Armchair investors: Irish furniture sector provides comfortable returns for investors

The furniture and DIY sectors in Ireland have enjoyed a boom time during and post-lockdown – and this is creating opportunities for investors and entrepreneurs to make solid returns.

The COVID-19 pandemic resulted in most people spending more time at home than ever before. Consequently, it’s unsurprising that many are looking to buy new or better furniture and home accessories or take on DIY projects to enhance their living space.

One of the more common projects has been to create a home office working space. With many employees working at home for the first time, it was inevitable that some would look to make a comfortable space to ensure they could operate at their best. While people are returning to the office as lockdown rules have been eased, many will continue with hybrid working into the future – spending part of the week in the office and the remainder at home.

This demand has resulted in furniture and related businesses enjoying a strong performance and many interiors businesses are now looking to raise funds or make acquisitions.

The furniture market in Ireland was worth $2,600 million (€2,210 million) in 2021, according to Statista [www.statista.com/outlook/cmo/furniture/ireland]. The market is expected to grow annually by more than 2% in the years to 2025.

The biggest segment of the market is living room and dining room furniture, which is estimated to be worth $753 million this year.

Online sales are also growing in the furniture market in Ireland and are expected to generate 17% of total revenue in 2021 – a figure that has been growing year-on-year and is expected to continue to grow in the coming years.

Timing

As a result,  there’s never been a better time to raise money to launch into the Irish market.

Ufurnish, a search engine for furniture, is a good example. The company, founded in 2018, has partnered with more than 100 retailers, including famous names such as Habitat, and the site has more than one million products available to search for and buy.

The company, based in London but co-founded by Irish-born entrepreneur Diedre McGetterick, is currently raising €11.6 million – double its original planned fundraising target. The increase is due to the surge in business brought on by the pandemic and the demise of chain stores such as Debenhams.

Some of the funds raised by the business will be used to launch the brand in Ireland before the end of the year. Ufurnish has already started the recruitment process for this.

McGetterick hopes to expand Ufurnish into other countries in years to come. “If you look at how Airbnb has grown across multiple geographies then I think we can mirror that,” she told The Irish Times. [www.irishtimes.com/business/retail-and-services/ufurnish-targets-irish-launch-and-looks-to-raise-10m-1.4491002]

Investment

Other UK-based businesses are looking to capitalise on the boom in DIY and housing renovation and construction in Ireland. Screwfix, which sells more than 24,000 products from power tools to workwear for the DIY and trade, recently announced plans to open a further 11 stores in Ireland before the end of the year, taking the company’s total number of stores in the country to 29.

The new stores are set to create 140 jobs and is the latest part of Screwfix’s rapid expansion in Ireland since it established its first store there in 2019.

“The growing demand for convenience has led to the opening of more stores to help our busy customers get their jobs done,” said John Mewett, Screwfix CEO. “We know that time is money for our customers and our new stores in Ireland will not only enable us to provide our customers with added convenience and certainty, but also allows us to provide even more job opportunities for local communities.”

Acquisitions

Overseas investors are also looking to acquire Irish furniture businesses. For instance, in August bedding company Kayfoam Woolfson was acquired by US office furniture and bedding specialist Leggett & Platt for €101.2 million.

Kayfoam Woolfson, which has manufacturing plants in Dublin and Kilcullen in County Kildare, employs some 300 people and mainly sells into the Irish and UK markets, with its brands including King Koil, Odearest and Kaymed.

Leggett & Platt’s chief operating officer Mitchell Dolloff expects the Kayfoam Woolfson acquisition will lead to more growth opportunities in Europe for the company. Following the deal, Kayfoam Woolfson will be absorbed into Leggett & Platt’s bedding division.

But Irish companies in the sector are also being acquisitive internationally. Building materials distributor and DIY retailer Grafton Group plc has been active in 2021, most recently securing a deal to buy Finnish rival Isojoen Konehalli Oy and Jokapaikka Oy (IKH) in July.

IKH is one of the largest workwear, personal protective equipment, tools, spare parts and accessories technical wholesalers and distributors in Finland.

Gavin Slark, chief executive officer of Grafton, said IHK was a “good strategic and cultural fit” with the company.

This was preceded in late 2020 by Grafton’s £44 million acquisition of UK-based bespoke wooden stair manufacturer AVC (StairBox) Ltd, which trades as Stairbox.

Stairbox has developed a software application that enables customers to easily and accurately design, visualise and price staircases on the company’s website.

Slark said Stairbox has an efficient production process, nationwide distribution and strong growth potential. “The acquisition of StairBox is in line with our strategy of acquiring specialist high quality businesses with attractive returns,” he added. Under the terms of the deal, Stairbox’s existing management will remain in place.

Grafton also agreed to sell its Traditional Merchanting Business in Great Britain for £520 million to Blackstone-backed independent builders’ merchants Huws Gray.  The disposal – which is not expected to be completed until the first quarter of 2022 – followed a strategic review of the business, which was announced in April. The review concluded that the sale would optimise shareholder value. Grafton will instead focus on its Selco Builders Warehouse branch network and its other specialist distribution and manufacturing businesses in Great Britain.

The Traditional Merchanting Business involves a number of brands including Buildbase, Civils & Lintels, PDM Buildbase, The Timber Group, Bathroom Distribution Group, Frontline and NDI.

Slark explained the divestment was in line with the company’s strategy of deploying capital resources towards higher growth potential businesses offering superior returns.

Future prospects

The furniture and DIY sector is expected to grow solidly in the years to come as people look to make their homes – and increasingly home office – more comfortable and finished to a higher standard.

While the sector is relatively mature in Ireland, Ufurnish and Screwfix highlight that there are opportunities to enter the market.

It is not a sector that is likely to make stellar returns for investors, but healthy and steady income over an extended period. The Irish economy is stable and the country is also part of the EU and has unrestricted access to the single market; a significant pull factor for businesses with international sales ambitions.

Getting advice

For those looking to set up a furniture or DIY business in Ireland, or invest in or acquire an existing company, it is crucial to get the right advice to give you the best chance of realising the potential of the venture.

Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects from setting up a company to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset. Remember, while Ireland may share a land border with the UK, the regulatory regimes can be quite different, which can trip up unwary investors.