Co-op Group exceeds profitability expectations
Co-op Group reported improvements in revenue, food like-for-like sales and profit before tax in its annual results on Friday, as it claimed to have returned £79m returned to Co-op members and communities.
The firm said total revenues grew by 14% to £10.2bn, which was driven by its acquisition of Nisa and a strong performance from the food operation.
Like-for-like revenues continued to grow in food, by 4.4%, with the Co-op now reaching five consecutive years of like-for-like revenue growth.
Funeralcare and life planning revenue was down by 1% year-on-year, which the board said reflected the change in customer trends within the funeral sector.
Profitability exceeded the Co-op’s expectations, which it said reflected growth in overall revenues, while still incorporating the £79m of member and community reward.
Profit before tax from continuing operations was ahead 27% to £93m, while underlying profit before tax remained flat at £43m.
Capital expenditure of £414m ensured that the Co-op was “well-positioned” for future growth, the board said, saying that included £326m within the food business as it invested in new stores, refits and new infrastructure.
To further strengthen its funeral and life planning business, the Co-op invested £43m in infrastructure and technology during 2018.
Net debt widened due to the Nisa acquisition, but remained below the firm’s £900m debt ceiling target, while the Co-op’s surplus on pension schemes increased by £300m to £1.8bn.
Looking at its social activities, the Co-op rewarded its members and their communities for by returning £79m to them, which consisted of £60m directly to members and £19m to more than 4,000 community projects across the UK.
It launched its ‘Safer Colleagues, Safer Communities’ campaign, which was aimed at ensuring colleague safety in the communities they served and to help identify the root causes of community crime.
The firm also introduced the UK's first compostable carrier bags as part of its initiative to tackle plastics which would see the Co-op stop using hard-to-recycle plastics within five years.
Its pension fund was responding to the UK's social housing crisis by looking to invest up to £50m within the social and affordable housing market, the board said, as it also continued to grow the Co-op's investment for, and in, future generations by adding six new Co-op academy schools and hiring more than 1,000 apprentices during the year.
The Co-op said it continued to champion the causes that mattered to members by tackling issues including modern slavery and loneliness, and driving the ongoing success of Fairtrade.
Looking ahead, the Co-op said it remained focussed on the long-term growth of the business and the positive role it could play in communities.
Despite a challenging political and consumer backdrop, the firm said it was confident that it could continue to drive its commercial success, and increase its social impact in the process.
“The acquisition and integration of the Nisa wholesale business has been a game changer in expanding our food footprint and we have also set out the path by which we can offer our members a broader range of compelling Co-op solutions in insurance and health,” said chief executive Steve Murrells.
“We continue to demonstrate that the Co-op is a good business that does good for society as we lead on issues including single use plastics, funeral affordability and social housing.
“It is this determination to make a positive difference for all of our stakeholders which will ensure that we fulfil our ambition to build a stronger Co-op and stronger communities.”
Allan Leighton, independent non-executive chair of the Co-op, added that a year into launching the ‘Stronger Co-op, Stronger Communities’ ambition the firm was continuing to grow both sales and social impact.
Leighton noted it had also made “significant investments” to further align the business with the needs of members, and deepen its understanding of the communities in which they lived.
“In these uncertain economic times we have the opportunity to demonstrate that the Co-op Way of doing business has never been more relevant than it is today.
“With the continued support of our colleagues, members and communities, I have no doubt that we will thrive in the years ahead.
“I am confident and excited about the path we are following and the greater social impact we can create for our members and their communities.”