TIDM42TF
RNS Number : 9252L
Co-operative Group Limited
16 September 2021
News release
16 September 2021
Interim Results Announcement: 26 weeks to 3 July 2021
Co-op invests in its future and its people as it continues to
support communities through Covid
'Co-operating for a Fairer World' highlights from H1
Fairer for members and communities
-- More than GBP15m of value given to members through their
cards, after buying selected products and services across the
group, as well as personalised offers and rewards.
-- GBP3.5m distributed in interim payments to the current round
of 4,500 local causes from our Local Community Fund.
-- More than GBP2.8m raised by colleagues, customers and members
for our charity partners Mind, SAMH and Inspire, taking total to
GBP5.5m by 3 July.
-- Launch of Hubbub partnership with commitment to have a total
of 250 community fridges in place by next year, feeding and
empowering communities.
-- Project launched with the Youth Endowment Fund and the #iwill
Fund*, worth GBP5.2m - 'Peer Action Collective' - giving young
people the chance to make their communities fairer, safer places to
live.
Fairer for our colleagues
-- Co-op Levy Share service launched to create fund for SMEs to
take on apprentices they otherwise wouldn't usually have access to.
Total reached GBP3.4m by the end of H1.
-- Pregnancy loss policy implemented to support current and
future colleagues across the business.
Fairer for our planet
-- Ten-point climate plan launched, including commitment to
match pricing of own brand plant-based ranges with meat-based
equivalents, to support sustainable and more balanced
consumption.
-- Europe's most extensive in-store recycling scheme at 1,500
Co-op stores prepared in H1 for July rollout; scheme to be extended
to 2,300 stores by November, allowing us to reach 100% own brand
packaging recyclability.
Key H1 investments
-- Capital expenditure of GBP161m, including 53 store refits and 33 new stores.
-- Introduction of Real Living Wage for all colleagues, with an
additional investment of GBP17m in first half of the year to
support our colleague population.
-- GBP26m invested in food price.
-- GBP6m invested into reducing prices for funerals and funeral
plans, and GBP600,000 on developing Funeralcare's digital
presence.
-- GBP3.2 million invested in developing ecommerce within our Food business.
-- GBP22m invested in Biggleswade depot, a key part of our Food
infrastructure, due to open in 2022.
Financial H1 highlights
-- Total group revenue up GBP0.2bn or 4.2% against pre-pandemic
levels, with growth across our Food, Legal Services and newly
launched Insurance business (H1 2021: GBP5.6bn, H1 2019: GBP5.4bn).
Down 3.2% from last year (H1 2020: GBP5.8bn), after unprecedented
purchasing behaviour during the start of the pandemic.
-- Underlying operating loss before tax of GBP15m, down GBP71m
(2020: GBP56m), but generally consistent with 2019 (underlying
operating loss of GBP11m). This is due to planned investment in our
colleagues and our business, as well as significant costs, impacts
on sales and profit erosion related to product availability issues
and the ongoing effects of Covid.
-- Net debt up to GBP712m (2020 year end: GBP550m) excluding
lease liability, reflecting increased investment.
Outlook
Moving forwards, we will continue to progress and evolve our
business strategy, driving innovation and further efficiencies
across the Group. This will ensure that the Co-op remains well
placed to benefit from changing consumer habits and support our
members' interests across our Food and Life Services areas.
The unplanned supply chain challenges and ongoing Covid costs
will bring greater levels of uncertainty. This will in turn apply
pressure on our prior expected level of profitability for year
end.
We continue to be led by our Co-op values and vision of
'Co-operating for a Fairer World', for the benefit of our
colleagues, communities and the planet. Our vision underpins every
part of our business and our work in supporting people and
communities has never been more important than it is now. The Co-op
will continue to play an important role in helping the nation build
back better and different, especially within areas which tackle
inequality and unfairness.
Operational H1 highlights
Food
-- Food sales exc fuel saw significant 6.5% increase on
pre-pandemic levels (H1 2021: GBP3.6bn**, H1 2019: GBP3.4bn.) Down
2.8% on H1 2020: an unprecedented year in purchasing behaviour (H1
2020: GBP3.7bn).
-- Online services made available in 1,000 more Food stores in
350 locations, reaching 52% of population.
-- By the end of 2021, 1,600 Food stores to have an online offer
with 80% of the UK population covered by click and collect and 60%
covered by home delivery.
-- H1 2021 total online food sales were approximately five times more than those in H1 2020.
-- Market share in line with pre-pandemic levels (H1 2019:
6.24%; H1 2021: 6.3%), but down from 6.85% last year, following an
unprecedented year last year.
-- Wholesale revenue down 14% to GBP688m as contract with
McColl's Retail Group concludes, but Nisa saw an increase of more
than 11% on sales, on a two year like-for-like basis.
-- Retailer recruitment has seen 316 new stores being serviced by Nisa.
-- Honest Value range grown to double the number of products compared to initial 2020 launch.
-- Reduced pricing on Gro products to align with meat-based
equivalents are part of our new ten point climate plan.
Funeralcare
-- Funeralcare business remains strong and market leader in both
the at-need and funeral planning space.
-- Funeralcare sales down 7% to GBP142m (H1 2020: GBP152m) due
to a 17% decrease in the number of funerals, as death rate drops
below the five year average (excluding 2020) after March.
-- Funeral planning business sees an increase in clients
considering and purchasing a plan. 24,521 plans sold in the period,
a 24% increase on H1 2020.
-- New direct cremation funeral plan launched in partnership
with market-leading private crematoria operator, Memoria, providing
more options for clients.
-- Funeral Benefit Options now provided in partnership with the
Post Office, offering direct payment to Co-op Funeralcare and
discounts on final costs, as part of over 50's life cover
policy.
Insurance
-- Insurance sales revenue for new business model at GBP18m,
including GBP7m in underlying profit, following the sale of
underwriting business and progress in growing business
footprint.
-- Pandemic continues to impact sales including Travel policies,
with customer interest growing towards the end of the period in
line with new Government guidelines.
-- Life and Pet insurance both saw very strong performances with
26% and 45% more policies sold than in H1 2020.
Legal
-- Total revenue for Legal Services at GBP20m (H1 2020: GBP19m).
-- On an underlying basis, Legal Services saw a 12% increase in
revenue to GBP19m across its continuing businesses (H1 2020:
GBP16.9m), after exiting the small claims personal injury insurance
market as a result of the sale of CISGIL to Markerstudy in December
2020.
-- Legal Services total sales up 5% at GBP20m (H1 2020: GBP19m).
-- Probate case volumes increased 17% year-on-year increasing market share and solidifying UK market-leading position. Wills cases increased 0.4% year-on-year.
-- Family law practice continued to perform well seeing a 9%
increase in revenue compared to H1 2020. Employment law practice
remains stable, with revenue in line with last year.
-- Legal Services to focus on making new partners and develop
digital services to support growth in H2. Expecting a rise in
employment law cases as the furlough scheme ends.
Power
-- To continue to grow Co-op Power, as the biggest energy-buying
co-operative in the UK. Welcomed Strait Capital Investment Group
and McCarthy Stone to the group in H1, as other businesses seeking
green, low-cost energy sourced sustainably and ethically.
Steve Murrells, Chief Executive of the Co-op, said:
"As we continue to experience the effects of the Covid-19
crisis, it is clear that things will never be the same again. As a
business and as a society, it is crucial that we learn from the
last 18 months, particularly as we turn to the momentous task of
rebuilding Britain and face into the continuing disruption to our
business and our supply chains. I'd like to thank our 62,000
colleagues for everything they've done during this time.
"Despite the challenges that the pandemic has presented to us,
we have adapted to become more efficient and agile, which has
allowed us to continue to feed and care for the nation throughout
the crisis. Whilst our commercial performance has been impacted by
Covid-19 and Brexit headwinds, we have responded magnificently to
support our colleagues, members, customers and communities
throughout.
"Covid has reinforced the fact that our vision, 'Co-operating
for a Fairer World,' has never been more relevant, as well as
showing us the areas in which we need to move quicker. As we look
ahead, we will continue to advocate the power of co-operation so
that as we emerge from this crisis, we are able to empower and lift
people up with us."
Allan Leighton, Independent Non-Executive Chair of the Co-op,
said:
"Everyone at the Co-op has worked incredibly hard since the
outset of the pandemic to overcome the significant challenges that
we've faced - it has been no small feat to continue to keep our
stores and funeral homes running during this period. On top of
that, we have still made a difference, supporting our communities
and our colleagues.
"This experience has strengthened the business in many ways and
has driven home the power of co-operation. Whilst there are
undoubtedly challenges ahead, the business is well positioned to
continue to grow and play its part in helping the nation build back
better."
Ends
* #iwill Fund is a joint investment between The National Lottery
Community Fund and the Department for Digital, Culture, Media and
Sport
** Group performance figures include fuel sales
Media Enquiries :
The Co-op
Russ Brady
Tel: 07880 784442
Headland Consultancy
Susanna Voyle
Tel: 07980 894557
Chloe Franklin
Tel: 078 3497 4624
About the Co-op:
The Co-op is one of the world's largest consumer co-operatives
with interests across food, funerals, insurance and legal services.
Owned by millions of UK consumers, the Co-op operates 2,500 food
stores, over 800 funeral homes and provides products to over 5,100
other stores, including those run by independent co-operative
societies and through its wholesale business, Nisa Retail
Limited.
Employing over 62,000 people, the Co-op has an annual turnover
of GBP11.5 billion. As well as having clear financial and
operational objectives, the Co-op is a recognised leader for its
social goals and community-led programmes. The Co-op exists to meet
members' needs and stand up for the things they believe in.
Co-operative Group Limited
Interim Report 2021
Co-operating for a Fairer World
Our Co-op has continued to support our members and their
communities through the pandemic, whilst increasing investment into
the business
Community and membership: Continuing to deliver for communities
and the planet in the first six months of 2021
-- More than GBP15m of value given to members through their
cards, after buying selected products and services across the
group, as well as personalised offers and rewards
-- 200,000 new members joined our Co-op
-- New Co-op Levy Share reached GBP3.4m and more than 140
apprenticeship opportunities confirmed for under-represented
groups
-- New ten-point climate plan launched, including a target to be
the first food retailer producing carbon neutral own brand food and
drink within five years
-- Since May, more than 12,000 local community groups connected
through our free online community centre, Co-operate
-- More than GBP2.8m raised by colleagues, customers and members
for our charity partners Mind, SAMH and Inspire, taking total to
GBP5.5m by 3 July
-- After doubling support for communities through Co-op
membership last year, GBP4.9m raised by new Community Partnerships
Fund
-- More than 7,000 students, mostly from Co-op Academies, took
part in 80 'Virtual Work Experience' opportunities
-- New key community project announced with Hubbub and another
with the Youth Endowment Fund and the #iwill Fund*- 'Peer Action
Collective'
Commercial: Trading performance in line with expectations after
Covid headwinds, as ongoing Covid costs and strategic investments
impact short term profitability
o GBP5.6bn
Group revenue down 3.2% from GBP5.8bn in 2020, but 4% higher than in 2019 (GBP5.4bn.)
o GBP44m
Group profit before tax down 38% from GBP71m in 2020** (2019:
GBP20m.***)
o -GBP15m
Group underlying loss before tax difference (after furlough
repayment) of GBP71m, from GBP56m profit in 2020. Consistent with
GBP11m loss in 2019.
o Group net debt up from GBP550m to GBP712m
o Key business investments:
o Introduction of Real Living Wage with additional investment of
GBP17m in the first half of the year.
o GBP26m invested in food prices and promotions.
o GBP22m invested in Biggleswade depot, a key part of our Food
infrastructure, due to open in 2022.
o GBP6m invested into reducing prices for funerals and funeral
plans.
o GBP3.2 m invested in developing ecommerce within our Food
business.
o Capital expenditure of GBP161m, including across store refits
and new stores.
-- Co-op Food sales (exc fuel) saw a significant 6.5% increase
on pre-pandemic levels (H1 2021: GBP3.6bn**, H1 2019: GBP3.4bn.)
Down 2.8% on H1 2020: an unprecedented year in purchasing behaviour
(H1 2020: GBP3.7bn)
As well as investment in price, colleague pay and
infrastructure, significant business development was made in key
areas:
o H1 2021 total online food sales were approximately five times
more than those in H1 2020.
o Online services were made available in 1,000 more Food stores
across 350 locations, reaching 52% of population.
o 316 new stores serviced by Nisa.
o Honest Value range doubled since launch.
o 33 more stores opened, 53 refitted and eight extended. 14 more
franchise stores were opened, including first ever service station
store in Cornwall.
-- Co-op Funeralcare saw a 7% decrease in revenues year on year
(H1 2021: GBP142m; H1 2020: GBP152m), although an increase was seen
in funeral planning sales, up 24% on same period last year:
o 98.4% of clients reported they were satisfied with their
overall experience.
o Gradual return to full funeral services as Government
restrictions eased.
o 'In Loving Memory' brand campaign achieved 'Best Topical
Campaign' at the Newsworks Planning Awards and a Campaign Media
Award.
-- Co-op Insurance saw an income of GBP18m in H1 2021 as new
distribution and marketing business evolves:
o Covid continued to impact business, including travel policy
sales.
o Life insurance and Pet insurance sales were up 26% and 45%
respectively on H1 2020, as pandemic influences customer
priorities.
-- Co-op Legal Services achieved a 12% increase in revenue
across continuing business and a 3% rise in case volumes:
o Total revenue for Legal Services at GBP20m (H1 2020:
GBP19m).
o New digital lasting power of attorney service and digital
probate administration service launched.
o New partnerships established with Elder, the Openwork
Partnership, Owl Financial and others.
-- Co-op Power now at more than 70 members and providing energy to 20,000 sites
o Aiming to save business customers 1,000 tonnes of carbon a day
with targeted growth of 30% for 2021 full year.
* #iwill Fund is a joint investment between The National Lottery
Community Fund and the Department for Digital, Culture, Media
and Sport ** PBT figures includes GBP9m cost (2020: GBP40m
income) of net finance costs / income on funeral plans following
the change in accounting noted in our 2020 Annual Report. Includes
one-off gain in 2021 of GBP99m following early settlement of Group
Relief payable owed to Co-operative Bank PLC. ***2019 figure as
reported in our 2020 interims being unadjusted for the change in
way we account for funeral plans.
Outlook: As we start to look forwards with more optimism, our
Co-op is well positioned to play its role in helping the nation
build back better and different. Whilst a number of uncertainties
remain, our underlying business model is strong, but also our
Vision and Purpose are both clear and distinctive. We will continue
to remain vigilant and take action where needed to ensure we
deliver clear value for our members, their communities and for the
planet.
CHAIR'S INTRODUCTION
It is now 18 months since Covid-19 changed our lives and those
of billions of people across the planet.
Before reflecting on the past six months' performance, I want
again to extend my sincerest thanks, and those of the Co-op Group
Board, to our incredible 62,000 colleagues for their combined
efforts during the pandemic and to all our customers for their
loyalty. As one of the world's largest consumer co-ops, with
business interests spanning across the food, funeral, insurance,
legal and power sectors, we've uniquely supported millions of
members and thousands of communities over the past 18 months, in a
way that's been distinctly Co-op and indeed co-operative in
nature.
With the vaccination programme in the UK and other developed
countries continuing at pace, we are now in a position to look
forward with a greater sense of confidence. It is vital, however,
that the hand of co-operation extends further to support the
developing nations on the planet in many different ways, so they
can equally protect their populations and also enjoy the improved
social and economic benefits, which in turn should follow. To that
end, our continued and demonstrable support for Fairtrade
producers, as part of our Global Wellbeing Charter, will take
onboard extra importance in the months and years ahead.
It is testimony to all those connected with our Co-op that we've
been able to achieve and deliver so much, at a time of great
national and, indeed, international need.
Our Co-op is a powerful force for good in our country, owned by
those who buy from us and other co-operatives who share our values.
We are capable of creating sustainable value for our members and
the communities in which we operate, where it matters the most.
As Steve will outline in his introduction, we cannot and will
not take our success for granted and must continue to compete and
win in our chosen markets, albeit by winning in The Co-op Way. That
means continuing to invest our members' funds wisely, whether
that's in relation to our large physical estate or by growing our
online digital capabilities further. It will mean continuing to
keep a firm grip on our costs, so that we can continue to invest in
price, proposition and innovation across our extensive product
range. And it must mean that we hold dear the distinctive value of
Co-op membership, as the true means of ensuring that our Co-op
continues to thrive and not just survive in a post pandemic
world.
We are fortunate in that we have a clear Vision - 'Co-operating
for a Fairer World' - which was developed with our elected Members'
Council prior to the pandemic. It feels even more relevant and
powerful, given the world we are facing into. Visions, of course,
need to be brought to life and I am very proud of the work we have
done so far this year to make things fairer for our colleagues, our
members and their communities and, of course, the planet. This
matters because Covid has clearly exposed and heightened
inequalities - if we genuinely want to build back better and
different, then we must find ways to bridge these inequalities in a
meaningful and co-operative way.
Our Co-op Purpose of 'championing a better way of doing
business' also significantly influences our decision making process
and throughout this year we've maintained all aspects of our
democratic governance, taking our regular Board and Council
meetings online.
For the second time in our history we regrettably had to ask our
members not to attend our AGM, moving it to a largely online event.
That didn't, however, prevent us from attracting excellent
engagement, through both live and playback viewings, and it is
clear that we must continue to use the technology at our disposal
to reach and engage our members more and more in the years ahead.
And not necessarily just through the AGM; we continue to look to
create new channels for members and we routinely welcome feedback
through our Member Pioneers and Join In opportunities, as just two
examples.
I'd like to thank the Board, Council and members for their
continued flexibility and adaptability as we've all trialled,
learned and evolved during these unprecedented times - our Co-op is
stronger, more agile and more fit for purpose as a result.
At this point, I'd like to welcome Kate Allum, our new Member
Nominated Director who brings her passion for working with our
members, diversity and sustainability to our Board. She's an
amazing addition, with leadership experience across food supply
chains and agriculture, and as former Chief Executive of First
Milk: the British farmer-owner dairy co-operative. We also welcome
the new President of our Members Council, Denise Scott-McDonald,
who joins us after succeeding Nick Crofts this summer and has a
long established focus on fairness, justice and the wider world.
Denise is a councillor and deputy leader of Greenwich Council - a
Co-operative Council, which really brought communities together
during the pandemic and does amazing things. I'd like to say a
final thank you and farewell to Matt Atkinson too, our Chief
Customer and Membership Officer, who has made a tremendous
contribution to our Co-op over the last four years.
And at Co-operatives UK, our movement's apex body, we're
delighted to see Rose Marley in her new role as Chief Executive.
Rose is clearly a strategic thinker with huge drive to create
change for the better, through a strong focus on engaging younger
people, technology and motivating a broader audience of
co-operators to play their part. The time has never been riper for
a modern and inclusive movement and we are very much looking
forward to a new era for co-operation with our friends and partners
from across the sector.
In looking forward, we remain confident that our Co-op can
continue to succeed and deliver against our business objectives. We
know this will not be easy by any means, given the markets in which
we operate. We are, however, clear in terms of our Vision and
Purpose and the strategy needed to bring this to life. With a
hugely talented Executive team, 62,000 engaged colleagues and a
truly distinctive co-operative approach, I believe we are set to
succeed further during the rest of 2021 and beyond.
Allan Leighton
Chair, Co-op Group
CHIEF EXECUTIVE'S REPORT
As we start to emerge from one of the most traumatic periods in
recent history, I can reflect with pride on the contribution made
by our Co-op in supporting the nation and look forward to us
helping the nation build back better and different.
During the first half of 2021, with the country having to
contend with ongoing lockdown restrictions, we continued to help
feed and care for our members and their communities in true Co-op
fashion. Throughout the pandemic, our large physical presence has
provided so much more for our members than delivering on the
basics. In being able to keep open over 3,400 community based Food
stores and funeral homes, we have been able to provide a smile, a
conversation and a familiar face to millions of our members and
customers, whose physical and mental wellbeing have been so
severely tested over the past 18 months. Our 62,000 colleagues have
been and continue to be local heroes and I am immensely proud and
grateful for their contributions. Also, we continue to applaud the
teams who have kept our Co-op Academies running throughout the
pandemic so valiantly, finding ways to safeguard students'
education and wellbeing.
Running alongside everything we've done to provide key services
during these unprecedented times, our Co-op has continued to find
ways to support the futures of young people and their communities,
and we remain on our way to achieving greater diversity and
inclusion, and tackling social injustice. We are determined to play
our part and have done this successfully throughout the first half
of 2021. We continue to find new ways to work with others - whether
that's individuals, grassroots groups or national organisations -
on what we can do across our business or with our members to
support those who may be overlooked and discriminated against; to
be truly anti-racist and drive opportunities for young people.
Underpinning all of our efforts over the last six months has
been our 'Co-operating for a Fairer World' Vision, which drives
forwards and connects all our priorities. In focusing on creating a
fairer world for our colleagues, communities and the planet we have
been able, as this report will highlight, to make good progress
across all of these areas.
At the same time, and with the vaccine and easing of Government
restrictions starting to provide more ground for optimism, we have
continued to invest more into our business, to ensure that our
Co-op is both fit for the future and capable of meeting the
changing needs of millions of Co-op customers and members.
This planned investment has seen us sharpening prices and
promotions across all our business areas, whilst investing GBP43m
into Food store refits and a further GBP31m into new store
openings. With a determination to develop our retail, wholesale and
ecommerce operations, we've also focused on our logistics
infrastructure, making a GBP22 million investment in our Food
business' new Biggleswade depot, which opens next year and has
contributed to a reduced cash position as planned, and consequent
increase in net debt from year end of GBP162m.
This, combined with the significant investment being made within
our Life Services businesses (those being our Funeralcare, Legal
Services and Insurance businesses) will ensure that we are well
placed to maintain our momentum going forwards, despite the many
challenges facing the retail sector.
Fundamental to our ongoing success as the UK's largest co-op,
will be the role played by our 62,000 colleagues. The additional
GBP17m investment we have made this year to align pay for 33,000
frontline colleagues to the Real Living Wage, as colleagues where
pay wasn't already at that level, is a clear acknowledgment of
this. This takes our total investment in colleague pay to GBP68m in
just the past two years alone.
Financial overview
Overall, our Co-op's revenue was down 3.2% to GBP5.6 billion, a
decrease of GBP0.2 billion on the same time last year.
