Co-op invests in its future and its people as it continues to support communities through Covid

16 September 2021

‘Co-operating for a Fairer World’ highlights from H1

Fairer for members and communities

  • More than £15m of value given to members through their cards, after buying selected products and services across the group, as well as personalised offers and rewards.
  • £3.5m distributed in interim payments to the current round of 4,500 local causes from our Local Community Fund.
  • More than £2.8m raised by colleagues, customers and members for our charity partners Mind, SAMH and Inspire, taking total to £5.5m by 3 July.
  • Launch of Hubbub partnership with commitment to have a total of 250 community fridges in place by next year, feeding and empowering communities.
  • Project launched with the Youth Endowment Fund and the #iwill Fund*, worth £5.2m – ‘Peer Action Collective’ – giving young people the chance to make their communities fairer, safer places to live.

Fairer for our colleagues

  • Co-op Levy Share service launched to create fund for SMEs to take on apprentices they otherwise wouldn’t usually have access to. Total reached £3.4m by the end of H1.
  • Pregnancy loss policy implemented to support current and future colleagues across the business.

Fairer for our planet

  • Ten-point climate plan launched, including commitment to match pricing of own brand plant-based ranges with meat-based equivalents, to support sustainable and more balanced consumption.
  • Europe’s most extensive in-store recycling scheme at 1,500 Co-op stores prepared in H1 for July rollout; scheme to be extended to 2,300 stores by November, allowing us to reach 100% own brand packaging recyclability.

Key H1 investments

  • Capital expenditure of £161m, including 53 store refits and 33 new stores.
  • Introduction of Real Living Wage for all colleagues, with an additional investment of £17m in first half of the year to support our colleague population.
  • £26m invested in food price.
  • £6m invested into reducing prices for funerals and funeral plans, and £600,000 on developing Funeralcare’s digital presence.
  • £3.2 million invested in developing ecommerce within our Food business.
  • £22m invested in Biggleswade depot, a key part of our Food infrastructure, due to open in 2022.

Financial H1 highlights

  • Total group revenue up £0.2bn or 4.2% against pre-pandemic levels, with growth across our Food, Legal Services and newly launched Insurance business (H1 2021: £5.6bn, H1 2019: £5.4bn). Down 3.2% from last year (H1 2020: £5.8bn), after unprecedented purchasing behaviour during the start of the pandemic.
  • Underlying operating loss before tax of £15m, down £71m (2020: £56m), but generally consistent with 2019 (underlying operating loss of £11m). This is due to planned investment in our colleagues and our business, as well as significant costs, impacts on sales and profit erosion related to product availability issues and the ongoing effects of Covid.
  • Net debt up to £712m (2020 year end: £550m) excluding lease liability, reflecting increased investment.

Outlook

Moving forwards, we will continue to progress and evolve our business strategy, driving innovation and further efficiencies across the Group. This will ensure that the Co-op remains well placed to benefit from changing consumer habits and support our members’ interests across our Food and Life Services areas.

The unplanned supply chain challenges and ongoing Covid costs will bring greater levels of uncertainty. This will in turn apply pressure on our prior expected level of profitability for year end.

We continue to be led by our Co-op values and vision of ‘Co-operating for a Fairer World’, for the benefit of our colleagues, communities and the planet. Our vision underpins every part of our business and our work in supporting people and communities has never been more important than it is now. The Co-op will continue to play an important role in helping the nation build back better and different, especially within areas which tackle inequality and unfairness.

Operational H1 highlights

Food

  • Food sales exc fuel saw significant 6.5% increase on pre-pandemic levels (H1 2021: £3.6bn**, H1 2019: £3.4bn.) Down 2.8% on H1 2020: an unprecedented year in purchasing behaviour (H1 2020: £3.7bn).
  • Online services made available in 1,000 more Food stores in 350 locations, reaching 52% of population.
  • By the end of 2021, 1,600 Food stores to have an online offer with 80% of the UK population covered by click and collect and 60% covered by home delivery.
  • H1 2021 total online food sales were approximately five times more than those in H1 2020.
  • Market share in line with pre-pandemic levels (H1 2019: 6.24%; H1 2021: 6.3%), but down from 6.85% last year, following an unprecedented year last year.
  • Wholesale revenue down 14% to £688m as contract with McColl’s Retail Group concludes, but Nisa saw an increase of more than 11% on sales, on a two year like-for-like basis.
  • Retailer recruitment has seen 316 new stores being serviced by Nisa.
  • Honest Value range grown to double the number of products compared to initial 2020 launch.

