PROFITS AT DIY and builders’ merchants specialist Grafton rebounded in the second quarter after a poor performance in the opening three months of the year, the group said yesterday.
The harsh winter hit Grafton, which owns the Atlantic Homecare and Woodie’s DIY chains, in the first few weeks of 2010.
As a result, the group lost €25 million in sales in January and €22 million in the the first quarter as a whole.
In a trading update for the first six months of the year, Grafton estimated that turnover for the period was €980 million, only marginally behind the €990 million the group reported for the same period in 2009.
“Profits recovered strongly in the second quarter relative to the first quarter of 2010 and the corresponding quarter in 2009,” Grafton’s statement said.
All the growth came from its builders’ merchants businesses in Britain, which account for over half its overall operations.
Improving conditions in the new housing market there helped to drive that growth, the company said.
Sales in the builders’ merchants division in Ireland were down 22 per cent in the first quarter of the year and 10 per cent in the second.
Overall, group revenues grew 1 per cent in the second quarter after a fall of 7 per cent in the first three months. In Britain, sales increased by 4 per cent in the second quarter following a 2 per cent fall in the first quarter.
At its annual general meeting in May, Grafton executives blamed the harsh winter for the poor performance in the first quarter and said trade had improved considerably since then.
Grafton is in talks to refinance part of its €322 million debt. The group has not said how much of its borrowings it ultimately intends to refinance, but management has pledged to reveal this figure “when appropriate”.
Yesterday it signalled that a refinancing deal would be concluded some time over the next three months.
“The group’s financial position continues to be strong, with good liquidity and substantial cash flow from operations,” its statement said. “The refinancing of the group’s debt is progressing satisfactorily and on schedule. It is anticipated that new arrangements will come into effect in the third quarter.”
An analyst for stockbroker Davy, Robert Gardner, said yesterday that Grafton’s trading update was broadly as expected. Davy has already predicted that Grafton sales would fall by 1 per cent this year and he said yesterday’s statement indicated that this was likely.
“Significantly, the group is also flagging a strong recovery in profitability in Q2 due to the combined effect of cost-cutting and better volumes. We have an ‘outperform’ rating on the stock,” he said.
However, investors were less impressed and Grafton lost almost 2 per cent in Dublin yesterday to close at €3.001, a fall of nearly six cents on its opening quote.
Dealers said that the group’s trading update was broadly in line with what the market expected, adding that investors may have been hoping for slightly better news.