This is mostly driven by the impact of the pandemic on our
customers' shopping habits during the first half of 2020, amid peak
lockdown restrictions. It makes a meaningful year on year
comparison quite difficult, so comparing our most recent results to
those from the first half of 2019 can help here. On that basis,
total Group revenue is up by GBP0.2bn or 4.2% with growth across
our Food, Legal Services and our newly launched Insurance business.
The two year comparative growth of our Food business, at 6.5%(exc
fuel sales) and wholesale at 11% are strong.
We made a group underlying loss before tax of GBP15m (which
includes GBP16m of furlough repayments) and represents a decrease
of GBP71 million against last year, which was impacted by Covid-19.
This is consistent with the loss of GBP11m that we made in the
first half of 2019. Also, our underlying profitability is generally
back end loaded to the second half of the year, in our main retail
businesses.
Planned investment in our Food business in the first half of
2021 has impacted underlying profitability. This has been offset by
increases in profitability, when compared to 2019, in Wholesale,
Funeralcare and our new Insurance business, along with cost savings
achieved in our central supporting functions.
Our profit before tax of GBP44 million is down GBP27 million
from GBP71 million last half year, but up from 2019 (GBP20m). A tax
charge of GBP7 million meant we recorded an overall profit of
GBP37m from continuing operations in 2021 (2020: GBP20m and 2019:
GBP47m).
There are some other significant items within our figures this
year that also make a simple year on year comparison more
complicated, including a one-off gain of GBP99m on the early
settlement of a liability agreed at GBP48m against a historic
liability of GBP147m, owed to Co-operative Bank PLC. Further
details on this and more insight on our financial performance can
be found in the 'Our Financial Performance' section of this RNS
.
Co-operating for a Fairer World
Co-operation is part of our DNA, and our Vision - 'Co-operating
for a Fairer World' - ensures we bring it to everything we do. We
have to walk the talk as a co-operative and come together with
others and within our business, as members, to address the
inequalities and unfairness that existed long before the pandemic,
but have really come to the fore over the last 18 months.
It drives us to take action, whether that's finding new routes
to skills & employment for young people; creating better
diversity and inclusion within our business; continuing to support
mental wellbeing or in ensuring access to food for all.
Our Vision is based on three key pillars: 'Fairer for our
members and communities'; 'Fairer for our colleagues' and 'Fairer
for our planet.'
-- Fairer for our members and communities
Membership is at the heart of our Co-op, it's what makes us
different and allows us to bring our Vision to life in the heart of
communities right across the UK.
Following the membership re-launch in September 2020, our
members now earn 2p for every pound they spend on selected Co-op
branded products and services, with the same amount going to local
communities via the Local Community Fund and the Community
Partnerships Fund.
Already this year our new Community Partnerships Fund is making
a difference, and we've announced a number of projects with
like-minded organisations to help make things a little fairer for
local communities.
The Peer Action Collective is a GBP5.2 million programme, which
aims to give young people the chance to make their communities
safer, fairer places to live. It is funded by the Youth Endowment
Fund, the #iwill Fund (a joint investment between The National
Lottery Community Fund and the Department for Digital, Culture,
Media and Sport) and our Co-op through the Community Partnerships
Fund.
This will build a ground breaking network of peer researchers
aged 16-25, who'll find out about young people's experiences, take
what they learn and turn it into action. From campaigning to
improving local mental health services, setting up a youth centre
or supporting young people into employment - together, we'll create
more opportunities for young people to make change.
And in May this year we announced another important new
partnership, this time with environmental charity Hubbub, to fast
track the expansion of its community fridge network across the UK.
Community fridges are spaces where everyone can share surplus food,
including donations from local food business, producers, households
and gardens. Hubbub co-ordinates the world's largest community
fridge network, with more than 150 operating in the UK - we have
pledged to help them grow this to more than 250 fridges by next
year. This will enable people in communities to help themselves and
not rely on foodbanks.
And of course we continue our charity partnerships with Mind,
SAMH and Inspire. T hanks to our members choosing Co-op, we've
donated GBP1.5m to our partnership with Mind, SAMH and Inspire
through our Community Partnerships Fund. And our astounding
colleagues, in collaboration with customers, members and
communities, have now raised over GBP5.5 million for these amazing
organisations. The funds raised by our members also mean that we
can keep supporting local causes and, through our Local Community
Fund, we distributed GBP3.5m in interim payments to the current
round of 4,500 local causes in April, with final payments to follow
in November. It's part of our 'Co-operating for a Fairer World'
Vision, helping local communities create stronger, more resilient
and adaptable communities, by offering access to food, mental
wellbeing support and education & employment for young
people.
For the first time, when causes applied to the Local Community
Fund this year, they also benefited from Co-operate : our free
online community centre. Over 12,000 groups are now connecting with
people across the UK; it's helping to empower more people to
'Co-operate for a Fairer World' and make good things happen where
they live. This is an exciting development which shows the power of
co-operation beyond funding. Everyone can get involved at
coop.co.uk/co-operate.
And the Community Wellbeing Index, our data insight tool
championed by our Members' Council, helps us understand what
communities need and the areas where we can have the greatest
impact.
To continue this momentum, we need people across the UK to join
us as members and be part of our Co-op. We know that during the
last 12-18 months, a large proportion of our members haven't used
us for their lunch or 'meal for tonight' as they normally would.
Their shopping habits have had to change due to Covid lockdowns and
different ways of living and working.
While we think we'll see some of them again, we are also seeking
to actively recruit new members again this year, and we have a
range of member recruitment activities planned throughout the year.
This includes a focus on encouraging new young members to join our
Co-op.
By joining our Co-op, members not only help us to do great
things in communities. They also unlock greater value for
themselves with exclusive member deals and personalised offers for
the things they buy most in our Food stores, as well as discounts
across our family of businesses.
So far, in the first half of 2021, we've had over 200,000 new
members join us. We ran a recruitment campaign across May and June,
where we also thanked our existing members by doubling the member
discount on our personalised digital offers for two weeks at the
same time. We saw a record breaking 539,064 offers selected in the
second week of the promotion.
Being a Co-op member isn't just about communities and discounts,
though. Our members are at the heart of our business and can also
get involved and have their say on the products and services we
sell, the way we're run, the issues we champion, the causes we
highlight, the injustices we tackle and where we use our voice to
help make a difference.
In the first half of 2021 we have seen a significant increase in
the number of members participating in their Co-op, including their
involvement in a series of opportunities to bring new
member-inspired food products to our stores. The new initiative
will see us launch a range of new member-designed products across
stores over the rest of the year and into 2022.
Our June 'Join In' email to members generated a record breaking
100,000 engagements in a little over 24 hours, with the development
of a new flavour to add to our range of Co-op ice cream tubs
becoming our most successful engagement opportunity to date.
Also, with our members, when it comes to making donations to
causes, through our Local Community Fund, Community Partnerships
Fund and charity partners, we have a solid foundation to build
from. However, we know this isn't enough when it comes to making
the difference they need. So we continue to actively partner with
other organisations, our academies, and our own Member Pioneers, to
create longer term, sustainable impact.
Our Co-op Young Members Group has continued delivering projects
with its network of young people, most recently working with the
Communities team to explore the needs of young people in
communities and how members and our Co-op can work together to
support them.
Also, working with Mind, SAMH and Inspire through our Community
Partnerships Fund, is seeing great things happen. It is helping to
fund pilot services like 'No Gimmicks, Straight Lyrics' with
Lambeth and Southwark Mind, which uses lyric writing to help young
black men express themselves and develop greater mental
wellbeing.
And during a time when some have stopped offering opportunities
for young people to learn and develop new skills, we continued to
commit to creating apprenticeship opportunities in our businesses.
We recruited our first cohort of Co-op Legal Services Solicitor
Apprentices, creating fairer access to a career in law by allowing
five young people to become qualified solicitors without the cost
of university education.
We launched the Co-op Young Business Leaders programme, a first
of its kind, which gives 20 BTEC Business Studies students from
Co-op Connell College the opportunity of paid work experience at
our Manchester support centre during their final year of college.
It's providing young people with valuable income and increased
employability through building their skills and confidence in a
real working environment.
We've offered a number of roles to Co-op Academy students too,
ready to start in September this year, including a Connell student
from the Co-op Young Business Leaders programme into our CBS Sales
& Service Apprenticeship, and a Head Girl of Co-op Academy
Manchester into an apprenticeship in Co-op Property.
Plus, we've been offering Co-op Academy students the chance to
participate in virtual work experience. Our Virtual Work Experience
programme engaged more than 7,000 students, including those from
Co-op Academies, during a five week period. 80 live sessions were
available from 18 different sectors of the Co-op, as well as 11
supplier sessions led by Kellogg's, Microsoft, ITV, Marsh, and
Mitie.
All of these are fantastic examples of our commitment to
providing opportunities for young people who we know have been one
of the hardest hit groups in our communities during the Covid
pandemic.
-- Fairer for our colleagues
As we moved into 2021, our colleagues continued to work through
the extraordinary circumstances of the pandemic, and we maintained
the support, care and information they needed.
Safer Colleagues, Safer Communities
We've continued to run our 'Safer Colleagues, Safer Communities'
programme in 2021 to tackle violence against shopworkers. Since its
inception in 2018, we've invested in stores with intelligent CCTV,
body cameras, product security, training for all colleagues and
much more. We've also been working with MPs, unions and other
retailers to get new legislation that increases the penalty given
for violence towards a retail worker.
In January, the Scottish Parliament voted in favour of the
Protection for Workers (Retail and Age-restricted Goods and
Services) Bill which creates a new statutory offence of assaulting,
threatening or abusing a retail worker and offers further
protection when the worker is carrying out their statutory duties,
such as age-restricted sales.
We want the same protection in place for all of our retail
colleagues and have been continuing our campaign in the first half
of 2021. In June, colleagues, members, customers and suppliers sent
over 25,000 letters and emails asking the Government to support a
similar amendment to the Police, Crime, Sentencing and Courts
Bill.
Colleague wellbeing
The scale and longevity of the pandemic has meant that
supporting the wellbeing of our colleagues has been more important
than ever. We've continued to share our 'Co-op Care' newsletter,
introduced at the start of the pandemic, to give colleagues the
information they need to help them cope with the physical, mental
and financial issues we know many of them will have been facing. We
even organised 'Uplift Festival': a virtual festival of wellbeing
for all colleagues.
Our businesses innovated too. Our Funeralcare team, for example,
introduced additional support through a dedicated colleague
wellbeing programme, including mental health first aiders and
colleague wellbeing packs and hampers, in recognition of the
unprecedented demands the pandemic has placed on our frontline
colleagues.
Through 2021 so far, our approach to developing new colleague
wellbeing initiatives has continued to be based on insight and data
directly from our colleagues. New initiatives this year include:
Headsmart - mental health awareness training for managers; Smart
Health - providing all colleagues and their families with access to
a virtual GP and support in areas such as mental health, complex
medical cases, nutrition and fitness; and the introduction of a pay
advance product, Wagestream.
Our wellbeing platform, provided by LifeWorks, has continued to
grow in popularity, giving colleagues access to a range of
self-help wellbeing resources. We're also continuing to partner
with Stepchange, Neyber, Co-operative Credit Union and Keep Credit
Union to bring quality financial wellbeing guidance to colleagues.
And we've created a wellbeing hub to help our leaders easily access
all wellbeing content from one place to support their teams.
This year we're also focusing on updating our policies, so
they're completely in line with who we are and what we stand for as
a business. Our new pregnancy loss policy is an example of this.
Developed in collaboration with The Miscarriage Association, the
policy practically supports parents who experience pregnancy loss
at any stage of pregnancy, including but not limited to
miscarriage, stillbirth, embryo transfer loss, molar pregnancy and
termination of pregnancy (for any reason). This policy - as part of
our drive to create a truly inclusive workplace - supports both
parents who have been affected, whether it happens directly to
them, their partner or their baby's surrogate mother, regardless of
the nature of their loss, stage of the pregnancy and whatever their
length of service or contracted hours.
Diversity and inclusion
Our diversity and inclusion strategy has seen increased focus
this year as we've begun to deliver on the commitments to racial
inequality we launched in September 2020. These are a holistic set
of commitments across colleagues, customers, membership and
communities, which go beyond our focus on colleagues to put
inclusion at the heart of everything we do. We've made good
progress on these commitments and we'll be reporting on them at the
end of the annual report in October.
Our colleague-focused diversity and inclusion strategy remains
focused on creating an inclusive culture where everyone has a sense
of belonging and has a fair and equal chance to fulfil their
potential. We've made significant progress in a number of areas
including inclusive leadership; attracting, retaining and advancing
diverse talent and improving our diversity data and measures. We've
also identified four enablers that we'll focus on to consciously
create a diverse, and inclusive organisation:
1. Creating an equitable colleague experience by designing
processes that help us to eliminate or reduce barriers in our
People process to enable colleagues to fulfil their potential, no
matter their identity.
2. Actively ensuring our recruitment and talent pipeline is more
diverse to represent the communities we serve.
3. Building capability and awareness to enable our leaders to
lead diverse teams and create the environment for diversity to
thrive.
4. Consciously creating an inclusive culture, where we actively
understand and celebrate difference as well as tackle non-inclusive
behaviours such as bullying, harassment and discrimination.
Additionally, we have a full calendar of inclusion events in
place that recognises and celebrates events with our colleagues and
are actively led by our colleague networks. So far this year we've
celebrated International Women's Day; LGBTQ+ Pride; Ramadan and
Eid; Zero Discrimination Day and Chinese New Year among others.
This year we've launched our network for colleagues with
disabilities, Represent. This new network joins our existing
networks of: Aspire (women), Respect (LGBTQ+), Strive (young
colleagues aged 18-30) and Rise (ethnic diversity), who represent
our diverse colleague base and help us to champion best
practice.
Fair pay and meaningful work
As part of our commitment to providing our colleagues with fair
pay, and in recognition of the vital role played by our frontline
store colleagues, we aligned our minimum hourly rates of pay to the
Real Living Wage with effect from 1 April. This significant
investment - a 5.6% increase - has received positive feedback from
our Customer Team Members. The essential role our Team Leaders play
in running our stores has also been reflected in their 7.1% pay
increase.
The introduction of Work Levels as part of our Grading Evolution
activity is enabling us to create simpler and flatter structures,
where empowered colleagues are trusted to get on and get things
done, and where our leaders have the space to lead and inspire.
We're also continuing to expand our reach into new communities
to create opportunities through the apprenticeship levy share and
our own apprenticeship programmes, and will focus on developing new
partnership relationships to tackle youth unemployment.
In May we launched a levy share service to promote
apprenticeship opportunities for individuals from under-represented
groups. We pledged to share GBP500,000 from our apprenticeship levy
that would otherwise expire and be returned to the Treasury.
We have called on other employers through our networks and
supply chain to step in, visit www.cooplevyshare.co.uk and bring
together funding of GBP15 million - the fund had reached GBP3.4m as
the first half of the year ended. This will create thousands of new
opportunities for those who may be overlooked or experience
prejudice, within external organisations that need support to offer
apprenticeships.
This is in addition to the commitment we made last year to
support 150 young people from the Department of Work and Pension's
Kickstart scheme. We have since looked to create opportunities
where they're really needed - sourcing locations based on data from
our innovative Community Wellbeing Index - to ensure they're
offered to those communities where they will make the biggest
possible impact. In May we began recruitment of our first cohort
into Logistics and Funeralcare.
Transforming our Leadership
To help us deliver our Vision of 'Co-operating for a Fairer
World,' we need leaders who:
-- Are motivated by our Purpose, connected to our Vision and
really understand what co-operation means.
-- Lead with humility and vulnerability, creating safety and trust for those they lead.
-- Are committed to their personal growth.
-- Are courageous to ask for help, co-create and innovate to positively disrupt.
We're supporting our leaders through our Leadershift leadership
development journey, which provides timely and relevant development
opportunities to all leaders, putting our leadership behaviours at
the heart of all we do.
We know Covid-19 has challenged our leaders in new ways so it
has been very encouraging that our insight is telling us that
'adaptability' is a top five theme, where leaders and colleagues
thought the Co-op was 'doing well'. And in a poll of 216 leaders,
96% agreed that content on Leading Well for Everyone was relevant
right now to their leadership and 98% of leaders had a positive
experience to date of the learning events and interventions.
-- Fairer for our planet
The world has been on pause during the Covid-19 crisis and as
the global economy starts to reopen, it's down to us all to reset
in the right way and with our future world in mind.
2021 is a hugely significant year for climate change and the
world will be watching as the UK Government hosts the largest
climate change conference ever: COP-26.
Tackling climate change has long been one of our priorities but
now, more than ever, new ways of thinking and unprecedented
co-operation will be needed. That's why I announced earlier this
year that I'll be chairing the British Retail Consortium (BRC)
Climate Action Roadmap steering group. Alongside other retail
executives, we will support the industry and supply chains reach
net zero carbon emissions by 2040 and play a part in making things
fairer for our planet.
Aligned to the BRC Roadmap, in May we launched our ten-point
climate change plan which follows three key principles; follow the
science, leave no one behind and bring about systematic change
through partnering. We have laid out how we will get to net zero by
2040 across all our business areas, by:
-- Offsetting the greenhouse gas emissions of our Co-op's
products and services, including food and drink, to achieve carbon
neutral status by 2025.
-- An industry first move: price matching Co-op branded
plant-based foods to meat-based equivalents.
-- Offsetting the greenhouse gas emissions from running our
Co-op's operations (stores, buildings and logistics) - a feat
achieved in the first half of 2021.
-- Investing millions of pounds of proceeds from the carrier bag
levy to support UK natural restoration projects and creating an
innovation fund for carbon reduction research and development
initiatives.
-- Expanding our Co-op Power wind and solar energy buying group
to offer services to Co-op's suppliers and more UK businesses and
organisations.
-- Calling on the Government to take some immediate steps
including mandating all businesses report on greenhouse gas
emissions, reaffirm its target of 0.7% of national income to
international aid and greater transparency and penalties to prevent
further deforestation.
On plastics, we took action to reduce our contribution to
plastic pollution in the first half of the year. Back in 2007, we
were the first retailer to launch certified compostable carrier
bags and in April, we rolled them out to all of our Food stores -
removing all 'bags for life' in the process.
To support this, we launched our Bags to Rights report that
calls for all single-use carrier bags to be compostable, the price
of reusable bags to increase (to encourage more than one use) and
for it to be mandatory for all retailers to report on the sales of
all plastic bags.
We also put operations in place to launch a new soft plastics
recycling scheme at the very beginning of H2, available in at least
one store in every community in the UK initially before a wider
roll out to more stores. Our work on soft plastics recycling allows
us to reach 100% own brand packaging recyclability; makes it as
easy as possible for customers to recycle all packaging and
demonstrates to Government that film recycling is possible and can
be made financially viable.
Behind every ingredient in Co-op products lie essential
ecosystems and trade that supports people, livelihoods, families
and communities. Unfairly, our global producers who provide us with
our essential food and drink are some of the most vulnerable to the
shocks of extreme weather and disease outbreaks, and are without
the capital or resource to protect themselves and their
livelihoods. For example, it's expected that the total area of land
suitable for coffee growing alone will have halved by 2050. We
already have leading Fairtrade commitments and we'll grow our
support with them even further as well as setting targets around
deforestation, soy in our supply chains and palm oil.
Our Life Services businesses also remain focused on what they
can do for our environment. Co-op Insurance celebrated 15 years
since it brought the first UK car insurance policy with carbon
offsetting to the market in H1. Every customer who purchases
vehicle cover directly through Co-op Insurance sees ten percent of
their motor carbon emissions offset through carbon mitigation
schemes across the world for the first year of their policy, at no
extra cost. This includes rainforest protection projects in Sierra
Leone, provision of safe drinking water in Kenya and stoves that
use less fuel in India, Ghana and Kenya.
This year also marks ten years of carbon neutrality for Co-op
Funeralcare, across its operations. We only use wood certified by
the Forest Stewardship Council in our coffins and have developed a
strong set of natural and eco funeral services and options. In
Funeralcare, we've also committed to install electric vehicle
charging points as standard across new and refitted care centres
opening this year and beyond.
Our focus for the second half
We're determined to maintain our focus on how we can continue to
best feed the nation and grow our Food business, overcoming some of
the challenges that continue to be presented by Brexit and the
pandemic as only our Co-op can. This will include continuing on our
Retail Business Transformation journey - something I'm very proud
of.
All our businesses will continue to develop their online
offerings, building on the great strides they've made recently, to
provide true convenience and ease for our members, and drawing upon
the new digital skills many developed during lockdowns.
Maintaining the real momentum we've achieved so far, with our
member engagement, is key. It's vital to us that they have
opportunities to feedback and shape what we do and who we are.
We'll also look to make good on some of the exciting new
partnerships we've developed, as part of our drive to support our
communities through this pandemic and beyond.
Steve Murrells
CEO, Co-op Group
COMMERCIAL UPDATES
Food
During the first half of 2021, our Food business continued to
work with the challenges brought by Covid-19. Our colleagues across
our store estate, throughout our logistics network, and at our
support centre in Manchester continued to play a vital role in
feeding the nation.
We traded strongly against our forecast across our three routes
to market; retail, wholesale and online. In the same period last
year, we were experiencing the peak trading from the first lockdown
in March where members and customers flowed to convenience before
the market shifted slightly to online in the autumn, meaning our
total sales are GBP4.55bn this half year, where they were at
GBP4.72bn in H1 2020, across our Food and Wholesale segments.
However, our two-year growth remains strong and we continue to see
growth each month in a challenging market. We have also continued
to invest significantly in colleague pay, value and our
infrastructure to enable our future growth.
It's been well reported that the UK supply chain is dealing with
many challenges including driver shortages, sourcing raw materials
for production, new ways of working post Brexit and the long tail
of Covid as we all work to return to normality. Our trading
position has been strengthened by the hard work we've put in with
our suppliers. We are striving to be the best customer to our
suppliers and were recognised in this year's Grocery Code
Adjudicator report as being the second best in the industry and the
most improved a second year in a row.
In the first half of the year, we have continued to invest in
our infrastructure to support future growth through a stronger
supply chain. We continued to roll out our new SAP software
solutions to all ambient product categories to improve ranging,
stock holding, availability and forecasting over our IT systems.
