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Inside the world of business

Belgian venture looking sweet to building merchant

DIY AND builders’ merchant Grafton could be looking to break new ground with its next acquisition.

The group is focused on Ireland and Britain, with the latter territory now accounting for more than 70 per cent of sales and a larger share of profits and earnings.

It has a strong franchise in both countries. In Ireland it owns the Woodies and Atlantic Homecare DIY chains and the Heiton Buckley, Chadwicks and McNaughton Blair builders’ merchants.

It is the third-biggest player in the British builders’ merchants market, with businesses operating under the Homebase, Plumbase and Selco banners.

The company generates plenty of cash, almost €50 million in the first half, and it knocked another €36 million off its net debt, hammering it down to €246 million by June 30th.

Add to that the fact that it is on the cusp of refinancing those liabilities and stretching repayment dates out to three and five years, and it’s easy to see that it has a decent war chest should it want to begin making acquisitions, or at least one solid acquisition.

Recently appointed chief executive Gavin Slark seems keen to go this route, but he did make it clear yesterday that there would have to be a compelling case for any purchase made in the current climate.

He said he believes its Belgian venture, a 53 per cent share of local operator, BMC Groep, which has seven branches and €50 million in annual revenues, could help point the way forward.

Slark says that it gives the group a chance to dip its toes in a different market, without having to take a plunge.

Belgium built between 30,000 and 40,000 new homes last year.

With activity on this front almost non-existent in Ireland, and slowing again in Britain, it’s easy to see why Belgium, or a similar territory could look attractive to a company like Grafton.

Borrowers banking on action, not talk

THE PROBLEM facing the Government on debt forgiveness was illustrated precisely in the interviews given by Minister for Finance Michael Noonan yesterday.

On the one hand, Ministers want to reassure people in trouble with their mortgages that the banks have the resources and the willingness to help them; on the other, they are not in a position to promise financial assistance that might undermine the recently recapitalised banks or run foul of the troika overseeing our bailed-out economy.

An interdepartmental group, which has been examining options that might broadly be defined as debt forgiveness, has yet to report and the Government will naturally want to hear its proposals before making and implementing policy decisions.

However, in Noonan’s comments and those of Minister for Transport Leo Varadkar on Tuesday, the broad shape of favoured options is emerging. Noonan clearly favours an informal system where people in trouble approach banks, which, in their recapitalised form, have the wherewithal to sanction debt forgiveness on an individual basis.

The second, more formal, element will likely involve a fundamental reform of the insolvency law such that people will be able to surrender their homes and walk away without the prospect of a mortgage shortfall following them.

It remains possible that some deal where people are allowed to remain in their home with the lender taking a stake in any upside from an eventual sale will also form part of any proposal. This is not without its merits. A profitable sale would reap a return for the lender. At the other extreme, a sale that returned nothing beyond the outstanding mortgage would see the lender take a hit.

That is not entirely unreasonable given that, in many cases, it was their irrational lending that permitted the original purchase.

But with one in eight residential mortgage-holders in trouble, according to the latest figures – to say nothing of the carnage among holders of mortgages on investment property – time is of the essence. People can ill afford false hope or endless policy reviews.

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