Strong and focused Co-op delivers growth

25 September 2024

  • Strengthened financial performance with increases in revenue, operating profit, profit before tax and further reductions in net debt
  • 20% growth in number of active member owners to 5.5 million (H1 2023: 4.6 million), firmly on target to reach 8 million members by 2030
  • £130 million of support provided to colleagues, members and communities in H1 amid continued cost of living challenges – including investment in colleague pay (£48 million), colleague discount (£18 million), lower food prices and member offers (£55 million) and supporting communities (£9 million)
  • Outperformed market within our three business units, operating in continuing challenging sectors

Financial highlights

H124 tables

  • Group revenue up 1.5% to £5.6 billion, notwithstanding challenging external headwinds and contraction in the wider food retail convenience market. Notable sales increases, with our largest business unit Food up by 3.2% and our highest growth unit Legal Services up by 35%.
  • Underlying operating profit up by £4 million to £47 million (H1 2023: £43 million), with membership and q-commerce growth offsetting market and operating cost inflation headwinds. Material earnings investments in H1 across member pricing, colleague, and communities support.
  • Group PBT returned to profit - up by £91million to £58 million (H1 2023: £33 million loss), driven by lower interest payments supporting underlying PBT improvement, and reduced non-underlying charges and strong Funeralcare pre planned investment returns driving further improvements in statutory profit.
  • Strong balance sheet continues, with further reduction in net debt to £42 million - a decrease of £55 million (H1 2023: £97 million) versus the same period last year, and 95% lower than FY21.
  • Cash from operations generated £207 million in H1, more than covering increasing our capital investment by 72% during the period.
  • May 2024 £200 million bond repaid in full without requirement for refinancing.

Commenting on the results, Shirine Khoury-Haq, Chief Executive of the Co-op, said:

“We have delivered a strong performance for the first six months of this year as our strategy starts to gain real momentum. Although the external environment remains challenging, it is testament to the underlying strength of our Co-op that we have outperformed in all our markets while significantly increasing our investments in our colleagues, pricing and in the growth of our businesses.

“While there is much more for us to achieve, we are on track to reach our goal of 8 million Co-op member owners by 2030. This confidence is supported by a strong balance sheet, a clear business strategy, a compelling vision, and 55,000 amazing Co-op colleagues who are central to our achievements over the last six months.”

Debbie White, Chair of the Co-op, added:

“These results demonstrate the progress we have made over the last six months. I’m delighted we have grown our membership by 20%, with our 5.5-million-member owners central to our plans and at the heart of our Co-op.

“I’d also like to thank all our colleagues for their hard work and dedication, which has enabled us to deliver this improved performance. We continue our focus on growing our membership to create more value for our member-owners, and in turn communities across the UK.”

Key highlights - Owned By You. Right By You. - delivering for our members

Growing our membership

  • Growth of our active membership base by 20% reaching 5.5 million-member owners (H1 2023: 4.6 million) with a 79% increase in new members joining aged 25 and under.
  • Naming rights sponsorship of new Co-op Live venue in Manchester, which opened in May directly resulting in 54,000 new member-owners joining in H1.
  • Over £26 million investment in expanding our reach to better serve more members with our food offer, across our retail estate, franchise proposition and online services.

Giving back to our members and communities

  • £55 million further investment in food prices, including branded items for the first time, taking total to 298 member prices available at end of H1.
  • An additional £48 million invested into colleague pay to support with cost of living, maintaining our commitment to Real Living Wage and continued investment of £18 million in the 30% colleague member owner discount on own-brand products - the only food retailer to offer this colleague benefit.
  • Almost 1 million members participated in our Winner Shares It All prize draw, supporting grass roots causes across the UK, enabling members to win £500, with £5,000 to support their local Community Fund cause.
  • First UK convenience retailer to have its Net Zero targets validated by Science Based Targets Initiative (SBTi).
  • Further growth in our Co-op Levy Share Scheme with over £5 million pledged in H1, taking the total to £28.5 million, enabling the matching of over 2300 apprentices.
  • Reached £2.5 million fundraising milestone in support of 750,000 young people across the UK with Barnardo’s.
  • Reached milestone of raising £20 million to support clean water, hygiene and sanitation projects with The One Foundation, marking 18 years of partnership, improving the lives of over 3 million people.

Our members own our Co-op

  • Increased member engagement with an uplift of 38% year-on-year on member owner voting at our Annual General Meeting.

  • Led the campaigning against retail crime on behalf of our colleagues and members, effecting positive change with the new Government stating its intention to deliver on its long-standing policy to change the law and create the standalone offence.

Outlook

  • We have a clear focus to continue growing our membership base and create even more value for our member-owners with a goal to increase our active member-owners to 8 million by 2030, supported by our new owned by you, right by you ethos.
  • Our strategy will see us prioritise growth across our core business areas of Food Retail, Business to Business and Life Services and into adjacent markets, whilst also continuing our strong financial discipline.
  • We will continue to look for ways to reach more members with our food offer, with plans to open 120 new stores across retail and franchise by the end of 2025.
  • Our strong balance sheet enables us to navigate further external headwinds and positions us well to compete effectively in challenging markets, and pursue future growth and investment across our businesses.

