Strong home improvement and new-build markets in the revitalised UK and Irish economies have buoyed Grafton (GFTU). The builders' merchant and DIY specialist grew its operating profits by 21 per cent to £61m for the half-year, prompting the market to send its shares up 6 per cent. Chief executive Gavin Slark was particularly pleased with Grafton's robust cash generation, which helped slash net debt by nearly a third to £51m - the lowest level since 1998.
The renewed strength of the housing market drove sales in the group's core UK merchanting segment up 10 per cent to £817m. Management credited an improving domestic economy and the avoidance of another hung parliament as reasons for this success. New branches, 'implants' - where the company opens a concession for one of its brands in the outlet of another - acquisitions and branch consolidation contributed just over half the growth. The balance was provided by price inflation of 1-1.5 per cent and volume growth of about 3 per cent.
20-odd per cent of revenues are generated in Ireland, where an improving economy and housing market have buoyed consumer spending. At constant currencies, the Irish merchanting unit's operating profits increased by a half to €10.2m (£7.5m) as divisional sales soared 15 per cent.
Broker Peel Hunt expects adjusted pre-tax profit of £123m, giving EPS of 41.8p (£101.2m and 34.4p in FY2014).
| GRAFTON (GFTU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 714p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 712-715p | 12-MONTH HIGH: | 868p | LOW: 570p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 400p* | NET DEBT: | 5% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 1.02 | 45.9 | 15.4 | 3.75 |
| 2015 | 1.08 | 57.9 | 20.2 | 4.50 |
| % change | +7 | +26 | +31 | +20 |
Ex-div: 10 Sep Payment: 9 Oct *Includes intangible assets of £483m, or 207p a share | ||||
