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The Coop sees profit boost as business continues to turn around

Published:  09 April, 2015

The Co-op reported "solid progress" in turning the business around as it posted like-for-like sales up 3.2% across its convenience business.

Group revenue were £9.4bn in the 52 weeks to 3 January, versus £9.7bn in 2013 and the company returned to a pre-tax profit of £124m following the sale of its farms and pharmacy business last year. This contrasted to a net loss of £255m in 2013.

Net debt was also reduced "significantly" from £1.4bn in 2013 to £808m, the company said.

The food business, which forms its base, delivered a "robust performance" with like-for-like sales up 0.4% overall, and 3.2% in the core convenience. Although revenue was £7.09bm, down from £7.24bn last year, underlying profits increased 1.5% to £251m.

"Our core businesses continued to deliver for customers, with their financial performances reflecting challenging trading conditions across all of our markets, and the different stage they are each at in terms of rebuild," chief executive Richard Pennycook said.

However he added that without the benefit from the one-of disposal, the group would "at best, have broken even" and therefore profits would be used to address a long-term underinvestment in the business. "A resumption of dividend payments is unlikely until the rebuild phase is complete and we have returned to sustainable profitable growth," he said.

Independent non-executive chairman Allan Leighton, who took on the new role in February, said it was not "just another commercial turnaround" and the company was committed to revitalising its membership model and delivering a 3-year strategy to rebuild the business by 2017. He said it had developed a comprehensive plan for further improvement of the commercial performance of its core food & drinks division. "We will continue to invest in price, product and our people by further improving our operational efficiencies and cost base."

The move follows a radical change to The Co-op's constitution last year after the "crisis year" of 2013 which saw the Group report losses of £2.3bn. 

Fiona Cincotta, a senior market analyst at said the "significant" property disposals and sale of the the farm and pharmacy business was an important element to its return to profits.

"After being brought to its knees back in 2008 after a series of disastrous business decisions, the mutually owned group has emerged from a drastic rescue programme as a slimmer more streamlined business," she said. "The Co-operative Group only now is in a position to rebuild itself focusing on its core business unit."

Figures released yesterday by Kantar Worldpanel saw The Co-op's market share shrink 1.7% to 6% in the 12 weeks to  29 March 2015.