Grafton profits jump 90%

Improving fortunes in the Irish market and a better climate in UK merchanting helped Irish merchant group Grafton to almost double group operating profits for the year to December 31 2010.

Grafton profits jump 90%

Group revenue was €2bn, up 1% from 209’s €1.98bn, with operating profits of €50.6m 93% ahead of 2009’s €26.2m.

Turnover in the merchanting business was up by 2.6% to €1.73 bn (2009: €1.69 bn).

Grafton owns the Grafton Merchanting GB business in the UK, which includes brands such as Buildbase, Plumbase, and Jacksons. UK merchanting branches increased turnover by 6.5 % to €1.40 bn (2009: €1.32 bn), with an average daily like for like sales increase of 2.3%. Operating profit before restructuring costs rose 33%t to €57.8m (2009: €43.5m). The UK merchanting operating profit margin improved to 4.1% from 3.3%.

With trading in the UK merchanting businesses severely affected by the bad weather in January, it took a while before growth resumed and average daily like for like sales increased by 4.0% during the period from February to June 2010.

In the second half of the year, average daily like for like sales were up by 4.5%, although trading in December 2010 was disrupted by the extreme weather conditions.

Buildbase grew turnover driven primarily by more positive market conditions in the new build orientated civils and lintels branches and operating profit also increased due to overhead savings. Jacksons reported unchanged like for like turnover but increased operating profit through an improvement in gross margin and overhead savings. Plumbase maintained turnover at last year’s level, despite the competitive market. The 18 heating spares branches that trade under the Shoreheat brand increased turnover and operating profit.

The implementation of a single accounting, administration and support office function for the Buildbase, Plumbase, Jacksons and smaller specialist merchanting brands was successfully completed and meant a significant saving in back office costs.

Selco, the trade only warehouse format, has 28 stores and continued to report strong like for like turnover growth in the 20 mature stores, with the eight opened in 2008 and 2009 performing to expectations.

Michael Chadwick, executive chairman said: “The Group’s strong financial position and lower cost base leave it well placed to benefit from improvements in its markets. The UK economy appears to be in a modest growth phase and activity in our sector has recovered from historically low levels. The outlook for Ireland remains unpredictable. Group turnover for the first two months of 2011 is encouraging with a continuation of like for like sales growth in the UK and signs of stabilisation in Irish turnover. We expect further improvement in profit as markets recover.”

The UK economy appears to be in a modest growth phase, the group reports. In particular, activity levels have recovered from historically low levels though the availability of mortgage lending continues to be an issue.

The outlook for Ireland remains unpredictable. However, the group says it is encouraged by the modest return to profitability in Irish merchanting and the resilience of the DIY business.

The Group recently completed the acquisition of 12 plumbing and heating branches in England and Wales from Travis Perkins Group plc and a single branch acquisition in Scotland.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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