The Co-Operative Group is back on form reporting half year profits of £36m, compared to its losses in 2014.
In 2013 the firm was brought to the brink of collapse when it was forced to sell off its farm and pharmacy divisions to cover a £1.5bn hole in its banking arm. CEO Richard Pennycook called its newfound success a “good start on the three year journey” to rebuild the business.
The group posted underlying pre-tax profits of £63m for the 26 weeks ending 4th July 2015, compared to losses of £1m in the prior year. The rise has been attributed to robust trading in both food and funeral services, as well as an improved general insurance performance.
Customers at the Co-Op have recently enjoyed slashed prices for fresh fruit and vegetables, the cheapest amongst the group‘s main convenience store rivals, as well as £300m in discount vouchers and “swipe and win” prizes for members.
“The early days are about fixing the basics,” continued Pennycook, “-putting in place new leadership teams and providing the investment to deliver the strategies for our business. Our customers and members are beginning to see the difference.”
Capital expenditure increased from £97m to £144m following significant investment by the Co-Op Group: 35 new convenience stores have been opened. Corporate costs, meanwhile, rose to £73m from £62m, which the group says reflects the investment in the rebuild programme and rising pension costs.
Despite these pleasing results, the group warned that full year profitability is likely to reduce year on year given the planned and increased levels of investment it will be making in the second half of the year in order to continue its rebuilding strategy, which will include more store openings, IT investment, increased pay for staff and discounts.
Allan Leighton, independent Non-Executive Chairman of the Co-Operative Group, said “The commercial improvements we‘ve made in the first half of 2015 have gone hand in hand with the further strengthening of our board, council and senior management teams.
Our members are now represented through a highly experienced board who are already providing safe guidance, and through the members‘ council, which has a new leadership team. I look forward to working with them as we revitalise the engagement of our broad membership in our business and community activities.”