Co-op growth and community impact soars
05 April 2019
Total revenue up 14%, Food like-for-like sales up 4.4%, Profit before tax up 27% £79 million returned to Co-op members and their communities
Co-op difference highlights 2018: growing member value and social impact
- We rewarded our members and their communities for trading with us as we returned £79m to them – £60m directly to members and £19m to over 4,000 community projects across the UK.
- We launched our Safer Colleagues, Safer Communities campaign, aimed at ensuring colleague safety in the communities they serve and to help identify the root causes of community crime.
- We introduced the UK’s first compostable carrier bags as part of our initiative to tackle plastics which will see the Co-op stop using hard-to-recycle plastics within five years.
- Our pension fund is responding to the UK’s social housing crisis, by looking to invest up to £50m within the social and affordable housing market.
- We continued to grow the Co-op’s investment for, and in, future generations:
- Six new Co-op Academy Schools were added in 2018.
- More than 1,000 apprentices worked within the business in 2018.
- We continued to champion the causes that matter to our members by tackling issues including Modern Slavery and loneliness and driving the ongoing success of Fairtrade.
Financial and operational highlights: delivering a stronger Co-op
- Total revenues grew by 14% to £10.2bn, driven by our acquisition of Nisa and a strong performance from Food.
- Like-for-like revenues continued to grow in Food (+4.4%) and the Co-op has now enjoyed 5 consecutive years of like-for-like revenue growth.
- Funeralcare and Life Planning revenue reduced year-on-year (-1.0%), reflecting the change in customer trends within the funeral sector.
- Profitability exceeded expectations, reflecting the growth in overall revenues, whilst still incorporating the £79m of member and community reward.
- Profit before tax from continuing operations was up 27% to £93m.
- Underlying profit before tax remained flat at £43m.
- Capital expenditure of £414m ensured that the Co-op is well positioned for future growth:
- This included £326m within our Food business as we invested in new stores, refits and new infrastructure.
- To further strengthen our Funeral & Life Planning business, we invested £43m in infrastructure and technology during 2018.
- Net debt rose due to the Nisa acquisition, but remained below our £900m debt ceiling target.
- Surplus on pension schemes increased by £300m to £1.8bn (2017: £1.5bn).
Serving our members by growing our scale and ambition
Our Stronger Co-op, Stronger communities plan has gone from strength to strength in 2018 with the Co-op further aligning our business to our members’ needs and significantly broadening the positive impact we can have on society.
- Community Wellbeing Index developed to deepen our understanding of what communities need to help them thrive; three main areas identified where future Co-op Investment can make a significant difference:
- Physical and mental wellbeing
- Education and skills
- Community space
- Our Local Community Fund helped every part of the UK, returning more than £19m to 4,087 local causes, with each receiving on average more than £4,500.
- The relationship between the Co-op and our members continued to strengthen, with growing engagement in our campaigns and Local Community Fund and sales to our members growing to 35% of total sales, in line with our targets.
- Our 300 Member Pioneers are bringing people together around our stores and funeral homes to discuss what matters most to their community and how the Co-op can help improve their wellbeing.
- We partnered with Neyber, a financial wellbeing company, to offer our colleagues financial planning advice and an affordable practical alternative to payday loans.
- In Food, we saw our fastest growth in seven years.
- Like-for-like sales were up 4.4%.
- We invested £75m into opening more than 100 new food stores, refitted 138 existing stores and created 1,600 new jobs.
- The successful acquisition of Nisa and expansion of our wholesaling business has significantly grown our footprint and capacity, making Co-op products available to many thousands of new customers.
- We instigated major changes to supplier governance and processes and introduced a new supplier charter in line with the findings of a report by the Groceries Code Adjudicator into historical supply practices at the Co-op.
- We strengthened our commitment to UK farming and British produce with 100% of our fresh and frozen meat now coming from British farms.
- In challenging market conditions for Funerals & Life Planning, we responded to changing market and member needs with the launch of our direct to cremation service.
- Efforts to tackle funeral affordability saw the cost of our Simple Funeral reduced in England and Wales by £200 for members and £100 for non-members.
- Simplify Probate successfully integrated into the business, making Co-op the UK’s largest single provider of probate services.
- We have worked closely with the CMA on their market study into funeral services and inputted into HM Treasury’s consultation on funeral plan regulation.
- In Insurance, we are clear in terms of our strategic direction and the best means of creating increased value for our members and their communities.
- The planned sale of our insurance underwriting business for £185m will allow us to focus on our strategy of providing a broader range of insurance products for members, via our distribution business.
- The sales and profit figures for our insurance business are therefore not included within our Profit Before Tax line, but within discontinued items. The loss of £230m includes the write-down of net assets but does not reflect the anticipated value to be generated from the 13 year distribution agreement included within the sale proceeds.
- We launched a market-disrupting Travel insurance product that covers people of any age and health condition and was built with input from members.
Our ‘Guarantee to beat’ offer for Co-op members on home insurance renewals has seen a 24% increase in member sales during 2018.
In New Ventures, the acquisition of Dimec, a healthcare technology platform, will provide the Co-op with the building blocks for a digitally enabled healthcare service for our members.
- The service will connect patients to their GPs so they can order repeat prescriptions online, helping to take pressure off the NHS.
Outlook - As we enter the 175th anniversary of UK consumer co-operation, we remain focused on the long-term growth of the Co-op and the positive role we can play in communities. Despite a challenging political and consumer backdrop, we are confident that we can continue to drive the Co-op’s commercial success and increase our social impact in the process.
Steve Murrells, Chief Executive of the Co-op, said:
“Over the past year we have continued to successfully transform the Co-op, leading to a 14% increase in revenues to £10.2bn and the return of £60m directly to our members and £19m to over 4,000 community projects across the UK.
“The acquisition and integration of the Nisa wholesale business has been a game changer in expanding our food footprint and we have also set out the path by which we can offer our members a broader range of compelling Co-op solutions in Insurance and Health.
“We continue to demonstrate that the Co-op is a good business that does good for society as we lead on issues including single use plastics, funeral affordability and social housing. It is this determination to make a positive difference for all of our stakeholders which will ensure that we fulfil our ambition to build a Stronger Co-op and Stronger Communities.”
Allan Leighton, Independent Non-Executive Chair of the Co-op, said:
“A year into launching our Stronger Co-op, Stronger Communities ambition and we continue to grow both sales and social impact. We have also made significant investments to further align our business with the needs of our members and deepen our understanding of the communities in which they live.
“In these uncertain economic times we have the opportunity to demonstrate that the Co-op Way of doing business has never been more relevant than it is today.
With the continued support of our colleagues, members and communities, I have no doubt that we will thrive in the years ahead. I am confident and excited about the path we are following and the greater social impact we can create for our members and their communities.”
Tel: 07545 210812
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About the Co-op:
The Co-op is one of the world’s largest consumer co-operatives with interests across food, funerals, insurance, legal services and health. It 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-op operates 2,600 food stores, over 1,000 funeral homes and it provides products to over 5,100 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail Limited. It has more than 63,000 colleagues and an annual revenue of over £10 billion.