ALTHOUGH the Co-operative Group's results for the year ended January 8th reveal falling sales and profits, Chief Executive Martin Beaumont remains upbeat about the society's long-term prospects.
Mr Beaumont admitted that the latest figures – with pre-tax profits down £ 241.3 million to £ 144.1 million and food profits alone down by almost £ 48 million – were disappointing, but told the News that he had never anticipated a sudden bounce-back.
`We said at the half year that 2004 would be a difficult year for the Co-operative Group and the results confirm that. While a number of our businesses performed well, the results of Food Retail and CIS have not met expectations.
`Although our difficulties stem as much from internal issues as from the challenging retail and business environment, we have already begun a great deal of work to address these and are making good progress.`
Mr Beaumont said there are encouraging signs that remedies put in place in the second half of the year are beginning to take effect, with improvements in a number of key areas.
`We are confident that we will see further gains coming through later in 2005,` said Mr Beaumont, who forecast that the impact of recently-appointed executives Eoin McGettigan (food retail)and Zoe Morgan (marketing) – plus David Anderson, who takes over at CFS in June – would soon be felt.
The Chief Executive also predicts an upturn in food sales and availability after next month's opening of a new national distribution centre near Coventry.
He told the News: `We are working on all aspects of our consumer offer, including price, range and availability and we have to get the logistics right.
`There's no doubt the new Coventry centre will be a key part of that and improve our ability to supply stores. We are going through pain right now, but we are tackling the long term strategic issues that probably should have been tackled long ago.
`The changes now going on at CIS is a classic example of that. So overall, I'm upbeat about the future, though of course there are no instant solutions and what we are looking for is slow, steady improvement.`
The annual report to be presented to members at next month's AGM in Glasgow shows total income down by 4.5 per cent to £ 7.8 billion, with underlying sales (excluding buying for other co-ops) at £ 6.9 billion.
The Group's consolidated operating profit was £ 243.7 million, compared to £ 327.3 million the previous year – a decrease of 26 per cent.
The report points out some good performances elsewhere within the Group. Co-operative Bank increased its profits and Pharmacy and Travelcare both showed good progress, while Funeralcare contributed solidly. There were also signs of recovery at Farmcare.
The Group's balance sheet remains strong and net debt is in line with previous years' levels. Capital expenditure was £ 232 million, ahead of the previous year's £ 205.2 million, reflecting the acquisition of the Conveco chain and increased investment in food stores and logistics.
The report says Food Retail had a difficult year after five excellent years of expansion and success and blames infrastructure and logistical problems – particularly in relation to acquired stores – for the poor performance.
Profits fell by £ 47.8m to £ 74.5 million, a decline of 39 per cent, on sales of £ 3,439 million. Like-for-like sales fell by one per cent over the year.
In Specialist Retail – Co-op Pharmacy, Travelcare, Funeralcare and department stores – overall sales were up, but operating profit fell by £ 5.3 million to £ 26.6 million. Sales increased by £ 51.5 million.
Co-op Pharmacy recorded profits of £ 13.2 million, £ 1.3 million up on 2003. This included strong like-for-like growth in prescriptions, which were well ahead of the market, up by 4.4 per cent.
Due to a continuing decline in the death rate, Funeralcare's profits were down to £ 16.3 million as opposed to £ 18.2 million the previous year – although the Group's share of the national market was maintained at 14 per cent.
Travelcare increased its sales and profits despite the impact of the tsunami disaster in South-East Asia. Profits rose by £ 0.9 million to £ 1 million and sales rose by £ 28 million.
The Group's Department and Home stores business showed a loss of £ 4.2 million, compared with a £ 0.3 million profit in 2003, but the Property Division contributed well to the Group's bottom line, with trading profits above 2003 at £ 15 million.