January 2021. It shows the assets 
  we have and the amounts we owe. 
 
                                                  2020         2019      Opening 
                                                                            2019 
                                                          restated*    restated* 
-------------------------------    ------  -----------  -----------  ----------- 
                                            (2 January   (4 January   (6 January 
                                                 2021)        2020)        2019) 
-------------------------------    ------  -----------  -----------  ----------- 
                                    Notes         GBPm         GBPm         GBPm 
-------------------------------    ------  -----------  -----------  ----------- 
 Non-current assets 
 Property, plant and 
  equipment                           9          1,955        2,001        2,005 
 Right-of-use assets                 10          1,031        1,045        1,056 
 Goodwill and intangible 
  assets                             11          1,105        1,087        1,094 
 Investment properties                              17           16           42 
 Investments in associates 
  and joint ventures                                 3            3            3 
 Funeral plan investments            12          1,331        1,271        1,223 
 Derivatives                         16              3            -           27 
 Pension assets                      15          1,931        1,973        1,984 
 Trade and other receivables                       203          111           81 
 Finance lease receivables           10             34           40           14 
 Contract assets (funeral 
  plans)                                            60           54           47 
 Total non-current assets                        7,673        7,601        7,576 
---------------------------------  ------  -----------  -----------  ----------- 
 Current Assets 
 Inventories                                       460          454          458 
 Trade and other receivables                       546          445          528 
 Finance lease receivables           10             11           11            3 
 Contract assets (funeral 
  plans)                                             6            4            4 
 Cash and cash equivalents                         269          308          278 
 Assets held for 
  sale                               13             21        1,090        1,113 
 Total current assets                            1,313        2,312        2,384 
---------------------------------  ------  -----------  -----------  ----------- 
 Total assets                                    8,986        9,913        9,960 
---------------------------------  ------  -----------  -----------  ----------- 
 Non-current liabilities 
 Interest-bearing 
  loans and borrowings               14            803          803          976 
 Lease liabilities                   10          1,234        1,277        1,329 
 Trade and other payables                          214          183          202 
 Contract liabilities 
  (funeral plans)                                1,570        1,483        1,377 
 Derivatives                         16              1            1            - 
 Provisions                                         85           95          163 
 Pension liabilities                 15             77          109          125 
 Deferred tax liabilities                          161          122          169 
 Total non-current liabilities                   4,145        4,073        4,341 
---------------------------------  ------  -----------  -----------  ----------- 
 Current liabilities 
 Interest-bearing 
  loans and borrowings               14             16          200           66 
 Lease liabilities                   10            191          193          185 
 Income tax payable                                  -            7            8 
 Trade and other payables                        1,747        1,520        1,390 
 Contract liabilities 
  (funeral plans)                                  167          158          134 
 Provisions                                         46           62           62 
 Liabilities held 
  for sale                           13              5        1,015        1,045 
 Total current liabilities                       2,172        3,155        2,890 
---------------------------------  ------  -----------  -----------  ----------- 
 Total liabilities                               6,317        7,228        7,231 
---------------------------------  ------  -----------  -----------  ----------- 
 Equity 
 Members' share capital                             74           73           73 
 Retained earnings                               2,594        2,597        2,644 
 Other reserves                                      1           15           12 
 Total equity                                    2,669        2,685        2,729 
---------------------------------  ------  -----------  -----------  ----------- 
 Total equity and liabilities                    8,986        9,913        9,960 
=================================  ======  ===========  ===========  =========== 
 
 
 
 *Refer to Note 19 for details of the restatement. As the restatement 
  applies to all previous years including the closing 2018 balance sheet 
  (as at 5 January 2019) then for comparative purposes we have also 
  included an adjusted opening 2019 balance sheet (as at 6 January 2019). 
 
 
 Consolidated statement of changes in equity 
 for the period ended 2 January 2021 
 
 What does this show? Our statement of changes in equity shows 
  how our net assets have changed during the year. 
 
 For the 52 weeks ended 2 January 2021                         Members'    Retained       Other     Total 
                                                                  share    earnings    reserves    equity 
                                                                capital 
                                                       Notes       GBPm        GBPm        GBPm      GBPm 
-----  ------------------  -----------------  ------  ------  ---------  ----------  ----------  -------- 
 Balance at 4 January 2020                                           73       2,597          15     2,685 
--------------------------------------------  ------  ------  ---------  ----------  ----------  -------- 
 Profit for the period                                                -          77           -        77 
--------------------------------------------  ------  ------  ---------  ----------  ----------  -------- 
 Other comprehensive income 
  / (loss): 
 Remeasurement losses on employee 
  pension schemes                                         15          -        (83)           -      (83) 
 Gains less losses on fair value of 
  insurance assets**                                                  -           -           6         6 
 Fair value losses on insurance assets 
  transferred to the income statement**                               -           -         (2)       (2) 
 Fair value losses on insurance assets 
  transferred to the income statement 
  on disposal of subsidiary**                                         -           -        (18)      (18) 
 Tax on items taken directly to other 
  comprehensive income                                     6          -           3           -         3 
 Total other comprehensive loss                                       -        (80)        (14)      (94) 
--------------------------------------------  ------  ------  ---------  ----------  ----------  -------- 
 Contributions by and distributions 
  to members: 
                                                                                                 -------- 
 Shares issued less shares withdrawn                                  1           -           -         1 
--------------------------------------------                                                     -------- 
 Balance at 2 January 2021                                           74       2,594           1     2,669 
 
 **The sale of our Insurance underwriting business completed on 
  3 December 2020. The business has been classified as a discontinued 
  operation in the Consolidated income statement in both 2019 and 
  2020 with assets and liabilities transferred to held for sale 
  in the 2019 Consolidated balance sheet. Further details of the 
  disposal are given in Note 7 (Loss on discontinued operations, 
  net of tax). 
 
 For the 52 weeks ended 4 January                              Members'    Retained       Other     Total 
  2020 (restated**)                                               share    earnings    reserves    equity 
                                                                capital 

                                                       Notes       GBPm        GBPm        GBPm      GBPm 
=====  ==================  =================  ======  ======  =========  ==========  ==========  ======== 
 Balance at 6 January 2019                                           73       2,644          12     2,729 
============================================  ======  ======  =========  ==========  ==========  ======== 
 Profit for the period                                                -          33           -        33 
--------------------------------------------  ======  ======  =========  ==========  ========== 
 Other comprehensive income 
  /(loss): 
 Remeasurement losses on employee 
  pension schemes                                         15          -        (99)           -      (99) 
 Gains less losses on fair value of 
  insurance assets                                                    -           -           8         8 
 Fair value gains on insurance assets 
  transferred to the income statement                                 -           -         (2)       (2) 
 Tax on items taken directly to other 
  comprehensive income                                     6          -          17         (1)        16 
====================================================  ======  =========  ==========  ========== 
 Total other comprehensive income 
  / (loss)                                                            -        (82)           5      (77) 
============================================  ======  ======  =========  ==========  ==========  ======== 
 Revaluation reserve recycled to retained 
  earnings                                                            -           2         (2)         - 
                                                      ------  ---------  ----------  ----------  -------- 
 Balance at 4 January 2020                                           73       2,597          15     2,685 
============================================  ======  ======  =========  ==========  ==========  ======== 
 
 **Refer to Note 19 for details of the 
  restatement. 
 
 
 
 
 Consolidated statement of cash flows 
 for the period ended 2 January 
  2021 
 
 What does this show? Our statement of cash flow shows the cash 
  coming in and out during the year. It splits the cash by type 
  of activity - showing how we've generated our cash then how we've 
  spent it. 
 
                                                           2020          2019 
                                                                  (restated*) 
==========================================     ======  ========  ============ 
                                                Notes      GBPm          GBPm 
==========================================     ======  ========  ============ 
 Net cash from operating 
  activities                                        8       672           663 
 Cash flows from investing 
  activities 
 Purchase of property, 
  plant and equipment                                     (253)         (352) 
 Proceeds from sale of property, 
  plant and equipment                                        35           123 
 Purchase of intangible 
  assets                                                   (60)          (55) 
 Acquisition of businesses, net 
  of cash acquired                                         (31)          (32) 
 Disposal of 
  businesses                                                104            15 
 Payments to funds for pre-paid 
  funeral plan sales                                       (86)         (111) 
 Receipts from funds for pre-paid funeral 
  plans performed and cancelled                             107            74 
 Net cash used in investing 
  activities                                              (184)         (338) 
-------------------------------------------    ------  --------  ------------ 
 Cash flows from financing 
  activities 
 Interest paid 
  on borrowings                                            (79)          (86) 
 Interest paid on lease 
  liabilities                                              (77)          (78) 
 Interest received on 
  subleases                                                   3             4 
 Interest received on 
  deposits                                                    1             1 
 Repayment of corporate 
  investor shares                                  14       (1)           (2) 
 Repayment of borrowings                           14     (246)         (343) 
 Proceeds from new borrowings                      14         -           299 
 Settlement of interest 
  rate swaps                                                  -            27 
 Payment of lease liabilities                             (128)         (115) 
 Net cash used in financing 
  activities                                              (527)         (293) 
-------------------------------------------    ------  --------  ------------ 
 Net (decrease) / increase in cash 
  and cash equivalents                                     (39)            32 
 Net cash and overdraft balances 
  transferred to held for sale                      7         -           (2) 
 Cash and cash equivalents at beginning 
  of period                                                 308           278 
 Cash and cash equivalents 
  at end of period                                          269           308 
-------------------------------------------    ------  --------  ------------ 
 Analysis of cash and 
  cash equivalents 
 Cash and cash equivalents 
  (per balance sheet)                                       269           308 
-------------------------------------------    ------  --------  ------------ 
 
 *Refer to Note 19 for 
  details of the restatement. 
 The balances above include cashflows from Discontinued operations. 
 
 Group Net                                                 2020          2019 
  Debt 
                                                Notes      GBPm          GBPm 
==========================================     ======  ========  ============ 
 Interest-bearing loans 
  and borrowings: 
  - current                                                (16)         (200) 
  - non-current                                           (803)         (803) 
===========================================    ======  ========  ============ 
 Total Interest-bearing 
  loans and borrowings                                    (819)       (1,003) 
-------------------------------------------    ------  --------  ------------ 
 Lease liabilities: 
  - current                                               (191)         (193) 
  - non-current                                         (1,234)       (1,277) 
 Total Lease 
  liabilities                                           (1,425)       (1,470) 
---------------------------------------------  ------  --------  ------------ 
 Total Debt                                             (2,244)       (2,473) 
---------------------------------------------  ------  --------  ------------ 
  - Group cash                                              269           308 
 Group Net 
  Debt                                             14   (1,975)       (2,165) 
---------------------------------------------  ------  --------  ------------ 
 Add back fair value / 
  amortised cost adjustment                        14        34            33 
 Group Net Debt (pre fair value 
  / amortised cost adjustment)                     14   (1,941)       (2,132) 
============================================   ======  ========  ============ 
 
 Group Net Debt (interest-bearing 
  loans and borrowings only)                              (550)         (695) 
============================================   ======  ========  ============ 
 Add back fair value / 
  amortised cost adjustment                        14        34            33 
 Group Net Debt (interest-bearing loans 
  and borrowings only and pre fair value 
  / amortised cost adjustment)                     14     (516)         (662) 
=============================================  ======  ========  ============ 
 
 
 Notes to the financial statements 
 
 1 Operating segments 
 
 What does this show? This note shows how our different businesses have 
  performed. This is how we report and monitor our performance internally. 
  These are the numbers that our Board reviews during the year. 
 
                                                        2020 
------------------------------------------------------------------------------------------------------------------- 
                          Revenue from          Underlying     Operating          Additions            Depreciation 
                    external customers   segment operating        profit     to non-current        and amortisation 
                                   (e)     profit / (loss)      / (loss)       assets (d,e) 
                                                       (a) 
                                  GBPm                GBPm          GBPm               GBPm                    GBPm 
==================  ==================  ==================  ============  =================  ====================== 
 Food                            7,765                 350           316                264                 (306) 
 Wholesale                       1,577                   6             6                  6                   (7) 
 Funerals                          272                  16           (2)                 21                  (29) 
 Legal                              37                   4             4                  -                   (1) 
 Other businesses 
  (c)                                8                (11)          (12)                  -                     - 
 Federal (f)                     1,813                   -             -                  -                     - 
 Costs from 
  supporting 
  functions                          -               (130)         (105)                 22                  (37) 

 Total                          11,472                 235           207                313                 (380) 
==================  =======  =========  ==========  ======  ====  ======  =======  ========  ===  =============== 
 
                                          2019 (represented and restated*) 
------------------------------------------------------------------------------------------------------------------- 
                          Revenue from          Underlying     Operating          Additions            Depreciation 
                              external   segment operating        profit     to non-current        and amortisation 
                             customers     profit / (loss)      / (loss)       assets (d,e) 
                                   (e)                 (a) 
                                  GBPm                GBPm          GBPm               GBPm 
------------------  -------  ---------  ----------  ------  ----  ------  -------  --------  ---  --------------- 
 Food                            7,505                 283           274                342                 (299) 
 Wholesale                       1,423                (10)          (39)                  6                  (10) 
 Funeral (c)                       272                  12             3                 29                  (32) 
 Legal (c)                          39                   6             6                  -                   (1) 
 Other businesses 
  (c)                               12                 (8)           (9)                  -                     - 
 Federal (f)                     1,613                   -             -                  -                     - 
 Costs from 
  supporting 
  functions                          -               (110)          (62)                 30                  (37) 
 Total                          10,864                 173           173                407                 (379) 
------------------  ------------------  ----------  ------  ----  ------  -----------------  -------------------- 
 *Refer to (c) below and the general accounting policies section for 
  details of the representation and to Note 19 for details of the restatement. 
 a) Underlying segment operating profit / (loss) is a non-GAAP measure 
  of segment operating profit before the impact of property and business 
  disposals (including impairment of non-current assets within our businesses), 
  the change in the value of investment properties, and one-off items. 
 b) Each segment earns its revenue and profits from the sale of goods 
  and provision of services, mainly from retail activities. 
 c) The Group identifies its operating segments based on its divisions, 
  which are organised according to the different products and services 
  it offers its customers. The operating segments (and the captions) reported 
  above are based on the periodic results reported into the Chief Operating 
  Decision Maker which is the Board and whether the respective division's 
  results meet the minimum reporting thresholds set out in IFRS 8 (Operating 
  Segments). 
 
  The results of our Insurance underwriting business have been classified 
  as discontinued operations from 2018 following the announcement of the 
  proposed sale of CISGIL and are no longer shown in the tables above. 
  See Note 7 (Loss on discontinued operations, net of tax) for further 
  details. 
 
  The results of our Legal services business are now shown as a separate 
  segment (for the 52 weeks ended 4 January 2020, Legal was aggregated 
  with our Funerals business within a segment called Funeral and Life 
  Planning). This follows a change in the way the information is reported 
  to our Board. 
 
  In the current period Other businesses mainly comprises the results 
  of Co-op Health and Co-op Insurance (our insurance marketing and distribution 
  services business excluding CISGIL). Co-op Insurance is currently an 
  immature business and will be shown in its own separate segment once 
  it reaches an appropriate level of maturity. The sale of our Co-op Health 
  business was announced on 12 March 2021 (see Note 18 (Events after the 
  reporting period)). In the comparative period other businesses mainly 
  comprised the results of Co-op Electrical (which ceased trading in the 
  second quarter of 2019) and Co-op Insurance. 
 
  Our other holding and support companies are included within costs from 
  supporting functions. 
 d) Additions to non-current assets are shown on a cash flow basis. 
 e) The Group's external revenue and non-current assets arise primarily 
  within the United Kingdom. The Group does not have a major customer 
  who accounts for 10% or more of revenue. There are no material transactions 
  between the main operating segments. 
 f) Federal relates to the activities of a joint buying group that is 
  operated by the Group for itself and other independent co-operative 
  societies. The Group acts as a wholesaler to the other independent co-operatives 
  and generates sales from this. This is run on a cost recovery basis 
  and therefore no profit is derived from its activities. 
 g) Transactions between operating segments excluded in the analysis 
  are GBP1m (2019: GBP1m) sales of legal cover made by Legal Services 
  to our Insurance underwriting business during the period. Our insurance 
  underwriting business was sold on 3 December 2020 and was classified 
  as a discontinued operation in 2019 and 2020 and so not shown in the 
  segmental tables above. 
 h) Operating profit includes GBP16m of employee furlough payments received 
  under the UK Government's Coronavirus Job Retention Scheme and GBP66m 
  of assistance through business rates relief. These amounts have been 
  netted against relevant cost lines in operating profit. Subsequent to 
  the year end, the Board of The Co-op has decided to repay GBP15.5m of 
  the money it received in Government support during the COVID-19 pandemic, 
  this equates to the amount it claimed in Furlough payments (see Note 
  18 (Events after the reporting period)). 
 i) A reconciliation between underlying segment operating profit and 
  operating profit is as follows: 
 
 2020                             Food   Wholesale      Funeral    Legal          Other             Costs   Total 
                                                                             businesses   from supporting 
                                                                                                functions 
                                  GBPm        GBPm         GBPm     GBPm           GBPm              GBPm    GBPm 
----------------------  ----  --------  ----------  -----------  -------  -------------  ----------------  ------ 
 Underlying segment 
  operating 
  profit /(loss)                   350           6           16        4           (11)             (130)     235 
 
 One-off items                      15           -            -        -              -               (3)      12 
 Property, business 
  disposals 
  and closures                    (49)           -         (18)        -            (1)                27    (41) 
 Change in value of 
  investment 
  properties                         -           -            -        -              -                 1       1 
 Operating profit 
  / (loss)                         316           6          (2)        4           (12)             (105)     207 
----------------------  ----  --------  ----------  -----------  -------  -------------  ----------------  ------ 
 
 One-off items totalling a GBP12m gain (2019: GBP5m charge) includes 
  GBP15m of income received for refunded business rates in relation to 
  externally facing ATMs following the Supreme Court ruling that ATMs 
  outside stores should not be separately assessed for business rates. 
  One-offs also includes a GBP3m charge in respect of aligning guaranteed 
  minimum pensions for members of our schemes who have previously transferred 
  out of the scheme. In the prior period the GBP5m charge was made up 
  of an GBP11m gain following a reduction in the contingent consideration 
  payable that was originally recognised as part of the Nisa acquisition 
  and a further GBP13m gain in relation to a reduction in the expected 
  costs required to achieve final IT separation from the Co-operative 
  Bank Limited off-set by a GBP29m impairment charge to reduce the carrying 
  value of the intangible assets (customer relationships) recognised on 
  the Nisa acquisition. 
 
 2019 (represented                Food   Wholesale      Funeral    Legal          Other             Costs   Total 
  and restated*)                                                             businesses   from supporting 
                                                                                                functions 
                                  GBPm        GBPm         GBPm     GBPm           GBPm              GBPm    GBPm 
----------------------  ----  --------  ----------  -----------  -------  -------------  ----------------  ------ 
 Underlying segment 
  operating 
  profit /(loss)                   283        (10)           12        6            (8)             (110)     173 
 
 One-off items                       -        (29)            -        -              -                24     (5) 
 Property, business 
  disposals 
  and closures                     (9)           -          (9)        -            (1)               (3)    (22) 
 Change in value of 
  investment 
  properties                         -           -            -        -              -                27      27 
 Operating profit 
  / (loss)                         274        (39)            3        6            (9)              (62)     173 
----------------------  ----  --------  ----------  -----------  -------  -------------  ----------------  ------ 
 
 *Refer to the general accounting policies section for details of 
  the representation and Note 19 for the restatement. 
 
 
 
 j) A reconciliation between Underlying operating profit 

  and Profit before tax is provided below: 
                                                                   2020           2019 
                                                                           (restated*) 
 Continuing Operations                                     Notes   GBPm           GBPm 
----------------------------------------------     -----  ------  -----  ------------- 
 Underlying operating profit                                        235            173 
 Underlying loan interest payable                              5   (63)           (64) 
 Underlying net interest expense on 
  lease liabilities                                         4, 5   (72)           (74) 
-----------------------------------------------    -----  ------         ------------- 
 Underlying profit before tax                                       100             35 
-------------------------------------------------  -----  ------  -----  ------------- 
 One-off items                                                 1     12            (5) 
 Loss on property, business disposals 
  and closures (see table below)                               1   (41)           (22) 
 Change in value of investment properties                             1             27 
 Finance income (excluding any lease interest or 
  fair value movement on funeral plans)                        4     41             57 
 Unrealised fair value movement of funeral 
  plan investments                                             4     81             11 
 Discount unwind on funeral plan 
  debtors                                                      4      7              1 
 Interest accruing on funeral plan 
  liabilities                                                  5   (60)           (59) 
 Other non-cash finance costs                                  5   (14)           (21) 
 Profit before tax from continuing 
  operations                                                        127             24 
-------------------------------------------------  -----  ------  -----  ------------- 
 *Refer to Note 19 for details of 
  the restatement. 
 
 Loss from property, business disposals, 
  closures and impairment of non-current 
  assets                                                2020              2019 
                                                    GBPm    GBPm   GBPm           GBPm 
----------------------------------------------     -----  ------  -----  ------------- 
 Disposals, closures and onerous 
  contracts 
  - proceeds                                          35            123 
  - less net book value written 
   off                                              (23)           (94) 
  - provisions recognised                           (17)            (7) 
-------------------------------------------------  -----  ------  -----  ------------- 
                                                             (5)                    22 
 Impairment of property, plant and equipment, 
  right-of-use assets and goodwill                          (36)                  (44) 
-------------------------------------------------  -----  ------  -----  ------------- 
 Total                                                      (41)                  (22) 
-------------------------------------------------  -----  ------  -----  ------------- 
 
 Impairment charges are split: Food GBP36m (2019: GBP19m), Funerals GBP10m 
  (2019: GBP15m) and Costs from supporting functions saw a net impairment 
  reversal of GBP10m (2019: GBP10m charge) in respect of our non-trading 
  property estate. 
 
 
 2 Operating expenses 
 
 
 What does this show? This note shows the costs we have incurred during 
  the period. It splits costs into key categories such as trading activities 
  and employee benefits. 
 
 
 Operating profit is stated after 
 (charging) 
 / crediting the following: 
                                                                                  2020         2019 
                                                                                  GBPm         GBPm 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Cost of inventories recognised as an 
  expense                                                                      (8,135)      (7,637) 
 Employee benefits expense (see below)                                         (1,507)      (1,433) 
 Distribution costs                                                              (496)        (489) 
 (Loss) / gain on property, business disposals 
  and closures (before impairments)                                                (5)           22 
 Impairment of plant, property and 
  equipment 
  and goodwill                                                                    (26)         (22) 
 Impairment of right-of-use assets                                                (11)         (25) 
 Impairment reversal on subleases                                                    1            3 
 Net gain on other plant and equipment 
  disposals                                                                          2            - 
 Change in value of investment properties                                            1           27 
 Depreciation of plant, property and 
  equipment                                                                      (250)        (252) 
 Depreciation of right-of-use assets                                             (113)        (110) 
 Amortisation                                                                     (17)         (17) 
 Subscriptions and donations                                                       (4)          (3) 
 Community reward earned                                                          (13)         (11) 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 
 *Operating profit (see Note 1) includes GBP16m of employee furlough 
  payments received under the UK Government's Coronavirus Job Retention 
  Scheme and GBP66m of assistance through business rates relief. These 
  amounts have been netted against relevant cost lines in operating profit. 
  Subsequent to the year end, the Board of The Co-op has decided to repay 
  GBP15.5m of the money it received in Government support during the COVID-19 
  pandemic, this equates to the amount it claimed in Furlough payments 
  (see Note 18 (Events after the reporting period)). 
 
 Employee benefits expense 
                                                                                  2020         2019 
                                                                                  GBPm         GBPm 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Wages and salaries                                                            (1,323)      (1,261) 
 Social security costs                                                            (82)         (67) 
 Pension costs - defined benefit schemes                                           (5)          (4) 
 Pension costs - defined contribution 
  schemes                                                                         (60)         (56) 
-----------------------------------------  -----------  ---------  ---------            ----------- 
 Total employee benefits expense 
  (continuing 
  operations)                                                                  (1,470)      (1,388) 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Total employee benefits expense 
  (discontinued 
  operations)*                                                                    (37)         (45) 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Total employee benefits expense                                               (1,507)      (1,433) 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 
 Employee benefits expense includes 
  executive directors. 
 
