Grafton warns of job cuts

Grafton Group is targeting a further operating profit increase and “modest” turnover growth this year, but has warned that cost cutting measures could result in some job losses.

The Dublin-headquartered builders’ merchants and DIY retail group, yesterday, reported a 3% rise in revenue for 2011 to just over €2.05 billion.

Underlying operating profit was up by 13% to €54.7 million and underlying pre-tax profits rose by 3% to €42.3m. However, exceptional restructuring costs of €32m — including €19.4m linked to “onerous leases” in the Irish retail business — dragged those profit figures down to €22.7m and €10.3m, respectively — on both counts, down significantly from 2010 levels.

Turnover in Grafton’s merchanting arm — which covers Ireland, Britain and Belgium — grew by 3.2%, to €1.79bn, with operating profit up by 6% at €64.9m. That said, the Irish-based merchanting business saw revenue decline by 6.4% to just under €307m. In the retail division — which mainly covers Woodie’s DIY and Atlantic Homecare — turnover declined by 4.7% to €219.7m.

Grafton’s management said that, while the Irish market remains challenging, it is optimistic in that the group’s business here remains profitable.

Demand is expected to remain weak in both the merchanting and DIY divisions here and Grafton’s focus remains on its businesses in Britain to drive growth.

More than 70% of group revenue is generated from the UK merchanting division, while the business in Belgium is beginning to show profit contribution and accounts for around 2% of group revenues.

Grafton’s net debt has fallen from €584m to €226m since 2005 and group finance director, Colm O’Nuallain said that if no acquisitions were made this year, the group could lower that figure to below €200m this year. However, he also said the business is in a position to be able to participate in the consolidation trend currently evident in the builders merchanting industry; and could acquire in a number of geographical territories.

“We have a strong balance sheet and plenty of surplus capacity available,” he said, but added that there was “no panic” to buy and any purchase would be made on value terms, rather than scale.

Grafton currently employs around 9,000 people across its entire group of businesses and chief executive Gavin Slark said further rationalisation and cost cutting would be looked at, and job cuts could not be ruled out. However, he added that massive branch closures “is not where we’re at” and any cost cutting would be aimed at protecting as many jobs as possible.