Despite delivering our biggest transformation programme ever whilst
working remotely, we're adapting to new ways of working well and
are now focused on delivering our remaining fresh categories in the
remainder of the year. We also remain on track to open our newest
depot in Biggleswade. By January 2022 we'll have transformed the
660,000 sqft space into our largest regional distribution centre,
handling over two million cases of frozen, ambient and fresh
products a week. This supports our existing logistics network as
well as unlocking the potential for further growth in London, the
South and South East.
That's meant we've enjoyed a fantastic start to the summer,
maximising the opportunities that came with a calendar full of
sporting events and many customers enjoying staycations instead of
travelling abroad.
In April, we aligned pay for 33,000 frontline colleagues with
the Real Living Wage, where it wasn't already, and in July we moved
our stores to a three-tier management structure as part of our Fit
for Future programme. These changes have freed up our store
colleagues to give our customers great service from efficient and
well-run shops. We have created new roles to retain talent, given
colleagues protected terms and were able to offer alternative
positions to all colleagues affected.
Our focus in the first half remained on strengthening our routes
to market and expanding our reach.
In retail, we opened up 33 more stores, refitted 53 and extended
eight. We also opened 14 franchise stores including our first ever
service station store in Cornwall, getting into more local
communities where we don't currently have a presence and improving
the shopping experience where we do.
Trading in Co-op Wholesale has been strong and in line with our
Retail business. In the first half of 2021 retailer recruitment has
seen 316 new stores being serviced by Nisa. This is off the back of
great trade and new account wins during 2020. Like-for-like sales
for the first half of 2020 versus the first six months of 2021
reflect the end of a supply agreement with McColl's Retail Group
(MRG) and new Brexit regulations adversely impacted sales to
retailers in the Republic of Ireland.
In our online business, we've continued to expand at pace and
we're investing to match the capabilities of our competitors.
Whilst volumes may dip as restrictions ease, our national coverage
and focus on quick deliveries and range means we're brilliantly
placed to leverage new opportunities in a uniquely Co-op way. We
now have more than 4,000 products available, delivered to door or
collected within an hour plus our usual membership benefits, Co-op
prices and promotions. Online services made available in 1,000 more
Food stores across 350 locations in the first half of the year,
reaching 52% of UK population.
Continuing to innovate for our customers is critical to our
growth. Over H1, we introduced a series of new products to our
everyday low price 'Honest Value' range. It now has around twice as
many products as it did when we launched in 2020.
Showcasing our Co-op values through our products and services is
still our point of difference.
As part of the launch of our ten-point climate plan we announced
that we'll be the world's first food retailer to produce carbon
neutral own brand food and drink within five years and the first to
match our plant-based GRO range against equivalent meat
products.
We also took action to reduce our contribution to plastic
pollution. We were the first retailer to launch certified
compostable carrier bags almost 15 years ago, and this spring they
were rolled out to all of our stores and bags for life removed.
We also established operations before the end of the half year
for our new soft plastics recycling scheme, to be available in
every community in the UK in H2. This is part of our efforts to
reach 100% own brand packaging recyclability and create a recycling
process that is easy and accessible for our customers.
Funeralcare
Whilst the UK experienced a further peak of Covid in Q1 2021,
overall the first half of this year has seen notably fewer deaths
than the first half of 2020, with the death rate beyond March
consistently below the five-year average (excluding 2020). This
reflects the pattern of the pandemic and the success of the
vaccination programme.
Unsurprisingly, our Funeralcare business also saw a decrease in
the number of funerals arranged, carrying out 48,988 funerals,
which is 9,916 fewer funerals than the first half of 2020 - a
decrease of 16.8%.
The efforts of our Funeralcare colleagues have continued to be
truly exceptional throughout this time, as they cared for the
nation's bereaved and deceased. This is reflected in our customer
satisfaction scores: 98.4% of clients reported that they were
satisfied with their overall experience.
With the majority of funeral restrictions having been lifted by
the Government over the last three months, we have seen a gradual
return to full service funerals, where we have been able to offer
more unique personalisation, enabling our clients to fully
celebrate the life of a deceased loved one.
We are also proud of our direct cremation offering, and making
this key, simple and affordable service widely available to clients
and members during the pandemic, when Government restrictions put
real limits on how loved ones could say goodbye. Overall, the
proportion of our clients opting for a direct cremation funeral in
H1 2021 has remained broadly flat, and on average just under 8% of
our clients chose a direct cremation.
Our funeral planning business remains strong and, as the
pandemic has slowed, we have seen an increase in the number of
clients considering and purchasing a plan, with 24,521 sales in the
first half of the year. This is an increase of 4,814 compared to
the same period last year. In the last six months, we have
successfully launched a new d irect cremation funeral plan in
partnership with Memoria, a market-leading private crematoria
operator, as well as providing Funeral Benefit Options in
partnership with the Post Office. Also, our 'In Loving Memory'
brand campaign achieved 'Best Topical Campaign' at the Newsworks
Planning Awards and a Campaign Media Award.
We continue to make good progress in our strategic
transformation programme, and have created positive shifts in our
client experience across all channels, developing a more modern and
diverse brand and improving our proposition to offer greater
personalisation for clients at more affordable prices.
These changes included:
-- New options and services for our clients to provide even
greater personalisation; including a new floral range, new colour
options across our coffin range, new hearse options and even more
choice of memorial and remembrance options. We have also focused on
adding more options to our eco and natural ranges. All client
literature and website collateral has been improved to help guide
clients through the choices available.
-- Products and services that better represent the communities
we support, with the development of personalisation choices
reflecting African-Caribbean heritage in key locations across
London and the South East.
-- More online services, including the launch of a funeral
planning tool on our website. These services enable clients to see
our full range of products and services, with full price
transparency; start to plan a funeral online; participate in a live
chat and pay their final invoice online.
-- The introduction of a standardised arrangement framework -
'Best Arrangement' -across all our funeral homes, to give clients a
consistently excellent and caring experience wherever they need our
support.
-- Updating the technology our colleagues use in our funeral
homes to help make their lives easier and enable them to provide
more seamless service and care to our clients. We have also
introduced new time and attendance technology across the
operation.
We engaged fully with the Competition and Markets Authority
(CMA) as they developed sector-wide remedies across 2021. We are
proud to have made a series of reductions to the price of our
funeral services since 2019. We are also proud to have increased
transparency and choice, and importantly, led the way with our high
standards of service and care of the bereaved and the deceased who
rest with us. We are fully committed and on track to meet all
requirements set out by the CMA in their order by September.
Separately, the Financial Conduct Authority (FCA) has recently
released its final rules on how they intend to regulate the
pre-paid funeral planning sector. As the leading provider of
funeral plans in the UK, we are proud to help thousands of clients
every year plan ahead with full confidence in our Co-op brand and
values. We are confident that regulation will raise standards
across the sector and improve consumer confidence when purchasing a
funeral plan. We continue to work closely with the FCA through this
next phase and any further consultations, to ensure that our
business is prepared and ready for the introduction of regulation
in July 2022 .
Insurance
We have over 150 years of experience in developing and providing
high quality insurance products for members, and our new go-forward
model with Markerstudy Group will allow us to continue this in a
more capital light, customer focused and effective manner.
During the first six months of 2021, we have started to see the
exciting opportunities our motor and home partnership with
Markerstudy can provide. The sheer size and complexity of the
transition cannot be underestimated - we appreciated our customers'
patience as it took time and effort to develop new processes and
train colleagues in new ways of working. We look forward now, with
optimism, to growing our market presence in the years ahead,
although understand there may still be some challenges to navigate.
Together with the other partnerships we have in place for Life,
Travel, Pet and Business, we have the means to drive more
commercial value, whilst bringing better quality Co-op Insurance
products to the attention of our members more quickly.
Our new distribution agreement with Markerstudy and our
determination to grow the business' footprint have been the driving
force behind GBP18m in sales this half year.
Covid-19 has continued to have an impact on the mix of business
generated, with travel policy sales in the early part of the year
being very quiet, although changes to Government guidance towards
the end of June have stimulated some recent interest in the
product. All our Travel products were given a 'Superior' Covid-19
rating by Which? towards the end of the half year.
Contrary to this, Life insurance and Pet insurance sales have
had an excellent H1, with 26% and 45% more policies sold than in
the same period last year respectively. We see that Covid is
clearly influencing people's thinking in terms of ensuring that
they have the right levels of cover and protection in place to
support those closest to them.
Legal Services
Overall, Legal Services has had a strong start to the year, with
an increase in revenue of 12% to GBP19m across our continuing
business (H1 2020: GBP16.9m). Case volumes have also risen on this
basis by 3%.
As part of the sale of our insurance underwriting business last
year, we have exited the small claims personal injury insurance
market, and this is now a discontinued area of the business.
As the UK's market leader in probate, we have continued to gain
market share and have seen an increase in case volumes of 17%
versus the prior year. We won 'Best Estate Administration &
Probate Services Provider' at the CFI.co awards and 'Best Probate
Law Firm: South England' in The UK Probate Research Awards.
Due to the impact of the pandemic furlough scheme, we have also
seen a short term trend towards clients opting for DIY probate due
in part to an increase in people with additional time available to
them.
We have also continued to see growth in our wills business, with
new wills cases up by 0.4% in H1 2021, compared to H1 2020. This is
against a backdrop of a smaller overall market this year, due to
the pandemic accelerating demand in the prior year.
Our family law practice has continued to perform well in the
first half of 2021, with an increase in revenue of 9% year on year.
Our employment law practice is stable, with revenue largely in line
with H1 2020.
To drive overall growth in the business, we have continued to
invest in our digital capabilities and have launched new products
and services including a lasting power of attorney digital service
and a digital probate administration service.
Plus, we've increased the number of new business relationships
we have in place and have added over ten new partnerships across
charities and commercial businesses in the first half of 2021.
These include:
-- A new partnership with Elder, a leading provider of live-in
care services, which enables customers to take charge of their
later life finances and care arrangements through a virtual hub, to
provide legal guidance on a range of estate planning issues such as
wills, lasting power of attorney and inheritance tax along with
support on live-in care options.
-- A new partnership with The Openwork Partnership, one of the
UK's largest and longest established financial advice and
investment networks, which will enable The Openwork Partnership to
offer a range of legal support services, including wills, probate,
family law and employment law to advisers and their clients.
-- A new partnership with financial advisers Owl Financial and
2plan Wealth Management, offering their diverse client bases access
to legal services and information.
We have continued to build relationships within the charity
sector, supporting charities through free will offers to their
supporters as part of their drive for legacy donations. So far in
2021, we have developed five new partnerships with RNLI,
Alzheimer's Research, The Royal Marsden, Amnesty International and
Dementia UK.
We're also finding new ways to work with existing partners. We
have two new agreements with Legal & General, to provide
services to the customers of L&G Financial Advisers and L&G
Care.
Power
Co-op Power is the biggest energy buying co-operative in the UK.
We use collective buying power to save members money and source
purely green, low-cost energy in an ethical and sustainable
way.
In H1, we welcomed McCarthy Stone - the UK's leading developer
and manager of retirement communities - and Strait Capital
Investment Group to our group, putting us at over 70 members and
providing energy to 20,000 sites, saving an estimated 303,000
tonnes of carbon each year on average across all Co-op Power's
members.
Carbon emissions from our operations is where we have the
greatest responsibility and can make the greatest difference. We
surveyed our Co-op Food supply chain to understand how businesses
feel towards their own climate commitments. We found that 60% did
not feel like they have the resources to hit their net zero targets
and 35% told us they don't have trust in the energy market.
Co-operation is in our DNA and we are keen to share our
expertise with others and to work with our supply chain partners
and other businesses to reduce their costs and carbon
emissions.
We're looking to:
-- Expand the amount of green energy services provided to a
rapidly growing number of UK businesses, including suppliers as
part of Co-op's ten-point climate plan to achieve net zero carbon
emission by 2040; ten years ahead of the Government's own
ambition.
-- Double the amount of Power Purchase Agreement's (PPA's) to
help boost renewable capacity and reduce carbon intensity of
electricity. PPA's are long-term commitments to take a supply of
energy from a particular renewable generator or source. This will
not only guarantee a source of green energy but also guarantee
providence of power, whilst helping to fund future green
projects.
-- Develop a co-operative PPA proposition where multiple
customers join together with Co-op Power to commit to a PPA
difference, helping those who might not be the size or have the
capabilities to do this in house.
By working together, we can help each other to save money, save
on emissions and save the planet.
LOOKING AHEAD
Being Responsive For Our Members
The pandemic has accelerated trends we were already witnessing
in terms of buying habits and behaviours. We must continue to
ensure, therefore, that the products and services provided across
our Food and Life Services businesses reflect the omni-channel
society we live in. The choices we continue to make in support of
our 'bricks and clicks' business model, based on physical sites and
ecommerce, will always be in support of our Vision and Purpose, but
must also ensure we create sustainable member value for the medium
and longer term.
Adapting and innovating in Food
Our Food business is seeing continued challenges to its
performance from external forces that will follow into H2,
including the HGV driver shortage, inflation, rising Covid-19 cases
and the ongoing aftermath of Brexit. Convenience is still key to us
feeding the nation; creating ease for our members aligns with
extending our reach through wholesale and growing online.
We will continue to draw upon our 'Closer' strategy of getting
closer to where customers are, what they need and what they care
about, focusing on expanding reach through our three routes to
market of retail, wholesale and online.
We will roll out our new SAP stock and ordering system to the
remaining product categories as part of our Retail Business
Transformation programme, and will open our biggest depot yet in
Biggleswade next year.
We will also launch new sustainable diet commitments, re-launch
our water commitments and launch new Fairtrade commitments whilst
continuing to deliver on our ten-point climate plan. Our soft
plastics recycling scheme will have a place in every community in
the UK with a fuller roll out well underway before the year is
out.
Investing in technology
We will continue to invest in technology, to remain competitive
but also in acknowledgement of the increasing number of members
choosing to shop online, as a result of the pandemic.
By the end of 2021, 1,600 of our Food stores will have an online
offer with 80% of the UK covered by click and collect and 60%
covered by home delivery. We're expecting sales to be around
GBP200m by the end of the year, up from GBP70m in 2020. We'll be
concentrating on range, experience and service; creating convenient
product bundles as well as picking, packing and dispatching
accurately and on time.
As well as focusing on meeting the requirements set out by the
CMA and FCA, Funeralcare will also seek to offer its clients
greater ease and flexibility online and over the phone, providing
even greater transparency as part of their journey. It will remain
focused on providing exceptional client service and care and
developing its proposition to become more affordable and even more
personalised.
It is clear that the prior investment we made into our bespoke
customer relationship management system for our insurance business
is improving our ability to reach both existing and prospective new
customers with tailored communications, delivered through the right
channels. This will be the cornerstone upon which we will
strengthen our existing relationships but also create new ones into
H2, with partners who want to support our distinctive Insurance
business.
Our Legal Services business will also continue to invest and
develop its digital capabilities and offering, as a client focused
digital first business, to maintain its position as a leader in the
probate market but also accommodate growth into other practice
areas. In particular, with the anticipated end of the furlough
scheme, we are expecting a rise in employment cases in the second
half of the year.
Safer Colleagues, Safer Communities
In July, the House of Commons voted against the amendment to the
Police, Crime, Sentencing and Courts Bill, but committed to
reviewing the legislation at the next stage of the Bill in the
House of Lords - taking us one step closer to getting protection
for all our retail workers.
We'll continue to follow the latest developments and do
everything we can to ensure the safety of our colleagues.
Engaging our members
We're excited to build on the momentum we've established in H1,
in terms of member participation and engagement in our Co-op.
As well as holding the Board to account on its strategy and
commercial performance, our Members' Council plays an important
role in representing the views of our members. Our colleagues and
Executive have regular informal dialogue with different groups of
Council members to ensure that there is member input into our
approach to ethics, sustainability and community. Council has
recently elected Denise Scott-McDonald as its new President and we
look forward to working closely with Denise and her Council
colleagues during the second half of 2021.
We were pleased to see an increase in the number of members
voting in our AGM and National Members' Council and Member
Nominated Director elections, and we continue to work with Council
to explore how we can use new technology to evolve democratic
participation and our AGM to reach a wider audience.
We know members want to get involved with our Co-op in lots of
different ways, so we'll continue to drive further engagement with
our members through our 'Join In' programme of activity. These
informal, online opportunities enable members to shape our approach
across different areas of our Co-op including policy and product
development, campaigning and our community strategy. We've recently
begun to learn more about the diversity of members who participate
in these opportunities and in H2 we'll continue to work with a
group of members who will help to deliver our commitments to
anti-racism and better representation.
In September, a new member incentive programme will go ahead,
with a view to helping us recruit additional new active members by
the end of 2021.
Also, we're planning to launch a range of new member-designed
products during the second half of the year and through 2022; a
testament to the fundamental role our members play in what we do,
as a co-operative.
PRINCIPAL RISKS AND UNCERTAINTIES
Our Board and Risk and Audit Committee regularly review the
principal risks to our business, our position against our risk
appetite, and monitor progress to manage risks within that risk
appetite. Consideration is given to emerging risks and to any
changes in the internal or external environment that could impact
our strategy and how we operate. We regularly update our risks and
responses where required. The Board and Risk and Audit Committee
have reviewed the principal risks and uncertainties faced by our
Co-op.
The risks set out in the 2020 Annual Report and Financial
Statements remain relevant for the first half of 2021.
The pandemic and managing its impact
Category Impacts
-------------- -------------------------------------------------------------
Strategy
& Business * Competitor responses in a recessionary climate and
changing consumer habits as they seek value and
convenience through digital channels
* We are adapting our business strategies and how we
operate to meet this demand
-------------------------------------------------------------
Finance
& Treasury * 2020 saw increased levels of trade in our food and
other businesses, which will not be repeated to the
same degree in the current year
* Deterioration in our Funeral Plan Investment
Portfolio resulting from market volatility
-------------------------------------------------------------
Operational
& Customer * Continuously adapting our processes and procedures to
reflect Government advice, minimising impacts on our
colleagues, customers, operations and suppliers,
wherever possible
* Adapting to colleagues' changing working patterns and
the adoption of a hybrid working model in our support
centres, while ensuring that we maintain our Co-op
culture and productivity
* Supply chain impacted by the shortage of heavy goods
vehicle drivers, potentially leading to reductions in
product availability in our stores. Along with other
retailers and members of the logistics sector, we are
engaging with Defra
-------------------------------------------------------------
Regulatory
& Compliance * Maintaining the safety of our colleagues, members and
customers as restrictions are lifted
-------------------------------------------------------------
Brand &
Reputation * Altered colleague and member expectations of how we
serve and help protect our communities
-------------------------------------------------------------
The pandemic and the management of its impacts on our
colleagues, communities and customers remain a priority. During the
first half of the year we continued to see impacts across our
strategic plans, operations, colleagues and communities. It is
clear we will need to adjust to the situation as it evolves across
the UK, as well as globally, to ensure we operate safely and
effectively.
Trading relationship with the European Union and Northern
Ireland
The signing of the EU-UK Trade and Co-operation Agreement in
December 2020 has, to some extent, clarified our trading
relationship with the European Union. Shortages of products did not
materialise as much as initially feared, with disruption at borders
mainly confined to the effects of the pandemic restrictions on
drivers. There has been some impact on wholesale sales to retailers
in the Republic of Ireland. We continue to focus on reducing the
impact of the significant challenges related to the movement of
products between Great Britain and Northern Ireland, in line with
new regulatory requirements, some of which have not yet been
implemented or even clearly defined.
We are yet to fully understand the broader economic impact on
the UK, and our businesses, of leaving the European Union.
Principal Risks
The principal risks summarised below have the potential to
impact the delivery of our business strategy and our commitment to
creating value for our members and communities.
Risk Risk Description
Change If our plans are not delivered in an effective way, we
may not achieve the planned benefits of our change programmes.
-----------------------------------------------------------------
Competitiveness The competitive and economic landscape in which we operate
and external means that we need to monitor our growth targets, market
environment share and competitor behaviour to remain viable and innovative.
-----------------------------------------------------------------
Brand and We set ourselves high standards for responsible retailing
reputation and service, as well as speaking out on the issues that
matter to our members. If we don't meet those standards,
or fail to demonstrate our difference from our competitors,
there is a potential risk to our reputation.
-----------------------------------------------------------------
Pension obligations The measurement of our Defined Benefit liability is sensitive
to changes in several factors. Adverse movements could
result in lower pension surplus and may need our Co-op
to pay additional contributions.
-----------------------------------------------------------------
IT and cyber We hold data on our colleagues, customers, members and
threats partners. We are reliant on technology to deliver our
business operations so theft of data or a cyber attack
could significantly disrupt our operations.
-----------------------------------------------------------------
People Our ability to attract and retain colleagues with relevant
skills and experience is important to achieving a strong,
competitive Co-op. If we do not continue to recruit talent
and to invest in our colleagues, then it may impact our
operations and our ability to deliver on our strategic
plans.
-----------------------------------------------------------------
Misuse and/or We hold personally identifiable data on our colleagues,
loss of data customers and members. We need to make sure we protect
and manage this data.
-----------------------------------------------------------------
Health and Faced with a rise in violent and abusive crime, and busy
safety, and retail environments, we need processes in place to protect
security our colleagues, members, customers and visitors to our
premises.
-----------------------------------------------------------------
Operational If we are unable to prevent, adapt or respond to a major
resilience failure or external event to a key part of our business,
it could significantly affect the availability of products
and services delivered to our colleagues, customers,
partners and members.
-----------------------------------------------------------------
Regulatory Our Co-op is subject to laws and regulations across its
compliance businesses. Failure to respond to changes in regulations,
or stay compliant, could affect profitability and our
reputation through fines and sanctions from our regulators
and affect our licence to operate.
-----------------------------------------------------------------
Pre-Paid Funeral The measurement of our Pre-Paid Funeral Plan obligations
Plan obligations is sensitive to changes in several factors. Adverse movements
could result in lower than expected funds being available
and the business receiving a lower amount per funeral
or may result in individual contracts becoming onerous.
-----------------------------------------------------------------
Environment The way we choose to run our business operations and
and sustainability the products and services we provide has both social
and environmental impacts and affects the future of our
planet. Failure to run our operations in a more sustainable
manner and ready our Co-op to transition to a greener
economy could contribute to more damage to our environment
and increased financial cost and missed opportunities.
