Grafton gung-ho about Irish arm

Builders’ merchants group Grafton expects its Irish operations to contribute significantly to its overall growth in the coming three-to-five years.

The Dublin-based, but London-listed group — which generates most of its revenues from the UK — yesterday published a strong set of first-half results; with underlying pre-tax profits for the six months to the end of June up by 88%, year-on-year, to £45.9m (€57.8m), operating profit up by over 60% at £50.6m, and revenues ahead of the corresponding period last year by 11%, at just over £1bn. Adjusted earnings per share were up by 92% to 15.39p.

While growth was driven by its UK merchanting business, which represents almost three-quarters of group revenue, Grafton also noted “significant increase” in revenue and operating profit at its Irish merchanting division, as well as a modest increase in its Woodie’s DIY retail arm, here. Ireland contributes just over 20% to Grafton’s annual group revenues, but chief executive Gavin Slark said its profit performance, rather than proportion within the group, is what’s important.

“Ireland remains a very important part of the business and I wouldn’t underestimate the contribution made by the Irish merchanting division, where sales have risen by 15% in the past six-to-seven weeks alone,” he said.

Much of Grafton’s Irish growth has come via repair and maintenance work on houses, and management still believes it will take a considerable amount of time for the Irish house-building sector to return to sustainable annual levels.

However, Mr Slark said that the fact that growth is returning to the building materials market in Ireland, via firms undertaking small building jobs rather than large ones, is a sign the sector can grow in a measured and sustainable manner.

Grafton’s Irish growth will be organic in nature (it expects its retail element to pick-up from next year) due to acquisition opportunities being thin on the ground.

However, overseas acquisitions — predominantly more bolt-on buys in the UK merchanting bracket — are still on the horizon and Mr Slark said the group will, “at some point”, add to its geographical spread, which currently covers Ireland, Britain and Belgium.

With net debt cut by over £30m year-on-year and new credit facilities in place, Grafton can do more deals. Mr Slark didn’t divulge how much the group has to spend, but said there would be no issue over affordability.

He said the overall picture is positive. “These results demonstrate further progress by the group; in particular, the milestone of a 5% group operating margin,,” he said.