Grafton (GFTU) chief executive Gavin Slark admits that in recent years the Irish business has been more of a millstone around the company's neck than an asset. But he says things are now looking up, with "real traction" in the Irish economy.
The Irish builders' merchanting business more than trebled its operating profits to £5.6m, after a paltry £1.5 last year. That was driven by the recovering housing market, but also by Grafton's high operational leverage, which means even a small increase in revenues generates a big uplift in profits. Mr Slark says Grafton's branches are already set up to handle more volumes, so when those volumes come in they can be handled with minimal extra costs.
The much larger UK builders' merchanting business is also doing well, with operating profit rising by just over a third to £45.2m. Whilst Mr Slark admits the initial recovery bounce is over, he says top-line growth of around 5 per cent looks sustainable.
There's also scope for further margin improvement. The group operating margin rose 160 basis points to 5 per cent, and management is planning to set a more stretching margin target at the preliminary results early next year. Broker Numis expects earnings per share of 30.9p for the full year (2013: 22.1p).
GRAFTON (GFTU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 640p | MARKET VALUE: | £ 1.5bn | |
| TOUCH: | 640-643p | 12-MONTH HIGH: | 695p | LOW:514p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 377p* | NET DEBT: | 11% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 0.9 | 51 | 17.5 | 3 |
| 2014 | 1.1 | 46 | 15.4 | 3.75 |
| % change | +21 | -11 | -12 | +25 |
Ex-div: 03 Sep Payment: 03 Oct *Includes intangible assets of £486m, or 209p a share | ||||
