The Co-operative Group has swung back into profit but members of the embattled mutual will have to wait until 2018 for a resumption of their dividend payments.
The group, which had previously sunk £2.3 billion into the red due to the near collapse of its banking arm, benefited from the sale of its farms and pharmacy operations as it posted a net profit of £216 million for 2014.
Without the disposals the Co-op would, at best, have broken even, chief executive Richard Pennycook said.
He added that the Co-op had completed the rescue phase of its turnaround but said that a resumption of dividend payments was unlikely until after the rebuilding phase completes at the end of 2017.
“The hard work of rebuilding the Co-operative Group for the next generation, and restoring it to its rightful place at the heart of communities up and down the UK, is now under way,” he stressed.
The group is the UK’s largest mutual business, owned by more than eight million members. It is the UK’s fifth biggest food retailer with almost 2,800 local, convenience and medium-sized stores.
Co-op’s debt reduced to £808m from £1.4bn a year earlier, despite the cost of boosting the capital strength of its former banking arm, which is now 20 per cent owned by the mutual following a rescue by bondholders.
The results came as the group said it planned to open 100 additional convenience food stores over the coming year as part of ongoing efforts to boost its biggest business.
It expects that about half of the stores will be in and around the M25 belt in the south east of England, creating up to 700 full-time jobs.
The food business, which employs some 60,300 staff and commands a 6 per cent slice of the UK grocery market, posted underlying operating profits up 1.6 per cent to £251m, with overall like-for-like sales up by 0.4 per cent in the year to 3 January.
But the firm described the market last year as “volatile” with upmarket retailers and discounters growing share at the expense of the big four supermarket retailers, such as Tesco and Sainsbury’s.
It added that this led to general discounting and food price deflation in the second half of last year “for the first time in living memory”.
Former Asda boss Allan Leighton, whose father ran a Co-op store, was recently announced as the society’s first independent non-executive chairman under its reformed governance structure.
Leighton is working on the establishment of a new board of mainly independent directors.
Their appointment is expected ahead of the annual general meeting in May, with further elected directors set to join thereafter. About 2.9 million of its eight million members are eligible to vote at the AGM having met the minimum level of qualifying purchases.
Leighton said: “I am putting together a board which will be firmly focused on the tough job ahead of rebuilding the Co-operative, underpinned by the far-reaching governance reforms introduced in 2014.
“This is not just another commercial turnaround. The Co-operative Group is different because we are owned by our members.”
In its funeralcare division, sales fell by £7m in a year affected by a low death rate, although efficiencies meant underlying profits rose by 6 per cent to £66m.
The Co-op’s home and motor insurance business posted an underlying loss of £7m, compared with a profit of £36m in 2013, after revenues were impacted by lower industry premiums and a move to exit low-profit areas.
It warned conditions were expected to remain challenging in general insurance over the next 12 to 18 months but that the coming year for funeralcare should be less challenging as it moves to add 40 branches and upgrades its IT systems.
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