 The average number of people employed by the Group in the UK (including 
  executive directors) was: 
                                                                                  2020         2019 
                                                                                Number       Number 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Full-time                                                                      20,273       20,511 
 Part-time                                                                      43,982       41,320 
-----------------------------------------  -----------  ---------  ---------            ----------- 
 Total (continuing operations)                                                  64,255       61,831 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Total (discontinued operations)*                                                  963        1,093 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 Total                                                                          65,218       62,924 
-----------------------------------------  -----------  ---------  ---------  --------  ----------- 
 
 *The sale of our Insurance underwriting business (CISGIL) completed 
  on 3 December 2020 and the results of that business have been included 
  in Discontinued operations. The 2020 figures noted in the tables above 
  reflect the 11 month period in 2020 that CISGIL was under Co-op ownership. 
 Auditor remuneration and expenses                                               2020         2019 
                                                                                 GBPm         GBPm 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Audit of these financial statements                                              1.2          1.1 
 Amounts receivable by the Society's 

  auditor in respect of: 
 - Audit of financial statements of 
  subsidiaries in respect of the Society                                          0.3          0.8 
 Services relating to: 
 - Audit-related assurance services                                                 -          0.1 
 - All other services                                                             0.1          0.2 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Total                                                                            1.6          2.2 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 
 Accounting policies 
 Operating expenses 
  Operating expenses are analysed by nature, as defined by IAS 1 (Presentation 
  of Financial Statements). Payments to our members in their capacity 
  as customers or colleagues (rather than as members), or membership payments 
  to non-members such as charitable organisations, are treated as charges 
  in the income statement. 
 3 Supplier income 
 
 
 What does this show? Sometimes our suppliers give us money back based 
  on the amount of their products we buy and sell. This note shows the 
  different types of income we've received from our suppliers based on 
  the contracts we have in place with them. This income is taken off operating 
  expenses in the income statement. 
 
 
 Supplier income                                                                 2020         2019 
                                                                                 GBPm         GBPm 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Food - Long-term agreements                                                      140          139 
 Food - Bonus income                                                              130          148 
 Food - Promotional income                                                        355          330 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Total Food supplier income                                                       625          617 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Wholesale supplier income                                                        163          130 
 Total supplier income                                                            788          747 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 
 Percentage of Food's Cost of Sales 
  before deducting Supplier income                                                  %            % 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Long-term agreements                                                            2.3%         2.4% 
 Bonus income                                                                    2.2%         2.5% 
 Promotional income                                                              5.9%         5.8% 
 Total Food supplier income percentage                                          10.4%        10.7% 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 Wholesale supplier income percentage                                           10.3%        10.3% 
----------------------------------------  --------  ---------  ---------  -----------  ----------- 
 
 Accounting policies 
 Supplier income 
  Supplier income is recognised as a deduction from cost of sales on 
  an accruals basis, based on the expected entitlement that has been earned 
  up to the balance sheet date for each relevant supplier contract. The 
  accrued incentives, rebates and discounts receivable at year end are 
  included within trade and other receivables. Where amounts received 
  are in the expectation of future business, these are recognised in the 
  income statement in line with that future business. There are three 
  main types of income: 
 
  1. Long-term agreements: These relate largely to volumetric rebates 
  based on agreements with suppliers. They include overriders, advertising 
  allowances and targeted income. The income accrued is based on the joint 
  buying group's latest forecast volumes and the latest contract agreed 
  with the supplier. Income is not recognised until confirmation of the 
  agreement has been received from the supplier. 
 
  2. Bonus income: These are typically unique payments made by the supplier 
  and are not based on volume. They include payments for marketing support, 
  range promotion and product development. These amounts are recognised 
  when the income is earned and confirmed by suppliers. An element of 
  the income is deferred if it relates to a future period. 
 
  3. Promotional income: Volumetric rebates relating to promotional activity 
  agreed with the supplier. These are retrospective rebates based on sales 
  volumes or purchased volumes. 
 
 
 
 
 
 4 Finance income 
 
 
 What does this show? Finance income arises from the interest earned 
  on our pension scheme, interest earned on monies held on deposit and 
  the interest income earned on our subleases. We also include the movement 
  in the fair value of some elements of our debt and our interest rate 
  swap positions (which are used to manage risks from interest rate movements) 
  if these are gains. If they are losses, they are included in Finance 
  costs (see Note 5). If they are gains, then we also show the fair value 
  movement on our funeral plan investments (see Note 12) as well as the 
  discount unwind on funeral instalment plan debtors. 
 
 
                                                                 2020             2019 
                                                                           (restated*) 
                                                                 GBPm             GBPm 
---------------------------------------------------------     -------  --------------- 
 Net pension finance income                                        37               57 
 Underlying interest income from finance 
  lease receivables                                                 3                4 
 Fair value movement on interest rate 
  swaps (Note 16)                                                   4                - 
 Unrealised fair value movement on funeral 
  plan investments (Note 12)                                       81               11 
 Discount unwind on funeral plan debtors                            7                1 
------------------------------------------------------------ 
 Total finance income                                             132               73 
------------------------------------------------------------  -------  --------------- 
 
 *Refer to Note 19 for details of the restatement and Note 16 for details 
  of our accounting policy for funeral plans. 
 
 5 Finance costs 
 
 
 What does this show? Our main finance costs are the interest that we've 
  paid during the year on our bank borrowings (that help fund our business) 
  and the interest payments we incur on our lease liabilities. We also 
  include the movement in the fair value of some elements of our debt 
  and our interest rate swap positions (which are used to manage risks 
  from interest rate movements) if these are losses. If they are gains, 
  they are included in Finance income (see Note 4). We also include the 
  interest that accrues on the funeral plans we hold. Other finance costs 
  also include the non-cash charge we incur each year on long-term provisions 
  as the payout moves one year closer (the discount unwind). 
 
 
                                                                 2020             2019 
                                                                           (restated*) 
                                                                 GBPm             GBPm 
---------------------------------------------------------     -------  --------------- 
 Loans repayable within five years                               (26)             (30) 
 Loans repayable wholly or in part after 
  five years                                                     (37)             (34) 
 Underlying loan interest payable                                (63)             (64) 
------------------------------------------------------------  -------  --------------- 
 Underlying interest expense on lease 
  liabilities                                                    (75)             (78) 
 Total underlying interest expense                              (138)            (142) 
------------------------------------------------------------  -------  --------------- 
 Fair value movement on quoted Group debt 
  (Note 14)                                                      (10)              (7) 
 Fair value movement on interest rate 
  swaps                                                             -              (1) 
 Interest accruing on funeral plan liabilities                   (60)             (59) 
 Non-underlying finance interest                                  (4)             (13) 
 Other finance costs                                             (74)             (80) 
------------------------------------------------------------  -------  --------------- 
 Total finance costs                                            (212)            (222) 
------------------------------------------------------------  -------  --------------- 
 
 *Refer to Note 19 for details of the restatement and Note 16 for details 
  of our accounting policy for funeral plans. 
 Non-underlying finance interest includes the impact of discount unwind 
  on payables and provisions 
 Total interest expense on financial liabilities (including lease liabilities) 
  that are not at fair value through the income statement was GBP98m (2019: 
  GBP128m). 
 
 
 6 Taxation 
 
 
 What does this show? Our tax charge is made up of current and deferred 

  tax - this note explains how those items arise. Additional explanatory 
  footnotes are included to explain the key items. We were re-accredited 
  with the Fair Tax Mark during 2020 and the additional disclosures we 
  provide are in line with best practice guidance. 
 
 
                                                                     2020            2019 
                                                                              (restated*) 
                                                         Footnote    GBPm            GBPm 
--------------------------------------------------     -----------  -----  -------------- 
 Current tax charge - current period                         (i)        -             (7) 
 Current tax charge - adjustment to group                  (ii) 
  relief payable owed to The Co-operative 
  Bank                                                               (16)               - 
 Current tax credit - adjustment in 
  respect of prior periods                                  (iii)       -               1 
 Net current tax charge                                              (16)             (6) 
------------------------------------------------------------------  -----  -------------- 
 Deferred tax charge - current period                       (iv)     (39)            (17) 
 Deferred tax credit - adjustments 
  in respect of prior periods                                (v)        -              48 
 Net deferred tax (charge) / credit                                  (39)              31 
------------------------------------------------------------------  -----  -------------- 
 Total tax (charge) / credit - in 
  respect of continuing operations                                   (55)              25 
------------------------------------------------------------------  -----  -------------- 
 The tax on the Group's net profit before tax differs from the theoretical 
  amount that would arise using the standard applicable rate of corporation 
  tax of 19% (2019: 19%) as follows: 
----------------------------------------------------------------------------------------- 
                                                                     2020            2019 
                                                                              (restated*) 
                                                         Footnote    GBPm            GBPm 
--------------------------------------------------     -----------  -----  -------------- 
 Profit before tax from continuing 
  operations                                                          127              24 
 Profit / (loss) before tax from discontinued 
  operation                                                            11            (23) 
 Total profit before tax                                              138               1 
------------------------------------------------------------------  -----  -------------- 
 Tax charge at 19% (2019: 19%)                                       (26)               - 
--------------------------------------------------     -----------  -----  -------------- 
 Deferred tax reconciliation:                              (iv) 
 Expenses not deductible for tax (including 
  one-off costs)                                            (vi)      (1)             (6) 
 Depreciation and amortisation on 
  non-qualifying assets                                     (vii)    (11)             (8) 
 Non-taxable (losses) / profits arising 
  on business disposals                                    (viii)     (3)               1 
 Capital gains arising on property 
  disposals                                                 (ix)      (3)             (5) 
 Adjustment in respect of previous 
  periods                                                    (v)        -              48 
 Restatement of deferred tax to enacted 
  rate (2019:17.0%)                                          (x)      (1)               1 
 Subtotal of deferred tax reconciling 
  items                                                              (19)              31 
------------------------------------------------------------------  -----  -------------- 
 Current tax reconciliation: 
 Adjustment in respect of previous 
  periods                                                   (iii)       -               1 
 Adjustment to group relief payable                        (ii)      (16)               - 
 Subtotal of current tax reconciling 
  items                                                              (16)               1 
------------------------------------------------------------------  -----  -------------- 
 
Tax (charge) / credit at the effective 
 tax rate (ETR) of 44% (2019: -3,200%)                               (61)              32 
                                                       -----------  -----  -------------- 
 
 Tax (charge) / credit reported in 
  the income statement                                               (55)              25 
 Tax (charge) / credit attributable 
  to a discontinued operation                                         (6)               7 
 Total tax (charge) / credit                                         (61)              32 
------------------------------------------------------------------  -----  -------------- 
 
The net tax charge of GBP61m on a profit before tax of GBP138m gives 
 an effective tax rate of 44%, which is higher than the standard rate 
 of 19%. The main reasons for this difference is the adjustment to group 
 relief payable following the rate change enacted in the 2020 Budget 
 and deprecation on non-qualifying assets, being debits of GBP16m and 
 GBP11m respectively, see footnotes (ii) and (vii) below for more detail. 
 
Tax expense on items taken directly to consolidated statement of comprehensive 
 income or consolidated statement of changes in equity 
                                                                     2020            2019 
                                                                              (restated*) 
                                                                     GBPm            GBPm 
--------------------------------------------------     -----------  -----  -------------- 
 Actuarial gains and losses on employee 
  pension scheme                                                        -              17 
 Insurance assets held at fair value 
  through other comprehensive income                                    3             (1) 
                                                                        3              16 
    --------------------------------------------------------------  -----  -------------- 
 
 
*Refer to Note 19 for details of 
 the restatement. 
 
 
Of the tax taken directly to the consolidated statement of comprehensive 
 income, GBP15m credit (2019: GBP17m credit) arises on the actuarial 
 movement on employee pension schemes. There is also a GBP15m charge 
 being the impact of rate change on the deferred tax related to the employee 
 pension schemes. Following the disposal of CISGIL, the fair value gains 
 on insurance assets are transferred to discontinued operations shown 
 as a movement through the income statement. Therefore, the cumulative 
 deferred tax liability on these fair value gains at disposal had to 
 be transferred from equity reserves to the income statement. The GBP3m 
 charge in the income statement is shown within the tax charge attributable 
 to discontinued operations (2019: GBP1m charge). 
 
 2019 figures have been restated to show a further GBP12m credit that 
 was recognised in the consolidated statement of changes in equity. This 
 arises from the impact of the changes in how the Co-op Group applies 
 IFRS 15 on recognition of certain income and expenses. 
 
 *See general accounting policies section for details of the restatement. 
 
Following last year's Budget, on 11 March 2020, the Chancellor revoked 
 the enacted corporation tax rate reduction from 19% to 17%, thereby 
 leaving it at 19%. Accordingly, each deferred tax balance has been re-measured 
 individually based on the 19% enacted tax rate, (2019: 17.0%). This 
 has contributed GBP1m to the deferred tax charge in the current year. 
 
 Following the 2021 Budget, on 3 March 2021, the Chancellor has announced 
 that with effect from 1 April 2023 the corporation tax rate will increase 
 by 6% to 25%. Under IFRS it is the rate(s) actually enacted at the balance 
 sheet date that determine the amount of deferred tax to be recognised. 
 Accordingly, this announcement does not affect how the deferred tax 
 balance has been measured as at 2 January 2021. However, once the above 
 rate change has been enacted later this year, for subsequent reporting 
 periods the Co-op will take account of this increased rate for determining 
 the amount of deferred tax to be recognised. If this 6% rate increase 
 in 2023 had been applied instead of the current enacted rate of 19% 
 the impact that would be expected to go through the income statement 
 is a GBP9m charge. 
Tax policy 
We publish our tax policy on our website (https://www.co-operative.coop/ethics/tax-policy) 
 and have complied with the commitments set out in that policy. 
Footnotes to taxation 
 Note 6: 
i) The Group is not tax-paying in the UK in respect of 2020 due to the 
 fact it has a number of brought forward capital allowances (GBP295m 
 gross claimed in 2020) and tax losses (GBP5m gross utilised in 2020) 
 that offset its taxable profit for the period. The current tax charge 
 of GBP3m primarily relates to discontinued operations and will be met 
 by CISGIL following its disposal from the Group. Outside of the UK, 
 our Isle of Man resident subsidiary, Manx Co-operative Society, a convenience 
 retailing business in the Isle of Man showed a small profit in 2020, 
 giving rise to a small current tax liability of GBP0.3m (2019: GBP0.2m). 
 This is the Group's only non-UK resident entity for tax purposes, which 
 employs 106 part-time and 144 full-time colleagues out of our total 
 Group headcount figure. All other income in the consolidated income 

 statement is generated by UK activities and all other colleagues are 
 employed in the UK. 
 
 The unaudited 2020 revenue of Manx Co-operative Society is GBP37m and 
 all other revenue reflected in the consolidated income statement is 
 generated by UK trading activities. The unaudited net assets of Manx 
 Co-operative Society at 2 January 2021 were GBP12m, compared to net 
 assets of the consolidated Group of GBP2,669m. The Manx assets represent 
 the only overseas assets within the Group. A full copy of the most recent 
 accounts is available here https://www.co-operative.coop/investors/rules. 
 The presence of this IOM resident subsidiary has not resulted in any 
 additional tax charge in 2020 over and above that payable to the Isle 
 of Man authorities stated above. If these activities had been carried 
 out in the UK, these profits would have been included within the Group's 
 taxable profit prior to the availability of capital allowances and tax 
 losses. 
 
 In addition the Group has one company registered in the Cayman Islands, 
 Violet S Propco Limited. This is a legacy dormant company and is UK 
 resident for tax purposes, as it is managed and controlled entirely 
 within the UK. All tax obligations in respect of this company are therefore 
 reported in the UK. 
 
  ii) The Group holds a creditor balance in relation to group relief claimed 
  from The Co-operative Bank ('the Bank'). Group relief is the surrender 
  of tax losses made by one group company to another which made taxable 
  profits. In 2012 and 2013, the Bank had tax losses that it was able 
  to surrender to a number of Group companies which had taxable profits 
  during those two years. This group relief payable is linked to and held 
  at prevailing tax rates. Due to the enacted rate changed from 17% to 
  19% the creditor balance has been remeasured increasing the total liability 
  by GBP16m to GBP147m (2019: GBP131m). It should be noted that due to 
  the settlement of this creditor in February 2021, the rate change announced 
  in the 2021 Budget will have no impact on creditor. See additional Note 
  18 (Events after the reporting period) for more detail on the early 
  settlement of this in 2021. 
 
  iii) There was minimal adjustment in the current year relating to prior 
  years. The 2019 current tax credit of GBP1m represented tax recoverable 
  from a loss carry-back in one of our entities in 2018. 
 
  iv) Deferred tax is an accounting concept that reflects how some income 
  and expenses can affect the tax charge in different periods to when 
  they are reflected for accounting purposes. These differences are a 
  result of tax legislation. The current year charge primarily relates 
  to deferred tax arising on movements on our pension assets and fixed 
  assets. As the Group is not tax-paying in respect of 2020, the reconciling 
  items between the tax charge at the standard rate and the actual tax 
  charge mostly affect the deferred tax we carry as they will result in 
  us having more or less capital allowances or losses to offset against 
  future profits. 
 
  v) There was minimal adjustment in the current year relating to prior 
  years. In 2019 there was a GBP48m credit for adjustment to deferred 
  tax in respect of previous periods, primarily due to a one-off review 
  of the method used to determine the temporary differences arising in 
  respect of accelerated tax depreciation on fixed assets which resulted 
  in a revised estimation technique as noted in the 2019 financial statements. 
 
  It is common for relatively small adjustments to arise in respect of 
  prior years, as the tax charge in the financial statements is an estimate 
  that is prepared before the detailed tax calculations are required to 
  be submitted to HMRC, which is 12 months after the year end. Also, HMRC 
  may not agree with a tax return some time after the year end and a liability 
  for a prior period may arise as a result. Where there this gives rise 
  to uncertainties a provision is recognised. Our position on the level 
  of uncertain tax positions has reduced due to increased certainty gained 
  through correspondence with HMRC during 2020. 
 
  vi) Some expenses incurred by the Group may be entirely appropriate 
  charges for inclusion in its financial statements but are not allowed 
  as a deduction against taxable income when calculating the Group's tax 
  liability. Examples of this include some repairs, entertaining costs 
  and legal costs. 
 
  vii) The accounting treatment of depreciation differs from the tax treatment. 
  For accounting purposes an annual rate of depreciation is applied to 
  capital assets. For tax purposes the Group is entitled to claim capital 
  allowances, a relief provided by law. Some assets do not qualify for 
  capital allowances and no relief is available for tax purposes on these 
  assets. This value represents depreciation arising on such assets (primarily 
  Land and Buildings). 
 
  viii) In 2020, further re-measurement adjustments and costs to sell 
  have been recognised in arriving at the fair value of our insurance 
  underwriting business (CISGIL) following the completion of the deal 
  on 3 December 2020. We are not permitted to deduct the re-measurement 
  adjustments when calculating our profits for tax purposes. Further information 
  is provided about the re-measurement in Note 7 (Loss on discontinued 
  operations, net of tax). 
 
  ix) During the year a number of properties were sold, where the taxable 
  profit is in excess of the accounting profit. 
 
  x) It is a requirement to measure deferred tax balances at the substantively 
  enacted corporation tax rate at which they are expected to unwind. The 
  net impact of rate change on deferred tax balances recognised through 
  the income statement is minimal this year. 
 
Accounting policies 
 Income tax on the profit or loss for the period is made up of current 
 and deferred tax. Income tax is recognised in the income statement except 
 to the extent that it relates to items recognised directly in reserves, 
 in which case it is recognised in other comprehensive income. Current 
 tax is the expected tax payable on the taxable income for the period, 
 using tax rates enacted or substantively enacted at the balance sheet 
 date, and any adjustment to tax payable in respect of previous years. 
 
 
7 Profit / (Loss) on discontinued operation, 
 net of tax 
 
 
What does this show? We classify any of our business segments as discontinued 
 operations if they have been disposed of during the year or if they 
 are held for sale at the balance sheet date (which means they are most 
 likely to be sold within a year). This note shows the operating result 
 for these segments as well as the profit or loss on disposal. 
 
 
Discontinued operation - disposal of Insurance (underwriting) business 
 
  On 3 December 2020, the Co-op completed the sale of its insurance underwriting 
  business (CISGIL) to Soteria Finance Holdings Limited for cash consideration 
  of GBP104m. The assets and liabilities of CISGIL have been disposed 
  and are no longer shown in the Consolidated balance sheet. The results 
  of CISGIL for the period up to the point of disposal have been included 
  within Discontinued operations along with the final loss on disposal 
  calculation based upon the actual consideration received, the latest 
  forecasts of final incremental costs to sell and the final fair value 
  of the completion balance sheet at the point of disposal. 
 
  Since the sale of CISGIL, the Group is now focussed on marketing and 
  distributing insurance products instead of underwriting them and as 
  part of the disposal of CISGIL, the Group has signed a 13 year agreement 
  with Markerstudy to provide marketing and distribution services for 
  motor and insurance products. GBP78m has been included as deferred income 
  within Trade and other payables in respect of this agreement because 
  the Co-op group is being remunerated for future services. Of this deferred 
  income of GBP78m, cash of GBP46m has been received at the balance sheet 
  date with the remaining about due in annual instalments over the next 
  3.5 years. 
 
Results of discontinued                                                         2020*               2019 
 operation - Insurance 
                                                                                 GBPm               GBPm 
Revenue                                                                           273                315 
Operating 
 expenses                                                                       (352)              (423) 
Other income                                                                       85                 68 
Remeasurement adjustments recognised in arriving 
 at fair value less costs to sell                                                  10                 26 
Operating profit 
 / (loss)                                                                          16               (14) 
Finance costs                                                                     (5)                (9) 
Profit / (loss) 
 before tax                                                                        11               (23) 
Tax                                                                               (6)                  7 
Profit / (loss) for the period from 
 discontinued operation                                                             5               (16) 
 
* Figures cover the period to disposal (3 December 2020). 
 
Relevant accounting policies covering the results of discontinued operations 
 can be found in the 2017 Annual Report: Revenue (Note 2), Operating 
 expenses (Note 2), Other income and Finance costs (Note 5). Details 
 of accounting policies for insurance contracts are also shown in Note 
 28 to the 2019 Annual Report. 
 
Segmental analysis - Insurance 
                                      Revenue  Underlying  Operating        Additions       Depreciation 
                                from external     segment       loss   to non-current   and amortisation 

                                    customers   operating                      assets 
                                                   profit 
                                                 / (loss) 
                                         GBPm        GBPm       GBPm             GBPm               GBPm 
Period ended 2 December 
 2020                                     273           -         16               32               (43) 
52 weeks ended 
 4 January 2020                           315        (10)       (14)               56               (58) 
 
 
The fair value of CISGIL's balance sheet at the point of disposal is 
 shown below: 
 
Disposal group at cost                                                                 2020 
                                                                              (on disposal) 
                                                                                       GBPm 
Property, plant & equipment 
 and right-of-use assets                                                                  1 
Deferred acquisition 
 costs                                                                                   17 
Reinsurance 
 assets                                                                                  62 
Other investments 
 (Insurance assets)                                                                     705 
Insurance receivables 
 and other assets                                                                       178 
Total assets                                                                            963 
Reinsurance liabilities                                                                   7 
Lease liabilities 
 and borrowings                                                                           1 
Insurance contract 
 liabilities                                                                            654 
Deferred 
 tax liabilities                                                                          4 
Insurance and other 
 payables                                                                                27 
Overdrafts                                                                                6 
Total Insurance liabilities                                                             699 
Net assets of disposal 
 group                                                                                  264 
Cash consideration 
 (net of costs)                                                                          56 
Loss on disposal 
 of business                                                                          (208) 
 
An initial estimated loss on disposal of GBP207m was recorded in the 
 Group's 2018 Consolidated income statement within Discontinued operations 
 following recognition of CISGIL as being held for sale at the 2018 balance 
 sheet date. This was based on initial estimates as to the fair value 
 of the consideration that was to be received and the expected costs 
 to sell as well as the fair value of the net assets on disposal. These 
 estimates have been updated in all subsequent reporting periods with 
 any changes reflected in discontinued operations in the relevant reporting 
 period. The final loss on disposal noted above reflects the actual consideration, 
 costs to sell and net assets on disposal. Accruals of GBP5m and provisions 
 of GBP5m included with the loss on disposal calculation are held in 
 the consolidated balance sheet as at 2 January 2021 with the associated 
 cashflow expected to occur within 6 months of the balance sheet date. 
 
Net cash inflow arising on disposal: 
Cash received in cash and cash equivalents (net of costs)                                56 
Add: overdrafts disposed                                                                (6) 
                                                                                         62 
 
 
The table below shows a summary of the cash flows of discontinued operations: 
                                                                      2020             2019 
                                                                      GBPm             GBPm 
Cash flows from / (used in) 
 discontinued operations: 
Net cash from / (used in) 
 operating activities                                                   30             (26) 
Net cash used in 
 financing activities                                                  (5)              (8) 
Net cash from / (used in) 
 discontinued operations                                                25             (34) 
 
Cash flows from investing activities were not significant 
 for the discontinued operation in 2020 or 2019. 
 
