Reviving the beleaguered Co-operative Group after two years of turmoil could take as long as five years, the new head of the business warned today.
The Co-op — whose former boss Euan Sutherland branded the business “ungovernable” — has called on Richard Pennycook as its new, permanent chief executive, less than five months after it gave up control of its controversial bank which had a £1.5 billion black hole.
The wider group narrowed pre-tax losses to £9 million in the half-year to 5 July, vastly improving on last year’s £2.5 billion loss.
Pennycook — the interim boss who previously said he had no intention of taking on the job full-time — laid out a five-year plan for the mutual, likening the Co-op to a sick hospital patient.
He said: “We’re out of the operating theatre and in the recovery room. In time we’ll be on our feet again.”
But he also warned that the mutual is braced for a three-year “rebuild” phase and further two-year “renewal” phase following a year of scandals and fallouts which saw its bank chairman, Paul Flowers, plead guilty to possession of cocaine, crystal meth and ketamine.
Debts hit an incredible £1.4 billion last year but a series of disposals, including its pharmacy, farming and security businesses in recent months, will cut back the debt pile significantly this year.
“Co-op is a reshaped business and the businesses we have are all really well-suited to the type of organisation we are,” Pennycook said.
“This is now primarily a convenience retail business and that will be a foundation for our future.”
Last weekend the mutual voted through plans by former City minister Lord Myners to create a new board of governors with outside experience to improve corporate governance.
But analysts have questioned whether senior business leaders would be willing to put themselves forward.
Chairwoman Ursula Lidbetter admitted she has yet to be approached by anyone looking to fill the new board, but said the pay would be within the “median” range for non-executives.
She added: “We will be a median payer but we clearly realise that excessive pay is a major issue for our members.”
Co-op’s food business managed underlying profits of £107 million for the period, down 8.5 per cent compared with a year ago, while profits at its other major business, funerals, also fell 17 per cent to £35 million.