Grafton eyes further Dutch acquisitions after €91.5 million deal

Grafton Group is eyeing further Dutch acquisitions after the "excellent" timing of its entry into that market late last year with the €91.5 million purchase of a tool distributor, according to the company's chief executive Gavin Slark.

"Very much our plan, once we've bedded down the Dutch business, is to grow the business and there are absolutely acquisition opportunities in the Netherlands that we would look at as and when the time is right," Mr Slark told The Irish Times after the group's annual general meeting in Dublin on Tuesday.

The group is also looking at opportunities in the UK, even as it said that activity in its builders merchanting business there "softened" in April amid fears over Brexit.

“It’s taken quite a long time in the UK for the EU referendum to really get to the front of people’s minds,” said Mr Slark, adding that while the vote next month is weighing increasingly on sentiment, the medium-term outlook for the UK housing and repair and maintenance sector remains “very strong”.

Earlier on Tuesday, the builders merchanting and DIY group said its sales for the first four months of the year rose 13.2 per cent to £790 million (€1 billion) from €678 million, helped by acquisitions.

On a like-for-like basis, UK merchanting sales rose 4.8 per cent over the first four months of the year. This represents a slowdown from 5.8 per cent growth seen in the first two months of 2016, according to analysts at Davy.

Irish merchanting sales powered almost 11 per cent ahead on a like-for-like basis amid “ongoing improving economic and market conditions”.

Merchanting sales declined 5.2 per cent in Belgium due to a weak economy, the impact of the Brussels terrorist attacks in March and sale of a readymix business last year. The Dutch business acquired in November 2015, Isero, delivered 4.7 per cent like-for-like merchanting sales growth in the reporting period.

Retailing sales increased 2.1 percent on a like-for-like basis as increased Irish employment and disposable incomes helped the group’s Woodie’s DIY stores.

Looking ahead, Mr Slark signalled he’s comfortable with analysts operating profit estimates for this year of about £147 million, which would represent almost 16 per cent growth on last year’s result.

“It’s still very early in the year,” he said. “But we still look at this year with a degree of confidence.”

Shares fell as much as 2.5 per cent in early afternoon trading in London, to £6.73.

" Grafton shares have been under pressure as investors have avoided UK stocks and sterling exposure in the run up to the Brexit vote in June." said Darren McKinley, an analyst with Merrion Capital, who rates the stock a buy. "We assume Britain remains in the EU and would therefore be using the current weakness to accumulate Grafton Group as we see 15 per cent total return from these levels over the next six to 12 months."