Milestones boost Co-op’s performance

TWO milestone deals helped The Co-operative Group deliver an 85% hike in profits to a record £402m.

Last year the Manchester-based group bought supermarket rival Somerfield and also merged its financial services business with the Britannia Building Society.

Financial results for the 51 weeks to January 2 also showed a 31% rise in sales to £13.7bn.

The Co-operative, which runs 3,000 stores, the financial services business, farms, car dealerships and a funeral service, said it had now seen 16 successive quarters of like-for-like sales growth in its food business.

Last year food sales were 5.5% ahead.

Chief executive Peter Marks, who is from West Yorkshire, hailed good progress during an “historic year” for the organisation.

He said: “Our business has continued to thrive in spite of economic pressure, and I am pleased to report that we are on track with the integration of both Somerfield and Britannia.

“While we have expanded and evolved as an organisation, we have stayed true to our core principles and we continue to do what we do best: serving customers with excellent products and services, and bringing solid values and trust to the communities in which we operate.”

Mr Marks said he expects trading conditions to remain until the middle of next year, and warned: “Sustaining the level of success we have enjoyed over recent years will not be easy.

“All of our businesses are operating in fiercely competitive markets which will only get tougher, so we will be redoubling our efforts to help our customers by providing even greater value and service.”

Stripping out a £99m gain related to the Britannia merger and significant improvements in the performance of our investment property portfolio, underlying operating profits came in at £473m up 20%.

Borrowings increased from £648m to £1.6bn, largely as a result of the Somerfield acquisition and our heavy investment in the brand and a store refurbishment programme.

In the food business, sales including Somerfield, climbed  66% from £4.5bn to £7.5bn and trading profit rose 31% to £286m.

Last year 778 stores were rebranded and upgraded, 597 Co-operative and 181 Somerfield stores converted to The Co-operative brand which means that 65% of the total estate, including Somerfield, has now been rebranded and modernised. Sales in the rebranded stores have increased by 12% year-on-year.

There was also a strong performance in Co-operative Financial Services, which posted a 21% increase in operating profits.

The Co-op said its ethical business model was helping it win new financial services customers. Current account sales rose 38%, life and savings new business premiums for 2009 were 30% higher and general insurance gross written premiums increased by 8%.

In the pharmacy business, performance was described as “creditable” in tough trading conditions.

Sales were up narrowly at £745m, against £744m in 2008, but operating profits were down 21% from £37.8m to £29.9m.