THE ACCOUNTS OF THE

CO-OPERATIVE GROUP
A Summary from 2009 to 2014
Abstract
Bringing together the data from 6 years of financial reports in easily accessible charts

Kat Rose
katrose@live.co.uk

Contents
Executive Summary................................................................................................................................. 3
1. Revenue and Underlying Profits from businesses still owned by the Group ..................................... 5
1.1 How much does each business contribute to the Groups success? ............................................ 5
1.2 Food .............................................................................................................................................. 6
1.3 Funeralcare ................................................................................................................................... 7
1.4 Other Businesses........................................................................................................................... 9
2. The Co-operative Groups Assets 2009 to 2014 ............................................................................... 11
2.1 Measuring Trading Group Assets after the addition of Banking Assets ..................................... 11
2.2 Which Assets does the Group have and how has this changed from 2009 to 2014? ................ 12
2.3 Assets from Initial Asset Statements 2009 to 2013 .................................................................... 12
2.4 Assets from the 2013 Asset Re-statement and 2014 Asset Statement ...................................... 13
3. The Co-operative Groups Liabilities 2009 to 2014 ........................................................................... 15
3.1 Overall Trend 2009 2013 .......................................................................................................... 15
3.2 Overall Trend 2013 2014 .......................................................................................................... 15
4. Noma ................................................................................................................................................. 18
4.1 Context ........................................................................................................................................ 18
4.2 Projects within NOMA ................................................................................................................ 19
4.2.1 One Angel Square................................................................................................................. 19
4.2.2 Two Angel Square ................................................................................................................ 19
4.2.3 Three Angel Square .............................................................................................................. 19
4.2.4 Federation House ................................................................................................................. 19
4.2.5 Hanover Building .................................................................................................................. 19
4.2.6 Plot L..................................................................................................................................... 19
4.2.7 New Public Realm ................................................................................................................ 19
4.2.8 Hotel Indigo .......................................................................................................................... 19
4.2.9 New Century House ............................................................................................................. 20
4.2.10 Redfern............................................................................................................................... 20
4.2.11 Dantzic................................................................................................................................ 20
4.3 NOMA (GP) Limited / NOMA LP .................................................................................................. 20
4.4 NOMA conclusion ....................................................................................................................... 20
5. The Highest Value Re-statements 2009 2014 ................................................................................ 21
5.1 Food ............................................................................................................................................ 21
5.2 Funeralcare ................................................................................................................................. 22
5.3 Travel........................................................................................................................................... 22
5.4 Corporate Costs .......................................................................................................................... 22
6. Executive Pay Pro Rata by Job Role .................................................................................................. 25
1

6.1 Restatements to Executive Pay in 2012 ...................................................................................... 25

6.2 Chief Executive Officer ................................................................................................................ 26
6.3 Group General Council ................................................................................................................ 27
6.4 Marketing Director...................................................................................................................... 28
6.5 Director of Co-operative Relations ............................................................................................. 28
6.6 Chief Executive of External Affairs .............................................................................................. 29
6.7 Chief Information Officer ............................................................................................................ 30
6.8 Managing Director Co-operative Estates .................................................................................... 30
6.9 Chief Executive Co-operative Food ............................................................................................. 32
6.10 Chief Executive of Retail ........................................................................................................... 33
6.11 Human Resources Director ....................................................................................................... 34
6.12 Group Secretary ........................................................................................................................ 35
7. Retention Payments and Performance Related Pay ......................................................................... 36
7.1 Payments Not Included in Pay Tables ......................................................................................... 36
7.2 Categories of Payment ................................................................................................................ 36
7.2.1 Breakdown of Categories of Payment ............................................................................... 37
8. Conclusion ......................................................................................................................................... 37

Executive Summary
The research that led to this report was triggered by a lack of transparency, the area that first drew
my attention was Corporate Costs. Understanding Corporate Costs was not simply a matter of
tracking the Corporate Costs figures across a number of years; the categories were labelled and
relabelled repeatedly over a comparatively short space of time, with no apparent explanation for the
changes made. The overall result was a complicated patchwork of data:

Chart 1a

The information relating to Executive pay was even less transparent, the current practice of listing
pay by Executive name rather than job role, combined with a high turnover of Executives, renders
the information presented very difficult to interpret:

Executive Pay by Name and Months Worked (000)

3000
2500
2000
1500
1000
500

Richard Pennycook

Alistair Asher

Rod Bulmer

Claire Davies

Nick Folland

Paula Kerrigan

Steve Murrells

Pippa Wicks

Sam Walker

Euan Sutherland

Gill Barr

Mark Craig

Andy Haywood

Martyn Hulme

Rebecca Skitt

Peter Marks

Stephen Humes

Wayne Lee

Moira Lees

Martyn Wates

Barry Tootell

Niall Booker

Chart 1b

Dec-14

Nov-14

Oct-14

Sep-14

Aug-14

Jul-14

Jun-14

May-14

Apr-14

Mar-14

Feb-14

Jan-14

Dec-13

Nov-13

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

Mar-13

Feb-13

Jan-13

Movements within Executive Pay categories render this Executive Pay data even less transparent as
new payments were added to restated pay tables for 2012 and pay awards travelled between
Performance Related Pay and Retention Payment categories. The further I went into the
Co-operative Groups accounts, the more unexplained changes I found:
Why were 10.8m of payments to Executives on gardening leave, or received for factors other than
the work they directly contributed, not recorded in the pay tables?
Why were 1,457m of liabilities for 2013 adjusted from the current to non-current liabilities
category?
Why does the Annual Report say that the Group has entered into an 800m 50/50 joint venture
called NOMA with Hermes Real Estate, when papers at Companies House state that they entered
into that joint venture with the BT Pension Fund in the same month and year?
How much of the expected 400m investment in the NOMA joint venture does The Co-operative
have yet to pay?
And with the range of categories included in Corporate Costs subject to change every few years,
what does constitute a Corporate Cost, especially an Underlying Corporate Cost?
These are the kind of questions that I have only been able to uncover through hours of research, the
evidence for which is included in this report; they are also the kind of questions that Members of a
Co-operative should be able to obtain answers for.
If you have found The Co-operatives Accounts as impenetrable as I did at the start of researching
this report, then you will find answers here that are not readily available elsewhere; but more
importantly you will find questions.

