Grafton shares slide 8% over UK market concerns

Shares in builders merchanting group Grafton slid up to 8% yesterday on signs of slower growth in its core UK market.

The group gave a broadly upbeat trading update, saying overall revenues for the first 10 months of the year were up 9.1% on a year-on-year basis to £2.3bn (€2.6bn); buoyed by improving trends in its Irish and Dutch divisions.

However, growth in its smaller non-UK operations outgrew the key UK merchanting arm — where sales were up 5%, year-on-year — in the period. Grafton also owns the Woodies DIY retail network here. The Irish merchanting arm increased sales on a constant currency basis 9.4% and the Netherlands saw near 39% sales growth. The core UK revenues benefited from a weaker third quarter comparison last year, but suffered from softened demand in October and flatter volumes.

“We anticipate current trading conditions in the UK merchanting business are likely to continue over the remainder of the year, while the Irish and Netherlands businesses should benefit from favourable trading conditions and strong market positions,” said Grafton chief executive Gavin Slark.

While Grafton is on track to open 12 outlets this year, management said UK pricing levels remain “competitive”.

Davy said it remains positive on the stock but said “as Grafton begins to lap stronger comparative quarters, like-for-like performance in UK merchanting will moderate”.

“The continued strong growth in Ireland, improving trends on mainland Europe and ongoing Selco expansion are all encouraging, especially against a backdrop of a potentially slowing UK merchanting sector,” said Goodbody’s Robert Eason.


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