UK: Co-op food profits down on price investment

NON CORE BANKING LOSSES ADVERSELY IMPACT GROUP PROFITS

Retail businesses and core Bank deliver results in line with expectations

Group announces intention to sell General Insurance business

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

“2012 was a challenging year for The Co-operative Group.  Our core businesses performed in line with expectations in their respective markets delivering an underlying operating profit of £431m against the backdrop of a tough economy.  However the Group’s statutory profit was adversely impacted by a number of factors within the Bank. 

These included a realistically cautious approach to the impairment of corporate loans within the non-core business, further PPI provisioning and the write-down of IT assets, together totaling £650m.

“In Food, there was a marked improvement in the second half of the year, most notably with our like for like sales performance returning to growth in the last quarter.  Overall profitability for the year, however, was impacted by the competitive environment and our continued investment in prices, the store estate and our supply chain.  Our Specialist Businesses had another good year with underlying sales and profits both up as we again demonstrated a clear point of difference within the professional services markets in which we operate.

”We have a clear view of what is strategically important to ensure that the remarkable transformation of the Group over the last five years is fully embedded and can be built upon. In our Food business we are building on the momentum of the second half under our strengthened management team with a continued focus on prices and the roll-out of new store formats. During 2013 we will further improve the shopping experience for our customers. In our Specialist Businesses we will maintain our focus on excellent customer service as we continue to build on our position as one of the leading professional services organisations for consumers in the country. We will also continue to invest in key growth markets, such as legal services.

“In our Banking Group, we have clearly identified what is core and are taking firm action on non-core assets to improve performance and manage risk.  In addition, we are today announcing the Banking Group’s intention to sell its General Insurance business. This follows the signing earlier this week of a binding agreement to sell our Life and Savings business. These moves are in line with our strategy of focusing on our relationship banking activities and will also strengthen our capital position.  The Bank’s underlying financial strength remains solid, with a pro forma core tier one ratio of 9.2% and strong liquidity levels.

“The Co-operative Group is a great business. We have a fantastic brand, talented people, loyal customers and over 7 million members. We have effectively pursued a strategy of building strong positions in our chosen markets and are coming through the worst economic downturn I have seen in 40 years in business. Our ownership model means we have and can continue to take decisions for the long term. The strength of our capital position enables us to absorb short term losses. We know we are making the right strategic decisions which will enable us to make the most of the significant opportunities which lie ahead for the Group.”

Original source: The Co-operative Group