1. Revenue and Underlying Profits from businesses still owned by the

Group
1.1 How much does each business contribute to the Groups success?
The events around the Bank and their effects on the Groups finances are covered in detail
elsewhere. Between 2005 and 2010 Foods mean underlying operating profit was 198.4m whilst
the Co-operative Financial Services businesss mean underlying operating profit was 165.6m. By
2007 these two businesses had become the most significant undertakings of the Group.

Chart 2

The extent of their significance becomes apparent when the Banks Underlying Profits are removed,
as Food becomes the most significant source of Underlying Profit for the Group.

Chart 3

The impact of the Bank ceasing to contribute to the Groups profits would be more significant in
2013.

1.2 Food
The Food businesss Underlying Profits grew consistently between 2007 and 2010, before declining
consistently between 2010 and 2013. Between 2013 and 2014 the decline in Underlying Profits has
been reduced, the below result has been impacted by the addition of some asset sale Revenue.

Chart 4

The decline in Underlying Profits would have been of greater significance in 2013, because by that
point Food had become the source of the majority of the Groups profits.

Chart 5

The trend in Food Revenues has been symptomatic of a challenging market, this indicates that the
increase in Underlying Profit in 2014 was not caused by an increase in Revenue.

Chart 6

An examination of staff and store numbers over this period provides some indication as to how the
trends of Underlying Profit and Revenue can be so dissimilar, the below table commences from 2010
when these figures first became available.
Year
Food stores
Food
Employees

2010
2,883

2011
2,801

2012
2,816

2013
2,779

2014
2,796

85,000

75,000

72,670

69,482

60,265

Table 2

Between 2010 and 2014 the Group has seen a 3% reduction in its quantity of Food stores and a 29%
reduction of its Food employee numbers. As Revenue has declined, the Group has reduced its cost
base by reducing staffing hours.

1.3 Funeralcare
Funeralcare is less significant in scale than Food, it is the Groups second largest business and
contributes approximately twice the Underlying Profit level of any other business. Funeralcares
Underlying Profits have increased significantly between 2009 and 2014.

Chart 7

Funeralcares Revenue rose steadily between 2009 and 2013, before declining between 2013 and
2014.

Chart 8

The variation between the trends in Underlying Profit and Revenue, between the 2013 and 2014
Annual Reports, is indicative of a reduction in the businesss cost base through a decline in staff to
funeral home ratios.
Year
Funeral
homes
Funeralcare
Employees

2010

2011

2012

2013

2014

865

888

910

926

961

4,084

4,057

4,191

4,230

4,116

Table 3

Between 2010 and 2014 the Group have increased their number of branches by 11%, over the same
period of time their staff numbers have increased by 0.8%. They have increased their quantity of
funeral homes by 96 and have hired the equivalent of 32 more employees during this 5 year period.
The first real terms reductions in staffing levels were made between the 2010 and 2011 Annual
Reports. Funeralcares Underlying Profit levels are significantly lower than those of the Food
business.

Food and Funeralcare Underlying Costs (M)

450
400
350
300
250
200
150
100
50
0
2009

2010

2011

2012

Sum of Funeralcare (M)

Chart 9

2013
Sum of Food (M)

2014

The Food and Funeralcare businesses Revenue levels are more disparate than their profit levels.

Food and Funeralcare Revenue (M)

8000
7000
6000
5000
4000
3000
2000
1000
0
2009

2010

2011

2012

Sum of Funeralcare (M)

2013

2014

Sum of Food (M)

Chart 10

1.4 Other Businesses

The other businesses contribute less Revenue due to operating on a smaller scale than the
Funeralcare business.

Chart 11

Their profits are therefore on a lesser scale than those of Food or Funeralcare.

Chart 12

The smaller scale businesses are facing similar challenges to their larger scale counterparts and some
are recording losses.
With Revenue and Underlying Profit both bordering on decline, the Assets and Liabilities of the Cooperative Group become more salient.

10

2. The Co-operative Groups Assets 2009 to 2014

2.1 Measuring Trading Group Assets after the addition of Banking Assets
Some anomalies have arisen between 2013 and 2014 following the adjustment of some items
formerly held by the Bank into the records of the Trading Group in the 2014 report. In order to
assess the impact of this adjustment of the Groups Assets, it is necessary to compare the 2013 Asset
statement with the 2013 Asset Restatement a year later.

Chart 13

The Assets most affected by this adjustment are as follows:

Total Trading Group Assets have increased by 2,538m, 1,356m of which are Current Assets and
1,182m of which are Non-current Assets
Trade and other receivables have increased by 605m
Investments (including joint ventures) have increased by 221m
Deferred tax assets have increased by 73m
Cash and cash equivalents have increased by 64m
Intangible assets have increased by 47m
Property, plant and equipment have increased by 34m
11

The total value of these Assets (excluding the Total Trading Group category) has increased by
1,059m following this adjustment.
The total value of these Assets (including the Total Trading Group category) has increased by
3,597m following this adjustment. Given the difficulty of separating the effects of the adjustment
from the figures prior to it, Asset figures will be summarised in two parts.

