Grafton showing steady growth for 2010

GRAFTON GROUP said its trading performance was steady during the year, with trends showing some sign of improvement that were likely to continue into the fourth quarter.

In an interim management statement, the DIY and building supplies group said it recorded reasonably consistent like-for-like sales increases since February.

Third quarter sales rose to €546 million over the three months, compared with €522 million in the same period a year earlier. In the second quarter of the year, the company recorded turnover of €535 million.

Profitability in the third quarter was “well ahead” of last year and this trend has continued into the fourth quarter, Grafton said. However, the company did not provide specific figures.

Group turnover to November 17th was €1.7 billion, a marginal rise from the €1.69 billion recorded in the same period a year earlier.

Davy analyst Flor O’Donoghue said revenue trends in the second half to date were “generally as expected”.

“We are forecasting that Grafton will report operating profits (post-amortisation) of €32.1 million in H2 this year, up from €23 million in the second half of last year,” the note said.

However, the Irish market continued to present challenges for the firm. Merchanting sales continued to fall, although the rate of decline eased throughout the year.

Grafton’s retailing businesses in Ireland saw sales fall 7 per cent over the same period, while group manufacturing sales were down 3 per cent compared to a first half decline of 7 per cent.

In the UK, merchanting sales rose 6 per cent for the year to the end of October. There was also a return to profit in this division, while the Irish unit broke even.

“Retailing has operated profitably and losses in manufacturing were well below last year,” the company said in a statement. “Grafton’s financial position remains strong with good liquidity and positive cash flows from operations. A good base has been established from which renewed growth in earnings can be generated over the coming years as market conditions normalise.”

NCB said it was not changing its outlook for the full-year 2010.

“While conditions in Ireland remain difficult, the cost bases in the Irish merchanting and DIY operations have been successfully realigned to the reduced level of sales,” NCB said in a note.

“This provides a good base for profit improvement following a combined loss in the divisions of €7 million in 2009.”