The UK’s Co-op Group has announced a positive performance for 2018, with profit before tax on continuing operations up 27% on the previous year, although its underlying profit before tax remained flat at £43m.
The retailer said its food stores benefited from a hot summer and a good England performance in the World Cup – but that its funerals business had a “challenging” year. 2018 also saw the Group’s acquisition of the Nisa wholesale business, the sale of its insurance underwriting business and the purchase of the Dimec platform to prepare for its return to healthcare services.
Members of the co-operative received back nearly £60m through the 5% reward scheme, while a further £19m was distributed to 4,000 local community causes through the 1% reward scheme and funds from the sale of carrier bags.
“It’s important to understand that our Co-op’s commercial activity and its community and campaigning work go hand in hand,” said Allan Leighton, Co-op Group chair. “It’s beyond philanthropy and traditional social responsibility programmes. The support we give to local community causes or the campaigning we do on modern slavery and tackling loneliness are as important as running our food business or selling insurance cover. For us, doing the right thing makes good commercial sense.”
Mr Leighton added that while in 2019 the organisation would be marking the 175th anniversary of the Rochdale Pioneers opening their first co-op shop – widely regarded as the start of the consumer co-operative movement in the UK – now is “not a moment for looking back”.
“We were in the wilderness for a long period of time,” he said. “My view, is that this co-op was not a co-op for 50 years – but it’s been one for the last three to five years. In my view the way you celebrate 175 years is by going back to what the co-op used to do, but executing it with modernity. All of our core values are still much in play, but we’re trying to make them in such a way that they’re very relevant to the society today.”
He added: “It’s pretty uncertain times to say the least, but we believe that co-operation can really be part of the solution. So we’re investing to further align our businesses with the needs of our members. We’re really trying to increase our understanding of what goes on to communities, and what is the best way to tackle those issues.”
The Group’s total revenues grew by 14% to £10.2bn, driven by the Nisa acquisition and a strong performance from Food, where like-for-like revenues grew 4.4%. Capital expenditure was at £414m, £326m of which was attributed to store investment, refits and infrastructure. Net debt rose to £792m due to the Nisa acquisition, but remained below its £900m debt ceiling target. Surplus on pension schemes increased by £300m to £1.8bn (2017: £1.5bn). The figures for the planned sale of its insurance underwriting business (for £185m) are not included within its Profit Before Tax line, but within discontinued items.
Chief executive Steve Murrells said the plan for 2019 was to “continue to grow our business and reach more customers with our Co-op difference [by] opening more Co-op Food stores, through revitalising our Funeralcare business, through developing more Co-op Insurance products, and via our new Healthcare venture”.
He added: “Overall, we’re confident about the progress we’ve made in 2018 and the investment decisions we’ve taken. But there’s still much to do to achieve our Stronger Co-op, Stronger Communities ambition. In 2019 we want to further develop our community work through a deeper understanding of the needs and challenges faced by our members. Our plan is to create practical resources, founded on co-operative thinking, to help local communities thrive.”
On Brexit, Mr Murrells said: “Like other businesses, we’ve been preparing as best we can for the possibility of a no deal departure from the European Union. Our commitment to British farming provides our members and customers, as well as our suppliers, with some welcome protection from any increase in tariffs. However, we still source many of our fresh food products from the EU and we are making contingency plans to the best of our ability. Our priority is to do our best for our members and customers through what could be a challenging time for the whole nation.
“The thing that’s always troubled me through this whole process is how Brexit is dividing communities. That’s what worries me as much as whether it’s a hard or soft deal. Many of the issues that are opening up in communities around crime, around creating jobs, around homelessness, need to be talked about a lot more.”
On the return of profits to members, he added: “Our focus has been on putting more money into colleagues pay, into creating more jobs and into our IT infrastructure to make sure that we can serve customer needs better than ever before. And that’s going to be the continued focus for a number of years. The £60m that we’re giving to members [through the 5 and 1 scheme], we could choose to take that to the bottom line – but we don’t because it’s important that at this time members are getting benefits back on our success.
“We are making sure that we are building a successful Co-op for the future, focusing more on how we can help with the issues facing society. That’s where a lot of our energy is going.”