Near doubling of profit buoys Co-op

THE Co-operative Group posted strong results for a "transformational year" yesterday and warned the government against derailing a fragile recovery with too aggressive public debt reduction.

Peter Marks, chief executive of Britain's biggest mutual retailer, gave the warning as the group – whose activities span groceries, banking and funeral services – posted an 85 per cent jump in profit before payments to members of 402 million in the 51 weeks to 2 January.

Marks hailed the performance in a year that he said saw "the greatest change to the business in its entire history", during which Co-operative Group bought the Somerfield supermarket chain and merged with the Britannia building society.

However, warning of difficult trading conditions until possibly early 2011, he said: "We've got a general election, which unsettles people, we've got unemployment continuing to rise, and we've a massive budget deficit that needs tackled, although hopefully not too aggressively and too soon."

He added: "If whichever government gets in is too aggressive and tries to bring the budget deficit down too soon we could snuff out this very fragile recovery. If it is done all at once it will create massive unemployment."

The Co-op boss said the group was benefiting heavily from consumers' lack of trust in publicly-quoted banks in the aftermath of the credit crunch, with its financial services arm increasing its current accounts by 38 per cent to 1.25 million.

"For years the mutual sector had been regarded as an old-fashioned irrelevance," Marks said. "Now it is seen as a commercial success and because of the credit crunch people are thinking that this model may be the answer."

At the Scottish Retail Excellence Awards last year, the Co-op the won retailer of the year title. The group now runs some 380 food stores in Scotland, with a total staff north of the Border of 11,500. It has more than 120 Scottish funeral branches and nearly 70 pharmacies.

Underlying group profit rose 20 per cent, while like-for-like group food sales at the Co-op lifted 5.5 per cent last year – showing growth for 16 consecutive quarters. Trading profits in the food business rose 31 per cent to 286m, while financial services profits lifted 21 per cent to 177m from 147m last time. Pharmacy' profits fell 21 per cent to 29.9m, trading pressured by further cuts to funding from the Department of Health, the company said.

Funeralcare profits rose 11.5 per cent to 43.7m. But the travel business sank to a 2.3m loss compared to a 5.3m profit in 2008 in what the Co-op said was "the worst recession for 60 years and the most challenging year for the travel industry".