Grafton Group posts 79% profit drop but sees signs of stabilisation

Builders merchants and DIY retail group Grafton believes the end of the dramatic contraction in building activity here and in the UK may be in sight.

The owner of Woodies and Atlantic homecare today reported a 79% drop in profit last year but says sales are now beginning to stabilise in Ireland with signs of moderate recovery in the UK.

Results released this morning showed Grafton revenue falling 26% to €1.98bn from €2.67bn the previous year.

Pre-tax profits fall 79% from €64.1m to €13.6m.

In Ireland, the company said trading conditions expected to remain "muted", but a sharp fall in DIY volumes had been mitigated by improved operational efficiencies.

Merchanting turnover in Ireland was down 42% to €370m, with an operating loss of €15.6m, while

retail turnover fell 18% to €248m, with an operating loss of €0.7m.

The company however said the trading outlook was beginning to improve following a period of uncertainty.

“Group sales in the second half of 2009 were similar to the first half," CEO Michael Chadwick said.

"This stabilisation of sales, combined with the action taken to substantially reduce the cost base and integration benefits in our merchanting business, resulted in improved profitability during the second half of last year.

"Sales in the first two weeks of January 2010 were affected by snow. Since then sales have been close to expectations and last year with good increases in sales into the UK new housing sector."

“The Group’s strong businesses and financial strength position it to consolidate market share in its key markets. With a lower cost base and more integrated merchanting business, it is well placed to benefit from its operating leverage as its markets recover.”