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Some Observations on the Co-operative Groups

Interim Reports, 2011-2015.
The foremost question when examining the Interim Reports of the Co-operative
Group from 2011 to 2015 was how the turnaround of the business was
progressing. The biggest factor in this instance being the progress of the Food
business. Foods like-for-like sales are indeed up, if only by 0.8%. While this is
welcome news, increased sales do not always mean increased Revenues:

This of course raises the question of where the change in Underlying Profits has
come from.
Business
Category
Year
Total

Food
Underlying Profit (M)
2011 2012 2013 2014* 2015
142
119
117
99
120

Business
Category
Year
Total

Food
Revenue (M)
2011 2012 2013 2014* 2015
3,708 3,627 3,612 3,555 3,485

Given that Food Revenue has fallen every year since 2011, it is important to
ascertain how and when the Group plans to see Revenues increase again, or
even expects them to stop falling.

*Restated value
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One possibility that would decrease Revenue whilst increasing Underlying Profit
is the closure of some less profitable stores. This is because the closure of stores
would reduce Revenue, but closing them would result in the removal of the costs
associated with keeping them open. There is some evidence that such store
closures are happening:
Vowing to ditch its larger stores to focus on convenience, the society last month [April 2015] revealed it had sold
37 larger stores in the year to 3 JanuaryChief executive Richard Pennycook estimated 50 to 75 larger stores a
year would close, but said the Coop was not in a hurry to dispose of them as he wanted to achieve a fair
valuation.
The Grocer, 01 May 2015, The Co-operative Group sells six stores and closes another in convenience focus

Corporate Costs
Another area of interest is that of Corporate Costs, at a time when the business
is in recovery and expenditure is subject to scrutiny, it might be hoped that they
would be falling. A quick look at the interim report for 2015 reveals that
Underlying Corporate Costs have increased from 62million in 2014 to 73m in
2015. (2015 Interim Report, page 20).
Comparing the 2014 Interim Report to that of 2015 also reveals that they have
been re-stated and prior to re-statement the 2014 Underlying Corporate Costs
were 70m. (2014 Interim Report, page 19).
A potential reason for this re-statement of 8million away from Corporate Costs
is provided in a footnote to the 2015 Interim Report:
b) The operating segments are restated since 3 January 2015 such that the
results of the Estates division are now included within Food (previously within
Corporate costs). (2015 Interim Report, page 20).
Viewing the 2014 Interim Report alongside that of 2015, with regard to the
Underlying Profit of the Food business, does reveal a fall in Underlying Profit from
its initial statement at 107million to its restatement a year later at 99million.
The reason why the movement of 8million in Estates losses from Corporate
Costs to Food matters, is because it means that the Underlying Profit figures for
Food no longer reflect the unadulterated Underlying Profit figures for Food.
Likewise, the Operating Profit figures for Food no longer reflect the unadulterated
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Operating Profit figures for Food. For 2015, we do not know what the Interim
Underlying Operating Profit for Food really was, neither do we know what the
Operating Profit itself for Food really was.
It is not clear why the Estates business figures are not listed alongside those for
the Other Businesses, other than for the reason that in 2014 (as restated in the
2015 Interim Report) Estates underlying losses appear to have been 8 times
higher than the Other Businesses profits.
Business
Category
Year
Total

2011

Estates - Interim Underlying Profit

Underlying Profit (M)
2012
2013
2014
18
10
7

-8

Estates - Interim Underlying Profit 2011-2014

20
15
10
5
0
2011

2012

2013

2014

-5
-10

The restatements of Estates are a factor here, the other factor impacting upon
how far Estates Interim Underlying Profits might affect the Other Businesses
category, if it were added to it, will be the performances of those businesses
themselves.

Joint Ventures
These ventures dont appear to be delivering great value as yet. A number of
these categories are recent additions to the interim reports. This data represents
the Groups share of these figures only:

Business
The Co-operative Bank plc
Category
Investment and Income (M)
Year
2011
2012
2013
2014
2015
Investment
246
224
Income
27
5
Does The Group still have a Director on the Bank's Board?
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Business
Category
Year
Investment
Income

2011
-

NOMA
Investment and Income (M)
2012
2013
2014
2015
29
31
0
1

2011
-

TCCT Holdings UK Limited (Travel)

Investment and Income (M)
2012
2013
2014
2015
37
42
36
-9
0
-7

2011
-

Windfarm joint ventures

Investment and Income (M)
2012
2013
2014
2015
12
13
26
0
1
1

Business
Category
Year
Investment
Income

2011
-

Other investments
Investment and Income (M)
2012
2013
2014
2015
5
5
2
0
0
0

Business
Category
Year
Investment
Income

Total
Investment and Income (M)
2011
2012
2013
2014
2015
59
335
319
-1
-10
-9
28
0

Business
Category
Year
Investment
Income
Business
Category
Year
Investment
Income

This discussion paper is designed to be a quick overview of some core concerns

with regard to the Co-operative Groups interim reports, rather than a summary
of the businesss progress as a whole.
Kat Rose 2016