FOOD-to-funerals mutual the Co-operative Group has shed its final stake in the Co-op Bank. The group retained only a one-per-cent share in the troubled lender after a £700 million rescue deal aimed at bringing new stability was completed weeks ago.
It has now confirmed that this stake has been offloaded to an existing shareholder in a deal worth around £5 million.
The transaction was carried out in the last few days.
Details emerged as the Co-op Group posted a sharp fall in profits after bumper payouts to members.
Underlying profits dropped 48 per cent to £14m for the six months to July 1 after the group, which prides itself on ethical trading, paid £29m in member rewards, £6m to good causes and dealt with losses at its insurance arm.
On a bottom-line basis, profits rose 47 per cent to £25 million.
The figures come weeks after Co-op Group nudged out rival bidder Sainsbury’s to become the front-runner to buy convenience store operator Nisa and increase its hold on the UK’s high streets.
The Co-op is understood to be considering a £140m approach for Nisa, whose 1300 shopkeeper members run 3000 outlets.
Steve Murrells, group chief executive of the Co-op, said ongoing discussions “could potentially lead to an offer being put to the members”.
He said a Nisa buyout would “play to its core strengths”, as the group’s “roots are firmly in wholesale”.
Murrells also defended the sale of the stake in the Co-op Bank as a “logical” move.
He said: “At one per cent, we would have had no influence in that business, and in selling to an existing shareholder it now gives us the opportunity to focus on our core business. That felt the right and logical thing to do.”
The refinancing deal between the Co-op Bank and its hedge funds had already signalled the end of the historic relationship between the mutual and the lender, with the formal agreement ending in 2020.
However, the bank – which was on the verge of collapse in 2013 after the discovery of a £1.5 billion black hole in its finances – will retain the Co-op branding.
Murrells said it was not up to the mutual to rule on this, adding that the bank will need to meet articles of usage, monitored by independent bodies. In its half-year results, the Co-op Group hailed its 14th quarter in a row of rising sales at Co-op Food, with like-for-like growth of 3.5 per cent in its first half. Convenience store like-for-like sales rose 4.5 per cent, which the group said was boosted by its recently revamped membership reward scheme. It has signed up more than 1.1 million people as members since relaunching the long-standing initiative a year ago, bringing the total to 4.5 million.
The group – which, like other food retailers is now preparing for key Christmas trade – said underlying operating profits from the food business jumped three per cent to £65m and were 22 per cent higher on a reported basis.
Meanwhile, the results showed the Co-op’s insurance business swung to an underlying operating loss of £1m against profits of £11m a year earlier as it increased reinsurance through third parties.
On a reported basis, the division saw operating losses widen to £11m from £4m a year ago.
Murrells said the group “continued to perform in the face of challenging markets”.
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