Morrisons AR 2017 Web StrategicReport

BUILDING A BROADER,
STRONGER BUSINESS
Wm Morrison Supermarkets PLC Strategic Report and Supplementary Material 2017/18
Overview
BUILDING A BROADER,
STRONGER BUSINESS
Morrisons is becoming broader and stronger, aiming to be more
popular and accessible for customers. Growth is capital light,
meaningful and sustainable, built on strong free cash flow and
balance sheet foundations
ST R AT EG IC R E PO RT SU PPL E M E N TARY MAT E R IAL

Our core purpose 2 Composition of the Board 28
Chairman’s statement 4 Executive Committee 29
Chief Executive’s statement 6 Summary Directors’ remuneration report 30
Our six priorities 8 Consolidated statement of comprehensive income 33
Case studies 10 Consolidated balance sheet 34
Our customers 12 Consolidated cash flow statement 35
Our colleagues 14 Consolidated statement of changes in equity 36
Our suppliers 16 Investor relations and financial calendar 37
Our shareholders – Chief Financial Officer’s report 17 Information at your fingertips 38
Corporate responsibility 21
O N LI N E AN N UAL R E PO RT
Risk 23
Read how we are creating value for all our stakeholders:
www.morrisons-corporate.com/annual-report-2018
Throughout the Strategic report and supplementary material:

Unless otherwise stated, 2017/18 refers to the 53 week period ended 4 February 2018 and 2016/17 refers to the 52 week period ended 29 January 2017.
2017 and 2018 refer to calendar years.
Overview Strategic Report Supplementary Material
Highlights
Measuring the progress of Fix, Rebuild and Grow
FI NAN CIAL H IG H LIG H TS
# Group like-for-like (LFL) sales # Underlying profit before tax #

Group revenue (exc. fuel)* (UPBT)*
£17.3bn +5.8% +2.8% £374m +11.0%

17.3 1.9% 2.8% 374
16.8 345 337
(2.0)%
16.1 16.3
242
(5.9)%
2014/15 2015/16 2016/17 2017/181 2014/15 2015/16 2016/171 2017/181 2014/15 2015/161 2016/17 2017/182
1 Group revenue on a 53 week basis 1 2016/17 and 2017/18 include wholesale contribution 1 2015/16 reported UPBT. UPBT before £60m one-offs was £302m
to LFL sales 2 UPBT on a 53 week basis. £369m 52 week equivalent
SH SH SH
Free cash flow* Net debt* Total dividend
£350m £973m down £221m

year-on-year 10.09p
inflow 2,340 +85.8%
1,746
1,194 973
2014/15 2015/16 2016/17 2017/18
* Alternative Performance Measures as defined in the Glossary on page 127 of the Annual Report
N O N - FI NAN CIAL H IG H LIG H TS
Like-for-like (LFL) customer # C CO

transaction numbers Customer satisfaction Colleague engagement index
+2.9% +7% pts +2% pts

4.0% +7% 78%
2.9% 76% 76%
+3% +2%
75%
Base
(1.9%) (1.6%)
2014/15 2015/16 2016/17 2017/18 Jan 15 Jan 16 Jan 17 Jan 18 2014/15 2015/16 2016/17 2017/18
LFL customer transaction numbers, year-on-year change. Customer satisfaction measured at January each year, Colleague engagement index as measured in the annual
Excludes online year-on-year change ‘Your Say’ survey
O PE R ATIO NAL H IG H LIG H TS
• Meaningful, sustainable sales and profit • Started a rolling programme to supply

growth with strong cash flow McColl’s stores nationwide with both
• Improving capability, and becoming more branded products and our own revived
differentiated for all stakeholders Safeway brand
• Proposal to return surplus capital to • Store-pick online service extending
shareholders through a total ordinary Morrisons.com into further new areas
dividend of 6.09p per share and a special • ‘Morrisons at Amazon’ expanded into
dividend of 4.00p per share more postcodes and more cities
Alignment of highlights to our stakeholder ambitions:

C Customers S Suppliers CO Colleagues SH Shareholders # All
1
Our core purpose

We make and provide food we’re all proud of,
where everyone’s effort is worthwhile, so more
and more people can afford to enjoy eating well
Resources and
relationships Our business
Customers Food maker

Over 11 million customer transactions take place We have thousands of food makers in our stores and in our manufacturing sites
every week
• Our skilled food makers make fresh food • Over half of the fresh food we sell, we make
Colleagues daily in our stores on Market Street for ourselves
our customers • We work with our suppliers to carefully
Over 105,000 friendly and skilled colleagues,
and a high quality management team • We make fresh food in our manufacturing source the products we don’t make ourselves
sites across the UK
Sites
491 conveniently located supermarkets
18 manufacturing sites
9 distribution centres
Increasing digital
presence
Brand Our business...

A well known brand which is becoming more
popular and accessible to more customers Our food making skills provide products Controlling the whole supply chain means
that are fresh, good quality, great value and we know where our food comes from and
unique to us can provide our customers with what they
want, when they want it
…delivered through our six priorities

1 To be more 2 To serve customers 3 Find local
competitive better solutions
Financial strength
A strong balance sheet, with a largely freehold
estate, low debt and a net pension surplus
Continued generation of significant and …and supported by our five ways of working
sustainable levels of free cash flow
1 Customers 2 Teamwork 3 Freedom in the
first framework
2
Outcomes for our

stakeholders
Distributor Retailer 1. Customers

We have a national distribution network We sell the products we make and buy, in our stores • More customers, buying more
that moves the food we make and buy and online from us, more often
• Customers can get what they
want, when they want it
• Our stores are serviced by eight regional • Listening informs improvements we make See page 12 for more detail
distribution centres and one national • We have a Morrisons price list, providing good quality fresh
distribution centre food and great value
• This supports our growth through
other channels
• Our shopkeepers care deeply about service 2. Colleagues
• Our More Card helps us to understand and serve our • Engaged and motivated
customers better colleagues
• Colleagues sharing in the
• Over 60% of the UK population has access to our online offer
success of the business
and we continue to expand our reach • A fair day’s pay for the work
they do
See page 14 for more detail
Wholesaler
We are a wholesaler, providing products to retail partners
and wholesale customers
3. Suppliers
• Establishing lasting relationships
• We aim to make our brands more popular, accessible and increase • Working together with
volume through our existing assets simplified terms
• We leverage the strength of our brand and manufacturing See page 16 for more detail
capability to deliver good quality products at great value
• Revival of the Safeway brand for wholesale
4. Shareholders
• A strong balance sheet
• A cash generative business with
falling debt
• Sales, profit and dividend
growth
Understanding our customers powers the Through stores, manufacturing, online and See page 17 for more detail
decisions we make. Customers trust our brand our wholesale partners, we can leverage our
and see us as competitive and locally relevant brand to achieve meaningful and sustainable
capital light growth
Environmental
and social value
• Making a positive contribution
to society
See page 8 for more detail • Reducing food waste and
taking care of the environment
• Ethical trading practices
4 Develop popular 5 To simplify and 6 To make the core See page 21 for more detail
and useful services speed up the supermarkets
organisation strong again
See page 15 for more detail
4 Listening and 5 Selling, controlling costs, growing

responding profits, removing waste
3
Chairman’s statement
A TURNAROUND
SHARED BY ALL
STAKEHOLDERS
The Board spend time balancing the need to deliver adequate

short‑term returns with the imperative of investing back in the
shopping trip, such that we can deliver long-term sustainable growth
Andrew Higginson, Chairman
4
HIGHLIGHTS
10.09p
Total dividend
12.19p
Underlying basic earnings
per share (2016/17: 10.86p)
It is now three years since David and the team started the Morrisons This last point is especially important for us; our dedicated and hard-
turnaround journey. The business is in good shape. Like-for-like sales have working colleagues are the driving force behind the turnaround and, as
been positive for more than two years, the balance sheet and cash flow they continue to improve the shopping trip for customers, we are paying
are strong, and we are developing successful relationships with retail and them more in hourly wages and a higher annual bonus. Our hourly pay
wholesale partners such as Ocado, Amazon, Rontec, Timpson and, more rate for front line colleagues has increased by 27% in just three years,
recently, McColl’s and Sandpiper in the Channel Islands. and the average colleague bonus payment has more than doubled over
We were pleased with our strong performance last year, becoming more the last two years. In addition, over 1,000 of our most senior colleagues,
competitive for customers and delivering strong sales, profit and return including store managers, are benefiting from our Long Term Incentive
on capital employed (ROCE) growth in a very tough environment, despite Plan. As I said in last year’s Annual Report, the management team are
being faced with some substantial input inflation and other cost pressures. making a big difference at Morrisons, and they will be well rewarded over
the long term for consistent success, but this will be a turnaround shared
There is still a very long way to go. Morrisons has many opportunities by all the Morrisons team.
to grow and develop into a broader, stronger business.
As I noted last year, a sustainable turnaround will be accompanied by
To achieve success for the long term, the Board will give management a sustainable dividend, and I am pleased that we recently announced
headroom to execute the Fix, Rebuild and Grow strategy. We are a final ordinary dividend of 4.43p per share. As we continue to Fix,
determined not to repeat the missteps of the food retail industry in Rebuild and Grow, Morrisons will remain highly cash generative and our
recent years, where inappropriate targets sometimes contributed to commitment to capital disciplined growth will be unwavering. We intend
behaviours and strategies that were not in the best long-term interests to return surplus capital to shareholders, and are proposing a special
of stakeholders. Our targets for management are designed to prioritise dividend of 4.00p per share which, together with the ordinary, means
consistent and sustainable long-term growth over short-term profit. a 10.09p total dividend for the year, up 85.8% on last year. In future we
The Board was disappointed to receive only a low vote of support for the will continue to be guided by the principles of our capital allocation
Directors’ remuneration report at the 2017 Annual General Meeting (AGM), framework, and retain a strong and flexible balance sheet. We will
and has been grateful for subsequent shareholder consultation and review options for uses of our strong free cash flow each year.
feedback. We are pleased the new remuneration policy, commencing this
Andrew Higginson
year, was well supported, and hope to now move forward with interests Chairman
and opinions aligned.
Key to aligning all those stakeholder interests will be continuing to
improve the shopping trip for customers. As I have said before, this may
seem simple but it is not easy. We are making good progress. Fresh Look
is transforming the look and feel of our stores; new and improved ranges
are bringing excitement, freshness and provenance to our offer, and; our
unique team of food makers and shopkeepers are reconnecting with
customers and serving them better.
Governance Highlights
Board composition and membership Board effectiveness External Auditor
• The Board comprises of seven independent • Consilium Board Review undertook an external review • The Audit Committee is satisfied that the Group’s
Non‑Executive Directors and two Executive Directors of Board effectiveness this year, and reported that the statutory auditor, PwC, who were appointed in 2014/15,
• There is an appropriate mixture of skills and experience Board has a well balanced set of capabilities, and that are performing effectively
on the Board, which has been further strengthened governance and compliance is strong • The Board has a policy on the engagement of the
with the appointment of Tony van Kralingen and • The Directors have all attended an appropriate number external auditor to supply non‑audit services
Kevin Havelock of Board and Committee meetings and commit
sufficient time to the Group Accountability
• There is a clear division of responsibilities between
the roles of Chairman and the Chief Executive • The Board is satisfied with the effectiveness of internal
control and that risk is being managed effectively
• All Directors stand for re-election annually at the AGM
across the Group
• Our Senior Independent Director is Rooney Anand
5
Chief Executive’s statement
BROADER,
STRONGER, MORE
COMPETITIVE
2017/18 was a year of continued progress

and strong performance. A broader,
stronger Morrisons is emerging
David Potts, Chief Executive
6
2017/18 quarterly Group LFL sales (exc. fuel) 2017/18 LFL quarterly number of transactions
3.4% 4.6% 4.6%

