Co-operative Group slumps to £132m loss after bank stake write-off
The Co-operative Group has fallen into the red for the first time since 2013 after writing off the value of its stake in the troubled Co-operative Bank to nothing.
The mutual slumped to a pre-tax loss of £132 million for 2016 after the value of its 20% holding in the Co-operative Bank was slashed from £185 million in 2015 to zero.
The Co-operative Bank was put up for sale in February amid concerns over its balance sheet strength as it continues to suffer following its 2013 rescue after the discovery of a £1.5 billion black hole in its finances, which left it majority controlled by US hedge funds.
Losses at the Co-op Group come against profits of £23 million in 2015 and mark the first time it has fallen back into the red since 2013, when it was plunged into crisis as the full scale of the woes at the banking business emerged.
It said the move to write off its stake in the Co-op Bank was "prudent", but it hoped to get "some value from the sale".
The group had already marked down the value of the shareholding to £140 million at its half-year results.
Newly appointed chief executive Steve Murrells - who took over from Richard Pennycook last month - said the group backed the Co-op Bank sale plans, but was keen to ensure any buyer took on the values and ethics of the mutual.
He said: "We're absolutely behind the decision and hopeful that a good bidder will come forward.
"We clearly have the two million of our customers involved in the bank and getting the right outcome for them is very important for us."
It is understood the deadline for expressions of interest in the Co-op Bank was earlier this week , with potential bidders said to include Sir Richard Branson's Virgin Money and Clydesdale and Yorkshire banking brands owner CYBG.
But it is thought the sale - set to save the lender from raising up to £750 million or being wound down - could see bidders snap up parts of the bank rather than the whole business.
Chairman Allan Leighton said 2016 was a "momentous" year for the group as it finished its second year of a major turnaround plan launched in the wake of its troubles in 2013.
Membership numbers rose to four million after it relaunched its reward scheme and it has signed up another 350,000 so far in 2017.
Annual results showed t he convenience store arm notched up a 3.5% rise in like-for-like sales, although underlying operating profits slipped 2% to £182 million as it invested in the chain.
Underlying earnings were flat at its funeralcare business, at £69 million, while i t narrowed losses in its insurance arm to £18 million from £60 million in 2015 thanks to a record 28% surge in sales.
But the group gave a cautious outlook, warning that "a ll of our markets remain fiercely competitive and we face a challenging consumer and economic backdrop".
Mr Murrells said food earnings were expected to remain largely flat in 2017 as it battles against rising inflation.
He also issued an apology after the group was accused of sexism over an advert urging customers to buy their daughter a chocolate Easter egg to "treat her" for "doing the washing up".
Mr Murrells said it was a "genuine error" and the advert, which ran over the weekend, has since been changed.