Irish merchanting and retailing group hit by slowdown in trading but vows to emerge stronger and more competitive

The effects of the most challenging trading conditions in 15 years has hit profits at Grafton.

Profits before tax were halved from €106.4m to €53.4m, the Irish merchanting and retailing group said on Friday.

It went on to cite instability in financial markets and a restriction of credit for a marked downturn in its UK and Irish businesses in an interim statement covering the six months to June 30, 2008.

UK turnover fell by 7.4% to €907.4m ((2007: €979.4m); UK operating profit declined by 24% to €48.6m (2007: €63.8m); operating margin was 5.4% (2007: 6.5%).

Irish turnover declined by 16% to €530.5m (2007: €628.8m) and operating profit was down 60% to €24.3 m (2007: €60.6 m).

Demand in the Irish DIY business including Woodies was hit by declining consumer confidence and poor weather: turnover fell by 8% to €154.6m (2007: €168.2m) and profit described as 'significantly lower'.

Grafton now expects sharply reduced volumes in merchanting and manufacturing. It added that acquisition activity would be lower and the group would look at opportunities as they arise.

Executive chairman Michael Chadwick said Grafton's experience of dealing with adverse economic conditions, prudent management and the implementation of systems to control costs would protect it against the downturn.

"The group is focused on emerging from this downturn a stronger and more competitive organisation," he added.

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