The Co-operative Group Annual Review 2012 The Co-operative Group Annual Review 2012 Our 2012 Headlines Group financial performance Gross sales: Underlying operating profit: Over £100m paid out to and on behalf of members £13.5bn £54m £528m capital investment Food Underlying operating profit: New food stores: £22m £288m 83 invested in Avonmouth (down £30m) distribution centre Banking Group Underlying operating profit/loss: Agreed Heads of Terms Core business: with Lloyds Banking 8.2% £120m profit (down £53m) Group for purchase of increase in primary Non-core business: Verde business, including account openings £377m loss (down £380m) 632 branches Specialist Businesses Underlying operating profit: UK’s first major consumer brand to be 5 £107m awarded an ABS licence hospital outpatient (up £8m) dispensaries opened The Co-operative Group Annual Review 2012 1 Here for you for life A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. They are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others. – International Co-operative Alliance Inside this year’s review: Overview Performance Governance and Financials 2 About the Co-operative Group 12 Food 22 Financial statistics 4 Range of interests 14 Banking Group 24 Board of Directors 6 Chair’s overview 16 Specialist Businesses 26 Management Executive 8 Chief Executive’s overview 18 Estates 27 Payments to and on behalf 10 Group vision and performance 19 Our people of members 20 Social goals 28 Independent auditor’s report The Co-operative Group 2 Annual Review 2012 About the Co-operative Group Member owned model Membership lies at the heart of our business. The Co-operative Group believes in open and voluntary membership, democracy and member economic participation. We are owned by our members, we manage our business for their Evolution benefit and share the profits with them. Along with all co-operative societies, The Co-operative Group has its origins in The Co-operative Group is Rochdale, Lancashire. The Rochdale democratically controlled Pioneers Society was famously by its members. established in 1844 based upon the However we differ from most other UK consumer notion of ethical trading and belief that co-operatives in that we have both independent society the profits of the business should be members and individual members. Anyone can become shared amongst members according a member of the Group by subscribing for a £1 share. to their purchases. Currently the Co-operative Group is jointly owned by over 7.6 million individual members and approximately By 1900 there were over 1,400 separate independent 80 independent co-operative societies. We are in business co-operative businesses in the UK, all members of a to serve our members and their communities, and our wider Co-operative Movement. During the 1900s, many business is run for their benefit. We listen to member of these independent societies began to merge. One of opinions and integrate these into our business activities the most significant in recent times was in 2000, when and our social and campaigning agenda. The Co-operative Group was formed following the merger of the Co-operative Wholesale Society and Co-operative The equitable nature of the Co-operative Group is Retail Services. This was followed in 2007 by the exemplified through the opportunity for each and every merger of United Co-operatives with the Co-operative member to get involved in running the business. In addition Group. In 2009 Britannia Building Society merged with to having the right to vote on a one member, one vote The Co-operative Banking Group, the financial services basis, each member has the right to stand for election to arm of The Co-operative Group and in the same year an Area Committee, Area Committee members are in turn The Co-operative Food business acquired Somerfield, elected to Regional Boards and ultimately onto the main a rival food business. Co-operative Group Board – democracy in action. The Co-operative Group Annual Review 2012 3 Social goals Other stakeholders In the midst of the current global Although the Co-operative Group is economic crisis, the co-operative model owned and governed by its members, is being seen as increasingly relevant there are other key stakeholders to a more balanced, equitable which are crucial to the co-operative and sustainable economy. The principles upon which the business Co-operative Movement was founded is conducted. to serve a social purpose, as well as The communities in which we work and operate are a commercial one. important to us. We have a presence in every postal area in the UK and our work in these communities is highlighted Co-operative members believe in the ethical values of in our Social Goals report. honesty, openness, social responsibility and caring for others. As an ethical leader, we exist not just to serve Another of the Co-operative Group’s key stakeholders our communities but to contribute to their long term are our people. Our people are vital to our success. good health. Social responsibility is in our DNA. Since From looking after our pensioners, to developing our 2009, we have been benchmarking ourselves against current employees and recruiting apprentices to form the the Corporate Responsibility Index (CRI) operated by next generation of Co-operative leaders, we continually Business in the Community (BitC). The full extent of our focus on our people. Co-operatives provide education ethical credentials and commitment to social goals is and training for their managers and employees so they included on pages 20 to 21. can contribute effectively to the development of their co-operatives. The section on ‘Our people’ on page 19 provides more details on our commitment in this area. Involvement with the wider Co-operative Movement Within the UK, Co-operativesUK is the over-arching co-operative national trade body. The Co-operative Group accounts for around 80% of the total Co-operative Movement in the UK and as such we play a leading role within Co-operativesUK. Co-operation is not limited to the UK. The United Nations designated 2012 its International Year of Co-operatives. The Co-operative Group played an integral role in co-hosting a momentous event in Manchester which was the global culmination of the International Year. The Co-operative Group 4 Annual Review 2012 Range of interests The Co-operative Group is the UK’s largest customer-owned business, offering a wide range of services including the following: Trading across Food Banking Group the Group Our large family of We are the 5th largest We are Europe’s most businesses and loyal food retailer in the UK operating sustainable bank*, offering membership base gives us across the whole country in banking and insurance a unique opportunity to offer 2,816 local, convenience services to personal and a wide range of products and medium sized stores. business customers. and services to members Our aim is to be the UK’s We operate through 342 and customers. Our profits leading community high street branches and are shared with each food retailer. 22 corporate banking centres, member, in proportion to telephony and online channels. Find out more how much they trade with See page 12 Find out more us, across all our businesses, See page 14 in any one year. We will continue to encourage and reward our members and customers for trading across the Group. Find out more at www.co-operative.coop * Winner of Europe’s Most Sustainable Bank, awarded by the Financial Times and the International Financial Corporation (part of the World Bank). The Co-operative Group Annual Review 2012 5 Specialist Estates Investment Businesses decisions Pharmacy We have a portfolio In line with our We are the 3rd largest of property investments, member-owned model, pharmacy chain in the UK, and provide a wide range investment decisions operating through over of property services across are not driven by the purely 750 branches. our family of businesses. financial demands of Funeralcare We also provide shareholders, but by energy the wider concerns of As the UK’s leading purchasing expertise funeral director, we carry across the Group and to our members. out over 100,000 funerals our partners. For that reason, we can make each year and sell over long term investment Find out more 90,000 funeral plans. See page 18 decisions for the benefit Co-operative Legal of the environment, Services communities, our Co-operative Legal Services members and employees is at the forefront of as well as profit. regulatory changes, with the aim of becoming the preferred provider of consumer legal services in the UK. Electrical Our online electrical store, focuses on excellent customer service and high quality products. Find out more See page 16 The Co-operative Group 6 Annual Review 2012 In the midst of this recession it will be vital that we continue to offer good value as well as good values and ensure that our customer service remains high. The Co-operative Group Annual Review 2012 7 Chair’s overview 2012 will be remembered for two great events: the Olympics and the Queen’s Diamond Jubilee. But those moments of national pride took place against a back-drop of continued economic gloom. Last year we also witnessed: a double dip Our member-owned model Peter Marks and recession, a further lack of trust in many large businesses and a continued lack of consumer Most businesses, when faced with the challenging Euan Sutherland confidence.