2.2 Which Assets does the Group have and how has this changed from 2009 to 2014?
To establish an overall trend it is first necessary to compare the Groups Asset statements from 2009
through to 2013, then to compare the Groups Asset Re-statement from 2013 with its Asset
Statement from 2014.

2.3 Assets from Initial Asset Statements 2009 to 2013

Chart 14

The Co-operative Groups Trading Group Assets have declined by 115.8m between 2009 and 2013.
12

A significant decline in the value of these Assets occurred between 2012 and 2013, primarily with
regard to Property, Plant and Equipment, Intangible Assets and Trade and Other Receivables. In
2014 the highest value losses under Property, Plant and Equipment, were 37m of Property and
38m of Plant and Equipment reclassified as assets held for sale; alongside 101m of disposals and
91m of Subsidiary Undertakings disposals (AR2014, p.116). These disposals and reclassifications
contribute 267m of the 313m change. The most significant change to Intangible Assets was the
loss of 504m of Pharmacy licenses with the sale of the Pharmacy and 180m on the amortisation of
the same. With regard to Trade and Other Receivables 14m of the change is derived from the
Non-current category, whilst 503m is from the Current category. Of the 517m reduction, 314m is
from Prepayments and Accrued Income and 155m is from Amounts Receivable from Disposal of
Businesses; these two changes account for 469m of the 517m change.
Notable areas of increased value are Funeral Plans, Investments in Associates and Joint Ventures,
and Deferred Tax Assets.

2.4 Assets from the 2013 Asset Re-statement and 2014 Asset Statement

Chart 15

The total value of the Groups Assets decreased by 138m between 2013 and 2014; this second
decrease in Asset value coincides with an increase in Pension Assets of 837m which resulted from
adjustments to categorisation between the Bank and the Trading Group categories. The Group
ceased to own the majority of the Bank from 20th December 2013, this resulted in a significant
movement of Assets (Annual Report 2013, p. 107).

13

Chart 16

Chart 17

A comparison of the changes between 2013s Statement and 2013s Re-statement, against the
changes between the 2013 Re-statement and 2014 Statement, show few shared areas of increased
value: Cash and Cash Equivalents, and Investments in associates and joint ventures are the only
two areas affected by the Re-statement that also increase their value in the 2014 Annual Report.
14

3. The Co-operative Groups Liabilities 2009 to 2014

3.1 Overall Trend 2009 2013

Chart 18

3.2 Overall Trend 2013 2014

Chart 19

The Co-operative Groups Trading Group Liabilities declined by 96.7m between 2009 and 2012,
then events relating to the Bank led to an increase in liabilities of 1,746m between the Restatements of 2012 and 2013, from 4,840m to 6,586m.
A comparison of Chart 18 with Chart 19 reveals a common upward trend in the Trading Groups
current liabilities. The reduction of the rate at which current liabilities were increasing, combined
with a substantial change in non-current liabilities from decline to increase, appears to suggest a
switch of some liabilities from the current to the non-current category. The comparison of 2013
15

Total Trading Group Current and Non-current Liabilities as initially reported, with 2013 Total Trading
Group Current and Non-current Liabilities as adjusted, is suggestive of approximately 1.5billion
being moved from current to non-current liabilities.
There is some ambiguity regarding the extent to which the adjustment has been caused by the sale
of the Bank; however, no other explanations are apparent at this point in time: The Group adopted
IFRIC 21 Levies (2013) on 5 January 2014. As the Bank was disposed of in 2013 and is therefore a
discontinued operation, the only restatement from the adoption of the IFRIC has been to transfer
26m from results from operating activities in discontinued operations to loss on sale of
discontinued operations. The income statement and balance sheet have not, therefore, been
restated. The Bank has also restated a number of other items in its 2013 balance sheet within its
2014 annual report. These items have not been adjusted in the Group financial statements as the
net effect is not material. The Co-operative Group Annual Report 2014, p.101.

Chart 20

The following chart illustrates the extent to which the movement of liabilities from the current
liabilities category to the non-current liabilities category has had an affect upon their value. the Total
Trading Group Liabilities for 2013 prior to adjustment were 4,638m and The Total Trading Group
Liabilities for 2013 after the adjustment were 4,638m. The Total Trading Group Liabilities for 2014
were contrary to the trend of previous years as they saw an increase of 982m on the previous year
and totalled 5,620m.

16

Chart 21 (figures derived from Note 24. Interest-bearing loans and borrowings, on p.159 on the 2014 Annual Report)

Whilst Unsecured Bank Loans have been reduced significantly, the majority of the financial liabilities
have been adjusted from current liabilities to non-current liabilities with no apparent change in the
date upon which their repayment is due.

