Co-op's first half profits plunge but turnaround plan "firmly on track"

The Co-operative Group’s first half profits plunged 53% as the company invested in its three-year turnaround plan.

Pre-tax profit in the six months to 2 July dropped to £17m from £36m the same period a year earlier as the group gave pay rises to frontline staff and cut prices at its supermarkets amid fierce competition.

The Co-op’s revenues rose 2.2% to £4.7bn in the 26 weeks to 2 July, with customer transactions up 3.3%. Food like-for-like sales rose 3.1%, driven by growth at the firm’s convenient stores.

Its Funeralcare business saw broadly unchanged revenues as a lower death rate offset growth in pre-paid funeral plan sales.

The mutual said its General Insurance division delivered strong sales and profits with more than 100,000 new policies

The company said its turnaround plan, which has included rebranding its stores and writing down the value of its investment in its banking division by £45m, was on “firmly on track”.

“We are only half way through the Rebuild and much remains to be done, whether it is investing in our digital capability or campaigning on key issues,” said chief executive Richard Pennycook.

“We remain firmly on track with our plans and are encouraged that the work we are doing is attracting more and more people back to the Co-op.”

The decision to write down its investment in the Co-operative Bank comes after the lender came close to collapse in 2013 due to losses from bad debts on commercial property opening up a £1.5bn hole in its finances.