UK Co-op expects inflationary pressures to continue and interim profits to fall By Reuters

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© Reuters. FILE PHOTO: Signs are posted outside a branch of a co-operative food store in north London April 17, 2014. REUTERS/Neil Hall (BRITAIN – Tags: BUSINESS FOOD)

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(Reuters) – Britain’s co-operative group reported a sharp drop in interim profit on Thursday as the funeral supermarket supplier continued to grapple with supply chain issues and higher labor and energy costs, in an environment of rising inflation.

The Manchester-headquartered company said rising energy and wage inflation raised costs in the first half of the year for the business, despite attempts to cut costs to compensate for certain external adverse winds.

Co-op, founded more than 180 years ago, has seen cost reductions help the company avoid passing inflationary headwinds onto its customers, chief executive Shirine Khoury-Haq said.

British consumer confidence levels hit a record high this month as they battle the rising cost of living, with the government’s mini-budget wreaking havoc on the mortgage market and leading to warnings of a sharp drop in real estate prices.

“We know the current testing conditions will not improve in the second half, and we will continue to meet the challenges,” Chairman Allan Leighton said in a statement.

In August, the company sold its oil farm, comprising 129 sites, to supermarket rival Asda for £600m, which is expected to help reduce its net debt significantly.

Net debt at the end of the first half was £731 million compared to £920 million at the end of 2021.

Co-op operates more than 2,500 food stores and more than 800 funeral homes saw revenue for the six months stand at 5.6 billion pounds ($6.1 billion) from a year ago a year.

The company also saw an 84% fall in first-half pre-tax profit to £7m.

($1 = 0.9194 pounds)

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