Grafton: Weather saw sales plunge

BUILDING materials group Grafton said January trading was “badly affected” by the bad weather and resulted in sales plunging €25 million below the level a year earlier.

The company said that following this difficult start, trading in Britain, which accounts for more than 70% of its turnover, picked up with like for like sales growth in the following four months.

It said it has seen a “strong resurgence” in new house building in Britain and is optimistic that the positive effects of this on its businesses will continue.

In Ireland, sales continue to be below levels achieved last year but the rate of decline has reduced, it said.

Negotiations are continuing on the refinancing of some of Grafton’s debt and it is anticipated that new arrangements will come into effect in the third quarter of this year.

Following the announcement of the results Grafton’s price target was raised to €4 from €3.70 at Goodbody Stockbrokers, which cited a “strong resurgence” in the British new housing market. Grafton shares closed almost 1% up at €3.47 in Dublin last night.

Group turnover for the four months to the end of April was €617m, down €22m on the first four months of 2009. British merchanting sales in sterling increased 4% in the period.

During the first three months Grafton said it incurred further rationalisation costs of €1.7m and this will result in annualised savings of €4.2m.

It said it continues to “retain good liquidity and financial flexibility with a strong balance sheet and high cash deposits”.

The benefit of the recent return to growth in turnover, the significant reduction in the group’s cost base and strengthening market positions are being reflected in an improved operating performance.

Davy analyst Flor O’Donoghue said: “Overall, the year-to-date revenue trend is very positive. It marks a massive change from this time last year when Grafton’s Q1 revenues were down 32% year-on-year.”

It also announced yesterday that Roderick Ryan was appointed as senior independent director to succeed Anthony Collins who retired from the board at the AGM.

Davy is forecasting a 1% decline in the group’s revenues this year and said trading year-to-date suggests that this is on track.