Musgrave Group results year ended 31 December 2008

Musgrave Group, partner to entrepreneurial food retailers and foodservice professionals in Ireland, the United Kingdom and Spain has announced its Group results for the year ended 31 December 2008. 

Key Financial Highlights:

•    Musgrave sales of €4.8 billion up 5% at constant exchange rate (down 1% at actual rates);

•    Retail sales by our retail partners of €7.1 billion up 6% on a constant exchange rate basis (down 0.6% at actual rates);

•    Profit before tax of €75.5 million, down 20%;

•    Profit after tax of €65.1 million, down 8% (1.3% return on sales);

•    Net debt reduced from €95.6 million to €86.2 million.

CEO comment

Commenting on the performance for the year, Chris Martin, Group Chief Executive, Musgrave, said, “Given the recession across all the markets in which we operate and the fact that the Irish grocery market is contracting, this is a satisfactory performance.  I am pleased to report that our Irish retail brands outperformed the market again in 2008 driven by our investment in brand development over the past three years. 

"Behind these sales we have been investing in lower prices for consumers and have been supporting our retail partners during these difficult times. Increased margin and cashflow support is helping them to compete and deliver lower prices which has led to a 20% reduction in our profit. This ongoing support is our commitment to ensuring that we and our retailers are able to compete in an extremely challenging market.” 

“In addition to lowering prices, our strategic focus has been on developing our brands to ensure that there is no compromise on the quality of the shopping experience. Consumers have responded well to this combination of exceptional quality and lower prices.

"We have invested more than €140 million in price reductions on thousands of products across our Irish retail brands and we will continue to invest in price reductions this year. 

"These lower prices together with the unique insight our retail partners bring to serving their local communities ensure that today’s shopper gets real value, real choice, a compelling range of well-known Irish and international brands, superb quality and excellent customer service. 

"We have a well-established and long-term commitment to supporting Irish food producers. This approach is at the heart of the entire organisation and will continue to provide us with an enduring source of competitive advantage.   

“The uniqueness of our business is making real progress in the UK.  Our UK retail brands SuperValu, Centra and Mace in Northern Ireland and Budgens and Londis in GB performed well in 2008 with more than 2,400 stores owned and operated by independent retailers.  Clearly our business model is taking hold in the UK and is responding well to the changing needs of the consumer who is hunting for choice and value in a local context.

"With the recent acquisition of an additional 13 Somerfield convenience stores that are in the process of being sold to independent retailers and the successful integration of Mace into our Northern Ireland business, we are continuing to invest and grow in that market.”

Business Review

Musgrave Group supports nine retail brands across the Republic of Ireland, the UK and Spain. The Group’s retail partners operating under these brands reported good growth in 2008 with a combined turnover of €7.1 billion, up 6% on a constant exchange rate basis.

Republic of Ireland

• In the Republic of Ireland, SuperValu and Centra delivered increased sales, primarily from new stores.
• Over the course of 2008, eight SuperValu and 44 Centra stores were opened in the Republic of Ireland alone, bringing further competition to the market.
• Daybreak also delivered increased sales primarily from the opening of 30 new stores.
Musgrave’s retail brands in the Republic of Ireland grew sales to €4.0 billion up 5.6%;
• Centra retailers achieved sales of €1.5 billion, up 9.3%;
• SuperValu had another year of growth with retail sales of €2.3 billion, up 3.4%;
• Sales in our Cash and Carry business in the Republic of Ireland and Northern Ireland were flat.

United Kingdom

• In the United Kingdom, Budgens and Londis, together with SuperValu, Centra and Mace in Northern Ireland delivered a robust performance with retail sales of, €3.0 billion (Stg £2.4 billion) up 7.3%. 
• Since the year end, the acquisition of 13 convenience stores was also completed and these stores are in the process of being sold to independent retailers.

GB

In 2008, retail sales in independent Budgens stores grew by 44.5% to €630 million (Stg £503 million) benefiting from the increase in the number of independent stores;

Londis retailers achieved combined sales of €1.6 billion (Stg £1.3 billion).

Northern Ireland

• In 2008, the combined sales of SuperValu retailers grew by 8.1% to €240 million (Stg £192 million);
• Centra retailers had combined sales of €223 million (Stg £178 million) up 11.6%;
• 193 Mace retailers had combined sales of €204 million (£163 million).

Spain

SuperValu and Dialprix retailers achieved sales of €126 million, up 4.6%.

Outlook

Commenting on the outlook for the Group in 2009, Chris Martin, said, “Our work over the past three years on developing our brands has ensured that our retail partners in all markets are competing aggressively.

"The Irish grocery market is extremely challenging, but we will continue to bring lower prices to the consumer.  We are confident that our retailers through their partnership with Musgrave will continue to deliver a competitive offer.

"As an Irish business working with local entrepreneurial food retailers and suppliers, we will drive our business forward. In the UK our business model is attracting independent retailers and based on a solid foundation built up over several years, we see further growth in this market.

“We are an Irish business committed to the long term with shareholders who recognise the need to support our retail partners for the future.  The business has succeeded in reducing debt again in 2008 ensuring the business is solidly placed to adapt to the challenging times ahead. 

"I am confident that through developing different and better brands, driving efficiencies in our business and delivering value to a price-focused consumer as well as supporting our retail partners, Musgrave and our retail partners will continue to successfully adapt to the difficult market conditions and emerge as a stronger business.”