Co-op's chaos laid bare as chief issues warning
Worst year in 150-year history sees losses of £2.5bn
The Co-op's boss has issued a stark warning about the mutual's future after revealing annual losses of £2.5bn – the worst in its 150-year history.
Interim chief executive Richard Pennycook said the disastrous results were a "wake-up call" to the serious challenges faced by the group – weeks ahead of a key vote on a planned shake-up of the Co-op's structure.
He said the food-to-funerals mutual needed to change course after it had tried too hard to be "all things to all men".
Mr Pennycook painted a picture of staggering mismanagement and chaotic governance at the group which meant even its own board was unaware of its £1bn-plus debt mountain or that it was paying for 650 properties it did not need.
He announced a £100m cost-cutting drive and the disposal of the majority of sites picked up in the ill-fated takeover of Somerfield. However, debts at the end of last year stood at £1.4bn and the Co-op's backers are already keeping a close eye on the progress of bitterly-contested reform plans which the group's leadership insists are vital for its survival.
If the stake in the bank falls below 20%, a guarantee that it must uphold its ethical co-operative values will no longer stand, though the business can choose to retain it.
Mr Pennycook said: "2013 was a disastrous year for the group, the worst in our 150-year history. The results demonstrate that but they also highlight fundamental failings in management and governance over many years."
The group's performance has been hobbled by the ill-fated acquisitions of the Somerfield supermarket chain as well as the banking arm's takeover of Britannia, both in 2009, and a more recent abortive attempt to buy 600 Lloyds branches. He said it would "be a very sad day" if a business such as the Co-op, committed to campaigns and returning profits to communities, were no longer to exist. The Co-op's £2.49bn loss included £1.44bn from the performance of its bank, plus a £625m hit from the reduction in its 100% stake to 30%, as bondholders took control of the rest of the business.
There were also group operating losses of £148m plus a £226m write-down of the value of its Somerfield acquisition.
The Co-op offered signs of improvement in its grocery arm, bolstered by the improved performance of its expanding convenience store network. It plans 100 smaller outlets to compete with Aldi and Lidl.
The group's calamitous performance for 2013 was dominated by the failure of its banking arm, which nearly collapsed after a £1.5bn hole was discovered in its balance sheet.
Its holding in the bank has shrunk to 30% as part of a rescue deal but the group will have to go to its lenders if it wants to put in a further £120m that will be needed to preserve the size of the stake.