Grafton to plug €280m pension deficit

Building materials and DIY group Grafton said it is willing to make “a very significant contribution” in order to lower its near €280m pension deficit.

Yesterday, the Dublin- headquartered group published a healthy set of annual results for 2012.

However, the figures also detailed how the group’s pension deficit increased by €54.9m — from €224.6m to €279.5m — over the course of the year.

Finance director Colm O’Nualláin has blamed the Pensions Board for imposing high valuations on pensioner liabilities for effectively killing defined benefit schemes and adding to deficits.

But he said Grafton is in negotiations with its Irish- based trustees, unions, and employees “with a view to mitigating the deficit”.

About 2,500 of Grafton’s total staff count of 8,000- 9,000 are directly affected.

Meanwhile, Grafton’s 2012 figures showed a 41% increase in underlying pre-tax profits to €59.7m and a 33% rise in underlying operating profits to €72.9m. Group revenue rose by 6%, during the year, to €2.2bn, and basic earnings per share were up by 27% to 19.5c.

While all of the group’s divisions were deemed profitable; the group profit rise was driven by its UK builders merchants division, which outperformed the local market.

Around 76% of Grafton’s revenues are generated from outside of Ireland, with that figure rising.

Group CEO Gavin Slark has said that restructuring measures have enabled the group to make “significant progress in very challenging conditions”.

“We remain cautious on the near-term outlook, due to the uncertainties in the economies and markets in which we operate.

“We expect to make further progress in the year ahead by focusing on a new phase of measures to improve profitability.”

Grafton’s Irish DIY retail business was impacted by weak retail spending last year, but Mr Slark said Atlantic Homecare — which last year went into examinership and was, ultimately downsized and partially subsumed into the Woodie’s DIY brand — has performed “quite well” since, on the back of significant rent reductions.

While the DIY business is seeing “very difficult” trading conditions, revenue declines are slowing — down by 5% in the first two months of 2013, as opposed to 9% for the same period last year.

Grafton’s net debt fell for the fifth consecutive year in 2012 — falling by €23.9m to €202m.

Mr O’Nualláin said that reducing debt will continue, depending on Grafton’s acquisition spend this year. To that end, he said that the acquisition pipeline is positive and, technically, Grafton could afford to comfortably spend up to €100m on purchases and more, if necessary.