The Co-operative Group has swung into the black after posting a pre-tax profit of £36m, driven by its core food convenience business.
- Co-op reports £36m half-year profit following £9m loss in same period last year
- Core food convenience business delivers 3.3% rise in like-for-likes
- But mutual warns full-year profits will be hit by higher levels of investment
The mutual said its c-stores delivered a 3.3% jump in like-for-like sales for the 26 weeks to July 4, while like-for-likes were up 0.8% in the overall food business. Underlying profits in its food business increased 21% from £99.7m to £120.4m.
Despite group revenues holding “stable” at £4.6bn during the period, the Co-op warned that full-year profits will be hit, reflecting “investment levels in the second half of 2015 and absence of one-off disposal profits” it recouped during 2014.
It said this “will result in lower profitability and increased debt.”
Having carried out the recovery part of his three-point strategy, group chief executive Richard Pennycook is now focusing on the “rebuild” phase of his plan. Capital expenditure increased to £144m during the period compared to £97m the previous year, as the Co-op invested in 35 new convenience stores and 10 new funeral homes.
The corporate costs of the mutual’s rebuild programme also soared from £11m to £73m during the half-year.
Pennycook said: “We’ve made a good start on the three year journey to rebuild the Co-operative Group. These early days are about fixing the basics – putting in place new leadership teams and providing the investment to deliver the strategies for our businesses. Our customers and members are beginning to see the difference.
“Our colleagues share a great belief in the Co-operative, and what we stand for. They are at the forefront of our rebuild efforts as we focus on our purpose of ‘championing a better way of doing business for you and your community’.”
The group added that it would hand its 47,000 in-store staff an 8.6% pay rise in order to meet the government’s new national living wage, which comes into force next April. But it reaffirmed plans not to pay members a dividend until 2018 at the earliest.