Operating profits for Co-operative Legal Services (CLS) fell year-on-year by 63% during the first half of 2012, the organisation revealed today. In its half-year financial report, the Co-operative Group says its legal services arm made a profit of £700,000 as it spent heavily on recruitment and expansion.

In a statement, CLS said the decrease in profit is ‘in line with expectation and reflects investment for future growth’. Legal services recorded sales of £17.1m, up 18.9% on the same period in 2011.

During the first six months of 2011, operating profits year-on-year at CLS rose by 3%, with sales rising by 22%. In April, the Co-op became one of the first entities to be granted an alternative business structure licence by the Solicitors Regulation Authority. The successful application prompted a recruitment drive that will lead to the creation of 3,000 new roles at CLS.

The fall in profits and rise in sales of the legal division is repeated in the Co-op group’s overall financial performance. Operating profit fell year-on-year from £264m to £174m, with net borrowing also rising from £1.4bn to £1.516bn.

Gross sales rose from £6.546bn to £6.559bn in the first six months of 2012.

Profits went up by 19.3% in the pharmacy and funerals business, but profits in the banking and food divisions fell by 68% and 16% respectively.

Peter Marks, chief executive of the Co-operative Group, said: ‘We have been able to continue to invest for the long-term development of all our businesses and to protect our customers even though we, like all businesses, have felt the impact of the tough headwinds of the unrelenting consumer downturn.

‘A year ago I warned that we were operating in the worst conditions that I have seen in more than 40 years in business. The results we are announcing today show the full impact of that with the profitability of our two biggest businesses affected.’