2.9% 2.8%
2.6% 2.5% 3.2%
2.1% 2.0%
Q4* Q1 Q2 Q3 Q4 Q4* Q1 Q2 Q3 Q4
Definition Definition
See the Glossary on page 127 of the Annual Report LFL number of transactions, year-on-year change.
for a definition. Excludes online.
*2016/17 *2016/17
2017/18 was a year of continued progress and strong performance. This, and other ongoing work focusing on our brand at our prices,
A broader, stronger Morrisons is emerging. Capability is improving, the means we are making good progress towards our own Morrisons price
offer is more consistent and more competitive, and we are becoming list. I was especially pleased last year that, despite input cost pressure
more differentiated for all stakeholders. All three phases of our on many commodities, our good work meant the price of a basket
turnaround – Fix, Rebuild and Grow – are running concurrently of key 2017 Christmas items was the same as in 2016.
and providing meaningful and sustainable growth opportunities. We made further progress in the year with our plans for a broader,
The year was not without its challenges, most notably the inflationary stronger Morrisons.
pressures on imported food prices caused by weak sterling. However, In wholesale supply, we are open for business. We signed a major new
the team responded well, creating self-help opportunities from these agreement with McColl’s, and have started a rolling programme to supply
challenges, and further improving Morrisons offer for customers. all McColl’s stores nationwide with both Safeway products and national
We continued to listen and learn from customers and colleagues. brands. In addition, we recently announced we will be supplying around
We again improved all aspects of the shopping trip, served customers 40 Sandpiper stores in the Channel Islands, many of which will convert
better, and became more competitive. to Morrisons Daily. We are on track for our target of £700m of annualised
Our core supermarkets are showing strong annual growth on growth wholesale supply sales by the end of 2018.
as we enter a fourth year of turnaround. Two year like-for-like (LFL) For online, we are adding extra capacity to Morrisons.com through new
was in the 4%-5% range for most of the year, and accelerated to above store-pick capability in areas outside of those covered by the Dordon
6% during the important Christmas and New Year period. customer fulfilment centre (CFC), for example in North East England.
Growth was driven by more customers and more volume. Put simply, We are also growing as Amazon grows its food offer, and are now
more and more customers found more things they wanted to buy at supplying 40 Rontec-owned Morrisons Daily stores on its forecourts.
Morrisons. New and improved ranges in areas such as Home & Leisure Despite this strong progress, our approach remains restless and relentless.
and ‘Eat Smart’, and more innovation meaning multi-year growth in
‘Best’, ‘Free From’ and ‘Nutmeg’. For example, in its second Christmas, Our colleagues have many ideas of how we can keep improving for years
our premium ‘Best’ range grew sales by 25%. to come. For example, capability in technology and data is improving, but
we still have substantial opportunities – in automated ordering, in-store
Our Fresh Look refit programme extended to another 80 stores during administration, distribution, and procurement of goods not for resale – to
the year, and we have now completed around half of our stores. save on cost and recycle the savings back into improving the offer further.
In addition, many of the Fresh Look learnings are being applied across the
whole estate as we go. For example, the majority of our cafés, Fruit & Veg, I am pleased we made further good progress with our plan for
and Florist departments were updated with a new look and feel during £75m-£125m of incremental profit from wholesale, services, interest
the year. We are very pleased with the Fresh Look results. A modernised and online, and that debt has fallen to less than £1bn as we guided.
Morrisons is emerging, with its roots firmly in fresh food and Market We are striving to keep growing sales, profit and ROCE, and generate
Street, for which we are rightly renowned. significant levels of free cash flow, which we expect to be capital light,
meaningful and sustainable. The recent announcement proposing a
The growth on growth is not just in sales. Our turnaround is colleague-led, special dividend reflects our good progress so far and our expectations
and customers are again telling us that our service is improving and our for continued growth.
colleagues are friendly. Our customer satisfaction scores improved again,
and have now been growing for three years. This was helped by our new All of the progress – in morale, customer transactions, customer
automated ordering system which was fully operational by the end of satisfaction, sales, profits, ROCE, and cash flow – are interlinked.
the year, improving availability, reducing cost and freeing up time for our They are as a result of Morrisons colleagues listening to customers and
colleagues to serve customers better. responding to improve the shopping trip. Our people really are the key.
I would like to thank every colleague for helping make 2017/18 a success,
One of the biggest opportunities created by the inflationary pressures and know they will make every effort to keep up the pace of progress
was to improve our price position further and become more competitive into 2018/19 and beyond.
for customers. As a uniquely vertically integrated British food maker
and shopkeeper, we are ideally placed to do this, and we are working David Potts
hard to save customers every penny we can. For example, we recently Chief Executive
bought a potato processing plant in Scotland, which is enabling us to have
closer relationships with local farmers. We have also invested in industry
leading robotics and innovation which is improving product quality and
consistency, and is providing lower prices for customers. We are just
starting a similar project in our newly acquired egg packing business
in Yorkshire.
7
To be more
competitive
The progress
we have made on
To serve
OUR SIX customers
better
PRIORITIES
We continued to listen and learn from Find local
customers and colleagues. We again solutions
improved all aspects of the shopping
trip, served customers better, and
became more competitive
David Potts, Chief Executive
Develop
popular and
useful services
Simplify and
speed up
Make core
supermarkets
strong again
8
We are listening and responding

• As a British business with a largely British supply • ‘Price Crunch’, ‘Way Down’ and ‘Morrisons Makes
chain, the impact of weaker sterling on imported It’ are building a great value Morrisons price list
food inflation is an opportunity to help save • We are making good progress on improving the
customers every penny we can quality and packaging of our own label range
• We work hard with growers, farmers and while keeping prices low
suppliers to focus on being more competitive • Our premium own label range, ‘Best’
on the products which matter the most continues to grow, with a broader range
to our customers and twice as many products as last year
• Our unique manufacturing skills help us to drive • We introduced improved ranges in Home &
prices lower, particularly on fresh food Leisure, ‘Eat Smart’, ‘Free From’ and ‘Food to Go’

• The shopping trip across the store is becoming • More customers are able to shop with us online,
more consistent and customer satisfaction via a new store-pick delivery service
has improved • A new ‘Flowerworld’ website has been launched,
• A new automated ordering system is improving offering fresh bouquets with free next day
availability, reducing stock levels and helping delivery
to lower costs • ‘Food to Order’ is available all year round, in-store
• Investment in new and improved checkouts gives and online including a large selection of ‘Free
customers more choice and shorter queues From’ products
• Colleagues in-store are more visible, showcasing
their craft skills, particularly on Market Street

• Local solutions enable us to tailor our offer • We are identifying and sourcing more products
to each store’s catchment from the nation’s best local growers, farmers,
• We continue to improve our offer during fishermen and other food makers
key events and tailor ranges around different • Through the Fresh Look programme, we continue
demographics and seasons to incorporate local solutions based on listening
• We have hosted hundreds of local suppliers to how we can improve the store
at 16 different regional food maker events • Data from our More Card helps us understand
across Britain how we can improve the shopping trip
store‑by‑store
We are listening and responding • Parcel pick up services continue to be popular.

We have Amazon lockers in over 400 stores, and
• Existing services are increasingly popular and Doddle is now in over 160 stores
continue to perform well
• Timpson continues to grow and is now in around
• We have modernised almost all of our cafés, and 180 stores
introduced over 50 new standalone barista bars
• We are utilising our car parks better through
• In addition to our plans with Rontec partnerships with car wash and tyre change
for Morrisons Daily, we are developing concessions
more convenience opportunities on
our own forecourts

• We are simplifying and speeding up the organisation end-to-end, focusing
on providing colleagues with simpler and more efficient ways of working
• We continue to work with suppliers to build strong, long-term and mutually
beneficial relationships
• We have started to introduce more automation in our warehouse
management systems, which will improve forecasting and demand planning
• There remain opportunities to simplify procurement processes for goods
not for resale and we have developed partnership programmes with
suppliers in many key areas

• Fresh Look extended to another 80 stores during • We continue to make improvements across
the year and have now completed around half Market Street, particularly in Fruit & Veg and
of our stores Florist departments
• Many local Fresh Look learnings have been applied • ‘Nutmeg’ womenswear has been further
across the whole estate expanded and is now in almost 100 stores,
with plans for more next year
9
Case studies
A YEAR OF
PROGRESS IN OUR
STRATEGY TO FIX,
REBUILD AND GROW
We have continued
to make progress
in our turnaround.
These case studies illustrate the
progress this year in building a
broader, stronger Morrisons and
delivering against our six priorities.
1 To be more competitive
2 To serve customers better

Manufacturing
3 Find local solutions During the year, we invested
in our supply chain for British
Develop popular and
4 useful services potatoes. We acquired a potato
facility in Angus, Scotland, as well
5 Simplify and speed up as investing in increasing capability
in existing manufacturing sites.
Make core supermarkets
6 strong again Wholesale Owning more of the supply chain
We are open for business as a wholesaler, and are making good progress. During means we can work closely with
the year, we announced a major new wholesale supply agreement with McColl’s. farmers and growers to improve
As part of this agreement we are reviving the Safeway brand which we have been product quality and consistency,
developing since the end of 2016. Many products will be made by our own skilled lower the cost of production
food maker colleagues in one of our 18 manufacturing sites. ‘Morrisons at and provide our customers the
Amazon’ continues to grow and expand into new areas, and a further 32 Rontec lowest possible prices.
owned and operated Morrisons Daily convenience stores were opened, taking
the total to 40. We also recently announced a new wholesale agreement with 1 5 6
Sandpiper in the Channel Islands.
1 4
Fresh Look
Through Fresh Look we are improving our
stores each day, one by one, by resetting
and introducing new ranges, and providing
the tools and environment our team of
food makers and shopkeepers need to
deliver great customer service. It is
important we take the time to listen to
customers, both before and after, the
Fresh Look is completed, and that we
keep disruption to a minimum. So far we
have improved around half of our stores,
and will complete the rest in a phased
programme over the next few years.
1 2 3 4 5 6
10
Morrisons ordering Mastercraft

We have introduced a new automated ordering system Mastercraft is our national competition to find our best food makers and
into all stores, which has given greater visibility of stock and shopkeepers from across our stores and sites. Our colleagues demonstrate
helped to improve availability and lower costs. The system their expertise, knowledge and passion for their craft in our biggest annual celebration
did not require a large capital investment and utilises cloud of how we make and provide food we are all proud of. There were 12 categories this
technology, and store-specific sales data to accurately year including Butchery, Bakery, Fishmongers, Fruit & Veg, Deli, Floristry, Cake Shop,
forecast stock requirements. We have identified further Wine & Spirits, three apprentice categories and an ‘innovation’ category which was
efficiency opportunities upstream within our depots, new for 2017. The event was a huge success and truly showcased the breadth of skills
manufacturing sites and with suppliers. and the talented colleagues we have at Morrisons.
2 5 6 1 2 6
Local solutions
Customers tell us that local is important to them. They value
local products and want to support their community, so we
listened and launched a search for the next generation of
local food makers nationwide through The Nation’s Local
Foodmakers. Throughout the year, we hosted 16 different
events where we met hundreds of local farmers, growers,
fishermen and other food makers.
Local solutions enable us to tailor our offer in each store
and we take pride in working with smaller, local suppliers
to create a range that is locally relevant for our customers
and reflects our individual stores’ demographic. Locally
grown fruit and vegetables are now seasonally available
in 350 stores, and locally sourced meat is now available
in all Scottish, Welsh, Yorkshire, Lincolnshire and, most
recently, South West stores.
Our Skipton store in Yorkshire features over 500 local
products across categories such as crisps, yogurts, cereals
and pies. The store has specific local point of sale, feature
bays and regular tasting sessions. We are proud that 100%
of the beef and pork on the Butchery counter in Skipton
is sourced from Yorkshire.
1 2 3 6
11
HIGHLIGHTS
Over 11m
Customer transactions per week
on average
40,000
Customers connected with
each month
Our four stakeholder ambitions
OUR CUSTOMERS
Listening and responding to our customers Customers continue to rate us highly on our food maker credentials,
With over 11 million transactions per week on average, it is important recognising the skill and expertise of our in-store crafts people and
that we listen to our customers and respond quickly wherever possible. our unique Market Street offer. Customers have told us they appreciate
We continue to increase the breadth and depth of our customer listening the fact that our in-store experts make and provide more fresh food
activities across the business and more colleagues now spend more of from scratch than anyone else in Britain. The ‘Morrisons Makes It’
their time listening to customers. campaign, which showcases unique products made by our specialists,
has been well received by customers. Customers continue to associate
Improving the customer shopping trip by listening hard and responding us strongly with buying from British suppliers and working closely
quickly remains fundamental to our plan. Our colleagues are doing an with farmers and growers. We are working hard to build this national
outstanding job of serving customers better and we are listening to association at a regional and local level through The Nation’s Local
customers in more ways than ever. Every month, we connect with Foodmakers programme.
around 40,000 customers through a combination of our large online
panel of customers, our regular in-store listening programme and monthly Our brand continues to play an important role at Morrisons.
customer surveys. Understanding our customers and focusing on the things that matter
most, such as price, quality and range, help us ensure that our brand
The ‘My View’ online customer panel is an important way for customers remains relevant and attractive.
to give us immediate feedback so that we can respond quickly.
We have improved the quality of our products within both the ‘Savers’
Through this programme of listening, customers have told us that and Morrisons ranges, and removed unnecessary packaging making the
healthy eating, price, increased convenience and simplicity in stores product more visible. We have doubled the size of our ‘Best’ range to
are all becoming more important in their lives. This customer feedback over 1,000 products and we are continuing to see strong growth. We have
has helped us to make significant improvements. also extended our range of ‘Free From’ and made it easier for customers
Our customer service contact centre connected with over 1.7 million who want to buy these specific products to find them in our stores.
customers during the year by telephone, email, letter or social media. In 2017, we won over 300 awards for the quality of our own brand
Our contact centre colleagues put the customer at the heart of products, with some highlights being Own-label Range of the Year for
everything they do. ‘Best’ at the Grocer Gold Awards; Supply Chain Innovation of the Year
for our automated ordering system at the IGD Awards; Innovator of the
Improving the customer shopping trip Year at the International Wine and Spirits Competition; and Multiple Beer
As food makers and shopkeepers we are committed to improving the Retailer of the Year and Multiple Cider Retailer of the Year at the 2018
customer shopping trip. More customers than ever are highly satisfied Drinks Retailing Awards. Demonstrating the opportunity to extend our
with the service they receive in our stores, and they have told us that ‘Nutmeg’ brand beyond clothing, we also won Best Disposable Nappy
we have improved in a number of important areas. For example, for our ‘Nutmeg’ Ultra Dry Nappy at the Mumii Awards.
customers told us they continue to see improvements in reduced queues.
We also focused on improving shop floor service, and customers told us
that we have made significant improvements in staff friendliness, store
cleanliness and ease of navigation. Customers also tell us that we have
made improvements in the availability of products on our shelves.
12
UK grocery market size (£bn) 2017 Composition of UK grocery market size
184.5 Supermarkets £86.0bn

177.0 178.0 179.0 Convenience £40.0bn
175.0
Discounters £20.1bn
Hypermarkets £16.2bn
Other Retailers £11.8bn
2013 2014 2015 2016 2017
Online £10.4bn
Source Source
Institute of Grocery Distribution (IGD) Institute of Grocery Distribution (IGD)
Being more competitive The Market

