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Co-op crisis deepens with record losses

Thursday, Apr 17, 2014 - 02:05

Apr.17 - Britain's Co-operative Group has announced losses of 2.5 billion pounds in what the country's biggest mutual describes as a disaster. As Ciara Sutton reports 2013 was the worst 12 months in the Co-op's 150-year history.

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The most disastrous 12 months in its 150 year history - Britain's Co-operative Group's response to its 2013 results. It made a loss of 2.5 billion pounds after being hit by a 1.9 billion pound funding gap at its bank. That followed a drugs scandal involving a former chairman - Paul Flowers was charged this week with drug possession. And then came an exodus of top executives, including the CEO who only lasted 10 months. Interim Chief Executive Richard Pennycook. (SOUNDBITE) (English) COOP INTERIM CHIEF EXECUTIVE RICHARD PENNYCOOK, SAYING: "We need to recover from that. We need to make the changes necessary to once again become a proud organisation. But I don't want to underestimate that we have some hard yards ahead." The losses reflect the cost of recapitalising the bank last year and a decline in the value of stores it acquired five years ago. It's now selling off its farm business and - possibly its pharmacies - to help raise cash. Hargreaves Lansdown's Richard Hunter. (SOUNDBITE) (English) HEAD OF EQUITIES AT HARGREAVES LANSDOWN, RICHARD HUNTER, SAYING: "When you hear things like this it sometimes flies in the face of an economy which is obviously recovering. We've got the cost of living gap which is now being closed as of yesterday, unemployment looking good. Bank of England now needing to decide where we go next. And this really should be a time for bluer companies to be starting to reap the rewards of previous cost cutting and streamlining." Co-op is still considering whether to inject more cash into its bank. It needs an extra 400 million pounds to cover the cost of past misconduct. The group saw its stake in the bank fall to 30 percent last year following a capital raising, with bondholders including U.S. hedge funds taking control. So far Co-op customers are remaining loyal, with no clear evidence of savers switching to other banks. But the deepening crisis could impact consumer confidence at a critical time. One independent director - who's standing down in May - has warned the Co-op must reform or die.

Co-op crisis deepens with record losses

Thursday, Apr 17, 2014 - 02:05

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