Co-op brings back the 'divi'

THE famous 'Co-op divi', first launched in 1844, is being brought back by the Co-operative Group in a move aimed at attracting new members and encouraging existing ones to spend more.

About a million consumer members will receive a flat-rate payment of £10 each this year. But from next year the divi will be based on the amount spent across all its businesses, from supermarkets and convenience stores to its Co-op Bank, insurance, travel agencies, pharmacy and funeral operations.

'The payments are fairly modest to start with, but they will increase to around 25% of profits, in line with what a Plc would pay out in dividends,' said Co-op chief executive Martin Beaumont.

The original divi ran for more than 100 years before largely dying out in the 1960s and 1970s. The Co-op has always paid a dividend to corporate members and also runs a food loyalty scheme.

Beaumont today reported a big bounce back into the black for the Co-op last year, with pre-tax profits of £385.4m against a loss of £112.5m the previous year when it was hit by a big write-down in the value of its insurance-arm investments.

Operating profits from trading activities jumped 66% to a record £135.5m, with profits from the food retail operations rising by 63% to £113.4m. Underlying sales for the year to 10 January were up 9% to £7.3bn.

In food retail, where the Co-op has been concentrating on the fast-expanding convenience stores format, sales reached £3bn, an increase of more than 17%.

Like other food retailers, however, it is increasingly feeling the impact of price-war competition, reflected in flat like-for-like sales for the first three months of the current year.

Beaumont warned that he expects no let-up in the competition. 'It's a battleground and it's not getting easier,' he said.

The Co-op remains keen to expand its 1,249-strong convenience stores chain and is 'actively looking' for acquisition opportunities.

Elsewhere in the group, profits at its funerals arm, the biggest funeral provider in Britain, recovered from £12.7m to £18.2m, thanks to improved financial management.

In farming, there was a profit of £1.6m, the first time the business has been in the black since 1997.

Milk side on auction block

THE Co-op has put its milk-processing and manufacturing arm, ACC Milk, up for sale following a strategic review of the business.

It returned to the black last year, with profits of £5.5m on turnover of £310m but Beaumont said he believed it would do better under new ownership. It is a big supplier of milk to primary schools and also makes cottage cheese, yogurt, butter and dairy desserts.

'We are exploring options for the sale of the business and believe there will be considerable interest in it,' Beaumont said.