House building behind but level preferable to the boom – Woodie’s
Grafton Group chief executive Gavin Slark says ‘massive spikes’ were not sustainable
Grafton Group chief executive Gavin Slark. Photograph: Nick Bradshaw
House building levels still have a “significant way to go” for a normalised market, but sustainable levels of growth are better than the boom time “spikes”, according to the owner of DIY chain Woodie’s.
Grafton Group, the Irish-headquartered builders’ merchant business, recorded a 19 per cent increase in profit before tax during the first half of 2018 compared with the same period last year, the company’s interim results showed on Wednesday.
The company made a profit of £90 million (€100 million) in the six months to June 30th, 2018, compared with £75.4 million (€83.9 million) last year.
The company’s Irish subsidiary, Woodie’s, has 35 branches nationwide offering a range of DIY products, paints, lighting, homestyle, housewares, bathroom accessories, building, gardening products and fitted kitchens.
In its results, Grafton said the growth of house building in the Republic was “slower than expected”.
“The rate of growth in house building accelerated in the half year from a very low base with completions now estimated at 14,436 units in 2017 and just 53,600 units in the seven years to the end of 2017, both of which are lower than originally estimated,” it said.
“Population growth has widened the gap between house building and housing demand, despite the recent increase in supply, leading to increased revisions to medium-term demand for housing to 40,000 units per annum.
“Growth in house building was a significant contributor to revenue growth in the half year, particularly for building materials used in the early stages of construction including site services, groundworks and foundations.
“There was also good demand in non-residential markets with significant activity coming from infrastructure projects.”
Speaking to The Irish Times after the publication of the company’s results, Grafton Group chief executive Gavin Slark said “massive spikes” in the construction sector were not sustainable.
“Some people get frustrated that the Irish construction business isn’t recovering more quickly, but from my perspective it is recovering in a way that feels manageable and sustainable,” he said.
“There is still some significant way to go to get house construction in Ireland back up to where it needs to be for a normalised market. It will probably take a few years to get to that level, [but] it’s a much more sustainable level than seeing massive spikes.”
In its results, the company said the performance of Woodie’s was driven by “good fundamentals” in the DIY, home and garden market, and the benefits of investment in the business over recent years.
Like-for-like revenue growth of 13.4 per cent at Woodie’s was “broadly divided” between an increase in the number of customer transactions and an increase in average transaction values.
Grafton said its Irish merchanting business, which trades under the Chadwicks and Heiton Buckley brands in the Republic, “maintained good revenue and operating profit growth momentum”.
Overall revenue growth of 7.6 per cent in constant currency in Grafton’s Irish merchanting business was underpinned by like-for-like growth of 6.3 per cent. Grafton said it was reinvesting in the business with the creation of 60 new full-time positions.
Overall, group revenue at Grafton increased by 8.6 per cent to £1.4 billion (€1.5 billion) from £1.3 billion (€1.4 billion) the year before, and by 7.9 per cent in constant currency. The interim dividend has been increased by 14.3 per cent to 6p from 5.25p.
Mr Slark said the company was planning for a range of post-Brexit scenarios, including the possibility the UK crashes out of the EU in March without a deal.
The outlook for the Republic “remains positive with relatively strong growth forecast for the year supported by increased employment and earnings”, the company added.