$3 bln drive to double profits
LONDON, April 17 (Reuters) – The Co-Operative Group, Britain’s biggest mutual retailer, unveiled a 1.5 billion pound ($3 billion) investment drive aimed at doubling profits over the next three years and said it wanted to buy rival Somerfield.
“It would be a great strategic fit,” Chief Executive Peter Marks told Reuters on Thursday. “But it’s still early days and we’ve got a lot of work to do.”
A source close to the matter told Reuters last week the Co-Op was the frontrunner to buy Somerfield from its owners, private equity groups Apax and Barclays Capital, a unit of Barclays Plc, and property magnate Robert Tchenguiz.
However, newspapers have said it is reluctant to pay an asking price of about 2 billion pounds ($3.9 billion).
Marks declined to comment.
The Co-Op, created last July from the merger of The Co-Operative Group and United Co-Operatives, is Britain’s fifth-biggest food retailer, third-largest pharmacy chain and biggest provider of funeral services.
The group, which employs 85,000 and has 2.5 million members, said it was embarking on a 1.5-billion-pound investment drive to transform its more than 4,300 outlets to a single brand by the end of 2009 and help it compete with rivals such as Tesco Plc and J. Sainsbury Plc — which have expanded into the Co-Op’s main convenience store market.
Marks said the new green fascia of its food stores — the group’s largest business — emphasised its commitment to the environment. Stores would have more space for fresh food, would get new fixtures and fittings and staff would get more training.
The group would also continue to expand its own-brand products, of which it has introduced about 1,200 over the past 12 months, including the upmarket Truly Irresistible range.
Operating profit before one-off items rose 35 percent to 322.7 million pounds in the 52 weeks to Jan. 12 and the group said it aimed to double that number over three years.
Marks said trading conditions were tough, as debt-laden shoppers cut back spending amid rising mortgage and fuel costs and a cooling housing market.
However, he said the Co-Op was well placed to cope, with its refitted stores giving a big boost to sales.
Like-for-like sales at the group’s 2,223 food shops rose 4.6 percent in its last financial year and were up over 4 percent in the first quarter of this year, he said in a phone interview.
The average rise in sales at rebranded stores was 13 percent, he said.
Group sales in the year ended Jan. 12 were up 18.8 percent to 6.3 billion pounds.
The Co-Op, which traces its roots back to the founders of the co-operative movement in Rochdale, northwest England, in 1844, said it was paying dividends totalling 45 million pounds to its members, around double the level of the year before.
It is also paying a dividend of about 20 million pounds to staff and said it had donated about 10 million pounds to charities and community projects.