Bank shines but Co-op’s profits fall 12%
THE Co-operative Group revealed a dip in half year profits as chief executive Peter Marks said retail conditions were the worst he had seen in his 40-year career.
Despite a strong performance from the Manchester-based group’s financial services business, which includes the Co-op Bank and smile its Internet brand, profits fell 12% or £31.5m to £230.8m.
Group sales at the group, whose businesses include funerals, farms, pharmacies as well as financial services and food retailing, were down a fraction in the six months to July 2, coming in at £6.89bn compared with £6.95bn a year ago.
The mutual organisation, one of Manchester’s biggest employers, with 5,000 staff, said the results were in line with expectations in a tough trading environment.
Commenting on the figures Peter Marks, said: ” At the full year we warned that the downturn was biting deeper than anyone had expected and predicted that challenging trading conditions would continue into 2012.
“This has clearly proved to be the case. Indeed, it is the worst I have seen in over 40 years of retailing and, against this backdrop, the results we are announcing today are in line with our expectations. It is a mixed picture, but one that shows the strengths of having a diversified portfolio of great businesses, with Financial Services turning in a particularly strong performance.”
Marks said he could not “see signs of any real improvement in the economy” and warned that full year profits would struggle to top the record figures seen last year.
“Given the outlook and our determination to continue to invest through the cycle, we will find it difficult to match the record profits we made in 2010; but I remain optimistic.
“Our ownership model means that we can take a long-term view and we are as driven, determined and ambitious as ever to modernise our business. Following the overhaul of the group in recent years the business is in excellent shape and when the economic upturn finally begins we will be better placed than ever before to take advantage of new opportunities.”
The financial services business was the star performer, growing underlying operating profits 20% to £131.3m from £109.3m last year.
In the food business, where the Co-op is the largest player in the convenience sector, and the fifth largest national grocer behind Tesco, Sainsbury’s Asda and Morrison’s’ an increasingly tough market with an aggressive promotional environment saw profits fall to £135.4m from £171.6m last year a reduction of 21%.
The Co-op said its other businesses had performed well despite tough market conditions with underlying operating profits £70m, down a touch from £71m in 2010.
Profits would have been well ahead but for a £9m hit due to a reduction in government funding of prescriptions and a change in policy on revenue recognition on the sale of funeral bonds which impacted profits by £2.7m.
Despite the challenging trading environment the group said it had continued with its three-year £2bn investment programme and £280m had been invested in the period.
