THE Co-operative Group has reported pre-tax profits of £ 258.4 million for the year to January 14 - up 39.5%, with the results boosted by a strong performance from CIS and property.
The Group said that while turnover grew by 1.3% for the year; operating profit was up by 15.6% to £ 366m. Borrowings were reduced by a third to £ 246m. And, the Group plans to distribute £ 9.8m to individual members and £ 15m to corporate members during 2006.
Martin Beaumont, Group Chief Executive, said that it had been a year of huge change for the Group. He said: "Although many of the changes we have made have yet to make a significant impact on our Group results, there are some encouraging signs.
"We have strengthened the foundations of the Group and expect to see the benefits of that work over the coming years in improved profits as well as continuing to achieve our social goals."
In Food Retail, the Group's biggest business, profits were flat on the previous year at £ 71.6m, although within this, the second half showed a significant improvement on the first half.
"We have made real progress in revitalising our Food Retail business, resulting in an improved trading performance over the second half of the year which has been maintained in the first quarter of this year," commented Mr Beaumont.
Guy McCracken was appointed chief executive of Food Retail in May last year and has worked hard to reinvigorate the business. Huge changes were implemented during the year to increase the efficiency and capacity of the supply chain, including the opening of a new national distribution centre in Coventry and a South East distribution centre in West Thurrock.
During the year the Group invested £ 12m refurbishing around 100 stores and this year a further 200 will be refitted and equipment upgraded at a cost of £ 60m.
The increasing public enthusiasm for Fairtrade products was a strong selling point for the Group and in Fairtrade fortnight sales of Fairtrade goods increased by 130% compared to an average week's sales. The Co-op remains market leader in this field.
Specialist Retail produced diverging performances from different businesses as the Group reshaped the division to concentrate on the areas with biggest potential. The two biggest businesses in this area both produced very good results: Co-operative Funeralcare increased sales by 7.3% to £ 185.3m while Co-op Pharmacy, saw sales rise by 11.1% to £ 293.8m.
However, Travelcare was affected by difficult market challenges such as the terrorist attacks in London and Turkey, and saw profits fall to £ 0.3m although significant steps were taken to remodel the way in which travel opportunities are sold to the consumer. In Department Stores, where the Group has already announced it intends selling its operations, losses increased to £ 10.8m.
Property was the star performer showing a strong growth in both the value of the investment portfolio and in rental income and 2005 was the eighth successive year of record profits, up 43% to £ 106.5m.
During the year Property formed a joint venture with ScottishPower to develop a 16 megawatt wind farm at the Group's estate at Coldham in Cambridgeshire, which is now generating electricity for the Group head office and the National Grid.
Meanwhile Farmcare suffered from increased fuel and fertiliser costs and difficulties with crop yields and pricing, but offset this by making significant cost savings on overheads..
At Co-operative Financial Services, which produced its results earlier this month, the success of the modernisation programme at CIS helped produce a strong performance. CIS operating profits rose by 56.5% to £ 67m, while the Co-operative Bank's profit was held back by an increase in personal bad debts, in line with the experience of other UK banks, resulting in a 14.4% decline to £ 98m.
For the coming year, Mr Beaumont said he believed the Co-operative Group would begin to shift its emphasis towards expansion and new business opportunities. In Food Retail, the environment is expected to remain challenging, with competitive and inflationary pressures likely to increase.
"Our priority is to build on the signs of improved trading we saw in the second half of 2005," he said.
For members, 2006 will also bring the implementation of a full membership programme, which will pay an accurate variable dividend based on members' total economic spend over the family of businesses. Members will be given detailed information in August, and the Group intends using this as the basis of a drive for new members in 2007.