Grafton sees revenues increase to over €2.6bn

Builders, merchanting, and DIY group Grafton increased revenues by almost 10% last year, helped by exposure to the recovering construction sectors in Ireland and the UK.

Revenue for the year totalled £2.08bn (€2.66bn), an increase of 9.5% the £1.9bn seen in 2013.

Despite the increase, growth eased, as anticipated in the second half of the year.

Trading conditions were favourable in the final quarter with positive momentum from a sustained recovery in the UK and Irish economies leading to increased demand in residential repair, maintenance, and improvement, as well as new build markets.

Grafton chief executive Gavin Slark said performance was in line with expectations and leaves the company in a strong position for the coming year.

“Revenue trends evolved broadly in line with the group’s expectation of a moderation in the rate of growth as the year progressed,” said Mr Slark. “The group anticipates reporting 2014 results consistent with current market expectations and enters 2015 in a robust position as it continues to execute its growth strategy.”

Grafton’s merchanting business, which accounts for 90% of group revenue and is the selling of commodities, enjoyed a particularly strong close to 2014.

In the final quarter of last year, merchanting sales in the UK grew by 4%, while Irish merchanting sales expanded by 12.4%.

The group’s performance in Belgium was somewhat weaker, however, with merchanting sales down 2.7%.

Merrion Stockbrokers head of research David Holohan agreed with the group’s management that the results were largely as expected.

“Overall, there are no surprises in the trading update from the Grafton Group,” said Mr Holohan.

“The UK had a strong 2014 despite a moderation of the growth rate as the year progressed, while in Ireland there continues to be a stronger performance emanating from the merchanting business while the consumer facing retail operations remains challenging.

“In Belgium, market weakness has persisted given the difficult underlying macroeconomic landscape of the country at present.”

Growth in the UK merchanting business, which accounted for three quarters of group revenue, benefited from the continued recovery in the wider economy, although volumes in the plumbing and heating market remained subdued.

The rate of revenue growth in the comparable Irish business increased sharply during 2014 as the impact of the market recovery spread and the economy moved on to a stronger growth path.

Davy Stockbrokers described Grafton as a “clear standout” in a sector where earnings estimations have come under pressure.

“It is no great surprise that Grafton’s in-line trading update confirms that 2014 was an excellent year for the business,” said analyst Flor O’Donoghue.

“Earnings growth last year will approach 50%. A series of earnings upgrades made it a clear standout... Despite this, the stock actually fell very slightly in 2014 and derating has left Grafton’s valuation at its most attractive level for a considerable level of time.”

There was a modest increase in core retail sales in Ireland as households continued to struggle with financial pressures and high levels of personal debt.


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