Lincolnshire Co-op has hailed “a successful half year” in its report for the six months to 4 March, weathering a “challenging” economy that hit its profits despite a growth in sales.
Overall sales were up 2% from £195.4m to £199.4m, but surplus dropped from £8.9m in the last half year to £6m as the society absorbed the rising costs affecting the retail sector.
The report said the society had enjoyed strong performances in several business areas but added: “There is no doubt that the current economic climate is challenging and we are managing our costs carefully while continuing to create as much value as we can for our members, colleagues and communities.”
Food stores saw growth of 5%, though volumes were down “as shoppers seek to manage household budgets”.
Distribution costs, availability and manufacturing issues continue to bring volatility to the retail sector, the report warns, adding: “We work closely with our co-operative buying group to manage any increases as best we can.”
There are also financial pressures on the co-op’s pharmacies. “We campaign to raise the issue of fair NHS funding as this puts a strain on us, and many other community health providers.”
Alongside consultations, advice and healthy living services our teams provide, the pharmacy business saw the number of prescriptions increase by 4% to 3m items.
In travel, customer numbers are down but sales are back at pre-pandemic levels “and confidence in the industry is such that our teams have reintroduced events and promotions for our customers, many of whom are booking with us for the first time”.
Funeral branches carried out 1,498 arrangements in the half year.
Lincolnshire continues to subsidise its network of post offices, the report adds. “As access to banking services in rural areas becomes even more of an issue, we are focusing on promoting those services to local communities.”
Investments include new food stores in Barrowby, near Grantham, Lincoln’s Skellingthorpe Road and Warsop, near Mansfield; the society purchased a pharmacy in Winterton, near Scunthorpe, and revamped its travel branch in Market Rasen.
“Difficult decisions” included the transfer of Springfields Filling Station to “a new specialist forecourt operator that is better placed to run this outlet going forward”.
“Energy costs have greatly impacted on the society,” the report adds. “In our food business usage has dropped by 1.1% but our bills have increased from £1.3m to £2.6m. We buy ahead to protect ourselves from the worst of the price rises, but it is still a significant extra expense.
“Coupled with other rising costs, such as increased wages and food distribution, it means our surplus has dropped from £8.9m in the last half year to £6m – though last year’s result was buoyed by one-off property receipts and a reduction in the provision set aside for holiday cancellations needed in our travel business, as departures returned to more normal patterns.
“It’s a healthy surplus but we need to proceed with caution during the challenging months to come.”
Ongoing efficiency measures include centralised dispensing in pharmacies and the possible introduction of electronic shelf edge labels in food stores. The society will also review its profit share schemes, including the rate of members’ year-end dividend bonus and the colleague profit share, to ensure they remain in line with the surplus.
The society’s Community Champions fundraising raised over £153,000 for 26 groups providing first response for people feeling suicidal and dealing with mental ill health rom September to November, we raised over £153,000 for 26 groups providing first response for people feeling suicidal and dealing with mental ill health. And it raised over £164,000 for 252 local community groups ranging from wildlife schemes and friendship groups to sports clubs.
The society also contributed to food bank and warm spaces initiatives and the Disasters Emergency Committee’s Turkey Syria earthquakes appeal.
In terms of sustainability, the society is setting goals as part of the Science Based Targets initiative (SBTi), focused on climate emissions, and is working to reduce waste food and packaging, and instal electric vehicle charging points, with 13 now in service at stores.
Memberhip grew by 9,550 to 305,627.
In October, colleagues received a bonus equal to 45% of a weekly wage. During the half year the co-op consulted Usdaw union on the retail pay agreement, which covers the majority of colleagues. “Those covered by the agreement have now received at least a 6% pay increase, with some customer facing roles seeing a larger increment,” the report adds.