The Co-op Group has announced a pre-tax profit of £127m for the year to 2 January, up from £24m the previous year.
The reported figure took into account a change in the accounting policy for funeral plans; excluding that, profit before tax was £92m (2019: £67m).
Revenue was £11.5bn (2019: £10.9bn) with food sales up 3.5% and Funeralcare revenue flat year-on-year, the annual report reveals.
Reported profit after tax and discontinued items was £77m (2019: £33m). The Group’s net debt has been reduced to £550m (2019: £695m).
The retailer has also said it will not repay all of the government funding it received during the pandemic. It will repay £15.5m in furlough payments but will hold on to more than £66m in business rates relief.
The Group said it had incurred additional costs of £84m from the pandemic, greater than the value of the government support it had received, including the hiring of extra staff, increased colleague absence, a reward payment for colleagues, and the purchase of PPE.
Asked about the decision by Co-op News, chief executive Steve Murrells said the board’s decision on the funding was a unanimous one, “shaped by listening to the National Members’ Council who confirmed that paying back business rate relief would be the wrong thing to do”.
He said the decision took into account the position of the independent retail societies “and what they have endured during these past months”, and also reflected the Group’s continued efforts to rebuild its balance sheet. The Group had taken a number of business decisions last year based on the assumption that the rate relief would be retained, he said.
Mr Murrells said the decision is “very much in line with ethics of our society” but was concerned that some in the media “will frame it in a different way”.
Advance reports of the move had already drawn an unfavourable online story from Sky – but on the Co-op Members’ Facebook page, members came to the Group’s defence, arguing that the critics failed to take into account the co-op model which sets it apart – reinvesting its surplus in communities rather than delivering dividends to shareholders, and not being able to draw on capital markets for finance.
In terms of community support during the pandemic, more than £12m was given to charities and community causes, and a further £15m shared with 4,500 causes from the Local Community Fund.
FareShare distributed five million meals through the Group’s support, while £3.1m in Co-op food vouchers and technology equipment was provided to 6,000 pupils at its Co-op Academies.
The Co-operate online volunteering and community platform was launched, and 1,000 Co-op Member Pioneers provide dedicated support for the vulnerable during lockdown.
The Group is also a key member of the Stop Child Food Poverty Taskforce, supporting Marcus Rashford in his successful campaign to extend free school meals.
The annual report paid tribute to the work by colleagues to keep 3,400 of its food stores and funeral homes open through the crisis and keep another 5,000 independent food stores supplied.
The Group also gave £25m given to colleagues in recognition of their efforts during the pandemic, and committed to improving its hourly pay rates, boosting pay for 33,000 colleagues with an investment of £53m per annum.
The report gave a breakdown of business performance, with food sales of up 3.5% to £7.8bn and wholesale business hitting sales of £1.6 bn compared to £1.4bn in 2019; a further 624 new independent stores have signed up by Nisa.
During the pandemic, 56 new Co-op stores were opened, a further 105 were refitted and 13 more were extended, adds the Group, while its online offer was expanded to include 800 Co-op Food stores.
The Funeralcare business conducted 10,000 more funerals than 2019 – an increase of 11.4%, reflecting the excess deaths caused by Covid-19. But lockdown restrictions meant those funeral arrangements were restricted to the basics, keeping revenue flat year on year at £272m.
“As we right-sized the branch estate for the future we made the difficult decision to close 164 funeral homes,” the Group added.
Insurance sales were reduced during the spring and early summer, particularly for motor and travel insurance policies, as lockdown restrictions impacted trading, but Legal Services saw case volumes grew by 9%.
In November the Group re-launched Co-op Power, its business-to-business clean energy buying group, with plans to significantly grow its membership in the years ahead. Recent corporate clients include Nationwide Building Society, Roadchef and the RNLI.
Despite significant growth of its healthcare business – an online pharmacy service given a high profile launch in 2019 – the Group decided it needed “significant additional capital to move it forwards” and last month announced its sale to Phoenix UK Group.
Mr Murrells told Co-op News that the Group had “entered the crisis in good shape. Our response has served us well, it shows we can be agile, responsive and resilient”.
But the coming year will be tough, he warned. “Revenues grew but when you get into the numbers our profits only went up by £25m. We must be careful with scarce resources.”
He added that the pandemic had put pressure on frontline colleagues, who had to stay in public-facing roles. “In those early months everybody was wrapped up in the need to serve and care for the nation but as we went through a lot of time putting our arms around the team.
“The length of this crisis is weighing heavy on their shoulders and through the year we’ve come up with innovative ways of saying thank you.”
Jo Whitfield, CEO of Co-op Food, said the bravery and commitment of frontline colleagues had been “awe-inspiring”. In addition to the summer bonus, the retailer held ’12 days of recognition” for staff over Christmas and is currently organising an “uplift festival” for colleagues based on wellbeing and ways to take care of themselves and each other.
Mr Murrells said Group will be judged by its actions during the pandemic, giving it a chance to assert its “vision of co-operating for a fairer world” by campaigning on access to food and education, and for environmental protection.
“That’s where the Co-op can do its best work – we’ve built an infrastructure of assets on the ground, we’re being fairer for communities, colleagues and the planet. The interesting bit is everyone else is waking up to this as well.”
Asked if this would see more support by the Group for the development of a wider co-operative economy in the UK, he said: “We’re keen to encourage more co-ops to come forward and partner with us”.
Pointing to recent studies by Co-operatives UK which demonstrate the resilience of the co-op business model, he added: “People realise a co-op gives members a chance to have a say, they recognise that co-ops put people before profits, and if there’s an area where we can support or work with them, then we will.”