Has Richard Pennycook saved the Co-operative? After a series of catastrophes it looks like things could be looking up for the Manchester-based mutual. Today it announced profits before member payments (which it describes as the equivalent of pre-tax profits) of £124m in 2014 , after a £255m loss in the previous year. That’s despite a 3% dip in revenues to £9.4bn.
The Co-op’s food business delivered a like-for-like sales boost of 0.4%, offsetting falls in its funerals, insurance and legal services divisions. It’s managed to shed around £600m of net debt, which now stands at £808m.
There’s much to be done though. The company said it was now out of the ‘rescue’ stage and into the ‘rebuild’ stage of its turnaround plan. Pennycook admitted that its good profit figures were largely thanks to the disposal of its farms, pharmacy business and other property.
‘Without these we would, at best, have broken even,’ he said. ‘Against that backdrop, and given the need to invest in all our businesses, the board will not be recommending a dividend to members and believes that a resumption of dividend payments is unlikely until the rebuild phase is complete and we have returned to sustainable profitable growth.’
The Co-op’s woes began in May 2013 when Moody’s downgraded its bank division by six notches to junk status and in August that year it revealed pre-tax losses of £709m. The arrest of former chairman Paul Flowers over drug allegations that November didn’t exactly help matters either.
Its reputation was dealt another blow when chief exec Euan Sutherland left last March after less than a year in the job, describing the company as ‘ungovernable’. It seems Pennycook was keen to prove him wrong, and while today's results are a step in the right direction, it's clear he's got a long way to go.