06 April 2017

Annual results for The Co-op Group for the 52 weeks ended 31 December 2016

  • Active membership hits 4m at year end; further 350,000 members already recruited in 2017
  • Unique 5 +1 reward scheme generates £19m benefit for members and their communities in just four months from launch
  • Group revenues up 3% to £9.5bn, with Food, Funeralcare and Insurance all delivering strong levels of growth
  • Operating profit up 32%, reflecting good performance of core businesses and gains on disposals
  • Group records pre-tax loss at a statutory level reflecting prudent valuation of minority shareholding in The Co-operative Bank

Group highlights

Entering final phase of Co-op Rebuild, Group delivers results in line with plan, growing sales, market share and membership.

Revenues increased by 3% to £9.5bn (2015: £9.2bn)

  • Food like-for-like *** sales rose 3.5%, driven by core convenience business, as Food continued to outperform the market
  • Funeralcare revenues grew by 3% and market share increases for first time in five years, driven by move to make funerals more affordable and 69% increase in sales of pre-paid funeral plans
  • Insurance delivered strong sales, up 28%, based on motor premium inflation, improved pricing and distribution capabilities

Profits in line with plan on continued Rebuild investment, colleague pay increases and price cuts for consumers:

  • Operating profit of £148m (2015: £112m), driven by £20m profit on disposals, largely reflecting the sale of our crematoria, and lower restructuring costs
  • Underlying profit before tax** of £59m (2015: £81m), down due to increased Rebuild investment
  • Loss before tax of £132m (2015: £23m profit), reflecting £74m increase in our finance costs due to changes in the value of our bonds and writedown in carrying value of 20% shareholding in The Co-operative Bank, offset in part by one-off gains. Based on volatility caused by ongoing sales process at Bank, adoption of prudent valuation of Bank shareholding at £Nil (2015: £185m)
  • Valuation has no impact on Rebuild investment plans

Successful rebranding and launch of new member benefits in September, offering 5% back on Co-op branded products and 1% given to local causes:

  • More than 600 Food stores and 200 Funeral homes rebranded
  • The original target of recruiting 1m members by the end of 2018 significantly accelerated and now due to be reached by end 2017
  • Enhanced use of digital technology for member interactions
  • Members now account for 31% of Food sales as at 31 March 2017, up from 20% before launch of membership scheme

Championing a better way of doing business

  • Announced commitment to make 80% of packaging recyclable by 2020
  • Co-op campaigns to tackle loneliness with £5.5m raised for British Red Cross to support work to reconnect 12,500 people with their communities

As planned, net debt is at £885m which is within expected levels; sale of travel joint-venture with Thomas Cook agreed and will raise £82m plus interest in 2017

Allan Leighton, Independent Non-Executive Chair of the Co-op, said:

“This was an exceptional year for the Co-op and these results show the success of all the work to rebuild. We’ve invested in our brand, our businesses and our colleagues and now we can clearly see the benefits – a big jump in membership, better sales and increasing market share. The Co-op is now better for members, better for colleagues and better for communities up and down the UK.

“This investment was made in a disciplined fashion and within our agreed debt profile. All of this was achieved while staying true to our purpose, as evidenced by the millions we are paying out to local causes.”

Steve Murrells, Group Chief Executive of the Co-op, said:

“We’ve made great progress in rebuilding our Co-op, with all our businesses delivering strong performances. While much remains to be done, our Rebuild plans have really started to deliver value for our customers, our members and their communities. That is exactly what the Co-op should be doing.

“Against this backdrop, 2017 sees us turning our attention to the next phase of our development. Our ambition will remain the same – championing a better way of doing business in communities up and down the country. We will continue to take our existing businesses forward and ensure they are ready for the digital age, but we will also look wider than our current markets. We are exploring how we can enter markets that are not serving people well and challenging existing providers. To do that we are thinking again like the original Rochdale Pioneers. They were true pioneers in every sense of the word – disruptors in markets and agitators for change. There’s never been a more exciting time in the Co-op’s history and we are confident that we’ll continue to thrive.”

