Shares have soared over 10% in the Grafton Group, which is considered the ultimate Brexit bellwether stock because it owns building merchants in the UK, Ireland, and on the continent.
The bounce came after it reassured investors it was shaping up well to any threat of the UK crashing out of the EU at Halloween.
Grafton generates over half of its revenues in sterling from Britain and the North, and over a third in euro from Ireland, where it owns Chadwicks, Heiton Buckley, the Panelling Centre and the 35 DIY Woodie’s stores.
The balance of its sales is also generated in euro from its highly profitable business in the Netherlands.
The shares are exposed to any further slump in sterling and the prospects of the damage that any hard Brexit could inflict on the British economy.
However, unveiling a 6% gain in operating profit to almost £104m (€114.6m) based on a 2% rise in revenues to £1.48bn at the half-year stage, the company signalled upgrowth in its merchanting and retailing operations in Ireland which boosted operating profit here almost 12%, and “good growth” in the Netherlands.
That was only tempered somewhat in the UK where the merchanting operations and profitable EuroMix manufacturing mortar business “was satisfactory in a softer market”. It plans to sell its merchanting business in Belgium.
Grafton shares had fallen in the past year, but after the 10% shares surge in London, the firm is now valued close to £1.79bn (€1.97bn).
Analyst Darren McKinley at Cantor Fitzgerald Ireland said Grafton could be considered “the ultimate Brexit stock”. Mr McKinley predicts a 15% downside on the Grafton share price in the event of a hard Brexit, and a 15% upside if a deal is struck.
Chief executive Gavin Slark said getting through the “short-term disruptions” of Brexit would mean the company could tap a British economy, which he described as “fundamentally” sound and where its housing stock will need to be updated in the coming years.
Business in Ireland is growing in an economy that is also likely to continue to expand, he said.
However, he told the Irish Examiner Grafton doesn’t have any reserve list of deferred merger and acquisition deals which it would hurriedly introduce should the risk of a no-deal Brexit recede this autumn.
However, its long-term acquisition targets were still outside Ireland and the UK, but the Dutch business, with its “double-digit” profit margins, still has scope to expand, he said.
“We look at an awful lot of businesses. We are very disciplined about what we do decide to buy. The acquisition process is not that short-term,” said Mr Slark.