Business Unit Performance & Highlights

Food Retail

  • Food revenue up by 3.2% at £3.7 billion (H1 2023: £3.6 billion), with strong sales across both food stores and online.
  • Food underlying operating profit increased 10% to £85 million (H1 2023: £77 million), inclusive of absorbing £39 million in colleague pay increases as part of our commitment to the Real Living Wage, and £55 million in pricing, with £34 million specific to members. Performance significantly ahead of the convenience market in H1, outperforming market level sales growth by 7.4% points (Circana).
  • Quick commerce sales growth of 62%, reaching £217million (H1 2023: £134million). By the end of H1 2024, we were the largest grocery provider on Deliveroo, Just Eat and Uber.
  • Member penetration in our Food stores up at 36% (H1 2023: 31%).
  • An investment of up to £80 million in year, across our core food estate including new stores, relocations, refreshes and freehold purchases.
  • Increased pay of store colleagues to at least £12 per hour, aligning with Real Living Wage, up 10.1% on last year, and representing a 21% increase since March 2022.
  • Leakage costs (theft and fraud) up 19% at £39.5 million (H1 2023: £33.3 million), with continued focus on campaigning on behalf of colleagues and members on retail crime.

Business to Business (B2B)

Wholesale

  • Wholesale*** revenue down 2.9% at £0.7 billion (H1 2023: £0.7 billion).
  • Wholesale profits down with loss of £8.0 million, (H1 2023: £3.0 million profit) – due to the wider challenging market and our decision to make significant price investment across hundreds of products to support Partners in an increasingly challenging market.
  • Growth in NISA market share of 1% to 12.9%, despite operating against a contracting market.
  • Outperformance of market with volume decline of 4.7% set against broader market volume decline of 13% (Circana).
  • More than 93% of our partners continue to leverage our Co-op own brand (H1 2023: 93%).

Franchise

  • Franchise increased revenue over 11% to £32 million (H1 2023: £28 million), with 5 new franchise openings including our first stores in Wales.
  • Plans to double the number of new Franchise stores into the first half of 2025.
  • Strong pipeline of launches for H2 including the openings from the new EG On The Move master franchise agreement announced in July.

FRTS (Federal Retail Trading Services)

  • Federal services revenue down 2.5% at £1.0 billion (H1 2023: £1.0 billion) - continuing to provide sustainable shared buying power across co-operative retail societies.

.*** Wholesale and franchise are reported together in segment reported financials.

Life Services

Funeralcare

  • Revenue up by 1.4% to £148 million (H1 2023: £146 million), driven by pre-need funeral plans, with at need volumes down (4.7%) against overall 5.5% reduction in the UK death rate.
  • Profit before tax rose to £63 million (H1 2023: £1 million), due to an increase in investment returns.
  • Underlying operating profit up at £1 million (H1 2023: £4 million loss) – with improved cost savings and debt recoverability more than offsetting the increase in plan fulfilment costs in the pre-need business.
  • At need market share held at 14.9% (H1 2023: 14.9%).
  • Significant increase in funeral plan sales at 19,730 (H1 2023: 7,743) with the launch of our new Direct Cremation Funeral plan, as well as improving consumer confidence in the sector.
  • Client satisfaction scores increased to 97.9% (H1 2023: 96.8%).

Legal

  • Revenue up 35% to £42 million (H1 2023: £31 million) and increased underlying operating profit at £14 million (H1 2023: £9 million) - delivered whilst holding the prices of our services throughout H1.
  • Our largest practice areas of probate and estate planning performed strongly with a 45% increase in new estate planning cases, and an 8% increase in probate cases, despite a lower death rate.
  • New solicitor apprenticeships for students wishing to pursue an alternative path into a career in the legal profession recruited in H1, enabling individuals to complete the apprenticeship with a law degree.
  • Our overall Trustpilot score remains rated as excellent, reflecting our dedication commitment to customer satisfaction and excellence.

Insurance

  • Revenue increased by 7% to £15 million (H1 2023: £14 million), alongside increased profitability at £9 million (H1 2023: £7million).
  • Travel insurance sales up by 54%, with recognition from Which? as a Best Buy across our platinum, gold, and silver cover.
  • 35% increase in life insurance sales, following refresh of life insurance product with additional features.
  • Expanded our product range with launch of new renters’ insurance product in May.
  • Roll out of member prices to all our insurance products as well as introduction of new functionality to make it simpler to become a member-owner when buying travel insurance online.
  • Continued external headwinds in motor and home throughout H1, with evidence of increased consumer switching returning to market.

ENDS

Media Enquiries

Co-op - Russ Brady, 07880 784 442, russ.brady@coop.co.uk - Cat Turner, 07834 090 783, catherine.turner@coop.co.uk

Citigate Dewe Rogerson - Angharad Couch, 07507 643 004, angharad.couch@citigatedewerogerson.com - Jos Bieneman, 07834 336 650, jos.bieneman@citigatedewerogerson.com

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