Graham reverses three-year slide

GRAHAM, the builders' merchant being floated off from BTR next month, reversed a three-year decline in the year to December, showing a 25 per cent increase in pre-tax profits.

The 148-branch chain, which will be the sector's fourth-largest company in terms of sales after Wolseley, Harcros and Jewson, benefited from increased housing starts and an end to the decline in the number of people moving house, recording pre-tax profits of pounds 13.5m.

Although well up on 1992's pounds 10.8m profits, the figures underlined the depth of the recession in the industry. In 1989 profits reached pounds 33.2m.

The issue yesterday of the pathfinder prospectus for Graham's flotation outlined the new management's strategy. Ian Mills, managing director, said the priority was to improve gross margins, which lagged behind the rest of the sector.

He said a margin of 22 per cent, compared with 28 per cent for the rest of the industry, would be boosted by changing the mix of products sold and by increasing the number of customers who collected goods rather than having them expensively delivered.

There would be an increased emphasis on selling kitchens and bathrooms, which traditionally attract the highest margins, and an expansion of ironmongery sales.

Customers would be encouraged to collect products from branches by a pounds 36m capital expenditure programme designed to refurbish counters and showrooms, and improvements to distribution and information systems.

Mr Mills said Graham would benefit from improving conditions in the market for repair, maintenance and improvement of houses, which he thought accounted for 50 per cent of sales.

Work in that sector is dependent on house moves, which fell to 1.14 million in 1992 compared with a peak of 2.15 million in 1988. The other important influence, housing starts, suffered a similar fall, from 252,000 in 1988 to 157,000 in 1992.

BTR is expected to sell all its shares in Graham at the flotation, the price of which will be announced on 22 February. It acquired the company as part of Thomas Tilling, the conglomerate it bought in 1983.