Cork-based wholesale grocery group Musgrave recorded a loss of €94.9 million in 2013 largely due to poor trading in Britain.
The company was dragged into the red by €141.2 million in exceptional items. This comprised a write down of €131 million on the value of underperforming assets in Britain and costs of €12.2 million associated with its decision last year to axe the Superquinn brand and integrate its 24 stores into the SuperValu network.
Musgrave’s group turnover declined by 1.9 per cent to €4.8 billion last year while its operating profit fell to €68 million from €82.4 million in 2012.
Its interest costs reduced to €9.6 million from €12.4 million in 2012 as its net debt declined by €19.3 million to €120.9 million.
Sales in Britain fell by 3 per cent to €1.5 billion but the company declined to quantify the extent of trading losses. “The losses are sizeable …but manageable,” Musgrave chief executive Chris Martin told The Irish Times today.
Musgrave responded to its difficulties by clearing out the management team, which was led by Donal Horgan, and installing former Tesco executive Peter Ridler as managing director to lead a turnaround.
“In taking that write down, its’s enabling us to clear the decks in the UK to enable us to go forward,” Mr Martin said, adding that Musgrave remains “committed to its Budgens and Londis brands there.
Commenting on its problems in Britain, Mr Martin said: “Straight up, there are market issues and there are management issues. We pursued a growth strategy, which was relaxing our rules and disciplines, particularly around what sort of retailers we take on and also the standards that they have to put in place. We now have a turnaround situation.
“We’ve got to get to a core of good retailers who want to work with us and who we want to work with and then we’ve got the basis of a big business.”
While Musgrave owns the Budgens and Londis brands in Britain, the shops are run by independent retailers on a franchise basis. Musgrave then wholesales product to those shops.
“We have minimum purchasing loyalty requirements,” Mr Martin explained. “Some of those rules were relaxed [in Britain] on the basis that we’d get those accounts in and they would begin to comply with the way that we work but they didn’t.”
On when Musgrave might return to the black in Britain, Mr Martin said: “It’s going to take time. We are expecting reduced losses this year and it’s probably going to take two to three years to get it into the right shape for what we want.”