Shares in Grafton group take tumble

AROUND €140 million was wiped off the value of the Grafton group yesterday as its shares tumbled 7% after a major British rival warned of a slowdown in the building materials market.

Investors offloaded shares in Grafton, the owner of Woodie’s DIY, Atlantic Homecare and Chadwick’s builders merchants, on the back of fears over sales in Britain, which account for around 55% of the group’s total profits.

Grafton said in September that it would shed 150 of the 7,500 staff in its British operations to trim costs in line with slowing sales, but market confidence took a fresh dent yesterday when industry heavyweight Travis Perkins issued a profit warning and said its bottom line would fall short of expectations by around 10%.

Its share price took a 10% hammering on the news.

The company blamed stiff competition and aggressive price-cutting by rivals, as well as a slump in consumer confidence, and warned its prospects would be gloomy until well into next year. “We anticipate that this heightened level of price driven competition will continue into 2006 and will reverse some of our market share gains made up to August 2005,” the company told the London stock exchange.

Davy Stockbrokers analyst Florence O’Donoghue said Travis Perkins’ decision to flag ongoing pain was worrying.

“This does not augur well for 2006,” he said. But he added investors should take comfort from the fact that Grafton was less dependent on Britain than in the past.

“Travis Perkins’ comments are clearly relevant from the perspective of Grafton and do not make pleasant reading,” he said.

“However, we would caution that while Britain is very important to Grafton, the big driver for the group in 2006 and 2007 will be Ireland.”

Grafton’s €360 million takeover of smaller rival Heiton, which was completed earlier this year, transformed the group’s profile and cut the percentage of group profits generated in Britain from a high of over 70% to 55%.