Grafton Group upbeat on Ireland amid UK uncertainty

Builders merchanting business, Grafton Group has expressed confidence in its Irish operations continuing to grow, amid concern over its core UK business in the aftermath of Britain’s decision to leave the EU.

The Dublin-headquartered group yesterday reported first half revenues of £1.23bn (€1.5bn), up 13.3% year-on-year in sterling terms, and ahead 11.7% on a constant currency basis. Growth was seen across the board – in merchanting and retail; and geographically except for its Belgian operations, where sales fell by over 13%.

However, while the UK merchanting division – which dominates Grafton’s revenues – saw 8.2% sales growth in the six months to the end of June; the second quarter of the year saw its sales growth slow to 1.6% compared to 5.3% growth in the first quarter of the year.

Falling consumer confidence since last month’s EU referendum and recent sterling volatility are weighing heavily on Grafton’s full-year outlook.

“The referendum decision in the UK to leave the EU has created uncertainty about the near-term outlook and prospects for the economy, and this is likely to weigh on demand in the new housing and RMI [repair, maintenance and improvements] markets over the remainder of the year,” said chief executive Gavin Slark.

Grafton’s shares were still up by nearly 1% in London, yesterday, at £5.22; although they are down around £2 since the day of the Brexit vote.

However, Grafton has become more upbeat about its Irish operations. The first half of the year saw 12.6% revenue growth – in constant currency terms - in the merchanting business here, while on the retail side (basically, the Woodie’s DIY chain) sales rose by nearly 14% in sterling terms and 6.4% on a constant currency basis. This carried on from a rise in retail sales in Ireland last year.

“Growth in the Irish and the Netherlands merchanting markets is expected to continue broadly in line with recent trends.

"The group’s financial strength and geographic diversity leave it well-positioned to take advantage of any opportunities that may emerge across the markets in which it operates,” Mr Slark added.

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