Co-operative Group admits to a disastrous year with losses of £2.5 billion
The Co-operative Group has reported having a disastrous year after heavy losses at its bank led to a group comprehensive loss of £2.5 billion for 2013.
In the group’s full-year results statement for the 52 weeks to 4 January 2014, interim group chief executive Richard Pennycook said the scale of losses highlighted fundamental failings in management and governance at the group over many years. He added: “These results should serve as a wake-up call to anyone who doubts just how serious the challenges we face are."
Ursula Lidbetter, the Co-op Group chairman, said that the organisation's senior management had "fallen far short" of acceptable standards and that urgent fundamental reforms were needed.
"During 2013, it became apparent that our governance had fallen far short of the standards to which we aspire as a co-operative society," she said. "Now is the time to put that right through fundamental reform – we have to act with urgency if we are to lay the foundations for a stronger, healthier co-operative business in the future."
While the majority of losses came from the Co-op's crisis hit bank where a £1.5 billion black hole was discovered last year, the group was also hit by a partial write-off of the goodwill created on the 2009 acquisition of the Somerfield supermarket chain following a strategic review of the business.
Group sales were £10.5 billion, down from the £11 billion recorded in the previous year.
Looking at its core businesses of food, funeral care, pharmacies and general insurance, the Co-op said they had delivered a “solid performance” in tough markets.
While the group's food business saw like-for-like sales fall by 0.2% in the year, like-for-like sales in its core convenience chain rose by 1.6%. The like-for-like performance for the food business improved to a 0.6% increase in the second half, with a 5.3% increase in convenience. However, sales fell from £7.44 billion to £7.24 billion as a result of store disposals, a shorter accounting period and price reductions. Underlying operating profit dropped from £269 million to £247 million.
Pennycook said the group’s True North strategy for its food business would include the opening of over 100 new convenience stores this year and a focus on reducing prices for customers.
Looking ahead Pennycook said: “We have a huge job ahead of us - transforming this organisation will take at least four years and the path will not always be smooth. Through all the events of the past year, however, I have never lost my faith that this is a great business that holds a special place in the hearts and minds of people in communities up and down the United Kingdom. This country needs a strong Co-op and that is what the management team and I are determined to deliver.”
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