10th May 2016 10:11
LONDON (Alliance News) - Builders' merchant and DIY company Grafton Group PLC said on Tuesday its current activity levels were being hurt by uncertainty surrounding the UK's position in the European Union, but said it expects the strong growth seen in the Netherlands and Ireland at the start of the year to be sustained..
Shares in FTSE 250-listed Grafton were down 0.4% in London at 688.00 pence on Tuesday morning.
The Dublin-based company said it has enjoyed a "broadly positive" start to the year across its end-markets, with a broadly favourable economic environment in the UK, continuing growth momentum in Ireland, and improving conditions in the Netherlands, which has supported volume growth in its businesses.
Grafton said revenue in the four months to the end of April was GBP790.0 million, up 13% from GBP698.0 million for the same period a year earlier. In constant currency, this was 12% higher than the same period a year earlier.
Within Grafton's Merchanting division, which provides 91% of group revenue, the UK business grew both organically and through acquisitions, Grafton said, with revenue coming in 9.0% ahead of the same period a year earlier.
Grafton said it saw good progress at its local builder merchant Selco Builders Warehouse, with the 41st branch opened in March in Watford and further branch openings planned for later this year. The company noted that the five Selco branches opened in 2015 were performing in line with expectations.
Grafton added that although its UK merchanting business reported moderate growth in average daily like-for-like revenue, of 4.8%, the market softened in April following a good first quarter, which it said may reflect current market uncertainties about the EU referendum.
The Irish merchanting business saw double-digit revenue growth during the period, of 17%, or 11% in constant currency, from the same period a year earlier. Increased spending on residential repair, maintenance and improvement projects continued to generate strong volume growth, Grafton said, and the early stage recovery in the house building, infrastructure and commercial property markets also contributed to the favourable trading conditions.
Grafton entered the Netherlands market in November 2015 with the acquisition of tools and fixings distributor Isero BV, the company said, and has seen good revenue growth since, driven by increased consumer spending and a strengthening of the Dutch housing market. Grafton reported average daily like-for-like revenue growth of 4.7% in the Netherlands.
However, the Belgian business experienced difficult trading conditions, due to weak economic fundamentals and the terrorist attacks in March, which resulted in lower activity in the merchanting market. The disposal of the non-core readymix operation in June 2015 also contributed to the decline in revenue, Grafton said, as it reported a 9% fall in revenue for the four months, or 14% in constant currency, from the same period a year earlier.
The Manufacturing division, which generates 7.0% of group revenue, saw strong growth compared to a year earlier, with revenue 17% higher, due to stronger activity in the new housing market boosting the mortar manufacturing business in the UK. The Retailing division, which provides 2.0% of group revenue, benefited from increased consumer spending and from its concrete and mortar manufacturer Carlton Manufacturing Ltd acquisition in July.
"We are positive about the prospects for the group and expect the recent trends in the group's markets in Ireland and the Netherlands to be sustained over the remainder of the year. Strong market fundamentals should support activity in the UK housing and repair, maintenance and improvement markets although uncertainty over the outcome of the referendum on continued membership of the EU appears to be having a bearing on current activity levels," said Grafton Chief Executive Gavin Slark.
By Hannah Boland; [email protected]; @Hannaheboland
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