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Grafton Group reports strong profit growth in 2014

Selco Builders Warehouse

Builders’ merchant and DIY group Grafton has reported profit before tax that was up 56 per cent to £101.2 million (€141 million) for the year ended December 2014.

Revenues was up 9.6 per cent to £2.1 billion (€2.9 billion) from £1.9 billion ( €2.65 billon) 12 months earlier while operating profit rose 43 per cent to £110.1 million from £77.2 million.

The company, which operates the Woodie’s chain across Ireland, and also has operations in the UK and Belgium, reported significant profit growth in its Irish merchanting business as the market recovery here accelerated. It said its DIY business in Ireland also showed improvement although revenue was flat.

Woodies DIY owner Grafton said that the acquisition of TG Lynes further strengthens the group’s platform for future growth in this target sector and will be earnings enhancing from completion. 

Irish Merchanting revenue rose by 6.0 per cent to £257.5 million over the year. The increase in constant currency was 11.7 per cent. Operating profit increased by 217 per cent to £16.4 million and by 234 per cent to €20.4 million in constant currency. The operating profit margin increased by 4.3 percentage points to 6.4 per cent.

Grafton said its UK merchanting business, which generated 73 per cent of group revenue, recorded strong growth driven by growth in the housing repair, maintenance and improvement and new-build markets. UK merchanting revenue increased by 9.5 per cent over the year to £1.53 billion while operating profit grew by 22.2 per cent to £92.8 million.

“2014 was a year of significant progress for Grafton which recorded its fifth successive year of strong profit growth and met the Board’s ‘first base’ financial targets of an operating profit margin exceeding 5 per cent and a double digit return on capital employed. Given that 2014 was also the first full year of recovery in its major businesses, the overall outlook for the Group is positive,” said Gavin Slark, chief executive.

Average daily like-for-like revenue growth of 7.1 per cent increased group revenue by £133.1 million over the year. Operating profit in the like-for-like business increased by £31.1 million including an incremental property profit of £1.9 million, a drop through rate of 22 per cent that incorporated an improvement of 0.5 per cent in the gross margin and an increase in like-for-like overheads of 3.8 per cent.

Underlying group operating profit margin increased by 120 basis points to 5.3 per cent from 4.1 per cent. Adjusted basic earnings per share was up 54 per cent to 34.4p.

Return on capital employed increased by 330 basis points to 11.1 per cent, the group said.

A second interim dividend of 7.0p was approved to give a total dividend for the year of 10.75p. This represents an increase of 26.5 per cent on total dividends of 8.5p paid for 2013.

Looking ahead, Grafton said record levels of employment, along with falling oil prices and low inflation should translate into growth in consumer spending in the UK.

In Ireland, the overall outlook is for the recovery to continue with solid economic growth forecast for 2015. However, growth in retail spending, including DIY, is likely to be modest as households continue to gradually reduce high levels of debt.

Source : Charlie Taylor - Irish Times

10 March 2015

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