Grafton on upward curve as it posts €15m profit
Analysts say worst is over for Woodies' parent company
Published 01/09/2010 | 05:00
Shares in Woodies and Atlantic Homecare owner Grafton Group jumped over 6pc yesterday morning after the company swung back into the black, posting a first-half operating profit of €14.8m compared to an €8.3m loss a year earlier.
Delivering an upbeat assessment of the first six months of the year, executive chairman Michael Chadwick said that the market challenges faced by the group had "eased considerably" during the first half.
Turnover at the group, which also owns outlets such as Heitons, dipped 1pc to €979m. Revenue at the company's UK merchanting business rose 5pc to €678.5m, while in Ireland they fell 17pc to €117.5m.
Grafton generates about 70pc of its revenue in the UK, where it operates divisions such as Plumbase, Buildbase and Jacksons. Operating profit at the UK division doubled to €28m during the first half.
"The improved trends in group turnover were sustained in July and August," said Mr Chadwick.
"Grafton's profits are now recovering and we expect further profit improvement in the second half. A good base has been established from which renewed growth in earnings can be generated over the coming years as market conditions normalise."
Investors, encouraged by the optimistic sentiment, sent Grafton shares higher. The group also announced the financing of €280m of debt, extending the maturity out to 2013. The company has €75m in debt maturing this year and a further €150m next year, but with cash reserves of €330m, Grafton executives said there was no issue in relation to meeting repayments.
Speaking yesterday, Mr Chadwick said that the Irish DIY market remained "pretty rough", with revenue at Woodies and Atlantic Homecare outlets having fallen 7pc to €117.5m in the first half. They posted an unspecified operating loss.
Finance director Colm O'Nuallain added that the merchanting business in Ireland was "heading towards break-even". The Irish merchanting business had contracted 33pc in the final quarter of 2009, and contracted 16pc in the first half of 2010.
In the UK, Grafton's dry mortar business had improved following a return to house-building in the region.
Grafton has been slashing costs amid the downturn in Ireland and the UK. Overheads were €22.6m lower in the first half of 2010 than in the corresponding quarter a year earlier. Headcount was reduced by 100 during the first half of this year to 9,200, bringing the total shed since January 2008 to 2,900.
Davy Stockbrokers analyst Flor O'Donoghue said that the latest figures offered "compelling evidence that the worst is over for Grafton".
Shares in the company closed up 14 cent at €2.69 for a 5.6pc gain.