Co-op mulls sell-offs as profits slide
Fringe assets may be ditched to focus on banking and groceries amid 'worst conditions in 40 years'
The Co-operative Group is considering plans to jettison some of its smaller businesses in the latest shake-up of the mutually owned business, which will post a sharp fall in annual profits this week.
Peter Marks, the chief executive, wants to focus its strategy on the Co-op's grocery and banking divisions, and may consider offloading fringe assets, such as its own-label workwear, electricals business or car dealership unit.
The move comes as fears grow over the group's bid to acquire 632 branches from Lloyds Banking Group, after the process fell behind schedule. While the Co-op still has preferred bidder status, Lloyds last week admitted it would not agree terms on the complex transaction before the end of March.
This is the latest headache for the group, which has unveiled hundreds of redundancies already this year, as it seeks to deliver cost savings and efficiencies across its businesses from retail pharmacy and funeral care to legal services.
On Thursday, Mr Marks is expected to have to defend lower pre-tax profits than the record £414.4m delivered in the year to 1 January 2011.
While its banking division is thought to have performed robustly, the Co-op's 3,000-store grocery operation has had a year to forget. Its food business suffered a 21 per cent fall in operating profit to £135.4m in its first half to 2 July, hit by what Mr Marks described as the worst trading conditions in his more than 40 years at the organisation.
The Co-op, which acquired the Somerfield chain for £1.6bn in March 2009, posted a 3.6 per cent fall in like-for-like food sales over the first half. Since then, its grocery performance has improved, but its underlying sales remained in negative territory in its fourth quarter.
Its banking division remains in negotiations with Lloyds and the Financial Services Authority over problems such as the potential hurdles of capital constraints and any possible disruption to customers.
NBNK, a rival for the 632 Lloyds branches, is reportedly ready to step in if the Co-op's bid falters. Lloyds has promised to update the market in its second quarter and could still pursue a flotation of the branch business.
The Co-op's banking division made 187 staff redundant this month , in addition to the 300 job cuts made in its food business in February. The group declined to comment.
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