The Co-op Group has released its interim results for the six months to 2 July, with pre-tax profits falling to £7m – down from £44m for the same period last year.
Revenues held steady at £5.6bn, while underlying operating profit was £18m, down from £51m in the first half of 2021.
The Group said its net cash from operating activities showed an improvement – up to £315m (H1 2021: £162m), and there was a reduction in net debt of £189m – compared to an increase in net debt of £162m H1 2021. This follows “decisive management action taken to reduce operational costs, improve operational performance and prioritise capital expenditure” including the £600m of its petrol station forecourt stores.
Sales performance was “robust” despite challenging markets, the report added, with food sales rising period-on-period throughout the six months “driven by an increase in the shopping frequency – 16 million shoppers use Co-op stores each week”. Overall food revenue increased 1% year-on-year to £3.91bn.
The funeral business grew its market share but revenue fell by £3m to £139m, as mortality rates fell after the pandemic. Rising energy costs and industry regulatory changes saw underlying operating profit decline by £6m to £11m.
The insurance business performed in line with the forecast, with reduced revenue planned to bed in the new Markerstudy distribution business model and ways of working (Insurance income H1 2022: £11m; H1 2021: £18m.)
At the legal arm, revenue rose more than 10% to £22m, “driven by continued growth of our market-leading probate business and an expansion of our digital capabilities”, with 100 new colleagues, including apprentices, taken on to handle the workload.
Costs incurred across the Group include “improvements to the pay of 41,000 front line colleagues of up to 5.3%, for all ages, including apprentices”, and a £37m price investment to lower the cost of 120 key products into the New Year.
Group members earned and redeemed £8.7m in personal rewards, the report added, and a £50 shopping bonus went to members who purchased new or renewed motor insurance policies.
Community investments included £19m in extra funding for UK pig farmers, and a total of £1.5m given to 4,500 local causes supported by the Local Community Fund in H1.
The Group was also awarded the Queen’s Award for Enterprise for Sustainable Development, with new sustainability initiatives including the launch of the Caboodle platform to tackle food waste and the continued rollout of electric hearses.
Recently appointed CEO Shirine Khoury-Haq said: “Against a highly challenging economic backdrop, we have made significant progress in strengthening our balance sheet, whilst continuing to support the needs of our colleagues, members, customers and the communities in which we operate. Our clear focus on developing our businesses, whilst controlling costs, improving our cash position and reducing debt is paying dividends.
“Looking ahead, while we are mindful of the continued economic challenges, we have great confidence in the underlying strength of the Co-op and all our businesses. Having faced into some tough decisions in the first half, focused on cutting costs and improving efficiency, we ended the period stronger both operationally and financially.
“Since then, we have progressed further with the planned sale of our non-core petrol forecourts business. This will strengthen us more and provide the means to invest in our core businesses, whilst enabling us to support our members, customers, colleagues and communities through the cost-of-living crisis.
“I’d like to thank every single one of our colleagues for their leadership in delivering our results and vision this year.”
Chair Allan Leighton added: “The first six months of the year have been a time of challenge for us – as they have been for all businesses. I was delighted that we were able to confirm Shirine Khoury-Haq as our permanent CEO during this period. Her energy to move decisively on improving our financial position, focusing on core business development, whilst still delivering on our vision commitments, is helping us move forwards with pace and purpose.
“We know that the current testing conditions will not ease in the second half, and we will continue to face into the challenges, by remaining focused and by building upon our incredible co-operative heritage. I would like to thank all our colleagues for their hard work and dedication in these extraordinary times.”