Effects of lending restrictions yet to be felt: Grafton

The full effects of the Central Bank’s mortgage lending restrictions are yet to be felt but underlying demand for homes offers the potential of strong growth for builders’ merchants.

Effects of lending restrictions yet to be felt: Grafton

Speaking as Grafton Group reported its half-yearly results, chief executive Gavin Slark said his builders’ merchanting and DIY business can look ahead to a positive short-to-medium term with encouraging economic signs on both sides of the Irish Sea.

Revenue rose 7% to £1.08bn (€1.48bn) in the first six months of the year while operating profit surged by more than 20% to £61.2m.

Also contributing to a brighter financial position which allowed it to approve a 20% increase in its interim dividend from 3.75p to 4.50p was Grafton’s operating margin increasing from 5% to 5.6%.

The group’s merchanting business, which accounts for 91% of revenue, continued to have a resurgence with revenues of £912.7m.

That is an increase of 8%. Growth in the UK division eclipsed its Irish equivalent however, with merchanting sector growth of 9.6% and 2.3%.

“The UK is further down the recovery track in terms of the economic cycle, [it] has been growing for longer than the Irish market.

"In pure percentage terms the Irish market is actually growing very strongly… so it’s pleasing on both sides of the Irish Sea. You’ve good levels of growth maintained in the UK and high levels of early recovery growth still in Ireland,” said Mr Slark.

The Dublin-headquartered firm’s chief executive said that growth meant the group could look ahead to the future with a degree of optimism but admitted that the effect of the Central Bank’s lending caps are still somewhat unknown.

“Even with the restrictions on mortgages that have been placed there that going forward over the medium term, you’ve got good underlying demand for new house building and you’ve got a good strong market in terms of the repair and maintenance market,” he said.

Mr Slark said an expansion of its chain of Woodies DIY stores wasn’t on the cards but said with a modest increase in revenue recorded in its Irish retail division in the first half of the year and an anticipated increase in consumer spending, its outlook was also positive.

With more than £190m of credit available, the group has a pipeline of small acquisitions that it may pursue in the second half of 2015.

Net debt halved to £51m, the group’s lowest level in almost 20 years.

More in this section

IE_180_logo
Price info

Subscribe to unlock unlimited digital access.
Cancel anytime.

Terms and conditions apply

The Business Hub
Newsletter

News and analysis on business, money and jobs from Munster and beyond by our expert team of business writers.

Sign up
Puzzles logo
IE-logo

Puzzles hub

Visit our brain gym where you will find simple and cryptic crosswords, sudoku puzzles and much more. Updated at midnight every day. PS ... We would love to hear your feedback on the section right HERE.

Lunchtime
News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up
Revoiced
Newsletter

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up