Sales growth at Coles supermarkets slowed at the end of last year, in what the company has called a “challenging retail environment”.

In its first standalone result since spinning off from Wesfarmers, Coles reported comparable supermarket sales growth of 1.3 per cent in the second quarter of the financial year, down from 5.1 per cent the previous quarter.

The ‘Coles Little Shop’ collectables campaign boosted sales growth over the half but the effect seemed to wane in the second quarter, which was also impacted by New Year’s Eve falling in the third quarter this year.

Average basket size increased by 3.1 per cent over the half-year, with customers buying more items per basket.

Half-year net profit fell 14 per cent to $738 million. It took a $146 million provision for restructuring of its supply chain, including two new automated distribution centres.

The company will not pay an interim dividend but said Wesfarmers will pay a dividend in March that will reflect, in part, Coles earnings up until the demerger.

Coles chief executive Steven Cain described it as a “solid outcome in a challenging retail environment”.

Sales growth looks unlikely to improve in the third quarter, with the supermarket flagging that momentum remains broadly in line with the second quarter.

Investors baulked at the higher costs imbedded in the results with shares falling around 2 per cent in morning trade to $2.38.

IOOF lifts profit and provisions

Meanwhile, troubled wealth manager IOOF appears to have shrugged off a humiliating run at the banking and financial services royal commission to deliver strong first half profit.

The company reported a trebling in net profit to $135 million, although that was supported by the sale of its corporate trust business.

On an underlying basis, stripping out one-off items, profit rose a more modest 6 per cent to $100 million.

IOOF raised its provisions to cover compliance and regulatory costs arising out of the royal commission to between $20-30 million through to 2020.

This is higher than the $5-10 million previously on the books, but a long way short of the $600 million analysts at Macquarie believe may be heading IOOF’s way.

Bank scandals could cost $6b

The big four banks, AMP and IOOF have already set aside around $2.6 billion to resolve financial scandals, but one analyst predicts it will cost much more.

IOOF gained notoriety at the royal commission for, among other things, dipping into superannuation funds, rather than its own corporates resources to compensate members who had been overcharged.

This led the bank regulator’s move to disqualify chief executive Chris Kellaher, chair George Venardos, chief financial officer David Coulter, company secretary Paul Vine, and general counsel Gary Riordan from managing peoples’ superannuation savings.

The leadership group has stood down from the company pending APRA’s actions and charges the company had breached prudential standards.

Acting chief executive Renato Mota said meeting the licence obligations set down by APRA was a “key priority” and the company was committed to resolving each of the requirements demanded.

“IOOF is fully supportive of the royal commission recommendations that lead to a better, stronger financial services industry,” Mr Mota said.

“Our review of advices has not highlighted any systematic issues, but we are committed to ensuring our advisors are providing high quality advice outcomes.

IOOF’s funds-under-management swelled by $688 million, or 10 per cent, to $138 billion due to the acquisition of ANZ’s wealth business and another 661 new wealth advisors.

The ANZ wealth business also came under fire at the royal commission over a number of issues including over-charging and mis-selling products.

The interim dividend was cut by 6 per cent to 25.5 cents per share.

Shareholders were relieved the news was not worse with share bouncing more than 7 per cent to $5.70 in early trade (10:30am AEST), although IOOF is down more than 50 per cent from its pre-commission highs.

-ABC