 
Accounting policies 
The Group classifies non-current assets and disposal groups as held for 
 sale if their carrying amounts will be recovered principally through 
 a sale transaction rather than through continuing use. Non-current assets 
 and disposal groups classified as held for sale are measured at the lower 
 of their carrying amount and fair value less costs to sell. Costs to 
 sell are the incremental costs directly attributable to the disposal 
 of an asset (disposal group), excluding finance costs and income tax 
 expense. 
 
 The criteria for held for sale classification is regarded as met only 
 when the sale is highly probable and the asset or disposal group is available 
 for immediate sale in its present condition. Actions required to complete 
 the sale should indicate that it is unlikely that significant changes 
 to the sale will be made or that the decision to sell will be withdrawn. 
 Management must be committed to the plan to sell the asset and the sale 
 expected to be completed within one year from the date of the classification. 
 
 Discontinued operations are those operations that can be clearly distinguished 
 from the rest of the Group, both operationally and for financial reporting 
 purposes, that have either been disposed of or classified as held for 
 sale and which represent a separate major line of business. Property, 
 plant and equipment and intangible assets are not depreciated or amortised 
 once classified as held for sale. 
 
 Assets and liabilities classified as held for sale are presented separately 
 as current items in the balance sheet. Discontinued operations are excluded 
 from the results of continuing operations and are presented as a single 
 amount as profit or loss after tax from discontinued operations in the 
 income statement. 
 
 A disposal group qualifies as a discontinued operation if it is a component 
 of an entity that either has been disposed of, or is classified as held 
 for sale, and: 
 -- Represents a separate major line of business or geographical area 
 of operations 
 -- Is part of a single co-ordinated plan to dispose of a separate major 
 line of business or geographical area of operations. 
 
 
8 Reconciliation of operating profit to net cash flow from operating 
 activities 
 
 
What does this show? This note shows how we adjust our operating profit, 
 as reported in the income statement, to get to the net cash from operating 
 activities which is the starting position in the cash flow statement. 
 Non-cash items are added back to or subtracted from the operating profit 
 figure to show how much cash is generated from our operating activities. 
 
 
                                                                      2020         2019 
                                                                            (restated*) 
                                                                      GBPm         GBPm 
Operating profit (Note 
 1)                                                                    207          173 
Depreciation and amortisation charges (excluding 
 deferred acquisition costs)                                           380          379 
Non-current asset impairments                                           36           73 
Loss / (profit) on closure and disposal of 
 businesses and non-current assets                                       3         (22) 
Change in value of investment 
 properties                                                            (1)         (27) 
Retirement benefit obligations                                        (35)         (46) 
Increase in inventories                                                (6)          (7) 
Increase in receivables                                              (248)         (13) 
Increase in contract assets 
 (funeral plans)                                                       (8)          (7) 
Increase in contract liabilities 
 (funeral plans)                                                        99          119 
Increase in payables 
 and provisions                                                        215           67 
Net cash flow from operating activities before 
 net cash operating inflow from discontinued operations                642          689 
Net cash flow from operating activities 
 relating to discontinued operations                                    30         (26) 
Net cash flow from operating 
 activities                                                            672          663 
 
*Refer to Note 19 for details 
 of the restatement. 
 
 
 
9 Property, plant and equipment 
 
 
What does this show? Property, plant and equipment is the physical 
 assets we use in our business such as our buildings, equipment and vehicles. 
 This note shows how the amount we include on our balance sheet for these 
 assets has changed over the period. 
 
 
For the period ended 2 January 
 2021 
                                               Property      Plant and equipment   Total 
                                                   GBPm                     GBPm    GBPm 
Cost or valuation: 
At 4 January 2020                                 1,463                    2,437   3,900 
Additions                                            45                      218     263 
Reclassified as assets held 
 for sale (see Note 13)                             (8)                      (6)    (14) 

Disposals                                          (33)                     (69)   (102) 
At 2 January 2021                                 1,467                    2,580   4,047 
Depreciation: 
At 4 January 2020                                   588                    1,311   1,899 
Charge for the period                                25                      225     250 
Impairment                                           13                        8      21 
Reclassified as assets held 
 for sale (see Note 13)                             (2)                      (3)     (5) 
Disposals                                          (17)                     (56)    (73) 
At 2 January 2021                                   607                    1,485   2,092 
Net book value: 
At 2 January 2021                                   860                    1,095   1,955 
At 4 January 2020                                   875                    1,126   2,001 
Capital work in progress 
 included above                                      35                       74     109 
 
The impairment charge of GBP21m (2019: GBP15m) primarily relates to 
 poor performing food stores and funeral branches (see also Critical 
 accounting estimates and judgements section of this note for further 
 detail on impairment). 
 
 
For the period ended 4 January 
 2020 
                                      Property  Plant and equipment  Total 
                                          GBPm                 GBPm   GBPm 
Cost or valuation: 
At 5 January 2019                        1,472                2,373  3,845 
Impact on adoption 
 of IFRS 16                                  -                (120)  (120) 
Additions                                   46                  262    308 
Transfer from investment 
 property                                    1                    -      1 
Reclassified as assets held 
 for sale (see Note 13)                    (3)                  (1)    (4) 
Disposals                                 (53)                 (77)  (130) 
At 4 January 2020                        1,463                2,437  3,900 
Depreciation: 
At 5 January 2019                          578                1,221  1,799 
Impact on adoption 
 of IFRS 16                                  -                 (79)   (79) 
Charge for the period                       25                  227    252 
Impairment                                   6                    9     15 
Reclassified as assets held 
 for sale (see Note 13)                    (1)                    -    (1) 
Disposals                                 (20)                 (67)   (87) 
At 4 January 2020                          588                1,311  1,899 
Net book value: 
At 4 January 2020                          875                1,126  2,001 
At 5 January 2019                          894                1,152  2,046 
Capital work in progress 
 included above                             30                   65     95 
 
 
Critical accounting estimates and judgements 
 Impairment 
 The carrying amount of property, plant and equipment is reviewed at 
 each balance sheet date and if there is any indication of impairment, 
 the asset's recoverable amount is estimated. An impairment loss is recognised 
 whenever the carrying amount of an asset or its cash-generating unit 
 exceeds its recoverable amount. Impairment losses are recognised in 
 the income statement. Impairment losses recognised in respect of cash-generating 
 units are allocated first to reduce the carrying amount of any associated 
 goodwill allocated to cash-generating units, and then to reduce the 
 carrying value of other fixed assets. 
 
Impairment 
 
 The recoverable amount for Food and Funeral cash generating units (CGUs) 
 is the greater of the fair value of the CGU (less costs to sell) and 
 the value in use (VIU) of the CGU. The value in use for Food and Funeral 
 CGUs has been determined using discounted cash flow calculations. 
 
 The key assumptions in the value in use calculations are as follows: 
 
Assumption                                        Food Segment                            Funeral Segment 
Structure                            Each individual food store is            A CGU is deemed to be a local 
 of a CGU                             deemed to be an individual CGU.          network of interdependent branches, 
                                                                               known as a Funeralcare Hub. 
Cash flow                            Future cash flows derived using          Derived from Board approved 
 years /                              historical store performance adjusted   four-year plan cash flow projections. 
 assumptions                          for expected growth in sales and/or 
                                      costs.                                  These cash flows are extrapolated 
                                                                              over the remaining lease term 
                                      These forecasts are extrapolated        for leasehold properties or 
                                      over a period of 4 years and then       into perpetuity for freehold 
                                      subject to a long term growth           properties. 
                                      rate of 0% (2019: 1.9%). 
                                                                              Perpetuities included in cash 
                                      Where lease terms are shorter           flows where the Hub is expected 
                                      than this, the remaining lease          to be operational beyond its 
                                      terms have been used.                   current lease terms. 
 
                                      Perpetuities are included in            A growth rate of 0% (2019: 
                                      cash flows where stores are expected    1.9%) is applied beyond Board 
                                      to be operated beyond their current     approved four-year plan horizon. 
                                      lease term. 
 
                                      Cash flows include estimated 
                                      store capital maintenance costs 
                                      based on the square footage of 
                                      the store. 
Covid considerations                 Store cash flows observed over           The impact of Covid-19, specifically 
                                     the last 12 months have been heavily      the impact on future average 
                                     impacted by Covid-19 trading              selling price movements, funeral 
                                     conditions.                               volume assumptions and payroll 
                                     This has resulted in a number             costs assumptions are embedded 
                                     of stores seeing their profitability      within the Funeralcare four-year 
                                     levels fall significantly due             plan approved by the Board. 
                                     to Covid-19 enforced lockdown 
                                     restrictions, particularly city 
                                     centre locations. 
 
                                     Significant judgement has been 
                                     applied in determining whether 
                                     the impact of Covid-19 will be 
                                     temporary or permanent, and if 
                                     temporary, at what point the store 
                                     will return to its pre-Covid trading 
                                     levels. 
 
                                     31 stores have been identified 
                                     as being particularly negatively 
                                     impacted as a result of Covid-19 
                                     lockdown restrictions. The assets 
                                     attributable to these stores total 
                                     GBP20m. If these stores are not 
                                     able to recover to their pre-Covid 
                                     trading levels as expected, there 
                                     is a risk that impairment of up 
                                     to GBP20m may need to be recognised 
                                     in future periods. 
 
                                     A number of previously impaired 
                                     stores have seen their profitability 
                                     levels improve as a result of 
                                     increased trading from Covid-19 
                                     enforced lockdown restrictions. 
                                     However, impairment has not been 
                                     reversed in these cases as the 
                                     impact of Covid-19 is only expected 
                                     to be temporary for these stores. 
Discount                             Post tax discount rate representing      Post tax discount rate representing 
 rate                                 the Food segment's weighted average      the Funeralcare segment's weighted 
                                      cost of capital (WACC), subsequently     average cost of capital (WACC), 
                                      grossed up to a pre-tax rate of          subsequently grossed up to 
                                      8.2% (2019: 8.2%).                       a pre-tax rate of 9.5% (2019: 
                                                                               8.2%). 
                                      Post tax WACC calculated using 
                                      the capital asset pricing model.         Post tax WACC calculated using 

                                                                               the capital asset pricing model. 
                                      Certain inputs into the capital 
                                      asset pricing model are not readily      Certain inputs into the capital 
                                      available for non-listed entities.       asset pricing model are not 
                                      As such, certain inputs have been        readily available for non-listed 
                                      obtained from industry benchmarks        entities. As such, certain 
                                      which carries a measure of estimation    inputs have been obtained from 
                                      uncertainty. However, as discussed       industry benchmarks which carries 
                                      in the sensitivity section below,        a measure of estimation uncertainty. 
                                      this estimation uncertainty level        However, as discussed in the 
                                      is not deemed to be material.            sensitivity section below, 
                                                                               this estimation uncertainty 
                                      In each of the current and comparative   level is not deemed to be material. 
                                      years, sensitivity analysis has 
                                      been performed in relation to            In each of the current and 
                                      our store impairment testing,            comparative years, sensitivity 
                                      testing for a 1% increase in discount    analysis has been performed 
                                      rate and a decrease in growth            in relation to our Funeralcare 
                                      to minus 1%; within both these           Hub impairment testing, testing 
                                      sensitivities no additional material     for a 1% increase in discount 
                                      impairment was calculated. The           rate and a decrease in growth 
                                      sensitivity analysis performed           to minus 1%; within both these 
                                      considers reasonably possible            sensitivities no additional 
                                      changes in the discount rate and         material impairment was calculated. 
                                      growth rate assumptions.                 The sensitivity analysis performed 
                                                                               considers reasonably possible 
                                      Sensitivity analysis has also            changes in the discount rate 
                                      been performed on our goodwill           and growth rate assumptions. 
                                      impairment testing, see Goodwill 
                                      impairment - sensitivity testing         Sensitivity analysis has also 
                                      below.                                   been performed on our goodwill 
                                                                               impairment testing, see Goodwill 
                                      Our main sensitivity in relation         impairment - sensitivity testing 
                                      to our Food store impairment testing     below. 
                                      is shown in the Covid Considerations 
                                      box above. 
 
 
Critical accounting estimates and judgements 
 
Goodwill impairment - sensitivity 
testing 
 
The key assumption used in the review for potential impairment of goodwill 
 within the Food business is cash flows from operation of stores (no 
 growth rates (short or long term)) have been applied within our impairment 
 testing, to reflect the current levels of uncertainty within the UK 
 economy as a result of the Covid-19 pandemic (2019: 1.9%-2.5%) based 
 on management's best estimate based on the profile of the stores, and 
 including an allocation of central costs, taken into perpetuity and 
 discounted to present value at a pre-tax rate of 8.2% (2019: 8.2%). 
 In each of the current and comparative years, sensitivity analysis has 
 been performed on this assumption, testing for a 1% increase in discount 
 rate and a decrease in growth to minus 1%; within both these sensitivities 
 the cash flows remain well in excess of the current carrying value. 
 The sensitivity analysis performed considers reasonably possible changes 
 in the discount rate and growth rate assumptions. 
 
 For the Funerals goodwill impairment review, average selling price 
 increases and wage and cost inflation have been applied in line with 
 the assumptions in the four-year plan. Cash flows have been projected 
 based on the four-year plan and into perpetuity from year five and discounted 
 back to present value using a pre-tax discount rate of 9.5% (2019: 8.2%). 
 No long term growth rates have been applied beyond the four-year plan 
 period (2019: 1.9%). Sensitivity analysis has been performed with the 
 discount rate increased by 1% and a decrease in growth by minus 1%, 
 and under these sensitivities no further material amounts of impairment 
 are calculated. The sensitivity analysis performed considers reasonably 
 possible changes in the discount rate and growth rate assumptions. 
 
Accounting policies 
 Where parts of an item of property, plant and equipment have materially 
 different useful economic lives, they are accounted for as separate 
 items of property, plant and equipment. Cost includes purchase price 
 plus any costs directly attributable to bringing the assets to the location 
 and condition necessary for it to be capable of operating in the manner 
 intended by management. Depreciation is provided on the cost or valuation 
 less estimated residual value (excluding freehold land) on a straight-line 
 basis over the anticipated working lives of the assets. The estimated 
 useful lives are as follows: 
 
  Property 
  Freehold buildings - 50 years 
  Leasehold property - shorter of period of lease or 50 years 
  All properties are measured at cost less accumulated depreciation and 
  impairment losses. 
 
  Plant & equipment 
  Plant and machinery - 3 to 13 years 
  Vehicles - 3 to 9 years 
 
  The residual value, if significant, is reassessed annually. 
We no longer include property, plant and equipment in our balance sheet 
 when the Group loses the right to the future economic benefits associated 
 with the asset. For property, this usually happens when we have exchanged 
 contracts on an unconditional basis to sell it. 
Impairment 
 At each reporting date, the Group reviews the carrying amounts of its 
 property, plant and equipment to determine whether there is any indication 
 that those assets have suffered an impairment loss. If any such indication 
 exists, the recoverable amount of the asset, being the higher of its 
 fair value less costs to dispose and its value in use, is estimated 
 in order to determine the extent of the impairment loss. Impairment 
 losses are recognised in the income statement. 
 
 Where the asset does not generate cash flows that are independent from 
 other assets, the Group estimates the recoverable amount of the cash-generating 
 unit (CGU) to which the asset belongs. For Food stores, the CGU is deemed 
 to be each trading store. For Funeralcare, the CGU is deemed to be a 
 local network of interdependent branches. Where an individual branch 
 within a local network is to be closed, the individual branch is defined 
 as the CGU, rather than being included with the network of interdependent 
 branches. This is because the branch is no longer expected to contribute 
 to the business through cash generated through its operating activities 
 but instead through any proceeds on disposal. 
 
 An impairment loss is reversed if there has been a change in the estimate 
 used to determine the recoverable amount. An impairment loss is reversed 
 only to the extent that the asset's carrying amount is returned to what 
 it would have been, net of depreciation or amortisation, if no impairment 
 loss had been recognised. 
 
 
10 Leases 
 
 
What does this show? This note shows the value of our leased assets 
 and the corresponding value of our lease liabilities. The tables show 
 how these balances have moved in the period from additions, disposals, 
 payments, interest charges and impairments. 
 
 
 
A. As a lessee 
 
Right-of-use 
 assets 
                                                   Property           Plant    Total 
                                                              and equipment 
                                                       GBPm            GBPm     GBPm 
Balance at 4th January 
 2020                                                   979              66    1,045 
Depreciation charge 
 for the year                                          (98)            (15)    (113) 
Additions                                                93              28      121 
Disposals                                               (9)               -      (9) 
Transfer to assets held 
 for sale (see Note 13)                                 (2)               -      (2) 
Impairment                                             (11)               -     (11) 
Balance at 2nd January 
 2021                                                   952              79    1,031 
 
Balance at 6th January 
 2019                                                 1,011              45    1,056 
Depreciation charge 
 for the year                                          (98)            (12)    (110) 
Additions                                               100              33      133 
Disposals                                               (9)               -      (9) 

Impairment                                             (25)               -     (25) 
Balance at 4th January 
 2020                                                   979              66    1,045 
 
 
The Group leases many assets, principally it leases properties for its 
 food retail stores and funeral branches as well as some vehicles and 
 other equipment. The leases of retail stores are typically between 1 
 and 20 years in length (2019: 1 and 20 years), and leases of funeral 
 branches are typically between 1 and 8 years in length (2019: 1 and 
 8 years). Vehicle and equipment leases are typically between 1 and 4 
 years in length (2019: 1 and 4 years) and in some cases the Group has 
 options to purchase the assets at the end of the contract term. 
 
 
                                                                       2020     2019 
Lease liabilities                                                      GBPm     GBPm 
Current                                                               (191)    (193) 
Non-current                                                         (1,234)  (1,277) 
Lease liabilities included in the 
 Consolidated balance sheet                                         (1,425)  (1,470) 
 
                                                                       2020     2019 
                                                                       GBPm     GBPm 
Lease liabilities                                                   (1,470)  (1,482) 
Additions                                                             (114)    (145) 
Disposals                                                                26       42 
Interest expense                                                       (77)     (78) 
Transfer to liabilities 
 held for sale (see Note 
 13)                                                                      5        - 
Payments                                                                205      193 
Total lease 
 liabilities                                                        (1,425)  (1,470) 
 
The Group recognised rent expense from 
 short-term leases of GBP3m (2019: GBP1m). 
 
 
Extension and termination 
 options 
 
Some leases of retail stores contain extension or termination options 
 exercisable by the Group up to one year before the end of the non-cancellable 
 contract period. Where practicable, the Group seeks to include extension 
 and termination options in new leases to provide operational flexibility. 
 The extension and termination options held are typically exercisable 
 only by the Group and not by the lessors. 
 
 The Group assesses at lease commencement whether it is reasonably certain 
 to exercise the extension or termination options. The Group reassesses 
 whether it is reasonably certain to exercise the options if there is 
 a significant event or significant change in circumstances within its 
 control. 
 
 As at 2 January 2021, potential discounted future cash outflows of 
 GBP139m (2019: GBP124m) have not been included in the lease liability 
 because it is not reasonably certain that the Group will exercise the 
 extension option. Included within the lease liability are discounted 
 future cash outflows of GBP125m (2019: GBP135m) where the group holds 
 termination options but it is not reasonably certain to execute those 
 termination options. 
 
Sale and leaseback 
During the year the Group completed sale and leaseback transactions 
 on some of its freehold buildings used within food retail and our funerals 
 business. Aggregate consideration of GBP7m (2019: GBP30m) was received, 
 a net lease liability of GBP2m (2019: GBP7m) was recognised and net 
 book value of GBP3m (2019: GBP19m) disposed creating a profit on disposal 
 of GBP2m (2019: GBP4m). 
 
B. As a lessor 
Lease income from lease contracts in which the Group acts 
 as a lessor is as below: 
 
                                                                              2020   2019 
                                                                              GBPm   GBPm 
Operating 
 lease (i) 
Lease income                                                                    12      9 
Finance lease 
 (ii) 
Finance income on the net 
 investment in the lease                                                         3      4 
 
i. Operating 
 lease 
 
The Group leases out its investment property. The Group classifies these 
 leases as operating leases, because they do not transfer substantially 
 all the risks and rewards incidental to the ownership of the assets. 
 The following table sets out a maturity analysis of lease payments, 
 showing the undiscounted lease payments to be received after the reporting 
 date. 
 
                                                                              2020   2019 
                                                                              GBPm   GBPm 
Less than 
 one year                                                                        7      8 
One to two 
 years                                                                           6      7 
Two to three 
 years                                                                           5      6 
Three to four 
 years                                                                           4      4 
Four to five 
 years                                                                           4      4 
More than 
 five years                                                                     45     77 
Total undiscounted lease 
 payments receivable                                                            71    106 
 
ii. Finance 
 lease 
 
The Group also sub-leases some of its non-occupied leased properties. 
 The Group classifies the sub-lease as a finance lease, where the period 
 of the sublease is for substantially the remaining term of the head 
 lease. The following table sets out a maturity analysis of lease receivables, 
 showing the undiscounted lease payments to be received after the reporting 
 date. 
 
                                                                              2020   2019 
                                                                              GBPm   GBPm 
Less than 
 one year                                                                       12     12 
One to two 
 years                                                                          11     11 
Two to three 
 years                                                                           8     10 
Three to four 
 years                                                                           7      8 
Four to five 
 years                                                                           7      7 
More than 
 five years                                                                     31     38 
Total undiscounted lease 
 payments receivable                                                            76     86 
Less: Unearned finance 
 income                                                                       (21)   (24) 
Present value of minimum lease payments 
 receivable                                                                     55     62 
Impairment loss allowance                                                     (10)   (11) 
Finance lease receivable (net of 
 impairment allowance)                                                          45     51 
 
 
                                                                                2020               2019 
                                                                                GBPm               GBPm 
Current                                                                           11                 11 
Non-current                                                                       34                 40 
Finance lease receivable as per 
 Consolidated balance sheet                                                       45                 51 
 
The average term of finance leases entered into is 8 years (2019: 8 
 years). 
 
Impairment of finance 
 lease receivable 
The Group estimates the loss allowance on finance lease receivables 
 at an amount equal to lifetime expected credit losses. The lifetime 
 expected credit losses are estimated based upon historical defaults 
 on subleases, the credit quality of current tenants and forward-looking 
 factors. 
 
Accounting policies 
 
 Right-of-use assets 
 
 The Group recognises right-of-use assets at the commencement date of 
 the lease (i.e. the date the underlying asset is available for use). 
 Right-of-use assets are measured at cost, less any accumulated depreciation 
 and impairment losses, and adjusted for any remeasurement of lease liabilities. 
 The cost of right-of-use assets includes the amount of lease liabilities 
 recognised, initial direct costs incurred, and lease payments made at 
 or before the commencement date less any lease incentives received. 
 Unless the Group is reasonably certain to obtain ownership of the leased 
 asset at the end of the lease term, the recognised right-of-use assets 
 are depreciated on a straight-line basis over the shorter of its estimated 
 useful life and the lease term. Right-of-use assets are subject to impairment. 
 
 Lease liabilities 
 
 At the commencement date of the lease, the Group recognises lease liabilities 
 measured at the present value of lease payments to be made over the 
 lease term. The lease payments include fixed payments (including in-substance 
 fixed payments) less any lease incentives receivable, variable lease 
 payments that depend on an index or a rate, and amounts expected to 
 be paid under residual value guarantees. The lease payments also include 
 the exercise price of a purchase option reasonably certain to be exercised 
 by the Group and payments of penalties for terminating a lease, if the 
 lease term reflects the Group exercising the option to terminate. The 
 variable lease payments that do not depend on an index or a rate are 
 recognised as expense in the period on which the event or condition 
 that triggers the payment occurs. 
 

 In calculating the present value of lease payments, the Group uses 
 the incremental borrowing rate at the lease commencement date if the 
 interest rate implicit in the lease is not readily determinable. After 
 the commencement date, the amount of lease liabilities is increased 
 to reflect the accretion of interest and reduced for the lease payments 
 made. In addition, the carrying amount of lease liabilities is remeasured 
 if there is a modification, a change in the lease term, a change in 
 the in-substance fixed lease payments or a change in the assessment 
 to purchase the underlying asset. 
 
 Short-term leases and leases of low-value assets 
 
 The Group applies the short-term lease recognition exemption to its 
 short-term leases of machinery and equipment (i.e., those leases that 
 have a lease term of 12 months or less from the commencement date and 
 do not contain a purchase option). It also applies the lease of low-value 
 assets recognition exemption to leases that are considered of low value 
 (i.e. below GBP5,000). Lease payments on short-term leases and leases 
 of low-value assets are recognised as expense on a straight-line basis 
 over the lease term. 
 
 
 
11 Goodwill and intangible 
 assets 
 
 
What does this show? Intangible assets have long-term value but no 
 physical presence, such as software or customer relationships. This 
 note shows how the amount we include on our balance sheet for these 
 assets has changed over the period. 
 