In September 2017, we introduced ‘Way Down Price Crunch’ which During the year, the UK grocery market continued to be competitive.
communicates our great value prices, and prices which have been held The backdrop is still one of some uncertainty for UK consumers, with
down lower for longer. With more prices being ‘Crunched’ for customers, the longer term outlook for the UK economy and the wider implications
and a higher average discount, ‘Crunch’ sales have achieved record levels. of Brexit still unclear.
Customers have responded positively, telling us that ‘Way Down Price Input inflation, as we had expected, was a factor during the year
Crunch’ provides a clearer and more confident communication that we as a result of weaker sterling pushing up import prices. In these times
are lowering prices across the store, and that they can expect to make of uncertainty value is even more critical to customers, as their budgets
more noticeable savings. do not expand if prices are higher, so we continue to work hard to
More Card manage the impacts of retail price inflation.
The Morrisons More Card continues to grow in popularity. More and However, we believe these challenges can continue to bring the best
more of our customers are regularly collecting points and receiving out of Morrisons. We are listening hard to customers and colleagues,
rewards, which they can use to make savings when they shop with us. which is helping us better respond to these changes as they occur.
We are improving every day and our team of food makers and
We continue to innovate, and have recently introduced a student specific shopkeepers continue to find ways to be more competitive and
programme for the More Card which encourages students to join when serve customers better.
they start higher education.
Our vertically integrated supply chain means we are less reliant on
The More Card continues to be a very important way to listen to our imported products. As a British manufacturer sourcing home-grown
customers allowing us to better tailor our offer to meet our customers’ products wherever possible, and as British farming’s biggest single
needs. We are using what we learn about our customers in a number of supermarket customer, we are well placed to mitigate some of the
different ways and responding accordingly, from providing personalised wider economic pressures. We continue to work hard with growers,
rewards that are based around customers actual shopping behaviour, farmers and other suppliers to save customers every penny we can.
to developing our pricing strategy and making sure the range in each
individual store is relevant to the customers who shop in it. Whilst much of our continued turnaround is in our own hands, we are
aware of, and respond to, changes in customer sentiment and trends
in the market. We expect the trends towards digital shopping, more
frequent shopping and convenience to continue, and these are real
opportunities for a broader, stronger Morrisons.
Wholesale, online and popular and useful services provide opportunities
for Morrisons in these significant and growing channels, and help increase
the size of the market in which we operate. We are serving more
customers online in new areas through a new store-pick delivery service
launched with our partner Ocado. We will be extending that further
into more new areas in the coming year, as well as taking some capacity
in Ocado’s new customer fulfilment centre at Erith. New wholesale
partnerships with McColl’s and Sandpiper, together with existing partners
Amazon and Rontec, and our own Morrisons Daily stores, make Morrisons
more accessible to more customers, through new channels.
However, supermarkets continue to represent around half of the
UK grocery market and it is forecast this sub-sector will represent
the majority of the market for many years. Therefore, our focus on
the core supermarkets is a key priority in our turnaround. The Fresh
Look programme, guided by listening and incorporating local solutions,
continues to be rolled out and improvements in growing areas such
as Clothing and ‘Food to Go’ are important to strengthening the offer
in our core supermarkets.
We cannot predict the future but, as long as we continue to do what
is right for our customers, we expect to emerge from this period of
uncertainty a broader, stronger business.
13
HIGHLIGHTS
78%
Colleague Engagement Index Score
(2016/17: 76%)
Over
7,000
Number of colleagues involved
in ‘Your Say’ forums
OUR COLLEAGUES
Listening hard and responding each store. We will be investing in more colleague roles across stores to
Listening to colleagues at all levels and across the organisation is critical serve our customers better. This will mean that we reduce the number of
to the business and its turnaround. Through our annual ‘Your Say’ survey management roles by c.1,500, whilst simultaneously creating c.1,700 more
and ongoing forums, we have listened more than ever to the views of colleague roles in stores. We will continue to look to mitigate the impact
our colleagues. as much as possible. All those impacted will be given the opportunity to
apply for alternative roles in stores or elsewhere in the business.
Three-quarters of colleagues completed the 2017 ‘Your Say’ survey.
Feedback included over 80,000 comments on how we can make Tools and training to do the job
Morrisons a better place to work and shop. For the second consecutive During the year, we introduced our ‘MyMorri’ digital platform which gives
year, our colleague engagement score increased across the business and all colleagues online access to their payslip, colleague handbook and a
overall we have achieved an engagement score of 78%, with every single dedicated news channel to keep up-to-date with all relevant company
business function in positive growth. information. We have introduced ‘My Perks’ on this platform giving
Our ‘Your Say’ forums have been up and running for over a year, and colleagues access to discounts across many high street retailers. Since
over 7,000 colleagues have been involved in identifying ways of making the launch, we have seen over 95% of our colleagues use ‘MyMorri’.
Morrisons a better place to work and shop. Our national forum saw We also introduced a new online learning management system,
colleagues from all areas of our business join members of the Executive ‘My Learning’. This provides a single platform to access relevant training
Committee to discuss and agree ways to continue to improve Morrisons. materials and an electronic employee record regarding legal training.
Fair day’s pay and colleague bonus Our ‘My Job’ programmes continue to be delivered across the business
to develop technical and leadership skills. This year we delivered
It is important that colleagues feel valued and that they share in the a programme to 2,500 colleagues.
success of the business. We listen closely to the feedback in this area
through our ‘Your Say’ survey. Positive responses to the question ‘I receive An opportunity to develop, progress and grow
a fair day’s pay for the work I do’ has increased again. We also continue To give our colleagues the opportunity to develop, progress and grow,
to invest in colleagues, with pay increasing from £8.20 per hour to £8.50 we introduced the internal ‘Pathways’ programme which give a clear,
during the year, and again to £8.70 from April 2018, for our front-line visible route to progression. We had over 500 successful applications
store colleagues. starting on the first of the team manager, senior manager and store
We have introduced an improved bonus scheme for junior managers manager programmes.
and the average colleague bonus payout in March 2017 was over We have also introduced 21 designated training stores aligned to
25% higher this year than the previous year. During the year, we also geographic regions, where we now train both technical and behavioural
introduced a new pension scheme which provides colleagues with skills consistently across the business.
a more affordable way to save, enabling them to make contributions
starting at 1% of salary, which are matched by the Group. Over 850 colleagues completed our ‘Leading with Purpose’ programme
up to December 2017. This programme, which is delivered by Leadership
Store management structures Team members, enables colleagues to understand their role in the
We have continued to listen to our colleagues and customers and review turnaround of Morrisons and in delivering our core purpose.
our structures to make sure we are in a strong position to serve our Our graduate programmes continue to increase in size with
customers better. Over the past two years, we have introduced a number 76 graduates starting their careers on one of our eight schemes. Over
of new ways of working and invested in stores by improving some of our 50 colleagues have started our new look degree apprentice programme,
technology and systems, as well as offering new products and services. and our apprenticeship programmes continue to grow with over 300
During the year, we have carried out a full review of our store structure colleagues starting an apprenticeship in areas including Butchery, Bakery,
and announced that we are proposing to introduce a new management Fishmongers, Engineering and Floristry. We held our annual in-house
structure which is simpler, with clearer management accountabilities that Mastercraft competition in November 2017 to celebrate the talent of our
establishes an improved balance of colleague and management roles in very best food makers and shopkeepers from across the business and
once again it was a huge success. For more details, see page 11.
14
HIGHLIGHTS
18%
Percentage of store managers
who are female (2016/17: 7%)
Over
95%
Colleagues who have
accessed ‘MyMorri’
Five ways of working Diversity

Our five ways of working underpin everything we do and how Morrisons We pride ourselves on being a diverse and inclusive business.
operates. They provide a clear and consistent way of doing things All colleagues and people in the communities in which we work are
and apply to every colleague in Morrisons across our stores, sites welcomed and treated with respect, regardless of their background.
and central teams. We remain committed to maintaining an environment that enables
colleagues to be at their best more of the time, offering equal
Customers first opportunities for colleagues to develop, progress and grow.
During the year, Morrisons employed over 58,000 female colleagues
Our customers are at the heart of everything colleagues do.
and over 47,000 male colleagues.
We care about our customers and do everything we can to
always put them first. We remain committed to improving representation of females in senior
leadership roles. The Board comprises seven men and two women,
while 73% of the Leadership Team are male and 27% female. We continue
Teamwork to make progress with our ambition to increase the number of female
Through teamwork, colleagues can help each other to get things store managers and have moved from 34 (7%) in 2016 to 86 (18%) as of
done, knowing that we can do more together. Each colleague plays November 2017. We introduced ‘Women in Leadership’ workshops across
their part in the team, respecting and enjoying working with others the business to give colleagues the opportunity to discuss the barriers and
to get better results. To ensure we serve our customers better, concerns that our female colleagues face and to share details on personal
especially at the times of the year that mean the most to them, such development and opportunities in Morrisons.
as Christmas, all colleagues working in central roles help out in stores.
Gender continues to be a key area of focus for Morrisons.
Since September 2017, over 400 colleagues have joined a new
Freedom in the framework LGBT+ network.
Freedom in the framework means colleagues have the freedom Looking forward to 2018, the recently established diversity and inclusion
and are trusted to make decisions to help achieve our priorities. working group will define the future plans based around such things
as gender, culture, LGBT+ and disability.
Listening and responding
Listening and responding quickly wherever we can is at the heart
of our turnaround. Taking the time to listen to all of our stakeholders
is embedded in the way we work across the business.
Selling, controlling costs, growing profits

and removing waste
All colleagues are food makers and shopkeepers and are encouraged
to do everything they can to help sell more, manage our costs more
effectively, and identify opportunities to improve how we do things.
15
HIGHLIGHTS
Percentage of Morrisons
branded fresh meat,
milk and eggs sourced in Britain
100%
OUR SUPPLIERS
Strong supplier relationships informed by listening The Groceries Supply Code of Practice (GSCOP)
Our aim is to develop mutually beneficial relationships with our suppliers, GSCOP applies to designated grocery retailers in the UK, adding specific
based on responsible and fair trading terms and practices in line with the regulations into the trading relationships between retailers and their
Groceries Supply Code of Practice (GSCOP). Having effective relationships suppliers. We actively engage with the relevant regulatory bodies, the
with suppliers ultimately helps us serve our customers better. We are GCA and the Competition and Markets Authority (CMA), to build best
pleased with the progress we have made in simplifying the way we buy practice. We meet regularly with the GCA and provide updates on our
and sell. This has helped us work with our suppliers in a transparent and activity and details on specific areas of interest to the GCA.
fair manner. We are encouraged that our progress in this area is being The 2017 GCA supplier survey reported Morrisons as the second most
recognised in our own listening surveys with suppliers and in industry improved retailer. We continue to work hard to listen and respond
surveys, including the Groceries Code Adjudicator’s (GCA) annual to our suppliers, so we can improve processes and build better,
supplier survey. stronger relationships.
During the year, we undertook our own surveys to listen to our suppliers We encourage and welcome feedback from suppliers and conduct our
and buyers to help us improve our relationships and develop long-term own regular surveys that provide valuable insight on further improvements
partnerships with our suppliers. We have been working with a number we can make to continually improve relationships. Our Code Compliance
of partner suppliers from across all categories, where there is a joint focus Officer (CCO) spoke to suppliers in every category at supplier conferences
on driving the quality of our offer. Long-term planning and collaboration throughout the year.
has allowed us to lower end-to-end costs in the supply chain and improve
our quality proposition, so we can serve our customers better. Matters raised by suppliers or the GCA have been focus areas for the
business during the year and we have worked hard to understand and
We have also simplified the way we work with suppliers throughout the address them. Key developments during the year have included:
buying process. For example, our dedicated supplier helpdesk provides
a single point of contact, and we continue to improve the speed with • Investing in improved systems, including introducing a Supplier Portal,
which we resolve queries. which is provided free of charge for all suppliers;
• Establishing a ‘Good Faith Receiving’ process for suppliers delivering
Our supply chain into our fresh warehouses; and
We continue to invest in our vertically integrated business model to • Enhancing the dedicated supplier helpdesk, which is committed
have greater control over the supply chain in order to become more to resolving supplier queries within five working days.
competitive and improve our quality position. We continue to provide training, guidance and support to all colleagues in
As food makers and shopkeepers we are the single biggest supermarket our Trading teams together with bespoke training for relevant colleagues
customer for British farmers, and we are proud to support the British in our Supply Chain and Finance teams.
economy. 100% Morrisons branded fresh meat, milk and eggs are sourced Governance in this area includes a group comprising senior Leadership Team
in Britain. We continue to have direct relationships with British farmers, members from all relevant functions. Routine updates are provided to our
which both strengthens the agricultural industry and supports rural Executive Committee and to our Corporate Compliance and Responsibility
communities. Our customers support the farming community through Committee, including developments regarding the operation of the Code.
purchasing products in the ‘For Farmers’ range (milk, cheese, butter, We formally report details of activity over the year and specific concerns
cream and bacon), where a clear element of the selling price goes back raised with our CCO to the GCA and to the CMA at the financial year end.
to farmers.
GSCOP related enquiries are dealt with in accordance with the regulations.
We also take pride in working with smaller, local suppliers to create a range Any matter not resolved directly with a buyer is escalated to the relevant
that is locally relevant for our customers and reflects the demographics Category Director and, if requested, to our CCO. During the year, our CCO
of individual stores. During the year, we launched our nationwide search received a small number of supplier enquires, none of which remained
for the next generation of local food makers through The Nation’s Local outstanding at the year end.
Foodmakers. For more details on these events, see page 11.
Contact details and further information can be found at
www.morrisons.co.uk/gscop
16
OUR
SHAREHOLDERS
Another strong year where we made

progress against the key financial measures
Trevor Strain, Chief Financial Officer
Introduction
2017/18 was another strong year, where we made good progress Our focus on free cash flow continues, and we are committed to
against the key financial measures fundamental to becoming a broader, being capital disciplined – spending capital to maintain assets, reduce
stronger business. costs or improve returns. Net debt is below £1bn and we have a strong,
We are now in our third year of positive like-for-like (LFL) sales growth and strengthening balance sheet, with significant freehold property
and are pleased to have made good progress with wholesale, an important ownership and a net pension surplus. These are firm foundations on
part of Morrisons meaningful and sustainable future growth opportunity. which to rebuild and grow.
Delivering 11% underlying profit growth is a strong performance in any year, A final ordinary dividend of 4.43p per share is proposed. Reflecting
but is especially so in the context of 2017/18 where the market conditions continued adherence to the principles of our capital allocation framework,
were challenging. and our expectations for sustained future growth and strong free cash flow
We are managing the business for all our stakeholders for the long term, generation, the Board has also proposed a special dividend of 4.00p per share.
and are prioritising improved competitiveness, customer satisfaction
and colleague engagement. There were cost pressures in the year, but
we successfully absorbed these and were able to reinvest the benefits
of higher sales volumes back into improving the shopping trip for
our customers.
17
Group LFL sales (exc. fuel) Net debt (£m)
HIGHLIGHTS
Revenue
£17.3bn
1.9% 2.8% 2,340
(2.0%) 1,746
1,194
973
(5.9%)
2014/15 2015/16 2016/17 2017/18 2014/15 2015/16 2016/17 2017/18

