Co-op aims to double its profits within three years

Apr 18 2008 by Iain Laing, The Journal

THE Co-operative Group has unveiled an "ambitious" three- year plan to double profits and invest £1.5bn in transforming its retail estate.

The strategy by the UK’s largest mutual retailer will focus on a single unified brand for the business following its creation from the merger of the Co-operative Group and United Co-operatives last summer.

The Co-op is the UK’s fifth largest food retailer, the third largest pharmaceuticals chain, the biggest provider of funeral services and the largest independent travel business in the country. It now employs 85,000 people, has 2.5 million members and operates more than 4,300 retail outlets.

Chief executive Peter Marks said he wanted these sites to be trading under the same brand by the end of 2009.

He added: "The Co-operative Group now has the critical mass necessary to deliver real change. With the successful integration behind us, we can embark on our ambitious three-year plan to invest £1.5bn to transform our retail estate under a single unified brand and build market share." Despite the plans, which include a pledge to double profits, Mr Marks said the business would not sacrifice its social goals. Mr Marks added: "Customers, members and employees will continue to choose us for what we do with our profits as well as for how we make them."

The strategy was unveiled as the Co-op said profits before one-off items and accounting changes rose 35% to £322.7m in the year to January 12.

Pre-tax profits fell to £195.5m from £359.1m, as a result of post-merger integration costs and factors relating to its financial services arm. The division posted results earlier this month, with profits dented by the impact of severe weather on general insurance operations and from the bank’s exposure to structured investment vehicles. The Co-op said dividend payments to customer members were up from £22m to £45m.

The business also confirmed recent media reports that it was in talks to buy rival convenience store business Somerfield. However, it said the discussions were at an early stage and there was no certainty a deal will be completed.

The chain’s owners – a consortium including property tycoon Robert Tchenguiz, private equity firm Apax and investment bank Barclays Capital – are looking to sell the business although only one bidder, the Co-op, has reportedly submitted a proposal. The consortium is said to be holding out for £2bn.