April’s National Members’ Council

Spent Saturday at the Co-op Council meeting: where the main focus of discussion was the publication of our year-end results, which were published last week. You can see the full report at https://assets.ctfassets.net/5ywmq66472jr/4Xi9Pw36VOEkmE2yqZhCQT/4d716091dec9e6e8832a357c718ca47b/Co-op_Annual_Report_2018.pdf

Overall our underlying profit result was flat year on year.  But with strong growth in food sales and an increased Profit Before Tax line the reception in the financial press has been very positive.  Food’s performance was outstanding with like for like sales up 4.4% – well ahead of the market – and the addition of NISA taking the Co-op’s total turnover to over £10 billion for the first time since we disposed of the Co-operative Bank. Funeralcare results were a little disappointing, with a drop in market share and profitability impacted by our introduction of lower-cost funeral options.  However, we still have a very strong platform and many opportunities in that sector and I am confident that we will see that part of our business turn around.  

It was very pleasing that the press gave plenty of coverage to other aspects of our performance too, recognising in particular the work we are doing to address crime levels in local communities, the investment by our pension trustees in social housing and the expansion of our network of academies.  This year we published the Co-op Way report at the same time as our financial results – which is something I have pushed for over the last couple of years.  There’s lots more interesting and encouraging news to draw out from that report, which I will cover in a future blog post.

The Council session also spent a lot of time looking at our work on leadership and colleague culture as well as reviewing remuneration policies which are covered in huge detail in the Annual Report.

During the Directors Q&A sessions we were challenged on a number of areas, including:

  • Progress on our IT transformation programme in the Food division (slipping behind schedule which will increase cost and delay service improvements – but we need to take the time required to get it right).
  • Reactions to the Grocery Code Adjudicator’s report and whether we were confident that our house was being put in order now: as previously declared, we had got things wrong but were working hard to make sure we treated suppliers well.
  • Colleague security: a continuing area of concern, in which we continued to invest time and money. 
  • Whether it was easier to report to shareholders or to members: we find Council questioning ranges far wider than that of financially-focused shareholders, and appreciate the fact that members take a longer term and broader perspective 

Altogether a very positive day, and I very much hope that it does not prove to be my last Council meeting, as the next one will not be until after our AGM in May when I hope to be re-elected!

Annual results

This week has been dominated by preparations for the release of the Co-op Group annual results for 2016 on Thursday.

The headlines have predictably focused on the decision to write down the value of our holding in the Co-operative Bank to nil.  Although the headlines say this means we just get it to be “worthless”, in fact it simply points to the impossibility of being able to put a clear value on the shares at a time when a sale is in prospect and uncertainty is being fuelled by (often misleading) press speculation.

Highlights

The newsworthiness of this item and the fact that the write-down turned our year end profit into a loss have hidden a lot of other good news:

  • All three of our core businesses (Food, Funerals and Insurance) have shown growth in both sales and market share.
  • Strong uptake of our new membership scheme, and re-engagement of many members with the Society.
  • Operating profit was up 32% year on year.
  • Underlying profit before tax was slightly down on last year, but ahead of our budget and unsurprising given the scale of re-investment we are making across our businesses and in re-launching our brand and membership proposition.

The full press release can be found here.

Future prospects

Our markets remain fiercely competitive, of course, so the next couple of years will be challenging.  Nevertheless we now have a stable and much stronger platform from which to develop and launch our plans for the future. It was interesting that the BBC coverage ended up focusing on what markets the Co-op might choose to enter next and disrupt.  That’s quite a change from just three years ago when everyone was wondering whether the Group could even survive!