Grafton profits slide 77% to €13m

PROFITS AT the owner of the Woodies and Atlantic Homecare DIY chains fell 77 per cent to €13 million last year as the recession continued to erode its core markets in Ireland and Britain.

Builders’ merchant and DIY group Grafton said yesterday that sales fell 28 per cent in 2009 to €1.98 billion from €2.67 billion.

The continued decline of the construction industry last year left its Irish builders’ merchants division with a €10.3 million operating loss, against a €48.3 million profit in 2008. The division sells direct to the trade and includes well-known suppliers such as Heiton Buckley and Chadwicks.

The company pointed out yesterday that an estimated 17,000 new homes were built in the Republic in 2009, less than a fifth of the near 90,000 built at the height of the construction boom in 2006.

Pretax profits across the entire group were down 77 per cent last year at €13.6 million from €64.1 million in 2008.

However, the markets reacted positively to the news, as sales held up during the second half of the year, while the group ended 2009 with €300 million in cash and cut its debts by €113 million to €322 million.

Grafton’s share price made its strongest gains in more than three months on the Dublin market, adding 23 cent at one point to sell at €2.68.

Grafton says 85 per cent of its sales come from its merchanting operations in Ireland and Britain. Overall, that division saw turnover fall 26 per cent to €1.69 billion last year, while operating profits were €39.3 million, almost 70 per cent down on the €122 million recorded in 2008.

Its highest profile businesses are Woodies and Atlantic Homecare – both are major players in the Irish DIY market. Executive chairman Michael Chadwick said yesterday that they were profitable in 2009.

Sales at Grafton’s overall retail operations in Ireland and Britain fell 18 per cent last year to €248 million from €303 million in 2008, while operating profits fell to €3.3 million from €11.8 million over the same timescale.

Grafton reduced costs during the year and cut employee numbers by 1,100 to 9,300 at the end of December. It saved a total of €80 million last year.

The group also cut its debts by €113 million to €322 million. In the previous two years, it reduced its borrowings by €228 million.

At the end of 2009, its debts stood at about 35 per cent of its year-end shareholders’ funds, which were €912 million on December 31st.

Grafton is negotiating the refinancing of its existing debts with the objective of extending the repayment dates of liabilities, due over the next two years, out to 2013.

Finance director Colm Ó Nualláin said that the cost of any future loans is likely to rise by 2 per cent to 3 per cent.

The company had €300 million in cash at the end of the year.

Mr Chadwick said that the group is not pursuing any specific acquisitions at the moment, but said the possibility of it making at least one this year could not be ruled out.

Results: Grafton Group

Turnover:€1.98 billion (-28.5%)

Pretax profit:€13.6 million (-77%)

Earnings per share:5.8 cent -70%)

Dividend per share:5 cent (-66%)

SUMMARY

Grafton’s sales of €1.98 billion were in line with expectations, while the group saw some improvement in the second half of the year, indicating stability is returning to the market.

The group’s business is mainly focused on builders’ merchants, but it is the biggest player in the Irish DIY market through its ownership of the Woodies and Atlantic Homecare chains.

Britain is now responsible for almost 70 per cent of its turnover, with Ireland responsible for the balance.

Grafton yesterday said its overall performance was satisfactory in the context of a pronounced recession in its main markets on both sides of the Irish Sea. The company added that it believed that the Irish market is beginning to bottom out.

Cuts across its businesses have generated savings of €80 million a year, while it cut a further €113 million off its debts and is working on refinancing some of its remaining liabilities.

The group also has €300 million in cash.