Co-op's battening down after buy-outs.

THE Co-operative Group has said it is now preparing for a period of consolidation following the acquisitions of supermarket Somerfield and building society Britannia.

Announcing a 17% rise in interim profits to pounds 228.8m, the Co-op said the year's second half would see it focus on integrating the two businesses.

Chief executive Peter Marks added that economic conditions were also likely to remain challenging.

He added: "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 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 like-for-like food sales exceeded the rest of the market, with 7.3% growth.

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 to meet competition concerns or ditch stores that did not meet its trading format. It has converted 29 stores to its brand so far, with 200 due to follow in the year since acquisition.

The merger with Britannia created a business with pounds 70bn of assets, nine million customers and more than 300 branches. Prior to the deal, Co-op Financial Services saw profits rise 11% to pounds 81.4m after general insurance new business sales increased 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, despite the Government's move to reduce the level of reimbursements to pharmacies from prescriptions.

Co-operative Funeralcare increased profits by 16.7% to pounds 28.1m, while the economic downturn meant the group's travel arm saw profits fall to pounds 2.5m from pounds 7.9m a year earlier.