Grafton's low debt lets it eye more buys
Debt levels at builders merchanting group Grafton are at a 20-year low despite acquisitions in the UK and Netherlands, giving it significant scope to make further buys says CEO Gavin Slark.
Grafton's net debt was just under £63m (€71.1m) at the end of 2017, giving it a net debt to ebitda (earnings before interest, tax, depreciation and amortisation) ratio of just 0.3 times.
Speaking to the Irish Independent as Grafton released full-year results, Mr Slark said that, outside the UK and Ireland, the Netherlands and Belgium could remain a key growth focus for the group in the near term. But he stressed that the company remains geographically agnostic.
"If we come across something in a different country that ticks the boxes of being a good business with a good management team and great potential, then we would definitely look at it," he said.
"We certainly don't feel constrained by geographic boundaries.
"However, hopefully now people understand that we are very careful about what we buy.
"We only acquire businesses when we believe we can really make a good return out of them. So it's much more about the quality of the business rather than the geography."
Last month, Grafton paid £82.4m (€93m) to buy London-based specialist decorator merchant Leyland SDM. Grafton will look at opportunities for expanding that brand to other UK cities.
Revenue at Grafton, which is headquartered in Ireland but listed on the FTSE-250 and reports in sterling, rose 9pc to £2.7bn (€3bn), while its operating profit before profits from property disposals, climbed 17pc to £160.9m (€181.6m).
The company generated 70pc of its revenue in the UK last year, where it has an extensive merchanting business.
Its Irish arm, which includes builders merchanting businesses Chadwicks and Heiton Buckley, as well as the Woodie's DIY chain, accounted for £583m of revenue, or 22pc of the group total.
Mr Slark said growth at the Irish merchanting business would moderate from a double-digit annual pace over the past few years, to a high single-digit rate.
Sales at the Irish merchanting business rose 8.9pc on a constant currency basis to £403.6m (€455.7m), while operating profit at the segment was 19.7pc higher on the same basis, at £34.5m (€39m).
Revenue at Woodie's jumped 7.4pc in constant currency terms, to £180.4m (€203.7m) last year, while the business generated an operating profit of £11.2m (€12.6m), a 44.3pc constant currency increase.
Mr Slark said that there are no plans to open new Woodie's stores. Store upgrades will continue.