Grafton soars as revenue grows

by Geoff Percival

Shares in Dublin-headquartered builders merchanting group Grafton jumped nearly 7% on the back of a strong end of year trading update, with a better-than-expected performance in the final quarter of 2017.

The London-listed group — which owns the Woodie’s DIY retail brand but generates more than 90% of its sales from its UK merchanting division — said group revenue for the year rose by 8.8% to £2.7bn (€3.03bn), with growth evident across all geographies.

Revenues in its Irish business grew by over 16% last year, the second consecutive year of double-digit percentage growth, driven by a high rate of home improvement activity. Woodie’s also traded well during the year, Grafton said.

A 49.2% increase was seen in the Netherlands — where it added a further small bolt-on acquisition in November — and a 7.5% rise was evident in Belgium. Its core UK division delivered sales growth of nearly 5%.

Grafton had said in November that it saw signs of slowing growth in the UK. Indeed, like-for-like growth in UK merchanting in the last three months of the year slowed to 3% from 4.7% in the third quarter.

However, overall revenue last year was helped by a better-than-anticipated 4.4% revenue rise in the fourth quarter.

“We enter the new year in a favourable position well-placed to implement our growth strategy supported by good cash flow from operations, a strong balance sheet and low net debt,” said chief executive Gavin Slark.

“Grafton’s efficient deployment of capital in recent years has created a sector-leading proposition in the UK alongside attractive opportunities beyond,” said Davy which is likely to increase its current forecasts for Grafton by 2%. Full-year Ebita of around £161m indicates that we will upgrade our 2017 assumptions by approximately 2%.”

However, Davy added: “Grafton must now contend with a significantly more challenging comparative base as it annualises its own outperformance through much of the last 12 months. This is especially the case in UK merchanting.”

“Twelve months ago, we took a cautious approach to our merchanting forecasts, given the economic uncertainty around Brexit in the UK. However, this did not materialise and — in combination with the favourable market dynamics in Grafton’s other markets — has resulted in around 20% upgrades to forecasts,” said Robert Eason at Goodbody.

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