Co-operative Group’s profit increases by 50%

The Co-operative Group has announced a near 50 per cent increase in profits during 2010.

In its annual results released this morning for the 52 weeks until January 1st 2011, the Group reported combined sales of £13.7 billion, with a combined profit of £545.7 million, up by 48.3 per cent on last year’s results.

The total dividend that is set to be paid to members this year, after approval from the Group’s AGM on May 21st, has increased by 38 per cent to £150.2m. Broken down, consumer members will receive £77.4m (up by 55 per cent), while employee members are set to be given £41m (up by 37 per cent).

In the trading group — which includes food, funerals, pharmacy, farms and motors — sales increased by 6.3 per cent to £11.2bn, while the underlying profit was £459.3m, an increase of 34.7 per cent.

The society’s food business increased sales by 4.8 per cent to £7.5 billion, with operating profit before significant items up 33.3 per cent to £382.6m. Despite the surge in profit, like-for-like sales were down 2.5 per cent, which was blamed on the integration with Somerfield, along with poor winter weather and an "anticlimactic World Cup", which normally drives sales.

During the last year 524 stores were rebranded under The Co-operative, and all stores are expected to be under the brand by the end of April.

The Group still has a target to acquire a total of 350 stores over the next two years creating 7,000 jobs, which equates to 50 this year, increasing to 125 in 2012 and 175 in 2013. This year £70m will also be invested in the food logistics network.

Due to the proposed joint venture between Co-operative Travel and Thomas Cook, the results of the business were required to be reported under discontinued operations, in-line with accounting rules. The profit after tax, but before loss, on discontinued operations were £246.9m, while a £26.9m loss was reported leaving total profit for the period at £220m.

The other large trading business, Funerals and Pharmacy, were up by 10 per cent and 3.5 per cent respectively. This was achieved in Funerals against a falling death rate and in Pharmacy operating in a market suffering continued government ‘claw back’ reforms. A number of the smaller businesses — including Life Planning, Motors, Legal Services and E-store — all achieved significant increases in sales revenue.

Co-operative Financial Services reported that its revenue was up by 23.6 per cent to £2.5bn, creating an underlying operating profit of £208.6m — up by 17.7 per cent on the previous year. During 2010 there was also a 79 per cent increase in current account switchers to the Co-operative Bank.

The capital and liquidity profile for the business remains strong. The Bank’s core tier 1 ratio was 9.6 per cent (2009: 8.7 per cent), reflecting the strong capital base of the business. The society also underlined that it has not taken, or needed, government capital support. In addition, CFS said the levels of customer funding in the Bank were at 107 per cent in December 2010, and the continued reduction in arrears, further attests to its principle of being financially prudent and strong.

Peter Marks, Group Chief Executive, said: “I am delighted to report that 2010 was another record year for the Co-operative Group, with solid results right across the Group and continued growth in sales and profitability. The past year caps what has been a truly remarkable and exhilarating period for the Group, marking the completion of our three-year business plan following the merger of the Group and United Co-operatives in 2007. 

“We have achieved our success due to continued investment in our store and branch estates and in our brand, our products and our service. In addition, we made two ambitious and transformative acquisitions — Somerfield in Food and Britannia in Financial Services. 

“We have now embarked on the next phase of our journey – working to ensure that we maximise the potential of the Co-operative family of businesses to better serve our 6.5m members. At the same time, our ethics and social campaigning will continue to be at the forefront as we work to reaffirm The Co-operative Group as the pre-eminent ethical business in the UK."

Mr Marks added that the economic downturn is expected to see tough trading conditions going into 2012. He said: “Looking ahead, we had hoped to see signs of economic recovery by the start of 2011, but the downturn is clearly biting deeper than we had expected. We now anticipate challenging trading conditions through to the end of this year and into 2012. With consumers feeling the squeeze on their spending, I know that all of our businesses will have to fight for their market share. That means we must make even greater efforts to ensure we are responding to the needs of our members and customers and are giving them good reasons to continue to trade with us. 

“But, despite the difficult economic environment I am confident that we are well placed to meet the challenge. During 2011 we will still be a business in transition, however, all the work done over the past three years means we are in good shape to continue to weather the downturn and make the most of opportunities when the economic situation improves. We will continue to set ourselves challenging, but achievable targets for both our business performance and our social goals because that is what our members ask for and expect. It is that drive and ambition for excellence that I believe will ensure our long-term success."

Across the Group’s family of businesses 

The Co-operative Farms reported its operating profit was up 42.9 per cent from £4.2m to £6m. This year the Farms division is planting 60,000 trees to increase apple production — an aim to provide all British apples in Co-operative stores within seven years.

Co-operative Pharmacy has seen a sales increase of 3.5 per cent from £745m to £771.3m in 2010. This has led to a rise in operating profit before significant items of 11.7 per cent from £29.9m to £33.4m. This year is set to be challenging for the business, according to the Group, which has said the Government funding ‘claw back’ is reducing the profits it makes on generic drugs.

Funeralcare announced that, against a falling death rate, operating profit was up 18.8 per cent from £43.7m to £51.9m, while funeral sales during the year were also up by 10 per cent from £287.4m to £316.0m. During the year, £9.5m was invested in the business to improve the fleet of vehicles and £11.1m to improve the branch estate. It is also developing its products and services to include a masonry and woodland burial ground offer.

Co-operative Legal Services continues to grow strongly with sales up 19.2 per cent from £20.3m to £24.2m. Profits have increased slightly by £100,000 to £3.9m, with particular praise paid to the personal injury service, which performed well. The Life Planning business reported that sales were up 20.8 per cent from £29.8m to £36m and operating profit up 35.6 per cent from £4.5m to £6.1m.

Sunwin Services Group, which includes cash in transit services, cash machine support and security, reported that sales were up 3.6 per cent from £28.1m to £29.1m. Operating profit was up 24.4 per cent from £4.5m to £5.6m.

The Co-operative Motors made an operating profit of £2.9m, against a £1m lost the previous year. During the year, the Group’s 19 dealerships adopted The Co-operative brand.

In its online operations, the E-Store increased revenue by 11.5 per cent to £87.9m, and operating profit increased to £2.1m.

Co-operative Clothing, which develops clothing ranges for businesses, increased its operating profit from £0.2m to £0.5m.

The Co-operative Estates reported that underlying operating profit was up 2.7 per cent from £18.4m to £18.9m over the previous year. In addition, the revaluation of our investment property portfolio contributed an additional £14m to operating profit, ending the year at £339m, aided by an uplift in the property market and proactive portfolio management. Property disposals of £96.8m were completed in the year, which helped realise capital that can be invested in other Group projects and assist with Group cash flow.

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