Underlying profit before tax
Definition
See the Glossary on page 127 of the Annual Report
for a definition.
Definition
for a definition.
£374m
Our four stakeholder ambitions continued

Summary income statement Operating profit
2017/18 2016/17 2017/18 2016/17
£m £m £m £m
Revenue 17,262 16,317 Operating profit 458 468

Operating profit 458 468 Underlying adjustments:
Net finance costs (80) (145) – Impairment and provision for onerous contracts (6) (6)
Share of profit of joint ventures 2 2 – Profit/loss on disposal and exit of properties and
Profit before tax 380 325 sale of investments (19) (32)
Underlying profit before tax 374 337 – Pension scheme set-up credit (13) –
Underlying earnings per share 12.19p 10.86p – Other exceptional costs 25 2
Basic earnings per share 13.30p 13.11p Underlying operating profit 445 432
Operating profit was £458m (2016/17: £468m). Before the exceptional items
Revenue described below, underlying operating profit was £445m (2016/17: £432m).
Total revenue during the period was £17.3bn, up 5.8% year-on-year. Following the annual impairment and onerous contract review, a net
Revenue excluding fuel was £13.5bn, up 4.4%. 2017/18 was a 53 week credit of £6m has been recognised. In the second half of the year, as
year. On an equivalent 53 week basis, total revenue including fuel planned, we launched a new defined contribution pension scheme.
was up 3.8% and revenue excluding fuel up 2.5%. The actual cost of back-dated contributions was lower than expected,
Group LFL sales excluding fuel were up 2.8% over the year, comprising primarily due to participation rates. This resulted in a credit of £13m.
supermarket growth of 1.9%, online growth through central fulfilment Property profits were £19m in the year, and there was a charge of £25m
of 0.4% and a contribution from wholesale of 0.5%. primarily relating to restructuring. All of these items were reported
The year had some challenges, especially inflationary pressures on outside of underlying profit before tax.
imported food prices caused by weaker sterling, but we continued Underlying profit
to become more competitive for our customers. We were pleased
2017/18 2016/17
that quarter four was the ninth consecutive period of positive LFL £m £m
sales growth. Reported profit before tax 380 325
Fuel continued to trade well, and we were very competitive throughout Underlying adjustments:
the period with sales up 11% to £3.7bn. – Impairment and provision for onerous contracts (6) (6)
– Profit/loss on disposal and exit of properties and
sale of investments (19) (32)
– Costs associated with the repayment of borrowings 16 56
– Pension scheme set-up credit (13) –
– Net pension interest income (9) (8)
– Other exceptional costs 25 2
Underlying profit before tax 374 337
Underlying profit margin 2.2% 2.1%
Reported profit before tax was £380m (2016/17: £325m) including a benefit
of £5m from the 53rd week. Underlying profit before tax, which excludes
exceptional items, was £374m (2016/17: £337m).
Basic earnings per share increased to 13.30p (2016/17: 13.11p), and underlying
earnings per share increased to 12.19p (2016/17: 10.86p).
18
Capital expenditure (£m) Return on Capital Employed (ROCE)
HIGHLIGHTS
520 7.7% Operating working capital inflow over

500 7.3%
419 four years
£949m
365 5.8% 5.6%
2014/15 2015/16 2016/17 2017/18 2014/15 2015/16 2016/17 2017/18
Total payments in tax

Definition
Measured as additions to property, plant and equipment,
investment properties, intangible assets, assets held-for-sale
and investments as per the cash flow statement.
Definition
for a definition. £1,114m
Debt, cash flow and working capital Summary balance sheet

Summary cash flow 2017/18 2016/17
£m £m
2017/18 2016/17
£m £m Fixed assets and investments 7,761 7,761
Cash generated from operations before onerous Working capital (2,045) (2,009)
capital payments 926 1,207 Provisions and tax (792) (767)
Onerous capital payments (42) (94) Net pension asset 594 272
Cash generated from operations 884 1,113 Net debt (973) (1,194)
Proceeds from sale of property, plant and equipment Net assets 4,545 4,063
and sale of investments 108 123
Capital expenditure (500) (419) Pensions
Dividends paid (129) (118)
The net pension asset on the balance sheet is £594m, an increase of
Dividends received 8 8 £322m since last year. During the year, one of the schemes entered
Purchase of own shares (4) (5) into a transaction to insure part of the scheme’s liabilities (a ‘buy in’).
Tax and interest (136) (129) We continue to work with the pension trustees to identify further
Costs incurred on repayment of borrowings (17) (42) opportunities to de-risk the schemes. We also amended our approach
Proceeds on settlement of share options 26 – for setting discount rate assumptions. We believe this new approach
better reflects the profile of the scheme’s liabilities.
Other non-cash movements (19) 21
Movement in net debt 221 552 We launched our new defined contribution scheme in September 2017.
Opening net debt (1,194) (1,746) This provides another option for colleagues to save for their retirement,
with colleague contribution rates starting at 1% of salary, matched by
Closing net debt (973) (1,194) the Group.
We made further progress on cash in the year, with net debt falling Capital expenditure
by £221m to £973m. Operating working capital inflow was £35m, taking
the total over four years to £949m. Capital expenditure was £500m, (2016/17: £419m). In the year we completed
80 Fresh Look refits, meaning we have now refitted around half of the
Cash capital expenditure was £500m, and cash outflow on previously estate. We also invested in maintenance and productivity in areas such
provided onerous commitments was £42m. Proceeds from disposals were as Morrisons ordering and new self-scan checkouts.
£108m taking total proceeds since the start of the programme, to £1bn.
Borrowings
Interest
We continue to apply our policy of maintaining a conservative debt
Net finance costs were £80m (2016/17: £145m). During the year, we maturity profile and continue to reduce the level of debt. In the year,
completed tender offers of £241m across two sterling bond and one we completed a tender offer across three of our bonds – repaying £241m.
euro bond. There was an exceptional cost of £16m incurred relating to Liquidity remains strong and we have not drawn down on our £1.35bn
these early repayments. Before this exceptional cost and impact of IAS 19 revolving credit facility since October 2015.
pension income, underlying net finance costs were £73m (2016/17: £97m).
Tax
We understand the importance of the tax contribution we make, and
we take our responsibility towards the communities in which we operate
and towards our colleagues, customers, investors and suppliers seriously.
We have a tax management framework which ensures the needs of all of
our stakeholders are considered. The Group is committed to paying all
of its taxes in full and on time. The Group consistently ranks as one of the
largest contributors across a range of UK taxes. In 2017/18, Morrisons made
net payments of £1,114m to the UK government of which £596m was borne
by Morrisons and the remaining £518m was collected on behalf of our
colleagues, customers and suppliers.
Corporation tax payments made during the year were £74m which was
in line with the current tax charge of £73m in the income statement.
19
Our four stakeholder ambitions continued

Return on capital employed (ROCE) Shareholder returns
Return on capital employed increased to 7.7%. The growth opportunities Our policy is for the ordinary annual dividend to be sustainable and
we are focused on require relatively low capital expenditure and are covered around two times by underlying earnings per share. The final
accretive to profit and returns. ordinary dividend will be 4.43p, bringing the ordinary dividend for
the full year to 6.09p.
Key balance sheet metrics
In addition to the final ordinary dividend, the Board is proposing a special
2017/18 2016/17 dividend of 4.00p per share, taking the total dividend for the year to
Interest cover 6.1 times 4.6 times 10.09p, an increase of 85.8%.
Net debt/EBITDA 1.1 1.4 The principles of our capital allocation framework guide us to reinvest
Gearing 21% 29% to deliver profitable growth and return surplus capital to shareholders.
ROCE 7.7% 7.3% In recent years, we have made strong progress with the turnaround and
our Fix, Rebuild and Grow strategy. While there is still much we plan to do,
Financial strategy a new Morrisons is now emerging. We are growing sales and profit, and
expect that growth to continue to be meaningful and sustainable in the
future. We are generating significant levels of free cash flow, which we
Capital allocation framework also expect to sustain. The special dividend reflects our good progress
1 Invest in maintaining the estate and reducing cost so far and our expectations for continued growth.
2 Maintain debt ratios to support investment grade rating Looking forward, we will retain a strong and flexible balance sheet. We will
3 Invest for profitable growth be guided each year by the principles of our capital allocation framework
in assessing the uses of free cash flow.
4 Pay dividends in line with stated policy
5 Return surplus capital to shareholders The components of our financial plan remain unchanged. We will
continue to focus on improving the total return for our shareholders.
Trevor Strain
Our capital allocation framework is set out above and remains unchanged. Chief Financial Officer
Our first priority is to invest in our stores and infrastructure, and to reduce
costs. Second, we will seek to maintain debt ratios that support our target
of an investment grade credit rating. Third, we will invest in profitable
growth opportunities. Fourth, we will pay dividends in line with our stated
policy, and then any surplus capital will be returned to shareholders.
20
HIGHLIGHTS
£9m
Raised for British farmers through the
‘For Farmers’ range
Over 3m
unsold food products donated to charity
Corporate responsibility
RESPONSIBLE RETAILING
Our corporate responsibility programme ensures we operate in a way Our focus areas this year:
that is right for our customers, colleagues, suppliers and shareholders,
Help British farmers to be competitive, profitable and sustainable
while making a positive contribution to society and taking good care
of the environment. We buy animals and whole crops direct from British farmers. By owning
our own abattoirs, manufacturing and packing facilities, we can utilise
This section showcases some of the highlights during the year as well
the whole animal and all of the crop, meaning farmers get a fair price
as our future plans.
and we can reduce waste.
• During the year, we reinforced our commitment to British products
This report should be read in conjunction with our annual Corporate by announcing our intention to sell only 100% fresh British Morrisons
Responsibility Report which can be found at branded meat.
www.morrisons‑corporate.com/cr • Our ‘Milk for Farmers’ range comes from a dedicated pool of British
The Corporate Responsibility Report details the disclosure farmers, who produce to a higher welfare standard. The extra 10p per
requirements for the new Non‑Financial Reporting requirements litre paid by customers is shared among all the farmers in the Morrisons
of the Companies Act 2006. These include: dairy group. Since the ‘For Farmers’ range launched, we have raised over
• environmental – information on the actual and potential impacts £9m for farmers.
of our operations on the environment, and on how current and Ensure the authenticity, provenance and safety of our products
foreseeable environmental matters may affect our development,
performance or position; The high standards we set for our own brand suppliers, manufacturing
sites and stores ensure that we provide safe and legal products that
• social and employee matters – information including diversity issues,
meet the demands of our customers.
employment issues, health and safety in the workplace, consumer
relations, impacts on vulnerable consumers, responsible marketing • We have been working hard with our suppliers to reduce campylobacter
and community relations; levels in fresh Morrisons branded chicken and we have developed an
• respect for human rights – what we expect from our management, independent monitoring programme.
colleagues and business partners in relation to human rights, • Our‘CultureofExcellence’ programme ran for the second year
including core labour standards; and in our manufacturing business. This programme continues to p lay
• anti-bribery and corruption – how we manage anti‑bribery a key role in improving our food safety and quality w
ays of working.
and anti-corruption matters and occurrences. Our anti‑bribery All 18 manufacturing sites have been audited and each has robust
and anti‑corruption policy is available online at plans in place to further improve our culture of excellence targets
www. morrisons‑corporate.com for the coming year.
Reduce food waste

