Co-operative Group profits fall amid price cuts and pay increases
The Co-operative Group said profits have been sliced in half as restructuring costs and investments in price cuts at its convenience stores and staff pay took their toll on the firm.
Pre-tax profit for the first half of the year fell 53% from £36 million to £17 million, while revenue nudged up 2.2% to £4.7 billion.
Chief executive Richard Pennycook insisted the group's turnaround, dubbed Rebuild, is on track.
He said: "Revenues across the group have grown and, in line with our strategy, profitability has fallen due to our major Rebuild investment, pay increases for our people and price cuts for our customers.
"We are only halfway through the Rebuild and much remains to be done, whether it is investing in our digital capability or campaigning on key issues. We remain firmly on track with our plans and are encouraged that the work we are doing is attracting more and more people back to the Co-op."
Like-for-like sales at its food arm grew 3.1% over the period, with the Co-op hailing six consecutive quarters of positive growth. Like-for-like sales at its convenience store business grew 4.3%, but the firm added that its financial performance has been impacted by an 8.5% pay award for shop workers.
At its funeral business, underlying profit fell from £47 million to £42 million as the group said that a lower death rate was offset by an increase in "pre-paid funeral plans".
Sales at its insurance arm performed well, with gross written premiums rising 29% to £242 million and underlying operating profit rising from £2 million to £11 million.
However, the firm booked a £45 million write-down on its stake in Co-op Bank, with the company saying that it now values its shareholding at £140 million, "consistent with falls in bank valuations generally".
In April, Mr Pennycook asked the board to slash his pay from £1.25 million to £750,000 as the troubled mutual entered "calmer waters".
The mutual was struggling through a series of scandals when Mr Pennycook was appointed in 2014, including claims that former Co-op Bank chairman Paul Flowers had bought drugs and the discovery of a £1.5 billion black hole in its banking unit.