The Co-operative Group is at the start of a three-year rebuilding process for its businesses. Its future focus is on food, electrical, funerals, insurance and legal services. Here is a breakdown of how these core businesses performed last year and their outlook …
- Revenue: £7.09bn (down from £7.24bn)
- Underlying operating profit: £251m (up from £247m)
- Employees: 60,265
- Stores: 2,796 – 82 new stores and 37 large stores sold
- Awards: 170 food awards for quality, including 20 golds
Customers are buying little and often – which, says the Group, is beneficial to its focus on convenience stores. Sales rose by 0.4% in 2014 on a like-for-like basis – for stores open more than a year – compared with the previous year. By contrast, food retail sales fell nationally by 1.8%, according to the Institute of Grocery Distribution. Food’s convenience stores (stores up to 3,000 sq ft) saw like-for-like sales rise 3.2%, outperforming equivalent growth of 2.0% across convenience stores nationally, as measured by IGD.
The lower reported revenues of £7.09bn (2013: £7.24bn) was due to the disposal of larger stores and falling fuel prices. Underlying operating profit rose to £251m (2013: £247m), due to a strengthening store estate, while increased efficiency across the business saw savings of £93m from annual costs.
The food market will remain competitive, but the Group aims to acquire 100 convenience stores and refit 255 stores throughout the year.
- Revenue: £84m (down from £88m)
- Underlying operating profit £0.6m: (down from £0.7m)
- Employees: 102
- Sites: 3 (Manchester, Luton, Barnsley)
Sales and underlying operating profit were significantly down on 2013 for most of the year, which was blamed on the negative publicity around the Group’s financial difficulties. During the year, the service received a 98% ‘excellent’ feedback rating from customers on Feefo, the customer feedback service, earning a Gold Trusted Merchant Accreditation. Additionally, an annual survey of Which? readers ranked Co-operative Electrical the UK’s second best online electrical retailer.
A new website with better content and product information will be launched, as well as a focus on playing a stronger role in communities.
- Revenue: £363m (down from £370m)
- Underlying operating profit: £66m (up from £62m)
- Employees: 4,116
- Funeral homes: 961 – 37 new branches
Last year saw a relatively low number of deaths in the UK, which led to a fall in the total number of funerals. The funerals division conducted 92,000 funerals – roughly 6,000 fewer than in 2013.
A number of digital services were launched in 2014, including an online memorial service that allows the bereaved to create a lasting legacy of their loved one online.
During the year, 98.8% of customers reported they were ‘satisfied’ or ‘very satisfied’ with their overall experience. Furthermore, customer surveys suggest that 98% of customers would recommend services in the future.
In 2014, 97% of the coffins manufactured by the Co-operative Funeralcare were made from Forest Stewardship Council-certified wood, taken from certified forests and other controlled sources.
Growing Funeralcare is part of the Group’s rebuild strategy. In 2015, it expects to open a further 40 branches, expanding its geographical reach, while continuing the programme to improve processes and IT systems.
- Revenue: £371m (down from £476m)
- Underlying operating loss: £7m (down from £36m profit)
- Employees: 1,137
- Sites: 5 (Manchester, Nottingham, Rugby, London, Bury St Edmunds)
Co-operative Insurance has developed a strategy to be the “go-to insurer” for Co-operative Group members, which will build on the Co-operative brand, the Group’s distribution reach and insight from membership data.
Co-operative Insurance’s revenues fell after it exited business areas with low levels of profitability. Net earned premiums reduced to £371m, although premiums declined and claims ratios improved due to management action, costs were broadly unchanged, driving the business to an underlying operating loss of £7m.
Co-operative Insurance’s ethical investment policy continued to screen the fixed-income portfolios underpinning insurance policies to avoid companies that do not match up to the organisation’s standards in the areas of human rights, environment, trade and animal welfare.
Market conditions will remain challenging over the next 12 to 18 months, even if motor premiums continue their modest upturn. Home pricing is expected to remain weak over at least the first half of 2015. Investment returns are forecast to be subdued for some time, as interest rates remain low.
Co-operative Legal Services
- Revenue: £23m (down from £33m)
- Underlying operating loss: £5m (down from £9m loss)
- Employees: 342
- Sites: 3 (Manchester, London, Bristol)
In 2014, Co-operative Legal Services revenue declined by almost a third to £23m, largely due to a decline in personal injury income following the regulatory changes to referral fees and the restructure of the business. The family and wills practices reported positive growth, and the probate practice recorded a strong performance in a competitive market that faced a decline in the UK death rate.
While the business traded at a loss in the first half of the year, following a restructure it traded profitably during the second half (Half 1: £5.05m loss; Half 2: £0.05m profit).
The business is focused on developing a range of products and services to support the needs of customers and members with fair and transparent pricing.