 
For period ended 2 January                        Goodwill     Computer        Acquired            Total 
 2021                                                          software        customer 
                                                                          relationships 
                                                                              and other 
                                                                            intangibles 
                                                      GBPm         GBPm            GBPm             GBPm 
Cost: 
At 4 January 2020                                    1,295          264              43            1,602 
Additions                                                -           60               -               60 
Reclassified as assets held 
 for sale (see Note 13)                                (4)          (8)               -             (12) 
Disposals                                             (14)            -               -             (14) 
At 2 January 2021                                    1,277          316              43            1,636 
Accumulated amortisation 
 and impairment: 
At 4 January 2020                                      383           96              36              515 
Charge for the period                                    -           16               1               17 
Reclassified as assets held 
 for sale (see Note 13)                                  -          (2)               -              (2) 
Disposals                                              (4)            -               -              (4) 
Impairment                                               5            -               -                5 
At 2 January 2021                                      384          110              37              531 
Net book value: 
At 2 January 2021                                      893          206               6            1,105 
 
 
For period ended 4 January                        Goodwill     Computer        Acquired            Total 
 2020                                                          software        customer 
                                                                          relationships 
                                                                              and other 
                                                                            intangibles 
                                                      GBPm         GBPm            GBPm             GBPm 
Cost: 
At 5 January 2019                                    1,302          211              43            1,556 
Additions                                                1           54               -               55 
Disposals                                              (8)          (1)               -              (9) 
At 4 January 2020                                    1,295          264              43            1,602 
Accumulated amortisation 
 and impairment: 
At 5 January 2019                                      376           83               3              462 
Charge for the period                                    -           13               4               17 
Impairment                                               7            -              29               36 
At 4 January 2020                                      383           96              36              515 
Net book value: 
At 4 January 2020                                      912          168               7            1,087 
 
Goodwill 
The components of goodwill 
 are as follows: 
                                                                                   2020             2019 
                                                                                   GBPm             GBPm 
Food                                                                                866              883 
Other businesses                                                                     27               29 
                                                                                    893              912 
 
Food goodwill includes GBP638m (2019: GBP652m) that is allocated to 
 the group of cash-generating units that is Food as a whole (this includes 
 GBP98m (2019: GBP98m) in relation to goodwill arising on the acquisition 
 of Nisa), GBP68m (2019: GBP70m) allocated to stores as part of the 
 Alldays group acquisition and GBP160m (2019: GBP161m) assessed against 
 other specific components of the Food business, none of which is individually 
 significant. 
The goodwill within other businesses principally relates to the goodwill 
 recognised in the Funeral and Legal Services businesses. 
 
For further detail in relation to the critical accounting policies 
 and estimates used in the Group's impairment assessment of goodwill, 
 please refer to Note 9. 
Accounting policies 
Goodwill 
 Goodwill represents the difference between the cost of the acquisition 
 and the fair value of the identifiable assets, liabilities and contingent 
 liabilities acquired. 
 
 Assets and liabilities accepted under a transfer of engagements are 
 restated at fair value, including any adjustments necessary to comply 
 with the accounting policies of the Group. 
 
 Goodwill is stated at cost less any accumulated impairment losses. 
 Goodwill is allocated to cash-generating units and is not amortised 
 but is tested annually for impairment. In respect of associates, the 
 carrying value of goodwill is included in the carrying amount of the 
 investment in the associate. Where impairment is required the amount 
 is recognised in the income statement and cannot be written back. 
 
 Negative goodwill arising on an acquisition is recognised directly 
 in the income statement. 
 
 Acquisition costs are expensed to the income statement when incurred. 
 
Computer software 
 Computer software is stated at cost less accumulated amortisation 
 and impairment. In Financial Services, all costs directly attributable 
 to the development of computer software for internal use are capitalised 
 and classified as intangible assets where they are not an integral 
 part of the related hardware and amortised over their useful life up 
 to a maximum of seven years. 
 
Assets in the course of construction 
 Assets in the course of construction includes directly attributable 
 software development costs and purchased software that are not an integral 
 part of the related hardware, as part of strategic projects that meet 
 the capitalisation requirements under IAS 38 (Intangible Assets) but 
 which have not yet been brought into use. The costs are held within 
 assets in the course of construction until the project has gone live 
 or the related asset is brought into use. At that point the costs will 
 be transferred out of this classification and will be amortised based 
 on the useful economic life as defined by the intangible asset accounting 
 policy noted below. 
 
Subsequent expenditure 
 Subsequent expenditure on capitalised intangible assets is capitalised 
 only when it increases the future economic benefits embodied in the 
 specific asset to which it relates. All other expenditure is charged 
 to the income statement as incurred. 
 
Amortisation 
 Amortisation is charged to the income statement on a straight-line 
 basis over the estimated useful lives of intangible assets. Goodwill 
 with an indefinite useful life is tested for impairment at each balance 
 sheet date. Other intangible assets are amortised from the date they 
 are available for use. The estimated useful lives are as follows: 
 -- Software development costs: 3 - 7 years 
 -- Other intangible assets: 1 - 10 years 
 
Impairment 
 Goodwill is reviewed for impairment at least annually by assessing 
 the recoverable amount of each cash-generating unit, or group of cash-generating 
 units, to which the goodwill relates. 
 
 Food: 
 In the Food business, the CGUs to which goodwill has been allocated 
 and the level at which it is monitored are deemed to be the respective 
 acquired retail chains of stores. For example, the impairment testing 
 of smaller acquisition groups such as Alldays is carried out using 
 the acquired stores within the acquisition group as the CGU. 
 
 The goodwill that arose on the acquisition of Somerfield and Nisa 
 is allocated to Food as a whole to reflect the synergies (principally 
 buying benefits) that benefit the whole business. Accordingly, impairment 
 testing for the Somerfield and Nisa goodwill balances is carried out 
 using all the food stores as the CGU. 
 
 Other businesses: 

 The majority of goodwill within other businesses is allocated to the 
 Funerals business. 
 
 In the Funerals business, a CGU to which goodwill has been allocated 
 is determined as a local network of interdependent branches. 
 
 Where an individual branch within a local network is to be closed, 
 the CGU attributable to that branch is redefined as being solely that 
 individual branch on the basis that the branch is no longer expected 
 to contribute to the business through cash generated through its operating 
 activities but instead through any proceeds on disposal. 
 
 
 
12 Funeral plan investments 
 
 
What does this show? Our Funerals business holds some investments 
 in relation to funeral plans. This note provides information on these 
 investments and how they are accounted for. 
 
 
Funeral plan investments as per                    2020                            2019 
 the balance sheet: 
                                                   GBPm                            GBPm 
Current                                               -                               - 
Non-current                                       1,331                           1,271 
Funeral plan investments                          1,331                           1,271 
 
Funeral plan investments held by the Group are as follows: 
                                                   2020                            2019 
                                                   GBPm                            GBPm 
Fair value through the income statement: 
Funeral plan investments 
 (see below)                                      1,331                           1,271 
Total Funeral plan investments                    1,331                           1,271 
 
                                                   2020                            2019 
Funeral plan investments:                          GBPm                            GBPm 
At start of period                                1,271                           1,223 
Net plan investments (including 
 ongoing instalments)                                86                             111 
Plans redeemed or cancelled                       (107)                            (74) 
Unrealised fair value movement on 
 funeral plan investments (Note 4)                   81                              11 
At end of period                                  1,331                           1,271 
 
See Note 16 for further detail on the accounting policy for funeral 
 plans. 
 
 
The Group holds investments on the balance sheet in respect of funeral 
 plan policies which are predominantly invested in individual whole-of-life 
 insurance policies and, to a much smaller extent, independent trusts. 
 The investments are subject to an annual actuarial valuation. This 
 gives an assessment as to the headroom of the funeral plan investments 
 over an estimated present value (on a wholesale basis) of delivering 
 the funeral. The most recent valuation was performed as at 30 September 
 2020 and the headroom achieved is shown in the table below. 
 
Funeral Plan Investments Actuarial                      30 September    30 September 
 Valuation 
                                                                2020            2019 
                                                                GBPm            GBPm 
Total Assets                                                   1,287           1,296 
Liabilities: 
Present value (wholesale 
 basis)                                                        1,247           1,207 
Total Liabilities                                              1,247           1,207 
Headroom                                                          40              89 
Headroom as a % of 
 liabilities                                                      3%              7% 
 
During the period plan sales significantly exceeded plan redemptions 
 which, all other things being equal, would increase both total assets 
 and liabilities. A slight reduction in the inflation assumption has 
 been offset by an increase in the wholesale cost per funeral and a 
 lower expected investment return, given market expectations at 30 
 September 2020. However, it should be recognised that the group continues 
 to manage plans for the medium to long term given, in the normal course 
 of business, this is when the majority of the liability will crystallise. 
 
Key assumption                                          30 September    30 September 
                                                                2020            2019 
Average total wholesale costs per plan 
 funeral                                                    GBP2,646        GBP2,563 
 
The actuarial report is a best estimate and is neither deliberately 
 optimistic nor pessimistic. It is prepared by independent actuaries 
 based on management assumptions such as future funeral and disbursement 
 inflation. The headroom percentage is expressing the surplus as a 
 percentage of total liabilities. A 0.1% increase in the inflation 
 assumptions would reduce the surplus by approximately GBP24m (2019: 
 GBP21m). 
The "wholesale" actuarial valuation is based upon the Group's estimate 
 of the direct cost for a third party funeral director to perform the 
 promised services and the payment of associated disbursements (crematoria, 
 clergy fees etc) as if the Group were not in a position to carry out 
 these funerals. No incremental overheads are included because it's 
 assumed that the provider could absorb these funerals into existing 
 infrastructures. As the Group fully intends to perform these funerals 
 and undertake the professional funeral services itself the actual 
 cost would in reality be lower and subsequent marginal cost surplus 
 would be higher than the wholesale cost surplus. 
 
 
 
13 Assets and liabilities held for sale 
 
 
What does this show? This shows the value of any assets or liabilities 
 that we hold for sale at the period end (these generally relate to properties 
 or businesses that we plan to sell soon). When this is the case, our 
 balance sheet shows those assets and liabilities separately as held 
 for sale. 
 
 
                                                            2020      2019      2020      2019 
                                                            GBPm      GBPm      GBPm      GBPm 
                                                               Assets held    Liabilities held 
                                                                  for sale            for sale 
(a) Discontinued operation 
 - Insurance (see Note 7)                                      -     1,087         -     1,015 
(b) Other assets and liabilities 
 held for sale (see below)                                    21         3         5         - 
Total                                                         21     1,090         5     1,015 
 
(a) Discontinued operation 
 - Insurance 
The results of our Insurance underwriting business have been classified 
 as a discontinued operation from 2018 as the sale of the business was 
 highly probable at the 2018 and 2019 year end dates. The business has 
 subsequently been sold on 3 December 2020 and the assets and liabilities 
 have been removed from the balance sheet on disposal. Further detail 
 on the final disposal accounting is given in Note 7 (Loss on discontinued 
 operations, net of tax). 
 
                                                            2020      2019      2020      2019 
                                                            GBPm      GBPm      GBPm      GBPm 
(b) Other assets and liabilities                               Assets held    Liabilities held 
 classified as held for sale                                      for sale            for sale 
Goodwill and Intangible 
 assets                                                       10         -         -         - 
Right-of-use assets 
 (leases)                                                      2         -         -         - 
Lease liabilities                                              -         -         5         - 
Property, plant and 
 equipment                                                     9         3         -         - 
                                                              21         3         5         - 
 
Goodwill and intangible assets held for sale includes GBP6m in relation 
 to the proposed sale of our Health business which was highly probable 
 at the balance sheet date. Further details are given in Note 18 (Events 
 after the reporting period). 
 
Accounting policies 
 Non-current assets (or disposal groups comprising assets and liabilities) 
 that are expected to be recovered primarily through sale rather than 
 through continuing use are classified as held for sale. Immediately 
 before classification as held for sale, the assets (or components of 
 a disposal group) are remeasured in accordance with the Group's accounting 
 policies. After that, generally the assets (or disposal group) are measured 
 at the lower of their carrying amount and fair value less cost to sell. 
 Any impairment loss on a disposal group is first allocated to goodwill, 
 and then to remaining assets and liabilities on a pro rata basis, except 
 that no loss is allocated to inventories, financial assets, deferred 
 tax assets, employee benefit assets, investment property and biological 
 assets, which continue to be measured in accordance with the Group's 
 accounting policies. Impairment losses on initial classification as 
 held for sale and subsequent gains or losses on remeasurement are recognised 
 in the income statement. Gains are not recognised in excess of any cumulative 
 impairment loss. See also accounting policy in Note 7 (Loss on discontinued 
 operation, net of tax). 
 
 
14 Interest-bearing loans and borrowings 
 
 
What does this show? This note provides information about the terms 
 of our interest-bearing loans. This includes information about their 
 value, interest rate and repayment terms and timings. Details are also 

 given about other borrowings and funding arrangements such as corporate 
 investor shares and leases. All items are split between those that 
 are due to be repaid within one year (current) and those which won't 
 fall due until after more than one year (non-current). 
 
 
Non-current liabilities:                                                   2020   2019 
                                                                           GBPm   GBPm 
GBP105m 7.5% Eurobond Notes due 2026 (fair 
 value)                                                                     128    121 
GBP245m 7.5% Eurobond Notes due 2026 (amortised 
 cost)                                                                      259    261 
GBP300m 5.125% Sustainability Bond due 2024 
 (amortised cost)                                                           298    299 
GBP109m 11% Final repayment subordinated notes 
 due 2025                                                                   109    109 
GBP20m 11% Instalment repayment notes (final 
 payment 2025)                                                                9     13 
Total (excluding lease liabilities)                                         803    803 
Lease liabilities                                                         1,234  1,277 
Total Group interest-bearing loans and borrowings                         2,037  2,080 
 
 
Current liabilities:                                                       2020   2019 
                                                                           GBPm   GBPm 
GBP11m 6.875% Eurobond Notes due 2020 (fair 
 value)*                                                                      -     11 
GBP165m 6.875% Eurobond Notes due 2020 (amortised 
 cost) *                                                                      -    167 
GBP165m 6.875% Eurobond Notes due 2020 (amortised 
 cost) - interest accrued *                                                   -      5 
GBP245m 7.5% Eurobond Notes due 2026 (amortised 
 cost) - interest accrued                                                     9      9 
GBP300m 5.125% Sustainability Bond due 2024 (amortised 
 cost) - interest accrued                                                     2      2 
GBP20m 11% Instalment repayment notes (final 
 payment 2025)                                                                2      1 
GBP400m Sustainable revolving credit facility                                 -      1 
Corporate investor shares                                                     3      4 
Total (excluding lease liabilities)                                          16    200 
Lease liabilities                                                           191    193 
Total Group interest-bearing loans and borrowings                           207    393 
 
* In-line with the contractual expiry terms of the instrument then 
 the Group repaid GBP176m of the principal balance of the 6.875% 2020 
 Eurobond on the 8 July 2020. 
See Note 16 for more information about the Group's exposure to interest 
 rate and foreign currency risk, and a breakdown of the Group's borrowings 
 by the three-level fair value hierarchy (which reflects different valuation 
 techniques) as defined within IFRS 13 (Fair Value Measurement). 
 
 
Reconciliation of movement 
 in net debt 
Net debt is a measure that shows the amount we owe to banks and other 
 external financial institutions less the cash that we have and any 
 short-term deposits. Some of our Eurobond borrowings are held as financial 
 liabilities at fair value through the income statement. The fair value 
 movement on these liabilities is shown under non-cash movements in 
 the tables below. 
 
For period ended 2 January                               Start    Non cash movements   Cash   End of 
 2021                                                of period                         flow   period 
                                                                  New leases   Other 
                                                          GBPm          GBPm    GBPm   GBPm     GBPm 
Interest-bearing loans and 
 borrowings: 
 - current                                               (200)             -    (54)    238     (16) 
 - non-current                                           (803)             -       -      -    (803) 
Lease liabilities 
 - current                                               (193)          (15)   (188)    205    (191) 
 - non-current                                         (1,277)          (99)     142      -  (1,234) 
Total Debt                                             (2,473)         (114)   (100)    443  (2,244) 
Group cash: 
 - cash & overdrafts                                       308             -       -   (39)      269 
Group Net 
 Debt                                                  (2,165)         (114)   (100)    404  (1,975) 
Less fair value / amortised 
 cost adjustment                                            33             -       1      -       34 
Group Net Debt before fair value 
 / amortised cost adjustment                           (2,132)         (114)    (99)    404  (1,941) 
 
 
For period ended 4 January                 Start     Impact       Non cash movements   Cash   End of 
 2020                                  of period   on adoption                         flow   period 
                                                     of IFRS 
                                                       16 
                                                                  New leases   Other 
                                            GBPm          GBPm          GBPm    GBPm   GBPm     GBPm 
Interest-bearing loans and 
 borrowings: 
 - current                                  (66)             -             -   (182)     48    (200) 
 - non-current                             (976)             -             -     176    (3)    (803) 
Lease liabilities 
 - current                                   (4)         (177)          (19)   (186)    193    (193) 
 - non-current                              (28)       (1,273)         (126)     150      -  (1,277) 
Total Debt                               (1,074)       (1,450)         (145)    (42)    238  (2,473) 
Group cash: 
 - cash & overdrafts                         278             -             -       -     30      308 
Group Net 
 Debt                                      (796)       (1,450)         (145)    (42)    268  (2,165) 
Less fair value / amortised 
 cost adjustment                              46             -             -       1   (14)       33 
Group Net debt before fair 
 value / amortised cost adjustment         (750)       (1,450)         (145)    (41)    254  (2,132) 
 
Details of the Group's bank facilities are shown in Note 16. 
The tables above do not include balances in relation to CISGIL which 
 was classified as Held for sale in both periods and subsequently disposed 
 of on 3 December 2020. 
 
 
Terms and repayment schedule 
 
The 2026 GBP350m 7.5% bond has an original value of GBP350m (carrying 
 amount of GBP387m). This bond has been paying an additional 1.25% coupon 
 since 8 July 2013 following the downgrade of the Group's credit rating 
 to sub-investment grade. On maturity this bond will be repaid at par. 
The Group also has two subordinated debt instruments in issue - GBP109m 
 11% final repayments notes due 2025 and GBP20m 11% instalment repayment 
 notes, final repayment 2025. As at 2 January 2021 the GBP109m 11% final 
 repayments notes had an outstanding value of GBP109m. The GBP20m 11% 
 instalment repayment notes had an outstanding value of GBP11m. 
 
  The Group issued a GBP300m Sustainability bond in May 2019. The bond 
  is repayable in May 2024 and has an interest rate of 5.125%. As at 
  2 January 2021, the bond proceeds had been fully allocated against 
  the cost of purchasing Fairtrade products for resale (2019: GBP240m). 
The GBP400m RCF facility now matures in September 2023, following the 
 exercise of the Group's first extension option. A second extension 
 option remains exercisable in 2021. The RCF has been agreed on a sustainable 
 basis with rates of interest linked to the Group's CO2 emission targets. 
Further details of the Group's remaining banking facilities are given 
 in Note 16. 
 
Corporate investor 
shares 
 
Corporate investor shares represent borrowings the Group has with other 
 co-operative societies. The rate of interest payable on the borrowings 
 is determined by reference to the London Interbank Offered Rate (LIBOR). 
 The borrowings are split into Variable Corporate Investor Shares (VCIS) 
 and Fixed Corporate Investor Shares (FCIS). The VCIS are repayable 
 on demand and the rate of interest that is charged is fixed across 
 all societies based on a policy of LIBOR minus 0.5% with a minimum 
 of 0.25%. The FCIS are fixed term borrowings at fixed rates of interest 
 (currently 1%). Corporate investor shares may be issued to existing 
 corporate members who hold fully paid corporate shares and are registered 
 under the Co-operative and Communities Benefit Act 2014. 
 
Accounting policies 
 The Group measures its interest-bearing loans and borrowings in two 
 main ways: 
 
 1) Fair value through the income statement. Debt is restated as its 
 fair value each period with the fair value movement going through the 
 income statement. The hedged portion of the Eurobond quoted debt is 
 accounted for in this way. This is because the Group has used interest 
 rate swaps to hedge the impact of movements in the interest rate and 
 the movement in the fair value of the quoted debt is partially offset 
 by the fair value movement in the interest rate swaps (Notes 4 and 
 5). The un-hedged portion of the Eurobond quoted debt is accounted 
 for at amortised cost in accordance with IFRS 9. This approach applies 
 to those borrowings taken out prior to the adoption of IFRS 9 in 2018. 
 Any subsequent borrowings are measured at amortised cost as noted below. 
 
 2) Amortised cost. Borrowings are recognised initially at fair value, 
 which equates to issue proceeds net of transaction costs incurred. 

 Borrowings are subsequently stated at amortised cost. Any difference 
 between proceeds net of transaction costs and the redemption value 
 is recognised in the income statement over the period of the borrowings 
 using the effective interest rate method. The effective interest rate 
 is calculated when borrowings are first taken out and is the rate that 
 exactly discounts the estimated future cash payments associated with 
 the borrowings to the value when they are initially recognised. 
 
 
 
15 Pensions 
 
What does this show? This note provides information about our pension 
 schemes. It explains the types of pension scheme we have, the assets 
 and liabilities they hold, the assumptions used in valuing the pension 
 schemes and the key risks faced in connection with the schemes. 
 
 
                                                                                                                     2020      2019 
                                                                                                                     GBPm      GBPm 
Pension schemes in surplus                                                                                          1,931     1,973 
Pension schemes 
 in deficit                                                                                                          (77)     (109) 
Closing net retirement 
 benefit surplus                                                                                                    1,854     1,864 
 
Defined benefit (DB) plans 
The Group operates five funded DB pension schemes all of which are 
 closed to future accrual. This means that colleagues can no longer 
 join or earn future benefits from these schemes. The assets of these 
 schemes are held in separate trustee-administered funds to meet future 
 benefit payments. 
The Group's largest pension scheme is the Co-operative Group Pension 
 Scheme ('Pace') which accounts for approximately 80% of the Group's 
 pension assets. The DB section of Pace ('Pace Complete') closed to 
 future service accrual on 28 October 2015. Further information about 
 Pace is set out below. 
 
Defined contribution (DC) plans 
Since the closure of the DB schemes, the Group provides all colleagues 
 with DC pension benefits through the DC section of Pace. Colleagues 
 are able to select the level of contributions that they wish to pay. 
 The contribution paid by the Group varies between 1% and 10% of pensionable 
 salary depending on the contribution tier that the scheme member has 
 selected. 
 
Contributions are based on the scheme member's basic pay plus any earnings 
 in respect of overtime, commission and shift allowance. 
 
The Pace DC section provides benefits based on the value of the individual 
 colleague's fund built up through contributions and investment returns. 
 The Group has no legal or constructive obligation to pay contributions 
 beyond those set out above. There is therefore no balance sheet items 
 for DC pension benefits except for any accrued contributions. 
 
Balance sheet position for DB plans 
The table below summarises the net surplus in the balance sheet by 
 scheme: 
                                                                                                                      Net       Net 
                                                                                                                     2020      2019 
                                                                                                                     GBPm      GBPm 
Schemes in surplus 
The Co-operative Group 
 Pension Scheme (Pace)                                                                                              1,854     1,869 
Somerfield Pension 
 Scheme                                                                                                                71       104 
Yorkshire Co-operatives Limited Employees' 
 Superannuation Scheme                                                                                                  6         - 
Total schemes 
 in surplus                                                                                                         1,931     1,973 
Schemes in deficit 
United Norwest Co-operatives Employees' 
 Pension Fund                                                                                                        (43)      (73) 
The Plymouth and South West Co-operative Society Limited 
 Employees' Superannuation Fund                                                                                      (29)      (31) 
Other unfunded 
 obligations                                                                                                          (5)       (5) 
Total schemes 
 in deficit                                                                                                          (77)     (109) 
Total 
 schemes                                                                                                            1,854     1,864 
 
Recognition of accounting surplus 
Any net pension asset disclosed represents the maximum economic benefit 
 available to the Group in respect of its pension obligations. The Group 
 has carried out a review of the provisions for the recovery of surplus 
 in its pension schemes. This review concluded that the Group can recoup 
 the benefits of the surplus via a right to refunds and this is reflected 
 in the balance sheet position. 
 
Events arising during the year - Pace Bulk Annuities 
During the year, the Trustees of the Co-operative Group Pension Scheme 
 (Pace) entered into pension insurance buy-in contracts with Aviva (in 
 January 2020 and again in May 2020), worth a total of GBP1,368m and 
 Pension Insurance Corporation (PIC), in February 2020, worth cGBP1,032m. 
 As a result of these transactions, the Co-op section of the scheme 
 will receive regular payments from Aviva and PIC to fund all future 
 pension payments for c16,300 current pensioners. 
 
