The Co-operative Group marks a milestone today, returning to profit and declaring the “rescue” phase of its 3 year-turnround plan complete, in its recovery from two years of scandal.
The Group neared collapse in 2013, amid a £1bn hole in finances and disgrace from its former Chairman Paul Flowers. Euan Sutherland, now CEO of Supergroup, was brought in to lead the business but left after just 10 months, quickly replaced by then Finance Chief Richard Pennycook.
The Rescue, Renew and Rebuild programme includes the hire of retail turnaround specialist Allan Leighton as its chairman, who notably helped sell Asda to Walmart in the 1990s.
Due to complete in 2017, the programme has seen debts slashed to £808m. Although profit before member payments was at £216m in the year to January 3 (compared with a £2.3bn loss in 2013), Pennycook is realistic about the situation, aware that the Group still has a long road ahead.
"We significantly reduced net debt, even after meeting our outstanding contributions to the Co-operative Bank. This followed the successful sales of our farms and pharmacy businesses and detailed work to ensure we have the right cost base in place. Our core businesses continued to deliver for customers, with their financial performances reflecting challenging trading conditions across all of our markets and the different stages they are each at in terms of rebuild.”
He continues “A significant element of our 2014 profit relates to one-off disposal gains on the sale of our farms and pharmacy businesses and property disposals. Without these we would, at best, have broken even. Against that backdrop, and given the need to invest in all our businesses, the board will not be recommending a dividend to members and believes that a resumption of dividend payments is unlikely until the rebuild phase is complete and we have returned to sustainable profitable growth."