The Co-operative Group delivers solid results in line with expectations

March 29, 2012

Preliminary results for The Co-operative Group for the 52 weeks ended 31 December 2011


The Co-operative Group continues to invest through the economic downturn

Financial performance 2011 2010 % change
Gross sales £13.3bn £13.1bn +1.0%
Group operating profit £585m  £582m +0.5%
Profit before tax and member payments (equivalent to the pre-tax profit of a plc) £373m £396m -5.8%
Net borrowings £1.49bn £1.44bn +3.3%
   

Financial and operational highlights

  • Group delivers solid results, in line with expectations, against the backdrop of the severely challenging UK economic downturn
  • Results reflect the Group's determination to continue to invest in the business with £595m invested in 2011, along with continued investment in the customer offer
  • Performance through 2011 shows benefits and strength of the Group's portfolio of different businesses across three operating divisions:
    • Food's performance reflected an increasingly tough market  producing an underlying operating profit of £309m (2010: £389m); LFL sales steadily improved during the year, from -3.6% at the half year to -0.4% in the second half, making the full year -2.1% and the improving trend has continued into 2012
    • Banking Group produced a strong performance, turning in an underlying operating profit of £201m (2010: £202m); the Bank maintains stable capital and sound liquidity, with a core tier one ratio maintained at 9.6% (2010:9.6%) and an improved loan to deposit ratio of 94% (2010:103%)
    • The Group's other specialist businesses performed well with underlying operating profit of £99m (2010: £90m). This result was achieved in spite of a £18m impact on profits due to a reduction in government funding of prescriptions
  • Dividend per point of 1.75p (2010: 2.0p), down in line with underlying profit
  • The Co-operative Group named preferred bidder for the Lloyds Banking Group branch assets
  • Despite pressures on trading and our commitment to invest, net borrowings increased by only £48m
  • Continued moves to ensure we maximise the potential of The Co-operative brand across our family of businesses:
    • Pilots to introduce banking and electrical services to our food stores
    • Launch of provision of legal services through bank branches
    • Development of unified marketing proposition
    • New Manchester head office building on track to open later this year, helping change the way we do business as a Group
  • Continued investment in the business, through the downturn, demonstrates the strength of the Group's ownership model:
    • Food: two new distribution centres opened during the period and two more in the pipeline with a total investment of £110m; availability and service improving on the back of £12.5m investment in the rollout of SMART replenishment system; increased investment in new product development with 350 new lines planned for this year; 421 stores refitted,  32 new stores opened and the acquisition of the David Sands convenience chain of 28 Scottish stores; contactless payment system being rolled out in stores within the M25; £11m invested in energy reduction initiatives
    • Banking business: first stage of upgrading of core banking platforms completed – introducing the most modern systems in the industry to enable the delivery of market-leading products and services tailored to customer needs whilst further improving the customer experience through improved functionality; full servicing of current accounts rolled out during 2011 in the 245 Britannia-branded branches, effectively giving customers a near four-fold increase in outlets to conduct their banking; existing credit card platform replaced
    • Specialist businesses: Legal Services set to move into Family Law as "Big Bang" opens up the marketplace; continued investment by Funeralcare with £25m spent on improving the vehicle fleet, branch estate and new crematoria; E-Store launched a market-leading free 90-minute time-slot delivery service for major appliances or large screen TVs purchased online; Pharmacy moved into hospital outpatient dispensing and extended its customer service with the launch of E-Pharmacy and contactless payment trials; and Motors awarded dealer and service centre of the year by Land Rover; Group launched £800m development plan called NOMA set to transform 20 acres of Manchester city centre
  • The three-year rolling Ethical Plan, launched in February, demonstrates how the Group's longer term approach has enabled it to raise the ethical bar yet again as the UK's most responsible business, enabling us to offer value to customers while staying true to our values
  • Group colleagues raised £7m for MENCAP
  • Current trading in line with expectations across our family of businesses; looking ahead we do not see any significant recovery in the UK economy during 2012

Peter Marks, Group Chief Executive of The Co-operative Group, said:

"The Co-operative Group has delivered a solid set of results against the toughest economic backdrop I have seen in more than 40 years in business. 2011 was a time of severe challenge for the UK economy and for our millions of customers and members. Consumers have been assailed by rising costs, credit squeeze and uncertainty about the future to an extent unparalleled in recent times. Against this background, I believe that this is a creditable performance. We have delivered profitability in-line with expectations, while maintaining our financial strength and resilience.

“It is in times like these that a business shows its true colours; we have revealed ours by continuing to invest for the future – continuing the work that we have been doing over the past five years during which we have revitalised this business and set it up for the future, while doubling sales and doubling profits. Our determination to build on this success has not slowed and over the past year we have invested in the services, systems and infrastructure we need to deliver real value to our customers while setting out to realise the true potential of our vast, diverse customer base and our strong family of businesses. We have also invested significantly in discounts and special offers for our customers. Although these moves have impacted our short-term profitability, we believe our first duty in times of financial and job insecurity is to help our customers make their money go further.

“Looking ahead, I do not expect to see any significant recovery in the UK economy during 2012, with little hope of an improvement in disposable income for our customers. If anything, it is quite possible that things will get worse before they get better. In spite of this, I remain optimistic. The Co-operative Group is in better shape than ever before because of all the work done over the past five years. Our ownership model means that we can take a long-term view and we are as driven, determined and ambitious as ever to modernise our business. We will not allow the current economic downturn to knock us off the course we have set. We have the resources, the resolve and above all the belief to make our vision a reality. When better times come – and they will – these are the foundations on which we will build lasting success.”

Download consolidated income statement, statement of comprehensive income, balance sheet and cash flow (PDF 400 KB)

Enquiries:

The Co-operative Group:          
Martin Henderson: 07770 925 959
Russ Brady: 07880 784 442

Tulchan Communications:        
Susanna Voyle/Lucy Legh: 020 7353 4200

Notes to Editors:

The Co-operative Group is the UK’s largest mutual business, owned not by private shareholders but by over seven million consumers.  It is the UK’s fifth biggest food retailer and a major financial services provider, operating The Co-operative Bank and The Co-operative Insurance. Among its other businesses are the number one funeral services provider, the third largest pharmacy chain and one of Britain’s largest farming operations. As well as having clear financial and operational objectives, the Group has also set out its social and sustainability goals in its groundbreaking Ethical Plan, which specifies over 50 commitments in these areas.

The Group operates 4,800 retail trading outlets, employs more than 100,000 people and has an annual turnover of more than £13bn.  Further information is available at www.co-operative.coop