  The methodology used to value these transactions results in a decrease 
  in the value of the surplus by GBP400m in the Pace Scheme. As the insurance 
  contracts are assets of the scheme and the scheme has retained all 
  responsibility to meet future pension payments to pensioners this will 
  not be recognised as a settlement and consequently the decrease in 
  value of GBP400m has been recognised as a charge through Other Comprehensive 
  Income at the 2020 year end. 
 
Events arising during the year - Revisiting historic transfer values 
 to account for GMP Equalisation 
In 2018 an allowance was made in the accounts in respect of revisiting 
 Guaranteed Minimum Pensions (GMPs) in light of the judgement on the 
 back of the Lloyds case. A second hearing in November 2020 concluded 
 that schemes must top-up past transfer payments paid since 17 May 1990 
 that failed to take account of the obligation to equalise for GMPs. 
 A charge of GBP3m has been made and this is included within one off 
 items in the Consolidated income statement. 
 
Pace - nature of scheme 
As Pace represents around 80% of the Group's pension assets, further 
 information has been included on Pace below. As all of the DB schemes 
 will be exposed to similar risks to Pace, we have not provided additional 
 commentary on each scheme. Benefits accrued in Pace between 6 April 
 2006 and 28 October 2015 are calculated based on an individual's average 
 career salary. Benefits accrued prior to 6 April 2006 are linked to 
 final salary until scheme members end their pensionable service. 
 
Pace - funding position 
A valuation of the Co-op section of Pace DB was carried out as at 5 
 April 2019, in accordance with the scheme specific funding requirements 
 of the Pensions Act 2004. The results of the valuation showed that 
 the Co-op section of Pace DB had a surplus of GBP907m. On completion 
 of the actuarial valuation in July 2020 the Group and the Trustee agreed 
 that no contributions would be required. 
 
Pace - multi-employer provisions following sectionalisation 
Pace is a mutli-employer scheme but following sectionalisation of the 
 scheme in 2018, the Group accounts only for the Co-op section of Pace. 
 CFSMS, a subsidiary of the Group, participates in the Co-op's section 
 with a material share of accrued DB obligations. There are other participating 
 employers in the Group section which include Group subsidiaries, non-associated 
 and associated entities, but these do not have a material share. Non-associated 
 entities account for pension contributions in respect of the scheme 
 on a DC basis. 
 
  As a multi-employer pension scheme, Pace exposes the participating 
  employers to the risk of funding the pension obligations associated 
  with the current and former colleagues of other participating employers. 
  The sectionalisation of Pace largely removes The Co-operative Bank's 
  (the 'Bank's') 'last man standing' obligation to the rest of the Pace 
  scheme but an obligation on the Group to support the pension liabilities 
  of the Bank section could arise in limited circumstances if the Bank 
  were to not meet its own section's pension liabilities. The Bank element 
  of Pace is fully funded on both an IAS 19 accounting and a statutory 
  funding basis. At 31 December 2020, the Bank reported an overall defined 
  benefit pension scheme surplus of GBP643m (2019: GBP682m). This included 
  GBP509m in relation to the Pace scheme consisting of assets of GBP2,169m 
  and liabilities of GBP1,660m. Given this surplus position then then 
  'last man standing' risk for the Group is very limited. 
 
Legislative framework for DB schemes - pension scheme governance 
As required by UK legislation, the Group's five DB schemes are run 
 by Trustee boards which operate independently from the Group. The Trustees 
 are responsible for the development and implementation of appropriate 
 policies for the investment of the scheme assets and for negotiating 
 scheme funding with the Group. The Trustees consult with the Group 
 in developing investment strategy and delegates the responsibility 

 for implementing and monitoring the strategy to Investment Committees. 
 
 Each Trustee board has at least one professional Trustee and there 
 is also a requirement for the boards to have some member representation. 
 The Pace Trustee Board is made up of three professional independent 
 Trustee Directors appointed by the Group and a further professional 
 Independent Trustee Director appointed by the Bank. Other Trustee Boards 
 are made up of professional independent Trustee Directors, Co-op appointed 
 Trustee Directors and Member Nominated Directors elected by scheme 
 members. The Chair is appointed by the Trustee Directors. 
Legislative framework for DB schemes - scheme funding regime 
Under the scheme specific funding regime established by the Pensions 
 Act 2004, trustees of DB pension schemes have to undertake a full actuarial 
 valuation at least every three years. The purpose of the valuation 
 is to determine if the scheme has sufficient assets to pay the benefits 
 when these fall due. The valuation targets full funding (scheme assets 
 equal to the value of pension liabilities) against a basis that prudently 
 reflects the scheme's risk exposure. The basis on which DB pension 
 liabilities are valued for funding purposes differs to the basis required 
 under IAS19. The Group may therefore be required to pay contributions 
 to eliminate a funding shortfall even when a surplus is reported in 
 the IAS19 disclosure. 
Any shortfall in the assets directly held by the Group's DB schemes, 
 relative to their funding target, is financed over a period that ensures 
 the contributions are reasonably affordable to the Group. 
Deficit contributions over the 2020 financial year totalled GBP43.2m 
 (broadly GBP50m pa agreed and paid until the end of June 2020 and then 
 GBP35m pa paid from July 2020). Deficit contributions to Pace and Somerfield 
 have now ceased but contributions are still required to the United, 
 Yorkshire and Plymouth schemes. All schemes target a more prudent level 
 of funding than the target stipulated under IAS19 which is included 
 in these financial statements. Therefore the funding levels are not 
 comparable and it is possible to have a surplus under IAS19 and yet 
 still be required to pay deficit contributions. We also cannot use 
 a surplus in one scheme to offset the requirement to pay cash contributions 
 to fund a deficit in another scheme. Total expected deficit contributions 
 required in 2021 is GBP35m. 
The average duration of the liabilities is approximately 22 years. 
 The benefits expected to be paid from the schemes take the form of 
 a cash lump sum paid at retirement followed by a stream of pension 
 payments. 
 
The effective date of the last full valuations of 
 the schemes are shown below: 
The Co-operative Pension                                                                                                    5 April 
 Scheme ('Pace')                                                                                                               2019 
Somerfield Pension Scheme ('Somerfield Scheme')                                                                            31 March 
                                                                                                                               2019 
United Norwest Co-operatives Employees'                                                                                          31 
 Pension Fund ('United Fund')                                                                                               January 
                                                                                                                               2017 
Plymouth and South West Co-operative Society Limited Employees'                                                            31 March 
 Superannuation Fund ('Plymouth Fund')                                                                                         2019 
Yorkshire Co-operatives Limited Employees' Superannuation                                                                        31 
 Fund ('Yorkshire Fund')                                                                                                    January 
                                                                                                                               2017 
 
Risks associated with DB pension schemes 
The liability associated with the pension schemes is material to the 
 Group, as is the cash funding required. The Group and Trustees work 
 together to address the associated pension risk - in particular, steps 
 have been taken to significantly reduce the investment risk in the 
 schemes. 
The key risks in relation to the DB schemes are set out below, alongside 
 a summary of the steps taken to mitigate the risk: 
Risk description                                         Mitigation 
Risk of changes in contribution                          The closure of the DB schemes has reduced 
 requirements - When setting                              the exposure of the Group to changes in 
 the contributions that are                               future contributions. In addition, the Group 
 paid to a scheme, the Group                              and Trustee have taken steps to reduce the 
 and Trustee are required                                 volatility of the funding level (as set 
 to consider the funding level                            out below). The Group monitors the funding 
 at a specified valuation                                 level of the schemes in order to understand 
 date. The funding level at                               the likely outcome of valuations and the 
 future valuation dates is                                Trustee is required to obtain agreement 
 uncertain and this leads                                 from the Group to funding assumptions and 
 to uncertainty in future                                 deficit recovery contributions. 
 cash requirements for the 
 Group. 
Interest rate risk - Pension                             All of the schemes invest in liability-driven 
 liabilities are measured                                 investment (LDI) products which increase 
 with reference to yields                                 (decrease) in value when yields on government 
 on bonds, with lower yields                              bonds fall (rise), providing protection 
 increasing the liabilities.                              against interest rate risk. Across all schemes, 
 The schemes are therefore                                approximately 95% of the liability is currently 
 exposed to the risk of falls                             protected from movements in yields on government 
 in interest rates.                                       bonds. LDI involves investing in assets 
                                                          which are expected to generate cashflows 
                                                          that broadly mirror expected benefit payments 
                                                          from the scheme. 
Risk associated with volatility                          This risk has been mitigated by reducing 
 in asset value - The market                              the exposure of the pension schemes to those 
 value of the assets held                                 asset classes which have the most volatile 
 by the pension schemes, particularly                     market values. In particular, the schemes 
 the assets held in return-seeking                        have limited allocation to return-seeking 
 assets such as equity, can                               assets such as equity. 
 be volatile. This creates 
 a risk of short-term fluctuations 
 in funding level. 
Inflation risk - Many of                                 All of the schemes invest in liability driven 
 the benefits paid by the                                 investment products which increase (decrease) 
 schemes are linked to inflation.                         in value when expectations of future inflation 
 Therefore, the pension liabilities                       rates increase (fall), thus providing protection 
 reflect expectations of future                           against inflation risk. Across all schemes, 
 inflation with higher inflation                          approximately 95% of the liability is currently 
 leading to higher liabilities.                           protected from movements in inflation. 
Risk associated with changes                             All of the schemes' funding targets incorporate 
 in life expectancy - Pensions                            a margin for prudence to reflect uncertainty 
 paid by the schemes are guaranteed                       in future life expectancy. During 2020, 
 for life, and therefore if                               the Group reduced its exposure to longevity 
 members are expected to live                             risk in the Pace Scheme via three separate 
 longer, the liabilities increase.                        pensioner insurance buy-in contracts. 
 
Critical accounting estimates 
For IAS 19 disclosure purposes, DB obligations are determined following 
 actuarial advice and are calculated using the projected unit method. 
 The assumptions used are the best estimates chosen from a range of 
 possible actuarial assumptions which may not necessarily be borne out 
 in practice. 
 
Financial assumptions 
                                                                                                                     2020      2019 
Discount rate                                                                                                       1.47%     1.97% 
RPI Inflation rate                                                                                                  3.10%     3.18% 
Pension increases in payment (RPI 
 capped at 5% p.a.)                                                                                                 3.04%     3.11% 

Future salary increases                                                                                             3.35%     3.43% 
 
The discount rate has been derived by reference to market yields on 
 sterling-denominated high-quality corporate bonds of appropriate duration 
 consistent with the schemes at that date. 
Demographic assumptions 
The Group has used best estimate base mortality tables which reflect 
 the membership of each scheme. Allowance has been made for future improvements 
 in line with the Continuous Mortality Investigation (CMI) 2019 projections 
 and a long-term future improvement rate of 1.25% p.a. (2019: CMI 2018 
 1.25% p.a.). The actuaries considered no adjustment necessary in respect 
 of COVID experience. 
 
For illustration, the average life expectancy (in years) for mortality 
 tables used to determine scheme liabilities for Pace is as follows. 
 These are broadly similar to the life expectancies used for other schemes. 
 
Life expectancy from                                                                                                 2020       2019 
 age 65 
Male currently aged 
 65 years                                                                                                            21.0       20.9 
Female currently aged 
 65 years                                                                                                            23.4       23.2 
Male currently aged 
 45 years                                                                                                            22.0       22.0 
Female currently aged 
 45 years                                                                                                            24.6       24.5 
 
Sensitivities 
 The measurement of the Group's DB liability is particularly sensitive 
 to changes in certain key assumptions, which are described below. The 
 methods used to carry out the sensitivity analysis presented below 
 for the material assumptions are the same as those the Group has used 
 previously. The calculations alter the relevant assumption by the amount 
 specified, whilst assuming that all other variables remained the same. 
 This approach is not necessarily realistic, since some assumptions 
 are related: for example, if the scenario is to show the effect if 
 inflation is higher than expected, it might be reasonable to expect 
 that nominal yields on corporate bonds will also increase. However, 
 it enables the reader to isolate one effect from another. It should 
 also be noted that because of the interest rate and inflation hedges, 
 changes in the liability arising from a change in the discount rate 
 or price inflation would be expected to be largely mitigated by a change 
 in assets. 
 
                                                                                                                     2020       2019 
Change in liability from a 0.1% 
 increase in discount rate                                                                                          (197)      (200) 
Change in liability from a 0.1% 
 decrease in RPI inflation                                                                                          (147)      (154) 
Change in liability from a 0.25% increase in long-term 
 rate of longevity improvements                                                                                       129        128 
 
 
Changes in the present value of the                                                                                  2020       2019 
 defined benefit obligation (DBO) 
                                                                                                                     GBPm       GBPm 
Opening defined benefit 
 obligation                                                                                                         9,304      8,412 
Interest expense on DBO                                                                                               179        247 
Remeasurements: 
 a. Effect of changes in demographic 
  assumptions                                                                                                          22      (357) 
 b. Effect of changes in financial 
  assumptions                                                                                                         958      1,464 
 c. Effect of experience 
  adjustments                                                                                                       (251)       (37) 
Past service 
 costs                                                                                                                  3          - 
Benefit payments from 
 plan                                                                                                               (361)      (425) 
Closing defined benefit 
 obligation                                                                                                         9,854      9,304 
 
 
 
Changes in the fair value of the                                                                   2020       2019 
 plan assets 
                                                                                                   GBPm       GBPm 
Opening fair value 
 of plan assets                                                                                  11,168     10,271 
Interest income                                                                                     216        304 
Return on plan assets (excluding 
 interest income)                                                                                   646        972 
Administrative expenses paid from 
 plan assets                                                                                        (5)        (4) 
Employer contributions                                                                               44         50 
Benefit payments from plan                                                                        (361)      (425) 
Closing fair value 
 of plan assets                                                                                  11,708     11,168 
 
The fair value of the plan assets at the period end were as follows. 
 The assets have been split to show those which have a quoted market 
 price in an active market and those which are unquoted. 
 
                                                           2020      2020    2020      2019        2019       2019 
                                                         Quoted  Unquoted   Total    Quoted    Unquoted      Total 
                                                           GBPm      GBPm    GBPm      GBPm        GBPm       GBPm 
Equity instruments                                          276         -     276       265                    265 
Liability driven investments                              4,139         -   4,139     4,974           -      4,974 
Real estate                                                  17         -      17        31           -         31 
Investment grade 
 credit                                                   3,014         -   3,014     3,689           -      3,689 
Illiquid / other 
 credit                                                       -     1,377   1,377         -       1,385      1,385 
Alternative 
 investments                                                  -       374     374         -         368        368 
Cash and cash equivalents*                                   69     2,442   2,511        35         421        456 
                                                          7,515     4,193  11,708     8,994       2,174     11,168 
* GBP2,441m of the unquoted 'Cash and cash equivalents' represents 
 the value of the insurance buy-in contracts in respect of Pace and 
 Somerfield. 
 
Amounts recognised in the balance 
 sheet                                                                                             2020       2019 
                                                                                                   GBPm       GBPm 
Present value of funded 
 obligations                                                                                    (9,849)    (9,299) 
Present value of unfunded 
 liabilities                                                                                        (5)        (5) 
Fair value of 
 plan assets                                                                                     11,708     11,168 
Net retirement benefit 
 asset                                                                                            1,854      1,864 
 
 
Amounts recognised in the income statement 
 and other comprehensive income                                                                    2020       2019 
                                                                                                   GBPm       GBPm 
Interest expense on defined benefit 
 obligations                                                                                      (179)      (247) 
Interest income on 
 plan assets                                                                                        216        304 
Administrative expenses 
 and taxes                                                                                          (5)        (4) 
Past service 
 cost*                                                                                              (3)          - 
Total recognised in the income statement                                                             29         53 
Remeasurement losses on employee 
 pension schemes                                                                                   (83)       (99) 
Total recognised in other comprehensive 
 income                                                                                            (83)       (99) 
Total                                                                                              (54)       (46) 
 
* A charge of GBP3m has been made in respect of the obligation to equalise 

 GMPs. This is included within one off items in our Consolidated income 
 statement. 
Accounting policies 
The Group operates various defined contribution and defined benefit 
 pension schemes for its colleagues as stated above. A defined contribution 
 scheme is a pension plan under which the Group pays pre-specified contributions 
 into a separate entity and has no legal or constructive obligation 
 to pay any further contributions. A defined benefit scheme is a pension 
 plan that defines an amount of pension benefit that a colleague will 
 receive on retirement. In respect of the defined benefit pension scheme, 
 the pension scheme surplus or deficit recognised in the balance sheet 
 represents the difference between the fair value of the plan assets 
 and the present value of the defined benefit obligation at the balance 
 sheet date. The calculation of the defined benefit obligations is performed 
 annually by qualified actuaries (and half-yearly for Pace) using the 
 projected unit credit method. Plan assets are recorded at fair value. 
 When the calculation results in a potential asset for the Group, the 
 recognised asset reflects the present value of the economic benefits 
 that will arise from the surplus in the form of any future refunds 
 from the plan or reductions in future contributions to the plan. Obligations 
 for contributions to defined contribution plans are expensed as the 
 related service is provided. Prepaid contributions are recognised as 
 an asset to the extent that a cash refund or a reduction in future 
 payments is available. 
 
Remeasurements of the surplus / liability of each scheme (which comprise 
 actuarial gains and losses and asset returns excluding interest income) 
 are included within other comprehensive income. Net interest expense 
 and other items of expense relating to the defined benefit plans are 
 recognised in the income statement. Administrative costs of the plans 
 are recognised in operating profit. Net interest expense is determined 
 by applying the discount rate used to measure the defined benefit obligation 
 at the beginning of the year to the net defined asset / liability at 
 that point in time taking into account contributions within the period. 
 
 
 
16 Financial instruments, derivatives and valuation of financial assets 
 and liabilities 
 
What does this show? This note shows how our financial assets and liabilities 
 are valued, including our interest rate swaps. 
 
 
Derivatives 
Derivatives held for non-trading purposes for which hedge accounting 
 has not been applied are as follows: 
                                                        2020                                2019 
                                       Contractual/     Fair          Fair  Contractual/      Fair          Fair 
                                           notional    value         value      notional     value         value 
                                             amount   assets   liabilities        amount    assets   liabilities 
                                               GBPm     GBPm          GBPm          GBPm      GBPm          GBPm 
Interest rate swaps                             105        3             -           105         -           (1) 
Foreign exchange contracts                       89        -           (1)            20         -             - 
Commodity swaps (diesel)                         14        -             -             -         -             - 
Total recognised derivative 
 assets / (liabilities)                         208        3           (1)           125         -           (1) 
 
The interest rate swaps mature in 2026 and as such are held in non-current 
 assets. The majority of the foreign exchange contracts and diesel swaps 
 mature within 1 year so are shown in current liabilities. 
 
The following summarises the major methods and assumptions used in estimating 
 the value of financial instruments reflected in the annual report and 
 accounts: 
 
a) Financial instruments at fair value through the income statement 
Deposits with credit institutions 
 (Insurance) 
All Insurance investments were classified as held for sale in 2019 and 
 have subsequently been disposed of in 2020. See Note 7 (Loss on discontinued 
 operations, net of tax) for further details. In 2019 the fair value of 
 financial assets designated at fair value through the income statement, 
 being short-term (less than one month) fixed rate deposits, approximated 
 to their nominal amount. 
 
Investments in funeral plans 
Where there is no active market or the investments are unlisted, the 
 fair values are based on commonly used valuation techniques (refer to 
 accounting policy (section iv) of this note for further details. 
 
Derivatives 
Forward exchange contracts, such as the Group's interest rate swaps have 
 been determined by discounting expected future cash flows associated 
 with these instruments at the market interest rate yields as at the Group's 
 year end. The Group's derivatives are not formally designated as hedging 
 instruments but under IFRS 9 (Financial Instruments) they are used to 
 match against a proportion of the Eurobond liabilities carried at fair 
 value through the income statement, showing as a cost of GBPnil in 2020 
 and GBP1m in 2019 (see Note 5). 
 
Fixed rate sterling Eurobonds 
The fixed rate sterling Eurobond values are determined in whole by using 
 quoted market prices. 
 
b) Financial instruments at fair value through other comprehensive income 
 (Insurance - underwriting business) 
 All insurance investments were transferred to held for sale in 2019 
 and have subsequently been disposed of in 2020. See Note 7 (Loss on discontinued 
 operations, net of tax) for further details. The fair value of listed 
 debt securities was based on clean bid prices at the balance sheet date 
 without any deduction for transaction costs. Assets were regularly reviewed 
 for impairment. Objective evidence of impairment can include default 
 by a borrower or issuer, indications that a borrower or issuer will enter 
 bankruptcy or the disappearance of an active market for that financial 
 asset because of financial difficulties. These reviews gave particular 
 consideration to evidence of any significant financial difficulty of 
 the issuer or measurable decrease in the estimated cash flows from the 
 investments. 
 
c) Interest-bearing loans and borrowings - amortised cost 
These are shown at amortised cost which presently equate to fair value 
 or are determined in whole by using quoted market prices. Fair value 
 measurement is calculated on a discounted cash flow basis using prevailing 
 market interest rates. 
 
d) Receivables and payables 
 For receivables and payables with a remaining life of less than one 
 year, the nominal amount is deemed to reflect the fair value, where the 
 effect of discounting is immaterial. 
 
The table below shows a comparison of the carrying value and fair values 
 of financial instruments for those liabilities not carried at fair value. 
 
Financial liabilities                                             Carrying          Fair  Carrying          Fair 
                                                                     value         value     value         value 
                                                                      2020          2020      2019          2019 
                                                                      GBPm          GBPm      GBPm          GBPm 
Interest-bearing loans and 
 borrowings                                                            691           769       871           875 
 
 
The table below analyses financial instruments by measurement basis: 
 
 
2020                                               Fair value  Amortised             Loans  Total 
                                                      through       cost   and receivables 
                                             income statement 
                                                         GBPm       GBPm              GBPm   GBPm 
Assets 
Other investments                                       1,331          -                 -  1,331 
Trade and other receivables                                 -          -               601    601 
Derivative financial instruments                            3          -                 -      3 
Cash and cash equivalents                                   -        269                 -    269 
Total financial assets                                  1,334        269               601  2,204 
Liabilities 
Interest-bearing loans and borrowings                     128        691                 -    819 
Derivative financial instruments                            1          -                 -      1 
Trade and other payables                                    -      1,457                 -  1,457 
Total financial liabilities                               129      2,148                 -  2,277 
 
 
2019                                               Fair value  Amortised             Loans  Total 
                                                      through       cost   and receivables 
                                             income statement 
                                                         GBPm       GBPm              GBPm   GBPm 
Assets 
Other investments                                       1,271          -                 -  1,271 
Trade and other 
 receivables                                                -          -               420    420 
Cash and cash equivalents                                   -        308                 -    308 
Total financial assets                                  1,271        308               420  1,999 
Liabilities 
Interest-bearing loans and borrowings                     132        871                 -  1,003 
Derivative financial 
 instruments                                                1          -                        1 
Trade and other payables (*represented)                     -      1,373                 -  1,373 
Total financial 

 liabilities                                              133      2,244                 -  2,377 
 
*Refer to the general accounting policies section for details of the 
 representation. 
The following table provides an analysis of financial assets and liabilities 
 that are valued or disclosed at fair value, by the three-level fair 
 value hierarchy as defined within IFRS 13 (Fair Value Measurement): 
Level 1                                    Fair value measurements are those 
                                            derived from quoted prices (unadjusted) 
                                            in active markets for identical 
                                            assets or liabilities. 
Level 2                                    Fair value measurements are those 
                                            derived from inputs other than 
                                            quoted prices included within Level 
                                            1 that are observable for the asset 
                                            or liability, either directly (i.e. 
                                            as prices) or indirectly (i.e. 
                                            derived from prices). 
Level 3                                    Fair value measurements are those 
                                            derived from valuation techniques 
                                            that include inputs for the asset 
                                            or liability that are not based 
                                            on observable market data (unobservable 
                                            inputs). 
 
As pricing providers cannot guarantee that the prices they provide are 
 based on actual trades in the market then all of the corporate bonds 
 are classified as Level 2. 
 
 
Valuation of financial instruments 
 
2020                                                         Level   Level   Level   Total 
                                                                 1       2       3 
                                                              GBPm    GBPm    GBPm    GBPm 
 Assets 
 Financial assets at fair value through 
  the income statement 
 - Funeral plan investments                                      -       -   1,331   1,331 
 - Derivative financial instruments                              -       3       -       3 
Total financial assets at fair value                             -       3   1,331   1,334 
 Liabilities 
 Financial liabilities at fair value through 
  the income statement 
 - Fixed rate sterling Eurobond                                  -     128       -     128 
 - Derivative financial instruments                              -       1       -       1 
Total financial liabilities at fair value                        -     129       -     129 
 
Funeral plan investments are classified as level 3 under the IFRS 13 
 hierarchy. Level 3 fair value measurements are those derived from valuation 
 techniques that include inputs that are not based on observable market 
 data (unobservable inputs). The vast majority of our funeral plan investments 
 are held in Whole of Life (WoL) insurance policies. The plan investments 
 are financial assets which are recorded at fair value each period using 
 valuations provided to Co-op by the policy provider. The plan values 
 reflect the amount the policy provider would pay out on redemption of 
 the policy at the valuation date with the main driver being underlying 
 market and investment performance. 
The value of the Eurobonds carried at amortised cost is disclosed in 
 Note 14. The equivalent fair value for the unhedged proportion of bonds 
 that are now carried at amortised cost would be GBP296m for the 2026 
 Eurobond. 
There were no transfers between Levels 1 and 2 during the period and 
 no transfers into and out of Level 3 fair value measurements. For other 
 financial assets and liabilities of the Group including cash, trade 
 and other receivables / payables then the notional amount is deemed 
 to reflect the fair value. 
 