-----------------------------------------------------------------
Emerging risks
As is expected in a business of our size and diversity, we need
to respond to changes in regulations that affect our businesses. We
welcome such changes and the benefits they provide, although the
required changes are uncertain as yet. We're monitoring and
preparing for changes related to:
-- The Government's Health Strategy: we have actively reduced
the fat, sugar and salt content in our own brand products, and we
are monitoring the proposals on legislation in relation to the
pricing of products categorised as having a high fat, sugar and
salt content.
-- Climate-related financial disclosures: The outcome of the
Government's consultation to mandate Taskforce on Climate Related
Disclosures aligned climate-related disclosure for large
organisations by 2022, requiring them to provide better information
to measure and manage climate financial risk.
-- The Financial Reporting Council's response is based on
recommendations coming out of independent reviews by Sir Donald
Brydon, the Competition and Markets Authority and into audit sector
reform. This may bring regulation seeking to strengthen the UK's
corporate governance framework for major companies and the way they
are audited and this may have consequences for our Co-op.
More information on how we manage risk can be found on pages
45-53 of the 2020 Annual Report .
OUR FINANCIAL PERFORMANCE
Summary of financial performance 2021 2020
(*restated)
GBPm GBPm
Revenue 5,616 5,801
---------------------------------------- ------ --------------
Underlying operating profit:
Food 68 175
Wholesale 2 (2)
Funerals 17 21
Legal 2 2
Insurance 7 -
Costs of supporting functions (44) (67)
Other (1) (4)
Total underlying operating profit (a) 51 125
---------------------------------------- ------ --------------
Property revaluations, disposals and
one off items (43) (40)
Operating profit 8 85
---------------------------------------- ------ --------------
Underlying interest (b) (29) (32)
Net underlying lease interest (c) (37) (37)
Net finance (cost) / income on funeral
plans (9) 40
Other non-underlying net interest 12 15
One-off gain on settlement of Group 99 -
Relief Creditor**
Profit before tax 44 71
---------------------------------------- ------ --------------
Tax (7) (51)
Discontinued operations 10 (10)
Profit for the year 47 10
---------------------------------------- ------ --------------
Underlying (loss) / profit before tax
(a)-(b)-(c) (15) 56
---------------------------------------- ------ --------------
* When we announced our full year 2020 results in April of this
year we explained that we had restated our full year 2019
comparative figures following a change to the way that we account
for funeral plans and the Reclaim Fund. In line with this approach
then we have also restated the half year comparative figures in
these Interim financial statements (as they were published before
we revised our accounting policies) to ensure that all our numbers
are now shown on the same basis under the new accounting treatment.
Throughout these financial statements we refer to the comparative
period (being the 26 weeks to 4 July 2020) as being "restated" and
you can find further details on the restatement in Note 14 (Prior
period restatement) in the full Interim Report 2021.
** The one-off gain of GBP99m relates to the settlement of the
Group Relief Creditor owed to the Co-operative Bank PLC when a
settlement of GBP48m was agreed in February 2021 against a
liability of GBP147m. This was disclosed as a post balance sheet
event in Note 34 of the 2020 Annual Report and Accounts.
Our headline performance
Our half year results are significantly impacted by the global
Covid-19 pandemic. This means it is hard to make meaningful
comparisons between the results for this half year and those for
last half year, given the varying stages of lockdown restrictions
that were in place between the two periods. The contrast is most
significant in our Food business and because of this we have
included some additional financial measures in the business
performance commentary below that compares our most recent results
in Food to those in the equivalent period in 2019, which was not
impacted by the pandemic. We've done this to try to provide our
members with extra information that gets beyond the complicated
comparative picture and assesses the underlying performance of
their Co-op against more appropriate comparatives, designed to
supplement rather than replace our standard statutory
reporting.
In the first half of last year, we saw unprecedented levels of
sales in our Food and Wholesale businesses as customers looked to
shop closer to home at their local convenience store. Fuel sales
were significantly down on the previous half year as we were all
encouraged to stay at home and so didn't use our vehicles. In the
first half of this year, grocery sales have since fallen back from
the unusual levels that were seen when the first national lockdown
came into force. Fuel sales on the other hand are up significantly
in comparison following the easing of travel restrictions. Funeral
sales have also reduced in the first half of 2021 in comparison to
those experienced at the height of the pandemic, although there are
now fewer restrictions on the type of service we can offer, whereas
last year our offering had to be limited.
Total Group revenue fell by GBP0.2 billion (3.2%) compared to
the same period last year. We anticipated a reduction in both Food
and Wholesale sales, as we annualised the unusual customer
behaviour at the start of the pandemic, with the year-on-year
change in line with these expectations. Sales (excluding fuel) in
our Food business are down by 2.8% and those in Wholesale down by
14.2%. This decrease in revenue flowed through to our underlying
operating profit which is down GBP74 million to GBP51 million. This
is mainly driven by the annualisation of pandemic customer
behaviour, after an unprecedented year last year, and our strategic
investments in our Food business. It is in part offset by the new
income stream from our recently launched Insurance (marketing and
distribution) business and reduced costs from support functions.
After charging underlying interest on our bank borrowings and
leases we made an underlying loss of GBP15 million compared to a
profit of GBP56 million in the first half of 2020.
Our Operating Profit of GBP8 million is down GBP77 million on
the prior period figure of GBP85m and reflects the comparative
decrease in underlying profitability driven by the impact of
Covid-19 in the first half of 2020 and comparatively higher
investment in H1 2021.
Profit before tax (PBT) of GBP44 million is GBP27 million lower
than last year and includes a GBP49 million relative adverse net
interest charge on funeral plans (the charge in the current period
is GBP9 million, whereas it was a gain of GBP40 million in the
comparative period). The comparative swing reflects lower
investment returns on funeral plan investments and follows the
significant change in how we account for funeral plans that we
adopted in 2020. Our PBT also includes a significant benefit of
GBP82 million of net gains from one-off items which we explain in
more detail below (comprising a GBP17 million charge within
Operating profit and a GBP99 million gain in Finance income).
One-off items do not form part of our underlying profit but are
included in our profit before tax figures. We show how we adjust
profit before tax to get to our underlying profit before tax in
Note 1 of our interim financial statements.
Profit after tax from continuing operations is up by GBP17
million at GBP37 million driven by a particularly high relative tax
charge in the comparative period.
Our profits are shown after deducting the amount our members
have earned for themselves and their communities which totalled
GBP21 million in the first half of the year (2020: GBP33 million)
and our Operating profit also includes GBP20 million of Government
assistance (H1 2020: GBP33 million) which we benefitted from in the
first three months of the year through business rates relief.
As noted in our 2020 Annual Report, our Board agreed to repay
the GBP16m of furlough payments that we received in 2020. These
repayments have been made in 2021 and charged to Operating profit
in the current period results and we have not received any further
furlough support in 2021.
How our businesses have performed
Overall Food sales totalled GBP3.9 billion reflecting a fall of
GBP60 million in comparison to 2020. Sales of fuel within that
total increased by 18% (an increase of GBP33 million). As noted
above these figures compare against the particularly strong food
sales in the period from April to June last year at the start of
the pandemic as our customers shopped more and closer to home in
their local Co-op Food store and fuel sales fell away as we all
stayed at home. The first half of 2021 saw food sales adjust
following the unprecedented circumstances throughout 2020, whilst
fuel sales have also begun to climb. Throughout the first half we
have traded favourably to our forecasts - our like-for-like sales
are 3.1% down on the comparative period, but our two year
like-for-like sales growth is 5.2%. This compares the first half of
2021 against the first half of 2019 on a like-for-like basis.
We have continued to invest significantly in our business as
planned, and this has contributed to a 62% reduction in underlying
profits down to GBP68 million from GBP175 million. This includes
continued investment in price, customer proposition and range, as
well as considerable expenditure on our business processes and
infrastructure to ensure our operations are optimised for the
future. We have also invested in our colleagues through our
commitments on the Real Living Wage and we have continued to incur
ongoing costs to keep our customers and colleagues safe throughout
the pandemic. As noted above, our first half results also include
the repayment of the GBP16 million of furlough assistance we
received in 2020.
Our Wholesale business generated sales of GBP0.7 billion, a 14%
decrease on 2020. As with our Food business in the prior year, we
saw customers move to local Nisa stores and transfer trade from
pubs and restaurants with like-for-like sales growth of 18%. The
decrease in the first half of this year follows the unprecedented
circumstances of last year and our like-for-like sales versus the
first half of 2020 are down 7%. However, this still reflects a
solid performance in light of some considerable headwinds,
including the loss of MRG as a customer as well as the impact of
Brexit on our customer base in the Republic of Ireland. Recruitment
of new members remains strong. Nisa saw an increase of more than
11% on sales on a two year like-for-like basis. We recorded a
profit in the first half of 2021 of GBP2 million which is GBP9
million better than 2019 and GBP4 million better than 2020. This is
driven by the underlying sales growth and new partner recruitment
and we continue to drive efficiency in our model through the wider
Co-op Group buying benefits and other means.
Our Funeralcare business experienced a 17% decrease in volumes
in comparison to last year following notably fewer deaths in the
first half of 2021. However, the number of funerals conducted is up
by 1% on 2019 levels. Underlying profits decreased by 19% to GBP17
million from GBP21 million in 2020 with strong cost control
reducing the impact of lower sales. Sales of funeral plans remained
strong in the first half increasing by 24% on the comparative
period.
Our Legal Services business continues to perform well with sales
up by GBP1 million to GBP20 million and profits consistent at GBP2
million. Our newly launched Insurance business (marketing and
distribution) also performed strongly with income of GBP18 million
and profit of GBP7 million following the completion of the sale of
our insurance underwriting business in December 2020.
Costs for our Central Supporting functions decreased by GBP23
million to GBP44 million. This mainly reflects the relative savings
generated by our target operating model programme and the
associated costs to achieve that transition in the comparative
period.
The final run-off of costs and income from the sale of our
insurance underwriting business (which completed in December 2020)
are shown in Discontinued Operations and as part of the sale
agreement our Co-op has continued to supply the insurance
underwriting business with certain agreed services in the first
half of 2021 under a service agreement. The recorded profit of
GBP10 million in Discontinued Operations mainly reflects payments
received in respect of a legal claim.
Disposals, property valuation gains and one-off items
The table below shows the one-off items, disposals and property
valuation gains in the first half of the year (losses are shown in
brackets):
2021 2020
GBPm GBPm
Property and business disposals and
closures (26) (39)
Change in value of investment properties - -
One off items (17) (1)
------ ------
Total (43) (40)
------------------------------------------ ------ ------
The loss on disposal of GBP26 million in the current period
mainly relates to the disposal or closure of individual Food stores
and non-trading properties and includes GBP14 million of impairment
charges (2020: GBP21 million). The comparative figure included a
loss of GBP16 million relating to the sale of 100 funerals branches
and associated write down of assets and closure provisions.
At the half year, we have reviewed our trading sites in Food and
Funeralcare for potential impairment and booked GBP4 million (2020:
GBP11 million) of asset impairment write downs on loss making or
partially profitable sites where forecast trading is not expected
to support the asset values. Careful judgement has been applied in
relation to the future trading expectations of those stores that
have been particularly affected by the impact of Covid-19 on our
customers' shopping habits (particularly city centre locations) and
we'll keep these under close review as lockdown restrictions
continue to ease. We have also reviewed the 2021 investment
property portfolio and are confident their value is supported which
remains in line with the prior year.
We've recorded a significant one-off charge of GBP17 million
reflecting the costs of some organisational changes we are making
to colleague structures in our Food stores (under the Fit for
Future programme) to ensure we are set up in the best way to
efficiently serve our customers.
Financing and debt
Our financing costs are shown in the table below (costs are
shown in brackets):
2021 2020
GBPm GBPm
Underlying bank and loan interest payable (29) (32)
Net underlying lease interest (37) (37)
Total underlying interest (66) (69)
------------------------------------------- ------ ------
Net pension finance income 14 19
Net finance (costs) / income on funeral
plans (9) 40
Fair value movement on foreign exchange
contracts 3 -
Fair value movement on quoted debt and
swaps (3) (2)
Non-underlying finance interest (2) (2)
One-off gain on settlement of Group 99
Relief Creditor -
Non-underlying interest income / (costs) 102 55
------------------------------------------- ------ ------
Our financing costs from our borrowings and lease commitments
were broadly consistent with the prior period with lower underlying
interest reflecting lower debt across the period as we repaid the
remaining GBP176 million balance of the 6.875% 2020 Eurobonds on 8
July 2020. Net pension income at GBP14 million is down from GBP19
million due to the comparative reduction in the discount rate at
the start of the year.
Following the change in accounting treatment for revenue, we now
see a net interest income or charge on funeral plans on the face of
our income statement. In the first half of 2021 the returns on
funeral plan investments were outweighed by the interest we
accrued, so we show a net finance expense of GBP9 million. In the
prior period first half, investment gains outweighed the interest
we accrued so we showed a gain in finance income.
We've also recorded a significant one-off gain of GBP99 million
following the settlement of the Group Relief Creditor owed to the
Co-operative Bank PLC when a settlement of GBP48 million was agreed
in February 2021 against a liability of GBP147 million. This was
disclosed as a post balance sheet event in Note 34 of our 2020
Annual Report and Accounts and is shown as a finance income in our
Income statement.
Our total net debt of GBP2.2 billion at the end of the period,
including the IFRS 16 lease liability of GBP1.5 billion, was up
GBP199 million from the start of the year. Excluding the lease
liability, net debt was GBP712 million, an increase of GBP162
million from year end. This is primarily driven by a reduced cash
position (down from GBP269 million to GBP130 million). This
reflects the trading results for the first half, ongoing investment
in our businesses and includes the GBP48 million settlement of the
Group Relief Creditor and repayment of GBP16 million furlough
assistance received in 2020 but repaid in 2021.
Our loans and borrowings are consistent with the year-end
position and overall indebtedness remains below the ceiling we set
ourselves.
Tax
The half year tax charge of GBP7 million represents an effective
tax rate of 16% on a profit before tax of GBP44m. The tax charge
for the half year reflects the expected effective tax rate based on
our full year forecast and includes the impact of the change in the
corporation tax rate (from 19% to 25%) that was announced in the
budget in March. The rate change has a significant impact on our
deferred tax assets and liabilities with a GBP35 million increase
to deferred tax liabilities on our pension fund surplus being
reflected in other comprehensive income.
We do not have a current year corporation tax charge or
liability because of available tax reliefs and losses that offset
taxable profits.
The GBP51 million tax charge in the prior period was largely due
to specific deferred tax items including a GBP16 million impact due
to the change in corporation tax rate from 17% to 19% introduced in
the March 2020 Budget.
Our balance sheet
Net assets have decreased by GBP0.2 billion from the start of
the year. The main movements include a reduction in the net pension
surplus of GBP0.1 billion, a reduced cash position as noted above,
offset by the reduction in non-current payables following the early
settlement of the Group Relief Creditor due to the Co-operative
Bank PLC. As outlined above our net deferred tax liability has also
increased significantly following the Chancellor's announcement to
change the tax rate.
The actuarial surplus on our largest pensions scheme, PACE,
decreased by GBP0.1 billion with asset values falling by GBP0.5
billion whilst liabilities decreased by only GBP0.4 billion. Asset
values have fallen as investment returns have underperformed
against the discount rate which has been partially offset by an
increase in the discount rate which reduces the present value of
the scheme obligations.
Following the completion of the sale of our Insurance
underwriting business in December 2020, the assets and liabilities
of that business are no longer shown on our balance sheet
(previously they were included within Held for Sale items).
Furthermore, we no longer consolidate the Reclaim Fund Limited
('RFL') following a change in accounting treatment (as outlined in
Note 14) and the sale of RFL to HM Treasury on 30 March 2021.
Looking ahead
The financial results for the first half of 2021 represent a
complicated picture when compared to the first half of 2020, due to
the unprecedented circumstances that have played out through both
periods from the impact of the global Covid-19 pandemic.
However, it is clear that our customer offering and investments
are more relevant than ever and our dedicated colleagues have
helped us deliver a solid set of results despite the very
challenging operational and economic conditions we faced.
The fact that we have been able to cope with such large scale
challenges demonstrates that we have both a robust strategy and
resilient business model and as the world continues to adapt to the
new normal, we are confident we can continue to succeed and deliver
against our business objectives and face into any economic and
market uncertainties.
Condensed Consolidated Income Statement
for the 26 weeks ended 3 July
2021
What does this show? Our income statement shows our income for
the period less our costs. The result is the profit or loss that
we've made.
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 2021 4 July 2 January
2020 2021
Continuing Operations (unaudited) (unaudited (audited)
& restated*)
Notes GBPm GBPm GBPm
----------------------------------- ------ ------------ ------------- ----------
Revenue 1 5,616 5,801 11,472
Operating
expenses (5,613) (5,723) (11,277)
Other income 5 7 12
-------------------------------------- ------ ------------ ------------- ----------
Operating
profit 1 8 85 207
-------------------------------------- ------ ------------ ------------- ----------
Net finance income / (costs)
excluding funeral plans 3, 4 45 (54) (108)
Net finance (costs) / income
on funeral plans 3, 4 (9) 40 28
-------------------------------------- ------ ------------ ------------- ----------
Profit before
tax 44 71 127
-------------------------------------- ------ ------------ ------------- ----------
Taxation 5 (7) (51) (55)
Profit from continuing
operations 37 20 72
------------------------------------ ------ ------------ ------------- ----------
Discontinued Operation
------------------------------------ ------ ------------ ------------- ----------
Profit / (loss) on discontinued
operation, net of tax 6 10 (10) 5
-------------------------------------- ------------ ----------
Profit for the period (all attributable
to members of the Society) 47 10 77
---------------------------------------------- ------------ ------------- ----------
Non-GAAP measure: underlying profit / (loss)
before tax **
What does this show? The table below adjusts the operating profit
figure shown in the consolidated income statement above by taking
out items that are not generated by our day-to-day trading. This
makes it easier to see how our business is performing. We also take
off the underlying interest we pay (being the day-to-day interest
on our bank borrowings and lease liabilities).
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 2021 4 July 2 January
2020 2021
Continuing Operations (unaudited) (unaudited (audited)
& restated*)
Notes GBPm GBPm GBPm
----------------------------------- ------ ------------ ------------- ----------
Operating profit
(as above) 8 85 207
Add back
/ (deduct):
One-off
items 1 17 1 (12)
Property, business disposals
and closures 1 26 39 41
Change in value of investment
properties - - (1)
Underlying operating
profit 51 125 235
------------------------------------ ------ ------------ ------------- ----------
Less underlying loan interest
payable 4 (29) (32) (63)
Less underlying net interest
expense on lease liabilities 3, 4 (37) (37) (72)
Underlying (loss) / profit
before tax (15) 56 100
-------------------------------------- ------ ------------ ------------- ----------
The accompanying notes form an integral part
of these financial statements.
* In-line with our full year 2020 financial statements we have restated
our comparative results for the 26 weeks ended 4 July 2020 as we
have changed the way that we account for revenue on funeral plans.
See Note 14 for details of the restatement.
** Refer to note 1 for a definition of underlying profit / (loss)
before tax. Further details on the Group's alternative performance
measures (APMs) is given in the Jargon Buster section.
Condensed Consolidated Statement of Comprehensive Income
for the 26 weeks ended 3 July
2021
What does this show? Our statement of comprehensive income includes
other income and costs that are not included in the consolidated income
statement. These are usually revaluations of property, pension schemes
and some of our financial investments.
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 2021 4 July 2020 2 January
2021
(unaudited) (unaudited (audited)
& restated*)
Notes GBPm GBPm GBPm
--------------------------------------- ------ ------------ ------------- ----------
Profit for the period 47 10 77
------------------------------------------- ------ ------------ ------------- ----------
Items that will never be reclassified
to the income statement:
Remeasurement (losses) / gains
on employee pension schemes 7 (95) 133 (83)
Related tax on items above 5 (17) (40) -
---------------------------------------- ------ ------------ ------------- ----------
(112) 93 (83)
--------------------------------------- ------ ------------ ------------- ----------
Items that are or may be reclassified
to the income statement:
Gains less losses on fair value
of insurance assets** - 4 6
Fair value losses on insurance assets
transferred to the income statement** - - (2)
Fair value losses on insurance assets
transferred to the income statement
on disposal of subsidiary** - - (18)
Related tax on items above 5 - (1) 3
---------------------------------------- ------ ------------ ------------- ----------
- 3 (11)
--------------------------------------- ------ ------------ ------------- ----------
Other comprehensive (loss) / income
for the period net of tax (112) 96 (94)
--------------------------------------------------- ------------ ------------- ----------
Total comprehensive (loss) / income
for the period
(all attributable to members of the
Society) (65) 106 (17)
--------------------------------------------------- ------------ ------------- ----------
The accompanying notes form an integral part of these financial
statements.
* In-line with our full year 2020 financial statements we have restated
our comparative results for the 26 weeks ended 4 July 2020 as we have
changed the way that we account for revenue on funeral plans. See
Note 14 for details of the restatement.
** The sale of our Insurance underwriting business completed on 3
December 2020.
Condensed Consolidated Balance Sheet
as at 3 July 2021
What does this show? Our balance sheet is a snapshot of our financial
position as at 3 July 2021. It shows the assets we have and the
amounts we owe.
