Grafton Group Executive Chairman Michael Chadwick

Grafton Group plc, the builders merchants and DIY Group with operations in the UK and Ireland, announced profit before tax fell 50 per cent to €53.4 million in the first half of 2008.

Grafton, which operates the Chadwicks, Heitons and Woodies outlets in the Republic of Ireland, said that the first half of the year brought the most challenging trading conditions encountered by the group since the early 1990s. The impact of these conditions, together with an average 13 per cent decline in sterling’s exchange rate against the euro, resulted in the plunge in profitability compared to the record levels achieved in the first half of last year.

Turnover declined by 11 per cent to €1.44 billion and by 2 per cent in constant currency terms.

Grafton said trading conditions in July and August remained challenging and there are no immediate signs of an improvement in our markets.  In Ireland, turnover continued to decline at a similar rate to the first half and UK like for like sales showed a mid single digit decline in July.

The Irish economy is forecast to contract modestly in 2008 due to the decline in new housing investment. The ongoing adjustment to the housing market together with a general tightening in mortgage lending and higher interest rates is expected to lead to a continuation of the difficult trading environment in the Irish merchanting market over the remainder of the year. The weaker trend in consumer spending due to ongoing cost of living increases and weaker labour market conditions should continue to be reflected in moderating demand in the DIY sector.

Grafton said that the near term outlook for the UK economy remains subdued with a further softening in activity forecast over the remainder of the year.  

Commenting on the results today, Michael Chadwick, Executive Chairman said: “The first half brought the most challenging trading conditions encountered in over 15 years. With a healthy balance sheet and strong cash flows, the Group is focused on emerging from this downturn a stronger and more competitive organisation. 

Grafton’s current focus on cash generation, cost control, efficiency improvements and market development should leave the Group strongly positioned for profitable growth when the Irish and UK economies recover and trading conditions improve. Both economies are fundamentally sound and should return to more sustainable levels of growth when the restraining effects of higher inflation and tighter credit conditions ease.”