The Co-operative Group is to focus on building its profile in the small supermarkets sector, after it revealed underlying group operating profit surged 20% to £473m in the year to January 2.

Chief executive Peter Marks said: “We are the biggest convenience retailer by a long way, but the Somerfield acquisition has meant we also now operate a larger number of small supermarkets, up to 25,000 sq ft.

“Convenience is only part of our food business, so we will now seek to grow in small supermarkets and become market leader in that sector, just as we are in convenience.”

Sales for The Co-op’s food business, including Somerfield, soared 66% to £7.5bn, with profit up 31% to £286m. Like-for-like sales were up 5.5% year on year.

Marks said the integration of Somerfield is on plan to be completed at the end of this year. The timing of the closure of the Somerfield head office in Bristol has not yet been confirmed, but Marks said the retailer is working through the integration with the staff there.

He said customers have already seen the benefits of the Somerfield integration. “We’ve been able to achieve better prices and better promotions for customers from the merged group,” he said.

In 2009, 778 shops were rebranded and upgraded - 597 Co-op and 181 Somerfield. 65% of the total estate has now been rebranded and modernised. Sales from rebranded stores have risen 12% year on year.

Marks said mutual companies, like the Co-op, are “in vogue”. He said: “Customers have gotten sick of big traditional companies, such as banks, and have lost trust in them. Our model is very different and we have other goals aside from short-term profit. The Government is taking a renewed interest in our model as they see how successful it can be.”

The Co-op reported group sales were up 31% to £13.7bn for the year. In its pharmacy business, operating profits were down 21% to £29.9m, hit by tough trading conditions and government cuts. Sales in pharmacy were up slightly from £744m to £745m.