Co-op to report worst results in history

 
Co-operative bank branch The group's banking arm was hit by financial trouble and scandal last year

The Co-op Group's losses for 2013 are expected to be greater than £2bn, by far the worst in its history, when they are announced on 26 March.

I also understand that as the first stage in trying to revitalise the group as a whole, its chief executive, Euan Sutherland, will tell members of the Co-op's regional boards on Saturday that its substantial farming operation, which includes 15 farms, will be sold.

He will also reveal that Co-op is actively considering the sale of its 750 pharmacies, which generated revenues of £764m in 2012. "They are likely to be sold, but a formal decision hasn't yet been made," said a source.

Co-op Group's farms are mostly arable, producing cereal for bakers. They supply only a tiny proportion of the food in its stores.

As for the pharmacies, they have come under financial pressure, as the NHS tries to save money on prescriptions, and are not thought to be well integrated with other Co-op activities.

Co-op farming

  • Been farming since 1896
  • Owns 17,200 hectares
  • 200 employees
  • 70% of it is cereals
  • Only 2% goes directly to shops
Rescue

According to well-placed sources, the huge £2bn-plus losses to be revealed at Co-op Group stem mainly from its bank - which was rescued at the end of 2013 - together with a reduction in the value of the stores and goodwill it acquired with the Somerfield takeover of 2009 (what's known as a write-down).

For the first half of 2013, Co-op Group generated a pre-tax loss of £559m, following a loss in the previous year of £648m.

Since then, Co-op Group has been forced to recognise a collapse to nothing in the value of its investment in Co-op Bank, as part of a rescue which saw hedge funds and other investors emerging with majority ownership of the bank.

Job cuts

Over four years, Co-op Group is planning to cut running costs by £500m, of which it has already identified £100m of savings.

To achieve these cuts, I am told there will be thousands of job losses, probably between 4,000 and 5,000 by 2017, especially in head office and in support positions.

But Mr Sutherland and his board colleagues have yet to calculate precisely how many jobs will go, and he is not expected to give details for some weeks yet.

Euan Sutherland, speaking in February: "The business lost its way"

Co-op Group is by far the largest enterprise in the UK run on co-operative or mutual lines. It has millions of members, of whom tens of thousands are activists, who participate in elections for local boards.

Early leaks of the scale of the reconstruction of the group are fomenting tension between the activists and professional management led by Mr Sutherland.

"We worry that the board is exaggerating the scale of the crisis, including losses, to turn the Co-op into much more of a conventional business, and move it away from its democratic and ethical roots," said one.

Battle

Mr Sutherland won't unveil the full remaking of the Co-op until around the time of its annual meeting on 17 May.

He is carrying out a survey of how the public sees the Co-op, called "Have your Say", which has already seen more than 80,000 people express a view on how the Co-op should change.

Among the questions put to them, they are being asked whether the Co-op Group should continue paying a dividend to members, rather than simply cut prices, and whether it should continue to make financial contributions to the Co-operative Party, which in turn supports the Labour Party.

Co-op activists are concerned that the survey can be filled in by anyone, not just Co-op members, and they fear that the wording of the questions is designed to elicit a negative response on continued political donations, thus ending all ties to the Labour Party.

"There is going to be quite a battle over this," said one.

BBC business reporter Steph McGovern looks back at the history of the Co-operative Group and hears the views of some customers

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    0

    Comment number 588.

    I am absolutely fed up with how anti Co-op Robert Peston has continually been throughout the previous decade. He consistently exaggerates and overblows problems at the Group, which has been difficult considering how bad things have actually been. I suspect he has an ideological objection to mutual ownership since his pro-business politics are often clear, but that is not appropriate from the BBC!

  • rate this
    0

    Comment number 587.

    Many in the sad position of seeking the uselessOp pay its bills to small businesses on time or at all could have told any at the bad business whatbthey were heading for?

  • rate this
    0

    Comment number 586.

    579. Your post is even more confused. Redundancies are a consequence of businesses needing to adjust to meet changes in business environment. If it was al so easy they wouldn't hire in the first place. What on earth has short trading got to do with it. Co-op only sell 2% of produce produced by its farms in its shops; the farms are businesses.

  • rate this
    0

    Comment number 585.

    Think it is great to see that Mr Peston is quick to slate the Co-op yet again, yet when a UK bank that is 82% owned by the state makes a record loss of £8.2 billion and continues to pay a bonus he doesn't write a word!!! Good to see balanced journalism!!

  • rate this
    -1

    Comment number 584.

