Grafton builds on strong results as profits rocket 30% to €54.3m

BUILDING materials group Grafton turned in another strong performance yesterday as it reported a 30% hike in profits for the six months to June.

Pre-tax profits came in at €54.3 million as turnover surged to €911 million, a 29% increase on the same period last year.

Executive chairman Michael Chadwick said the group’s operations in Britain, which now account for three-quarters of total sales, had produced “high levels of growth” that showed the company’s decision to pursue the British market was correct.

Mr Chadwick said a strong management team had delivered good results in Ireland, where market conditions became more competitive.

Sales in Britain and Northern Ireland shot up 32% to €690 million as the benefits of newly-acquired businesses kicked in. The group also picked up a marginal benefit from stronger sterling, which was worth 2% more in euro terms over the half-year.

The Irish operations, which include Woodie’s DIY and Chadwick’s builders merchants, saw sales grow by 20%.

But the group’s two markets told different stories on operating margins. Irish margins remained higher than in Britain, but fell from 9.7% to 8.9%.

Grafton blamed the costs involved in opening two new Woodie’s stores (in Clonmel and on Dublin’s Naas Road), higher pension costs and the integration of businesses that enjoyed lower margins than the group’s average.

The reduced margin meant Grafton kept almost €1 less from every €100 taken in from its Irish customers.

Britain, however, more than made up for the slippage in Ireland. Operating margins ticked up from 6.8% to 7.3% as Grafton got to grips with integrating new acquisitions and delivering cost savings.

The group said the British economy continued to perform well and witnessed strong consumer activity, a buoyant housing market and a growing jobs market. Grafton has doubled its turnover in Britain over the last three years.

The company also predicted good news going forward and said trading had remained strong over the summer months. Its €336 million planned takeover of rival builders merchants and DIY group Heiton would be an “excellent” strategic fit.

The company will maintain its policy of not paying a dividend, but saw its share price slip back more than 1% yesterday, as investors took profits from recent gains.