FORMER MORRISONS FD Richard Pennycook has made an unexpected return to the frontline in accepting the FD post at beleaguered retail and banking giant Co-operative Group.
Pennycook, winner of the Lifetime Achievement Award at Financial Director’s inaugural Business Finance Awards, is widely regarded as a turnaround specialist. He succeeds Steve Humes, who departs after a two-year stint following a series of crises in the supermarkets-to-funerals group’s banking division.
The move comes as a surprise after Pennycook indicated he would pursue a portfolio career upon leaving Morrisons in June. During eight years at the supermarket, he achieved the seemingly impossible in winning back the City’s faith in the group following its failed acquisition of Safeway. He also relinquishes his non-executive role at Thomas Cook with immediate effect.
The Co-op was recently demoted to junk status by rating agency Moody’s in a six-notch downgrade, forcing the customer-owned business to deny that it would need a taxpayer-funded bailout to plug an estimated £1.8bn hole in its capital. Last month, the bank announced it would cease lending to new corporate customers.
That dramatic downturn has even drawn the attention of Parliament, with The Times noting the Treasury Select Committee plans to hold an inquiry into how the Co-operative bank was able to develop such a substantial shortfall.
Of particular interest to the committee is the 2008 decision to merge with Britannia Building Society in 2008, which brought with it hundreds of millions of pounds of bad debt.
Pennycook’s arrival, albeit on an initially interim basis, forms part of a wider reshuffle at the Co-op, which includes new chief executive Euan Sutherland, who joined the company from Kingfisher in May.
The task, at least initially, is something of a fire-fight for Pennycook, but he counts turnarounds at RAC and JD Wetherspoon among his most significant wins.
Speaking to Financial Director in 2004 after rescuing HP Bulmer, Pennycook noted “with a turnaround, you have to assume it will last at least six months. It might even last six years, you just don’t know”.
In the case of Co-op, it may be the latter, with concerns persisting over the integration of Britannia into the group five years on, while the Telegraph reports the FSA harbours reservations over the bank’s capital position. Moody’s, on the other hand, suggests the bank may need “external support”.
The sales of its life and general insurance arms, it is hoped, will ease the squeeze on the troubled bank, and despite the gloom, with the new management team in place, there is optimism.
Upon the announcement of Pennycook’s imminent arrival, group chair Len Wardle described the newly established team as “formidable” – far from the regulation platitudes traditionally deployed alongside such appointments.
That, it has to be said, may be an unusual luxury for Pennycook, who, in a 2008 interview with Accountancy Age, noted grimly: “One of the fundamental lessons when you arrive in a turnaround situation is that you won’t have enough good people, so you have to bring some in.”
Despite admitting that he enjoys the “calmer, real world” of a non-turnaround job, it seems the lure of one more job has proved too great for Pennycook.