Pretax profits down 1% as Musgrave posts €71m

CORK-BASED wholesale food group Musgrave expects the value of the Irish grocery market to contract by 1-2 per cent on a like-for-like basis this year as austerity measures continue to suppress consumer spending here.

Musgrave yesterday published its results for 2011, which showed that its turnover – sales to its retailers – rose by 1.6 per cent to €4.5 billion but its pretax profit fell by 1 per cent to €71 million.

When sales from Superquinn, which it acquired in October 2011, were stripped out, its turnover declined by 1.1 per cent.

The net sales decline amounted to €46 million, of which €18 million related to currency movements.

Musgrave chief executive Chris Martin told The Irish Times that he is expecting a similarly “challenging” market in 2012.

“We are one-third of the way though the year and the sector has grown by half a per cent at best,” Mr Martin said, adding that this year would see “little or no growth” in the value of the market.

He said continued austerity measures and high unemployment levels were making Irish consumers “apprehensive” about spending. It is a similar story for its UK and Spanish businesses.

Musgrave’s annual report shows the acquisition of Superquinn resulted in it moving from a net cash position of €21 million in 2010 to a net debt of €187 million at the end of last year.

The family-owned group, which operates the SuperValu, Centra and Daybreak retail brands in Ireland, secured a €360 million five-year facility with a syndicate of six banks. It also raised €75 million though a private placement by issuing guaranteed senior notes with a maturity of seven years.

The dividend paid to shareholders declined slightly last year to 29.1 cent from 29.5 cent in 2010. This amounted to a payout of €16.6 million compared to €17.1 million in 2010.

A tax charge of €10.2 million resulted in Musgrave posting an after-tax profit of €60.8 million, while the dividend payment left it with retained profits of €44.2 million, the same level as in 2010.

Ireland contributed €2.7 billion of turnover in 2011, with the UK – where it operates the Budgens and Londis symbols – accounting for €1.5 billion and Spain, where it uses the Dialprix retail brand, €190 million. Musgrave expects to increase its UK footprint this year, adding a net 140 shops to the 2,451 it had at the end of 2011.

Mr Martin said there would be a greater focus across the group on own-brand products, to provide better value. Musgrave expects own-brand sales to rise from €700 million to €1 billion in 2014.