Scotmid breaks £10m profit barrier

Published on Tuesday 27 April 2010 21:04

SCOTMID, the largest independent Scottish co-operative, has broken the £10 million profit barrier for the first time as it reaped the rewards of "difficult decisions" taken five years ago.

• Staff at Scotmid in Leith are to be transferred to Tesco as the store is sold due to its being too large. Picture: Toby Williams

The Edinburgh-based supermarket group, which this year celebrates its 150th anniversary, saw operating profits before exceptional items rise 10.9 per cent to 10.2m in the year to 30 January. It sold its M&S Toiletries business in 2008, and, on continuing operations, operating profits were up almost 18 per cent.

In 2005, Scotmid announced its first loss in 20 years – which led to store closures and hundreds of job losses.

Chief executive John Brodie yesterday told The Scotsman that the results were down to "a lot of hard work and difficult decisions we took a number of years ago. We restructured the business and went back to basics: the benefits are starting to come through. We operate in reasonably good sectors for a downturn," he added.

Scotmid owns discount health and beauty chain Semichem and a funeral home operation, as well as having a property division.

It has 140 Scotmid grocery outlets, all north of the Border, and roughly the same number of Semichem stores, the bulk of which are in Scotland, although 30 are in Northern Ireland and 11 in north-east England.

The group gave its 4,083 staff a 6.7 per cent increase in salary and pension contributions during the period, while directors enjoy a 20.5 per cent uplift. Brodie attributed this to a long-term incentive scheme for management paying out for the first time since it was started three years ago.

Profits before tax – or "surplus" – dropped 38.8 per cent to 5.6m after 3m of exceptional costs relating to the Co-operative buying group (CRTG).

The group encompasses all co-op societies in Britain, including Manchester's Co-operative Group, and the exceptional item relates to the latter's recent acquisition of Somerfield.

Brodie said this would pay dividends for Scotmid in the long-run. "Somerfield is being merged in with CRTG, bringing a lot of scale benefits. There is a cost of achieving that, and we shared that cost."

Scotmid opened 15 Semichem stores and five Scotmid outlets during the year, and Brodie said it would "keep growing and expanding". He said "several" store acquisitions in Scotland were in the pipeline, but cautioned that 2010 would be "just as challenging" a retail environment as 2009.

Brodie also defended Scotmid's plans to sell its largest supermarket – Scotmid on Duke Street in Leith – to Tesco for a "multi-million" pound sum.

The 40,000sq ft shop did not fit with Scotmid's strategy of being a "community convenience operator", he said. Scotmid's average store is just 2,500 to 3,000sq ft. Tesco will take over the store in early May, and its 86 staff will transfer to the supermarket giant.