17

4. Noma
4.1 Context
Noma is a joint project that the Co-operative Group launched in March 2011 with an announcement
that they sought another business to assist them in the progression of the project. The official
NOMA website states that:
NOMA is the mixed-use redevelopment project being led by The Co-operative Group. It will
transform Manchesters Northern Gateway into a remodelled and truly mixed use area anchored by
large corporate office occupiers, retail, residential and leisure uses and home to a broad range of
SMEs. NOMA will be built at a cost of 800m over 10-15 years on land owned by The Co-operative
Group in Manchesters northern pocket
NOMA was selected as a unifying name for a new Manchester district after a thorough branding
exercise by specialist consultants Landor. It is a new name for a place, and, over the planned 10 15
year period the people of Manchester will see a distinctive area emerge, worthy of its own name
and identity. While it reflects the sites location, NOMA is not intended to convey a specific meaning
but instead to unify a particular area of central Manchester.
The NOMA scheme was set to cost 800m when announced in 2011. If the Group is still an active
participant in this 10 15 year project, then this is likely to require a significant annual expenditure
from a business whose profit in 2014 was solely derived from sales of its Assets.
The 2012 Annual Report states that: The NOMA redevelopment of 20 acres of Manchester city
centre continued at pace in 2012 (Annual Report 2012, p,22).
Whilst in 2013 the intention to sell a portion of it was clear: In the Trading Group, the assets held for
sale in the current period relate to the sale of buildings, including the CIS Tower and surrounding
land and buildings of the Groups NOMA estate to a joint venture. This sale was deemed as being
highly probable within 12 months at year end. As part of the sale, the CIS Tower will be leased back
to the Group on a 15 year lease with a break clause at year 10 (Annual Report 2013, p,111).
In 2014 the Group still appeared to own a significant part of the Noma scheme: In June 2014,
Estates completed a 50/50 joint venture agreement with Hermes Real Estate to take the
development of the NOMA scheme to its next stage. Over the next ten years, the 800m programme
will create a mixed-use district in the heart of Manchester, including 2.5m sq ft of offices, 1m sq ft of
residential, and 0.5m sq ft of retail and leisure (Annual Report 2014, p,19).
In 2014 The Co-operative held an investment of 31m in the NOMA scheme which it did not appear
to hold in 2013, it also received 1m in income from the scheme in 2014 (Annual Report 2014,
p,125).
The NOMA scheme was far from completion in November 2013, as is evident in a report by
Manchester City Councils Chief Executive which was intended for a meeting of the Council Executive
on 20 November 2013, under Item 14, 4.1: Manchester City Council continues to be a strategic
development partner in delivering the full NOMA scheme. Significant further investment is needed
going forward to realise the vision and the project team continues to consider a range of funding
and development solutions to ensure that the scheme continues to realise its potential and deliver
on its core aims.
The records relating to NOMA are therefore limited by the fact that most of the building work was
still yet to commence in November 2013. The primary asset at that time was One Angel Square and
the Co-operatives shares in that complex have now been sold.
18

4.2 Projects within NOMA

The NOMA scheme consists of a number of projects, each of which is owned by a different company;
most companies are owned in part by The Co-operative, but One Angel Square is not due to it having
been sold.

4.2.1 One Angel Square

The Annual Report of One Angel Square Gp Limited, registered company no. 08334977, reveal that
the sole tenant of the fully-tenanted building 1 Angel Square, Manchester, United Kingdom paid
8,045,615 in rent to them in 2013 (Partnership Accounts, pp. 2, 15).

4.2.2 Two Angel Square

This is a new addition to the NOMA portfolio as reported by Place North West on the 6th March
2015 The Co-operative Group has released concept designs for the 200,000 sq ft 2 Angel Square
office block in Manchester. The scheme has been worked up by AHR Architects, with plans to submit
a planning application by the end of April. The office has been scheduled to complete by the end of
2018. Further coverage of this is available from the Manchester Evening News.

4.2.3 Three Angel Square

The Manchester Evening News reported on the 12th May 2014 that building work was soon to
commence on this project, the brochure for this project states under the Development Programme
that construction should take 21 months. Building work was still yet to commence though, as
reported by Place North West on the 2nd March 2015.

4.2.4 Federation House

This building is currently listed on the NOMA website in the following terms: NOMA are proud to be
home to the Castlefield Gallery New Art Spaces project. The flagship city centre location in
Federation House provides pop-up spaces for emerging talent in the North West. The Co-operative
does own shares in the Fed Building Limited, registered company no. 07465200. It is also listed as a
dormant company by Companies House which suggests that the Castlefield Gallery New Art Spaces
project are unlikely to be paying rent for their occupancy of the site.

4.2.5 Hanover Building

The Manchester Evening News reported on the 12th May 2014 that building work was soon to
commence on this project, the brochure for this project states under the Development Programme
that construction should take 66 weeks. The Hanover B Mcr Limited companys registered office is
1 Angel Square and its company no. is 07465214. The Co-operative did apply to have this company
struck-off the register of companies at Companies House on the 13th July 2015.

4.2.6 Plot L
The NOMA website states that Plot L will offer 455 units with great accessibility to city centre shops,
offices, amenities and transport hubs. This will be a landmark, 36 storey development in our new
urban neighbourhood and will lead the market both in terms of the quality of the design and the
quality of life it will offer residents. Development on site expected Q3 2015, first units ready for
occupation in 2017.

4.2.7 New Public Realm

On the 10th March 2015 the Manchester Evening News reported that It promises a mix of cafs,
restaurants, bars and shops nestled amongst the characterful buildings of the NOMA listed estate. It
is due to be completed by September 2015.

4.2.8 Hotel Indigo

This does not appear to be amongst The Co-operatives holdings as their website offers reward
points from another business once the hotel is built.
19

4.2.9 New Century House

Incorporated on the 9th December 2010 as with other NOMA businesses, New Century House
Limited is also registered to 1 Angel Square, its company no. is 07465090 and it is currently a nontrading business. The Co-operative did apply to have this company struck-off the register of
companies at Companies House, with a filing date of the 18th August 2015.

4.2.10 Redfern
Listed on the NOMA website as An Art Deco style building fronting on the new public realm to be
refurbished for the residential market and retail/leisure space on the ground floor. It is also
registered to 1 Angel Square, its company no. is 07475676 and it is currently a non-trading business.
The Co-operative did apply to have this company struck-off the register of companies at Companies
House, with a filing date of the 18th August 2015.

4.2.11 Dantzic
Listed on the NOMA website as A later addition to neighbouring Federation Building, Dantzic offers
short term let opportunities for businesses looking for interesting creative and studio space. Long
term options for Dantzic include office, retail and residential refurbishment. It is registered to 1
Angel Square, its company no. is 07465066 and it is currently a non-trading business.

