Friday 15 December 2017

Grafton shares soar as revenue hits £2.5bn amid UK expansion

Ceo Gavin Slark
Ceo Gavin Slark
John Mulligan

John Mulligan

Revenue at Grafton Group's Irish business soared 11.9pc last year as it reaped the benefits of an increase in construction activity and generally improved consumer spending.

Total revenue at the group rose 13.4pc to £2.51bn (€2.87bn) in 2015. That was 10.4pc higher on a constant currency basis.

Sales were 4.1pc ahead on a like-for-like basis during the year, and 5.3pc higher on that basis in the final quarter.

Shares in Grafton, which are listed in the UK, soared almost 8pc by mid-afternoon yesterday.

The company, headed by ceo Gavin Slark, said that the group has benefited from exposure to a number of markets. However, it still generates the bulk of its revenue in the UK.

He pointed out that Grafton opened seven new Selco branches in the UK, and completed two bolt-on acquisitions there during 2016.

Last November, it also agreed to buy Dutch firm Gunters en Meuse.

That transaction has now completed and strengthens Grafton's position in the Amsterdam market.

"A strong balance sheet and excellent cash generation from operations support these developments and our ongoing strategic initiatives," added Mr Slark.

Grafton said that its Selco business - a builders' provider - outperformed the UK merchanting market with revenue gains in established branches and growth from new outlets.

There are 47 outlets in the chain and Grafton plans to open at least 10 new branches this year given the resilient repair, maintenance and improvement (RMI) market in the UK.

Grafton also noted that revenue growth accelerated in the final quarter of 2016 at its traditional UK merchanting businesses, including Buildbase and Plumbase, but warned that the market remains very price competitive.

Its Irish merchanting business notched up double-digit revenue growth in 2016 - the third year in a row it has done so. Its Irish retail business - which includes Woodies DIY and Atlantic Homecare - also performed strongly, with Woodies reporting a "solid increase in volumes".

Grafton's retail businesses, which operate solely in Ireland, account for just 6pc of its group revenue.

In the Netherlands, Grafton said that its existing merchanting business there, which it acquired in November 2015, had performed well, supported by good economic growth and a "strong recovery" in the residential new-build and RMI markets.

Davy Stockbrokers said the prospects for the performance of Grafton's shares this year will be determined by the underlying conditions in its most important end-market - the UK.

"While recent evidence suggests that the group is navigating difficult conditions admirably, we still expect 2017 to be challenging," the broker noted.

It added: "We expect its exposure to the fast-recovering Irish and Netherlands markets (not to mention the current pace of growth of its highly profitable manufacturing operations) to generate above-sector average growth in 2017."

Irish Independent

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