Scotmid Co-operative said its turnover rose £4 million to £185 million in the 26 weeks to July 30 and trading profit was in line with last year at £2 million amid what it called  “a sluggish Scottish retail market and a period of considerable uncertainty.”

Scotmid said that as well as the general uncertainties caused by the Brexit referendum, its retail businesses also faced up to the challenges of price deflation, lukewarm consumer sentiment and the extra costs from the introduction of the National Living Wage.

Scotmid chief executive John Brodie said: “Against this background and that of a declining Scottish market our retail trading businesses delivered good performances.

“The Scottish Retail Consortium reported a 1.6% average reduction in like for like sales in the six month period.

“In this context our food convenience business performed well, with turnover growth driven by differentiation initiatives such as bakery and food to go helping to offset the market decline.

“Our Semichem stores found it more difficult to counter market factors but still delivered a positive sales performance ahead of the market.

“This included the benefit of further growth in premium fragrance sales building on the success of last year.”

Brodie said Scotmid’s funeral business performed ahead of expectations and rental income from Scotmid’s property investment portfolio was also robust, particularly for residential property.

Brodie said the second half of 2016 will be challenging.

“At the year-end we highlighted the specific challenge of the National Living Wage in the context of an unfavourable Scottish retail market,” Brodie added.

“The Society has delivered a positive initial response to this challenge by accelerating continuous improvement initiatives while maintaining focus on the development of our core business to deliver a solid first half result.

“However, the last six months has seen the magnification of general market uncertainties both in the lead up to and after the result of the Brexit referendum and we anticipate that the uncertainty will continue until the shape of the UK’s terms of exit become clear.

“Consequently, we expect the second half of 2016 to be equally or more challenging with the full cost impact of the National Living Wage.

“This will also continue into 2017 when we face further cost increases including the apprenticeship levy.

“The economy and in particular the unfavourable retail landscape will be a significant ongoing challenge for the society which we will continue to address with our continuous improvement philosophy which has served us well for a number of years.”