Summary of performance of largest business areas

Co-op Food

  • Sales - Total sales up 1% at £7.1bn; like-for-like sales up 3.5%
  • Operating Profit - Up 4% to £203m (2015: £196m)
  • Underlying Operating Profit * Down 2% to £182m (2015: £186m)

We continued to deliver against our strategy to make better food available to people in the places they want to shop, as we aim to be the UK’s leading convenience food retailer. More people are coming to our stores and they’re shopping more often. Our total sales were £7.1bn in 2016 (up from £7.0bn in 2015) while like-for-like sales rose by 3.5%. We enjoyed being the fastest growing food retailer excluding the discount supermarkets on a like-for-like basis.

We invested in refitting stores, increasing colleague pay, improving our infrastructure and strengthening our food range, especially local British produce. Even after making such an exceptional investment for our future competitiveness and prosperity, underlying operating profit was only slightly down on last year at £182m (£186m in 2015).

We’re implementing our strategy of focusing on convenience stores. In 2016, we opened 112 new stores and refitted 155 stores with our latest format. We also rebranded a further 607. We’re focusing on the right size of store to give customers the best convenience shopping experience, and so we sold or closed 141 stores that didn’t fit with this ambition. By the end of 2016 we had 2,774 stores, a little less than the 2,803 at the end of 2015. We also agreed the sale of 298 stores to McColl’s Retail Group which started to transfer across in early 2017. It’s far more enjoyable to shop at the Co-op now, after we spent £88m on new stores and £85m on refits. We’re also working behind the scenes to transform our logistics and store operations. Our shops are getting simpler and we’re improving how we transport goods to them.

Turning to the food we sell, it’s getting tastier and healthier all the time. For instance, in 2016 we relaunched our ‘Irresistible’ luxury range, with 2,500 new or improved products.

In 2014, we promised to double the number of local suppliers by the end of 2017. In line with this, we continued sourcing from local farms and businesses, and we launched a new small business charter. We also awarded contracts to a record number of micro-breweries. We’re on target to fulfil our local supplier promise.

We know food provenance really matters to our customers and so have committed to selling only British meat by May 2017. This will make the Co-op the only major food retailer to stock 100% own-brand fresh British beef, chicken, pork, lamb, bacon and turkey.

Co-op Funeralcare

  • Sales - Total sales up 3% to £307m
  • Operating Profit - Up 43% to £99m (2015: £69m)
  • Underlying Operating Profit * Flat at £69m

Revenues in our Funeralcare business rose 3% to £307m (2015: £299m) in spite of a small decline in the death rate and our moves to cut prices. We grew market share for the first time in five years, with share of the “at need” market up 1.9% to 16.4%, and our “pre-need” market share increasing to 28%. Plan sales rose 69% and customer satisfaction hit a record high of 95.2. Underlying operating profit was in line with last year at £69m (2015: £69m) as we continued to invest in the estate. Operating profit was £30m higher at £99m, boosted by the profit on the £41m sale of our crematoria. As a result, the Co-op increased its market share by 47% in the pre-need funeral market.

We invested heavily in 2016 to give people a better service and expand into more communities. Our 1,000th funeral home was opened in the year, and over three years we plan to open 200 more to serve more of our members in more communities. As well as opening 41 new homes, we refitted 200 existing ones as part of our plan to refit the entire estate by the end of 2019. We also continued to invest in our technology and operations, freeing colleagues to spend more time with the bereaved.

To build on this momentum, we are creating a single integrated team incorporating both our Funeralcare and Legal Services’ business, with a clear aim of expanding our business for the benefit of our members to help them with life planning.

We made a concerted move to cut prices. Our Simple Funeral was relaunched with a price reduction of about 7%. We were the first funeral business to sign up to the Fair Funerals enhanced pledge to tackle funeral poverty. At the same time we launched the UK’s most affordable national fully-guaranteed funeral plan.

Co-op Insurance

  • Sales - Total sales up 28% to £439m, with Gross Premiums up 15%
  • Operating Loss - £18m, down from a loss in 2015 of £60m
  • Underlying Operating Profit * £11m, up from a loss in 2015 of £13m

Revenues in our Insurance business were 28% higher at £439m (2015: £343m), as we wrote more motor policies against an inflationary backdrop for premiums due to claims inflation, together with a favourable movement in the value of claims from previous years. At the same time we continued to improve our pricing and distribution capabilities. This translated into an increase in underlying operating profit to £11m, up from a loss of £13m in 2015. The 2016 outcome includes a cost of £15m to reflect the change in the rate, set by the Government, which we use to calculate some of our longer term claims. The absence of any significant weather events like those that struck northern England and Scotland in 2015 saw lower claims than in previous years.

