Group to quadruple its presence in academies from 12 to 40 with £3.5m investment

The Co-op is planning a major push into running schools after its exit from banking helped the group bounce back into the black.

The mutual is to invest £3.5m in expanding academies from 12 to 40 over three years with a plan to take over failing schools in the north of England.

The Co-op, which includes funeral parlours, grocery stores and financial services, made a profit of £72m in the year to 6 January, swinging back from a £132m loss in the previous year, which reflected the £185m writedown of its stake in the Co-operative bank to nil. The group sold its final stake in the bank in the autumn.

Total sales remained stable at £9.5bn as sales at its established grocery stores rose 3.4%. Grocery sales were flat at £7.1bn after dozens of larger stores were sold. Funeral services and will writing revenues rose by 4% to £343m while insurance revenues slid from £439m to £331m as the result of a new reinsurance contract.

Steve Murrells, group chief executive who took charge last year, said he wanted to drive growth by creating a more commercial Co-op that also had a “distinctive voice in society”.

He said that a big expansion into schools was part of showing how the Co-op did things differently.

“We need a vibrant, commercially successful business and the more successful they are the more we can do in society,” he said. “The academy investment is exactly that playing out. It is our chance to help in an areas that needs a lot of care.”

The Co-op took on its first academy in Manchester in 2010 and now also runs schools in Leeds and Stoke. Murrells said the new schools would be in the north so they could share expertise and because there was more need in that part of the country.

“I think education needs our help and we have got a good track record on turning those schools around,” he said. “This is not based on a business case; it is based on doing the right thing.”

Murrells insisted that the move would not be a distraction for the business, after finally exiting the bank that had to be rescued from collapse and nearly brought down the Co-op Group in 2013, as they would be run by a “solid management team that are already there and eager to do more”.

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The schools expansion is likely to raise fears that the Co-op is stretching its management just as it battles to survive in a tough grocery market where discounters Aldi and Lidl are taking an increasing market share.

Convenience store chains, which include the Co-op, are facing particular turmoil as the UK’s biggest supermarket chain, Tesco, takes over major wholesaler Booker, head of the Premier, Londis and Budgens symbol groups, which lend their name and products to independent stores.

The Co-op is still awaiting clearance from competition authorities for its planned £143m takeover of the Nisa wholesale and symbol group and is also taking over supply of the Costcutter chain.

The Co-op faces an inquiry into its treatment of suppliers by the grocery industry watchdog that could lead to a multimillion pound fine.

Murrells said “we don’t feel great about where we find ourselves”, but said the Co-op was already improving its practices and was focused on “ensuring we get things right and come back stronger” in dealing with suppliers.

“This is not a crisis, it is not an on-going problem and we will learn quickly and fix it,” he said.