Grafton Group reports pre-tax profit of €142.5m

Irish headquartered building materials group and Woodies owner Grafton Group made a pre-tax profit of £101.2m (€142.5m) last year as the Irish and UK economies continued to improve.

Grafton Group reports pre-tax profit of €142.5m

The building merchant’s performance represented a 56% increase on 2013 profits which stood at just shy of £65m with the increase delivered on the back of strong revenue growth of 9.6%.

Significant growth in Grafton’s merchanting business which represents 90% of group revenue helped deliver full-year revenues of £2.1bn.

Irish merchanting revenue rose 6% to £275.5m with its profit margin climbing to 6.4% while the UK division saw a 9.5% increase and contributed £1.53bn to the overall performance.

Commenting, Grafton Group chief executive Gavin Slark said while the UK operation performed well the returns from the Irish merchanting business was particularly pleasing.

“It’s good to see continued recovery in the UK but I think probably even more pleasing was to see the results coming out of the Irish builders merchanting business and the fact that the profit went from £5m to £16m is a real good indicator of what can happen in Ireland when Ireland starts to recover... It’s great to see Ireland coming back to life,” said Mr Slark.

While declining to forecast growth for the coming year, Mr Slark pointed towards a “good level of potential growth” in Ireland with underlying demand in the housing market.

This demand, he said, is evident in the greater Dublin area but the group is starting to see growth come through in other urban areas like Cork and Limerick which should compensate for any cool down in the capital and its surrounds.

Retail growth will be “a longer road to travel” but Woodies is recovering albeit at a slower level than the merchanting division, Mr Slark said.

Revenue was flat in the Irish retailing business despite improvements in the wider economy and sentiment with Grafton highlighting consumers’ preference to pay down debt as the main contributory factor.

Grafton expects this trend to continue into 2015 with DIY spending likely to see only modest increases.

Mr Slark said the Irish-owned and UK-listed company is “quite committed “ to its portfolio of Woodies stores in Ireland and did not expect large-scale downsizing of the group of stores.

“Pretty much, it’s a store portfolio that we’re committed to. All I would say is as and when leases come to an end we will obviously have to have a look at if they’re the right leases to continue with.”

Having invested more than £30m in acquisitions last year, Grafton is continuing to look at further additions to its business in the coming 12 months with growth through acquisitions very much part of the group’s plan.

Analysts reacted favourably to the full-year results with Davy analyst, Flor O’Donoghue commenting that the group closed the year in a very strong financial position.

“As anticipated, Grafton has reported significant earnings growth (53%) for 2014. The results were better than expected by around 5%. The year saw further margin recovery in the UK while the Irish merchanting business generated a trading profit that easily exceeded that of the three previous years combined.”

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