2019                                                         Level   Level   Level 
                                                                 1       2       3   Total 
                                                              GBPm    GBPm    GBPm    GBPm 
 Assets 
 Financial assets at fair value through 
  the income statement 
 - Funeral plan investments                                      -       -   1,271   1,271 
Total financial assets at fair value                             -       -   1,271   1,271 
 Liabilities 
 Financial liabilities at fair value through 
  the income statement 
 - Fixed rate sterling Eurobond                                  -     132       -     132 
 - Derivative financial instruments                              -       1       -       1 
Total financial liabilities at fair 
 value                                                           -     133       -     133 
 
 
Interest rates used for determining fair value 
 Third-party valuations are used to fair value the Group's bond and 
 interest rate derivatives. The valuation techniques use inputs such 
 as interest rate yield curves with an adequate credit spread adjustment. 
 
  Accounting 
  policies 
The Group classifies its financial assets as either: 
 -- fair value through the income statement; or 
 -- loans and receivables at amortised cost. 
i) Recognition of financial assets 
 Financial assets are recognised on the trade date which is the date 
 it commits to purchase the instruments. Loans are recognised when the 
 funds are advanced. All other financial instruments are recognised on 
 the date that they are originated. The classification of financial assets 
 at initial recognition depends on the financial asset's contractual 
 cash flow characteristics and the Group's business model for managing 
 them. The Group initially measures a financial asset at its fair value, 
 with the exception of trade receivables that don't contain a significant 
 financing component or where the customer will pay for the related goods 
 or services within one year of receiving them. For financial assets 
 which are not held at fair value through the income statement, transaction 
 costs are also added to the initial fair value. Trade receivables that 
 don't contain a significant financing component or where the customer 
 will pay for the related goods or services within one year of receiving 
 them are measured at the transaction price determined under IFRS 15 
 (Revenue from Contracts with Customers). 
 
ii) Derecognition of financial assets and financial liabilities 
 Financial assets are derecognised (removed from the balance sheet) 
 when: 
 
 -- the rights to receive cash flows from the assets have ceased; or 
 -- the Group has transferred substantially all the risks and rewards 
 of ownership of the assets. 
 
 A financial liability is derecognised when the obligation under the 
 liability is discharged, cancelled or expires. When an existing liability 
 is replaced by the same counterparty on substantially different terms 
 or the terms of an existing liability are substantially modified, the 
 original liability is derecognised and a new liability is recognised, 
 with any difference in carrying amounts recognised in the income statement. 
 
iii) Loans and receivables 
 Loans and receivables are non-derivative financial assets with fixed 
 or determinable payments that are not quoted in an active market which 
 we do not intend to sell immediately or in the near term. These are 
 initially measured at fair value plus transaction costs that are directly 
 attributable to the financial asset. Subsequently these are measured 
 at amortised cost. The amortised cost is the initial amount at recognition 
 less principal repayments, plus or minus the cumulative amortisation 
 using the effective interest method of any difference between that initial 
 amount and the maturity amount, less impairment provisions for incurred 
 losses. 
 
iv) Financial investments and instruments at fair value through the 
 income statement 
 
 Funeral plans 
 When a customer takes out a funeral plan the initial plan value is 
 recognised as an investment asset in the balance sheet and at the same 
 time a liability is also recorded in the balance sheet representing 
 the deferred income to be realised on performance of the funeral service 
 covered by each of the funeral plans. The investments are held in insurance 
 policies or cash-based trusts and attract interest and bonus payments 
 throughout the year dependent upon market conditions. The plan investment 
 is a financial asset, which is recorded at fair value each period through 
 the income statement using valuations provided by the insurance policy 
 provider or reflecting the trust cash balances. The performance obligation 
 to deliver the funeral is treated as a contract liability (deferred 
 income) under IFRS 15. The deferred amount is subject to adjustment 
 to reflect a significant financing component which is charged to the 
 income statement each period. The liability accretes interest in-line 
 with the discount rate applied to the plan on inception. The discount 
 rate applied is based on an estimated borrowing rate between the customer 
 and the Group at the point the contract is entered into. The contract 
 liability is held on the balance sheet as additional deferred income 
 until the delivery of the funeral at which point the revenue is recognised. 
 
Funeral benefit options (FBOs) 
 FBOs are attached to Guaranteed Over 50's life insurance plans (GOFs) 
 sold by the Group's third party insurance partners. An FBO is the assignment 
 of the sum-assured proceeds of a GOF policy to Funeralcare for the purposes 
 of undertaking their funeral. In exchange the GOF customer is awarded 
 a discount on the price of the funeral. 
 
 No revenue is recognised by the Group at the point of assignment and 
 instead an element of the costs that have been incurred in obtaining 

 the FBO are deferred onto the balance sheet. These are then expensed 
 at the point of redemption when the revenue is recognised. Any plans 
 that are cancelled are written off at the point at which Funeralcare 
 are made aware of the cancellation. A separate provision is also made 
 to cover the expected cancellations of FBOs. No investment or liability 
 is recognised for FBOs as the option does not guarantee a funeral and 
 the liability for which remains with the insurance partner. Any difference 
 between the funeral price and the sum assured at the point of redemption 
 is the liability of the deceased estate or whoever takes responsibility 
 for arranging the funeral. 
 
Low Cost Instalment Funeral Plans (LCIPs) 
 LCIPs can be paid for by instalments over between 2 and 25 years or 
 they can be paid off in full at any time during this period without 
 any penalties. If the plan holder dies before the instalments have been 
 made in full (and provided that the plan has been in place for at least 
 12 months or the cause of death was as a result of an accident) then 
 the funeral will still be provided by Funeralcare and the customer will 
 not have to settle the outstanding balance on any instalments and the 
 balance of any monies owed will be waived. Any outstanding amounts owed 
 to Funeralcare (the difference between the full value of the plan and 
 the amount paid up to death by the customer) are covered by an assured 
 benefit from a third party insurer. The assured benefit is between Funeralcare 
 and the 3rd party insurer and has nothing to do with the customer. Funeralcare 
 continue to apply instalment monies received against customers' individual 
 funeral plans until such time as a plan is redeemed and/or cancelled. 
 
 The assured benefit between Funeralcare and the 3rd party is judged 
 to represent an insurance contract and as such falls under the scope 
 of IFRS 4 (Insurance Contracts). In line with IFRS 4 Funeralcare account 
 for the LCIPs in the same way as a normal funeral plan (see accounting 
 policy above). 
 
Interest rate swaps 
 The Group uses derivative financial instruments to provide an economic 
 hedge to its exposure to interest rate risks arising from operational, 
 financing and investment activities. In accordance with its Treasury 
 policy, the Group does not hold or issue derivative financial instruments 
 for trading purposes. 
 
 Derivatives entered into include swaps and forward rate agreements. 
 Derivative financial instruments are measured at fair value and any 
 gains or losses are included in the income statement. Fair values are 
 based on quoted prices and where these are not available, valuation 
 techniques such as discounted cash flow models are used. 
 
 Interest payments or receipts arising from interest rate swaps are 
 recognised within finance income or finance costs in the period in which 
 the interest is incurred or earned. 
 
v) Credit risk, liquidity risk and Impairment of financial assets 
 
 Credit risk 
 Credit risk is the risk that a counterparty will not meet its obligations 
 under a financial instrument or customer contract, leading to a financial 
 loss. The Group is exposed to credit risk from its operating activities 
 (primarily trade receivables) and from its financing activities, including 
 deposits with banks and financial institutions, foreign exchange transactions 
 and other financial instruments. 
 
 Credit risk from balances with banks and financial institutions is 
 managed by the Group's Treasury department in accordance with the Group's 
 policy. Investments of surplus funds are made only with approved counterparties 
 and within credit limits assigned to each counterparty. Counterparty 
 credit limits are reviewed by the Board on an annual basis, and may 
 be updated throughout the year subject to approval of the Risk and Audit 
 Committee. The limits are set to minimise the concentration of risk. 
 Financial assets held at fair value through the income statement are 
 primarily held in low-risk investments. 
 
Liquidity risk 
 The Group's objective is to maintain a balance between continuity of 
 funding and flexibility through the use of bank overdrafts, bank loans, 
 Eurobonds and leases. 
 
Trade receivables and contract assets 
 An impairment analysis is performed at each reporting date using a 
 provision matrix to measure expected credit losses. The provision rates 
 are based on days past due for groupings of various customer segments 
 with similar loss patterns (for example, by business division, customer, 
 coverage by letters of credit or other forms of credit insurance). 
 
 The calculation reflects the probability-weighted outcome, the time 
 value of money and reasonable and supportable information that is available 
 at the reporting date about past events, current conditions and forecasts 
 of future economic conditions. Generally, trade receivables are written-off 
 if past due for more than one year and are not insured or subject to 
 enforcement activity. The maximum exposure to credit risk at the reporting 
 date is the carrying value of each class of financial assets disclosed 
 in trade and other receivables. 
 
Impairment of financial assets carried at amortised cost 
 The amount of the impairment loss on assets carried at amortised cost 
 is recognised immediately through the income statement and a corresponding 
 reduction in the value of the financial asset is recognised through 
 the use of an allowance account. 
 
 A write-off is made when all or part of an asset is deemed uncollectable 
 or forgiven after all the possible collection procedures have been 
 completed and the amount of loss has been determined. Write-offs are 
 charged against previously established provisions for impairment or 
 directly to the income statement. 
 
 Any additional recoveries from borrowers, counterparties or other 
 third parties made in future periods are offset against the write-off 
 charge in the income statement once they are received. 
 
 Provisions are released at the point when it is deemed that following 
 a subsequent event the risk of loss has reduced to the extent that 
 a provision is no longer required. 
 
 
 
17 Related party transactions and balances 
 
 
What does this show? Related parties are companies or people which 
 are closely linked to the Co-op, such as members of our Board or Executive 
 (or their families), or our associates and joint ventures. This note 
 explains the nature of the relationship with any related parties and 
 provides information about any material transactions and balances with 
 them. 
 
 
                                                                 2020                      2019 
                                                   Relationship  GBPm                      GBPm 
Subscription to Co-operatives 
 UK Limited                                                 (i)   0.7                       0.7 
 
  i) The Group is a member of Co-operatives 
  UK Limited. 
 
The Group's Independent Society Members (ISMs) include consumer co-operative 
 societies which, in aggregate, own the majority of the corporate shares 
 with rights attaching. The Co-operative Group has a 76% shareholding 
 in Federal Retail and Trading Services Limited which is operated as 
 a joint buying group by the Group for itself and other independent 
 co-operative societies. The Group acts as a wholesaler to the other 
 independent co-operatives and generates sales from this and the arrangement 
 is run on a cost recovery basis and therefore no profit is derived 
 from its activities. Sales to ISMs, on normal trading terms, were GBP1,813m 
 (2019: GBP1,613m) and the amount due from ISMs in respect of such sales 
 was GBP138m at 2 January 2021 (2019: GBP128m). No distributions have 
 been made to ISMs based on their trade with the Group in either the 
 current or prior periods. 
 
Transactions with directors and 
 key management personnel 
Disclosure of key management compensation is set out in the Remuneration 
 Report. A number of small trading transactions are entered into with 
 key management in the normal course of business and are at arm's length. 
 Key management are considered to be members of the Executive and directors 
 of the Group. At the balance sheet date, certain key management personnel 
 had transacted with Funeralcare. These transactions totalled GBP2,000 
 (2019: GBP7,000). Other than the compensation set out in the Remuneration 
 Report, there were no other transactions greater than GBP1,000 with 
 the Group's entities (2019: GBPnil). Total compensation paid to key 
 management personnel is shown below. 
 
                                                                 2020                      2019 
Key management personnel 
 compensation                                                    GBPm                      GBPm 
Short-term employee 
 benefits                                                         6.4                       6.5 
Post-employment benefits                                          0.4                       0.4 
Other long-term benefits                                          1.6                       0.4 
Total                                                             8.4                       7.3 
 
 
18 Events after the reporting 
period 
 
 
What does this show? This note gives details of any significant events 
 that have happened after the balance sheet date but before the date 
 that the accounts are approved. These are things that are of such significance 
 that it is appropriate to give a reader of the accounts further detail 
 as to the impact of such events on the financial statements or any 
 expected likely impact in future periods. 
 
 
Group Relief Creditor owed to The Co-operative Bank - At the year 
 end date the Co-op held a liability on its balance sheet of GBP147m 
 due to The Co-operative Bank (the 'Bank'). This balance arose in 2015 
 when we agreed with the Bank that they would surrender their tax losses 
 as group relief to Co-op. In order to claim these tax losses from the 

 Bank, Co-op deferred the reliefs and capital allowances available to 
 it. It was agreed that Co-op would pay the Bank for its losses surrendered 
 when these previously deferred reliefs and capital allowances were 
 used in future tax periods. An equivalent deferred tax asset of GBP147m 
 is held at the balance sheet date representing the future benefit of 
 those losses and capital allowances which were previously disclaimed. 
 
 In February 2021 the Bank agreed a full and final settlement of GBP48m 
 as payment for the losses it had group relieved to Co-op Group. The 
 settlement of the liability is a non-adjusting post balance sheet event 
 (as it does not represent conditions at the balance sheet date) and 
 as such does not impact our 2020 results. Instead the gain of GBP99m 
 that arises on extinguishing a liability of GBP147m for GBP48m will 
 be shown in our 2021 results. Due to its size and nature then the gain 
 will be treated as a one-off item in 2021 (and so won't be included 
 within our underlying trading results). Co-op retains the full value 
 of the deferred tax assets. 
 
Sale of Co-op Health - On 12 March 2021 the Group announced the sale 
 of its Health business and the sale was completed on 6 April 2021. 
 Both the consideration from the transaction and the net assets disposed 
 were immaterial to the Group. As the sale was assessed as highly probable 
 at the balance sheet date then the assets of our Health businesses 
 were classified as held for sale (see Note 13). 
 
Government support - Subsequent to the year end, the Board of The 
 Co-op has decided to repay GBP15.5m of the money it received in Government 
 support during the COVID-19 pandemic, this equates to the amount it 
 claimed in Furlough payments. 
 
Reclaim Fund - On 30 March 2021, the entire issued share capital of 
 Reclaim Fund Limited was sold to HM Treasury for nominal consideration. 
 The sale has no material impact on the Group's financial statements 
 since the Reclaim Fund Limited is no longer consolidated within the 
 Group (see Note 19 for further information on the de-consolidation 
 of Reclaim Fund Limited). 
 
Litigation - On 19 February 2021, the Technology and Construction 
 Court handed down judgment in a claim brought by CISGIL against IBM 
 United Kingdom Limited, relating to a failed programme to implement 
 an IT platform. CISGIL was awarded damages of approximately GBP13m 
 subject to any applicable VAT deduction and excluding interest, with 
 the final amount of damages plus interest and costs to be determined. 
 During 2019, CISGIL assigned in equity the proceeds of the litigation 
 with IBM to Co-operative Group Limited for GBP14.1m. Following the 
 sale of CISGIL (since renamed Soteria Insurance Limited) in 2020, any 
 income relating to the claim will be reported through discontinued 
 operations within the income statement in 2021. 
 
 
19 Prior year restatement 
 
 
What does this show? Occasionally we realise that the numbers we published 
 in the accounts last year may not have been right due to a material 
 error (which might include when we may decide that there is a more 
 appropriate way to account for certain transactions). When this is 
 the case it may be appropriate to revise (restate) the prior year numbers 
 to correct them for the error. In such circumstances then this note 
 explains how the error happened and what we have done to correct it 
 and the impact this has had on the Group's accounts in the prior year. 
 
 
 
  Revenue recognition for funeral plans 
  The Group adopted the new accounting standard for revenue recognition 
  in 2018 and at that time we applied a judgement that the revenue to 
  be recognised for a funeral plan was variable and so changed over time. 
  When a customer takes out a plan, the monies are invested in whole 
  of life insurance policies whose value changes over time until redemption. 
  The key judgement we took was that on redemption of a policy, the monies 
  received from the policy was 'consideration' receivable for the funeral. 
  Therefore, investment gains from the policy were deferred on the balance 
  sheet and only recognised as revenue at the point the funeral is performed. 
  Our auditors disagreed with this judgement and qualified their 2019 
  audit opinion on that basis, with the view that the fair value investment 
  gains do not represent variable consideration because they are not 
  payments from the customer for the future provision of a funeral. Instead, 
  their view was that investment gains should be reflected in the consolidated 
  income statement as they arise in accordance with IFRS 9. Consequently, 
  because payments are received in advance of the delivery of a funeral 
  then a financing transaction is recognised, such that the payments 
  received from the customer are accreted by a rate which reflects a 
  financing rate between the Group and the customer. We were also subsequently 
  advised by the Financial Reporting Council's (FRC) Corporate Reporting 
  Review team that our 2019 accounts were subject to review including 
  specific reference to our accounting for funeral plans. 
 
  During the second half of the year and following discussions with the 
  FRC and our auditors we have reflected on this matter and we have agreed 
  to change the judgement we apply in 2020. Any investment gains and 
  losses from our whole of life insurance policies are now measured at 
  fair value through our income statement in accordance with IFRS 9 rather 
  than being deferred on the balance sheet until the funeral is performed. 
  Previously we considered revenue to be the amounts received on redemption 
  of a whole of life insurance policy, and this was considered to be 
  variable consideration as the value changed over time according to 
  the value of the underlying policy. We now consider revenue to be the 
  amounts we receive from the customer in accordance with IFRS 15 rather 
  than from the redemption of the whole of life insurance policy. Hence 
  there is no variable consideration. Under this policy, payments are 
  received from the customer in advance of a funeral being performed 
  and so we will recognise an effective interest charge on the monies 
  received from a customer in each year until the plan is redeemed at 
  which point the revenue is recognised as the total of the monies received 
  from the customer and the interest charged. The gains or losses arising 
  from movements in the fair value of funeral plan investments are now 
  recognised within our finance income or finance costs each year. 
 
  This change of judgement has been accounted for in accordance with 
  IAS 8 and our 2019 numbers have been restated to reflect the new accounting 
  treatment as if it had always been the case. The changes impact the 
  Group's 2019 consolidated income statement, 2019 consolidated balance 
  sheet, 2019 consolidated cashflow and 2019 statement of changes in 
  equity. As this restatement is material, we have presented an additional 
  third balance sheet, being our balance sheet as at the start of our 
  2019 financial year as required under IAS 1. 
 
Reclaim Fund de-consolidation 
 Previously Co-op have included the assets and liabilities of the Reclaim 
 Fund Limited (RFL) in our consolidated balance sheet. This was based 
 on a judgement that we controlled RFL and that we were exposed to changes 
 in the financial results of RFL. During 2020, the Group has been reflecting 
 on this judgement especially in the context of the proposed sale of 
 100% of the share capital of RFL to Her Majesty's Treasury as discussed 
 further in the post balance sheet event note (Note 18). 
 
 Whilst the Group was considering this judgement, it also received 
 notification that the Group's Annual Report and Accounts to 4 January 
 2020 were subject to review by the Financial Reporting Council's (FRC) 
 Corporate Reporting Review team. In response to this review and as 
 part of the Group's ongoing review of this judgement, it has been concluded 
 that the Group has not met the criteria to consolidate RFL under the 
 criteria set out in IFRS 10 'Consolidated Financial Statements'. In 
 arriving at this conclusion, it is noted that the Group is not exposed 
 to any variable returns from RFL, be they positive or negative and 
 as such consolidation is not permitted under IFRS 10 in such circumstances. 
 
 Furthermore, the Group's judgement is that it has insufficient ability 
 to direct the relevant activities of RFL, and as a result RFL should 
 not be treated as an associate within the Group's accounts either. 
 Accordingly, RFL has been treated as an investment in the financial 
 statements and held at nil value. Consequently, the deconsolidation 
 of RFL has been treated as a prior year restatement. 
A summary of the impact of the prior year adjustments on the 2019 consolidated 
 income statement, the 2019 consolidated balance sheet and the 2019 
 consolidated cashflow statement is noted below. We also include the 
 impact on the opening 2019 balance sheet (as at 6 January 2019). 
Consolidated income statement for the        As previously  Funeral  Reclaim  As restated 
 period ended 4 January 2020                      reported    plans     Fund 
Continuing Operations                                 GBPm     GBPm     GBPm         GBPm 
Revenue                                             10,860        4        -       10,864 
Operating expenses                                (10,700)        -        -     (10,700) 
Other income                                             9        -        -            9 
Operating profit                                       169        4        -          173 
Finance income                                          61        -        -           61 
Finance costs                                        (163)        -        -        (163) 
Net finance costs on funeral plans                       -     (47)        -         (47) 
Profit before tax                                       67     (43)        -           24 

Taxation                                                18        7        -           25 
Profit from continuing operations                       85     (36)        -           49 
Loss on discontinued operation, net 
 of tax                                               (16)        -        -         (16) 
Profit for the period (all attributable 
 to members of the Society)                             69     (36)        -           33 
 
 
Consolidated balance sheet          As previously  Funeral  Reclaim  As restated 
 as at 4 January 2020                    reported    plans     Fund 
                                             GBPm     GBPm     GBPm         GBPm 
Non-current assets 
Funeral plan investments                    1,271        -        -        1,271 
Contract assets (funeral 
 plans)                                        54        -        -           54 
Reclaim Fund assets                           206        -    (206)            - 
Other non-current assets                    6,276        -        -        6,276 
Total non-current assets                    7,807        -    (206)        7,601 
Current assets 
Contract assets (funeral 
 plans)                                         4        -        -            4 
Reclaim Fund assets                           478        -    (478)            - 
Other current assets                        2,308        -        -        2,308 
Total current assets                        2,790        -    (478)        2,312 
Non-current liabilities 
Contract liabilities (funeral 
 plans)                                     1,435       48        -        1,483 
Reclaim Fund liabilities                      540        -    (540)            - 
Deferred tax                                  134     (12)        -          122 
Other non-current liabilities               2,468        -        -        2,468 
Total non-current liabilities               4,577       36    (540)        4,073 
Current liabilities 
Contract liabilities (funeral 
 plans)                                       137       21        -          158 
Reclaim Fund liabilities                       70        -     (70)            - 
Other current liabilities                   2,997        -        -        2,997 
Total current liabilities                   3,204       21     (70)        3,155 
Equity 
Share Capital                                  73        -        -           73 
Other Reserves                                 89        -     (74)           15 
Retained earnings                           2,654     (57)        -        2,597 
Total equity                                2,816     (57)     (74)        2,685 
 
 
 
Consolidated statement of           As previously  Funeral  Reclaim  As restated 
 cashflows for period ended              reported    plans     Fund 
 4 January 2020 
                                             GBPm     GBPm     GBPm         GBPm 
Net cash from operating 
 activities                                   626       37        -          663 
Net cash used in investing 
 activities                                 (301)     (37)        -        (338) 
Net cash used in financing 
 activities                                 (293)        -        -        (293) 
Net cash and overdraft balances 
 transferred to held for sale                 (2)        -        -          (2) 
Cash and cash equivalents 
 at beginning of the period                   278        -        -          278 
Cash and cash equivalents 
 at end of the period                         308        -        -          308 
 
 
2018 Consolidated                 Closing   IFRS    Restated  Funeral  Reclaim     Opening 
 balance sheet                   position   16 *    for IFRS    plans     Fund    position 
                              as reported                 16                      restated 
                               (5 January         (5 January                    (6 January 
                                    2019)              2019)                         2019) 
                                     GBPm   GBPm        GBPm     GBPm     GBPm        GBPm 
Non-current assets 
Property, plant 
 & equipment                        2,046   (41)       2,005        -        -       2,005 
Right-of-use assets                     -  1,056       1,056        -        -       1,056 
Goodwill and intangibles            1,094      -       1,094        -        -       1,094 
Investment properties                  42      -          42        -        -          42 
Investments in associates               3      -           3        -        -           3 
Funeral plan investments            1,223      -       1,223        -        -       1,223 
Derivatives                            27      -          27        -        -          27 
Pension assets                      1,984      -       1,984        -        -       1,984 
Trade and other 
 receivables                           81      -          81        -        -          81 
Finance lease receivables               -     14          14        -        -          14 
Contract assets 
 (funeral plans)                       47      -          47        -        -          47 
Reclaim Fund assets                   209      -         209        -    (209)           - 
Total non-current 
 assets                             6,756  1,029       7,785        -    (209)       7,576 
Current assets 
Inventories                           458      -         458        -        -         458 
Trade and other 
 receivables                          528      -         528        -        -         528 
Finance lease receivables               -      3           3        -        -           3 
Contract assets 
 (funeral plans)                        4      -           4        -        -           4 
Cash and cash equivalents             278      -         278        -        -         278 
Asset held for sale                 1,113      -       1,113        -        -       1,113 
Reclaim Fund assets                   410      -         410        -    (410)           - 
Total current assets                2,791      3       2,794        -    (410)       2,384 
Total assets                        9,547  1,032      10,579        -    (619)       9,960 
Non-current liabilities 
Interest-bearing 
 loans and borrowings                 976      -         976        -        -         976 
Lease liabilities                      28  1,301       1,329        -        -       1,329 
Trade and other 
 payables                             214   (12)         202        -        -         202 
Contract liabilities 
 (funeral plans)                    1,353      -       1,353       24        -       1,377 
Provisions                            215   (52)         163        -        -         163 
Pension liabilities                   125      -         125        -        -         125 
Deferred tax liabilities              223   (49)         174      (5)        -         169 
Reclaim Fund liabilities              472      -         472        -    (472)           - 
Total non-current 
 liabilities                        3,606  1,188       4,794       19    (472)       4,341 
Current liabilities 
Interest-bearing 
 loans and borrowings                  66      -          66        -        -          66 
Lease liabilities                       4    181         185        -        -         185 
Income tax payable                      8      -           8        -        -           8 
Trade and other 
 payables                           1,470   (80)       1,390        -        -       1,390 
Contract liabilities 
 (funeral plans)                      132      -         132        2        -         134 
Provisions                             82   (20)          62        -        -          62 
Liabilities held 
 for sale                           1,045      -       1,045        -        -       1,045 
Reclaim Fund liabilities               73      -          73        -     (73)           - 
Total current liabilities           2,880     81       2,961        2     (73)       2,890 
Equity 
Share Capital                          73      -          73        -        -          73 
Other Reserves                         86      -          86        -     (74)          12 
Retained earnings                   2,902  (237)       2,665     (21)        -       2,644 
Total equity                        3,061  (237)       2,824     (21)     (74)       2,729 
Total equity and 
 liabilities                        9,547  1,032      10,579        -    (619)       9,960 
 
* The Group initially applied IFRS 16 (Leases) at the 6 January 2019 
 using the modified retrospective approach. Under this approach, comparative 
 information was not restated and the cumulative impact of applying 
 the new standard was recognised in retained earnings at the date of 
 initial application. As the restatement for IFRS 16 was taken through 
 reserves then a full restated balance sheet as at 6 January was not 
 reported but is presented now for completeness and to aid understanding 
 given the current year restatements for Reclaim Fund and revenue recognition 
 on funeral plans. 
 

