Group on track for double profits

Although 2010 will be an exceptionally tough year for retailing, Co-operative Group Chief Executive Peter Marks says his three-year pledge to double profits since the summer 2007 merger...

Despite what he termed a climate of fear for consumers due to worries over the state of the economy, Mr Marks told the Group AGM in Manchester that when he addresses next year’s annual meeting, he will be able to announce another significant improvement in the Group’s profits.

“We had a tremendous year in 2009, particularly in the context of the very difficult economic climate we’re working in,” said Mr Marks. “We enjoyed record sales of just short of £14 billion — consolidated results including the Trading Group and CFS — and a record operating profit of £473 million, up a substantial 20 per cent. Profit before tax is up a massive 85 per cent.”

However the Group CEO acknowledged that return on capital employed had dipped from 11.4 to 9.6 per cent. He said this was expected and planned for due to the massive Somerfield acquisition and described the fall as a “short term blip”.

Said Mr Marks: “Over the next three years you will see that rise well above 11.4 per cent. But, even at 9.6 per cent, it’s very respectable when we benchmark it against our peers in the markets that we operate in.

“What’s very important is what our members get out of all this success and I’m happy to report that the dividend to members is at record levels again — over £100 million. But it’s not just about financial reward, it’s what we do in our communities and again, the amount that we can give to all the projects that our regions are involved in on a day by day basis is also increasing.”

Mr Marks said that although Co-operative Group stores are performing well ahead of the market, sales decreases have been experienced in Somerfield stores, though this was not a cause for serious concerns.

He said the situation was “light years away from the Morrison-Safeway scenario” a few years ago when Morrisons’ profits plunged after it acquired its retail rival.

“Yes, we’d like the sales performance of Somerfield to be better, but as we disrupt the stores, close stores for refurbishment, change ranges, change IT systems, change distribution, it was bound to happen that the customer saw that and were disappointed,” said Mr Marks.

“But we will get through that. We have to do this integration at pace. We said we’d develop one business in two years, we’re half way through that project, we’re bang on track in terms of our integration.”

Mr Marks told delegates that the Group’s food retailing operation saw a 30 per cent in profits last year, despite the problems associated with absorbing Somerfield, but emphasised the society is more than just a grocery organisation.

He said: “We are represented in many markets and all the businesses are performing on budget, and a budget that was a stretching one to improve profits. 

“So our motor division, farms business, pharmacy business and all our other businesses are contributing to the profits. It’s early days; we’re only a quarter way through this year. It is going to be tough, there’s no doubt about it, but I believe having a values led business, together with the massive strides we’re making in the commercial offer is an unbeatable combination.

“As well as making great strides in our commercial performance, we are very focused on what that performance allows us to do in our social goals and we’ve made some terrific strides.”


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