Grafton Group tipping growth in Ireland as UK revenue weakens
Published 13/07/2016 | 02:30
Building materials firm Grafton Group has forecast further growth in the Irish and Dutch markets but has seen its UK trade weaken in the second quarter.
Revenue at the company, which trades as Woodie's in Ireland, rose by 13.3pc in the first half of the year up to £1.23bn.
Over 70pc of Grafton's revenue comes from its UK marketing business, which dipped into negative territory in June.
Goodbody equity analyst Jason Molins said it was still "early days" when it came to evaluating the impact Brexit will have on Grafton.
"We're highlighting the stronger performance in Ireland, the Netherlands, and also the Selco brand in the UK has proven a lot more resilient than parts of its own business but also compared to some of its other peers as well.
"In this space everyone's focus is on the UK and on Brexit and implications and we're just trying to highlight the differentiating factors," Mr Molins said.
Grafton's Irish merchanting revenue increased by 12.6pc in the first six month of the year while its Irish retailing and manufacturing arm increased by 6.4pc and 14.9pc respectively.
The company said it benefited from a positive trading environment in Ireland thanks to a recovering housing market.
"The recovery in retail sales in Ireland which gathered pace during 2015 continued into the half year supported by momentum in consumer spending that was reflected in strong revenue growth in the Woodie's DIY business," the company said.
Grafton chief executive Gavin Slark said he expects the uncertainty caused by the vote to weigh on the UK repair, maintenance, and improvement (RMI) market.
Shares in Grafton were among the worst hit on the Irish Stock Exchange following the outcome of the referendum.
Shares fell by as much as 18.4pc from £7.12 on the day after the UK vote.
The share price has since stabilised, standing at £5.14 (€6.09) at 2pm yesterday.
Grafton's acquisition of Dutch merchanting firm Isero has proved to be an initial success with the business benefiting from an improvement in the Dutch economy.
Mr Molins said the firm's strong balance sheet leaves it in a position to snap up businesses like Isero.
"They have a well regarded management team, they've made a number of key deals in recent years and have the firepower to look to do that," he said.