Working towards a global agenda Smarter supply chains help us reduce avoidable food waste.
This reduces environmental risk, creates efficiencies and it
The UN Sustainable Development Goals officially came into force in 2015. is important for our stakeholders.
They apply to all and aim to end all forms of poverty, fight inequalities and
tackle climate change on a global scale. These goals can only be realised • Through our unsold food programme our stores partner with local
with participation of all sectors including business. We at Morrisons community groups to donate any unsold food that is safe to eat.
recognise the importance of the goals and the true value of collaboration During the year, we donated over three million unsold food products,
in order to create change. working with over 420 community groups.
At Morrisons, we want to address these global challenges in a meaningful • We launched our ‘Wonky Veg’ range in 2015, and now sell 18 varieties
way that is relevant and aligned to our business strategy. As a result, we and over 500 tonnes per week of ‘Wonky Veg’.
have ensured we are aligned to at least one goal where possible.
21
Corporate responsibility continued
Look after our colleagues Reduce general operational waste and carbon emissions
It is important that our colleagues reflect the communities in which we Reducing operational waste and carbon throughout our supply chain
operate, and feel supported and engaged to enable us to deliver great is part of what we do everyday. This has environmental benefits and
customer service and achieve our six priorities. ensures efficiency throughout our operations.
Please see page 14 for further details on our ambitions and progress • 95% of our store waste is diverted from landfill and all of our
for our colleagues. manufacturing sites are zero waste direct to landfill.
• We are signatories to Courtauld 2025, which is a collaborative
Source responsibly
industry‑wide commitment to cut the waste and greenhouse gas
We must ensure that our supply chains remain sustainable and that emissions associated with UK food and drink by 20% before 2025.
we conserve the natural resources that we depend on. • As a result of our efforts to reduce energy use across our estate, since
• During the year, 87% of wood and wood derived products were Forest 2005 our operational carbon emissions fell by 34% against our target
Stewardship Council (FSC) certified, approved alternatives or recycled of a 30% reduction by 2020.
for own brand household and beauty products and 72% FSC, approved • We are committed to reducing unnecessary packaging, using recyclable
alternative or recycled in own brand Home & Leisure products. or recycled material wherever possible we work with suppliers on
• For the third year running we published details on the wild capture packaging innovation to ensure our packaging is only there to protect
fisheries we source from, ensuring greater transparency. More and preserve the product it contains, preventing food waste. To help
information can be found at www.sustainablefish.org customers, we use On Pack Recycling Label to clearly identify the
products that can be recycled.
Ensure fair working conditions for our suppliers • We have prohibited the use of plastic microbeads ahead of legislation
Our Ethical Trading Code sets out rights for workers, including as well as plastic stem cotton buds in our own brand cosmetic and
guidance on wages, working hours, safe and hygienic conditions and personal care products. In 2018, we will be removing the sale of single
discrimination. Compliance with the Ethical Trading Code is part use plastic bags, phasing out plastic drinking straws as well as offering
of our standard terms of supply. customers the option to refill their water bottles for free in our cafés.
• We are members of the Supplier Ethical Data Exchange, and share Group greenhouse gas emissions for year ending 31 December¹
common ethical information.
2005/06 2016/17 2017/18 Change vs
• We are a founder sponsor of the anti-slavery initiative Stronger Emission source Baseline year Prior year Current year baseline
Together. During the year, 587 colleagues at a manager level attended Combustion of fuel
Stronger Together training on identifying and tackling modern slavery. and operation of facilities
Natural gas 99,039 165,306 165,684 67%
Make it easier for our customers to live healthier lives
Haulage 144,497 119,611 107,473 (26%)
We have introduced a range of measures to help our customers Business miles 41,656 33,209 31,984 (23%)
make healthier choices, including product reformulation, clear
Fugitive emissions
nutritional information, healthier ranges, and strong promotions
on fruit and vegetables. Refrigerant 502,358 235,934 196,624 (61%)
Energy purchased for
• We are rolling out colour coded nutrition labels across our own own use
brand pre‑packed food and drink.
Electricity 767,786 587,954 503,585 (34%)
• We display calorie information on our customer café menus. Other
• During the year, we launched a range of value vegetable boxes including Staff travel 1,680 983 1,300 (23%)
organic, British and ‘Wonky Veg’. The boxes are designed to make eating
Waste 66,000 29,932 47,553 (28%)
fresh food more affordable and contain enough fresh vegetables to
feed a family of four for five days. Online deliveries – 15,155 17,046 –
Total 1,623,016 1,188,084 1,071,249 (34%)
Make a positive difference to the communities we serve Intensity ratio: kg CO2e
We are committed to supporting good causes that matter to our per sq ft gross internal
customers, colleagues and the communities we serve. area 53.9 32.0 29.1 (46%)
• Each of our stores work with local communities on a number 1 The information above is taken from our Group Carbon Footprint, prepared internally
and independently verified by Jacobs. We have reported for the calendar year 1 January
of initiatives, and support a range of other important charity campaigns to 31 December in order to remain consistent with our historical footprint reports. We have
including Marie Curie Great Daffodil Appeal, the Poppy Appeal and used the Government’s Environmental Reporting Guidelines (2013) to prepare these numbers,
Children in Need. and the emissions factors from the UK Government GHG Conversion Factors for Company
Reporting (2017). These guidelines state the baseline year should be recalculated if there have
• Last year the Morrisons Foundation donated £10m to 400 charities been structural changes that would significantly impact on the organisation’s base year figures.
For this year, we have revised our historical emissions figures given the acquisition and disposal
including £0.6m in colleague match funding. of a number of sites and revisions to carbon conversions factors.
• Our three year national charity partnership with CLIC Sargent began The Group Carbon Footprint includes all major sources of carbon emissions from the operation
in February 2017 and we have raised over £3m so far to support young of the Group’s supermarkets, manufacturing and distribution sites and operation of its haulage
fleet. Some minor exemptions include our Hong Kong office which deals with energy locally, a
cancer patients and their families. number of distribution sites operated by third parties who are responsible for the energy and
carbon, and five sites which have fuel oil (less than 0.1% of the total footprint).
22
Risk
MANAGING OUR RISKS

The achievement of our six priorities depends on our ability to make sound, risk-informed decisions.
Managing risk and uncertainty is an integral part of doing business
The risk management process The risk management framework
Top Board of Directors

down Maintains sound risk management and control systems, assesses principal risks
y Eva
tif l Audit Committee
n
Sets risk management framework, assesses effectiveness of risk and control systems and maintains
ua
Ide
oversight of risk monitoring

te
Executive Committee
Assesses principal and operational risks and undertakes regular monitoring of risk
Risk and Internal Audit

or
Mi
Coordinates risk management activity through review of risk registers, agreement of risk mitigation
nit
ti
ga plans and preparation of risk reporting

Mo te
Bottom Operational Management
up Reviews operational risks, operates controls and implements risk mitigation plans
Risk management approach Where potential weaknesses are identified, the Risk and Internal Audit
We manage uncertainty as we respond to changes in our industry and teams work with the business to agree robust actions to mitigate these.
the wider political-economic climate by maintaining a business-wide The Audit Committee supports the Board in maintaining a robust risk
understanding of our key risks and how to manage them. This assists in management framework by approving the risk management process and
delivering our promises to all of our stakeholders and means that we are reviewing the Group’s principal risks and key risk indicator reporting on
in a better position to achieve our objectives, respond to emerging risks a regular basis. Read more on risk governance in the Audit Committee
and create opportunities. report on page 36 in the Annual Report.
The risk management process Principal risks

Our risk management framework has been built to identify, evaluate, The Directors have carried out a robust assessment of the principal risks
mitigate and monitor those risks which threaten the achievement of our facing the Group, including those that would threaten its business model,
six priorities. The framework incorporates both a top-down approach to achievement of the six priorities, solvency or liquidity. The Directors
identify the Group’s principal risks and a bottom-up approach to identify consider these to be the most significant risks facing the business, they
operational risks. do not comprise all the risks that the business is facing. These principal
At the core of the risk management process are the risk registers for each risks are set out on the following page.
of the key business functions. These detail the main operating risks and The impact of the UK’s exit from the EU continues to be an important
are used to assess the gross level of risk (likelihood and impact), mitigating area of discussion. There are some continuing uncertainties around the
controls, and the resultant net level of risk and risk mitigation plans with impact of the Brexit negotiations, particularly in relation to the impact on
dates and target level of risk. Target levels of risks are assigned to each imported food prices, labour availability and costs, consumer confidence
risk based on the risk appetite framework established and agreed with and potential changes to access to EU labour. These uncertainties impact
the Board. The risk registers are owned and managed by operational a number of the established Group risks and have therefore been
management, with the head of each function certifying annually that factored into the assessment of the relevant risk where appropriate and
these have been reviewed and action plans are in place where required. the required mitigation plans. A dedicated steering group is in place that
The risk registers are formally reviewed and challenged by a sub-group monitors the risks associated with the outcome of the Brexit negotiations
of the Executive Committee. and the mitigating actions the business has put in place.
The Group risk register is formally reviewed twice a year by the As we expand the wholesale business the potential impact on ongoing
Executive Committee. The register details the Group’s principal operations is an area of focus. This increases complexity, and there are
risks, owners, the level of risk and mitigating actions. The Executive plans in place to address this.
Committee’s assessment of these risks takes into account the operating
Certain risks are inherent in the business and are fundamental to the
risks, strategic risks, external factors and any emerging risks. The principal
achievement of all of our key priorities. Other risks could directly impact
risks are monitored every month by the Executive Committee using key
the achievement of certain key priorities.
risk indicator reporting, supplemented by more detailed reviews
as appropriate to identify any changes in the risk landscape.
The Risk and Internal Audit function facilitates the preparation of both
functional and Group risk registers. It supports the Audit Committee in
reviewing the effectiveness of our risk management and internal control
systems and has established a rotational monitoring process for key
financial controls.
23
Risk continued
PRINCIPAL RISKS
The risks, which are shown in no particular order, are disclosed along with their alignment to the six priorities and the movement in residual risk during
the year. Residual risk is stated after considering the actions taken by management in response to new and emerging issues impacting the identified risks.
Risk Description Mitigation
Business There is a risk that a major incident, • We have recovery plans in place covering our stores, depots, sites and offices;
such as a significant failure of
Interruption technology, a natural disaster or
• These plans include, where appropriate, secondary locations which would be used
as backup in case of an incident;
# strike action, could cause significant
disruption to business operations. • Business continuity resilience exercises are undertaken to test processes and
The Group’s response must be management’s ability to respond effectively;
appropriate to minimise disruption • A Crisis Management Group is in place to oversee these plans and to manage and
and reputational damage. The growing respond to any major incidents;
wholesale business increases • We conduct supplier risk assessments and have contingency plans in place, where
the complexity of operations possible, to manage the risk of loss of supply; and
and technology.
• The Technology plan is aligned with the business strategy and considers the future
needs of the business including greater investment in cloud technologies to provide
further resilience.
Competitiveness The Grocery sector continues to • We review and actively manage our pricing, trade plan and promotional and
have high levels of competitive marketing campaigns;
1 activity. The continued impact of • We have simplified how we work with suppliers building joint business plans, ensuring
the EU referendum, and subsequent a competitive customer offer;
negotiations, on exchange rates and
• We continually review our range, category plan, and quality and respond to customer
the supply chain has affected costs
feedback, for example the ‘Best’ premium own brand range has grown to meet
of goods.
customer demand;
If we do not engage with our suppliers • Competitor pricing positions and market trends are reviewed on a weekly basis; and
and effectively manage our trade plan
to remain competitive there is a risk • Our strong balance sheet and strong cash flow will allow us to continue to invest
this will adversely impact performance. in our proposition.
Customer There is a risk that we do not meet • One of our six priorities is ‘to serve customers better’ and we have a range of
the needs of our customers in respect activities to support that;
1 2 3 of price, range, quality and service. • A large scale programme of customer listening groups is in place to gain a deep
We need to be responsive to changes understanding of what our customers want and, where we can improve, these
4 6 in customer confidence and trends have informed key activities such as our store Fresh Look programme and changes
which have been impacted by changes to range;
to the economy and the UK’s planned
• We closely monitor research on customer perceptions and respond quickly wherever
exit from the EU. If we do not provide
possible. For example, with a steering group to address any particular risks arising
the shopping trip that customers want,
from the UK’s planned exit from the EU; and
we could lose sales and market share.
• We have worked with wholesale partners to make Morrisons products accessible
to more customers and have continued to expand the geography covered by our
online offering.
Data A security breach leading to loss • The Group’s Data Steering Group has the responsibility for overseeing data
of customer, colleague or Group management practices, policies, regulatory awareness and training;
# confidential data is a key aspect of • Information security policies and procedures are in place, including encryption,
this principal risk. A major data security network security, systems access and data protection;
breach could lead to significant
reputational damage and fines. • This is supported by ongoing monitoring, reporting and rectification
of vulnerabilities;
The risk environment is challenging,
with increased levels of cybercrime • Focused working groups are in place – looking at the management of data across
and regulatory requirements. the business including colleague data, customer data, commercial data and financial
data; and
• A project team is in place which is implementing the plan to meet General Data
Protection Regulations (GDPR) in advance of May 2018.
Key Link to our six priorities
Increase in net risk 1 To be more competitive 5 To simplify and speed up the organisation
No change in net risk 2 To serve customers better 6 To make the core supermarkets strong again
Decrease in net risk 3 Find local solutions # Underpins all six priorities
4 Develop popular and useful services
24
Risk Description Mitigation
Financial and The main areas of this principal risk • The Group’s Treasury function is responsible for the forward planning and
are the availability of funding and management of funding, interest rate, foreign currency exchange rate and certain
Treasury management of cash flow to meet commodity price risks. They report to the Treasury Committee and operate within
# business needs. There is a risk of clear policies and procedures which are approved by the Board;
a working capital outflow if there • The Group’s treasury policy is to maintain an appropriate borrowing maturity
was a significant reduction in payment profile and a sufficient level of headroom in committed facilities. This includes
terms to suppliers. Some suppliers an assumption that supply chain finance facilities are not available for the benefit
benefit from access to supply chain of suppliers;
finance facilities. The withdrawal of
• There are governance processes in place to control purchases in foreign currency and
these facilities may require some
management of commodity prices; and
terms to be reviewed. In addition,
fluctuations in commodity prices and • For livestock and produce, we track prices and forecasts and enter into long-term
foreign exchange rates could impact contracts where appropriate to ensure stability of price and supply.
the Group’s profitability.
Food Safety There is a risk that the products we • Monitoring processes are in place to manage food safety and product integrity
sell are unsafe or not of the integrity throughout the Group and supply chain;
and Product that our customers expect. It is of • Regular assessments of our suppliers and own manufacturing and store facilities
Integrity utmost importance to us, and to the are undertaken to ensure adherence to standards;
# confidence that customers have in our
business, that we meet the required • Our vertical integration model gives us control over the integrity of a significant
standards. If we do not do this it proportion of our fresh food;
could impact business reputation and • Management regularly monitors food safety and product integrity performance and
financial performance. compliance as well as conducting horizon scanning to anticipate emerging issues; and
• The process is supported by external accreditation and internal training programmes.
Health The main aspect of this principal risk • We have clear policies and procedures detailing the controls required to manage
is of injury or harm to customers or health and safety risks across the business;
and Safety colleagues. Failure to prevent incidents • An ongoing training programme is in place for front line operators and management;
# could impact business reputation and
customer confidence and lead • A programme of health and safety audits is in place across our stores, depots, sites
to financial penalties. and offices with resources dedicated to manage this risk effectively; and
• Management regularly monitors health and safety performance and compliance.
People Our colleagues are key to the • We have fair employment policies, and competitive remuneration and
achievement of our plan, particularly benefits packages;
# as we improve the business. There is • A Group-wide reward framework is in place and roles are evaluated against
a risk that if we fail to attract, retain an external framework, driving stronger consistency of rewards;
or motivate talented colleagues, we
• Our training and development programmes are designed to give colleagues the skills
will not provide the quality of service
they need to do their job and support their career aspirations;
that our customers expect.
• Line managers conduct regular talent reviews and processes are in place to identify
Business change and the challenging and actively manage talent;
trading environment may impact on
colleagues leading to an increase in • Colleague engagement surveys, listening sessions and networking forums are used
this risk. There is uncertainty about to understand and respond to our colleagues; and
potential changes to employment • A steering group is in place to monitor and take action on any particular people risks
regulations when the UK leaves the EU relating to the UK’s exit from the EU.
and this could result in a retention and
recruitment risk, particularly at some
manufacturing sites.
Regulation The Group operates in an environment • We have a GSCOP compliance framework in place including training for relevant
governed by numerous regulations colleagues and processes to monitor compliance;
# including GSCOP (Groceries Supply Code • We have a senior level working group in place to review and improve GSCOP
of Practice), competition, employment, compliance activity;
health and safety, and regulations
• We have an independent whistleblowing line for suppliers to provide feedback to
over the Group’s products. There is
the Group and a Code Compliance Officer so that action can be taken as necessary;
uncertainty about any potential changes
to regulations relating to the UK’s exit • We have a senior level steering group in place to monitor and take action on any
from the EU. In all cases, the Board takes potential regulatory change resulting from the UK’s exit from the EU;
its responsibilities very seriously and • We have training, policies and legal guidance in place to support compliance with
recognises that breach of regulation Competition Law and other regulations; and
can lead to reputational damage and • We actively engage with government and regulatory bodies on policy changes which
financial damages to the Group. could impact our colleagues and our customers.
25
Risk continued
Viability statement The scenarios which have been modelled encompass the Group’s
The Group’s business model and strategy, as outlined on pages 2 to 3, principal risks.
are central to an understanding of its future viability. The Group continues
Principal Risks Description
to progress against its turnaround strategy, focusing on strengthening the
core supermarkets and delivering capital light growth whilst maintaining Failure to remain competitive (e.g. through price
discipline and control in relation to costs and maintaining a strong or keeping pace with changes in the market).
balance sheet. Competitiveness
The Directors have assessed the viability of the Group over a three year and Customer Increased inflation, labour and import costs
as a result of the UK’s decision to leave the
period to January 2021. The Group’s business model is not dependent
European Union.
on any particular contract or resource with fixed end dates. The period
was selected because the Group’s forecasts associated with the detailed Business A serious data security or regulatory breach
strategic and financial plans are prepared over this period and were interruption resulting in a significant monetary penalty and
considered to be the most robust and appropriate means to support and Compliance a loss of reputation among customers.
its viability statement.
A banking crisis leading to one or more of the
The Board assesses the Group’s prospects primarily through the strategic
Financial and members of the Group’s banking syndicate
planning process. The latest strategic planning update with the Board was treasury choosing not to, or being unable to honour
held in November 2017 with involvement of all relevant functions across the facility agreement.
the business.
As part of the strategic planning process, the Directors make a number Furthermore, reverse stress testing was performed to understand the
of assumptions about business performance and the ability of the level of performance decline that the Group could withstand.
Group to raise debt financing. The Group carefully plans and reviews
the maturity profile of debt facilities to avoid coterminous maturity dates Based on this assessment, and taking into account the Group’s current
and liquidity forecasting gives visibility of headroom under committed position, the Directors have a reasonable expectation that the Group
facilities over the period of the financial plans. will be able to continue in operation and meet its liabilities as they fall
due over the three year period of their assessment.
Key metrics in the plan, such as cash flow, interest cover, liquidity and the
ability to raise debt financing, were subject to sensitivity testing by flexing
a number of the main financial assumptions in order to assess the impact
of principal risks in severe but plausible scenarios.
Approval of the Strategic report

