Addressing members at the annual meeting in Manchester, the Co-operative Group’s chief executive, Richard Pennycook, said the society was on the way to recovery.
With a £2.3bn loss in 2013, the society’s main focus last year was to reduce its debt. “We were an example for a while of how not to do things but now I think we can begin to claim that we are becoming a role model for how we repair financial damage,” said the chief executive.
Prior to joining the Group, Mr Pennycook was involved in turning around several organisations that have faced hard times.
He explained to the AGM that turning around a business involved three phases – rescue, rebuild and a period of renewal. The Group is four months into the rebuild, he said, adding that this phase is expected to take three years, until the end of 2017.
“There is no quick fix. The damage has been too great and too deep so the rebuilt phase is about setting out a clear strategy and aligning the whole business to deliver that,” said Mr Pennycook. He believes staying focus and making sure that everyone in the organisation understands the goal will be crucial to achieving this.
The period of rescue saw the Co-operative Group regain control of its financial decision making by reducing massive debts down to manageable levels, said the chief executive.
“If the bank had gone down would have pulled the whole Group,” said Mr Pennycook. To reduce debt the Group has sold its pharmacy and farm businesses. The next step in the recovery process was agreeing a new strategy. The Group started working on a new governance structure and began an exercise to create a new purpose statement.
“Championing a better way of doing business for you and your communities, no other organisation on national scale could have that purpose. That strategy needs investment and it is dependent on us gaining profit,” said Richard Pennycook.
He thought the media coverage in 2014 has told a different story from the previous year, with a message that the Group is turning around.
“In recent weeks, I’ve handed over the mantle to biggest retail loss to Tesco and I’ve got no intention to ask for it back,” he added.
The Group reported a £216m profit in 2014. By contrast 2013, reported a £2.3bn loss. The Group’s debt went down by 42%.
“There are no further payments that we are obliged to make to the Co-op Bank, that situation saved £5bn the taxpayer, the Group took responsibility to clear up our own mess, in 2013 we did the right thing,” said the chief executive.
While the Group made a profit, it was unable to offer members a dividend. “We have to prioritise the business for the Group to have a future,” explained Mr Pennycook.
For the future, the Group will continue to focus on the 15 programmes set out to deliver its purpose, particularly its True North strategy in food. The programmes also include working with partners such as independent societies.
Getting a new membership proposition right is another priority according to Mr Pennycook. He said that pilot projects would begin in different parts of the country this year with the aim of getting a new proposition for customers. The Co-operative will also continue to respond to international emergencies. In just a few days the Group raised over £35,000 from members and colleagues and diverted another £30,000 to a camp to provide safe water to those made homeless by the disaster.
The Group aims to partner with a number of charities in the future to help address issues such as social isolation, challenges faced by young people or revitalising green spaces in local communities. It has also committed to three years of funding to Robert Owen Museum.
“We want to become well-known both locally and nationally for this work and restore our reputation for leadership in social issue.
“The difference between this AGM and last year is that we now have a very good reason to be opt about the future, we’ve turned the corner and the media is starting to report that we’re on the road to recovery”, he concluded.