Grafton sees 31% fall in turnover for first six months

GRAFTON, WHICH owns the Atlantic Homecare and Woodies DIY chains, has reported a 31 per cent fall in turnover for the first six months of the year.

In a relatively upbeat outlook statement, the group said there was evidence the economic slowdown was moderating, with “more stable” sales evident in recent months, particularly in the UK, which accounts for two-thirds of its turnover. It added that housing starts were rising in the UK.

This outlook sent Grafton’s share price up almost 9 per cent yesterday to close at €3.60.

“The group is confident of trading successfully through this major cyclical downturn, and is well positioned to capitalise on upturns in activity in its markets,” executive chairman Michael Chadwick said. “We should be somewhere around or somewhat above breakeven ,” he said in an interview.

Revenues fell by almost a third to €990 million, resulting in an operating loss of €8.3 million for the six months of the end of June, compared to an operating profit of €71.8 million during the same period last year.

Pretax profits fell to €3.7 million, down from€53 million a year earlier. If underlying exceptionals, such as a €22 million disposal gain and restructuring costs of €9.1 million, were stripped out the pretax losses were €15.4 million.

Grafton, which also owns Heiton Buckley and Chadwicks builders’ merchants in Ireland, said turnover in this sector dropped 46 per cent to €193 million in “very difficult trading conditions” with the units reporting a operating loss of €9.4 million.

Further cost-cutting was a priority for these businesses, the company said, adding that the repair, maintenance and improvement sector was now the most important market for these units. The group said it had responded to falling sales volumes by cutting overheads.

Its 41 DIY stores and seven kitchen showrooms in Ireland had faced a “challenging” first-half due to weak consumer spending, resulting in a loss of €3.2 million.

The group’s UK merchanting units reported a 26 per cent fall in turnover to €647 million.

During the first-half Grafton reduced its UK workforce by 321, following 800 job losses at the end of last year. These redundancies were part of a cost-cutting plan that yielded savings of €33 million.

Grafton also reduced its net debt by €56 million to €380 million, and is proposing a dividend of 2.5 cent per share.