Grafton Group is well built to withstand a hard Brexit, says CEO

Builders’ merchant revenues grew 9% to €3.45bn in 2018, with pretax profit up 20%

“Brexit could bring speed bumps but if you look at the size of the UK markets I’d see it only as a speed bump,” said Gavin Slark. Photograph: iStock

“Brexit could bring speed bumps but if you look at the size of the UK markets I’d see it only as a speed bump,” said Gavin Slark. Photograph: iStock

 

A hard Brexit is unlikely to adversely affect Irish building materials company Grafton Group, its chief executive has said.

After the builders’ merchanting group issued results that exceeded analysts expectations, Gavin Slark told The Irish Times that while it has ample stocks to deal with a hard Brexit, he “wouldn’t go so far as to say we are stockpiling”.

“Brexit could bring speed bumps but if you look at the size of the UK markets I’d see it only as a speed bump,” the chief executive said.

Grafton, which is based in Dublin but listed in London, said revenues climbed 9 per cent to £2.95 billion (€3.45 billion) while adjusted pretax profit was 20 per cent higher at £188.4 million.

Its largest market, the UK, is expected to see a slower year in 2019, with market revenues “round about flat”, according to Mr Slark. “Most of our business in the UK goes into the repair and maintenance cycle. In a nation with 60 million-plus people living in it, the market fundamentals are good,” he added.

In the Republic, despite the end of the Home Renovation Incentive (HRI) and the imminent end of the help-to-buy scheme, Mr Slark sees sustainable growth given the fact that the property market produced more than 18,000 houses last year when about 35,000 are needed annually.

Acquisitions

The Heiton Buckley and Chadwicks owner said the possibility for acquisitions in the Republic is limited owing to its significant market share.

Grafton recorded strong organic growth in its Ireland and Netherlands merchanting business last year, with the Woodie’s DIY retail business putting in an “excellent” performance.

Woodie’s, the smaller of Grafton’s business units in the Republic, grew revenue almost 10 per cent to £198.2 million, while operating profit rose 50.1 per cent to £16.8 million.

Grafton said it would increase its dividend by 16 per cent, marking a sixth consecutive year of double-digit growth

Its UK merchanting business saw a 12 per cent increase in profit, with its acquisition of Leyland SDM making a significant contribution, and Mortar Manufacturing performing well. The group bulked up its market share, growing revenue organically in new Selco branches.

Goodbody analyst Robert Eason said there were few surprises in Grafton’s management outlook and, with the company moving into a net cash position in 2019, there’s “plenty of scope to deploy capital to further drive earnings through organic and acquisitive growth”.

Grafton said it would increase its dividend by 16 per cent, marking a sixth consecutive year of double-digit growth.

The company said it was making significant progress towards realising its medium-term financial objectives.

Grafton reduced its net debt to £53.1 million and generated a cash flow of £109.2 million in the year.