Grafton reports £57m pre-tax profit

Grafton has announced a pre-tax profit of £57m which is well down on the £210m profit figure in the previous year.

The latest figures cover the 12 months to the end of 2008. Turnover dipped to £2.4bn after standing at £2.9bn in 2007.

Grafton has a large builders’ merchants’ network in the UK and a similar market operation in Ireland.

During 2008 the UK accounted for 63% of Grafton’s turnover while Ireland made a contribution of 37%.

Michael Chadwick, executive chairman, said: “Trading conditions in merchanting, DIY and mortar markets were very challenging in 2008 against the background of a sharp slowdown in the UK and Irish economies.

“The major influences on performance were contraction in the UK and Irish economies, a reduction in the availability of credit to households and the depreciation of sterling against the euro.

“The UK business had a positive start to the year. Demand eased during the first half and slowed substantially from mid-year.”

Grafton’s UK turnover was 1% down at £1.3bn. Operating profit was 44% off at £130m. This take represented 67% of the group’s total operating profit.

UK Merchanting

A challenging period.  The RMI sector remained firm in the early months of 2008 but weakened over the remainder of the year. 

In sterling terms, turnover was almost flat and was down by 7% when judged on a like-for-like basis.

The decline in profitability reflected the fall in like-for-like volumes, increased store opening costs in Selco and expansion of the Plumbworld business.

Profit was also reduced by “rationalisation measures” including a cut of 800 in the workforce.

The various UK merchanting businesses that trade under Buildbase, Plumbase and Jacksons brands are undergoing something of an integration process.

This “rationalisation programme” has resulted in the loss of 14 branches.

Profitable contributions from acquisitions completed in 2008 were more than offset by initial start-up trading losses incurred by the 26 greenfield branches that opened during the year.

UK Mortar

EuroMix manufactures a range of mortars from nine plants in England and Scotland for supply to residential, commercial and public sector construction.

The business remained profitable throughout the year.

However turnover and operating profit declined due to the sharp fall in residential construction. Reduced volumes in a competitive market prevented recovery of higher energy and raw materials costs.

Looking ahead, Chadwick said “Trading in January and February 2009 continued to decline, made worse by the heavy snowfall. Plans are in place to deal with any further contraction in business.

“In Ireland, the economy is forecast to contract sharply in 2009 resulting in further significant job losses.

“The UK economy is forecast to contract sharply in the first half of this year before starting to respond to the considerable stimulus measures put in place in recent months.

“The expectation for 2009 is that demand in the RMI market will continue to weaken as consumer spending contracts further due to lower employment, falling house prices and tight credit conditions.”