Underlying operating profit excludes the one-off costs associated with our transformation programme, on which we continue to progress. Including these one-off costs we made an operating loss of £18m, in line with our plans, compared to a £60m loss in 2015.

The Insurance business is on a journey to transform the way it engages with members and customers. This involves separating out the insurance systems from the Co-operative Bank’s systems, building a long-term operating model, reducing costs and having a set of systems in place which improves the way it distributes its products and services and broadens its offering.

The Co-operative Bank

The Co-op Group holds a 20% minority shareholding in The Co-operative Bank. Following the Group’s decision to reduce the carrying value of the stake at the half year to £140m, we have reviewed the fair value at the year-end and reduced the value to £Nil.

Given that the Bank is in a sale process, the consideration to be received for our share is obviously volatile and potentially has a large range of options and we believe this is a prudent valuation. We are supportive of the process the Bank is going through to find a secure home for members who use their services.

It should be noted that the Group, within its planning for both Rebuild and Renew, does not rely on any cash receipts as a result of holding this investment.


  • Colleagues actively involved in shaping the Co-op under strengthened governance structure, with 16 colleagues on the 100-strong members’ council
  • Co-op Executive takes strong leadership position, post the EU referendum, on the call to allow existing colleagues from EU to remain in the UK
  • More than 700 new Co-op apprentices appointed in the last 12 months across our businesses
  • Co-op colleagues participate in the new member benefits trial, with a sharp increase in colleague sales witnessed
  • 69,000 Co-op colleagues embarked on a unique “Back to Being Co-op” journey to reconnect them with Co-op heritage and values
  • Significant investment made in building the leadership skills of our colleagues with more than 5,600 attending “Being A Co-op Leader” programme
  • Colleagues play a major role in us reaching £5.5m fundraising mark to help tackle isolation and loneliness


  • All of our markets remain fiercely competitive and we face a challenging consumer and economic backdrop. Given our unique ownership structure, we will continue to invest in all our businesses and in member benefits, focused on the long term.
  • In Food, food price inflation will be a factor in 2017, but we remain confident that our compelling member offer will continue to drive sales. In Funerals, we expect to continue to improve our member offer through the creation of our Life Planning division, which will combine our Funeralcare and Legal Services offer in one business. In Insurance, market conditions remain fiercely competitive and the outlook for premiums remains uncertain due to inflationary pressure from sterling weakness.
  • Against this backdrop, and in line with our long-term plans, we’ll continue to invest to make our Co-op attractive to members and customers.
  • As indicated last year, we made no dividend payments to members in 2016 and we have been clear that this will continue through our Rebuild phase, with a continued focus on the 5+ 1 member benefit.
  • The benefits we offer to members are fundamental to our strategy. The initial response to the new member benefits was ahead of our expectations, both in terms of new member numbers and increased card usage by existing members. Against that backdrop, by the end of 2017 we expect to have 1m new members, taking membership to almost 5 million. With this target we would expect payouts to members and local causes in 2017 to be over £70m collectively.

Media Enquiries

The Co-op

Jon Church
Tel: 07545 210812

Russ Brady
Tel: 07880 784442

Tulchan Communications

Susanna Voyle
Jonathan Sibun
Tel: 020 7353 4200

*.Underlying operating profit excludes one-off items, property and business disposals and change in value of investment properties. A reconciliation of Operating Profit to Underlying Operating Profit is provided in the Our Business Performance section.

**.In addition to the items excluded from Underlying Operating Profit, Underlying Profit before Tax also excludes finance income and non-cash finance costs, and share of profits and losses from associates and joint ventures. A reconciliation of Profit before Tax to Underlying Profit before Tax is provided in the Our Finances section.

***.Like-for-like sales is a measure of year-on-year sales growth for stores that have been open for more than one year.

Notes to editors

About the Co-op Group

The Co-op, one of the world’s largest consumer co-operatives with interests across food, funerals, insurance, electrical and legal services, has a clear purpose of championing a better way of doing business for you and your communities. Owned by millions of UK consumers, The Co-operative Group operates a total of 3,800 outlets, with more than 69,000 employees and an annual turnover of over £9.5 billion

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