Woodie's owner in 'wait and see' mode over reopening of Irish business

Woodie’s DIY owner Grafton Group is set to reopen more of its UK-based builders merchants outlets next week, but remains in the dark over when it can ramp up production in its Irish business.
Woodie's owner in 'wait and see' mode over reopening of Irish business

Woodie’s DIY owner Grafton Group is set to reopen more of its UK-based builders merchants outlets next week, but remains in the dark over when it can ramp up production in its Irish business.

The Dublin-based group derives the vast majority of its annual revenues from its UK merchanting business, which has been operating – albeit at around 10% of normal volumes – in recent weeks providing materials for essential projects and emergency supplies.

In Ireland, Grafton’s building products business has been working on a skeleton basis, with merchanting branches currently operating at around 15% of normal volumes during restricted trading hours. The Irish distribution business has been operating a delivery-only service to support essential projects.

The group has previously said it is hopeful of its Woodie’s DIY retail chain reopening physical shops next week and an expected reopening of construction sites could boost its merchanting business here too.

The majority of Grafton’s UK building product distribution and manufacturing plants were closed on March 24, while the distribution business in Ireland was significantly scaled down four days later. Woodie’s stores were closed on the same day, although that business has continued to trade online.

In a trading update coinciding with its agm, Grafton said many of its UK builders merchants branches will return to more extended operations as of next Monday and will gradually extend their offering.

Grafton – which held its agm after surviving a High Court action, from significant shareholder and former chairman Michael Chadwick, to have the closed meeting postponed – said trading this year up to mid-March had been “broadly in line” with expectations, but the impact of Covid-19 became visible in the second half of March. It said that impact “instensified” after the lockdowns in the UK and Ireland.

Its Dutch operations have continued to perform strongly, however, with construction activity largely continuing in the Netherlands.

Grafton said it is taking “appropriate actions” to manage its cost base and protect jobs. It is availing of job retention schemes, in the UK and Ireland, for nearly 9,000 of its 11,000 employees in the two countries. The group also said it remains in a strong financial position, with £562m (€645m) in available cash.

It has also received approval from the Bank of England which permits drawdown under its Covid Corporate Finance Facility providing further financial flexibility.

Grafton said that no refinancing of any of its debt is due until March 2023.

“The actions that we are taking are to ensure that we emerge from the crisis as a strong and vibrant business,” said chief executive Gavin Slark.

"Grafton has a strong and geographically diverse portfolio of brands and very experienced management teams who are focused on protecting the group’’s businesses and the interests of all stakeholders,” he said.

"The anticipated easing of trading restrictions will lead to a pick-up in activity levels, although the pace and shape of the recovery is uncertain," said Davy analyst Flor O’’Donoghue.

"However, we are confident of Grafton’s durability. The group is backboned by a solid financial structure and has considerable liquidity. The recent rebound in the share price after a sharp but temporary sell-off level suggests investors are cognisant of this," he said.

However, Davy is still revising its earnings forecasts for Grafton.

“The pandemic will clearly have a deeply damaging effect on current year profitability. There should be a recovery in 2021 with next year’s earnings a better reflection of the underlying business,” said Mr O’Donoghue.

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