Grafton interim earnings soar but second half will be slower

27th Aug 2014 07:46

Builders merchant Grafton almost doubled earnings in the first half of the year as the recovery in UK and Ireland became more broadly based, but it expects the second half to slow against strong numbers the year before. Chief executive Gavin Slark reminded that the recovery in its markets was still in its early stages and that the results demonstrated the benefits of the operational changes management had made over recent years. He added: "We believe the overall outlook is positive, notwithstanding a slower rate of growth in the second half and we are confident that the full year's trading performance will be at least in line with current consensus expectations."The FTSE 250 group lifted operating margins to 5%, which Slark said was a key point in the company's "journey from recovery to growth".This meant that, as revenue rose 11% to £1.02bn, operating profits jumped 62% to £50.6m and, stripping out exceptional items, and adjusted basic earnings per share were up 92% to 15.4p.The UK merchanting business, which represents almost three quarters of group revenues, enjoyed the recovery in the wider economy and growth in both the residential repair, maintenance and improvement (RMI) and new-build markets, with revenues lifted 11% and operating profits up 36%. Operating profit margin increased by 1.1 basis points to 6.1.However, as flagged in a previous statement, the second quarter saw revenues slow somewhat. The Irish merchanting business increased revenue 5.6% and operating profit more than threefold to £5.6m as trading conditions progressively improved from a weak base as the recovery continued to take hold. On Ireland, the company said there was a "much firmer tone to demand" in the residential market and "tentative signs" of a housing recovery from currently depressed levels, with national housing transactions up 35% as more properties came on the market. While there is scope for a significant increase in residential construction, Grafton said it expected it would take some time for the supply side catch up.The Belgian business increased revenues 58% to £46.3m, with operating profit more than doubled to £0.7m as the economy expanded at its fastest pace in three years.OH