4.3 NOMA (GP) Limited / NOMA LP

NOMA (GP) Limited is listed as an entity in which The Co-operative has a holding on their website;
though its registered address is: 15 Atholl Crescent, Edinburgh. This business does appear to be a
holding of The Co-operative as Martyn Hulme, Managing Director Co-operative Estates, is registered
as one of its Directors and Steve Murrells is registered as a former Director.
Hermes Secretariat Limited is the registered Secretary of NOMA (GP) Limited and the co-owner of
the project is Hermes Real Estate who appear to be a subsidiary of Hermes Investment
Management. Hermes Investment Management announced the deal to buy half of the NOMA
scheme from The Co-operative on their website on the 3rd April 2014.
The link between Hermes Real Estate and Hermes Investment Management does seem to be
supported by their listing as subsidiaries of Hermes Fund Managers Limited in the 2014 Annual
Report of the BT Pension scheme, under Primary investment managers (p.3). It now appears to be
probable that this reference to NOMA LP on page 52 of the BT Pension Scheme 2014 Annual Report
is the NOMA scheme in which The Co-operative owns the other 50%: The Scheme invests in 50%
(2013: 0%) of the equity in NOMA LP, whose principal place of business is in the United Kingdom.
The possibility of a link between the BT Pension Scheme and The Co-operative Group does appear to
be confirmed in an LP6 form filed at Companies House for partnership registration number
SL016215, under the name of NOMA Limited Partnership. In this document the two partners listed
are 'Britel Fund Trustees Limited (acting in its capacity as Trustee of the BT Pension Scheme)' and
'Co-operative Group Limited', each of whom are recorded as contributing 49,900.50; the filing date
recorded for this document is 12/06/2014. Page 19 of The Co-operatives 2014 Annual Report states
that In June 2014, Estates completed a 50/50 joint venture agreement with Hermes Real Estate to
take the development of the NOMA scheme to its next stage. This creates some uncertainty as to
who The Co-operative has entered into this 800m joint venture with.

4.4 NOMA conclusion

The majority of NOMA was yet to be built at the time of the 2014 Annual Report, it was unlikely that
the 31m invested in NOMA by the Group in 2014 would be the last payment required.

20

5. The Highest Value Re-statements 2009 2014

This summary is completed to the fullest extent possible with the data that has been published.

5.1 Food
Food Retails Net Revenue for 2009 was adjusted from 7,516m to 7,173m. It is not clear why this
adjustment of 343m was made between the initial 2009 report and its subsequent restatement,
when The Co-operatives year end for reporting purposes is three months before the release of their
Annual Report. The following years Re-statement was 33m lower than the initial statement when
none of the years that followed saw any restatement higher than 4m.

Chart 22

The deal to buy Somerfield was completed in 2008 as reported by BBC News, the change in Revenue
for that acquisition was recorded under 2009. No change was reported for 2008, with Net Revenue
for 2008 both stated and re-stated at 4,526.8m. The fluctuation in the value of Foods Net Revenue
occurred in the two years following the acquisition. The change in Revenue between the statement
and restatement for 2010 may also have been influenced by the sale of 82 Food stores and loss of
10,000 staff members in the Food business between 2010 and 2011.

Chart 23

21

The adjustment of 19m in underlying segment operating profit from the Food business between
the 2012 statement which set it at 288m and the 2012 restatement of it at 269m cannot be
explained with the current available data. The 2012 'Revenue excluding internal sales' figure was
recorded at 7,442m in both the Statement and the Restatement, Additions to non-current assets
was recorded at 194m in both the Statement and the Restatement, Depreciation was recorded at
-225m in both the Statement and the Restatement and significant items do not tend to be recorded
in Underlying Profit; the cause of this 19m adjustment remains unclear.
Significant items ceased being recorded by business under Operating segments in 2013, in 2013
Operating loss was introduced in its place. Operating profit or loss are significant figures, but the
loss of the Significant items category prevents any analysis of its impact on the business after that
point. The 19m gap between the underlying segment operating profit from the Food business
statement and restatement is not elucidated by this change either. The Operating profit of 183m
in the 2012 Restatement is equal to the underlying segment operating profit from the 2012
statement with the Significant items (net) removed.
Though no conclusion can be drawn from this because of the absence of Significant items (net)
(2012 Restatement), as that missing category may or may not contain the missing 19m. The
restatement of all businesses profits following events at the Bank is a possible cause of this.

5.2 Funeralcare
The restatement of Revenue from external customers in 2012 is 10m lower than the initial
statement of 2012 Revenue from external customers, I have found no explanation for this.

5.3 Travel
A comparison of the 2012 Additions to non-current assets category between its statement in 2012
and restatement a year later reveals footnote e in the restatement. Footnote e of page 75 in the
2013 Annual Report states that Depreciation and amortisation includes amortisation of deferred
income relating to the Co-operative Travel brand; it does not state the value of this deferred income
amortisation is or to which business(es) it has been attributed.

5.4 Corporate Costs

Between 2009 and 2014 Underlying Corporate Costs have been reported under four different
categories, this renders drawing definitive conclusions difficult; the nature of the challenge is best
illustrated by the following chart:

Chart 24

22

This is a piecemeal summary of the trend in Underlying Corporate Costs but it does convey the
general nature of their movements.
It is evident from the previous chart that Corporate Costs is not a particularly transparent area to
chart, through enquiries I have managed to obtain the following information in verifiable reports.

