Pre-tax profits at the privately owned Musgrave retail group rose by 3.2 per cent to 34.3 million last year on record sales of 2.01 billion. Operating profits were 12 per cent ahead at 41.5 million, but a doubling of interest costs reduced profit growth at the pre-tax level.
Current trading was in line with group forecasts, according to managing director Mr Seamus Scally, who said he was confident of a strong operating performance this year.
Group turnover was 16 per cent ahead at 2.01 billion but the slower 12 per cent rise in operating profits reflected a fall in margins to 2.02 per cent, from 2.14 per cent. Tighter margins reflected the general cost pressures in the economy, including labour costs, which were the primary cost driver for the group which employs 2,100 people, according to finance director Mr Michael Walsh.
The group's SuperValu and Centra stores in the Republic produced record performances, Mr Scally said, adding that Musgrave Cash and Carry, the stores in Northern Ireland and Dialsur in Spain produced strong performances.
The investment in Budgens in the UK - last August Musgrave bought 28 per cent of the chain which has 200 supermarket and convenience stores in the south east of England - has allowed the group to learn about the British market, he said.
Asked if Musgrave would exercise its option next month to take its stake in Budgens to 44 per cent, Mr Scally would only say "we are not ruling anything in or anything out". But he said the group's focus for expansion was the UK market, adding that Musgrave was "hugely excited" by the opportunities opened by the investment in Budgens.
Musgrave is comfortable with its current gearing - borrowings as a percentage of shareholder funds - of about 150 per cent. Asked if it was considering flotation to raise funds, chairman Mr Hugh Mackeown said funding was tight but comfortable. "We plan and organise our business to continue as a private company," he said.
The latest results show that in the Republic, which accounts for 78.6 per cent of total group sales, turnover was up 17 per cent in "an increasingly hostile competitive environment". Sales at the 172 SuperValu stores in the Republic rose by 14 per cent to 1.2 billion, while at the 298 Centra stores sales were up 25 per cent to 542 million.
Both businesses produced growth well ahead of general market growth, increasing the group share of the market, according to Mr Scally.
SuperValu now has a 17.5 per cent market share, while Centra has 6 per cent of the market, giving the group 24 per cent when the share of retailers who buy from Musgrave Cash and Carry was added, he explained. Musgrave had "tailored part of our offering" to meet the needs of customers, who could be tempted to the newer discount stores such as Aldi and Lidl, Mr Sally said.
In Northern Ireland, sales rose 15 per cent to 294 million, with SuperValu and Centra taking 10 per cent of the retail grocery market. Musgrave aimed to take 15 per cent of this market over the next five or six years, Mr Scally said.
The cash and carry business performed well in a flat market, with a strong performance in the food service business, which supplies hotels and restaurants.
