Sunday 25 September 2016

Grafton enjoys strong 2016 start but sees Brexit, terror impacts

Published 11/05/2016 | 02:30

Grafton Group boss Gavin Slark said EU referendum has a bearing on current activity levels
Grafton Group boss Gavin Slark said EU referendum has a bearing on current activity levels

Concerns that UK voters will opt to leave the European Union in next month's Brexit referendum are beginning to weigh on the housing market there, the chief executive of Irish builders merchanting group Grafton has warned.

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Gavin Slark said that the company remains positive about the prospects for the group as a whole, and expects recent upward trends in its markets in Ireland and the Netherlands to be sustained over the remainder.

But he said that the recent terror attacks in Brussels had negatively impacted its business there.

"Strong market fundamentals should support activity in the UK housing and RMI (repair, maintenance and improvement) markets, although uncertainty over the outcome of the referendum on continued membership of the EU appears to be having a bearing on current activity levels," he said, as Grafton held its annual general meeting in Dublin yesterday.

Grafton generates about 75pc of its business in the UK, where it owns strings of builder merchants and plumbing outlets.

In Ireland, it owns the Woodies DIY and Atlantic Homecare chains, as well as Heiton Buckley and Chadwicks outlets.

Last year, the company posted record revenue of £2.2bn, which was up 6pc on 2014. It made a pre-tax profit of £119m, which was 17pc higher.

The company is listed on the London Stock Exchange.

Concerns over a possible Brexit have depressed business sentiment in the UK.

It has also served to dampen office demand in London, while the Bank of England has also voiced concerns that a Brexit would have far-reaching consequences for the UK labour market and the development of the economy.

But Grafton said that despite the concerns, it has had a strong performance in the first four months of 2016.

It said that group revenue for the period rose 13.2pc to £790m, and by 11.9pc in constant currency terms.

Its operations in Ireland also help to underscore the continued economic recovery.

In relation to its Woodies and Atlantic Homecare businesses, which only account for 7pc of group revenue, Grafton said that increased employment and disposable incomes continued to improve the financial position of households.

"The Woodies DIY business was a beneficiary of increased consumer spending, leading to strong quarter one revenue growth in a recovering market," the group said.

Average daily like-for-like revenue at its Irish merchanting business climbed 10.9pc in the first four months of the year, while total revenue at the unit was 11.1pc higher.

In the UK, the corresponding figures at its merchanting business were 4.8pc and 9pc respectively.

Its Belgian business suffered, however, with the numbers down 5.2pc and 13.9pc respectively.

"The Belgian business experienced difficult trading conditions due to weak economic fundamentals and the terrorist attacks in March which resulted in lower activity in the merchanting market," according to Grafton. "The disposal of the non-core readymix operation in June 2015 also contributed to the decline in revenue."

Grafton made its first foray into the Dutch market last year, buying tool distributor Isero for €92m. The subsidiary recorded "good revenue growth" in the first four months of 2016, according to Grafton.

Irish Independent

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