Grafton shares rise 1% on UK outlook

Shares in Grafton have risen 1% in London as the Woodie’s and international merchants group reassured about the outlook for its UK operations. 

There are fears the UK economy could slow rapidly as consumers rein in spending as prices soar after the Brexit-driven slump in the value of sterling.

However, in its trading update, Grafton chief executive said the group was cushioned by its international operations and by positive trends in Ireland and the Netherlands. “While we remain optimistic on the medium-term outlook for the UK, we are cautious about the shorter term impact of current uncertainty and pressure on real incomes which may temper growth in spending on housing,” said Gavin Slark.

Grafton shares have risen steeply since the June 2016 vote by the UK to leave the EU and have gained 30% since the start of this year.

Grafton generates over 90% of its sales from its international merchanting activities and only a small proportion from Woodie’s. Though exposed to any downturn in the UK market, revenues generated in the eurozone have provided a boost.

In the latest three months to the end of June, Irish merchanting outperformed other countries. Sales on a constant currency basis here rose over 10%, against 6.2% growth in Belgium, 4.7% in the UK, and a 4.4% expansion in Holland.

Merrion Capital senior equity analyst Darren McKinley said: “We consider the outcome in these two markets (Belgium and the UK) to be very positive particularly given the disappointing results reported by other UK retailers.” It has a ‘hold’ recommendation.

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