Scotmid profits fall as margins come under pressure

SCOTMID chief executive John Brodie said on Tuesday that the convenience store chain continued to look for growth opportunities as it reported a 13 per cent rise in full-year sales, boosted by the acquisition of Botterills in 2010.

However, the rise in sales to £427 million could not prevent a fall in profits to £6.5m for the year to 28 January, down from £9.1m a year earlier, as the co-operative faced “significant challenges” in its core markets.

Brodie said the Newbridge-based company’s retail business faced pressure on sales and margins “coupled with the impact of a further increase in VAT and the additional cost of National Insurance and carbon tax”.

Scotmid responded to the pressure by introducing £1 deals for necessities such as bread and milk, which helped performance in the second half.

“We saw a stronger second half of the year,” Brodie said, adding that the first half was “exceptionally difficult” as supply chains recovered following the severe winter of 2010.

The group, which owns the Semichem discount health and beauty chain, a funeral service and fragrance shops, has 190 Scotmid food stores across Scotland. Brodie said one of the key highlights of the past year was the successful integration of the Blantyre-based Botterills chain, which it bought for an undisclosed sum in November 2010.

“By the end of October last year, 49 stores had been converted to the Scotmid fascia, systems and range,” he said. “The business has integrated well and is on track to deliver value to the society in the long term.”

Brodie added: “We’re still looking to grow our businesses, but it’s more likely on the food side that it will be single stores or small numbers of stores.

“Bottterills was a one-off opportunity that came along and we took advantage of it. Prior to that, we had acquired a number of outlets, either through individual acquisitions or cold starts. Botterills is very much a long-term purchase that’s adding value for the business.”

While he said there were fewer opportunities to buy “significant chains”, the group may look at buying small numbers of stores.

Scotmid’s Semichem chain, which has over 140 stores across Scotland, the north of England and Northern Ireland, enjoyed strong online sales growth, but Brodie said difficult market conditions continued.

“The high street stores experienced increased competition from discounters and there were no improvements in the economic conditions in Northern Ireland, which continued to be harder hit by the economic downturn.”

He said the group has to continue to adapt and respond to the “new era” of reduced consumer spending and higher costs, and it remained cautious.

“I don’t see any change to the current economic conditions in the short term,” he added.

“Even if things were to improve, I think there would be a time lag before people accepted things had got better and were prepared to spend more again.”