Pages 2 to 26 of this report form the Strategic report.
The Strategic report was approved by the Board on 13 March 2018 and
signed on its behalf by:
Jonathan Burke
Company Secretary
13 March 2018
26
SUPPLEMENTARY
MATERIAL
Additional information about how our Directors are rewarded and how we have performed this year
Note: The Strategic report and supplementary material does not contain the information which
would allow shareholders (as the full Annual Report and Financial Statements do) a complete
understanding of the results of the Group, its state of affairs of the policies and arrangements
concerning Directors’ remuneration. Copies of the Annual Report and Financial Statements may be
obtained free of charge as noted in the investor information section at the back of this report.
27
Board of Directors and Executive Committee
ALWAYS LISTENING
Composition of the Board
The Board is independent and contains an appropriate mixture of skills and experience. The Board is satisfied that all Non-Executive Directors, including the Non-Executive Chairman,
remain independent according to the definition contained in the Code1. The criteria used to determine independence are set out in the corporate governance compliance statement
which can be found in the investor relations section of the Group’s website, www.morrisons-corporate.com. Each of the Non-Executive Directors has committed and is able to commit
an appropriate amount of time in fulfilling effectively their role and responsibilities on the Board.
1. Andrew Higginson 2. David Potts 3. Trevor Strain 4. Rooney Anand

Chairman Chief Executive Chief Financial Senior Independent
Officer Non-Executive
Director
C R N C C R N
5. Neil Davidson 6. Belinda Richards 7. Tony van Kralingen 8. Paula Vennells

Non-Executive Non-Executive Non-Executive Non-Executive
Director Director Director Director
A C R N A C R N A C R N A C R N
1. Andrew Higginson 3. Trevor Strain 5. Neil Davidson 7. Tony van Kralingen

Appointment Appointment Appointment Appointment
Andrew joined the Group as Deputy Trevor joined the Group in June 2009 Neil joined the Board as a Non-Executive Tony joined the Board as a Non-Executive
Chairman and Chairman Elect in October as Commercial and Operations Finance Director on 1 October 2015. He became Director on 1 September 2017.
2014 and became Chairman at the end Director. In June 2011, he became Finance Chair of the Corporate Compliance and Experience
of January 2015. Director Corporate and took responsibility Responsibility Committee on 1 January 2016. Tony has a very broad experience across
Experience for the Company’s productivity Experience a number of disciplines including marketing,
Andrew brings significant Board, programmes. Trevor joined the Board Neil has had an extensive career in supply, procurement and manufacturing
commercial, retail and leadership as Chief Financial Officer on 10 April 2013. manufacturing, starting with Northern and human resources. Tony served 35 years
experience to the Board. Andrew is a Experience Foods PLC where he rose to become at SABMiller PLC, 14 of which he was on the
former Executive Director of Tesco PLC Prior to joining Morrisons, Trevor worked Managing Director of its milk division. Executive Committee. He held a number
having spent 15 years on the Main Board, for Tesco PLC in a number of roles until He subsequently became CEO of Express of positions including Group Director:
first as Finance and Strategy Director, and his appointment as UK Property Finance Dairies PLC and then Arla PLC. He is Integrated Supply, Chairman and Managing
latterly as Chief Executive of their Retailing Director in 2006 and subsequently UK currently Chair of the Youth Sport Trust Director SAB, and Chairman and CEO:
Services business. His early career was with Planning and Reporting Finance Director. and has also been a Non-Executive Director Plzensky Prazdroj. He is also currently an
Unilever, Guinness, Laura Ashley and the Trevor began his career with Arthur of Produce Investments PLC, Persimmon Honorary Professor of Global Corporate
Burton Group. Andrew was previously the Andersen and is a member of the Institute PLC and Northern Recruitment Group PLC. Strategy at Nottingham University.
Chairman of Poundland Group PLC, Senior of Chartered Accountants in England External Roles External Roles
Independent Director of BSkyB PLC and and Wales. Chairman of OptiBiotix Health PLC Chair of Crown Commercial Services
a Non-Executive Director of the Rugby External Roles
Football Union. None 6. Belinda Richards 8. Paula Vennells
External Roles Appointment Appointment
Chairman of N Brown Group PLC 4. Rooney Anand Belinda joined the Board as a Non- Paula joined the Board as a Non-Executive
Non-Executive Director of Woolworths Appointment Executive Director on 1 September 2015. Director on 1 January 2016.
Holdings Limited Rooney joined the Board as a She became Chair of the Audit Committee Experience
Chairman of Evergreen Garden Care Non‑Executive Director and Senior on 1 January 2016. Paula has significant experience in
Independent Director on 1 January 2016. Experience commercial, marketing and supply chain.
2. David Potts Experience Belinda had a career in professional services Paula is currently Chief Executive of the
Appointment Rooney is a highly experienced retail and for over 25 years, where she operated as Post Office, a role she has held since April
David joined the Group as Chief Executive fast moving consumer goods (FMCG) a senior adviser in corporate finance and 2012. Paula joined the Post Office in 2007.
on 16 March 2015. executive. Following a career with United strategy. She was a corporate finance Previously she was Group Commercial
Experience Biscuits and then Sara Lee, he joined partner at Deloitte and Global Head of Director of Whitbread PLC having started
David is a vastly experienced retailer who Greene King PLC in 2001 as Managing Merger and Separation Advisory Services her career with Unilever and L’Oréal. Paula
joined Tesco PLC at the age of 16 and Director of its brewery company. He was until 2010. Belinda serves on the Advisory has held directorships in sales and
worked there for 39 years. He rose to appointed CEO in 2005. Group of Audit Committee Chairmen at marketing with a number of major retailers
become CEO of its Ireland business, its UK External Roles the Financial Reporting Council, is a including Dixons Stores Group and Argos.
retail stores business and then CEO of Chief Executive Officer of Greene King PLC member of the Governing Council of the External Roles
Tesco Asia. David was also on the Tesco PLC Chairman of Purity Soft Drinks Limited Centre for the Study of Financial Innovation Chief Executive of the Post Office
Board from 1998 until he left in 2011. Prior and is a Trustee of the Youth Sport Trust. Non-Executive Chair of First Rate Exchange
to his appointment as CEO of Morrisons, External Roles Services Limited
David held several advisory positions with Senior Independent Director and
a number of private equity and consultancy Remuneration Chair of Grainger PLC
firms and developed his own retail concept Non-Executive Director of Monks
to sell general merchandise. He also worked Investment Trust PLC
on two extensive retail projects in the UK. Non-Executive Director of Phoenix
External Roles Group Holdings (PGH)
1 On 6 February 2018, Belinda Richards was
None Non-Executive Director of Schroder appointed Trustee of the Youth Sport Trust,
Japan Growth Fund PLC a national charity, of which Neil Davidson
is Chairman. The Board has considered this
cross‑directorship and is satisfied that it
does not compromise the independence
of Belinda or Neil.
28
Executive Committee
The Executive Committee is driving a culture of listening to all of our key stakeholders
within the business.
9. Kevin Havelock Jonathan Burke 1. David Potts 2. Trevor Strain

Non-Executive Company Chief Executive Chief Financial Officer
Director Secretary
A C R N C
9. Kevin Havelock Appointment 3. Andy Atkinson 4. Darren Blackhurst

Appointment Jonathan was appointed as the Group’s Group Customer and Group Commercial
Kevin joined the Board as a Non-Executive Company Secretary on 15 February 2017, Marketing Director Director
Director on 1 February 2018. replacing Mark Amsden.
Experience Experience
Kevin has significant fast moving consumer As a qualified accountant and Company
goods (FMCG) industry experience, most Secretary, Jonathan has worked at
recently having been a member of the Morrisons for over 25 years holding
Executive Committee at Unilever and various finance, compliance and project C
President of Global Refreshment, which roles. He also previously held the role
comprises of Unilever’s drinks and ice of Company Secretary between 2001 5. Clare Grainger 6. Gary Mills
cream brands. Kevin is a Trustee of the and 2009. Group People Group Retail
British Council and a Trustee of The Director Director
Eden Project.
External Roles
Non-Executive Director of Fevertree PLC
Attendance at meetings 1. David Potts 5. Clare Grainger

Board Nomination Remuneration Audit CCR See Board of Directors on page 28 Appointment
Clare joined Morrisons in February 2009 and
Andrew Higginson 8/8 4/4 6/6 – 5/5 2. Trevor Strain was appointed Group People Director on
David Potts 8/8 – – – 5/5 See Board of Directors on page 28 1 September 2015.
Trevor Strain 8/8 – – – – Experience
3. Andy Atkinson Clare started her career at Asda and held
Rooney Anand 8/8 4/4 6/6 – 5/5
Appointment a number of roles both within Head Office
Neil Davidson 8/8 4/4 6/6 6/6 5/5 Andy joined Morrisons in 2011 and and the Retail division. She progressed
Kevin Havelock – – – – – was appointed as Group Customer through a variety of senior human
and Marketing Director in January 2016 resources (HR) roles including Head of HR
Tony van Kralingen 3/3 1/1 2/2 3/3 2/2
having held the interim position for at HBOS/Lloyds Banking Group, where she
Belinda Richards 7/8 4/4 6/6 6/6 5/5 over five months. led a number of programmes to drive
Paula Vennells 8/8 4/4 6/6 6/6 5/5 Experience differentiation in both sales and services.
On the rare occasions that a Director is unavoidably unable to attend a meeting, the Director will Andy previously held a number of senior
still receive and consider the relevant papers allowing them to share and discuss any comments Commercial and Trading roles within the 6. Gary Mills
or input with the other members of the Board before the meeting. organisation. Prior to joining Morrisons, Appointment
Andy held a variety of senior commercial Gary joined Morrisons in August 2015
roles within Boots, progressing to as Group Retail Director.
Commercial Director. Andy started his Experience
career at Coca-Cola before roles at Walt Gary has more than 30 years’ retail
Disney and then L’Oréal. experience, with Stewarts Supermarkets
in Northern Ireland and then with Tesco
4. Darren Blackhurst PLC where he held a variety of senior
Appointment positions including Retail Director for
Darren joined Morrisons in June 2015 Convenience and Retail Director for
as Group Commercial Director. the North and Northern Ireland. Gary’s
Experience experience covers all areas of retail and
Darren started his career at Tesco in 1988, all formats, including supermarkets
holding a number of buying roles in fresh and convenience stores.
food and grocery. In 1994, he was seconded
to Tesco’s French business Catteau before
Committee key holding a number of category director
positions. Darren became Commercial
A Audit Committee Director for Tesco Lotus Thailand in 2002.
He joined Asda in 2006 as Executive Trading
C Corporate Compliance and Responsibility Committee Director for Food and in 2008 was
appointed Chief Merchandising Officer. In
R Remuneration Committee
2011, he joined Matalan as Chief Executive
N Nomination Committee before moving to B&Q as Commercial
Director in 2014.
Committee Chairman
29
Summary Directors’ remuneration report

