Marks bullish despite fall in Co-op’s profits

THE CO-OPERATIVE Group announced a 34% slide in profits to £174m as its banking arm announced a first half loss of £58.6m.

The Manchester-based group’s chief executive Peter Marks said the figures were the result of “very difficult” market conditions, but pledged that the group would not be “blown off course”  in its growth and investment strategy.

He said £2bn would be invested across the grocery stores, banking and legal businesses over the next three years so the group would be ready “when the economic upturn comes, which it surely will.”

Mr Marks said impairments in the Co-operative Bank’s  corporate loan book, cost of regulation, a £40m charge for PPI mis-selling and the low interest rate environment were behind the loss in the bank.

Having secured a landmark deal to buy more than 630 branches from Lloyds last month, he said the Co-operative would fare much better as a larger bank in future years.

“We are taking a long term view. Even if market conditions continue as they are, it’s better to be a bigger bank,” he said.

Across the group, sales in the six months to the end of June were flat at £6.5bn.

Food’s performance reflected the on-going tough market and the bad weather this summer.  saw a 2.2% fall in overall and 1.2% like-for-like. Operating profit fell to £119m (2011: £142m).

Mr Marks said: “I joke that it’s been the worst summer since the Ice Age – and it really has affected our sales.”

In banking revenue rose by 3.9% to £1.bn but taking into account the year-on-year impact of PPI provisions fell by 1.1%, and underlying operating profit fell 67.9% to £36.9m

The Specialist Businesses continued to perform well, most notably in the pharmacy and funerals, despite challenging market conditions.

Revenue was up 1.5% at £777.1m (2011: £765.7m) and underlying operating profit jumped 19.3% to £62.m.

Mr Marks added: “None of this was unexpected and we had planned for this outcome, so were well prepared.”

“The current environment only highlights again the strength of our ownership model that lets us plan for the longer term by continuing to invest to ensure our businesses maintain momentum and our customers are always offered value with values.

“We are supported in this by our healthy financial position, with a robust balance sheet and strong cash position.”