As at 3 July As at 4 July As at 2 January
2021 2020 2021
(unaudited) (unaudited (audited)
&
restated*)
Notes GBPm GBPm GBPm
---------------------------- ---- ---- ---- ------ ------------- ------------- ----------------
Non-current assets
Property, plant and equipment 1,956 1,941 1,955
Right-of-use assets 1,063 1,012 1,031
Goodwill and intangible
assets 1,093 1,104 1,105
Investment properties 14 16 17
Investments in associates
and joint ventures 4 3 3
Funeral plan investments 12 1,344 1,309 1,331
Derivatives 2 - 3
Pension assets 7 1,799 2,127 1,931
Trade and other receivables 224 143 203
Finance lease receivables 30 36 34
Contract assets (funeral
plans) 62 55 60
Total non-current assets 7,591 7,746 7,673
---------------------------------- --------- ------ ------------- ------------- ----------------
Current assets
Inventories 454 456 460
Trade and other receivables 556 463 546
Finance lease receivables 11 10 11
Derivatives 3 - -
Contract assets (funeral
plans) 6 5 6
Cash and cash equivalents 130 464 269
Assets held for sale 8 2 982 21
Total current assets 1,162 2,380 1,313
---------------------------------------------- ------ ------------- ------------- ----------------
Total assets 8,753 10,126 8,986
---------------------------------------------- ------ ------------- ------------- ----------------
Non-current liabilities
Interest-bearing loans and
borrowings 9 803 802 803
Lease liabilities 9 1,265 1,253 1,234
Trade and other payables 55 163 214
Contract liabilities (funeral
plans) 1,606 1,506 1,570
Provisions 96 91 85
Derivatives 1 3 1
Pension liabilities 7 13 88 77
Deferred tax liabilities 5 185 200 161
Total non-current liabilities 4,024 4,106 4,145
---------------------------------- --------- ------ ------------- ------------- ----------------
Current liabilities
Interest-bearing loans and
borrowings 9 39 217 16
Lease liabilities 9 197 182 191
Trade and other payables 1,669 1,703 1,747
Contract liabilities (funeral
plans) 176 163 167
Derivatives 2 - -
Provisions 42 64 46
Liabilities held for sale 8 - 900 5
Total current liabilities 2,125 3,229 2,172
---------------------------------------------- ------ ------------- ------------- ----------------
Total liabilities 6,149 7,335 6,317
---------------------------------------------- ------ ------------- ------------- ----------------
Equity
Members' share capital 74 73 74
Retained earnings 2,529 2,700 2,594
Other reserves 1 18 1
---------------------------------------------- ------ ------------- ----------------
Total equity 2,604 2,791 2,669
---------------------------------------------- ------ ------------- ------------- ----------------
Total equity and liabilities 8,753 10,126 8,986
---------------------------------- --------- ------ ------------- ------------- ----------------
The accompanying notes form an integral part of these financial
statements.
* Refer to Note 14 for details
of the restatement.
Condensed Consolidated Statement of Changes in Equity
for the 26 weeks ended 3 July 2021
What does this show? Our statement of changes in equity shows how
our net assets have changed during the year.
Members'
For the 26 weeks ended 3 July 2021 Share Retained Other Total
(unaudited) capital earnings reserves equity
Notes GBPm GBPm GBPm GBPm
---------------------------------------- ------ --------- ---------- ---------- --------
Balance at 2 January 2021 74 2,594 1 2,669
----------------------------------------- ------ --------- ---------- ---------- --------
Profit for the period - 47 - 47
----------------------------------------- ------ --------- ---------- ---------- --------
Other comprehensive income / (losses):
Remeasurement gains on employee
pension schemes 7 - (95) - (95)
Tax on items taken directly to other
comprehensive income 5 - (17) - (17)
------------------------------------------ ------ --------- ---------- ----------
Total other comprehensive loss - (112) - (112)
------------------------------------------ ------ --------- ---------- ---------- --------
Balance at 3 July 2021 74 2,529 1 2,604
------------------------------------------ ------ --------- ---------- ---------- --------
For the 26 weeks ended 4 July 2020 Notes
(unaudited & restated*)
------------------------------------------ ------ --------- ---------- ---------- --------
Balance at 4 January 2020 73 2,597 15 2,685
----------------------------------------- ------ --------- ---------- ---------- --------
Profit for the period - 10 - 10
----------------------------------------- ------ --------- ---------- ---------- --------
Other comprehensive income / (losses):
Remeasurement gains on employee
pension schemes 7 - 133 - 133
Gains less losses on fair value
of insurance assets - - 4 4
Tax on items taken directly to other
comprehensive income - (40) (1) (41)
------------------------------------------ ------ --------- ---------- ---------- --------
Total other comprehensive income: - 93 3 96
------------------------------------------ ------ --------- ---------- ---------- --------
Balance at 4 July 2020 73 2,700 18 2,791
----------------------------------------- ------ --------- ---------- ---------- --------
* In-line with our full year 2020 financial statements we have restated
our comparative results for the 26 weeks ended 4 July 2020 as we
have changed the way that we account for revenue on funeral plans.
See Note 14 for details of the restatement.
For the 52 weeks ended 2 January Notes
2021 (audited)
Balance at 4 January 2020 73 2,597 15 2,685
----------------------------------------- ------ --------- ---------- ---------- --------
Profit for the period - 77 - 77
----------------------------------------- ------ --------- ---------- ---------- --------
Other comprehensive income / (losses):
Remeasurement losses on employee
pension schemes 7 - (83) - (83)
Gains less losses on fair value
of insurance assets - - 6 6
Fair value losses on insurance assets
transferred to the income statement - - (2) (2)
Fair value losses on insurance assets
transferred to the income statement on
disposal of a subsidiary - - (18) (18)
Tax on items taken directly to other
comprehensive income - 3 - 3
------------------------------------------ ------ --------- ---------- ---------- --------
Total other comprehensive losses: - (80) (14) (94)
------------------------------------------ ------ --------- ---------- ---------- --------
Contributions by and distributions
to members:
========================================== ====== ========= ========== ========== ========
Shares issued less shares
withdrawn 1 - - 1
Balance at 2 January 2021 74 2,594 1 2,669
========================================== ====== ========= ========== ========== ========
The accompanying notes on form an integral part of these financial
statements.
Condensed Consolidated Statement of Cash Flows
for the 26 weeks ended 3 July
2021
What does this show? Our statement of cash flows shows the cash
coming in and out during the period. It splits the cash by type
of activity - showing how we've generated cash and then how we've
spent it.
As at 3 July As at 4 As at 2 January
July
2021 2020 2021
(unaudited) (unaudited (audited)
&
restated*)
Notes GBPm GBPm GBPm
------------------------------------ ---- ---- ------ ------------- ------------ ----------------
Net cash from operating activities 10 162 448 672
------------------------------------------ ---- ------ ------------- ------------ ----------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (150) (102) (253)
Purchase of intangible assets (11) (28) (60)
Proceeds from sale of property,
plant and equipment 19 10 35
Acquisition of businesses,
net of cash acquired (26) (27) (31)
Disposal of business 6 - 104
Payments to funds for pre-paid
funeral plans (42) (38) (86)
Receipts from funds for pre-paid
funeral plans performed and cancelled 54 63 107
-------------------------------------------------------- ------------- ------------ ----------------
Net cash used in investing
activities (150) (122) (184)
------------------------------------------ ---- ------ ------------- ------------ ----------------
Cash flows from financing
activities
Interest paid on borrowings (10) (16) (79)
Interest paid on lease liabilities (39) (36) (77)
Payments and interest received
on subleases 5 3 3
Interest received on deposits - 1 1
Settlement of Group Relief Creditor
owed to The Co-operative Bank Plc (48) - -
Issue / (repayment) of corporate
investor shares 9 6 6 (1)
Repayment of borrowings 9 - (70) (246)
Payment of lease liabilities (65) (54) (128)
------------------------------------------------ ------ ------------- ------------ ----------------
Net cash used in financing
activities (151) (166) (527)
------------------------------------------------ ------ ------------- ------------ ----------------
Net increase / (decrease) in
cash and cash equivalents (139) 160 (39)
Net cash and overdraft balances
transferred to held for sale - (4) -
Cash and cash equivalents
at beginning of period 269 308 308
------------------------------------------ ---- ------ ------------- ------------ ----------------
Cash and cash equivalents
at end of period 130 464 269
------------------------------------------ ---- ------ ------------- ------------ ----------------
Analysis of cash and cash
equivalents
Cash and cash equivalents
per balance sheet 130 464 269
------------------------------------------ ---- ------ ------------- ------------ ----------------
The accompanying notes on form an integral part of these financial
statements. The balances above include cashflows from Discontinued
operations.
* In-line with our full year 2020 financial statements we have restated
our comparative results for the 26 weeks ended 4 July 2020 as we
have changed the way that we account for revenue on funeral plans.
See Note 14 for details of the restatement.
Group Net Debt As at 3 July As at 4 As at 2 January
July
2021 2020 2021
(unaudited) (unaudited (audited)
&
Notes restated*)
---- ---- ------ ------------- ------------
Interest-bearing loans and
borrowings:
- current (39) (217) (16)
- non-current (803) (802) (803)
------------------------------------------ ---- ------ ------------- ------------ ----------------
Total Interest-bearing loans
and borrowings (842) (1,019) (819)
------------------------------------------ ---- ------ ------------- ------------ ----------------
Lease liabilities:
- current (197) (182) (191)
- non-current (1,265) (1,253) (1,234)
Total lease liabilities (1,462) (1,435) (1,425)
------------------------------------------------ ------ ------------- ------------ ----------------
Total Debt (2,304) (2,454) (2,244)
------------------------------------------------ ------ ------------- ------------ ----------------
- Group cash 130 464 269
------------------------------------------ ------------ ------------- ------------ ----------------
Group Net Debt (2,174) (1,990) (1,975)
------------------------------------------------ ------ ------------- ------------ ----------------
Add back fair value / amortised
cost adjustment 9 34 30 34
------------------------------------------ ---- ------ ------------- ------------ ----------------
Group Net Debt (pre fair value
/ amortised cost adjustment) 9 (2,140) (1,960) (1,941)
------------------------------------------------ ------ ------------- ------------ ----------------
Group Net Debt (interest bearing
loans and borrowings only) (712) (555) (550)
-------------------------------------------------------- ------------- ------------ ----------------
Add back fair value / amortised
cost adjustment 9 34 30 34
------------------------------------------ ---- ------ ------------- ------------ ----------------
Group Net Debt (interest bearing
loans and borrowings only and
pre fair value / amortised cost
adjustment) 9 (678) (525) (516)
------------------------------------------------ ------ ------------- ------------ ----------------
Notes to the interim financial statements
1 Operating segments
What does this show? This note shows how our different businesses
have performed. This is how we report and monitor our performance
internally. These are the numbers that our Board reviews during the
year.
26 weeks ended 3 July
2021 (unaudited) Underlying
Property Change
Revenue segment and in
value
from operating One-off business of Operating
profit profit
external / (loss) Items disposals investment /
customers (b) (b) (i) (b) (ii) properties (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---- ------------ --------------- --- ------- ------ ----------- ----------------- -------------
Food 3,860 68 (17) (26) - 25
Wholesale 688 2 - - - 2
Funerals 142 17 - (1) - 16
Legal 20 2 - - - 2
Insurance (a) 18 7 - - - 7
Other businesses (d) 1 (1) - (1) - (2)
Federal (e) 887 - - - - -
Costs from supporting
functions - (44) - 2 - (42)
------------------------------ ---- ----------- --------------- --- ------- ------ ----------- ----------------- -------------
Total 5,616 51 (17) (26) - 8
------------------------------ ---- ----------- --------------- --- ------- ------ ----------- ----------------- -------------
26 weeks ended 4 July
2020 (unaudited and
restated - see (a) below) Underlying
Property Change
Revenue segment and in
value
from operating One-off business of Operating
profit profit
external / (loss) Items disposals investment /
customers (b) (b) (i) (b) (ii) properties (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---- ------------ --------------- --- ------- ------ ----------- ----------------- -------------
Food 3,920 175 - (12) - 163
Wholesale 801 (2) - - - (2)
Funerals 152 21 - (18) - 3
Legal 19 2 - - - 2
Insurance (a) - - - - - -
Other businesses (d) 2 (4) - - - (4)
Federal (e) 907 - - - - -
Costs from supporting
functions - (67) (1) (9) - (77)
------------------------------ ---- ----------- --------------- --- ------- ------ ----------- ----------------- -------------
Total 5,801 125 (1) (39) - 85
------------------------------ ---- ----------- --------------- --- ------- ------ ----------- ----------------- -------------
* Refer to Note 14 for details
of the restatement.
52 weeks ended 2 January
2021 (audited) Underlying
Property Change
Revenue segment and in
value
from operating One-off business of Operating
profit profit
external / (loss) Items disposals investment /
customers (b) (b) (i) (b) (ii) properties (loss)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---- ------------ --------------- --- ------- ------ ----------- ----------------- -------------
Food 7,765 350 15 (49) - 316
Wholesale 1,577 6 - - - 6
Funerals 272 16 - (18) - (2)
Legal 37 4 - - - 4
Insurance (a) 6 (2) - - - (2)
Other businesses (d) 2 (9) - (1) - (10)
Federal (e) 1,813 - - - - -
Costs from supporting
functions - (130) (3) 27 1 (105)
------------------------------ ---- ----------- --------------- --- ------- ------ ----------- ----------------- -------------
Total 11,472 235 12 (41) 1 207
------------------------------ ---- ----------- --------------- --- ------- ------ ----------- ----------------- -------------
a) In line with our 2020 year-end accounts the comparative results
for the 26 weeks ended 4 July 2020 have been restated following a
change in the way that we account for funeral plans. See Note 14
for further details of the restatement. Furthermore, the results
of our Insurance business (marketing and distribution) are now reported
as a separate operating segment in the tables above in both the current
period and the comparative periods being the 52 weeks ended 2 January
2021 and 26 weeks ended 4 July 2020 (previously the results were
reported within Other businesses). This is in-line with the way that
information is now reported to our Board and follows the sale of
our insurance underwriting business in December 2020 (the results
of which had been reported in Discontinued Operations from 2018 and
so were not shown in the segmental tables thereafter).
b) Underlying segment operating profit / (loss) is a non-GAAP measure
of segment operating profit / (loss) before the impact of property
and business disposals (including impairment of non current assets
within our businesses), the change in the value of investment properties
and one-off items. The difference between underlying segment operating
profit / (loss) and operating profit / (loss) includes:
i) One-off items comprises a charge of GBP17m (2020: GBPnil) relating
to organisational changes to colleague structures within our food
store teams (under the Fit for Future programme).
ii) Losses from property and business disposals of GBP26m (2020:
GBP39m loss) - see table below for details.
c) Operating profit for the 26 weeks ended 3 July 2021 includes GBP20m
of government assistance received through business rates relief in
the first quarter of 2021 and no employee furlough payments have
been received in 2021 (for the 52 weeks ended 2 January 2021 equivalent
figures were GBP16m of employee furlough payments and GBP66m of business
rates relief). These amounts have been netted against relevant cost
lines in operating profit. As noted in our 2020 financial statements,
Co-op has repaid the GBP16m it received in furlough payments in 2020
during the first half of 2021.
d) The 'Other businesses' segment includes activities which are not
reportable per IFRS 8. In the current and comparative period then
this mainly comprises the results of Co-op Health which was sold
on 6 April 2021. As noted in a) the results of our Insurance business
(marketing and distribution services excluding our underwriting business
CISGIL) had previously been reported within Other businesses but
are now shown in their own segment having reached appropriate maturity
following the sale of CISGIL in December 2020.
e) Federal relates to the activities of a joint buying group that
is operated by the Group for other independent co-operative societies.
This is run on a cost recovery basis and therefore no profit is derived
from its activities.
f) A reconciliation between underlying segment operating profit and
profit before tax is provided below:
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 4 July 2 January
2020
2021 (unaudited 2021
&
(unaudited) restated*) (audited)
GBPm GBPm GBPm
Notes
------------------------------------- ----------- ---- --- --------- ------- ------ ---- ----- -------- ------- -----
Underlying operating profit 51 125 235
Underlying loan interest payable 4 (29) (32) (63)
Underlying net interest expense 3,
on lease liabilities 4 (37) (37) (72)
Underlying (loss) / profit
before tax (15) 56 100
One-off items 1 (17) (1) 12
Loss on property, business disposals
and closures (see below) 1 (26) (39) (41)
Change in value of investment
properties - - 1
Finance income (excluding any lease
interest or fair value movement on
funeral plans) 3 17 19 41
One-off gain on settlement of Group
Relief Creditor owed to The Co-operative
Bank Plc** 3 99 - -
Unrealised fair value movement
of funeral plan investments 3 25 63 81
Discounting on funeral plan
debtors 4 (5) 7 7
Interest accruing on funeral
plan liabilities 4 (29) (30) (60)
Other non-cash finance costs 4 (5) (4) (14)
Profit before tax 44 71 127
* Refer to Note 14 for details of the restatement.
** The one-off gain of GBP99m relates to the settlement of the Group
Relief Creditor owed to the Co-operative Bank Plc when a settlement
of GBP48m was agreed in February 2021 against a liability of GBP147m.
This was disclosed as a post balance sheet event in Note 34 of the
2020 Annual Report and Accounts. The gain is shown in Finance Income
(see Note 3).
Losses from property and business 26 weeks 26 weeks 52 weeks
disposals and closures and impairment
on non-current assets
ended ended ended
3 July 4 July 2 January
2020
2021 (unaudited 2021
&
(unaudited) restated*) (audited)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- ----------- ---- --- ------- ------ ---- ----- -------- ------- -----
Disposals, closures and onerous
contracts
- proceeds 25 10 35
- less net book value written
off (31) (2) (23)
- provisions recognised (6) (26) (17)
(12) (18) (5)
Impairment of property, plant and
equipment, right-of-use assets and
goodwill (14) (21) (36)
Total (26) (39) (41)
Impairment
The Group reviews the carrying amounts of its property, plant and
equipment, right-of-use assets, intangible assets and goodwill
to determine whether there is any indication that those assets
have suffered an impairment loss.
This review is performed annually or in the event where indicators
of impairment are present. At 2 January 2021, the Group considered
whether the COVID-19 pandemic and the accompanying economic uncertainty
had the potential to represent a significant impairment indicator.
It was felt that despite additional associated costs of responding
to the pandemic, which were expected to be temporary, the Group's
main business areas had proven resilient and the performance of
the Group's cash-generating units remained strong. Therefore, management
concluded that the impact of COVID-19 on the longer term outlook
for these cash-generating units did not constitute an indicator
of significant impairment and hence a full impairment test across
all CGUs was not required. This judgement is unchanged as at 3
July 2021.
The Group has performed impairment testing at 3 July 2021 for
CGUs where there are other indicators of impairment. In general
this relates to when the CGU either has been loss making in the
previous 12 months or is forecasted to be loss making in the next
12 months.
The methodology for our impairment reviews is consistent with
the methodology disclosed in the 2020 annual report. This methodology
is summarised in the table below:
Assumption Food Segment Funeral Segment
Structure Each individual food store A CGU is deemed to be a local
of a CGU is deemed to be an individual network of interdependent
CGU. branches, known as a Funeralcare
Hub.
Cash flow Future cash flows derived Derived from Board approved
years / assumptions using historical store performance four-year plan cash flow
adjusted for expected growth projections.
in sales and/or costs.
These cash flows are extrapolated
These forecasts are extrapolated over the remaining lease
over a period of 4 years term for leasehold properties
and then subject to a long or into perpetuity for freehold
term growth rate of 0% (2020: properties.
0%).
Perpetuities included in
Where lease terms are shorter cash flows where the Hub
than this, the remaining is expected to be operational
lease terms have been used. beyond its current lease
terms.
Perpetuities are included
in cash flows where stores A growth rate of 0% (2020:
are expected to be operated 0%) is applied beyond Board
beyond their current lease approved four-year plan horizon.
term.
Cash flows include estimated
store capital maintenance
costs based on the square
footage of the store.
Covid considerations Store cash flows observed The impact of Covid-19, specifically
over the last 12 months have the impact on future average
been heavily impacted by selling price movements,
Covid-19 trading conditions. funeral volume assumptions
This has resulted in a number and payroll costs assumptions
of stores seeing their profitability are embedded within the Funeralcare
levels fall significantly four-year plan approved by
due to Covid-19 enforced the Board.
lockdown restrictions, particularly
city centre locations.
Significant judgement has
been applied in determining
whether the impact of Covid-19
will be temporary or permanent,
and if temporary, at what
point the store will return
to its pre-Covid trading
levels.
A number of previously impaired
stores have seen their profitability
levels improve as a result
of increased trading from
Covid-19 enforced lockdown
restrictions. However impairment
has not been reversed in
these cases as the impact
of Covid-19 is only expected
to be temporary for these
stores.
Discount Post tax discount rate representing Post tax discount rate representing
rate the Food segment's weighted the Funeralcare segment's
average cost of capital (WACC), weighted average cost of
subsequently grossed up to capital (WACC), subsequently
a pre-tax rate of 8.2% (2020: grossed up to a pre-tax rate
8.2%). of 9.5% (2020: 8.2%).
Post tax WACC calculated Post tax WACC calculated
using the capital asset pricing using the capital asset pricing
model. model.
Certain inputs into the Certain inputs into the
capital asset pricing model capital asset pricing model
are not readily available are not readily available
for non-listed entities. for non-listed entities.
As such, certain inputs have As such, certain inputs have
been obtained from industry been obtained from industry
benchmarks which carries benchmarks which carries
a measure of estimation uncertainty. a measure of estimation uncertainty.
This estimation uncertainty This estimation uncertainty
level is not deemed to be level is not deemed to be
material. material.
2 Supplier income
What does this show? Sometimes our suppliers give us money back
based on the amount of their products we buy and sell. This note
shows the different types of income we've received from our suppliers
based on the contracts we have in place with them. This income is
taken off operating expenses in the income statement.
Supplier Income 26 weeks 26 weeks 52 weeks
ended ended ended
3 July 2021 4 July 2020 2 January
2021
(unaudited) (unaudited (audited)
)
GBPm GBPm GBPm
Food - Long-term
agreements 77 68 140
Food - Bonus income 24 40 130
Food - Promotional
income 176 174 355
Total Food supplier
income 277 282 625
Wholesale - Long-term
agreements 12 16 28
Wholesale - Bonus
income 86 21
Wholesale - Promotional
income 48 55 114
Total Wholesale Supplier
income 68 77 163
Total Supplier
income 345 359 788
Percentage of Cost of Sales before %% %
deducting Supplier Income
Food - Long-term
agreements 2.7% 2.3% 2.3%
Food - Bonus income 0.8% 1.3% 2.2%
Food - Promotional
income 6.2% 6.0% 5.9%
Total Food supplier
income % 9.7% 9.6% 10.4%
Wholesale - Long-term
agreements 1.8% 2.0% 1.8%
Wholesale - Bonus
income 1.1% 0.8% 1.3%
Wholesale - Promotional
income 7.1% 6.9% 7.2%
Total Wholesale supplier
income % 10.0% 9.7% 10.3%
All figures exclude any income or purchases made as part of the
Federal joint buying group.
