Co-op powers ahead through troubled waters

GROCERY, financial services to funerals giant The Co-operative Group hailed a strong-all round performance as first half profits rose 17% to £228.8m.

The Manchester-based giant, which has been integrating record acquisition. supermarket chain Somerfield – which it bought for £1.6bn a year ago, said revenues had jumped 27% in the  28 weeks to July 25 to £6.4bn.

Having invested so heavily in Somerfield, and embarking on a multi-million pound programme to revamp and improve its existing stores, the Co-op said it had recouped £650m from the sale of 200 stores. Many of those sold were done so to satisfy competition regulators after the Somerfield deal.

Chief executive Peter Marks said he was delighted with like-for-like sales growth in the group’s stores of 7.3% and hailed an “exceptional” performance by the food business.

While there was profit increases in the financial services, funerals, pharmacies businesses, as well as the grocery arm, travel was hit by the ‘staycation’ phenomena as recession hit consumers axed holiday spending.

Although operating profits in travel were down from £7.9m to £2.5m, Mr Marks said the results were still “ahead of the market” 

He pledged to keep his “foot on the accelerator” and warned that despite bottoming-out the wider economy would not see a rapid recovery.

Mr Marks said the grocery business – which is firmly focused on the convenience store sector – had not seen any impact from shopper migration to low cost grocers such as Aldi, Lidl and Netto.

He said:“The Co-operative Group has delivered another strong performance, across all our markets, in the face of continuing economic uncertainty and increasing competition.

“In the trading group, our success has again been driven by an exceptional performance from our food business which continues to grow, both organically and as a result of our integration of Somerfield.

“This has enabled us to reduce prices to  customers and there will be some great offers in the run up to Christmas as well as more price reductions to come as the integration benefits kick in.”

Mr Marks said the last 12 months had been an “exciting time” for the group with the Somerfield takeover, the merger of the financial services business with Britannia Building Society this year, and planning permission being granted for a new headquarters building in Manchester.

Looking ahead he said: “After a period of extensive expansion and acquisition, the second half of 2009 will mark a period of consolidation. We will continue to focus on successfully integrating the Somerfield and Britannia businesses and delivering the benefits  to our customer members.

“During this period we expect the economy to remain challenging with continued increases in unemployment and no immediate signs of a recovery in consumer spending.

“In spite of our recent success it would be naive to think that we are immune to the recession. That said we are pleased with our half-year performance, the second half has started well and we look ahead to the future with renewed confidence.”