Loss forces Musgrave to restructure UK arm

The Musgrave Group has commenced a restructuring programme in its British operations, aimed at turning around the fortunes of adivision largely responsible for the group making a loss of nearly €95m last year.

The Cork-based grocery and food service group — which owns the likes of the SuperValu, Centra, and Daybreak brands in Ireland and UK players like Budgens and Londis — yesterday reported a pre-tax profit (before exceptional items) of €60m for 2013.

However, when €141.2m worth of exceptional items — relating both to its UK business and €12m in integration costs concerning the amalgamation of Superquinn with SuperValu — are included, Musgrave made a total loss of €94.9m last year. It made a profit of nearly €61m in 2012.

The €60m pre-tax profit was itself down from €72m the previous year.

Musgrave’s group revenues last year remained flat at €4.8bn, which was “pretty good”, according to management, given the challenging environment in which the group is currently trading.

Chief executive Chris Martin yesterday admitted the group had “made mistakes” and “relaxed some disciplines” in the UK, where Musgrave decided to write down €131m of assets.

The move saw it write down all of the remaining €78m worth of goodwill relating to its original Budgens and Londis acquisitions, €37m for tangible assets, and €16m for “onerous property obligations”.

The UK has been a loss-making market for Musgrave for the past two years, prior to which it had broken even.

Mr Martin said that certain unprofitable accounts (relating to both distribution and franchise agreements) had been taken on as part of an aggressive growth strategy which failed to deliver profitable sales.

He added that the group’s British division is now in turnaround mode — although it will take a few years to recover.

Mr Martin also said that management remains committed to its assets there. UK losses are expected to decline this year.

Elsewhere, things have gone better for Musgrave, despite ongoing tough trading conditions. In Ireland, both SuperValu and Centra have outperformed the market and have seen further sales growth — of 2% and 3%, respectively — over the first four months of 2014.

Mr Martin said Superquinn customers had been “very positive” about the changeover to SuperValu. The move effectively boosted the latter’s share of the Dublin grocery market from 8% to 22%.

In Spain, where Musgrave owns the Dialprix brand, growth has been seen in each of the last 40 weeks and a return to profitability is expected this year.

Management also said the group’s balance sheet remains strong (with net assets worth €314m), and net debt being decreased by €19m to €121m last year.


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