Acquisitive Co-op pauses to regroup.

THE Co-operative Group eyed a period of consolidation after adding supermarket Somerfield and building society Britannia.

Announcing a 17% rise in interim profits to pounds 228.8m, the Co-op said the second half of the year would see it focus on integrating the two businesses and delivering more benefits to its customer members.

Chief executive Peter Marks said economic conditions were also likely to remain challenging - amid rising unemployment and no immediate signs of a recovery in consumer spending.

He said: "In spite of our recent success it would be naive to think that we are immune to the recession.

"That said we are pleased with our half-year performance, the second half has started well and we look ahead to the future with renewed confidence."

The group said it had experienced a period of "extensive expansion and acquisition" after the deals to acquire Somerfield for pounds 1.6bn in February and to merge its financial services arm with Britannia in August.

The addition of Somerfield meant Co-op's food division racked up sales of pounds 3.9bn and trading profits of pounds 165.5m in the six months to July 25. Stripping out the acquisition, the Co-op said its food like-for-like sales exceeded the rest of the market with growth of 7.3% The tie-up created a chain with around 3,000 outlets, but the Co-op has since raised pounds 650m from the sale of 200 outlets to meet competition concerns or offload stores which did not meet its trading format.

It has converted 29 stores to its brand so far, with 200 due to be changed in the year since acquisition.

The merger with Britannia created a business with pounds 70bn of assets, 9m customers and more than 300 branches.

Before the deal, Co-op Financial Services saw profits rise by 11% to pounds 81.4m after general insurance new business sales increased by 28% and average customer lending grew by 12%.

In other parts of the Co-op business, healthcare increased profits by 8.7% to pounds 14.8m while Co-operative Funeralcare increased profits by 16.7% to pounds 28.1m,. The downturn meant the travel arm saw profits fall to pounds 2.5m from pounds 7.9m a year earlier.

CAPTION(S):

* HIGH RISE: Co-op Insurance Services have helped boost profits