Annual statement by the Chairman
of the Remuneration Committee
On behalf of the Board, I am pleased to present the

report on Directors’ remuneration for 2017/18
Tony van Kralingen, Remuneration Committee Chair
Dear Shareholder Alongside management’s strong performance is a colleague-led

This is my first report having been appointed as a Non-Executive turnaround. Central to this philosophy has been investing in colleague
Director and Chair of the Remuneration Committee in September 2017. pay – over the last few years hourly pay for front line colleagues has risen
My priorities in the six months since my appointment have been to: faster than any of the supermarkets, from £6.83 per hour in 2015 to £8.70
per hour in April 2018 (an increase of over 25%). Colleagues are also sharing
• understand the business, meet with management and colleagues and in the value they create, from the Sharesave scheme which matured in
learn about Morrisons past, present and future; 2017/18 providing a significant gain, to the spend on colleague bonus which
• meet with our shareholders and their representatives to understand has increased again this year. In addition, all parts of our business reported
their views on pay following the 2017 AGM outcome; improved colleague engagement, which has no doubt led directly to the
• review 2017/18 pay outcomes relative to short and long-term business increase in customer satisfaction.
performance and the shareholder experience; and Over the last few years we have also rediscovered the proud history that
• determine how the remuneration policy will be implemented in makes Morrisons unique – we are food makers and shopkeepers – and we
2018/19, enhancing the level of transparency in our remuneration are winning customers back.
determination process. From a shareholder perspective, in the three years since David Potts’
I address each of these areas in turn below: appointment and embarking on Fix, Rebuild and Grow, the business
has generated:
Understanding what makes Morrisons • nine consecutive quarters of positive like-for-like sales;
I have joined a business in turnaround – to paraphrase Winston • 8% increase in underlying profit before tax, or 24% on a two year basis;
Churchill, this is not the beginning of the end, but it is perhaps the
• c.£2bn of free cash flow; and
end of the beginning, and our aim is to ensure sustainable progress.
Management assumed responsibility for a business which had • 22% increase in share price.
experienced three years of continuous like-for-like sales decline, falling In 2017/18, this positive performance continued with the key
profits and increasing levels of debt. Talking to investors, I know they highlights including:
are understandably pleased with the performance of the business and
recognise that management has been pivotal in fixing the core business. • a second annual increase in like-for-like sales (2.8%, excluding fuel);
Equally they praise management for their innovative and capital light • growing like-for-like customer transactions by 2.9%;
ways of delivering growth. • an 11% increase in underlying profits before tax; and
• further strong free cash flow and a 4.00p special dividend, taking full
Group performance year total dividend up 85.8% to 10.09p.
£374m 12.19p 2.8%

£337m 10.86p 1.9%
Underlying profit Underlying Group like-for-like

before tax (UPBT) basic earnings sales (LFL)
per share (EPS)
2016/17 2017/18
30
Responding to feedback on Executive remuneration Over the last 12 months management has delivered another four
In taking on the role of Remuneration Committee Chair, I was keenly consecutive quarters of like-for-like sales growth (making nine in
aware of the voting outcome at the June 2017 AGM, where the new succession) resulting in the Company achieving:
remuneration policy for Directors was approved with 92% in favour, • like-for-like sales growth of 2.8% (excluding fuel) and, for the first time
but last year’s remuneration report only received 52% in favour. I have since 2011, two consecutive years of positive like-for-like sales growth;
engaged with shareholders to understand that gap, and listened to • underlying profit before tax of £374m, an increase of 11% on last year; and
their concerns about remuneration. I wish to extend my sincere thanks
• further progress in cost and productivity savings, and sustained
to those who have taken the time to share their views and help us in
improvements across a number of areas of the business including
this process.
productivity and procurement of goods not for resale and loss
Although there was inevitably some divergence of views expressed prevention savings, resulting in cost reduction/productivity
by investors on particular items, I observed two consistent themes improvement of £195m.
relating to:
As a consequence of this performance the Committee has approved
• a need for greater transparency in how targets are calibrated which a bonus payout of 98.7% of maximum for Executive Directors of which
contributed to the perception that there was a lack of stretch attached 50% will be deferred into shares which must be held for three years.
to the 2017-20 Long Term Incentive Plan (LTIP) targets; and
• a better understanding of the Committee’s target setting process which LTIP 2015-18
created doubts as to whether our due diligence is sufficiently robust. The 2015-18 LTIP outcome is the first to reflect the turnaround in
Notwithstanding that feedback, all shareholders we spoke to Morrisons performance since David Potts was appointed, and started the
recognised the highly effective job that management are doing to Fix, Rebuild and Grow plan. At the time David assumed the role of Chief
turn the business around, and were keen that they are retained and Executive, Morrisons reported full year like-for-like sales of (5.9)% and
appropriately incentivised. net debt at £2.3bn. The team has strengthened the balance sheet, grown
like-for-like sales and done so profitably. This has resulted in a share price
How we are responding which has outperformed the FTSE 100 (1 March 2015 to 1 March 2018) over
the period, and shareholders are rightly pleased with the performance.
Improving transparency
The performance over the period is summarised below:
The feedback noted that the rationale and context to accompany the Actual
2017-20 LTIPs could have been clearer, to help evaluate the level of stretch. Measure1,2 Min (25%) Max (100%) Weighting performance
In response, the Committee has enhanced the narrative to accompany Total sales (exc. fuel) £12.7bn £13.2bn 20% £13.5bn
targets in this Directors’ remuneration report and all relevant definitions Adjusted free cash flow £850m £1,600m 60% £2,053m
are clearly presented in one place (see page 45 of the Annual Report) Underlying earnings per 10p 15p 20% 12.19p
to remove any ambiguity and potential for misinterpretation, so our share (EPS)
investors are able to make a fully informed determination of the 1 See the definitions on page 45 of the Annual Report.
2 Additional detail on page 48 of the Annual Report.
target stretch.
It is also important to note that during this period, management
Restoring confidence
increased external guidance for working capital improvement (from
Food retailing is fast paced, adapting to fundamental shifts in consumer £600m to £1bn) and for disposal proceeds (from £1bn to £1.1bn); this has
behaviour. The performance of the sector is subject to intense resulted in management exceeding the targets significantly on free cash
scrutiny and what stretch performance looks like constantly evolves. flow – a measure that investors have told us is extremely important
Setting targets is therefore inherently challenging, but I wish to reassure to them, as well as on sales, which is a key measure of the health
our investors that the Committee subjects targets to a robust due of a food retailer.
diligence process as follows:
The LTIP is vesting at 96.3% of maximum, which the Committee believe
• targets are determined shortly before announcement of our preliminary is reflective of the value created for shareholders over the period.
financial results and prior to analysts updating their forecasts for both
Morrisons and the food retailing sector, thus the Committee must Implementation in 2018/19
exercise a degree of judgement; Base Salary
• as Board Directors, each member of the Committee benefits from
The Committee awarded both David Potts and Trevor Strain an
knowledge of business plans, strategic initiatives, projected cash flows
increase of 2.4% (in line with the wider workforce). David has again
and performance data which form primary reference points when
waived his increase, and his salary therefore remains unchanged since
determining the appropriateness of proposed targets. This information
his appointment.
is supplemented by economic indicators, competitor analysis and the
latest available analyst projections for the industry. The Committee also Annual Bonus
seeks the independent counsel of its advisers who subject targets to
complex probability analysis; and The performance measures and weightings remain unchanged. Subject
to no longer being commercially sensitive, the performance against
• having been presented with this information the Committee
targets will be disclosed in next year’s report.
purposefully adjourns to allow for individual deliberation and provision
of any additional information. On reconvening, each Committee LTIP
member is asked to feedback their individual view on each target before
the Committee collectively approve the targets by majority vote. In line with the policy approved by shareholders last year, awards
will be 300% of salary. Performance measures and weightings are
Pay for performance unchanged from the previous year. Further detail on the targets
can be found on page 44 of the Annual Report.
Outcomes in 2017/18
I look forward to your support at the 2018 AGM.
It is the policy of the Committee to ensure that superior reward should
only be received for superior performance. The food retail industry Tony van Kralingen
continues to be highly competitive for both customers and talented Remuneration Committee Chair
management. Looking at the industry, many of our competitors have
reported decreasing profits and like-for-like sales, so both in absolute
and relative terms, the team are outperforming the market.
31
Directors’ remuneration report continued

Annual report on remuneration
Audited information
Single total figure of remuneration

The table below sets out the single total figure of remuneration and breakdown for each Director for 2017/18 and the comparative figure for 2016/17.
2017/18 2016/17
Annual2 Pension4 Annual Pension4
Salary/fees Benefits1
bonus LTIP 3
benefits Total Salary/fees Benefits bonus LTIP5 benefits Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Executive Directors
D Potts 850 27 1,678 3,042 213 5,810 850 31 1,700 – 213 2,794
T Strain 596 35 1,177 1,503 143 3,454 575 35 1,150 809 138 2,707
D Philips – – – – – – – – – 366 – 366
Non-Executive
Directors
A Higginson 400 24 – – – 424 400 15 – – – 415
R Anand 102 – – – – 102 92 – – – – 92
P Vennells 89 – – – – 89 76 – – – – 76
T van Kralingen 35 – – – – 35 – – – – – –
N Davidson 102 – – – – 102 92 – – – – 92
B Richards 102 – – – – 102 92 – – – – 92
I Lee6 – – – – – – 54 – – – – 54
1 Taxable benefits for the Executive Directors include a car allowance (or other car benefit), transport costs and private health provision. The Chairman has use of a car and driver for Group business and
receives private health provision. For 2017/18, the figure disclosed for the Chairman includes tax paid via PAYE settlement agreement. All Directors receive the Group’s normal staff discount entitlement
which is not taxable. Applicable Sharesave awards granted in given financial years are also included in this figure.
2 50% of the annual bonus is deferred in shares for a period of three years. There are no performance conditions attached to this deferred element.
3 Awards granted under the LTIP in April 2015 are scheduled to vest in April 2018. The performance conditions relating to the 2015-18 LTIP award ended on 4 February 2018 and the vest value of the 2015-18
LTIP award is therefore calculated on the closing share price as at 2 February 2018 (the last trading day before year end). The figures stated in the 2017/18 figures also include the value of dividends accrued
on the 2015-18 LTIP award at the time of vesting. Further detail is in the table on page 48 of the Annual Report.
4 D Potts received a salary supplement equal to 25% of base salary. T Strain received a salary supplement of 24% of base salary. None of the Executive Directors have a prospective entitlement to a defined
benefit pension by reason of qualifying service.
5 The value of the 2014-17 LTIP vest that was disclosed in the 2016/17 Directors’ remuneration report was based on an indicative price at 27 January 2017. The value of the 2014-17 LTIP vest has been restated
to reflect the actual June 2017 vest value.
6 I Lee retired from the Board on 31 August 2016.
The Group is required to prepare a Directors’ remuneration report

for the 53 weeks ended 4 February 2018. The report has been prepared
in accordance with the Companies Act 2006 and the Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
32
Consolidated statement of comprehensive income

53 weeks ended 4 February 2018
2018 2017
£m £m
Revenue 17,262 16,317

Cost of sales (16,629) (15,713)
Gross profit 633 604
Other operating income 78 76
Profit/loss on disposal and exit of properties and sale of investments 19 32
Administrative expenses (272) (244)
Operating profit 458 468
Finance costs (94) (160)
Underlying finance costs (78) (104)
Adjustments for:
Costs associated with the repayment of borrowings (16) (56)
Finance income 14 15
Share of profit of joint venture (net of tax) 2 2
Profit before taxation 380 325
Analysed as:
Underlying profit before taxation 374 337
Adjustments for:
Impairment and provision for onerous contracts 6 6
Profit/loss on disposal and exit of properties 19 19
Profit arising on disposal of investment – 13
Costs associated with the repayment of borrowings (16) (56)
Pension scheme set-up credit 13 –
Net pension income 9 8
Other exceptional costs (25) (2)
380 325
Taxation (69) (20)
Profit for the period attributable to the owners of the Company 311 305
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension schemes 323 86
Tax on defined benefit pension schemes (55) (17)
268 69
Items that may be reclassified subsequently to profit or loss:
Cash flow hedging movement (18) 30
Items reclassified from hedging reserve in relation to repayment of borrowings (2) 6
Tax on items that may be reclassified subsequently to profit or loss (2) 1
Exchange differences on translation of foreign operations (1) (1)
(23) 36
Other comprehensive income for the period, net of tax 245 105
Total comprehensive income for the period attributable to the owners of the Company 556 410
Earnings per share (pence)
– basic 13.30 13.11
– diluted 13.03 12.95
33
Consolidated balance sheet

4 February 2018
2018 2017
£m £m
Assets
Non-current assets
Goodwill and intangible assets 428 445
Property, plant and equipment 7,243 7,227
Investment property 33 33
Pension asset 612 293
Investment in joint venture 53 56
Investments – –
Derivative financial assets 16 16
8,385 8,070
Current assets
Stock 686 614
Debtors 250 214
Derivative financial assets 15 22
Cash and cash equivalents 327 326
1,278 1,176
Assets classified as held-for-sale 4 –
1,282 1,176
Liabilities
Current liabilities
Creditors (2,981) (2,837)
Short-term borrowings (72) –
Derivative financial liabilities (13) (3)
Current tax liabilities (15) (24)
(3,081) (2,864)
Non-current liabilities
Borrowings (1,245) (1,550)
Derivative financial liabilities (1) (5)
Pension liability (18) (21)
Deferred tax liabilities (478) (417)
Provisions (299) (326)
(2,041) (2,319)
Net assets 4,545 4,063
Shareholders’ equity
Share capital 236 234
Share premium 159 128
Capital redemption reserve 39 39
Merger reserve 2,578 2,578
Retained earnings and other reserves 1,533 1,084
Total equity attributable to the owners of the Company 4,545 4,063
34
Consolidated cash flow statement

