Grafton sees profits treble to €33m

Profits at DIY and builder’s merchant group Grafton trebled to €33 million on the back of increased sales and lower costs, the latest figures show.

Grafton, owner of the Woodie’s and Atlantic Homecare DIY chains, said yesterday that revenues grew 6 per cent to €2.17 billion last year from €2.05 billion in 2011.

Pretax profit more than trebled to €33.5 million in 2012 from €10.3 million the previous year. Stripping out a €26.2 million exceptional charge, the group’s pretax profit came to €59.7 million. Operating profits also trebled to €73 million from €23 million, which was slightly ahead of the figure that it predicted in January.

Grafton’s 2011 accounts included once-off costs of €32 million, €17 million of which stemmed from the company writing off part of the value of leases on some of its Irish DIY stores. Last year Grafton put its Atlantic Homecare chain under High Court protection from its creditors while it put together a rescue plan for the business, which had been relying on funding from Woodie’s and other group subsidiaries to stay in business.

Rescue plan

The rescue plan resulted in savings of between €4 million and €5 million a year in rent. However, it also required Atlantic’s creditors, the biggest of which was Grafton itself, which was owed €56 million, to take a 32 per cent haircut on their debts.

The €26 million exceptional charge in its 2012 accounts includes an €11 million bill for the Atlantic rescue and a similar amount for redundancies in its builders’ merchants business.

Chief executive Gavin Slark signalled yesterday that the group has completed restructuring. “We would hope that it’s done now,” he said. Its net debt at the end of the year was €200 million, just 20 per cent of its net assets, which came to €1 billion. Mr Slark pointed out that very few public companies have a debt-to-assets ratio of 20 per cent. He added that Grafton’s debt is only likely to increase this year if it buys another business. The group’s operations generated €106 million in cash last year, up from €97 million in 2011. The group is currently in talks with staff and unions to find a solution to a near €63 million pension fund liability. Grafton’s has obligations of €51.3 million relating to five Irish schemes and €11.6 million for two UK retirement plans.

Liabilities

The liabilities increased by €44 million in 2012, primarily because of poor returns in the bond market which pushed up the cost of providing pensions.

Finance director Colm Ó Nualláin criticised the Pensions Board, arguing that the rules it sets for calculating retirement fund liabilities are forcing companies to ditch defined benefit schemes. Mr Ó Nualláin announced yesterday that he will be retiring next year when he reaches 60.