Co-op Group profits halve

PROFITS at the Co-op Group more than halved to £17m in the first six months of the year, as the group continues with its three-year plan to rebuild the business.

The company cited restructuring costs, pay increases and food price cuts for the fall in profits, adding it also expected full-year profits to be lower than last year.

Turnover increased by 2.2% to £4.7bn for the 26 weeks to July 2, as customer transactions rose by 3.3% and like-for-like food sales climbed 3.1%.

The group has also cut the value of its 20% stake in the Co-op Bank by £45m. The bank said in April it would remain unprofitable for around two years, as a result of tough trading.

Co-op group chief executive Richard Pennycook, who earlier this year took a voluntary pay cut, said the fall in profit was “expected and planned” as the group continues with its £1bn three-year Rebuild programme, which it started in 2014.

“We are only half way through the Rebuild and much remains to be done, whether it is investing in our digital capability or campaigning on key issues,” said Pennycook.

He added: “We remain firmly on track with our plans and are encouraged that the work we are doing is attracting more and more people back to the Co-op.”

The group said its food business expanded faster than many of its supermarket rivals as consumers shifted towards more frequent shopping at convenience stores.

The Co-op has around 2,600 grocery shops across the country, giving it a 6.6% share of the market, with 30 new food stores opening in the first six months as part of 100 planned for 2016.

The group has been in turmoil since 2013, when a £1.5bn hole emerged in its finances , after what former City minister Lord Myners described as a “series of value destructive transactions.”  

The crisis has seen the Manchester-based mutual forced to sell its pharmacies and farms businesses and sell around four-fifths of its bank.