Sales and profits jump at resurgent Co-operative

THE resurgent Co-operative Group today revealed that sales had passed the £10bn barrier and profits had hit a record £218m.

The food, funerals, pharmacies and financial services giant, which has its headquarters in Manchester, said it is putting the brakes on major corporate activity after sealing the £1.5bn takeover of Somerfield and winning support for the merger of its finanical services business with Brittania Building Society.

Operating profits before exceptional items rose 11% to £393m. This figures includes the contribution of Co-operative Financial Services, the parent company of The Co-op Bank and insurance arm CIS.

Chief executive Peter Marks told TheBusinessDesk: “We are absolutely delighted with the results, which underlines that The Co-operartiev really is going through a renaissance. We have been investing heavily in our stores and this has led the way for us.

“The Co-operative is a British institution and it’s coming out of the shadows and re-establishing itself in the premiership of food retailers.

“We are now in a period of consolidation, we have taken big steps with Somerfield and Brittania and we have got to focus very hard on making those acquisitions work for us.We have to be careful too about not overstreching ourselves.”

He said the next “two to three years” would be focused on “getting the business absolutely right”, but stressed that the mutual, which employs more than 110,000 people nationwide, would continue to invest heavily in revamping its stores.

More than 700 stores were refurbished last year, at a cost of £300m, while a similar sum would be invested this year, Mr Marks said.

Profits in the food business – which enjoyed a market-beating 5% increase in like-for-like sales in the year to January 10 – rose 38% to £219.1m. Sales rose 23% to £4.52bn.

The figures do not include sales from the 2,900 Somerfield stores, which were acquired after the year-end. Six Somerfield strores have already been converted to Co-operative stores, and have been well received by staff and customers, Mr Marks said.

There was a strong performance in the group’s Funeralcare division, which is the largest cahin of funeral directors in the UK. Sales rose 17% to £274m, while profits before exceptional items came in 14% higher at £39.2m.

Mr Marks said the healthcare business, which operates the country’s third-largest retail pharmacy chain, has suffered a “challenging time” caused by the Government slashing the fees it pays to pharmacists for processing prescriptions.

Underlying profits in this business fell 13.7% to £37.8m. Sales rose 37.5% to £744m.

Mr Marks said: “It is a big challenge for the industry, all we can do is work hard to improve efficiency. On tje one habd the Government is saying they want us to stay open longer and give patients more advice, and on the other they are going to pay you less.”

He said £10m had been invested in a new distribution centre in Stoke-on-Trent for the healthcare business, which would help make the business more efficient.

Other highlights of the results included a return to profit in Co-operartive Travel. The transformation of the fortunes of this part of the business was due to a new approach to digital and the launch of a new website.

Sales rose 20.7% to £262m, while a loss of £2.1m was transformed into profit of £5.3m.

The Co-op said its three million customer members would share a payout of  £50m, up £5m on last year.