Chart 25

These categories are added or removed from the reported Corporate Costs categories for various
reasons, once they are removed the changes in Corporate Costs are less significant:

Chart 26

As these figures do not appear to be published together elsewhere, they have been included here:
2012 Actuals
(m)
Corporate Costs without costs from
Estates/ Banking/ Other Businesses

-111

Table 4

23

2013 Actuals
(m)
-192

2014 Actuals
(m)
-149

The increase in value of the adjustments made to Corporate Costs has been more consistent than
the increase in Corporate Costs:

Chart 27

As these figures do not appear to be published together elsewhere, they have been included here:
2012
Other
Costs (m)
Adjustments to Corporate
Costs from Estates/
Banking/ Other Businesses

2013 Other Costs

Stated in 2013 (m)

(36)

(40)

2013 Other Costs

Restated in 2014
(m)

(49)

2014 Other
Costs (m)

(61)

Table 5

The full range of items which constitute Underlying Corporate Costs cannot be identified from the
available data.

24

6. Executive Pay Pro Rata by Job Role

The following charts require some explanation as the 2010, 2013, and 2014 changes to the
Executive, have combined with the conflation of roles, to dilute the transparency of this data. Where
sufficient data is available it has been published, but the explanatory notes under each chart are
more significant here than elsewhere.

6.1 Restatements to Executive Pay in 2012

The 2012 Remuneration figures were subject to re-statement, as reported in Note 9 on page 49 of
The Co-operatives 2013 Annual Report, the results of this adjustment are as follows:

Year
2012
2012
2012
2012

In/Left Post
relates to holding
that role whilst
on the Executive
In-post
In-post
In-post
Left

Officer Role
Bank CEO
CEO
CEX Food
CEX Food

Officer
Name
Barry Tootell
Peter Marks
Steve Murrells
Sean Toal

2012
Remuneration
as Stated in
2012 (000)
595
1332
360
237

2012
Remuneration
as Re-stated
in 2013 (000)
642
1332
606
N/A

Martyn Wates

970

970

Stephen Humes

577

611

2012 In-post

CEX Specialist
Businesses
Chief Finance
Officer

2012 In-post

Chief Information
Officer

Andy Haywood

320

454

2012
2012
2012
2012

In-post
In-post
In-post
Left

Director of Cooperative Relations

Group Secretary
HR Director
HR Director

Mark Craig
Moira Lees
Wayne Lee
Richard Bide

213
393
70
303

222
393
70
N/A

2012 In-post
2012 In-post

Managing Director
Co-op Estates
Marketing Director

Martyn Hulme
Gill Barr

376
351

376
402

2012 In-post

Table 6

In total these adjustments result in an increase of the Remuneration figures disclosed of 521,000,
some of this amount can be accredited to pension payments which only started to be included from
the 2012 Re-statements; other contributory elements are less readily identified.

25

6.2 Chief Executive Officer

Chart 28

At first glance this might appear to suggest that the Chief Executive Officer took a reduction in pay
relative to the amount that his predecessor received; however, his predecessor was the CEO for his
entire time in office during 2014, whilst the 2014 CEO in-post was only the CEO for a portion of 2014.

Chart 29 *EAS - Equivalent Annual Salary, this figure is calculated by dividing the years salary by the number of weeks worked in
that year using the week start and finish dates in use for PAYE, that answer is then multiplied by 52.

To understand what has truly occurred between 2013 and 2014 it is necessary to unpack roles
conflated under the name of the 2014 CEO In-post. The in-post CEO served as the Chief Finance
Officer between the 1st Jan and 11th March 2014, he served his first full day as the Interim CEO on
the 12th March, before he officially became the new CEO on the 4th September 2014.
It is not possible to calculate the Basic Pay level for the 2014 In-post CEO, the Basic Pay level for the
Chief Financial Officer in 2014 has not been supplied. It is possible to calculate the approximate pay
levels from which his salary was derived.

26

Officer Role

Equivalent
Weekly
Emoluments x
Equivalent Weeks CEO InAnnual
Post held
Emoluments Officer Role
(000)
for (000)

Weeks CEO
In-post held
Officer Role Original
for in 2014 Officer Role
In-post CFO
10.4
2013
Acting CEO
25.2
2014

Total
Emoluments
Equivalent Paid to
Weekly
Originial
Emoluments Emolument
(000)
Recipient (000)

CFO 2013

488

488.0

Acting CEO 2014

2014 combined pay
Approximate In-post
CEO 2014

400
888

400.0

1,627

1627.0

17

95.7

4,976

4976.4

52

95.7

2,901

2901.1

52

55.8

CEO In-post 2014,

CEO Only
Approximate Annual
Emoluments
Equivalent 2014
Average Equivalent
Annual Emoluments
2014 (CEO+Acting
CEO/2)
Table 7

Weeks
Worked by
Originial
Emolument
Recipient

46.9

1267

27

15.9

400

25.2

The approximate figure of 2.901m for the interim/new Chief Executive Officers Average Equivalent
Annual Emoluments are 257,000 less than his predecessors In-post Equivalent Annual Emoluments
for 2013; however the previous Chief Executive Officers Equivalent Annual Emoluments for 2013
included A payment of 1m to Euan Sutherland as compensation for incentive scheme awards that
he forfeited on resignation from his previous employer. It is unlikely that Mr Sutherland would have
received that 1m compensation again the following year, he was in-post for a portion of 2014 and
did not receive any compensation for incentive scheme awards that he forfeited on resignation
from his previous employer for that portion of that year.
If the 1m of compensation for leaving his previous employer is deducted from his predecessors Inpost Equivalent Annual Emoluments for 2013, the current Chief Executives approximate In-post
Equivalent Annual Emoluments for 2014 are 743,100 higher than those of his predecessor in 2013.

