Co-operative Group says investment will hit profits

The Co-operative Group has said increased investment means profits this year will be lower than in 2014.

This is despite the company reporting a pre-tax profit of £36m in the first half of 2015, compared with a loss of £9m a year earlier.

The group said the turnaround was due to "robust trading" in its food and funeral businesses.

These are the first results since radical changes to the business were brought in at the end of last year.

Following a review of the business by Lord Myners, the number of board members was cut drastically, while directors had to have qualifications suited to running the business. Members were also given one vote each.

The business recorded a deficit of £2.5bn in 2013 following massive losses at the Co-operative Bank. Following changes in the ownership structure of the bank, the Co-op Group now holds just a 20% stake in the bank.

Strong food sales

"We've made a good start on the three year journey to rebuild the Co-operative Group," said chief executive Richard Pennycook of the half-year results.

"These early days are about fixing the basics - putting in place new leadership teams and providing the investment to deliver the strategies for our businesses. Our customers and members are beginning to see the difference.

The food business saw like-for-like sales at its main convenience stores increase by 3.3%, as well as 35 new store openings.

The funeral business saw volumes rise by almost 12%, "principally due to a high death rate".

Despite the improvement in the business seen in the first half of the year, the company warned that "we expect full-year profitability to reduce year on year, given the planned and increased levels of investment we are making in the second half of the year".

It also said that, again due to greater investment, it was unlikely to declare any dividends before 2018.