Grafton is on target to meet full-year expectations

Revenues at builders merchanting and DIY group Grafton advanced by 10.1 per cent to £1.8 billion in the first ten months of the year, supported by increased demand in the residential repair, maintenance and improvement markets (RMI) in the UK and Ireland. Howevergrowth moderated to 6.1 per cent in the fourt months to October 31st.

Gavin Slark, chief executive officer of Grafton Group, said that growth in the UK market continues to moderate from the first half and the Irish merchanting business is showing "a marked improvement from a very low base".

“ The overall outlook continues to be positive and the group remains on course to report full year operating profit in line with its expectations,” he said.

After substantial growth in the Irish merchanting business in the first half of the year, this sector reported a 15.4 increase in the four months to October 31st, albeit from a very low base in demand.

On the DIY front, the business in Ireland, which includes Woodies DIY, continued to be subdued by pressure on household budgets and was also impacted by very strong demand for seasonal products in the prior year and by discontinuing a number of product ranges as the business refocused on its core strengths of DIY, home and garden.

Growth in the UK merchanting business, which accounted for three quarters of group revenue, was driven by the ongoing recovery in residential RMI activity and in the new housing market.

“Favourable trading in the established business combined with acquisitions and strategic development initiatives have led to total revenue growth of 10 per cent in the ten months to October 2014,” Grafton said.

In a note, Davy Stockbrokers said: “Grafton has by some distance the best earnings momentum in the European building materials sector at present. Its latest trading update underlines this, with good organic revenue growth rates persisting in its core UK and Ireland merchanting operations. The group is exploiting a favourable environment for volume growth with good operating leverage, resulting in substantial trading margin expansion. Grafton in particular offers direct exposure to recovering activity levels in the Irish residential sector”.