Grafton shares plunge on back of falling sales in Irish market
Pessimistic trading statement sparks one of steepest daily declines in firm's history
Shares in Grafton Group slumped yesterday after it warned that the trading environment in its key markets is proving slow to recover and sales at its Irish division fell at an accelerated pace during May and June.
The stock fell 8pc as markets opened and by the afternoon had slumped over 10pc, It ended the day 8.7pc lower at €3.04, marking one of the steepest daily declines ever for the company's shares.
Releasing a trading statement, the company, which in Ireland owns the DIY chains Woodies and Atlantic Homecare, said that group turnover for the first half of the year was about €997m, compared with €979m in the first half of 2010.
"Turnover in the early months of the year benefited from more favourable weather conditions than in the same period last year and the rate of growth moderated in the second quarter," Grafton noted.
"The trading environment in the group's key markets is proving slow to recover to more normal conditions in light of the continuation of weak mortgage lending and low levels of consumer confidence," it warned.
In Ireland, Grafton said that turnover was down by about 6pc in the first half of 2011 and was impacted by challenging trading conditions in its merchanting and DIY business.
Spending on house repair, maintenance and improvement (RMI), as well as DIY, was lower due to general weakness in the economy, said the group.
Grafton's Irish retail business had posted a 4.6pc rise in turnover in the first four months of the year, with the overall decline in turnover having moderated to 2.6pc. It now seems that consumers have once again taken fright.
In the UK, where Grafton generated 70pc of it sales last year and the bulk of its profits, the company fared better. Like-for-like turnover there, in sterling, was 4.7pc higher in the first six months of the year.
"Demand was resilient in the RMI-focused UK merchanting business against the background of pressure on disposable incomes and consumer spending."
The continuing difficulties facing the group come just days after Michael Chadwick formally stepped down from his role as executive chairman at the company and handed the reins over to new chief executive Gavin Slark.
Grafton had been quick to cut its cost base as economic downturns in Ireland and the UK took hold, but delivering for investors is now largely dependent on waiting for a firmer economic backdrop to develop.
Analyst Robert Gardiner at Davy Stockbrokers said the latest update showed that the pace of growth at Grafton's UK business was slowing, but not dramatically so.