Funeralcare

  • Funeralcare business remains strong and market leader in both the at-need and funeral planning space.
  • Funeralcare sales down 7% to £142m (H1 2020: £152m) due to a 17% decrease in the number of funerals, as death rate drops below the five year average (excluding 2020) after March.
  • Funeral planning business sees an increase in clients considering and purchasing a plan. 24,521 plans sold in the period, a 24% increase on H1 2020.
  • New direct cremation funeral plan launched in partnership with market-leading private crematoria operator, Memoria, providing more options for clients.
  • Funeral Benefit Options now provided in partnership with the Post Office, offering direct payment to Co-op Funeralcare and discounts on final costs,as part of over 50’s life cover policy.

Insurance

  • Insurance sales revenue for new business model at £18m, including £7m in underlying profit, following the sale of underwriting business and progress in growing business footprint.
  • Pandemic continues to impact sales including Travel policies, with customer interest growing towards the end of the period in line with new Government guidelines.
  • Life and Pet insurance both saw very strong performances with 26% and 45% more policies sold than in H1 2020.

Legal

  • Total revenue for Legal Services at £20m (H1 2020: £19m).
  • On an underlying basis, Legal Services saw a 12% increase in revenue to £19m across its continuing businesses (H1 2020: £16.9m), after exiting the small claims personal injury insurance market as a result of the sale of CISGIL to Markerstudy in December 2020.
  • Legal Services total sales up 5% at £20m (H1 2020: £19m).
  • Probate case volumes increased 17% year-on-year increasing market share and solidifying UK market-leading position. Wills cases increased 0.4% year-on-year.
  • Family law practice continued to perform well seeing a 9% increase in revenue compared to H1 2020. Employment law practice remains stable, with revenue in line with last year.
  • Legal Services to focus on making new partners and develop digital services to support growth in H2. Expecting a rise in employment law cases as the furlough scheme ends.

Power

  • To continue to grow Co-op Power, as the biggest energy-buying co-operative in the UK. Welcomed Strait Capital Investment Group and McCarthy Stone to the group in H1, as other businesses seeking green, low-cost energy sourced sustainably and ethically.

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

“As we continue to experience the effects of the Covid-19 crisis, it is clear that things will never be the same again. As a business and as a society, it is crucial that we learn from the last 18 months, particularly as we turn to the momentous task of rebuilding Britain and face into the continuing disruption to our business and our supply chains. I’d like to thank our 62,000 colleagues for everything they’ve done during this time.

“Despite the challenges that the pandemic has presented to us, we have adapted to become more efficient and agile, which has allowed us to continue to feed and care for the nation throughout the crisis. Whilst our commercial performance has been impacted by Covid-19 and Brexit headwinds, we have responded magnificently to support our colleagues, members, customers and communities throughout.

“Covid has reinforced the fact that our vision, ‘Co-operating for a Fairer World,’ has never been more relevant, as well as showing us the areas in which we need to move quicker. As we look ahead, we will continue to advocate the power of co-operation so that as we emerge from this crisis, we are able to empower and lift people up with us.”

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

“Everyone at the Co-op has worked incredibly hard since the outset of the pandemic to overcome the significant challenges that we’ve faced - it has been no small feat to continue to keep our stores and funeral homes running during this period. On top of that, we have still made a difference, supporting our communities and our colleagues.

“This experience has strengthened the business in many ways and has driven home the power of co-operation. Whilst there are undoubtedly challenges ahead, the business is well positioned to continue to grow and play its part in helping the nation build back better.”

Co-op Interims RNS

Ends

  • iwill Fund is a joint investment between The National Lottery Community Fund and the Department for Digital, Culture, Media and Sport

    ** Group performance figures include fuel sales

Media Enquiries:

The Co-op

Russ Brady Tel: 07880 784442

Headland Consultancy

Susanna Voyle Tel: 07980 894557

Chloe Franklin Tel: 07834974624

About the Co-op:

The Co-op is one of the world’s largest consumer co-operatives with interests across food, funerals, insurance and legal services. Owned by millions of UK consumers, the Co-op operates 2,500 food stores, over 800 funeral homes and provides products to over 5,100 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail Limited. Employing over 62,000 people, the Co-op has an annual turnover of £11.5 billion. As well as having clear financial and operational objectives, the Co-op is a recognised leader for its social goals and community-led programmes. The Co-op exists to meet members’ needs and stand up for the things they believe in.