Co-operative group profits hurt by price cuts and wages

The Co-operative group has reported a 53% decline in half-year profits which it says masks a recovery in sales across the business.

The food-to-funerals mutual said profit before tax fell to £17m in the 26 weeks to 2 July - down from £36m in the same period last year - adding that it had previously warned of such a hit.

It blamed the cost of its three-year Rebuild programme and several other factors including higher staff wage bills and a writedown of £45m in the value of its investment in the Co-op Bank - a move reported by Sky News earlier this week.

Co-op said investment in its supermarket offering contributed too, but it had benefited from that as like-for-like food sales rose 3.1% - its core convenience chain is growing ahead of the wider market, which remains locked in a bitter price war.

It reported a 4.3% increase in like-for-like convenience sales and reaffirmed its strategy of selling stores which do not meet its core convenience objective.

While Funeralcare revenues remained steady - aided by growth in pre-paid funeral plans - it said its general insurance arm had delivered a strong profit performance.

Rebuild - launched in early 2015 - was a response to the Co-op's near collapse in the wake of the financial crisis.

Chief (Taiwan OTC: 3345.TWO - news) executive Richard Pennycook said: "We are only half way 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."

Co-op said it was keen to put people back at the heart of its focus through the creation of a 'Co-op economy'.

It said more than five million members were set to receive new Co-op cards to mark the launch of a "compelling new membership offer."