Following two years of losses, the Co-operative Group has returned to profit.
It has reported a net profit of £216m compared to a loss of £2.3bn in the previous year due to the disposal of the Co-operative Bank and write-down of the 2009 Somerfield acquisition. The profit is also part-due to the selling-off of the pharmacy and farms businesses during the year.
“A significant element of our 2014 profit relates to one-off disposal gains on the sale of our farms and pharmacy businesses and property disposals,” said chief executive Richard Pennycook. “Without these we would, at best, have broken even. Against that backdrop, and given the need to invest in all our businesses, the board will not be recommending a dividend to members and believes that a resumption of dividend payments is unlikely until the Rebuild phase is complete and we have returned to sustainable profitable growth.”
During the year it also reduced its central corporate costs by £30m from £176m and it also paid its final instalments of capital commitment to the Co-operative Bank of £313m. The net-debt of the society was also reduced from £1.4bn to £808m. Overall Group revenue was reported as £9.4bn, down on £9.7bn in 2013.
Despite the profit of £124m, before member payments, the Group has said there will be no dividend and that payments will resume after the three-year rebuild of the organisation has ended in 2017.
Like-for-like sales in food were up 0.4% overall, and 3.2% in its core convenience estate. The disposal of larger stores and falling fuel prices led to the fall in revenues from £7.24bn to £7.09bn, while underlying profits increased 1.5% to £251m. During the year 82 convenience stores were acquired and refurbished more than 700 stores.
The Funeralcare business saw sales fall almost 2% by £7m, which was due to a low death rate during the year. It arranged approximately 92,000 funerals, roughly 6,000 fewer than in 2013. Pre-paid funeral plans remained largely flat at approximately 28,000, while revenues fell to £363m (2013: £370m). Underlying profits rose to 6% to £66m (2013: £62m) following a number of cost initiatives.
General insurance saw premiums fall from £476m to £371m due to a focus on just motor and home insurance, which resulted in a loss of £7m compared to a previous profit of £36m.
Legal services saw revenues fall by a third to £23m (2013: £33m), which was blamed on the decline of personal injury income following regulatory changes. The division reported a loss of £5m compared to a £9m loss last year.
In the annual results report, Mr Pennycook added: “In 2013 the Group nearly failed and, had it done so, it would have been a cruel end to a 150-year proud history. In 2014 we took the necessary first steps to repair the damage and we are now set firmly on a journey of recovery. We have repaired our balance sheet, met our commitments to the Co-operative Bank and begun the implementation of fundamental governance reforms.
“There will be no quick fixes though, and it will take at least three years to rebuild the Co-operative, to a position where we can promise sustainable ongoing growth. Embedding our new constitution will run alongside this. The reassurance we can give to our members is that we are now fully engaged in the work of rebuilding an iconic and much loved organisation. This work is far more than just another commercial turnaround.
“We have already made the Group more efficient, delivering a new target operating model aligned to our rebuild strategy and we are pushing further with efficiencies, making sure we have the appropriate running costs that allow us to invest where our customers will see the difference. Savings of over £100m were delivered in the year.
“The figures in this report already show some early success in stabilising the Group. Whilst comparisons are difficult because of the extraordinary events of 2013, we have moved from a £2.3bn loss reported in 2013 to a £216m profit. Our debt is back at a more manageable level, having reached £1.5bn before our disposals. It is forecast to remain below £900m during the three years of our rebuild strategy.”