    569: No, they'll sell the farms cheap to some heddge fund mates of someone in Go'vt, who'll make apacket turning them round in a few years.
    Get orf my land !

  • rate this
    0

    Comment number 583.

    So, what started as a good enterprise to raise the standard of living of the common man, is now wrecked by mismanagement and economic slump.
    So, who let the Bankksters take over Co Op Bank ?
    Indeed, it would have helped reduce the crisis, if Building Societies had been allowed to stay Building Societies, instead of being greedily gobbled up by Americcan style megabanks.

  • rate this
    -1

    Comment number 582.

    537 Lawrence

    If that's the case, its for all the wrong reasons and I doubt the recent demise was due to superstitious forces, more down to long term arrogance, over pricing and sheer incompetence. You couldn't make it up.

  • rate this
    0

    Comment number 581.

    I am a former member of the Britannia BS. During the take over it was estimated that if there had been a straight sale to the coop each member would have got £2000.
    What's happened to my money!
    I demand a refund for mis selling!

  • rate this
    0

    Comment number 580.

    Co-op Group began to lose its way in the 1950s. When the Co-op Building Society decided to become independent, it found its way to growth and success and became the UK's largest building society as the Nationwide. Unlike the Co-op Bank, Nationwide remains independent and prosperous.

  • rate this
    0

    Comment number 579.

    Re falling TP - Companies routinely make profits through mass redundancy, outsourcing of employment to the third world or shameful price hikes. They do things that I personally believe cause societal harm in the name of fulfilling a legal obligation to some investment banker short-trading with some unwitting party's pension fund. Empowering farmers means strengthening the backbone of the UK.

  • rate this
    0

    Comment number 578.

    577. No firm increases profits "at all costs"

    "empowering farmers" - what on earth does this mean? Farmers are ltitle different to any producer group & as such deserve no particular favours. Unfortunately they do in terms of CAP; an example of crony capitalism if ever you wanted one in which consumers are forced to pay higher prices to subsidise a industry with a pworful lobby.

  • rate this
    0

    Comment number 577.

    @Falling TP - They don't have a legal obligation to their owner-employees the same as private companies do for their shareholders, to increase profit year on year at all costs. This has been the sensible driving force behind it for generations, empowering farmers and owner-employees alike, as well as the local communities. That all goes down the pan due to PPI fraud copied from Barclays and co.

  • rate this
    0

    Comment number 576.

    Lots of talk of ETHICS when people mention the Coop, not very ETHICAL that their Pharmacy Employees only heard about any of this on BBC News yesterday morning !!

  • rate this
    -1

    Comment number 575.

    Hypocrisy has also been the undoing of the Co-op. Whilst the Co-Op is happy to stock products from African countries with the most appalling Human rights records they are happy to boycott Israeli settlements - whilst you agree or disagree with these settlements the Co-op position is just hypocritical.

  • rate this
    -1

    Comment number 574.

    573. Absolute drivel. It is the primary purpose of Co-op to produce profits. It can then choose what it wishes to do with those profits but for it to attempt to operate in any other fashion would be irresponsible both to its employees and to its members.

  • rate this
    0

    Comment number 573.

    It is a testament to the scale of fraudulent practice that occurs in the financial sector and the perfect metaphor for how the deviant, predatory habits of the banking world have scuppered social provision across society as a whole. Decades of hard work and solidarity down the pan because in order to be competitive the Co-Op has behaved like every other privately owned vulture bank. Very sad.

  • rate this
    0

    Comment number 572.

    Call it superstition or coincidence or bad luck but I call it the kiss of death or how the mighty have fallen.Collaborate in mindrape at your peril.If they think they can act above the law then the greater law of morality or God or fate gets those evil people who collaborate in mindrape in the end.
    I don`t like them and others won`t either.

  • rate this
    0

    Comment number 571.

    @11.Justin150

    Why wouldn't they own their own farms? They can control their food production, and guarantee the quality to customers. I think all supermarkets should have their own farms. I don't understand why they have pharmacies, to be honest.

  • rate this
    0

    Comment number 570.

    I really hope the quality of their food doesn't suffer if they sell their farms; I buy meat from them because of their standards. They'll end up losing even more money if people can't trust their food standards any more.

  • rate this
    +1

    Comment number 569.

    Hey folks do cheer up - the loss is barely a quarter of RBS's loss and that crowd have been taxpayer funded - I don't recall the government riding to the rescue of the Co-op Group.
    Seriously though it is obviously a bad situation - I just hope that the profitable regional co-op businesses - yes they do exist - can buy the farms & pharmacies & work more closely with the national group

 

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