Unrealistic rents may close some stores, warns Grafton Group

THE OWNER of the Woodies and Atlantic Homecare DIY chains warned yesterday it would have to consider closing some of its stores if State agency Nama and other landlords do not agree to more realistic rents.

Grafton, which owns the DIY stores and a group of builders’ merchant businesses in Ireland and Britain, yesterday reported that its operations generated pretax profits of €42.3 million last year, almost 3 per cent more than the €41 million earned in 2010.

However, once-off costs of €32 million left Grafton with pretax profits for the year of €10.3 million, a 60 per cent fall on 2010’s surplus of €25.5 million.

Finance director Colm Ó Nualláin said yesterday the once-off charge included restructuring costs and a €19.4 million write-off of the value of leases on a number of its Irish DIY stores.

Mr Ó Nualláin said the company had to account for the fact that the rents on a number of stores meant they were losing money and were set to do so into the future.

He warned that unless landlords, including State assets agency Nama, agree to cut rents to more realistic levels then the group would have to consider the future of the stores in question. “I would be hopeful that we do not have to close any stores.”

Nama is involved in “a good chunk” of Grafton’s properties, but not all of them, according to Mr Ó Nualláin. The agency either owns loans secured against premises that the group is leasing or has appointed receivers to some of its landlords’ businesses. Nama is directly a creditor of Grafton’s.

An agency spokesman said yesterday that it does not comment on individual cases, but pointed out that since the budget there had been a system in place that allowed businesses which believed they were paying excessive rents on Nama-controlled properties to appeal directly to the agency.

Mr Ó Nualláin confirmed the company has been in talks with Nama and other landlords, and those discussions were a “work in progress”.

Stripping out the once-off charges, Grafton’s businesses grew during 2011. Operating profits were up 12.5 per cent at €57 million. Revenues increased by 2.5 per cent to €2.05 billion from €2 billion.

Over 70 per cent of its turnover now comes from Britain, where it has a series of builders’ merchant businesses which are focused mainly on supplying trade customers rather than consumers.

Turnover there grew 4 per cent to €1.46 billion, while operating profits there were €60 million. Overall, the group generated €67 million in free cash flow.

Chief executive Gavin Slark said the group occupied the top three or four position in most of its markets in Britain, along with the top slot in its Irish businesses.

“We will continue to focus on margin-enhancement, cost-management and cash-generation and evaluate value-adding expansion opportunities.”

Along with DIY, Grafton’s businesses include the Heiton Buckley and Chadwick’s builders’ merchants in the Republic, McNaughton Blair in the North and Buildbase and Plumbase in Britain. It also has a joint venture in Belgium which accounts for €55 million of its turnover.

Source : Barry O'Halloran
www.irishtimes.com/newspaper/finance/2012/0308/1224313004024.html