3 Finance income
What does this show? Finance income arises from the interest earned
on our pension scheme and interest from finance lease receivables
which have been discounted. If they are gains then we also include
the movement in the fair value of some elements of our debt, our
interest rate swap positions, foreign exchange contracts and commodity
derivatives (which are used to manage risks from interest rate
movements). If they are losses, they are included in Finance costs
(see Note 4). If they are gains, then we also show the fair value
movement on our funeral plan investments as well as the discount
unwind on funeral plan instalment debtors.
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 2021 4 July 2020 2 January
2021
(unaudited) (unaudited (audited)
)
GBPm GBPm GBPm
Net pension finance
income 14 19 37
Underlying interest income from
finance lease receivables 1 2 3
Fair value movement
on interest rate swaps - - 4
Fair value movement on foreign exchange
contracts and commodity derivatives 3 - -
Unrealised fair value movement
on funeral plan investments 25 63 81
Discount unwind on funeral
plan debtors - 7 7
One-off gain on settlement of Group
Relief Creditor owed to The Co-operative
Bank Plc** 99 - -
Total finance income 142 91 132
------------
* In-line with our full year 2020 financial statements we have
restated our comparative results for the 26 weeks ended 4 July
2020 as we have changed the way that we account for revenue on
funeral plans. See Note 14 for details of the restatement.
** The one-off gain of GBP99m relates to the settlement of the
Group Relief Creditor owed to the Co-operative Bank Plc when a
settlement of GBP48m was agreed in February 2021 against a liability
of GBP147m. This was disclosed as a post balance sheet event in
Note 34 of the 2020 Annual Report and Accounts.
4 Finance costs
What does this show? Our main finance costs are the interest that
we've paid during the year on our bank borrowings (that help fund
the business) and the interest payments we incur on our lease liabilities.
We also include the movement in the fair value of some elements
of our debt and our interest rate swap positions (which are used
to manage risks from interest rate movements) if these are losses.
If they are gains, they are included in Finance income (see note
3). We also include the interest that accrues on the funeral plans
we hold and any impact of discounting on funeral plan instalment
debtors if it is a charge. Other finance costs also include the
non-cash charge we incur each year on long-term provisions as the
payout moves one year closer (the discount unwind).
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 2021 4 July 2020 2 January
2021
(unaudited) (unaudited (audited)
)
GBPm GBPm GBPm
Loans repayable
within five years (15) (13) (26)
Loans repayable wholly or in part
after five years (14) (19) (37)
Underlying loan
interest payable (29) (32) (63)
Underlying interest
expense on lease liabilities (38) (39) (75)
Total underlying
interest expense (67) (71) (138)
Fair value movement
on quoted debt - - (10)
Fair value movement
on interest rate swaps (3) (2) -
Interest accruing on
funeral plan liabilities (29) (30) (60)
Discounting on funeral plan
debtors (5) - -
Non-underlying
finance interest (2) (2) (4)
Other finance costs (39) (34) (74)
Total finance costs (106) (105) (212)
* In-line with our full year 2020 financial statements we have
restated our comparative results for the 26 weeks ended 4 July
2020 as we have changed the way that we account for revenue on
funeral plans. See Note 14 for details of the restatement.
5 Taxation
What does this show? This note shows the tax charge recognised
at half year. This is calculated in four parts based on (i) the
forecast effective tax rate for the full year applied to our underlying
half year trading results (excluding the tax impact of any material
transactions) (ii) material transactions reflected in the half
year results (iii) recognition of the full impact of enquiries
concluded by HMRC in the first half of the year and (iv) an adjustment
in respect of revised estimates used to calculate the timing of
when deferred tax charges arise.
The Group does not expect to be tax-paying in respect of its half
year results due to the availability of brought forward tax losses
and allowances.
The tax charge in respect of continuing operations of GBP7m (26
weeks ended 4 July 2020 restated*: charge of GBP51m; and 52 weeks
ended 2 January 2021: charge of GBP55m) and effective tax rate
of 16% (26 weeks ended 4 July 2020 restated*: 72%; and 52 weeks
ended 2 January 2021: 43%) relates to:
1. A review of the effective tax rate for the full year has been
applied to the underlying trading results (excluding recurring
net pension credits taken to the income statement) - this results
in a tax charge of GBP3m.
2. A review of material transactions reflected in the year gave
rise to a net tax credit of GBP5m. The tax impact of these material
transactions mainly relate to losses on property disposals (tax
credit of GBP2m) and the impact of one-off transactions (tax credit
of GBP3m).
3. HMRC have not raised any further enquiries in the first half
of the year, as such the uncertain tax risk provision for existing
enquiries remains unchanged from as at 2 January 2021.
4. The Finance Act 2021 being brought into legislation means the
Corporation Tax rate will rise from 19% to 25% on 1 April 2023.
Following the substantial enactment of this rate change, the deferred
tax assets and liabilities of the Group need to be restated to
the prevailing 25% tax rate in the half-year results, where these
are materially expected to unwind after 1 April 2023. The impact
of this is an GBP9m net tax charge in relation to the restatement
of these deferred tax assets and liabilities.
A credit of GBP18m has been posted to other comprehensive income
in respect of the actuarial movement arising on the Group's pension
schemes. In addition, a charge of GBP35m has been posted to other
comprehensive income in respect of the restatement of the deferred
tax liability related to the Group's pension schemes.
The net deferred tax liability of the Group at half year is GBP185m
(as at 4 July 2020 restated* GBP201m; and 2 January 2021: GBP161m)
and the corporation tax creditor for continuing operations is GBPnil.
Deferred taxes in respect of brought forward tax losses and allowances
are fully recognised and offset against deferred tax liabilities.
A reconciliation of the opening deferred tax balance to the closing
balance is set out below:
26 weeks
ended
3 July
2021
Movements in deferred tax (unaudited)
in period to 3 July 2021
GBPm
At beginning of the year
(net liability) (161)
Charged to the Income Statement:
Current period
movement 2
Impact of change to deferred
tax rate (9)
Charged to equity:
Employee pension
schemes 18
Impact of change to
deferred tax rate (35)
At end of period
(net liability) (185)
* Refer to Note 14 for details
of the restatement.
6 Profit / (loss) on discontinued
operation, net of tax
What does this show? We classify any of our business segments
as discontinued operations if they have been disposed of during
the year or if they are held for sale at the balance sheet date
(which means they are most likely to be sold within a year). This
note shows the operating result for these segments as well as the
profit or loss on disposal.
Discontinued operation - Insurance (underwriting business)
The sale of our insurance underwriting business (CISGIL) completed
on 3 December 2020. The results of that business had been classified
as a discontinued operation in both 2019 and 2020 and shown in
a separate line at the bottom of the consolidated income statement
under Discontinued Operations. As part of the sale agreement Co-op
have continued to supply CISGIL with certain agreed services in
the first half of 2021 under a service agreement (TSA). The costs
and recoveries associated with that agreement are included in the
table below within operating expenses and other income respectively
and are shown within Discontinued operations in the Consolidated
Income statement. Other income also includes a gain of GBP12m following
the settlement of a historic legal claim.
26 weeks 26 weeks 52 weeks
ended ended ended
3 July 4 July 2 January
2021 2020 2021
Results of discontinued operation - Insurance (unaudited) (unaudited) (audited)
(underwriting business)
GBPm GBPm GBPm
Revenue 14 157 273
Operating
expenses (16) (187) (352)
Other income 12 38 85
Remeasurement adjustments recognised in
arriving at fair value less costs to sell - (11) 10
Profit / (loss) from
discontinued operation 10 (3) 16
Finance costs - (5) (5)
Profit / (loss) profit before tax
from results of discontinued operation 10 (8) 11
Tax - relating to the pre-tax profit
/ (loss) on discontinued operation - (2) (6)
Profit / (loss) for the period
from discontinued operation 10 (10) 5
Segmental analysis - Insurance (underwriting 26 weeks 26 weeks 52 weeks
business)
ended ended Ended
3 July 4 July 2 January
2021 2020 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Revenue 14 157 273
Underlying segment operating
(loss) / profit (2) 13 19
Operating profit
/ (loss) 10 (3) 16
The table below shows a summary of the
cash flows of discontinued operations:
Cash flows used in discontinued operations: 26 weeks 26 weeks 52 weeks
ended ended Ended
3 July 4 July 2 January
2021 2020 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Net cash from operating
activities 10 50 30
Net cash used in financing
activities - (73) (5)
Net cash from / (used in) discontinued
operations 10 (23) 25
Cash flows from investing activities
were not significant in any period.
7 Pensions
What does this show? This note shows the net position (either a
surplus or a deficit) for all of the Group's defined benefit (DB)
pension schemes and the key assumptions that our actuaries have
used to value the Pace scheme as well as showing how the total net
position has changed during the period.
3 July 4 July 2 January
2021 2020 2021
Net retirement benefit asset (unaudited) (unaudited) (audited)
(per balance sheet)
GBPm GBPm GBPm
Pension schemes
in surplus 1,799 2,127 1,931
Pension schemes
in deficit (13) (88) (77)
Closing net retirement
benefit 1,786 2,039 1,854
The Group operates a number of defined benefit (DB) pension schemes,
the assets of which are held in separate trustee-administered funds
for the benefit of its employees and former employees. The Group
also provides pension benefits through defined contribution (DC)
arrangements.
The main DB pension scheme for the Group is the Pace scheme which
closed to future service accrual on 28 October 2015. The actuarial
valuations for the Pace scheme have been updated to 3 July 2021
in accordance with IAS 19. The Plymouth and Yorkshire schemes merged
into Pace in March 2020, they have also been updated for the 2021
interim financial statements and included in the Pace scheme numbers.
Valuations for the Somerfield and United schemes have also been
updated for the 2021 interim financial statements.
Assumptions 3 July 4 July 2 January
2021 2020 2021
(unaudited) (unaudited) (audited)
The principal assumptions used to determine
the liabilities of the Pace pension scheme
were:
Discount
rate 1.90% 1.66% 1.47%
RPI Inflation
rate 3.38% 3.08% 3.10%
Pension increases in payment (RPI
capped at 5.0% p.a.) 3.29% 3.02% 3.04%
Future salary increases 3.63% 3.33% 3.35%
3 July 4 July 2 January
2021 2020 2021
Net Retirement
benefit asset (unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Opening net retirement benefit
attributable to Group 1,854 1,864 1,864
Admin expenses paid from plan
assets (2) (2) (5)
Net finance
income 14 19 37
Employer contributions 15 25 44
Past service
costs - - (3)
Remeasurement (losses)
/ gains (95) 133 (83)
Closing net retirement benefit
asset 1,786 2,039 1,854
Amounts recognised in the balance 3 July 2021 4 July 2020 2 January
sheet: 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Fair value of plan assets:
- Pace 9,189 9,408 9,407
- Somerfield Scheme 1,173 1,115 1,187
- Other schemes 818 1,001 1,114
Total assets 11,180 11,524 11,708
Present value of liabilities:
- Pace (7,461) (7,389) (7,553)
- Somerfield Scheme (1,102) (1,009) (1,116)
- Other schemes (831) (1,087) (1,185)
Total liabilities (9,394) (9,485) (9,854)
Net retirement benefit asset
per balance sheet:
Pace 1,728 2,019 1,854
Somerfield scheme 71 106 71
Total assets 1,799 2,125 1,925
Other schemes * (13) (86) (71)
Total Liabilities (13) (86) (71)
Net Assets 1,786 2,039 1,854
*The only other scheme is now the United fund. In March 2021 the
Yorkshire and Plymouth funds merged both their assets and liabilities
into Pace.
The present value of unfunded liabilities recognised in the balance
sheet is GBP5m (GBP5m as at 4 July 2020 and 2 January 2021).
During first quarter of 2021 the Plymouth and Yorkshire funds merged
into the Pace scheme, effectively meaning these two Schemes had
all their assets and liabilities transferred into Pace and the two
transferring schemes are in the process of being wound up. As a
consequence the Co-op is no longer required to pay deficit contributions,
as set out in their former schedule of contributions, in respect
of the Plymouth and Yorkshire schemes, totalling GBP10m per annum.
8 Assets and liabilities held for sale
What does this show? This shows the value of any assets or liabilities
that we hold for sale at the year end (these generally relate to
properties or businesses that we plan to sell soon). When this
is the case, our balance sheet shows those assets and liabilities
separately as held for sale.
3 July 4 July 2 January
2021 2020 2021
Assets held for sale (unaudited) (unaudited) (audited)
GBPm GBPm GBPm
(a) Discontinued operation - Insurance
underwriting business (see note 6) - 980 -
(b) Other assets held for sale (see
below) 2 2 21
Total 2 982 21
Liabilities held for sale
(a) Discontinued operation - Insurance
underwriting business (see note 6) - 900 -
(b) Other liabilities held for sale
(see below) - - 5
Total - 900 5
(a) Discontinued operation - Insurance
(underwriting business)
The sale of our insurance underwriting business completed on 3
December 2020. The results of that business had been classified
as a discontinued operation in both 2019 and 2020 as well as in
the current period (26 weeks ended 3 July 2021) and shown in a
separate line at the bottom of the consolidated income statement
under Discontinued operations. The assets and liabilities were
remeasured at fair value less costs to sell and were shown separately
in the balance sheet. Further detail is given in Note 6 (Loss on
discontinued operations, net of tax).
(b) Other assets and liabilities classified as held for sale are
below:
3 July 4 July 2 January
2021 2020 2021
Other assets and liabilities classified
as held for sale (unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Goodwill and intangible assets - - 10
Right-of-use assets (leases) - - 2
Property, plant and equipment 2 2 9
Total assets 2 2 21
Lease liabilities - - 5
Total liabilities - - 5
9 Interest-bearing loans and borrowings
What does this show? This note gives information about our interest-bearing
loans including their value, interest rate and repayment timings.
Details are also given about other borrowings and funding arrangements
such as corporate investor shares and our leases. All items are
split between those that are due to be repaid within one year (current)
and those which won't fall due until after more than one year (non-current).
See Note 12 for a breakdown of the IFRS 13 level hierarchies (which
reflect different valuation techniques) in relation to these borrowings.
As at As at As at 2
3 July 4 July January
2021 2020 2021
Non-current liabilities: (unaudited) (unaudited) (audited)
GBPm GBPm GBPm
GBP105m 7.5% Eurobond Notes
due 2026 (fair value) 128 121 128
GBP245m 7.5% Eurobond Notes due
2026 (amortised cost) 258 260 259
GBP300m 5.125% Sustainability
Bond due 2024 (amortised cost) 299 299 298
GBP109m 11% final repayment subordinated
Notes due 2025 109 109 109
GBP20m 11% Instalment repayment
Notes (final payment 2025) 9 13 9
Total (excluding lease
liabilities) 803 802 803
Lease liabilities 1,265 1,253 1,234
Total Group non-current interest-bearing
loans and borrowings 2,068 2,055 2,037
As at As at As at 2
3 July 4 July January
2021 2020 2021
Current
liabilities: (unaudited) (unaudited) (audited)
GBPm GBPm GBPm
GBP11m 6.875% Eurobond
Notes due 2020 (fair value) - 11 -
GBP165m 6.875% Eurobond Notes
due 2020 (amortised cost) - 165 -
GBP165m 6.875% Eurobond Notes due 2020
(amortised cost) - interest accrued - 11 -
GBP245m 7.5% Eurobond Notes due 2026 (amortised
cost) - interest accrued 19 17 9
GBP300m 5.125% Sustainability Bond due
2024 (amortised cost) - interest accrued 2 2 2
GBP20m 11% Instalment repayment Notes
(final payment 2025) 3 1 2
GBP109m 11% final repayment subordinated
Notes due 2025 - interest accrued 6 - -
Corporate investor
shares 9 10 3
Total (excluding lease liabilities) 39 217 16
Lease liabilities 197 182 191
Total Group current interest-bearing
loans and borrowings 236 399 207
Reconciliation of movement
in net debt
Net debt is a measure that shows the amount we owe to banks and
other external financial institutions less our cash and short-term
deposits.
For 26 weeks ended 3 July Non cash movements
2021 (unaudited) Cash flow
Start End of
of period New leases Other period
GBPm GBPm GBPm GBPm GBPm
Interest-bearing loans
and borrowings:
- current (16) - (25) 2 (39)
- non-current (803) - - - (803)
Lease liabilities
- current (191) (15) (95) 104 (197)
- non-current (1,234) (97) 66 - (1,265)
Total Debt (2,244) (112) (54) 106 (2,304)
Group cash:
- cash & overdrafts 269 - - (139) 130
Group Net Debt (1,975) (112) (54) (33) (2,174)
Less fair value
/ amortised cost
adjustment 34 - - - 34
Group Net Debt before fair
value / amortised cost
adjustment (1,941) (112) (54) (33) (2,140)
For 26 weeks ended 4 July Non cash movements Cash flow
2020 (unaudited)
Start End of
of period New leases Other period
GBPm GBPm GBPm GBPm GBPm
Interest-bearing loans
and borrowings:
- current (200) - (11) (6) (217)
- non-current (803) - 2 (1) (802)
Lease liabilities
- current (193) (4) (39) 54 (182)
- non-current (1,277) (26) 50 - (1,253)
Total Debt (2,473) (30) 2 47 (2,454)
Group cash:
- cash and overdrafts 308 - - 156 464
Group Net Debt (2,165) (30) 2 203 (1,990)
Less fair value / amortised
cost adjustment 33 - (3) - 30
Group Net Debt before fair
value / amortised cost
adjustment (2,132) (30) (1) 203 (1,960)
For 52 weeks ended 2 January Non cash movements Cash
2021 (audited) flow
Start New leases Other End of
of period
period
GBPm GBPm GBPm GBPm GBPm
Interest-bearing loans and borrowings:
- current (200) - (54) 238 (16)
- non-current (803) - - - (803)
Lease liabilities
- current (193) (15) (188) 205 (191)
- non-current (1,277) (99) 142 - (1,234)
Total Debt (2,473) (114) (100) 443 (2,244)
Group cash:
- cash & overdraft 308 - - (39) 269
Group Net Debt (2,165) (114) (100) 404 (1,975)
Less fair value adjustment 33 - 1 - 34
Group Net debt before fair value
/ amortised cost adjustment (2,132) (114) (99) 404 (1,941)
The tables above do not include balances in relation to CISGIL which
was classified as Held for sale throughout 2019 and 2020 and subsequently
disposed of on 3 December 2020.
10 Reconciliation of operating profit to net cash
flow from operating activities
What does this show? This note shows how our operating profit figure,
as reported in the income statement, is reconciled to the net cash
from operating activities as shown as the starting position in the
cash flow statement. Non-cash items are added back to or deducted
from the operating profit figure to show how much cash is generated
from our operating activities.
26 weeks 26 weeks 52 weeks
ended ended ended 2
3 July 4 July January
2021 2020 2021
(unaudited) (unaudited (audited)
& restated*)
GBPm GBPm GBPm
Operating profit from continuing
operations (Note 1) 8 85 207
Depreciation and amortisation
charges 197 189 380
Non-current asset impairments 14 21 36
Loss on closure or disposal of businesses
and non-current assets 12 18 3
Change in fair value of investment
properties - - (1)
Retirement benefit obligations (14) (23) (35)
Decrease / (increase) in inventories 6 (2) (6)
Increase in receivables (46) (86) (248)
Increase in contract assets (funeral
plans) (2) (2) (8)
Increase in contract liabilities
(funeral plans) 24 40 99
(Decrease) / increase in payables and
provisions (47) 158 215
Net cash flow from operating activities
(continuing operations) 152 398 642
Net cash flow from operating activities
(discontinued operations) 10 50 30
Net cash flow from operating
activities 162 448 672
* Refer to Note 14 for details of the restatement.
11 Commitments and contingent liabilities
What does this show? This note shows the value of capital expenditure
that we're committed to spending at the balance sheet date and
provides an update on the contingent liabilities included in our
2020 annual report.
Capital expenditure which the Group is committed to at 3 July 2021
(but which has not been accrued for at that date as it has not
yet been incurred) was GBP14m (4 July 2020: GBP19m). There are
no significant contingent liabilities to report as at 3 July 2021.
12 Funeral plan investments and fair values of financial
assets and financial liabilities
What does this show? Our Funerals business holds some investments
in relation to funeral plans. This note provides information on
these investments as well as how any other financial assets and
liabilities are valued.
3 July 4 July 2 January
2021 2020 2021
Funeral plan investments as (unaudited) (unaudited) (audited)
per the balance sheet:
GBPm GBPm GBPm
Current - - -
Non-current 1,344 1,309 1,331
Funeral plan investments 1,344 1,309 1,331
3 July 4 July 2 January
2021 2020 2021
Fair value through the income (unaudited) (unaudited) (audited)
statement:
GBPm GBPm GBPm
Funeral plan investments 1,344 1,309 1,331
Total Funeral plan
investments 1,344 1,309 1,331
Fair values recognised in the
balance sheet
The following table provides an analysis of the financial assets
and liabilities that are recognised at fair value. These are grouped
into three levels based on the following valuation techniques:
-- Level Fair value measurements are those derived from quoted prices
1 (unadjusted) in active markets for identical assets or liabilities.
-- Level Fair value measurements are those derived from inputs other
2 than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
-- Level Fair value measurements are those derived from valuation
3 techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
12 Funeral plan instruments and fair values of financial
assets and financial liabilities continued
Fair values recognised in the balance
sheet continued
3 July 2021 (unaudited) Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through
income or expense
- Derivatives - 5 - 5
- Funeral plan investments - - 1,344 1,344
Total financial assets held at fair
value - 5 1,344 1,349
Liabilities
Financial liabilities at fair value
through income or expense
- Fixed-rate sterling Eurobond - 128 - 128
- Derivative financial instruments - 3 - 3
Total financial liabilities held at
fair value - 131 - 131
There were no transfers between Levels 1 and 2 during the period
and no transfers into and out of Level 3 fair value measurements.
For other financial assets and liabilities of the Group including
cash, trade and other receivables / payables then the notional
amount is deemed to reflect the fair value.
The table above (and the comparative tables below) only show those
funeral plan assets that are "financial assets". They don't include
funeral plan assets in respect of instalment plans that are shown
within debtors. The coverage of our funeral plan assets over plan
liabilities as at the last actuarial valuation is shown in the
table at the end of this note and indicates we have headroom of
over 3% on a wholesale basis.
