Co-op gives cautious outlook after falling into red in 2016

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Co-operative Group has written off the value of its stake in the troubled lender that bears its name after the food and funerals giant sunk to a full-year loss.

The mutual yesterday revealed pre-tax losses of £132 million for 2016 as it took a £185m hit after slashing the value of its 20 per cent holding in the Co-operative Bank to zero.

The lender has been put up for sale amid concerns over its balance sheet strength in the wake of its 2013 rescue following the discovery of a £1.5 billion black hole in its finances, which left it majority controlled by US hedge funds.

Losses at the group compare with a profit of £23m in 2015 and mark the first time it has fallen back into the red for three years, when it was plunged into crisis as the full scale of the woes at the banking business emerged.

The latest figures reveal that group revenues increased by 3 per cent to £9.5 billion, with like-for-like takings at the food division lifting 3.5 per cent, driven by its core convenience business.

Membership numbers rose to four million after the group relaunched its reward scheme and it has signed up a further 350,000 so far in 2017.

Underlying earnings were flat at the funeralcare business, at £69m, while the Co-op narrowed losses in its insurance arm to £18m from £60m in 2015 thanks to a record 28 per cent surge in sales.

New chief executive Steve Murrells, who recently took over from Richard Pennycook, said the group backed the Co-op Bank sale proposals, but was keen to ensure any buyer took on the values and ethics of the mutual.

He said: “We’re absolutely behind the decision and hopeful that a good bidder will come forward. We clearly have two million of our customers involved in the bank and getting the right outcome for them is very important for us.”

The group also gave a cautious outlook, warning that “all of our markets remain fiercely competitive and we face a challenging consumer and economic backdrop”.

Murrells said food earnings were likely to remain largely flat this year as the group battles fierce competition and rising inflation.

Chair Allan Leighton said: “We’ve invested in our brand, our businesses and our colleagues and now we can clearly see the benefits – a big jump in membership, better sales and increasing market share.”

More than 600 food stores and 200 funeral homes have now been rebranded.