General accounting policies

 
What does this show? This section outlines the general accounting 
 policies that relate to the financial statements as a whole. Details 
 of other accounting policies are included within the notes to the financial 
 statements to which they relate. This allows readers easy access to 
 the relevant policy. This section also gives details of the impact 
 of any new accounting standards that we've applied for the first time 
 and the expected impact of upcoming standards that will be adopted 
 in future years where that impact is likely to be significant. 
 

Status of financial information

The financial information, which comprises the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated balance sheet, Consolidated statement of changes in equity, Consolidated statement of cash flows and related notes, is derived from the full Group financial statements for the 52 weeks to 2 January 2021 and does not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards.

The Group Annual Report and Financial Statements 2020, on which the auditors have given an unqualified report and which does not contain a statement under part 7, section 87(4) or (7) of the Co-operative and Community Benefit Societies Act 2014, will be submitted to the Financial Conduct Authority following the 2021 Annual General Meeting.

General information

Co-operative Group Limited ('the Group') is a registered co-operative society domiciled in England and Wales. The address of the Group's registered office is 1 Angel Square, Manchester, M60 0AG, and the trading locations of all stores and branches can be located on our website https://finder.coop.co.uk/food.

Basis of preparation

The Group accounts have been prepared in accordance with international accounting standards in conformity with the requirements of the Co-operative and Community Benefit Societies Act 2014 and additionally in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union for the 52 week period ended 2 January 2021. As permitted by statute, a separate set of financial statements for the Society are not included.

The accounts are presented in pounds sterling and are principally prepared on the basis of historical cost. Areas where other bases are applied are explained in the relevant accounting policy in the notes. Amounts have been rounded to the nearest million.

The accounting policies set out in the notes have been applied consistently to all periods presented in these financial statements, except where stated otherwise.

The accounts are prepared on a going concern basis. See later section on 'Going Concern'.

Basis of consolidation

The financial statements consolidate Co-operative Group Limited, which is the ultimate parent society, and its subsidiary undertakings. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The diagram below shows the composition of the Group and its principal subsidiaries. A full list of subsidiaries that make up the Group for the purposes of these financial statements can be found at:

http://www.co-operative.coop/corporate/aboutus/oursubsidiaries/

 
                                                    Co-operative Group Ltd 
 
 
                        Co-operative Group                      Rochpion Properties                      Angel Square 
                        Holdings (2011) Ltd                           (4) LLP                            Investments 
                                                                                                             Ltd 
 
 
    Co-operative                                 Funeral              Nisa Retail                         CFSMS Ltd 
     Group Food                                  Services                 Ltd 
        Ltd                                        Ltd 
 
 
     Co-operative                                                                     Co-op Insurance 
      Foodstores                                                                         Services 
          Ltd                                                                               Ltd 
 
 
              Co-operative Legal 
                 Services Ltd 
 
                      Direct Holding 
 
                      Indirect Holding 
 
All shareholdings are 100% owned unless otherwise 
 stated. 
 

Change in accounting policy

As explained further in Note 19 , during the second half of the year and following discussions with the FRC and our auditors we have we have agreed to change the judgement we apply in 2020 in respect of accounting policy for revenue recognition for funeral plans. The change in accounting policy impacts the amount of revenue we recognise on a funeral plan but does not change the timing of recognition, which is on performance of a funeral. The policy also impacts our accounting for our plan investments, as these are now recognised at fair value through the income statement in accordance with IFRS 9. Further details of the accounting policy can be found in Note 2 and Note 16. The change in policy requires our 2019 results to be restated in accordance with IAS 8 accounting policies, changes in accounting estimates and errors. Further details on this change in policy can be found in the 'key judgements' section below.

We also no longer consolidate The Reclaim Fund Limited, further details can be found in the 'key judgements' section below.

Accounting dates

The Group and its main trading subsidiaries prepare their accounts to the first Saturday of January unless 31 December is a Saturday. These financial statements are therefore prepared for the 52 weeks ended 2 January 2021. Comparative information is presented for the 52 weeks ended 4 January 2020. Since the financial periods are virtually in line with calendar years, the current period figures are headed 2020 and the comparative figures are headed 2019.

Co-operative Insurances Services Limited and certain small holding companies have prepared accounts for the period ended 31 December 2020. This differs from the Group and other Trading Group subsidiaries. For the period ending 2 January 2021, there are no significant transactions or events which need to be adjusted for to reflect the difference in reporting dates.

One-off items and non-GAAP (Generally Accepted Accounting Procedures) measures

One-off items include costs relating to activities such as large restructuring programmes and costs or income which would not normally be seen as costs or income relating to the underlying principal activities of the Group.

To help the reader make a more informed judgement on the underlying profitability of the Group, a non-GAAP measure: underlying profit before tax, has been presented. This is shown at the bottom of the income statement and we show the adjustments between this measure and operating profit. In calculating this non-GAAP measure, property and business disposals (including individual store impairments), the change in value of investment properties, net finance income/costs from funeral plans and one-off items are adjusted for.

Offsetting

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to do so and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

Significant accounting judgements, estimates and assumptions

The preparation of financial statements that comply with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Key judgements:

In the process of applying the Group's accounting policies, management has made the following key judgements which have the most significant impact on the consolidated financial statements:

   --      Revenue from contracts with customers: Funeral plans 

The Group adopted the new accounting standard for revenue recognition in 2018 and at that time we applied a judgement that the revenue to be recognised for a funeral plan was variable and so changed over time. When a customer takes out a plan, the monies are invested in whole of life insurance policies whose value changes over time until redemption. The key judgement we took was that on redemption of a policy, the monies received from the policy was 'consideration' receivable for the funeral. Therefore, investment gains from the policy were deferred on the balance sheet and only recognised as revenue at the point the funeral is performed. Our auditors disagreed with this judgement and qualified their 2019 audit opinion on that basis, with the view that the fair value investment gains do not represent variable consideration because they are not payments from the customer for the future provision of a funeral. Instead, their view was that investment gains should be reflected in the consolidated income statement as they arise in accordance with IFRS 9. Consequently, because payments are received in advance of the delivery of a funeral then a financing transaction is recognised, such that the payments received from the customer are accreted by a rate which reflects a financing rate between the Group and the customer. We were also subsequently advised by the Financial Reporting Council's (FRC) Corporate Reporting Review team that our 2020 accounts were subject to review including specific reference to our accounting for funeral plans.

During the second half of the year and following discussions with the FRC and our auditors we have reflected on this matter and we have agreed to change the judgement we apply in 2020. Any investment gains and losses from our whole of life insurance policies are now measured at fair value through our income statement in accordance with IFRS 9 rather than being deferred on the balance sheet until the funeral is performed. Previously we considered revenue to be the amounts received on redemption of a whole of life insurance policy, and this was considered to be variable consideration as the value changed over time according to the value of the underlying policy. We now consider revenue to be the amounts we receive from the customer in accordance with IFRS 15 rather than from the redemption of the whole of life insurance policy. Hence there is no variable consideration. Under this policy, payments are received from the customer in advance of a funeral being performed and so we will recognise an effective interest charge on the monies received from a customer in each year until the plan is redeemed at which point the revenue is recognised as the total of the monies received from the customer and the interest charged. The gains or losses arising from movements in the fair value of funeral plan investments are now recognised within our finance income or finance costs each year.

This change of judgement has been accounted for in accordance with IAS 8 and our 2019 numbers have been restated to reflect the new accounting treatment as if it had always been the case. The changes impact the Group's 2019 consolidated income statement, 2019 consolidated balance sheet, 2019 consolidated cashflow and 2019 statement of changes in equity. As this restatement is material, we have presented an additional third balance sheet, being our balance sheet as at the start of our 2019 financial year as required under IAS 1.

A significant accounting judgement is present in deriving a suitable financing rate to apply to the monies received from a customer. This financing rate is fixed for the duration of the plan. The accretion rate applied is based on an estimated borrowing rate between the customer and the Group at the point the contract is entered into and reflects the security over our customers' plans through the whole of life policies we have in place. This accretion rate is derived from UK AA rated average corporate bond yields.

   --      Determination of accretion rate: Funeral plans 

As noted above, a significant accounting judgement is present in deriving a suitable accretion rate to apply to the monies received from a customer when they purchase a funeral plan. The accretion rate is required to reflect the borrowing rate that would be applied between the Group and the customer in a separate financing transaction reflecting similar credit characteristics and similar security at the point the contract is entered into. These rates are then fixed for the duration of the plan and we have plans which are up to 36 years old. We derive the relevant accretion rates based upon UK AA rated average corporate bond yields. When a customer enters into a funeral plan, the monies they pay to the Co-op, less an admin fee, are invested in whole of life insurance policies with FCA regulated institutions protected by the Government's financial services compensation scheme. For further protection, the proceeds of the investments are held on trust by an independent trustee, Apex Corporate Trustees (UK) Limited, to ensure that the customer is entitled to the benefit of the invested monies in the event that the Group goes out of business. Given this protection and security, a UK AA rated average corporate bond yield is considered to have a similar risk profile as that of a separate financing transaction between the Group and a customer and hence a suitable reference point for an accretion rate.

   --      Consolidation of Reclaim Fund 

The Group holds 100% of the share capital of Reclaim Fund Ltd (RFL). RFL is a not-for-profit organisation whose surplus is held entirely for the benefit of The National Lottery Community Fund (TNLCF) and the Group derives no financial benefit from RFL, nor can it access RFL's reserves. RFL was established in 2011 following the enactment of the Dormant Bank and Building Society Accounts Act 2008. RFL makes it possible for money in dormant bank and building society accounts to be used for good causes through distributions to TNLCF. As at 31 December 2020, RFL had net assets of GBP74m, made distributions to TNLCF of GBP69m and made a GBPnil profit after taxation.

The Group has previously applied judgement in consolidating RFL into the Group's results. The consolidation of RFL was done through disclosure of single line items on the Group Balance sheet for current and non-current assets and liabilities of RFL rather than consolidation on a line-by-line basis within the Group's balance sheet.

During 2020, the Group has been reflecting on this judgement especially in the context of the proposed sale of 100% of the share capital of RFL to Her Majesty's Treasury for a nominal fee as discussed further in the post balance sheet event note (Note 18). Whilst the Group was considering this judgement, the FRC's Corporate Reporting Review team also included this matter in their letter to the Group as referred to above. In response to this review and as part of the Group's ongoing review of this judgement, it has been concluded that the Group has not met the criteria to consolidate RFL under the criteria set out in IFRS 10 'Consolidated Financial Statements'. In arriving at this conclusion, it is noted that the Group is not exposed to any variable returns from RFL, be they positive or negative and as such consolidation is not appropriate under IFRS 10 in such circumstances.

Furthermore, the Group's judgement is that it has insufficient ability to direct the relevant activities of RFL, and as a result RFL should not be treated as an associate within the Group's accounts either. Accordingly, RFL has been treated as an investment in the financial statements and held at nil value. Consequently, the deconsolidation of RFL has been treated as a prior year restatement. The impact of this restatement can be seen in Note 19.

   --      Determining the lease term of contracts with extension and termination options 

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Group has the option, under some of its leases to lease the assets for additional terms of 5 to 10 years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew.

   --      Federal sales: Principal versus agent presentation 

The Group operates a joint buying group for itself and other independent co-operative societies. The Group acts as a wholesaler to the other independent co-operatives and generates sales from this. This is run on a cost recovery basis and therefore no profit is derived from its activities.

The Group applies the judgement that it is acting as the principal in these transactions as opposed to an agent, in accordance with IFRS 15. In making this judgement, the Group has considered the nature of its sales to other independent co-operatives and the level of control the Group has over the goods sold to those co-operatives.

Key estimates and assumptions:

The key assumptions and areas of uncertainty around key assumptions at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

The Group based its assumptions and estimates on information available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

-- Pensions (Note 15) - the Group's defined benefit pension obligations are determined following actuarial advice and are calculated using the projected unit method. The assumptions used are the best estimates chosen from a range of possible actuarial assumptions which may not necessarily be borne out in practice. The most significant assumptions relate to the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, the Group's defined benefit obligation is highly sensitive to changes in these assumptions. Further details of the financial and demographic assumptions that have been used are shown in Note 15 along with associated sensitivities to those assumptions.

-- Impairment of non-financial assets (Notes 9, 10 & 11) - the carrying amount of non-financial assets (such as property, plant and equipment, right-of-use assets, goodwill and intangibles) are reviewed at each balance sheet date and if there is any indication of impairment, the asset's recoverable amount is estimated.

The recoverable amount is the greater of the fair value of the asset (less costs to sell) and the value in use of the asset. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit (CGU) exceeds its estimated recoverable amount. For property assets the fair value less costs to sell are measured using internal valuations based on the rental yield of the property.

The Group considered whether the COVID-19 pandemic and the accompanying economic uncertainty had the potential to represent a significant impairment indicator as at 2 January 2021. Despite additional associated costs of responding to the pandemic, which are expected to be temporary, the Group's main business areas have proved resilient and the performance of the Group's cash-generating units has remained strong. Therefore, management concluded that the impact of COVID-19 on the longer term outlook for these cash-generating units did not constitute an indicator of significant impairment and hence a full impairment test across all CGUs was not required.

The Group estimates the value in use of an asset by projecting future cash flows into perpetuity and discounting the cash flows (DCF) associated with that asset at a pre-tax rate of between 8-10% dependent on the business.

The key assumptions used to determine the recoverable amount for the different CGUs, and the sensitivity analysis that is undertaken, are disclosed and further explained in Note 9.

-- Provisions - a provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The most significant provision for the Group relates to property provisions for non-rental costs associated with properties that are no longer used for trading purposes and significant assumptions and estimates are made in relation to the estimation of future cash flows and the discount rate applied.

-- Pre-need funeral plan obligations (Note 12) - the Group holds investments on the balance sheet in respect of funeral plan policies which are predominantly invested in individual whole-of-life insurance policies and, to a much smaller extent, independent trusts. The investments are subject to an annual actuarial valuation. This gives an assessment as to the headroom of the funeral plan investments over an estimated present value (on a wholesale basis) of delivering the funeral. The headroom is estimated to be GBP40m (2019: GBP89m), see Note 12. The actuarial report is a best estimate and is neither deliberately optimistic nor pessimistic. It is prepared by independent actuaries based on management assumptions such as future funeral and disbursement inflation. A 0.1% increase in the inflation assumptions would reduce the surplus by approximately GBP24m (2019: GBP21m).

The "wholesale" actuarial valuation is based upon the Group's estimate of the direct cost for a third party funeral director to perform the promised services and the payment of associated disbursements (crematoria, clergy fees etc) as if the Group were not in a position to carry out these funerals. No incremental overheads are included because it's assumed that the provider could absorb these funerals into existing infrastructures. As the Group fully intends to perform these funerals and undertake the professional funeral services itself the actual cost would in reality be lower and subsequent marginal cost surplus would be higher than the wholesale cost surplus.

Restatement and Representation

The comparative figures presented within these financial statements for the financial year ended 4 January 2020 have been restated. Full detail of the restatements is shown in Note 19. Additionally, we have represented the following areas of the 2019 accounts:

Funeral and Life Planning - t he results of our Legal Services business are now shown as a separate operating segment (Note 1). For the 52 weeks ended 4 January 2020 they were included in Funeral and Life Planning. This follows a change in the way the information is reported to our Board.

Trade and other payables - following a reassessment of their true nature then certain balances originally reported within other payables have been represented in accruals. There is no impact on the consolidated income statement or the line items in the consolidated balance sheet.

The tables below show the impact on those line items in the consolidated income statement and the trade and other payables note affected by the representations:

Operating Segments (for period ended 4 January 2020)

 
GBP'm                                Funeral         Funerals         Legal 
                                     and Life      (represented)   (represented) 
                                     Planning 
                                   (as reported) 
Revenue from external customers        307             268              39 
Underlying segment operating 
 profit                                 14              8               6 
Operating profit / (loss)               5              (1)              6 
Additions to non-current assets         29              29              - 
Depreciation and amortisation          (33)            (32)            (1) 
 

Trade and other payables (as at 4 January 2020)

 
GBP'm                              As reported  Representation  Represented 
Trade payables                        1,035                        1,035 
Value added tax, PAYE and social 
 security                              41                           41 
Accruals                               128           202            330 
Deferred consideration                 65                           65 
Other payables                         434          (202)           232 
Total                                 1,703           -            1,703 
 

New and amended standards adopted by the Group:

The Group has considered the following standards and amendments that are effective for the Group for the period commencing 5 January 2020 and concluded that they are either not relevant to the Group or do not have a significant impact on the financial statements:

   --       Amendments to References to the Conceptual Framework in IFRS Standards; 
   --       Definition of Material (Amendments to IAS 1 and IAS 8); 
   --       Interest Rate Benchmark Reform Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7) 
   --       Definition of a Business (Amendments to IFRS 3) 
   --       Covid-19 Related Rent Concessions (Amendments to IFRS 16) 

Standards, amendments and interpretations issued but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 2 January 2021 reporting periods and the Group has not early adopted the following standards and statements.

The adoption of these standards is not expected to have a material impact on the Group's accounts:

-- Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 & IFRS 16)

-- IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint

   --      Amendments to IAS 1 Classification of Liabilities as Current or Non-current 
   --      Amendments to IFRS 3 Reference to the Conceptual Framework 
   --      Amendments to IAS 16 Property, Plant and Equipment-Proceeds before Intended Use 
   --      Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract 

-- Annual Improvements to IFRS Standards 2018-2020 Cycle - Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture

The adoption of the following standards will or may have a material impact on the Group's accounts when adopted and the Group's assessment of the impact of these new standards and interpretations is set out below:

 
Title             IFRS 17 Insurance Contracts 
Nature of the     IFRS 17 is a comprehensive new accounting standard 
 change            covering recognition, measurement, presentation 
                   and disclosure of insurance contracts and replaces 
                   IFRS 4 Insurance Contracts. 
                   In contrast to IFRS 4, the new standard provides 
                   a comprehensive model (the general model) for 
                   insurance contracts, supplemented by the premium 
                   allocation approach (which is mainly for short-duration 
                   contracts such as certain non-life insurance contracts). 
                   IFRS 17 requires insurance liabilities to be measured 
                   at a current fulfilment value and provides a more 
                   uniform measurement and presentation approach 
                   for all insurance contracts. 
Impact            The standard will be effective for annual periods 
                   beginning on or after 1 January 2022 and management 
                   are currently assessing the impact of the new 
                   standard upon the Group's Insurance business. 
Date of adoption  Applicable to annual reporting periods beginning 
 by the Group      on or after 1 January 2022. 
 

Going concern

The Directors have considered the Group's business activities, together with the factors likely to affect its future development, performance and position. The Directors have also assessed the financial risks facing the Group, its liquidity position and available borrowing facilities. These are principally described in Note 14 to the accounts. In addition, Note 14 also includes details of the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and its financial instruments and hedging activities. The directors have specifically considered the ongoing impact of Covid-19 and the UK recession.

In making their assessment the Directors have noted that the consolidated group accounts show a net current liability position. The Group meets its working capital requirements through a number of separate funding arrangements certain of which are provided subject to continued compliance with certain covenants (Debt Covenants). Profitability and cash flow forecasts for the Group, prepared for the period to June 2022 (the forecast period), and adjusted for sensitivities considered by the Board to be reasonably possible in relation to both trading performance and cash flow requirements, indicate that the Group will have sufficient resources available within its current funding arrangements to meet its working capital needs, and to meet its obligations as they fall due. Sensitivities have been applied to the market conditions of each of our trading businesses, as well as applying sensitivities to our key strategic activities and in respect to the ongoing impact of Covid-19.

After making all appropriate enquiries, the Directors have a reasonable expectation that the Society and the Group have access to adequate resources to enable them to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's financial statements.

Jargon buster (unaudited)

There are lots of technical words in our accounts which we have to use for legal and accounting reasons. We've set out some definitions in the jargon buster table below to help you understand some of the difficult phrases accountants like to use. When a word is in bold in the jargon buster table that means you can also find the definition of that word in this table.

There is also a "What does this show?" introduction to every note to the accounts describing in simple terms what the note is trying to show.

Initially though we define and explain some of the Alternative Performance Measures (APMs) that we use throughout the Annual Report and Accounts.

Alternative Performance Measures (APMs)

Our Annual Report and Accounts includes various references to Alternative Performance Measures (APMs). These are financial ratios and metrics that are not defined by International Financial Reporting Standards (IFRS) and as such they may not be comparable with the APMs that are reported by other entities.

We include our APMs in the Annual Report and Accounts as we think they give useful information to our members to help them better understand the underlying performance and financial health of their Co-op. We don't however think the APMs that we provide are better than the statutory measures noted under IFRSs and they are not meant to replace them.

The table below explains in simple terms how the APMs are calculated and why we think they are useful measures to use. Where possible we also call out the nearest equivalent IFRS measure and cross-refer to the section of the financial statements where we reconcile between the APM and that IFRS measure. Our choice of APMs has been consistent year-on-year.

 
APM 
                      Definition and Purpose: 
                       Like-for-like sales growth relates to growth in sales 
                       at those Food stores that have been open for more 
                       than one year (with any sales from stores that have 
                       closed in the year being removed from the calculation 
                       and prior year figures). The calculation includes 
  Like-for-like        VAT on sales but excludes fuel sales from our petrol 
  sales                forecourts. For Wholesale then the like-for-like 
                       metric relates to those partners (stores) that have 
                       been with Co-op for more than one year (with any 
                       sales from partners who have left in the year being 
                       removed from the calculation). 
 
                       The measure is used widely in the retail sector as 
                       a relative indicator of current trading performance 
                       versus the prior year. It is also helpful to our 
                       members in comparing our underlying performance and 
                       growth against the wider market as well as against 
                       other retailers (as it removes the impact that opening 
                       and closing stores may have on absolute sales levels). 
 
                       Closest IFRS equivalent: 
                       There is no close equivalent to this measure under 
                       IFRS. 
 
