Co-operative Group Chief Executive Peter Marks has warned that the Group faces another tough year of trading after announcing a drop in underlying profits for the half-year to July 2nd.
Overall sales were down from £6.95 billion in the equivalent period last year to £6.89bn in 2011 and the Group’s underlying operating profit fell to £275.1 million compared to £308.1m in 2010.
The Group said the ‘mixed’ results showed reduced profits in the society’s food business — but a 6.4 per cent increase in the gross revenue generated by Co-operative Financial Services — are “in line with expectations” as the society continues to invest and modernise.
Many of the Group’s other businesses — including Funeralcare, Legal Services, the Motor Group and E-store — saw increased profits and Pharmacy delivered an operating profit of £12.7m despite difficult trading conditions in the sector.
For accounting purposes, travel is classified as a discontinued business following the Competition Commission’s approval of the imminent joint venture arrangement with Thomas Cook.
Mr Marks said the diversity of the Group’s family of businesses will help steer the society through the difficult economic conditions, but predicted that the overall trading climate is unlikely to improve significantly in the next 12 months.
He told the News: “At the full year we warned that the downturn was biting deeper than anyone had expected and predicted that challenging trading conditions would continue into 2012. This has clearly proved to be the case.
“It is the worst I have seen in over 40 years of retailing and, against this backdrop, the results are in line with expectations. It is a mixed picture, but one that shows the strengths of having a diversified portfolio of great businesses, with Financial Services turning in a particularly strong performance.”
Added Mr Marks: “Looking ahead, we do not see signs of any real improvement in the economy and we are planning accordingly to help our customers, as much as possible, through this difficult period.
“Given the outlook and our determination to continue to invest through the cycle, we will find it difficult to match the record profits we made in 2010; but I remain optimistic.
“Our ownership model means we can take a long-term view and we are as driven, determined and ambitious as ever to modernise our business.
“Following the overhaul of the Group in recent years, the business is in excellent shape and when the economic upturn finally begins we will be better placed than ever before to take advantage of new opportunities.”
The interim report to be presented to the Group’s half-yearly meeting in Manchester in early November will say that the current economic environment is particularly challenging for those businesses within the Group that rely on ever-tightening discretionary spend.
However, the diversity of its portfolio of businesses is seen as a great strength and a Group statement pointed out that, in future, all its businesses will have the same customer-facing strategy, which will enable the society to leverage the benefits of the rejuvenated brand and increase synergies and cross-selling opportunities between businesses, as well as generate improvements through organic growth.
Although overall Group sales are down slightly, reflecting the tough trading conditions, CFS saw gross revenue rise 6.4 per cent to £1.33bn. Food business sales amounted to £3.7bn — down 4.6 per cent on this time last year and 3.6 per cent on a like-for-like-basis — while the Group’s other businesses produced sales of £1.43bn, roughly in line with last year.
Added the statement: “Falling sales was the main factor behind the falling profitability. Financial Services’ underlying profitability improved, while in Food, profits were down at £135.4m.
“Underlying operating profits in other businesses were £70m and, allowing for the non like-for-like impacts noted, underlying profit before payment to members would have been £242.5m.”
• To see the full breakdown visit: http://s.coop/4e48
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