Grafton shares enjoy rise on back of impressive first-half results

Shares in building materials group Grafton surged by 5 per cent yesterday after the company posted impressive first-half results and signalled continuing strong growth for the rest of the year.

Pre-tax profits were 32 per cent ahead of the same period in 2002 at €41.7 million, while turnover rose by the same margin to €706.5 million.

Profits at the operating level grew by 40 per cent to €53.4 million.

The performance, which came in comfortably ahead of analysts' forecasts, reflected a higher-than-expected contribution from Grafton's UK business, which accounted for 74 per cent of turnover and 67 per cent of operating profits.

Grafton drew particular strength over the half from the "milestone" acquisition in March of UK merchanting chain Jackson.

The company contributed almost €5 million to operating profits over the first six months.

Grafton chairman Mr Michael Chadwick looked forward to "continued profitable growth through organic development and acquisition in the second half".

He expects both profitability and earnings to surpass the same period of last year.

Highlighting "a healthy pipeline of attractive acquisition and development opportunities", Mr Chadwick acknowledged that the Jackson deal was probably a "one-off" in terms of scale.

The firm, which was purchased for €144 million, has propelled Grafton to a UK market share of some 8 per cent and will significantly enhance group purchasing power.

This was further boosted in the first six months by five additional UK acquisitions.

In the Republic, turnover grew by 12 per cent to €184 million over the first half, while operating profit was 19 per cent ahead at €17.8 million on the back of booming residential construction.Irish merchanting sales were up 10 per cent, while sales at Woodies DIY grew by 16 per cent, or 6 per cent on a like-for-like basis.

Mr Chadwick said the sustained growth in house-building had surprised him, and predicted that the slower economic background would eventually filter through into lower levels of activity.

Shares in Grafton closed 25 cents higher at €5.00 last night, as analysts worked on upgrading their forecasts for the stock.

Davy analyst Mr Florence O'Donoghue said an upgrade of about 10 per cent which would bring full-year EPS to 44c, was probably in order in the wake of the numbers.