Sunday 18 August 2019

Grafton shares slide despite strong trading

Grafton Group CEO Gavin Slark. Photo: El Keegan
Grafton Group CEO Gavin Slark. Photo: El Keegan
John Mulligan

John Mulligan

Shares in Grafton Group fell more than 7pc at one stage yesterday despite the company reporting strong trading in the four months to the end of October.

The group noted that demand in its UK merchanting business softened in October, however, with volumes broadly flat compared to an improving trend in 2016's fourth quarter.

Grafton shares also came under pressure as shares in UK housebuilders including Redrow, Taylor Wimpey and Persimmon fell amid concerns over political and economic uncertainty. Grafton chief executive Gavin Slark warned that the dampened demand in October at the group's UK merchanting unit will probably continue for the remainder of the year. "The Irish and Netherlands businesses should benefit from favourable trading conditions and strong market positions," he added.

Grafton said group revenue for the 10 months to the end of October was 9.1pc higher at £2.11bn (€2.38bn). In constant currency terms the figure was up 6.9pc. Like-for-like sales in the four months to the end of October were 6.1pc higher.

That compared to a 6.5pc rate of increase during the previous four months.

Grafton's merchanting business accounts for 92pc of its total revenues, with its Woodies retail business in Ireland accounting for just 6pc of turnover.

In the UK, Grafton owns builders' suppliers chains such as Selco, Plumbase and Buildbase. It generates more than 70p of its revenue in the UK. Grafton said that pricing in the sector remains competitive.

In Ireland, Grafton owns merchanting brands including Chadwicks and Heiton Buckley.

During the four months to the end of October, like-for-like sales at the Irish merchanting division rose 8.4pc.

"The pace of growth in the Irish merchanting business moderated a little, as anticipated, although the prospects for sustained growth are positive," noted Grafton. "The recovery in house building gathered momentum from a low base but it will require several years for supply to meet ongoing demand. Non-residential construction is in the early stages of a recovery that is expected to remain on a firm growth path."

Like-for-like sales at Woodies jumped 9.1pc in the four months to the end of October.

"Spending in Woodie's stores increased strongly as customers responded positively to the store upgrades and as employment and incomes continued to rise," according to Grafton.

Irish Independent

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