4 July 2020 (unaudited) Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through
income or expense
- Funeral plan investments - - 1,309 1,309
Total financial assets held at fair
value - - 1,309 1,309
Liabilities
Financial liabilities at fair value
through income or expense
- Fixed-rate sterling Eurobond - 132 - 132
- Derivative financial instruments - 3 - 3
Total financial liabilities held at
fair value - 135 - 135
2 January 2021 (audited) Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through
income or expense
- Funeral plan investments - - 1,331 1,331
- Derivatives - 3 - 3
Total financial assets held at fair
value - 3 1,331 1,334
Liabilities
Financial liabilities at fair value
through income or expense
- Fixed-rate sterling Eurobond - 128 - 128
- Derivative financial instruments - 1 - 1
Total financial liabilities held at
fair value - 129 - 129
Basis of valuation of Level 2 financial assets and liabilities:
Derivatives - the Group uses derivative financial instruments
to provide an economic hedge to its exposure to interest rate risks
arising from operational, financing and investment activities.
In accordance with our Treasury policy, the Group does not hold
or issue derivative financial instruments for trading purposes.
Derivatives entered into include swaps, forward rate agreements
and commodity (diesel) swaps. Derivative financial instruments
are measured at fair value and any gains or losses are included
in the income statement. Fair values are based on quoted prices
and where these are not available, valuation techniques such as
discounted cash flow models are used. Interest payments or receipts
arising from interest rate swaps are recognised within finance
income or finance costs in the period in which the interest is
incurred or earned.
Eurobonds - on inception these drawn-down loan commitments were
designated as financial liabilities at fair value through the income
statement. The Group adopted IFRS 9 from 7 January 2018 and subsequently
only GBP105m of the original par value of GBP350m 2026 notes were
designated as financial liabilities at fair value through the income
statement. Fair values are determined in whole by using quoted
market prices. The remaining Eurobonds are held at amortised cost
using an effective interest rate.
Basis of valuation of Level 3 financial assets and liabilities:
Funeral plans - when a customer takes out a funeral plan the initial
plan value is recognised as an investment asset in the balance
sheet and at the same time a liability is also recorded in the
balance sheet representing the deferred income to be realised on
performance of the funeral service covered by each of the funeral
plans. The investments are held in insurance policies or cash-based
trusts and attract interest and bonus payments throughout the year
dependent upon market conditions. The plan investment is a financial
asset, which is recorded at fair value each period through the
income statement using valuations provided to Co-op by the insurance
policy provider. The plan values represent what the policy provider
would pay out on redemption of the policy at the valuation date
with the main driver being underlying market and investment performance.
The performance obligation to deliver the funeral is treated as
a contract liability (deferred income) under IFRS 15. The deferred
amount is subject to adjustment to reflect a significant financing
component which is charged to the income statement each period.
The liability accretes interest in-line with the discount rate
applied to the plan on inception. The discount rate applied is
based on an estimated borrowing rate between the customer and the
Group at the point the contract is entered into. The contract liability
is held on the balance sheet as additional deferred income until
the delivery of the funeral at which point the revenue is recognised.
Funeral plan investments 3 July 4 July 2 January
2021 2020 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
At start of period 1,331 1,271 1,271
New plan investments (including
on-going instalments) 42 38 86
Plans redeemed or cancelled (54) (63) (107)
Unrealised fair value movement
on funeral plan investments 25 63 81
At end of
period 1,344 1,309 1,331
The Group holds investments on the balance sheet in respect of
funeral plan policies which are invested in either individual whole
of life policies, trusts or life assurance products. The investments
are subject to an annual actuarial valuation. The most recent valuation
was performed as at 30 September 2020 and reported headroom on
a wholesale basis of GBP40m (2019: GBP89m).
30 September 30 September
Actuarial Valuation (Unaudited) 2020 2019
GBPm GBPm
Total Assets 1,287 1,296
Liabilities:
Present value (wholesale
basis) 1,247 1,207
Total Liabilities 1,247 1,207
Headroom 40 89
Headroom as a % of liabilities 3% 7%
13 Membership and community reward
What does this show? This note shows the number of active members
that we have at the end of the period as well as the benefits earned
by those members for themselves and their communities during the
period. Active members are defined as those members that have traded
with one or more of our businesses within the last 12 months.
Members 3 July 4 July 2 January
2021 2020 2021
(unaudited) (unaudited) (audited)
m m m
Active Members 4.2 4.5 4.3
Membership and community rewards (within
the income statement) GBPm GBPm GBPm
Member reward earned 11 28 45
Community reward earned 10 5 13
Total reward 21 33 58
From October 2020 Member and Community rewards are earned at 2%
(prior to that Member reward was 5% and Community was 1%).
14 Prior period restatement
What does this show? Occasionally we realise that the numbers we
published in the accounts last year may not have been quite right
due to an error. When this is the case it may be appropriate to
revise (restate) the prior year numbers to correct them for the
error. In such circumstances then this note explains how the error
happened, what we have done to correct it and the impact this has
had on the Group's accounts in the prior year.
The restatements noted below relate soley to the half-year comparative
figures in these financial statements (covering the 26 week period
ending 4 July 2020). The restatements mirror those which were explained
in our 2020 Annual Report and Accounts (Note 35, Prior year restatement)
which applied to our full year 2019 numbers. We need to show a restatement
in these financial statements as this is the first time that the
2020 half-year comparative information has been published since
the new accounting treatment has been applied.
Revenue recognition for funeral plans - the Group adopted the new
accounting standard for revenue recognition in 2018 and at that
time we applied a judgement that the revenue to be recognised for
a funeral plan was variable and so changed over time. When a customer
takes out a plan, the monies are invested in whole of life insurance
policies whose value changes over time until redemption. The key
judgement we took was that on redemption of a policy, the monies
received from the policy was 'consideration' receivable for the
funeral. Therefore, investment gains from the policy were deferred
on the balance sheet and only recognised as revenue at the point
the funeral was performed. Our auditors disagreed with this judgement
and qualified their 2019 audit opinion on that basis, with the view
that the fair value investment gains do not represent variable consideration
because they are not payments from the customer for the future provision
of a funeral. Instead, their view was that investment gains should
be reflected in the consolidated income statement as they arise
in accordance with IFRS 9. Consequently, because payments are received
in advance of the delivery of a funeral then a financing transaction
is recognised, such that the payments received from the customer
are accreted by a rate which reflects a financing rate between the
Group and the customer. We were also subsequently advised by the
Financial Reporting Council's (FRC) Corporate Reporting Review team
that our 2019 accounts were subject to review including specific
reference to our accounting for funeral plans.
During the second half of 2020 and following discussions with the
FRC and our auditors we reflected on this matter and we agreed to
change the judgement we apply in 2020. Any investment gains and
losses from our whole of life insurance policies are now measured
at fair value through our income statement in accordance with IFRS
9 rather than being deferred on the balance sheet until the funeral
is performed. Previously we considered revenue to be the amounts
received on redemption of a whole of life insurance policy, and
this was considered to be variable consideration as the value changed
over time according to the value of the underlying policy. We now
consider revenue to be the amounts we receive from the customer
in accordance with IFRS 15 rather than from the redemption of the
whole of life insurance policy. Hence there is no variable consideration.
Under this policy, payments are received from the customer in advance
of a funeral being performed and so we recognise an effective interest
charge on the monies received from a customer in each year until
the plan is redeemed at which point the revenue is recognised as
the total of the monies received from the customer and the interest
charged. The gains or losses arising from movements in the fair
value of funeral plan investments are now recognised within our
finance income or finance costs each year.
This change of judgement was accounted for in accordance with IAS
8 and our 2020 half year numbers (for the 26 week period to 4 July
2020) have been restated to reflect the new accounting treatment
as if it had always been the case. The changes impact the Group's
half-year 2020 consolidated income statement, half-year 2020 consolidated
balance sheet, half-year 2020 consolidated cashflow and half-year
2020 statement of changes in equity. As this restatement is material,
then we also presented an additional third balance sheet in our
2020 Annual Report and Accounts, being our balance sheet as at the
start of our 2019 financial year as required under IAS 1.
Reclaim Fund de-consolidation - previously Co-op have included
the assets and liabilities of the Reclaim Fund Limited (RFL) in
our consolidated balance sheet. This was based on a judgement that
we controlled RFL and that we were exposed to changes in the financial
results of RFL. During 2020, the Group reflected on this judgement
especially in the context of the proposed sale of 100% of the share
capital of RFL to HM Treasury which completed on 30 March 2021.
Whilst the Group was considering this judgement, it also received
notification that the Group's Annual Report and Accounts to 4 January
2020 were subject to review by the Financial Reporting Council's
(FRC) Corporate Reporting Review team. In response to this review
and as part of the Group's ongoing review of this judgement, it
was concluded that the Group does not meet the criteria to consolidate
RFL under the criteria set out in IFRS 10 'Consolidated Financial
Statements'. In arriving at that conclusion, it was noted that the
Group was not exposed to any variable returns from RFL, be they
positive or negative and as such consolidation was not permitted
under IFRS 10 in such circumstances.
Furthermore, the Group's judgement was that it had insufficient
ability to direct the relevant activities of RFL, and as a result
RFL should not be treated as an associate within the Group's accounts
either. Accordingly, RFL was treated as an investment in the financial
statements and held at nil value. Consequently, the deconsolidation
of RFL was treated as a prior year restatement.
On 30 March 2021, the entire issued share capital of Reclaim Fund
Limited was sold to HM Treasury for nominal consideration. The sale
has no material impact on the Group's financial statements since
the Reclaim Fund Limited is no longer consolidated within the Group.
Impact on comparative information
A summary of the impact of the prior period adjustments on the consolidated
income statement for the 26 week period ended 4 July 2020, the consolidated
balance sheet as at the 4 July 2020 and the consolidated cashflow
statement for the 26 week period ended the 4 July 2020 is as follows:
Consolidated income statement for the As previously Funeral Reclaim Restated
26 week period ended 4 July 2020 reported plans Fund
GBPm GBPm GBPm GBPm
Revenue 5,797 4 - 5,801
Operating
expenses (5,723) - - (5,723)
Other income 7 - - 7
Operating
profit 81 4 - 85
Finance income 21 - - 21
Finance costs (75) - - (75)
Net finance costs on funeral
plans - 40 40
Profit before
tax 27 44 - 71
Taxation (43) (8) - (51)
(Loss) / profit from continuing
operations (16) 36 - 20
Consolidated balance sheet As previously Funeral Reclaim Restated
as at 4 July 2020 reported Plans Fund
GBPm GBPm GBPm GBPm
Non-current assets
Funeral plan investments 1,309 - - 1,309
Contract assets (funeral
plans) 55 - - 55
Reclaim Fund assets 150 - (150) -
Other non-current assets 6,382 - - 6,382
Total non-current assets 7,896 - (150) 7,746
Current assets
Contract assets (funeral
plans) 5 - - 5
Reclaim Fund assets 474 - (474) -
Other current assets 2,375 - - 2,375
Total current assets 2,854 - (474) 2,380
Total assets 10,750 - (624) 10,126
Non-current liabilities
Contract liabilities (funeral
plans) 1,483 23 - 1,506
Reclaim Fund liabilities 459 - (459) -
Deferred tax 204 (4) 200
Non-current liabilities 2,400 - - 2,400
Total non-current liabilities 4,546 19 (459) 4,106
Current liabilities
Contract liabilities (funeral
plans) 161 2 - 163
Reclaim Fund liabilities 91 - (91) -
Other current liabilities 3,066 - - 3,066
Total current liabilities 3,318 2 (91) 3,229
Total liabilities 7,864 21 (550) 7,335
Equity
Share Capital 73 - - 73
Other Reserves 92 - (74) 18
Retained earnings 2,721 (21) - 2,700
Total equity 2,886 (21) (74) 2,791
Total equity & liabilities 10,750 - (624) 10,126
Consolidated statement As previously Funeral Reclaim Restated
of cashflows for the 26 reported Plans Fund
week period ended 4 July
2020
GBPm GBPm GBPm GBPm
Net cash from operating
activities 473 (25) - 448
Net cash used in investing
activities (147) 25 - (122)
Net cash used in financing
activities (166) - - (166)
Net cash and overdraft balances
transferred to held for sale (4) - - (4)
Cash and cash equivalents at
beginning of the period 308 - - 308
Cash and cash equivalents
at end of the period 464 - - 464
Accounting policies and basis of preparation
What does this show? This section outlines the overall approach
to preparing the financial statements. This section also gives
details of the impact of any new accounting standards that we've
applied for the first time and the expected impact of upcoming
standards that will be adopted in future years where that impact
is likely to be significant.
These condensed consolidated interim financial statements of
Co-operative Group Limited ('the Society') for the period ended 3
July 2021 ('the interim financial statements') include the Society
and its subsidiaries (together referred to as 'the Group').
The audited consolidated financial statements ('the 2020 annual
report') of the Group for the year ended 2 January 2021 are
available upon request from the Society's registered office at 1
Angel Square, Manchester, M60 0AG.
The interim financial statements as at and for the 26 weeks
ended 3 July 2021 are unaudited and do not constitute statutory
accounts.
Statement of compliance
These interim financial statements have been prepared in
accordance with UK adopted IAS 34 Interim Financial Reporting and
the Disclosure and Transparency Rules (DTR) of the Financial
Services Authority. They do not include all the statements required
for full annual financial statements and should be read in
conjunction with the 2020 annual report.
The comparative figures for the financial year ended 2 January
2021 presented within these financial statements are not the
Society's statutory financial statements for that financial year.
Those financial statements have been reported on by the Society's
auditors. The report of the auditors was (i) unqualified, (ii) did
not include a reference to any matters in which the auditors drew
attention by way of emphasis without qualifying their report, and
(iii) contained no statement that the Society did not keep
appropriate accounting records.
These interim financial statements were approved by the Board of
Directors on 15 September 2021.
Accounting estimates and judgements
The preparation of the interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
In preparing these interim financial statements, the significant
judgements and estimates made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were consistent with those that applied in the 2020 annual report
except where stated within the notes to these accounts.
New standards and accounting policies adopted by the Group
Except as described below, the accounting policies applied in
preparing these interim financial statements are consistent with
those described in the 2020 annual report.
(A) New standards:
The Group has considered the following standards and amendments
that are effective for the Group for the period commencing 3
January 2021 and concluded that they are either not relevant to the
Group or do not have a significant impact on the financial
statements :
-- Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 & IFRS 16)
-- IFRS 10 and IAS 28 (amendments) Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
-- Amendments to IAS 1 Classification of Liabilities as Current or Non-current
-- Amendments to IFRS 3 Reference to the Conceptual Framework
-- Amendments to IAS 16 Property, Plant and Equipment-Proceeds before Intended Use
-- Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
-- Annual Improvements to IFRS Standards 2018-2020 Cycle -
Amendments to IFRS 1 First-time Adoption of International Financial
Reporting Standards, IFRS 9 Financial Instruments, IFRS 16 Leases,
and IAS 41 Agriculture
Standards, amendments and interpretations issued but not yet
effective
Details of those standards that may impact the Group's accounts
in future periods are given in the 2020 annual report. The adoption
of the following standards will or may have a material impact when
adopted. Management has undertaken an initial assessment of the
expected impact of applying the new standards on the Group's
financial statements and details are shown in the 2020 annual
report.
-- IFRS 17 Insurance Contracts.*
* Effective 1 January 2023.
(B) Other changes:
The results of our Insurance business (marketing and
distribution) are now shown as a separate operating segment (note
1). For the 52 weeks ended 2 January 2021 and 26 weeks ended 4 July
2020 they were included in Other Businesses. This follows the sale
in December 2020 of our insurance underwriting business (CISGIL)
and is in-line with the way that information is now reported to our
Board.
The comparative figures presented within these financial
statements for the interim period ended 4 July 2020 are consistent
with the 2020 interim report except for the re-statements noted
below:
-- Revenue recognition for funeral plans
-- De-consolidation of Reclaim Fund
Further details of these 2 items and full details of the impact
of these restatements on the comparative figures is given in Note
14.
Impact of Covid-19 on interim financial statements
Management has considered the impact that Covid-19 has had on
the Group's accounting policies, judgements and estimates.
Impairment reviews have been carried out in the period to reflect
the current economic environment and to reflect the increased
uncertainty within the UK economy. The results of these impairment
reviews have been detailed in note 1. Following the onset of the
pandemic in the first half of 2020 the Group refreshed its
judgements in relation to provisions, in particular vacant property
provisions where the ability to sublet vacant properties reduced
due to the impact of Covid-19 on the retail sector.
Going concern
The financial statements are prepared on a going concern basis
as the directors have a reasonable expectation that the Group has
enough money to continue in business for the foreseeable future.
Our Co-op borrows money from banks and others, and as part of this
process we have checked that we can comply with the terms of those
agreements, for example, banking covenants and facility levels.
The assessment of going concern relies heavily on the ability to
forecast future cashflows over the going concern assessment period,
to 30 September 2022. Although our Co-op has a robust planning
process, the current economic uncertainty caused by the Covid-19
pandemic and UK recession means that additional sensitivities and
analysis have been applied to test going concern under a range of
downside test scenarios. The following steps have been undertaken
to allow the directors to conclude on the appropriateness of the
going concern assumption:
1) Understand what could cause our Co-op not to be a going
concern.
2) Board review and challenge the base case forecast produced by
management including key investment choices.
3) Consider downside sensitivities across the base case forecast
as part of going concern.
4) Examine what mitigating actions would be taken in the event
of these scenarios.
5) Perform reverse stress tests to assess under what
circumstances going concern would become a risk,
assess the likelihood of whether they could occur and any
further mitigating actions.
6) Conclude upon the going concern assumption.
1) Understand what could cause our Co-op not to be a going
concern
In making their assessment the directors have considered a wide
range of information relating to present and future conditions,
including future forecasts of profitability; cash flow and covenant
compliance; and available capital resources. The potential
scenarios which could lead to our Co-op not being a going
concern are:
a. Not having enough cash to meet our liabilities as they fall
due. Throughout the going concern period
the facility limit within which we need to operate is GBP1,169m,
which includes GBP769m non-bank facilities
and GBP400m bank syndicate facilities; and/or
b. A breach of the financial covenants implicit in our bank
facility agreement.
-- Net Debt Leverage: Consolidated net debt as a multiple of
bank-defined EBITDA must not
exceed 3.00:1.00 at each six-monthly covenant test date.
-- Adjusted Interest Cover: The bank-defined EBITDA (further
adjusted by a fixed rental figure) as a
multiple of the consolidated net finance charges, must not fall
below 1.75:1.00 measured at each
six-monthly covenant test date.
2) Board review and challenge the base case forecast
We have conducted a highly detailed forward planning exercise as
part of our strategic plan. The Co-op's
base case forecast includes prudence due to the uncertainty in
the market and impact from recession. We
have also planned for ongoing pandemic-related costs and provide
contingency for risks materialising
through the year. 2021 represents a high investment year for our
Co-op as we seek to pay our frontline
colleague a fair wage and invest in our prices across Retail and
Funeralcare. The Board have reviewed and
approved these plans.
3) Consider downside sensitivities across the base case
forecast
In undertaking our going concern assessment, we have included
assumptions related to the impact of the
pandemic and sensitivities of internal and external factors on
the financial projections including (but not
limited to):
-- A reduction in the sales demand in our Retail business, with
a prudent 1% LFL reduction to sales
calculated versus 2019.
-- A reduction in the timely realisation of our transformation
and working capital initiative benefits across
our businesses.
-- A reduction in the demand of our Funeralcare business, with a
prudent 2% reduction in LFL sales. We
also modelled a lower return on our funeral plan
investments.
-- Potential repayment of some of the Covid-19 related
Government reliefs.
-- Additional Covid-19 pandemic risks in high staff absence
rates, lower fuel sales volumes and higher PPE
safety costs. Covid-19 risks reverse in 2022 as they represent
one-off costs that are only necessary during
pandemic conditions.
The sensitivities identified above do not risk the validity of
our Co-op as a going concern even before
applying the mitigating actions set out below.
4) Examine what mitigating actions would be taken in the event
of these scenarios
Whilst out of line with our strategic ambition, there are
several options within the business's control we
could exercise if the above risks materialised. 2021 represents
a high investment year and does therefore
provide short-term options not available in previous years.
Options include:
-- Our Co-op's ability to control the level and timing of its
capital expenditure programme (circa GBP550m
over the going concern timeframe).
-- Apply cost control measures across both variable and overhead
budgets.
-- Our Co-op's options to slow down and reduce investment into
price and membership.
5) Perform a reverse stress test and assess any further
mitigating actions
Whilst our initial going concern approach assesses likely risks
to our base case forecasts through severe but
plausible downside scenarios and options to mitigate them, the
reverse stress test represents a worst-case
scenario at which point the model breaks.
Whilst unlikely, to demonstrate the above, we have modelled a
significant downturn in the grocery market of
a further -3% retraction in Retail sales and a further reduction
in funeral volume of -4%. In addition, we have
modelled the impact of a significant shortfall in our
transformation programme benefits delivery.
We note, however, that we could mitigate the reverse stress test
scenario through a further reduction or delay
in capital expenditure and a change in the timing of our
investment into operational improvements. Whilst all remain
undesirable strategically there is also
the option to apply further stringent cost control measures.
6) Conclude upon the going concern assumption
For the purposes of going concern we assume that no new
facilities from re-financing are required or
needed. We do not anticipate any change in this assumption, but
this will be kept under review.
In addition, our Co-op has an accordion option with the banking
syndicate to obtain GBP100m of additional
revolving credit facilities. Whilst available to Co-op, this has
not been included in our assessment as our
base facilities are enough to cover our going concern
calculations without any breach of covenants.
Assessment versus previous assumptions
We have reviewed our actual results in the first half of 2021
against those that were used in the going concern forecast and
assessment for our 2020 financial statements and conclude that
there are no material differences between the actuals and the
forecast that was used which would change the going concern
assessment and assumption.
Jargon buster (unaudited)
There are lots of technical words in our accounts which we have
to use for legal and accounting reasons. We've set out some
definitions in the jargon buster table below to help you understand
some of the difficult phrases accountants like to use. When a word
is in bold in the jargon buster table that means you can also find
the definition of that word in this table.
There is also a "What does this show?" introduction to every
note to the accounts describing in simple terms what the note is
trying to show.
Initially though we define and explain some of the Alternative
Performance Measures (APMs) that we use throughout the Annual
Report and Accounts.
Alternative Performance Measures (APMs)
Our Annual Report and Accounts includes various references to
Alternative Performance Measures (APMs). These are financial ratios
and metrics that are not defined by International Financial
Reporting Standards (IFRS) and as such they may not be comparable
with the APMs that are reported by other entities.
