Grafton is optimistic the bottom is in sight
Published 05/03/2010 | 05:00
Grafton Group's finance director Colm O Nuallain believes the bottom of the residential construction market has probably been reached and that the projected 10,000 home completions this year represents an "unsustainably low" level of activity. He expects annual completions will recover to about 20,000 units within two to three years.
The owner of Woodies DIY and Heitons in Ireland, Grafton yesterday confirmed a 26pc decline in revenue last year compared to 2008 to €1.98bn. Pre-tax profit slumped 79pc to €13.6m during the period.
Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 57pc to €74.1m, while adjusted earnings per share (EPS) fell 83pc to 5.4c.
But shares in the company soared as much as 17pc in Dublin yesterday as executive chairman Michael Chadwick and his management team set a more positive tone for the coming year, noting that group rationalisation and an improving environment in the UK will benefit the business.
Overall, Grafton's operations in Ireland, which account for 30pc of group turnover, are unprofitable, weighed down by its retail division that comprises Woodies and Atlantic Homecare. Its merchanting business in Ireland remains profitable.
Grafton's operating margin during the peak of the boom in Ireland was hovering around 11pc. Last year it tumbled into negative territory, to -0.8pc.
The group yesterday described the 2009 trading environment as the "most difficult in decades", with turnover from its merchanting business falling 26pc to €1.69bn for the year, while revenue from its retail arm dropped 18pc to €248m.
Its mortar, plastics and window manufacturing division posted a 47pc fall in sales to €45.1m.
The group has cut its workforce from 10,400 at the end of 2008 to 9,300 by the end of 2009. Chief operating officer Leo Martin said it's likely that up to 100 more jobs will be cut in coming months at its UK operations.
Grafton spent about €31m on restructuring costs in the two years to the end of last December, while it has achieved annualised savings of €85m.
Following its headcount reduction, €76m has been shaved from its wage bill.
Grafton Group owns outlets such as Plumbase, Buildbase and Euromix in the UK, and in January had indicated that merchanting activity there had picked up during the second half of 2009.
Mr Chadwick said that while it has traditionally been normal for Grafton do undertake about one acquisition a month, the group remains cautious on such activity, requiring "compelling" reasons to do deals.
Grafton cut its net debt by €113m to €322m last year, while at the end of December it had €302m in cash on its books.