Grafton profits suffer dramatic fall from €53.4m to €3.7m

BUILDING materials to DIY group Grafton suffered a dramatic fall in pre-tax profits in the first half of 2009, ground down by the building slumps in its key Irish and British markets.

Profits fell from €53.4 million in the first half of 2008 to €3.7m in 2009, with sales down 31% to just under €1 billion. Earnings per share fell from 20.2 cent to 1.5 cent.

Figures for various parts of the business show that its merchanting division, which accounts for 85% of total sales, saw its profits collapse from €74.9m to €3.4m.

The Irish part of the business suffered a loss of €9.4m as Irish sales fell 46%.

Profits of €12.8m earned by the group’s British merchanting operations compensated for the Irish loss over the period.

Grafton said it improved its overall operating performance thanks to a €33m cost-cutting exercise that led to a charge in the current figures of €9.1m, partly offset by a €6m gain from property and €22m from an investment it had written down.

Executive chairman Michael Chadwick said the intensity of the downturn in its markets has started to ease, opening up the possibility of a more stable trading environment in the period ahead for the group.

He said the outlook emerging in Britain was particularly encouraging.

On the DIY retailing side of the operation, sales fell 18% from €155m to €127m as the business reported an operating loss of €3.2m.

The retailing segment, which comprises 41 DIY stores and seven kitchen showrooms in Ireland, had a challenging half year, reflecting weakness in consumer demand and lower housing completions.

“The weak trend in consumer spending evident during 2008 intensified in the half year,” it said.

The group will purchase one A Ordinary share per Grafton unit for a cash consideration of 2.5 cent payable on 9 October, 2009, compared to a payment of 5 cent per share for the last share purchase in April 2009, it said.

Looking ahead the immediate focus will remain on further overhead savings and cash generation, Grafton said.

“The group is well placed to deal with the current challenging trading environment and to benefit from the significant operating improvements implemented over the past year”.

Management said it was confident “the underlying strengths of its brands and market positions, which have delivered high levels of profitability and cash flow over the past decade, make it well positioned to capitalise on a recovery”.