Co-operative swings to profit but warns over full-year results
The Co-operative Group swung to a first-half pre-tax profit thanks to robust trading in its food and funerals businesses, but warned annual results would be hit by rising pension costs and its Rebuild programme.
Statutory pre-tax profit for the 26 weeks ended 4 July came in at £36m, compared with a loss of £9m last year. Group revenue, meanwhile, was stable at £4.6bn from £4.7bn in 2014.
The core food convenience business delivered a like-for-like sales increase of 3.3%, with LFL sales up 0.8% overall for the food business, while volumes in the funeral division increased by 12%, driven by what the company said was the busiest start to a year since 2008.
Chief executive Richard 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.”
The Co-op, which nearly collapsed in 2013 after a £1.5bn ‘black hole’ was found in its banking division, said capital expenditure rose to £144m from £97m as it invested for growth, with 35 new convenience food stores and 10 new funeral homes opened.
Corporate costs increased by £11m to £73m, reflecting the investment in the Rebuild programme and rising pension costs.
The group said that while it expects the trading performance across its core businesses to be in line with expectations, full-year profitability will reduce year-on-year, given the planned and increased levels of investment it’s making in the second half of the year to support its rebuild strategy.