Sustainability Report 2009 - The Co-operative

Delivering value
Trading Group – underlying profit
Underlying trading profit is a key measure of performance for the
Trading Group that underpins the business objective of ‘growing
profit’. It tracks the underlying profitability of the Trading Group
from ongoing trading before any one-off or non-trading items, such
as property disposals, changes in the investment property portfolio
or significant one-off integration costs or business disposal profits.
The result for 2009 was £338m, an increase of 22% on 2008 and
in excess of budget.
Market share
The Co-operative Food 14
(former Co-operative in brackets)
2007 11 2008 12 2009 13
3.83% 3.9% 5.8%
(3.9%)
The Co-operative Funeralcare 15 n/a 17.5% 17.7%
The Co-operative Pharmacy 16 7.4% 6.5% 7.2%
The Co-operative Travel 17 n/a 8.2% 9.1%
Underlying profit (£m)
CFS 18 : Current accounts –
Co-operative Bank
1.8% 1.9% 2.1%
Public policy Customers Employees Economic impact Membership and co-operation
2006 2007 2008 2009
Underlying profit 193 r 196 r 278 r 338
Trading Group – Return on Capital Employed
Return on Capital Employed (ROCE) is the second key measure
of growing profit and commercial success. This measures how
effective the Trading Group is at earning a return on members’
funds that are invested in the business. The measure is calculated
by expressing the trading profit of the Trading Group as a
percentage of the average capital employed in the business
over the year 7 . The result achieved for 2009 was 10.4%
(2008: 14.2%), exceeding the 2009 target 8 . A target of
achieving a minimum 11.2% ROCE in 2010 has been set.
CFS – profit generation
CFS’ strategy includes a commitment to be financially prudent
and strong. Following the merger (page 6), the four key financial
performance measures for CFS are shareholder profits, the value
of new business premiums for the Life and Savings business,
customer-funding ratio and capital ratio. CFS’ shareholder profits 9
for 2009 were £177.2m compared with £147.0m in 2008,
and underlying like-for-like profitability 10 increased by 3.4% to
£174.3m in 2009. The value of Life and Savings new business
premiums in 2009 was 30% higher than the previous year. CFS’
liquidity remains strong, with a customer-funding ratio of 104%
(excluding securitised assets). Its capital ratio stood at 13.5% in
December 2009 (2008: 11.2%).
Market share
Market share is one of the two key internal measures that underpin
the objective of ‘growing business’. The Trading Group aims to
increase its share of customers’ spend year on year, such that it
takes an increasing share of the markets across which it operates.
The market shares of businesses across The Co-operative vary
from less than 1% for certain CFS products to over 17% for the
Funeralcare business.
CFS: Current accounts – smile 0.3% 0.6% 0.6%
CFS: Motor insurance 2.3% 1.7% 2.0%
CFS: Investments –
Co-operative Insurance
CFS: Investments –
Co-operative Bank
1.6% 1.4% 1.2%
0.5% 0.5% 0.5%
CFS: Pensions 4.1% 2.9% 2.7%
Britannia – Mortgages 19 1.3% 1.2% 1.3%
Britannia – Savings 20 2.7% 2.8% 2.5%
Local sourcing
Local sourcing can have a range of positive impacts; from
supporting local economies, to meeting increasing customer
demand for seasonal and locally supplied products. The related
subjects of food miles and ‘considered carbon’ are discussed
separately on page 62.
The Co-operative is one of the UK’s largest farmers and grows
and sells an exclusive range of products ‘Grown by us’. The range
includes strawberries, potatoes, peas, flour, apple juice and honey,
and in 2009 was enlarged to include fresh turkey ‘Reared by us’.
In relation to local sourcing of protein, 100% of Co-operative
own-brand fresh beef, duck, turkey and plain chicken continued
to be British sourced in 2009, as was 100% of own-brand
frozen turkey, pork, sausage and beef (pages 31–33). In 2009,
The Co-operative Food extended its support to British Pig Farmers
by converting all its own-brand fresh pork, sausage and bacon
products to British sourced, and all own-brand pre-packed and
delicatessen ham 21 to 100% British.
100% of own-brand milk and eggs sold in stores in 2009
continued to be British sourced (page 31), and approximately
70% of cheese sold was British sourced. All own-brand milk, eggs
and cheese are labelled to indicate British region of origin 22 .
96
The Co-operative Group Sustainability Report 2009