Troubled Co-op posts fall in first-half profitThursday 04 September 2014 12.14
Britain's Co-operative Group said it would rebuild its food-to-funeral operations under chief executive Richard Pennycook after the loss of control of its bank and disposals helped stem the large losses of last year.
The mutual organisation was hit by a raft of problems that culminated in a £2.5 billion loss in total.
Pennycook, the interim chief executive who was confirmed in the role today, said the 150-year old mutual was now on a firmer footing.
But weaker first-half earnings in its remaining businesses underlined the scale of the challenge ahead, he added.
The group posted income of £116m for the six months to July 5, compared with a £1 billion loss a year ago, when it partly recapitalised its bank and wrote-off goodwill relating to its acquisition of the Somerfield grocery chain.
Its remaining businesses saw a fall in underlying profit to £66m, down from £116m a year ago.
It agreed last weekend to overhaul its governance structure, putting in place a board to return the 150-year old group to financial health.
Pennycook said he was under no illusions about the scale of work necessary. "The businesses are all underperforming, and we make no bones about that, but they all fit very well with the purpose of the Co-op to serve our members and be at the heart of our communities," he said.
Pennycook said the turnaround would take three years, but the disposal of parts of the business, such as its pharmacies, laid a solid foundation to rebuild. He will reveal his strategy at the full-year results next year.
The Co-op, like Britain's other big supermarket chains, is being squeezed by discount retailers Aldi and Lidl in a grocery market that is barely growing at all.
It had a 6.4% share of the British grocery market in the 12 weeks to August 17, down from 6.6% a year ago, according to Kantar Worldpanel.
Underlying profit in the group's food division fell 8.2% to £107m on flat overall sales of £3.6 billion.
Pennycook said despite the problems of recent years, some 11 million customers a week were still coming through its doors, and there was considerable goodwill towards a group that he said was an institution.