Interim Management Statement

RNS Number : 4327I

Grafton Group PLC

19 November 2008

 



Grafton Group plc

Interim Management Statement

Grafton Group plc, the builders merchants and DIY Group with operations in the UK and Ireland, issues the following Interim Management Statement.

Difficult trading conditions across our markets and significant sterling weakness resulted in a decline in Group turnover of 14.5% to €2.35 billion in the 10 months to October 2008.  The decline was 6 per cent in constant currency terms (after taking into account the impact of the average decline in Sterling of 13.6% during the period).

Although new house building activity in the UK declined dramatically in the period, the Group's significant exposure to the RMI sector supported turnover which increased by 1.5 per cent in Sterling. The downward pressure on the RMI market activity, already evident since the spring, gathered pace as the year developed resulting in a decline of six per cent in like for like sales in the ten months. Declining house prices, restrictions on the availability of mortgages and reduced growth in real disposable incomes put customers under pressure to cut back on housing related expenditure and investment.  

In Ireland, turnover was down by eighteen per cent in the ten months to the end of October 2008.  Like for like sales declined by 19%.  The economy continued to go through a very difficult period of slowdown and contraction.  The scale of the downturn in the housing market which is now under way for almost two years, has been made worse due to the significantly increased cost of borrowing and a severe tightening of credit.  The impact of the decline in housing starts and completions on the Irish Merchanting business has been partly offset by market share gains and reasonable levels of activity in the RMI and non residential new build markets.  

Turnover in the Irish DIY business declined being adversely affected by reduced retail spending due to a sharp decline in consumer confidence, weak labour market trends and a reduction in real disposable incomes.  

Grafton continues to be profitable and cash generative and is dealing with the challenges presented by weakening economic conditions and events in the financial markets from a position of strength.  The focus of our experienced management teams will remain on (i) achieving efficiencies through cost cutting yielding €30 million of annualised savings achieved to date at a cost of €6.2 million, and (ii) maximizing cash flow generation.  Our ability to control working capital continues to be a key priority and cash flow will also benefit from lower levels of capital expenditure and acquisition activity.  The balance sheet is supported by a prudent level of borrowing and good liquidity in the form of cash deposits and undrawn committed facilities. The Group's mainly floating rate interest exposure will benefit from the recent reductions in Euro and Sterling interest rates.   

The Group has a strong balance sheet backed by tangible assets with a substantial property portfolio.  The actions outlined above should leave the Group's strong brands well placed to cope with evolving market conditions and return to profitable growth when the UK and Irish economies begin to emerge from the current downturn. 

ENDS  19 November 2008

For further information please contact:
Grafton Group plc + 353 1 216 0600	Murray Consultants + 353 1 498 0300
Michael Chadwick, Executive Chairman	Joe Murray / Elizabeth Headon
Colm Ó Nualláin, Finance Director
	Citigate Dewe Rogerson + 44 207 282 2945
	Ginny Pulbrook

 

END

 

 

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