Heart of England Co-op has announced a trading profit of £4m (previous year £4.6m) in its annual report for the year ending 22 January.
Operating profit was £5.8m (previous year £3.3m) and pre-tax profit was £5.7m (£3.2m). The society called it a “satisfactory“ performance in “an ever more challenging marketplace”.
The society, which operates a network of 36 food stores and 16 funeral homes, invested £5.3m in new capital projects – an increase of £1m on new investments on the previous year.
It said: “Such level of investment goes against the grain in a year which saw continued economic turbulence, not least as a result of Covid-19.
“In addition, the society faced an unprecedented level of competition, predominantly in the food sector, not only from the major multiples but also from the discount retailers who significantly increased their market share over a short period of time.”
Turnover across Heart of England’s food and funeral businesses was £90.9m – a decrease of 1.3% compared with the previous 52 weeks, which saw record trading because of the pandemic.
The society added: “Operating profit exceeded £5.83m, reflecting an increase of more than 76% when compared with the previous year and accounting for exceptional costs of £574,000, a surplus of £861,000 on the sale of fixed assets, a £176,000 surplus on revaluation of investments properties and a positive increase in the fair value adjustment for funeral prepayments totalling £1.3m.”
Food sales dipped by 1.72% compared with the previous year. Heart of England said this was in part down to the increasing competition but also as a result of supply chain problems from a shortage of HGV drivers. A change in customer shopping habits has also contributed to a changing face in food retail, it added.
Margins were also under pressure, said the report, not only as a result of increased competition locally but also due to a drop in income against the previous year from the Co-op’s FRTS central buying group.
But the society continued its investment programme, completing significant capital projects within its food stores in both Bulkington and Harbury.
The £872,000 project in Bulkington saw the society broaden its customer offering and create a ‘hub’ experience for shoppers. The store was also divided into two units, with an Indian restaurant moving into the second unit.
The £445,000 refurbishment at Harbury was the store’s first major investment in more than a decade. The store, which has served the village since 1863, now has a broader customer offering and following a survey among locals was developed with the environment and sustainability top of mind.
Investments continue this year; in March the society opened its £2.7mstore at Lower Heathcote in Warwick, which will be followed by the refurbishments of the retailer’s Hillmorton and Balsall Common stores later this year. The Balsall Common store will feature a new coffee shop offering, while next year will see the opening of a drive-through coffee unit in Wellingborough, Northamptonshire – another first for the co-op.
The society’s funeral business posted a 2.59% increase in sales during 2021, although the number of funerals in that time fell by 4.79%. The drop comes against an extra ordinarily high number of funerals in 2020, brought about by Covid-19.
Pre-paid funerals saw an increase of 12.20% on the previous year.
Heart of England says it invested in a new funeral home in Brackley, south Northamptonshire, taking the business over from Midcounties Co-op The move allowed the funeral division to extend its footprint further south and followed on from the opening of its Towcester funeral home in late 2019.
All funeral homes were rebranded and are now known as Heart of England Co-op Funerals.
The society’s net worth now stands at £52.8m – an increase of 15.4% on 2020. Its bank balance is now at £16.4m, with a further £5.3m spent on new projects throughout the year.
Membership has increased to 166,000 from 162,500 last year, while the member rewards earned in Food stores over the year topped £367,000.
CEO Ali Kurji said: “We are operating in a very volatile and more complex environment than ever before as food retailing has been changing, and the continued pressure on margins as a result of price reductions by the multiples, in order to compete with the discounters, and customers are now shopping in different ways as we have seen tremendous growth in home deliveries and online shopping.
“We face an extremely challenging and very uncertain 2022 and all the economic indicators are pointing towards a slowdown in the economy as it appears to be losing momentum compounded by the increase in the national living wage by 6.5 per cent and the increase in national insurance from April 2022.”
Speaking of the funeral division, Mr Kurji added: “We continue to strive to develop our standards to the highest possible level, whilst maintaining a very competitive single price policy throughout all our funeral homes for the benefit of our client families.”