                       Where reconciled in the financial statements: 
                       Not applicable as there is no close equivalent to 
                       this measure under IFRS. 
                      Definition and Purpose: 
                       Underlying operating profit reflects our operating 
                       profit before the impact of property and business 
  Underlying           disposals (including individual store and branch 
  operating            impairments), the change in the value of investment 
  profit               properties and one-off items. 
  before               We exclude these items as they are not generated 
  tax                  by our day-to-day trading and by excluding them it 
                       is easier for our members to see and understand how 
                       our core businesses are performing. 
 
                       Closest IFRS equivalent: 
                       Operating Profit. 
 
                       Where reconciled in the financial statements: 
                       Income statement and Note 1 (Operating segments). 
                      Definition and Purpose: 
                       Our underlying PBT figure is simply our underlying 
                       operating profit (as calculated above) less our underlying 
                       interest (being the day-to-day interest we pay on 
                       our bank borrowings and lease liabilities). Other 
                       interest income or expense such as our net interest 
  Underlying           income or expense on funeral plans is either not 
  profit               generated by our day-to-day trading or is not considered 
  before               by management in the day-to-day running of the business 
  tax (PBT)            as it distorts the underlying trading performance 
                       of the Group. Such items are not included in our 
                       underlying PBT metric so it is easier for our members 
                       to see and understand how our core businesses are 
                       performing. 
 
                       Again the measure looks to remove those items that 
                       are not generated by our day-to-day trading (as per 
                       the definition noted above) but we also include the 
                       day-to-day finance costs of running of our businesses. 
 
                       Closest IFRS equivalent: 
                       Profit before tax. 
 
                       Where reconciled in the financial statements: 
                       Note 1 (Operating segments). 
                      Definition and Purpose: 
                       Net debt is made up of our of bank borrowings and 
                       overdrafts off-set by our cash balances. The figure 
                       excludes any lease liabilities. 
 
  Net debt             The metric provides a useful assessment of the Group's 
  (interest            overall indebtedness which in turn reflects the strength 
  bearing              of our balance sheet and consequently the financial 
  loans and            resources available to us to employ and direct on 
  borrowings           behalf of our members. 
  only) 
                       Closest IFRS equivalent: 
                       Interest bearing borrowings less cash and cash equivalents. 
 
                       Where reconciled in the financial statements: 
 
                       Consolidated statement of cashflows. 
                      Definition and Purpose: 
                       Total debt is made up of our of bank borrowings and 
                       any lease liabilities that we have. It excludes any 
                       cash or cash equivalent balances that we may hold. 
 
  Total                The metric provides a measure of the Group's gross 
  debt (including      indebtedness. 
  lease liabilities) 
                       Closest IFRS equivalent: 
                       Interest bearing loans and borrowings plus lease 
                       liabilities. 
 
                       Where reconciled in the financial statements: 
 
                       Consolidated statement of cashflows. 
 

Jargon Buster

 
Accounting surplus           When a pension scheme has more assets than 
 (pensions)                   the amount it expects to pay out in the 
                              future (the present value of its liabilities) 
                              then it has an accounting surplus. 
Accrued income               When we've performed a service but haven't 
                              billed the customer yet, we hold the amount 
                              due on the balance sheet as accrued income. 
                              Once we bill the customer the balance is 
                              then moved to receivables. 
Amortisation                 Similar to depreciation, but for intangible 
                              assets. 
Amortised cost               We value some of our debt based on its amortised 
                              cost. This is the present value of the expected 
                              future cash flows in relation to the debt. 
Asset                        This is an amount on our balance sheet where 
                              we expect to get some sort of benefit in 
                              the future. It could be a building we use 
                              or are planning to sell, some cash or the 

                              amount of money a customer owes us. 
Assets held for sale         Sometimes we have to sell things. When we've 
                              decided to make a large disposal before 
                              the year end but the asset hasn't been sold 
                              yet, we have to show it in this line on 
                              the balance sheet and reduce its value (impairment) 
                              if necessary. 
Assets in the course         These are assets that we're in the middle 
 of construction              of building. They're on our balance sheet 
                              as we've spent money already building them, 
                              but they aren't ready for us to use them 
                              yet so we're not depreciating them. 
Associate                    When we have significant influence over 
                              a company (usually by owning 20-50% of a 
                              company's shares and/or having a seat on 
                              its Board), we call that company an associate. 
Balance sheet                This shows our financial position - what 
                              assets we have and the amounts we owe (liabilities). 
Banking Syndicate            We have an agreement in place with a collection 
                              of banks (known as our Banking Syndicate) 
                              that gives us quick access to borrowings 
                              should we need them. 
Benefit payments (pensions)  This is the amount our pension funds pays 
                              out to pensioners. 
Capital expenditure          When we spend money on items that will become 
                              assets (such as property or IT systems) 
                              this is shown as capital expenditure. The 
                              costs are not shown in the income statement 
                              of the year it's spent - instead the costs 
                              are spread over the life of the asset by 
                              depreciation or amortisation. 
Cash flow statement          This shows how much cash has come in or 
                              gone out during the year and how we've spent 
                              it. 
Cash Generating Unit         A CGU is the smallest identifiable group 
 (CGU)                        of assets that generate cash inflows that 
                              are largely independent of the cash inflows 
                              from other assets or groups of assets. For 
                              our Food business this is defined as an 
                              individual store, and for our Funeral's 
                              business this is defined as a regional care 
                              centre and the funeral branches which it 
                              serves as they are heavily interrelated. 
CISGIL                       This is the society that operates the Insurance 
                              underwriting business - CIS General Insurance 
                              Limited. We sold this business on 3 December 
                              2020. 
Commitments                  Where we've committed to spend money on 
                              something (such as building projects) but 
                              we're not technically liable to pay for 
                              it, we don't put the amount on the balance 
                              sheet but we disclose the amount in the 
                              commitments note. 
Comprehensive income         This is our profit for the year plus other 
                              comprehensive income. 
Consolidated                 As this report is based on the financial 
                              performance and position of many societies 
                              and companies around the Group, we have 
                              to add up all those entities and the total 
                              is the consolidated position. 
Contingent asset             This is an amount that we might get in the 
                              future. Unless it's almost certain that 
                              we'll get the amount, we're not allowed 
                              to put it on the balance sheet but we show 
                              the amount in the contingent assets and 
                              liabilities note. 
Contingent liability         This is an amount that we might have to 
                              pay in the future. If it's only possible, 
                              rather than probable, that we'll have to 
                              pay the amount, then we won't show the amount 
                              on the balance sheet but we show the amount 
                              in the contingent assets and liabilities 
                              note. 
Contract assets              These are costs we've incurred in advance 
                              of being entitled to receive payment from 
                              a customer under a contract, such as costs 
                              incurred in setting up a funeral plan. We 
                              hold these on the balance sheet until we've 
                              delivered all the services to our customer 
                              and are entitled to receive payment. 
Contract liabilities         This is where a customer has paid us in 
                              advance of them receiving goods or services 
                              under a contract (for example, a funeral 
                              plan). We have to hold this on the balance 
                              sheet until the customer receives the service 
                              they've paid for. 
Corporate investor           This is money that other societies invest 
 shares                       with us and we pay them interest on it. 
                              The societies can get their money back at 
                              any time. 
Credit                       This is an increase in income/reduction 
                              in costs on the income statement or an increase 
                              in a liability/reduction in an asset on 
                              the balance sheet. 
Current                      An asset or liability that is expected to 
                              last for less than a year. 
Current tax                  This is the amount we expect to pay in tax 
                              for the year based on the profits we make. 
Debenture                    This is a type of loan that we've issued 
                              and are paying interest on. 
Debit                        This is a decrease in income/increase in 
                              costs on the income statement or a decrease 
                              in a liability/increase in an asset on the 
                              balance sheet. 
Debt                         Loans that we've issued and are paying interest 
                              on. 
Deferred acquisition         These are amounts which our Insurance underwriting 
 costs                        business pays to secure business. It then 
                              holds these costs on the balance sheet and 
                              amortises over the length of the insurance 
                              period. 
Deferred consideration       This is an amount we'll be paying to a seller 
                              for businesses we've bought or an amount 
                              we'll be getting from a buyer for businesses 
                              that we've sold. 
Deferred income              Occasionally we receive monies (or recognise 
                              deferred consideration following the sale 
                              of a business) in advance of when we will 
                              actually perform the service we are being 
                              paid for. When this happens we hold a liability 
                              on our balance sheet until the point at 
                              which we perform the service at which point 
                              we extinguish the liability and recognise 
                              the income. 
Deferred revenue -           Monies received from customers for funeral 
 significant financing        plans are held on our balance sheet as a 
                              contract liability. Over the life of the 
                              plan we accrue interest on those liabilities 
                              to reflect a financing element from receiving 
                              the monies upfront. This increases the liability 
                              as additional deferred revenue until the 
                              plan is redeemed. 
Deferred tax                 Sometimes our assets and liabilities are 
                              worth more or less on our balance sheet 
                              than they are for tax purposes. The tax 
                              on the difference in value is called deferred 
                              tax and can be an asset or liability depending 
                              on whether the value is greater in the balance 
                              sheet or for tax purposes. 
Defined benefit schemes      This is a pension scheme where an amount 
                              is paid out to an employee based on the 
                              number of years worked and salary earned. 
Defined contribution         This is a pension scheme where an amount 
 schemes                      is paid into the scheme and at retirement 
                              the employee draws on the amount that has 
                              been invested over the years. 
Depreciation                 Some assets the Co-op will have for a while 

                              (such as vehicles). When we buy them the 
                              cost goes on our balance sheet and then 
                              depreciation spreads the cost of the asset 
                              evenly over the years we expect to use them 
                              in the income statement. 
Derivatives                  These are financial products where the value 
                              goes up or down based on an underlying asset 
                              such as currency, a commodity or interest 
                              rate. 
Discontinued operations      When we sell a large business, we report 
                              its results at the bottom of the income 
                              statement so that it's easier for readers 
                              to see the performance of the Group's other 
                              continuing businesses. 
Discount rate                This is the amount that we are discounting 
                              by. It's a percentage and varies based on 
                              what we expect interest rates or inflation 
                              to be in the future. 
Discount unwind              Every year the amount that we're discounting 
                              is going to be worth more as we get nearer 
                              to paying or receiving it. We have to put 
                              that increase in value (the discount unwind) 
                              through our income statement. 
Discounting                  When we have to pay or receive cash in the 
                              future, accountants like to take off part 
                              of the amount if it's a big amount (like 
                              on our onerous leases). This is because 
                              cash we pay or receive in the future is 
                              going to be worth less than it is now - 
                              mainly because of inflation. 
Disposals                    When we have sold an asset. 
EBITDA                       This is operating profit excluding any depreciation 
                              or amortisation. The letters stand for earnings 
                              before interest, tax, depreciation and amortisation. 
Effective tax rate           This is the average tax rate we pay on our 
 (ETR)                        profits. This might be different to the 
                              standard corporation tax rate, for example, 
                              if we aren't allowed to deduct some of our 
                              costs for tax purposes. 
Equity                       This is the difference between the assets 
                              we own and the liabilities we owe - theoretically, 
                              this is how much money would be left for 
                              our members once every asset is sold and 
                              every liability is paid. 
Eurobond Notes               This is our largest, fixed interest debt 
                              that we pay interest on to fund our businesses' 
                              operations. 
Expected credit losses       This is an estimate of the amount of our 
                              receivables which will not be repaid. 
Fair value movement          There are some things on our balance sheet 
                              which we have to revalue every year. This 
                              includes some of our debt, investment properties, 
                              our pension schemes and funeral plans. The 
                              change in value is called the fair value 
                              movement. 
Federal                      Federal relates to the activities of a joint 
                              buying group that is operated by the Group 
                              for itself and other independent co-operative 
                              societies. The Group acts as a wholesaler 
                              to the other independent co-operatives and 
                              generates sales from this. This is run on 
                              a cost recovery basis and therefore no profit 
                              is derived from its activities. This is 
                              separate to our Wholesale business. 
Finance costs                These are usually the interest we pay on 
                              our debt, but can also be other things such 
                              as the fair value movement on our debt or 
                              the discount unwind of liabilities. 
Finance income               This mainly relates to the interest on our 
                              pension assets and the unrealised gains 
                              on funeral plan investments, but can also 
                              be other things such as the fair value movement 
                              on our debt or the discount unwind of receivables. 
Finance lease                A finance lease is a way of providing finance. 
                              Effectively a leasing company (the lessor 
                              or owner) buys the asset for the user (usually 
                              called the hirer or lessee) and rents it 
                              to them for an agreed period. 
Financial Conduct            The FCA regulates the financial services 
 Authority (FCA)              industry in the UK. 
Financial instruments        A collective term for debt or derivatives 
                              that we have. 
Financial Reporting          The FRC regulate auditors, accountants and 
 Council (FRC)                actuaries and they set the UK's Corporate 
                              Governance and Stewardship codes. 
First Mortgage Debenture     This is a small debt we owe that is secured 
 Stock                        against some properties - a bit like a mortgage. 
Fuel                         Refers to fuel sales generated from our 
                              petrol forecourts. 
Funds in use invoice         Invoice discounting is an arrangement with 
 discounting facility         a finance company so that we can be paid 
                              for amounts we are owed on invoices earlier 
                              than the date our customers are due to pay 
                              us. 'Funds in use' is just the term for 
                              the amount we owe to the finance company. 
Funeral plans                Our customers may not want their family 
                              to pay a large single sum for a funeral 
                              when he or she dies. Therefore, the customer 
                              can pay for it gradually or in lump sums 
                              over a number of years and the Group will 
                              invest that money. 
Funeral plan investments     When a customer gives us money for their 
                              funeral in the future, we invest this money. 
                              The balance of these investments is held 
                              on the balance sheet. 
Goodwill                     When we buy a business or a group of assets, 
                              sometimes we pay more for it than what its 
                              assets less liabilities are worth. This 
                              additional amount we pay is called goodwill 
                              and we put it on our balance sheet. 
(the) Group                  This is Co-operative Group Limited and all 
                              companies and societies that it owns. 
Hedging                      Sometimes we want to protect ourselves in 
                              case we have to pay more in the future for 
                              something. This could happen if the value 
                              of the pound falls so we have to pay more 
                              when buying something abroad or if interest 
                              rates go up. We take out derivatives to 
                              protect us from this and this process is 
                              known as hedging. 
IAS                          International Accounting Standards. The 
                              Group use these as the accounting rules. 
                              There are many different IASs that cover 
                              various accounting topics (e.g. IAS 38 is 
                              for intangible assets) 
IFRIC                        International Financial Reporting Interpretations 
                              Committee. These are interpretations of 
                              IASs or IFRSs that the Group also has to 
                              abide by. 
IFRS                         International Financial Reporting Standards. 
                              Similar to IAS, but cover different subjects. 
Impairment                   Sometimes our assets fall in value. If a 
                              store, branch, business or investment is 
                              not doing as well, we have to revalue it 
                              and put the downward change in value as 
                              a cost in our income statement. 
Income statement             This not only shows our income as the name 
                              suggests, but also what our costs are and 
                              how much profit we've made in the year. 
Intangible asset             We have assets at the Co-op that we can't 
                              see or touch which are shown separately 
                              to other assets. These include things like 
                              computer software and goodwill. 
Interest rate swaps          We like to know what interest we're going 
                              to be paying in the future so we can manage 

                              our businesses effectively. We enter into 
                              arrangements with banks so that we can do 
                              this - for example, if we have debt where 
                              the interest rate can vary, we can buy an 
                              interest rate swap which means that instead 
                              we'll pay a fixed rate of interest. The 
                              value of these swaps can go up or down depending 
                              on how the market expects interest rates 
                              to change in the future. 
Inventories                  This represents the goods (the stock) we're 
                              trying to sell. The cost of this is shown 
                              on our balance sheet. 
Inventory provision          If some of our stock isn't selling, we write 
                              those costs off to the income statement 
                              and hold a provision against those goods 
                              on the balance sheet. 
Investment properties        Properties that we don't trade from, and 
                              which we might rent out or hold onto because 
                              the value might go up, are called investment 
                              properties. 
Invoice discounting          Invoice discounting is an arrangement with 
 facility                     a finance company so that we can be paid 
                              for amounts we are owed on invoices earlier 
                              than the date our customers are due to pay 
                              us. 
Joint ventures               When we own 50% of a company we call it 
                              a joint venture. Sometimes associates are 
                              called joint ventures commercially as they're 
                              ventures with other parties, but are called 
                              associates for accounting purposes. A joint 
                              venture is a company where we own exactly 
                              50%. 
Lease Liability              This represents the discounted future payments 
                              we are due to make to suppliers in exchange 
                              for the right to use their equipment or 
                              property. 
Liability                    This is an amount on our balance sheet which 
                              we'll have to pay out in the future. 
Like-for-like sales          The measure of year-on-year sales growth 
                              for stores that have been opened for more 
                              than one year. This is a comparison of sales 
                              between two periods of time (for example, 
                              this year to last year), removing the impact 
                              of any store openings or closures. 
Listed debt securities       People can trade some of our debt such as 
                              the Eurobonds fair. When this is the case, 
                              it's a listed debt security. 
Member payments              This is an amount we've paid our members 
                              in the year and approved at the AGM such 
                              as dividends. 
Member rewards               These are the benefits that members have 
                              earned for themselves during the year as 
                              part of the 2% membership offer. 
Net assets                   Same as equity. 
Net debt                     This is the debt we have less any cash that 
                              we might have. 
Net operating assets         Net assets less investments, funeral bonds, 
                              deferred tax, pension surplus and drawn 
                              debt. 
Non-controlling interest     This is the equity in a subsidiary which 
                              is owned by another shareholder. For example, 
                              if we only own 60% of a company, the other 
                              40% is the non-controlling interest. 
Non-current                  An asset or liability that is expected to 
                              last for more than one year. 
Non-GAAP measure             GAAP stands for Generally Accepted Accounting 
                              Principles. This is the common set of accounting 
                              principles, standards and procedures that 
                              companies must follow. Sometimes, companies 
                              want to provide different measures to help 
                              readers understand their accounts (such 
                              as underlying profit) where there isn't 
                              a standard definition - these measures are 
                              called non-GAAP measures. 
One-off items                Items that are not regular in size or nature 
                              and would otherwise cloud the underlying 
                              profitability of the Group are stripped 
                              out. This could include a large IT project 
                              or a large restructuring exercise. 
Onerous leases               When we close a store we sometimes still 
                              have to pay running costs until the lease 
                              runs out (such as rates). When this happens, 
                              we make a provision for the amount of the 
                              running costs we will have to pay in future 
                              and hold this on the balance sheet. Rental 
                              costs are excluded from this provision now 
                              we have adopted IFRS 16 (Leases) as those 
                              costs are included in the lease liability. 
Operating profit             This is our profit before we have to pay 
                              any interest to our lenders or tax to the 
                              tax authorities. 
Operating segments           This is an accounting term for the different 
                              businesses we have. When the financial performance 
                              of one of our businesses is reviewed separately 
                              from the other businesses by our Board, 
                              we call that business an operating segment 
                              and its sales and profit are disclosed in 
                              Note 1. 
Other comprehensive          Sometimes we have big fair value movements 
 income                       on long term assets and liabilities. The 
                              income statement is meant to show the performance 
                              during the year, so to avoid this being 
                              distorted by these big changes, they are 
                              shown separately as other comprehensive 
                              income. 
Parent                       This is the owner of a subsidiary. 
Payables                     Another name for liabilities. 
PAYE                         Pay As You Earn. A tax which is paid on 
                              wages. 
Pension interest             This is the interest that we're allowed 
                              to show in our income statement and is the 
                              discount rate used to discount the pension 
                              liabilities multiplied by the pension surplus 
                              or deficit last year. 
Performance obligations      These are promises to provide distinct goods 
                              or services to customers. 
Prepayment                   When we pay in advance for a cost which 
                              relates to services that will be received 
                              over a future period of time (for example, 
                              rent or insurance), we hold that cost on 
                              our balance sheet as a prepayment and then 
                              spread the cost over the period of the service. 
Present value                This is the value of a future cost or income 
                              in today's money and is arrived at by discounting. 
Provisions                   This is a liability, but one where we're 
                              unsure what the final amount we have to 
                              pay will be and when we'll have to settle 
                              it. We use our best estimate of the costs 
                              and hold that on the balance sheet. 
Realised gains               This is when we sell an asset for a profit. 
Receivables                  When someone owes us some money, we hold 
                              that amount as a receivable on our balance 
                              sheet. 
Reclaim Fund                 This is an entity that helps money in dormant 
                              bank accounts to be used for charitable 
                              purposes. 
Related party                This is a company or person that is closely 
                              linked to the Co-op. It's usually a member 
                              of our Board or Executive or their close 
                              family plus companies such as our associates 
                              and joint ventures. 
Remeasurement gains          There are lots of assumptions that are used 
 / losses on employee         when valuing pensions. If those assumptions 
 pension schemes              change this can have a big effect on the 
                              size of the pension asset or liability. 
                              So that we don't distort the income statement, 
                              this effect is shown in other comprehensive 
                              income. 

Repayment notes              This is a type of loan, which we repay either 
                              in instalments or in a lump sum at the end 
                              of the loan. 
Reserves                     This is the amount of equity we have, but 
                              excluding any share capital. 
Restated                     Sometimes we change the numbers that we 
                              showed in last year's accounts. This might 
                              be because we have changed where or how 
                              we record certain things or it could be 
                              that we have corrected an error. There are 
                              strict rules around what can be changed 
                              and when we make changes we explain why 
                              in the accounting policies. 
Retained earnings            This is all the profits we've made since 
                              the beginning of time for the Co-op that 
                              have not yet been paid out to members. 
Retirement benefit           Another term for our pension liabilities. 
 obligations 
Return on plan assets        This is the income our pension assets have 
 (pensions)                   generated in the year. 
Revaluation reserve          When we revalue a property upwards, we're 
                              not allowed to put this unrealised gain 
                              through our income statement or within retained 
                              earnings as law dictates that this can't 
                              be distributed to members until the property 
                              is sold. It's then ring-fenced as a specific 
                              reserve. 
Revolving Credit Facility    This is money that our lenders have agreed 
                              we can borrow if we need to. It works a 
                              bit like an overdraft. 
Right of use asset           This is an asset that we don't own legally, 
 (ROU)                        but which we lease from another party. The 
                              asset represents the value the Co-Op has 
                              in being able to use the asset over the 
                              length of a lease contract. 
ROCE                         Return on capital employed. This is based 
                              on our underlying profit we make in the 
                              year divided by the net operating assets 
                              we have. 
Sale and leaseback           This is when an asset is sold to a third 
                              party and then immediately leased back under 
                              a lease agreement. For the Co-op, this usually 
                              relates to the sale of a building such as 
                              a store. 
Sensitivity analysis         When an item on our balance sheet varies 
                              in value from year to year based on some 
                              estimates that we make, we show a sensitivity 
                              analysis which shows you how much the asset 
                              or liability would change by if we were 
                              to change the estimate. 
Share capital                This is the amount of money that our members 
                              have paid us to become members less any 
                              amounts that we've repaid to them when they 
                              cancel their membership. 
Society                      The Co-operative Group Limited is a registered 
                              co-operative society. We sometimes refer 
                              to our collective whole as 'the Group' or 
                              'the Society' and the terms are broadly 
                              interchangeable. 
Subsidiary                   This is a company or society that is owned 
                              by another company. 
Supplier income              Sometimes our agreements with suppliers 
                              mean they will give us money back based 
                              on the amount of their products we buy and 
                              sell. We call this supplier income. 
Underlying interest          This is the day-to-day interest we incur 
                              on our bank borrowings and lease liabilities 
                              and is what management consider in the day-to-day 
                              running of our Co-op. Non-underlying interest 
                              are those items that are not generated by 
                              our day-to-day trading or are not considered 
                              by management in the day-to-day running 
                              of the business (such as the interest on 
                              funeral plan liabilities or the fair value 
                              movement on the Group's quoted debt and 
                              interest rate swaps). 
Unrealised gains             An asset may have gone up in value, but 
                              we've not sold it. If this is the case, 
                              the profit from the gain is unrealised as 
                              we've not sold the asset yet. 
Unrealised gains -           The funeral plan investments which we hold 
 funeral plans                on behalf of our customers attract interest 
                              and bonus payments each year (depending 
                              upon market conditions). The gains or losses 
                              in the fair value of the plan investments 
                              is recognised within finance income /costs 
                              each year. 
Wholesale                    The Group's operating segment (trading Division) 
                              that sells direct to other retailers (rather 
                              than to individual members of the public). 
                              This primarily relates to the business we 
                              operate after we bought Nisa but it also 
                              includes any franchise stores. Wholesale 
                              is separate to our Federal segment. 
 

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April 08, 2021 04:00 ET (08:00 GMT)