6.3 Group General Council

The Group General Council role has only been listed as a role within the Executive since 2013, for
this reason a chart would appear to be superfluous:
In/Left Post relates to holding that
role whilst on the Executive
Officer Role

Year

2014 In-post
2013 In-post

Officer Name

Group General
Council
Group General
Council

Equivalent Annual Total

Emoluments (*EAS 000)

Weeks in
Office

Alistair Asher

1,186

52

Alistair Asher

1,479

27

Table 8

In 2013 the Group General Council received a retention payment of 475,000 which he did not
receive in 2014. In 2014 his Equivalent Annual Basic Pay was 62,000 higher than the year before.
In/Left Post relates to holding that
role whilst on the Executive
Officer Role

Year

2014 In-post
2013 In-post

Officer Name

Group General
Council
Group General
Council

Table 9

27

Equivalent Annual Basic

Pay (*EAS 000)

Weeks in
Office

Alistair Asher

534

52

Alistair Asher

472

27

6.4 Marketing Director

The Marketing Directors Equivalent Annual Remuneration has increased by more than its initial
value since 2010.

Chart 30

The Marketing Directors Equivalent Annual Basic Pay has increased to a lesser extent.

Chart 31

6.5 Director of Co-operative Relations

The Director of Co-operative Relations has been the same person from 2010 until 2014, this renders
the changes in his wage easier to measure than those for other Executive Officers.

28

Chart 32

It is clear from this that his Equivalent Annual Basic Pay has increased relatively steadily between
2010 and 2012 whilst his Remuneration levels have been more volatile.

Chart 33

6.6 Chief Executive of External Affairs

The Chief Executive of External Affairs role has only been listed as a role within the Executive since
2013, for this reason a chart would appear to be superfluous:

Year

In/Left Post relates to

holding that role whilst on
the Executive

2014

In-post

2013

In-post

Officer Role
CEX External
Affairs
CEX External
Affairs

Officer
Name

Equivalent Annual
Total Emoluments
(*EAS 000)

Weeks in
Office

Nick Folland

1,307

52

Nick Folland

1,392

34

Table 10

The withdrawal of the 2013 retention scheme has signalled a reduction in his total Equivalent Annual
Emoluments; as with other Officers, this pattern has not been replicated in his Equivalent Annual
Basic Pay:

29

Year

In/Left Post relates to

holding that role whilst on
the Executive

2014

In-post

2013

In-post

Officer Role
CEX External
Affairs
CEX External
Affairs

Officer
Name

Equivalent Annual Basic

Pay (*EAS 000)

Weeks in
Office

Nick Folland

524

52

Nick Folland

405

34

Table 11

6.7 Chief Information Officer

A common trend is emerging in this data, the Equivalent Annual Emolument figures are volatile with
a peak in 2013 which has been heavily influenced by the Retention Programme; the Equivalent
Annual Basic Salary figures are significantly less volatile as they increase between 2010 and 2014.

Chart 34

In this instance, the Chief Information Officers Equivalent Annual Basic Salary has increased by
84,000 whilst his total Equivalent Annual Emoluments have returned to their 2012 level in 2014.

Chart 35

6.8 Managing Director Co-operative Estates

Co-operative Estates retained its Revenue and underlying operating profit between 2010 and 2012,
there were no significant changes in this area of the business during this time. After 2012 Estates
reduced in value significantly as assets were sold to repay Banking losses.

30

Estates Revenue and Profit 2010-2013 (M)

11

2013

28.0
19

2012

36.0
19.1

2011

36.1
18.9

2010

35.7
0.0

5.0

10.0

15.0

20.0

Estates Underlying Operating Profit

25.0

30.0

35.0

40.0

Estates Revenue

Chart 36

The Equivalent Annual Remuneration for the Managing Director of Estates increased by 25,000
between 2010 and 2012, it then increased by 309,000 between 2012 and 2013. 300,000 of that
increase was a part of the Retention Programme, 9,000 was not recorded as such.

Chart 37

Between 2010 and 2014 the Equivalent Annual Basic Pay of the Managing Director of Co-operative
Estates increased by 109,000 from his starting salary.

Chart 38

31

6.9 Chief Executive Co-operative Food

The Food business has seen falling Underlying Profits between 2010 and 2013, the substantial nature
of the fall may have contributed to the decrease in Equivalent Annual Remuneration and Basic Pay
figures for two out of three Chief Executives of the Food Business over this period.

Chart 39

The Chief Executive of Foods Equivalent Annual Remuneration fell from 1,089,000 in 2010 to
927,000 in 2011, his successors Equivalent Annual Remuneration fell from 564,000 in 2011 to
447,000 in 2012, then his successor was paid a higher Equivalent Annual Remuneration to leave his
present employer and halt the decline in underlying profits.

Chart 40

32

Equivalent Annual Basic Pay has increased for each Chief Executive of Food between when they
started their role and when they concluded it during this period.

Chart 41

6.10 Chief Executive of Retail

The Chief Executive of Retail role has only been listed as a role within the Executive since 2013, for
this reason a chart would appear to be superfluous:
In/Left Post relates to holding that
role whilst on the Executive
Officer Role

Year

2014 In-post
2013 In-post

Officer Name

Chief Executive
of Retail
Steve Murrells
Chief Executive
of Retail
Steve Murrells

Equivalent Annual Total

Emoluments (*EAS 000)

Weeks in
Office

1,767

52

1,615

52

Table 12

Between 2013 and 2014 the Chief Executive of Retails Equivalent Annual Remuneration has not
decreased as others Equivalent Annual Remuneration has. The Chief Executive of Retail did receive
a Performance Related Payment in 2014 whilst in 2013 he received no Performance Related
Payment; however, the pay award he received from the Retention Programme in 2013 does share
some similarities with that which he received as a Performance Related Payment in 2014. The Chief
Executive of Retails Equivalent Annual Basic Salary has increased over this period.
In/Left Post relates to holding that
role whilst on the Executive
Officer Role

Year

2014 In-post
2013 In-post

Officer Name

Chief Executive
of Retail
Steve Murrells
Chief Executive
of Retail
Steve Murrells

Equivalent Annual Basic

Pay (*EAS 000)

Weeks in
Office

729

52

642

52

Table 13

The Chief Executive of Retails Equivalent Annual Remuneration is also affected by the compensation
he has received for costs related to his appointment, with 75,000 of compensation for the incentive
scheme awards that he forfeited upon leaving his previous employer and 63,000 for relocation
expenses forming part of his Remuneration package.