We include our APMs in the Annual Report and Accounts as we
think they give useful information to our members to help them
better understand the underlying performance and financial health
of their Co-op. We don't however think the APMs that we provide are
better than the statutory measures noted under IFRSs and they are
not meant to replace them.
The table below explains in simple terms how the APMs are
calculated and why we think they are useful measures to use. Where
possible we also call out the nearest equivalent IFRS measure and
cross-refer to the section of the financial statements where we
reconcile between the APM and that IFRS measure. Our choice of APMs
has been consistent year-on-year.
APM
Definition and Purpose:
Like-for-like sales growth relates to growth in sales
at those Food stores that have been open for more
than one year (with any sales from stores that have
closed in the year being removed from the calculation
and prior year figures). The calculation includes
Like-for-like VAT on sales but excludes fuel sales from our petrol
sales forecourts. For Wholesale then the like-for-like
metric relates to those partners (stores) that have
been with Co-op for more than one year (with any
sales from partners who have left in the year being
removed from the calculation).
The measure is used widely in the retail sector as
a relative indicator of current trading performance
versus the prior year. It is also helpful to our
members in comparing our underlying performance and
growth against the wider market as well as against
other retailers (as it removes the impact that opening
and closing stores may have on absolute sales levels).
Closest IFRS equivalent:
There is no close equivalent to this measure under
IFRS.
Where reconciled in the financial statements:
Not applicable as there is no close equivalent to
this measure under IFRS.
We've introduced a new 2 year like-for-like sales
metric in the 2021 Interim financial statements.
2 year This is in-line with many other major retailers as
like-for-like we think it helps with the understanding of comparative
sales performance given the impact of CV-19 in the first
half of 2020.
The metric is calculated in a similar way to the
standard like-for-like definition (see above) except
that it compares the first half of 2021 to the first
half of 2019 (rather than the first half of 2020)
and includes those Food stores that have been open
for this time period since 2019. This is because
the first half of 2020 was so heavily distorted by
the impact of the pandemic and we think using 2019
(which was not impacted by CV-19) gives a more helpful
comparison of underlying performance.
Definition and Purpose:
Underlying operating profit reflects our operating
profit before the impact of property and business
Underlying disposals (including individual store and branch
operating impairments), the change in the value of investment
profit properties and one-off items.
before We exclude these items as they are not generated
tax by our day-to-day trading and by excluding them it
is easier for our members to see and understand how
our core businesses are performing.
Closest IFRS equivalent:
Operating Profit.
Where reconciled in the financial statements:
Income statement - and Note 1 (Operating segments).
Definition and Purpose:
Our underlying PBT figure is simply our underlying
operating profit (as calculated above) less our underlying
interest (being the day-to-day interest we pay on
our bank borrowings and lease liabilities). Other
interest income or expense such as our net interest
Underlying income or expense on funeral plans is either not
profit generated by our day-to-day trading or is not considered
before by management in the day-to-day running of the business
tax (PBT) as it distorts the underlying trading performance
of the Group. Such items are not included in our
underlying PBT metric so it is easier for our members
to see and understand how our core businesses are
performing.
Again the measure looks to remove those items that
are not generated by our day-to-day trading (as per
the definition noted above) but we also include the
day-to-day finance costs of running of our businesses.
Closest IFRS equivalent:
Profit before tax.
Where reconciled in the financial statements:
Note 1 (Operating segments).
Definition and Purpose:
Net debt is made up of our of bank borrowings and
overdrafts off-set by our cash balances. The figure
excludes any lease liabilities.
Net debt The metric provides a useful assessment of the Group's
(interest overall indebtedness which in turn reflects the strength
bearing of our balance sheet and consequently the financial
loans and resources available to us to employ and direct on
borrowings behalf of our members.
only)
Closest IFRS equivalent:
Interest bearing borrowings less cash and cash equivalents.
Where reconciled in the financial statements:
Consolidated statement of cashflows.
Definition and Purpose:
Total debt is made up of our of bank borrowings and
any lease liabilities that we have. It excludes any
cash or cash equivalent balances that we may hold.
Total The metric provides a measure of the Group's gross
debt (including indebtedness.
lease liabilities)
Closest IFRS equivalent:
Interest bearing loans and borrowings plus lease
liabilities.
Where reconciled in the financial statements:
Consolidated statement of cashflows.
Jargon Buster (unaudited)
Accounting surplus When a pension scheme has more assets than
(pensions) the amount it expects to pay out in the
future (the present value of its liabilities)
then it has an accounting surplus.
Accrued income When we've performed a service but haven't
billed the customer yet, we hold the amount
due on the balance sheet as accrued income.
Once we bill the customer the balance is
then moved to receivables.
Amortisation Similar to depreciation, but for intangible
assets.
Amortised cost We value some of our debt based on its amortised
cost. This is the present value of the expected
future cash flows in relation to the debt.
Asset This is an amount on our balance sheet where
we expect to get some sort of benefit in
the future. It could be a building we use
or are planning to sell, some cash or the
amount of money a customer owes us.
Assets held for sale Sometimes we have to sell things. When we've
decided to make a large disposal before
the year end but the asset hasn't been sold
yet, we have to show it in this line on
the balance sheet and reduce its value (impairment)
if necessary.
Assets in the course These are assets that we're in the middle
of construction of building. They're on our balance sheet
as we've spent money already building them,
but they aren't ready for us to use them
yet so we're not depreciating them.
Associate When we have significant influence over
a company (usually by owning 20-50% of a
company's shares and/or having a seat on
its Board), we call that company an associate.
Balance sheet This shows our financial position - what
assets we have and the amounts we owe (liabilities).
Banking Syndicate We have an agreement in place with a collection
of banks (known as our Banking Syndicate)
that gives us quick access to borrowings
should we need them.
Benefit payments (pensions) This is the amount our pension funds pays
out to pensioners.
Capital expenditure When we spend money on items that will become
assets (such as property or IT systems)
this is shown as capital expenditure. The
costs are not shown in the income statement
of the year it's spent - instead the costs
are spread over the life of the asset by
depreciation or amortisation.
Cash flow statement This shows how much cash has come in or
gone out during the year and how we've spent
it.
Cash Generating Unit A CGU is the smallest identifiable group
(CGU) of assets that generate cash inflows that
are largely independent of the cash inflows
from other assets or groups of assets. For
our Food business this is defined as an
individual store, and for our Funeral's
business this is defined as a regional care
centre and the funeral branches which it
serves as they are heavily interrelated.
CISGIL This is the society that operates the Insurance
underwriting business - CIS General Insurance
Limited. We sold this business on 3 December
2020.
Commitments Where we've committed to spend money on
something (such as building projects) but
we're not technically liable to pay for
it, we don't put the amount on the balance
sheet but we disclose the amount in the
commitments note.
Comprehensive income This is our profit for the year plus other
comprehensive income.
Consolidated As this report is based on the financial
performance and position of many societies
and companies around the Group, we have
to add up all those entities and the total
is the consolidated position.
Contingent asset This is an amount that we might get in the
future. Unless it's almost certain that
we'll get the amount, we're not allowed
to put it on the balance sheet but we show
the amount in the contingent assets and
liabilities note.
Contingent liability This is an amount that we might have to
pay in the future. If it's only possible,
rather than probable, that we'll have to
pay the amount, then we won't show the amount
on the balance sheet but we show the amount
in the contingent assets and liabilities
note.
Contract assets These are costs we've incurred in advance
of being entitled to receive payment from
a customer under a contract, such as costs
incurred in setting up a funeral plan. We
hold these on the balance sheet until we've
delivered all the services to our customer
and are entitled to receive payment.
Contract liabilities This is where a customer has paid us in
advance of them receiving goods or services
under a contract (for example, a funeral
plan). We have to hold this on the balance
sheet until the customer receives the service
they've paid for.
Corporate investor This is money that other societies invest
shares with us and we pay them interest on it.
The societies can get their money back at
any time.
Credit This is an increase in income/reduction
in costs on the income statement or an increase
in a liability/reduction in an asset on
the balance sheet.
Current An asset or liability that is expected to
last for less than a year.
Current tax This is the amount we expect to pay in tax
for the year based on the profits we make.
Debenture This is a type of loan that we've issued
and are paying interest on.
Debit This is a decrease in income/increase in
costs on the income statement or a decrease
in a liability/increase in an asset on the
balance sheet.
Debt Loans that we've issued and are paying interest
on.
Deferred acquisition These are amounts which our Insurance underwriting
costs business pays to secure business. It then
holds these costs on the balance sheet and
amortises over the length of the insurance
period.
Deferred consideration This is an amount we'll be paying to a seller
for businesses we've bought or an amount
we'll be getting from a buyer for businesses
that we've sold.
Deferred income Occasionally we receive monies (or recognise
deferred consideration following the sale
of a business) in advance of when we will
actually perform the service we are being
paid for. When this happens we hold a liability
on our balance sheet until the point at
which we perform the service at which point
we extinguish the liability and recognise
the income.
Deferred tax Sometimes our assets and liabilities are
worth more or less on our balance sheet
than they are for tax purposes. The tax
on the difference in value is called deferred
tax and can be an asset or liability depending
on whether the value is greater in the balance
sheet or for tax purposes.
Defined benefit schemes This is a pension scheme where an amount
is paid out to an employee based on the
number of years worked and salary earned.
Defined contribution This is a pension scheme where an amount
schemes is paid into the scheme and at retirement
the employee draws on the amount that has
been invested over the years.
Depreciation Some assets the Co-op will have for a while
(such as vehicles). When we buy them the
cost goes on our balance sheet and then
depreciation spreads the cost of the asset
evenly over the years we expect to use them
in the income statement.
Derivatives These are financial products where the value
goes up or down based on an underlying asset
such as currency, a commodity or interest
rate.
Discontinued operations When we sell a large business, we report
its results at the bottom of the income
statement so that it's easier for readers
to see the performance of the Group's other
continuing businesses.
Discount rate This is the amount that we are discounting
by. It's a percentage and varies based on
what we expect interest rates or inflation
to be in the future.
Discount unwind Every year the amount that we're discounting
is going to be worth more as we get nearer
to paying or receiving it. We have to put
that increase in value (the discount unwind)
through our income statement.
Discounting When we have to pay or receive cash in the
future, accountants like to take off part
of the amount if it's a big amount (like
on our onerous leases). This is because
cash we pay or receive in the future is
going to be worth less than it is now -
mainly because of inflation.
Disposals When we have sold an asset.
EBITDA This is operating profit excluding any depreciation
or amortisation. The letters stand for earnings
before interest, tax, depreciation and amortisation.
Effective tax rate This is the average tax rate we pay on our
(ETR) profits. This might be different to the
standard corporation tax rate, for example,
if we aren't allowed to deduct some of our
costs for tax purposes.
Equity This is the difference between the assets
we own and the liabilities we owe - theoretically,
this is how much money would be left for
our members once every asset is sold and
every liability is paid.
Eurobond Notes This is our largest, fixed interest debt
that we pay interest on to fund our businesses'
operations.
Expected credit losses This is an estimate of the amount of our
receivables which will not be repaid.
Fair value movement There are some things on our balance sheet
which we have to revalue every year. This
includes some of our debt, investment properties,
our pension schemes and funeral plans. The
change in value is called the fair value
movement.
Federal Federal relates to the activities of a joint
buying group that is operated by the Group
for itself and other independent co-operative
societies. The Group acts as a wholesaler
to the other independent co-operatives and
generates sales from this. This is run on
a cost recovery basis and therefore no profit
is derived from its activities. This is
separate to our Wholesale business.
Finance costs These are usually the interest we pay on
our debt, but can also be other things such
as the fair value movement on our debt or
the discount unwind of liabilities.
Finance income This mainly relates to the interest on our
pension assets and the unrealised gains
on funeral plan investments, but can also
be other things such as the fair value movement
on our debt or the discount unwind of receivables.
Finance lease A finance lease is a way of providing finance.
Effectively a leasing company (the lessor
or owner) buys the asset for the user (usually
called the hirer or lessee) and rents it
to them for an agreed period.
Financial Conduct The FCA regulates the financial services
Authority (FCA) industry in the UK.
Financial instruments A collective term for debt or derivatives
that we have.
Financial Reporting The FRC regulate auditors, accountants and
Council (FRC) actuaries and they set the UK's Corporate
Governance and Stewardship codes.
First Mortgage Debenture This is a small debt we owe that is secured
Stock against some properties - a bit like a mortgage.
Fuel Refers to fuel sales generated from our
petrol forecourts.
Funds in use invoice Invoice discounting is an arrangement with
discounting facility a finance company so that we can be paid
for amounts we are owed on invoices earlier
than the date our customers are due to pay
us. 'Funds in use' is just the term for
the amount we owe to the finance company.
Funeral plans Our customers may not want their family
to pay a large single sum for a funeral
when he or she dies. Therefore, the customer
can pay for it gradually or in lump sums
over a number of years and the Group will
invest that money.
Funeral plan investments When a customer gives us money for their
funeral in the future, we invest this money.
The balance of these investments is held
on the balance sheet.
Goodwill When we buy a business or a group of assets,
sometimes we pay more for it than what its
assets less liabilities are worth. This
additional amount we pay is called goodwill
and we put it on our balance sheet.
(the) Group This is Co-operative Group Limited and all
companies and societies that it owns.
Hedging Sometimes we want to protect ourselves in
case we have to pay more in the future for
something. This could happen if the value
of the pound falls so we have to pay more
when buying something abroad or if interest
rates go up. We take out derivatives to
protect us from this and this process is
known as hedging.
IAS International Accounting Standards. The
Group use these as the accounting rules.
There are many different IASs that cover
various accounting topics (e.g. IAS 38 is
for intangible assets)
IFRIC International Financial Reporting Interpretations
Committee. These are interpretations of
IASs or IFRSs that the Group also has to
abide by.
IFRS International Financial Reporting Standards.
Similar to IAS, but cover different subjects.
Impairment Sometimes our assets fall in value. If a
store, branch, business or investment is
not doing as well, we have to revalue it
and put the downward change in value as
a cost in our income statement.
Income statement This not only shows our income as the name
suggests, but also what our costs are and
how much profit we've made in the year.
Intangible asset We have assets at the Co-op that we can't
see or touch which are shown separately
to other assets. These include things like
computer software and goodwill.
Interest rate swaps We like to know what interest we're going
to be paying in the future so we can manage
our businesses effectively. We enter into
arrangements with banks so that we can do
this - for example, if we have debt where
the interest rate can vary, we can buy an
interest rate swap which means that instead
we'll pay a fixed rate of interest. The
value of these swaps can go up or down depending
on how the market expects interest rates
to change in the future.
Inventories This represents the goods (the stock) we're
trying to sell. The cost of this is shown
on our balance sheet.
Inventory provision If some of our stock isn't selling, we write
those costs off to the income statement
and hold a provision against those goods
on the balance sheet.
Investment properties Properties that we don't trade from, and
which we might rent out or hold onto because
the value might go up, are called investment
properties.
Invoice discounting Invoice discounting is an arrangement with
facility a finance company so that we can be paid
for amounts we are owed on invoices earlier
than the date our customers are due to pay
us.
Joint ventures When we own 50% of a company we call it
a joint venture. Sometimes associates are
called joint ventures commercially as they're
ventures with other parties, but are called
associates for accounting purposes. A joint
venture is a company where we own exactly
50%.
Lease Liability This represents the discounted future payments
we are due to make to suppliers in exchange
for the right to use their equipment or
property.
Liability This is an amount on our balance sheet which
we'll have to pay out in the future.
Like-for-like sales The measure of year-on-year sales growth
for stores that have been opened for more
than one year. This is a comparison of sales
between two periods of time (for example,
this year to last year), removing the impact
of any store openings or closures.
Listed debt securities People can trade some of our debt such as
the Eurobonds fair. When this is the case,
it's a listed debt security.
Member payments This is an amount we've paid our members
in the year and approved at the AGM such
as dividends.
Member rewards These are the benefits that members have
earned for themselves during the year as
part of the 2% membership offer.
Net assets Same as equity.
Net debt This is the debt we have less any cash that
we might have.
Net operating assets Net assets less investments, funeral bonds,
deferred tax, pension surplus and drawn
debt.
Non-controlling interest This is the equity in a subsidiary which
is owned by another shareholder. For example,
if we only own 60% of a company, the other
40% is the non-controlling interest.
Non-current An asset or liability that is expected to
last for more than one year.
Non-GAAP measure GAAP stands for Generally Accepted Accounting
Principles. This is the common set of accounting
principles, standards and procedures that
companies must follow. Sometimes, companies
want to provide different measures to help
readers understand their accounts (such
as underlying profit) where there isn't
a standard definition - these measures are
called non-GAAP measures.
One-off items Items that are not regular in size or nature
and would otherwise cloud the underlying
profitability of the Group are stripped
out. This could include a large IT project
or a large restructuring exercise.
Onerous leases When we close a store we sometimes still
have to pay running costs until the lease
runs out (such as rates). When this happens,
we make a provision for the amount of the
running costs we will have to pay in future
and hold this on the balance sheet. Rental
costs are excluded from this provision now
we have adopted IFRS 16 (Leases) as those
costs are included in the lease liability.
Operating profit This is our profit before we have to pay
any interest to our lenders or tax to the
tax authorities. It is also stated before
any net finance income / (costs) from funeral
plans.
Operating segments This is an accounting term for the different
businesses we have. When the financial performance
of one of our businesses is reviewed separately
from the other businesses by our Board,
we call that business an operating segment
and its sales and profit are disclosed in
Note 1.
Other comprehensive Sometimes we have big fair value movements
income on long term assets and liabilities. The
income statement is meant to show the performance
during the year, so to avoid this being
distorted by these big changes, they are
shown separately as other comprehensive
income.
Parent This is the owner of a subsidiary.
Payables Another name for liabilities.
PAYE Pay As You Earn. A tax which is paid on
wages.
Pension interest This is the interest that we're allowed
to show in our income statement and is the
discount rate used to discount the pension
liabilities multiplied by the pension surplus
or deficit last year.
Performance obligations These are promises to provide distinct goods
or services to customers.
Prepayment When we pay in advance for a cost which
relates to services that will be received
over a future period of time (for example,
rent or insurance), we hold that cost on
our balance sheet as a prepayment and then
spread the cost over the period of the service.
Present value This is the value of a future cost or income
in today's money and is arrived at by discounting.
Provisions This is a liability, but one where we're
unsure what the final amount we have to
pay will be and when we'll have to settle
it. We use our best estimate of the costs
and hold that on the balance sheet.
Realised gains This is when we sell an asset for a profit.
Receivables When someone owes us some money, we hold
that amount as a receivable on our balance
sheet.
Reclaim Fund This is an entity that helps money in dormant
bank accounts to be used for charitable
purposes.
Related party This is a company or person that is closely
linked to the Co-op. It's usually a member
of our Board or Executive or their close
family plus companies such as our associates
and joint ventures.
Remeasurement gains There are lots of assumptions that are used
/ losses on employee when valuing pensions. If those assumptions
pension schemes change this can have a big effect on the
size of the pension asset or liability.
So that we don't distort the income statement,
this effect is shown in other comprehensive
income.
Repayment notes This is a type of loan, which we repay either
in instalments or in a lump sum at the end
of the loan.
Reserves This is the amount of equity we have, but
excluding any share capital.
Restated Sometimes we change the numbers that we
showed in last year's accounts. This might
be because we have changed where or how
we record certain things or it could be
that we have corrected an error. There are
strict rules around what can be changed
and when we make changes we explain why
in the accounting policies.
Retained earnings This is all the profits we've made since
the beginning of time for the Co-op that
have not yet been paid out to members.
Retirement benefit Another term for our pension liabilities.
obligations
Return on plan assets This is the income our pension assets have
(pensions) generated in the year.
Revaluation reserve When we revalue a property upwards, we're
not allowed to put this unrealised gain
through our income statement or within retained
earnings as law dictates that this can't
be distributed to members until the property
is sold. It's then ring-fenced as a specific
reserve.
Revolving Credit Facility This is money that our lenders have agreed
we can borrow if we need to. It works a
bit like an overdraft.
Right of use asset This is an asset that we don't own legally,
(ROU) but which we lease from another party. The
asset represents the value the Co-Op has
in being able to use the asset over the
length of a lease contract.
ROCE Return on capital employed. This is based
on our underlying profit we make in the
year divided by the net operating assets
we have.
Sale and leaseback This is when an asset is sold to a third
party and then immediately leased back under
a lease agreement. For the Co-op, this usually
relates to the sale of a building such as
a store.
Sensitivity analysis When an item on our balance sheet varies
in value from year to year based on some
estimates that we make, we show a sensitivity
analysis which shows you how much the asset
or liability would change by if we were
to change the estimate.
Share capital This is the amount of money that our members
have paid us to become members less any
amounts that we've repaid to them when they
cancel their membership.
Society The Co-operative Group Limited is a registered
co-operative society. We sometimes refer
to our collective whole as 'the Group' or
'the Society' and the terms are broadly
interchangeable.
Subsidiary This is a company or society that is owned
by another company.
Supplier income Sometimes our agreements with suppliers
mean they will give us money back based
on the amount of their products we buy and
sell. We call this supplier income.
Underlying interest This is the day-to-day interest we incur
on our bank borrowings and lease liabilities
and is what management consider in the day-to-day
running of our Co-op. Non-underlying interest
are those items that are not generated by
our day-to-day trading or are not considered
by management in the day-to-day running
of the business (such as the interest on
funeral plan liabilities or the fair value
movement on the Group's quoted debt and
interest rate swaps).
Unrealised gains An asset may have gone up in value, but
we've not sold it. If this is the case,
the profit from the gain is unrealised as
we've not sold the asset yet.
Unrealised gains - The funeral plan investments which we hold
funeral plans on behalf of our customers attract interest
and bonus payments each year (depending
upon market conditions). The gains or losses
in the fair value of the plan investments
is recognised within finance income /costs
each year.
Wholesale The Group's operating segment (trading Division)
that sells direct to other retailers (rather
than to individual members of the public).
This primarily relates to the business we
operate after we bought Nisa but it also
includes any franchise stores. Wholesale
is separate to our Federal segment.
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END
IR LAMRTMTJBBPB
(END) Dow Jones Newswires
September 16, 2021 02:00 ET (06:00 GMT)
Co-op.gp. 25 (LSE:42TF)
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