Co-op profit dive steps up pressure

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The Independent Online
The Co-operative Wholesale Society will come under renewed pressure today as it reports that pre-tax profits have more than halved. Andrew Regan's Lanica Trust, which is stalking the Co-op, is likely to use the decline in performance to highlight the movement's inefficiencies and press the CWS Board to consider its approach to buy parts of its non-food businesses.

Though Mr Regan has received advice from political quarters not to go ahead with his bid before the general election, others in his camp have counselled that the prospects of a Labour government would not necessarily undermine his attempts. The poor trading figures may therefore act as the spur for Mr Regan to seek a special meeting of CWS members to discuss his proposal. He would need 10 of the 150 regional societies that control the CWS to support his campaign to requisition a special meeting.

John Owen, who stepped down from the Society's executive committee a week ago, said yesterday that though Mr Regan might have the backing of some smaller societies it would be unlikely that his support base was wide enough to pull off a deal. "I think he has very little chance of getting any significant support. There may be some people out there with a chip on their shoulder but I think he is on to a losing situation. We consider this an intrusion and an unwelcome distraction from what we are trying to do."

He added that the 30-plus members of the CWS board represented around 90 per cent of the membership "and they are unanimous in their opposition to the Lanica proposal".

CWS trading results for last year are expected to show a decline in pre- tax profits from pounds 31.4m to just pounds 14m due to falling trading profits and the effect of exceptional items. Trading profits fell from pounds 58.7m to pounds 48.8m.

CWS is also thought to have reported a loss of pounds 5.6m on pulling out of some activities and a further pounds 36m loss on a property venture with P&O called Slough Observatory.

There are also costs associated with redundancy payments. The accounts should also detail the retirement package of David Skinner, the former chief executive, who was paid pounds 388,000 last year.

As the Co-operative Bank which is owned by the CWS, recently announced profits of pounds 45m, the figures will call into question the operating performance of the remaining businesses. Some, such as the funeral parlours, are thought to be trading profitably. This would mean that other parts of the business, most notably the food retailing operation, must be trading at a loss.

Graham Melmoth, who took over as chief executive of the CWS last autumn, is expected to use the publication of the group's figures today to outline his strategy for improving the Society's performance.

This is expected to include plans to reduce central costs as well as improving staff incentives.

Though the Co-op is keen to trim its cost base, it is reluctant to do so at the expense of the CWS's federal role within the movement.

This includes acting as the administrative centre for the other regional societies as well as supporting the Co-operative union, the movement's secretariat in Manchester.

Lanica Trust has estimated the Co-op's cost to be pounds 16m. Andrew Regan would cut pounds 10m from these costs if his bid were successful, as well as offering incentive programmes for workers while pruning middle management jobs.