Grafton Group chief: Brexit not long-term worry

Grafton Group chief Gavin Slark has said there is nothing in the business’ half-year financial results “suggesting we have medium-term issues”, adding that management sees the uncertainty around Brexit being a short-term threat.

The Dublin-headquartered builders merchanting business, which derives the bulk of its revenues from its UK operations, yesterday reported double-digit revenue and profit growth for the first six months of the year.

However, the group’s own growth targets were missed due to the underperformance of its core UK merchanting business.

On a group-wide basis Grafton saw a 12% annualised rise in operating profit to £68.4m (€80.4m), a 10% increase in earnings per share to 22.3p (26.2c) and 13% higher revenues at £1.23bn (€1.45bn).

Grafton also increased its interim dividend by 6% to 4.75p (5.59c). But, its core UK business saw a near 1% year-on-year fall in adjusted operating profit to £46.9m (€55.2m), despite revenue rising by over 8% to £884m (€1,039m).

Grafton said it will incur an exceptional charge of £20m (€23.5m) in its full-year results from the undertaking of “organisational restructuring” in its UK business.

The UK merchanting business has continued to see flat trading in the early part of the second half of the year — with pressure particularly noticeable in the plumbing and heating businesses.

Mr Slark said “a number” of initiatives are being progressed that will control costs and provide long-term performance improvements.”

“As with anything in life, the worst position to be in is one of uncertainty,” he said.

“Once you know what is happening you can plan accordingly. We can’t pin everything happening in the UK market on Brexit but there is uncertainty because of it and that will continue until we know the terms and timeline [for Brexit].

"There are some fundamentals [in the UK market/economy] that will remain strong; the UK remains a mature and sophisticated economy.”

Mr Slark also hailed Grafton’s “good spread” of subsidiaries and geographical presence.

While Belgium remains weak, the group is trading well in the Netherlands and Ireland.

While Grafton is largely known for its ownership of Woodie’s DIY here, its Irish merchanting business contributed £10m (€11.8m) to group revenues in the first half and Mr Slark said he views the recovery in the Irish operations as being “reasonably sustainable”.

Acquisitions contributed to around half of Grafton’s first half revenue growth.

Mr Slark said Grafton is in a strong financial position and could make more acquisitions if the right opportunities present themselves.


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