Irish market leads decline as Musgrave profits fall 7%

PROFITS AT the Cork-based Musgrave grocery and cash and carry group fell by 7 per cent last year to €70 million as it continued…

PROFITS AT the Cork-based Musgrave grocery and cash and carry group fell by 7 per cent last year to €70 million as it continued to feel the effects of the recession on its wholesale businesses in Ireland, Britain and Spain.

Group sales declined by 3 per cent to €4.5 billion on a constant currency basis. The biggest decline was felt in Ireland, where the company operates the SuperValu, Centra and Daybreak symbol groups. Its sales here fell by 7 per cent to €2.7 billion.

In Spain, the decline was 3 per cent to €190 million.

But in Britain and Northern Ireland – where its brands include Budgens, Londis and Mace – Musgrave posted growth of 3 per cent to £1.4 billion. Chief executive Chris Martin said 2010 would be another “challenging” year for the family-owned group.

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“Turnover growth will still be a challenge in 2010 for two reasons,” he said. “There’s price deflation continuing in Spain and Ireland. And secondly, the UK market is invariably going to get tougher.”

In terms of profitability, he said: “We would be pleased with holding our profits this year.”

Mr Martin said there are indications of volume growth in Ireland but prices continue to decline. “Our [typical] SuperValu basket is down 9 per cent year on year,” he added.

The 2009 accounts show that the Musgrave family took a €19.1 million dividend from the business last year. This was down from the €20.2 million they were paid in 2008.

Mr Martin said the dividend payment would be cut by 7 per cent this year to reflect the challenges facing the business.

He said a pay freeze across the company would also remain in place. On a positive note, Musgrave reduced its net debt to €59 million at the end of 2009 from €86.2 million a year earlier.

Mr Martin said there would be some growth in store numbers this year, particularly in Britain.

It is looking at adding 12 stores to the 193-strong Budgens chain. “We’ll also be adding to Londis,” he explained. “And we will open some new stores in Ireland.”

Mr Martin said the rate of cross-Border shopping had eased, as sterling has strengthened against the euro and greater efficiencies and cost savings have allowed Musgrave’s network of independent retailers to squeeze their prices.

He cited the price differential currently in the range of 5-7 per cent where a year ago it was more than 30 per cent.

In Ireland, sales at Super Valu were down 5 per cent; Centra was 4 per cent lower; while Daybreak declined by 3 per cent.

Sales to the hospitality sector fell by more than 20 per cent.

In the UK, the picture was brighter for the group. Super Valu and Centra in Northern Ireland grew by 10 per cent and 8 per cent respectively. Its Budgens chain in the southeast of England grew by 10 per cent, while Londis recorded a sales increase of 3 per cent. But Mace sales in Northern Ireland slipped by 11 per cent as that business was restructured.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times