Grafton's revenues up 8% on improved markets

Wednesday 05 March 2014 18.08
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Grafton said it is making good progress in markets that remain challenging
Grafton said it is making good progress in markets that remain challenging
Grafton CEO Gavin Slark upbeat on outlook for this year
Grafton CEO Gavin Slark upbeat on outlook for this year

Building materials group Grafton has reported another year of revenue growth and said it is making good progress in markets that remain challenging. 

Grafton said its underlying pre-tax profits rose by 35% to £64.9m sterling for the year to December, while revenues increased by 8% to £1.9 billion. 

It said it believes that the economy in Ireland is stabilising and is seeing an underlying improvement in market conditions. 

Grafton said its second interim dividend rose by 22% to 5.5 pence from 4.5 pence. This gives a total dividend for the year of 8.5 pence, up 21% from the seven pence paid out in 2012.

It said the increase reflects continued improvement in its trading performance.

Grafton now has a sole listing on the London Stock Exchange and was admitted to the FTSE UK Index series in December. 

The company delivered its annual results for the first time in sterling today and said the change from euro to sterling should help to provide a clearer understanding of the group's financial performance as three quarters of its revenue for some time has been generated in the UK.

"Trading in the current year has been encouraging, and while we expect recovery in our markets to be gradual, the group is confident of building on its strong 2013 performance in 2014," commented Grafton's chief executive Gavin Slark.

The company said the highlight of last year's results was the performance of its merchanting business in the UK, which saw operating profits grow by almost 20% to £75.9m. 

Trading conditions in its Irish merchanting business stabilised in the first half and showed a return to growth in the second half of 2013. Grafton said the "significantly improved result" was achieved from a low base following the restructuring measures implemented in 2012. 

How the Grafton divisions performed

The merchanting division of the group - which generates 89% of group revenue - saw its revenue grow by over 8% to £1.69 billion. Operating profits rose by 22.5% to £81.8m  It noted that the resumption of volume growth in the merchanting market follows five years of flat or declining volumes. 

Irish merchanting revenue rose by 6.7% to £243m, while operating profits almost doubled to £5.2m as the Irish housing market showed signs of improvement last year. It added that early indications this year show that a recovery in the new housing markets was starting to take hold.

Grafton noted that the merchanting branches in Ireland grew like for like revenues by 1% in the first half of last year and by 6.2% in the second half. This is the first year since 2006 that the business has reported like for like revenue growth. 

Revenues at Grafton's retail division - which contributes 9% of group revenue - rose by 3.8% to £167.9m while operating profit increased to £1.2m from £0.2m. It said that trading conditions in the DIY market - where Grafton owns the Woodies chain - was hit by the severe weather conditions in March and April, but good weather in May, June and July saw strong demand for seasonal products including barbecues and garden furniture.

Operating profits at Grafton's manufacturing division - which contributes 2% of group revenue - more than doubled to £3.9m from £1.7m while revenues for the year rose by 7.1% to £37m.

Grafton, which has cut its workforce by a quarter and more than halved its net debt over the past five years, had responded to the financial crisis in Ireland by building up its business in Britain, where it is now the third largest building supplies merchant.