Builders' supplier Grafton Group provided a glimmer of hope for investors yesterday as it said profits for 2011 will be at the higher end of a €52m to €55m range that it previously forecast. Turnover rose 2.5pc last year to €2.05bn.
Grafton owns Woodies DIY, Heitons and Atlantic Homecare in Ireland. Its UK operations account for 70pc of its revenue.
The company said it will also take a €19m non-cash hit on its balance sheet in respect of some onerous lease arrangements. The decision to include the charge was a result of the government decision to backtrack on plans to eliminate upward-only rent reviews for existing leases.
The company is also shouldering a €13m restructuring charge for 2011 that will result in a €6m incremental benefit in 2012. The final two months of the period delivered a "firmer tone" to revenue generation due to more benign weather.
The UK market has remained relatively stable. Average daily like-for-like sterling turnover rose 4.5pc. But its Irish merchanting business declined 6.4pc in 2011, compared with a 7.7pc decline in the 10 months to the end of October.
Transaction levels at its Woodies and Atlantic Homecare stores "held up well", but lower spending on higher value products reduced turnover by about 4.7pc in 2011.
Flor O'Donoghue, at Davy Stockbrokers, said that while management at Grafton did an "impressive job" in lowering operating costs and reducing net debt, Grafton's stock continued to look expensive.
Bloxham Stockbrokers described Grafton's update as "reassuring". Robert Eason at Goodbody Stockbrokers said he doesn't foresee Grafton benefiting from a cyclical recovery until 2013. Shares in Grafton closed up 2pc at €2.55.