Musgrave Group, the Ireland-based firm behind the Budgens and Londis chains in the UK, saw pre-tax profits slump by 20% last year, as the company invested in price cuts amid the downturn.

The company, which oversees supermarkets and convenience stores in the UK, Ireland and Spain, booked pre-tax profits of EUR75.5m (US$103m) for 2008.

The weakness of sterling weighed on revenues. Musgrave reported that, at constant exchange rates, turnover rose 5% to EUR4.8bn. However, sales dipped 1% when foreign exchange was factored into the numbers.

Sales by retail partners rose by 6% to EUR7.1bn on a constant-currency basis but were down 0.6% at actual exchange rates.

Chief executive Chris Martin said "increased margin and cashflow support" was helping the retailer's banners compete.

"This ongoing support is our commitment to ensuring that we and our retailers are able to compete in an extremely challenging market," Martin said.

The Musgrave boss said the retailer had spent over EUR140m on price cuts in Ireland and would continue to invest in promotions this year.

Musgrave's Irish sales rose 5.6% to EUR4bn, while its turnover in the UK climbed 7.3% to EUR3bn.

Martin said the business was making "real progress" in the UK. "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," Martin said.

In Spain, Musgrave's SuperValu and Dialprix retailers posted a 4.6% rise in sales to EUR126m.