The Co-operative Group yesterday said it was poised to get the battered mutual back on track after returning to profit this year.
The retail-to-funeral care provider said income for the six months ending 5 July was £116m, compared to a £1bn loss during the same period last year.
The 150-year-old business also announced that temporary chief executive Richard Pennycook would take over the reins permanently.
“The important thing that we’ll need to do is around repairing the balance sheet and reforming our governance,” Pennycook told City A.M.
“Where we go next is really to start the fundamental transformation of our businesses, which remains a turnaround story. We go into what we are calling the re-build phrase, where over the next three years we will be restoring the fortunes of each of our businesses.”
Overall revenues for the 26-week period were £5.1bn, down from £5.3bn last year. Food remained the largest segment of the company’s earnings, accounting for £3.5bn in total.
The company has pushed on with a series of asset sales this year to get its balance sheet in order, including the sale of its farms, pharmacy and Sunwin businesses.
The sales have netted the group £910m, which it will use to pay down £1.4bn of debt.
Pennycook said the Co-op had no more plans to sell any other assets.
“We now have the businesses that we want to move forward with,” he said.
“They’re all businesses which perform really well. We hope now that we’re in a period of restoring the performance and fortunes of those businesses – but we don’t have anymore fundamental re-shaping to do.”
The group’s performance in 2013 was hit by the recapitalisation of the Co-op Bank, which turned control of the lender to a group of hedge funds and slashed Co-op’s ownership stake, and impairments relating to the purchase of Somerfield.
THE CO-OPERATIVE: CAN IT BE GOVERNED?
Co-op’s former chief executive Euan Sutherland notoriously walked away from the retailer earlier this year after just 10 months in charge – slamming the group as “ungovernable”. But the group’s chairman Ursula Lidbetter yesterday said a package of reforms recently voted through by the group would transform governance at the 150-year -old mutual society.
“With our new purpose I think the soul of the Co-operative is going to absolutely sing out,” she told City A.M. “We’ve had a lot of great things going on with the Co-operative but we’re almost drowned out by the problems with our governance structures and our very well rehearsed issues. In our new structure, we’re going to go back to community, the members are going to have a voice in the new structure. One member, one vote – people will notice a real difference.”
Lidbetter said the controversial changes proposed by in a report by Lord Paul Myners – which have seen the size of the board shrunk from 20 to 11 members – had broad support among the group’s members. “We’ve all regretted the situation we’re in, but the members have been decisive and positive about making sure that this idea had a future. They’re right behind the sales of the businesses and the reforms that we’ve made and right behind Richard [Pennycook] as well.”
Pennycook declined to say whether the group was indeed “ungovernable,” saying: “It’s a highly effective new governance structure, we have every confidence in that.”