33

6.11 Human Resources Director

The increase of In-post Equivalent Annual Remuneration in 2013 followed by a decrease the
following year is a recurring theme; however, the cause of the pattern between 2010 and 2012 is
less readily explained. The increase in Remuneration for the Human Resources Director who left in
2014, is explained in that Annual Report in the following terms: Rebecca Skitt was placed on garden
leave on 28 February 2014...The Committee obtained independent legal advice regarding Rebecca
Skitt's contractual entitlement.

Chart 42

The factors which determined the Equivalent Annual Remuneration levels, do not appear to have
affected Equivalent Annual Basic Pay levels between 2010 and 2012 in the same manner.

Chart 43

34

6.12 Group Secretary

Between 2010 and 2012 the Group Secretarys Equivalent Annual Emoluments declined, this decline
was not due to any decrease in Basic Pay. The changes in Equivalent Annual Total Remuneration
between 2010 and 2012 are due to the withdrawal of a pension allowance and a change in the type
of bonus for which the Group Secretary was eligible. Emoluments increased in 2013 due to a
payment of 350,000 from the Retention Programme, this was replaced by a Performance Related
Payment of 265,000 a year later. The level of variation is smaller in the chart below because the
Total Remuneration has been adjusted to its Annual Equivalent.

Chart 44

It is not clear why the Group Secretarys Equivalent Annual Basic Pay for 2014 declined to below the
2010 pay level for that role, this change has not resulted in a similar decline of Equivalent Annual
Total Remuneration.

Chart 45

Retention Payments and Performance Related Pay feature heavily in these figures, there does
appear to be some correlation between the two.

35

7. Retention Payments and Performance Related Pay

7.1 Payments Not Included in Pay Tables
None of the payments below featured in the pay tables of the Annual Accounts, though some were
recorded in footnotes.

Chart 46

7.2 Categories of Payment

There are four core reasons for these payments: severance pay, payments whilst on gardening
leave, compensation for costs related to joining the Group such as loss of rewards accrued at
previous employer or moving house, and payments in lieu of a notice period. Only payments that
do not relate to actively working for the Group have been included here below, for this reason
Taxable Benefits and Pensions Not Included in Tables of 87,000 and a Fixed role based allowance
for skills of 943,000 for Niall Booker have not been included below:

Chart 47

The majority of these payments were awarded between 2013 and 2014, as demonstrated in Chart
48.
36

7.2.1 Breakdown of Categories of Payment

These categories provide details of the grounds on which payments were awarded to Executive
Officers for joining the Group, leaving the Group, or being on gardening leave rather than for work:

Chart 48

The disclosure legislation change of 2012 brought greater transparency, as it led to payments such as
pension-based awards being stated in pay tables for the first time. Inconsistency of disclosure has
hindered this research by reducing the comparability between the years stated Remuneration
figures; however, the increase in disclosure caused by legislative changes is a progressive
improvement.

8. Conclusion
Now you know what I know, which is primarily how much the average Member of this Co-operative
is not allowed to know about the business they own. After calculating the growth of Equivalent
Annual Salaries, charting the progress of the NOMA Joint Venture, and observing the adjustments of
large sums of money, the following questions remain:
Why were 10.8m of payments to Executives on gardening leave, or received for factors other than
the work they directly contributed, not recorded in the pay tables?
Why were 1,457m of liabilities for 2013 adjusted from the current to non-current liabilities
category?
Why does the Annual Report say that the Group has entered into an 800m 50/50 joint venture
called NOMA with Hermes Real Estate, when papers at Companies House state that they entered
into that joint venture with the BT Pension Fund in the same month and year?
How much of the expected 400m investment in the NOMA joint venture does The Co-operative
have yet to pay?
And with the range of categories included in Corporate Costs subject to change every few years,
what does constitute a Corporate Cost?

37

I cant give you these answers, only you can get more answers and to get them you, I, everyone who
reads this, needs to call on The Co-operative to introduce greater transparency into their accounts.

The area most lacking in clarity is that of restatements, to address this the Annual Reports
need to include both the pre and post-restatement figures for every restatement and an
explanation for each change.
Corporate Costs are another area that is lacking in clarity, so the criteria for them need to be
standardised. Each time an item is moved into or out of Corporate Costs, whether total
Corporate Costs or Underlying Corporate Costs, its value should be stated and the reason for
its movement explained.
Partnerships can have a serious impact on the expenditure of the Co-operative Group;
therefore, if the Group either gains, loses or contributes more money from/to a joint
venture than from its smallest wholly owned venture, that ventures results should be
reported in the same manner as those of the wholly owned businesses.
Executive Pay tables should include both all significant payments received by the Executive
in that year and all significant payments received by former members of the Executive in
that year. The reason why the reported figures for 2012 had to be restated was that the
statutory minimum of reporting was provided prior to the regulatory change. Any payment
totalling more than 1,000 should be included in the Executive Pay tables, whether for a
current or former member of the Executive.
Gardening Leave payments are a particular cause for concern, 3.5m has been spent on
Gardening Leave and Continued Employment after Stepping Down between 2011 and
2014, this suggests that the time may have come to review the terms that are being
proposed on some of these contracts.

Principle 2 is Democratic Member Control, how can Members of this co-operative have any control
over it when so many questions remain and when accountability is limited by the amount of
information which Members cannot readily obtain?

38

KAT ROSE
September 2015
39