2018 2017
£m £m
Cash flows from operating activities

Cash generated from operations 884 1,113
Interest paid (66) (100)
Taxation paid (74) (35)
Net cash inflow from operating activities 744 978
Cash flows from investing activities

Interest received 4 6
Dividends received from joint venture 8 8
Proceeds from the sale of property, plant and equipment 108 79
Proceeds from the sale of investments – 44
Purchase of property, plant and equipment, investment property and assets classified as held-for-sale (429) (374)
Purchase of intangible assets (71) (45)
Net cash outflow from investing activities (380) (282)
Cash flows from financing activities

Purchase of own shares for trust (4) (5)
Settlement of employee tax liability for share awards (7) –
Proceeds from exercise of employee share options 33 –
Proceeds on settlement of derivative financial instruments 6 37
Repayment of borrowings (245) (729)
Costs incurred on repayment of borrowings (17) (42)
Dividends paid (129) (118)
Net cash outflow from financing activities (363) (857)
Net increase/(decrease) in cash and cash equivalents 1 (161)

Cash and cash equivalents at start of period 326 487
Cash and cash equivalents at end of period 327 326
Reconciliation of net cash flow to movement in net debt in the period

2018 2017
£m £m
Net increase/(decrease) in cash and cash equivalents 1 (161)

Cash outflow from decrease in debt 239 692
Non-cash movements (19) 21
Opening net debt (1,194) (1,746)
Closing net debt (973) (1,194)
35
Consolidated statement of changes in equity

Attributable to the owners of the Company

Capital
Share Share redemption Merger Hedging Retained Total
capital premium reserve reserve reserve earnings equity
£m £m £m £m £m £m £m
Current period
At 30 January 2017 234 128 39 2,578 18 1,066 4,063
Profit for the period – – – – – 311 311
Other comprehensive (expense)/income:
Cash flow hedging movement – – – – (18) – (18)
Items reclassified from hedging reserve in relation to
repayment of borrowings – – – – (2) – (2)
Exchange differences on translation of foreign operations – – – – – (1) (1)
Remeasurement of defined benefit pension schemes – – – – – 323 323
Tax in relation to components of other comprehensive
income – – – – 4 (61) (57)
Total comprehensive (expense)/income for the period – – – – (16) 572 556
Purchase of trust shares – – – – – (4) (4)
Employee share option schemes:
Share-based payments charge – – – – – 33 33
Settlement of employee tax liability for share awards – – – – – (7) (7)
Share options exercised 2 31 – – – – 33
Dividends – – – – – (129) (129)
Total transactions with owners 2 31 – – – (107) (74)
At 4 February 2018 236 159 39 2,578 2 1,531 4,545
Attributable to the owners of the Company

Capital
Share Share redemption Merger Hedging Retained Total
capital premium reserve reserve reserve earnings equity
£m £m £m £m £m £m £m
Prior period
At 1 February 2016 234 127 39 2,578 (10) 788 3,756
Profit for the period – – – – – 305 305
Other comprehensive income/(expense):
Cash flow hedging movement – – – – 30 – 30
Items reclassified from hedging reserve in relation to
repayment of borrowings – – – – 6 – 6
Exchange differences on translation of foreign operations – – – – – (1) (1)
Remeasurement of defined benefit pension schemes – – – – – 86 86
Tax in relation to components of other comprehensive
income – – – – (8) (8) (16)
Total comprehensive income for the period – – – – 28 382 410
Purchase of trust shares – – – – – (5) (5)
Employee share option schemes:
Share-based payments – – – – – 20 20
Proceeds and settlements of employee share award – 1 – – – (1) –
Dividends – – – – – (118) (118)
Total transactions with owners – 1 – – – (104) (103)
At 29 January 2017 234 128 39 2,578 18 1,066 4,063
Further information:
The auditor has reported on the full Annual Report and Financial Statements for the 53 week period ended 4 February 2018. The auditor’s report was unqualified,
and their statement under section 496 (whether the Strategic report and the Directors’ report are consistent with the accounts) of the Companies Act 2006
was unqualified. The independent auditor’s report can be found on page 55 of the Annual Report of the Annual Report and Financial Statements, available at
www.morrisons-corporate.com
36
Investor relations and financial calendar
Financial calendar 2017/18 Corporate responsibility enquiries Online reports and accounts
Financial events and dividends Telephone: 0845 611 5000 Our annual and interim Group financial
statements are available to download
Quarter 1 trading statement 10 May 2018 Annual General Meeting from the website along with Corporate
Final dividend record date 25 May 2018 responsibility reports and other financial
The AGM will be held on 14 June 2018 at
Annual General Meeting 14 Jun 2018 Wm Morrison Supermarkets PLC Head Office, announcements. The 2017/18 Annual Report
Final dividend payment date 28 Jun 2018 Gain Lane, Bradford, BD3 7DL. is also available to view in HTML format at
www.morrisons-corporate.com/annual-
Half year end 5 Aug 2018 A separate notice convening the meeting report-2018
Interim results announcement 13 Sep 2018 is sent to shareholders, which includes an
explanation of the items of special business The information in the online Annual Report
Interim dividend record date 28 Sep 2018
to be considered at the meeting. and Financial Statements, Strategic report, and
Interim dividend payment date 5 Nov 2018 the Interim reports is exactly the same as in the
Quarter 3 trading statement 6 Nov 2018 Dividend reinvestment plan printed version.
Financial year end 3 Feb 2019 The Company has a dividend reinvestment plan
which allows shareholders to reinvest their cash
Environmental matters
Company Secretary dividends in the Company’s shares bought in Our environmental footprint is taken very
the market through a specifically arranged share seriously. In the production of the 2017/18
Jonathan Burke
dealing service. Full details of the plan Annual Report, we have contributed to the
Company number and its charges, together with mandate forms, reduction in environmental damage in the
are available from the Registrars. following ways:
00358949
a) Website
Registered office Morrisons website Shareholders receive notification of
Wm Morrison Supermarkets PLC Shareholders are encouraged to visit our the availability of the results to view
Hilmore House website, www.morrisons.com, to obtain or download on the Group’s website,
Gain Lane information on Company history, stores and www.morrisons-corporate.com, unless they
Bradford services, latest offers, press information and have elected to receive a printed version of
BD3 7DL a local store finder. the results.
Telephone: 0845 611 5000 Shareholders are encouraged to view the report
www.morrisons.com
Share price information
on the website which is exactly the same as the
The investor information section of our website printed version, but using the internet has clear
Investor relations provides our current and historical share price advantages such as lowering costs and reducing
Telephone: 0845 611 5710 data and other share price tools. Share price the environmental impact.
Email: accinvr@morrisonsplc.co.uk information can also be found in the financial
press and the Cityline service operated by the b) Recycled paper
Financial Times. Telephone: 0906 843 3545. This document has been printed on recycled
paper that is manufactured in mills with ISO
14001 accreditation from 100% recycled fibre.
It is totally chlorine free and is an NAPM
certified recycled product.
37
Information at your fingertips
Customer You are also able to preview selected items Webcasts

from ranges such as ‘Nutmeg’ and Market Street, Webcasts of the Directors delivering the
Our website, www.morrisons.com, allows you and our new café offers, in-store services, preliminary results for 2017/18 on 14 March 2018
to shop online, search hundreds of inspirational award wins, pharmacies, glass hire and details are available.
products and recipes for the food we make and of our new store openings online. As standard, Shareholder information
provide, and find out useful information about morrisons.com also provides a mobile-friendly Other relevant shareholder information is
our stores and the services they offer. online Store Finder where you can find details available, for example share price history,
The delivery service of Morrisons.com now of your nearest store, opening times and dividends, financial calendar and corporate
covers over 60% of Great Britain. The geography services it offers. governance information.
that we cover is growing all the time with the Electronic communications
North East, Isle of Wight and parts of East Anglia Corporate Electronic communications (eComms) is the
opened up to customers in the last 12 months. fastest and most environmentally friendly way
A postcode checker makes it easy to see if you Our corporate website,
to communicate with our shareholders.
are eligible for our home delivery service. www.morrisons-corporate.com, is a one‑stop
portal that exists for the benefit of our Instead of receiving paper copies of the annual
At Morrisons.com you can: and financial results, notices of shareholder
investors, the public and the media. This site
• Purchase over 29,000 Morrisons grocery meetings and other shareholder documents,
has the following sections:
products, including over 1,000 Best you will receive an email to let you know this
products and 9,000 General Merchandise About Morrisons
You will find information about the Group, information is available on our website.
branded products;
its operations, strategy and structure, and Visiting our website to obtain our results
• Navigate from our home page to all our various
past financial information. reduces our environmental impact by saving
websites, including our newly deployed online
Jobs on paper and also reduces our print and
Florist (www.flowerworld.co.uk), and our new
Career opportunities and information distribution costs.
all year round order and collect service for
gatherings and special occasions; about working for Morrisons. Sign up to eComms on our website at
• Benefit from competitive ‘one-off’ delivery For our dedicated recruitment website, go to www.morrisons-corporate.com and follow
charges or purchase a delivery pass for www.morrisons.co.uk/jobs the investor eComms link.
unlimited deliveries for a one-off fee; Media centre
• Check out latest promotions and seasonal Latest releases about the growing estate
events, including online exclusive deals; of Morrisons, along with promotions and
product news.
• Review and research in-store only events and
‘when it’s gone it’s gone’ promotions, such Corporate responsibility
as those offered on Black Five Days; Here you can find out about our corporate
responsibility ethos, including how we take
• Sign up for our latest offers and our marketing
good care of our environment, society and how
by email;
we go about business. www.morrisons.co.uk/cr
• Find recipes based on our ingredients and
inspired by our campaigns and events; Investors
Presentations, announcements and
• Read content on healthy eating, reducing food financial reports can be quickly and easily
waste and our support for various charitable downloaded or viewed on-screen as PDFs.
causes such as CLIC Sargent or the Morrisons You can easily navigate around the Annual
Foundation; and Report and Financial Statements 2017/18
• Leave or research a Trustpilot review about on-screen, viewing only the parts you want
the customer service received at Morrisons, to, at www.morrisons-corporate.com/annual-
and with four stars Morrisons is rated the report-2018
highest of the UK multiples.
You can also sign up to and manage your More
Card account on our website, and earn points
on all your purchases. In our dedicated area, you
can find out what our loyalty card scheme has
to offer, check your points balance and make
changes to preferences. Designed & Produced by Printing by
Not all products are available online. However, Radley Yeldar Geoff Neal Group
the website is an excellent vehicle for finding ry.com Paper stock: This report is printed
out more about things we offer and you can on Amadeus Offset uncoated,
do this on the website through your desktop, Photography a 100% recycled paper.
your smartphone (using our App) and even using
Amadeus Offset is manufactured
your voice through an Alexa device – a first for Board and Executive to the certified environmental
a UK Supermarket. Committee portraits by management system ISO 14001.
Chris Leah Photography.
38
Wm Morrison Supermarkets PLC
Hilmore House, Gain Lane
Bradford BD3 7DL
Telephone: 0845 611 5000
Visit our website:

www.morrisons.com

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BUILDING A BROADER,

ST R AT EG IC R E PO RT SU PPL E M E N TARY MAT E R IAL

Throughout the Strategic report and supplementary material:

# Group like-for-like (LFL) sales # Underlying profit before tax #

£17.3bn +5.8% +2.8% £374m +11.0%

£350m £973m  down £221m

2014/15 2015/16 2016/17 2017/18

N O N - FI NAN CIAL H IG H LIG H TS

Like-for-like (LFL) customer # C CO

+2.9% +7% pts +2% pts

O PE R ATIO NAL H IG H LIG H TS

• Meaningful, sustainable sales and profit • Started a rolling programme to supply

Alignment of highlights to our stakeholder ambitions:

Our core purpose

Customers Food maker

Brand Our business...

…delivered through our six priorities

Outcomes for our

Distributor Retailer 1. Customers

See page 15 for more detail

4 Listening and 5 Selling, controlling costs, growing

The Board spend time balancing the need to deliver adequate

Chief Executive’s statement

2017/18 was a year of continued progress

3.4% 4.6% 4.6%

We are listening and responding

We are listening and responding

We are listening and responding

We are listening and responding • Parcel pick up services continue to be popular.

We are listening and responding

We are listening and responding

2 To serve customers better

Morrisons ordering Mastercraft

Our four stakeholder ambitions

UK grocery market size (£bn) 2017 Composition of UK grocery market size

184.5 Supermarkets £86.0bn

Being more competitive The Market

Our four stakeholder ambitions

Five ways of working Diversity

Selling, controlling costs, growing profits

Our four stakeholder ambitions

Our four stakeholder ambitions

Another strong year where we made

Group LFL sales (exc. fuel) Net debt (£m)

2014/15 2015/16 2016/17 2017/18 2014/15 2015/16 2016/17 2017/18

Our four stakeholder ambitions continued

Revenue 17,262 16,317 Operating profit 458 468

Capital expenditure (£m) Return on Capital Employed (ROCE)

520 7.7% Operating working capital inflow over

2014/15 2015/16 2016/17 2017/18 2014/15 2015/16 2016/17 2017/18

Total payments in tax

Debt, cash flow and working capital Summary balance sheet

Our four stakeholder ambitions continued

Reduce food waste

Corporate responsibility continued

MANAGING OUR RISKS

The risk management process The risk management framework

Top Board of Directors

oversight of risk monitoring

£350m £973m down £221m

Selling, controlling costs, growing profits

Capital expenditure (£m) Return on Capital Employed (ROCE)