Housebuilding in the British Isles is at record lows as the industry struggles with a backlog of unsold properties and a lack of building finance for new homes. This dire situation has forced Irish-based builders' merchant Grafton (GFTU) into a major restructuring programme and these results offered the first clear evidence that the company has found financial stability.
Headline revenues were flat when currency gains are stripped out, but strict cost control and a decent rise in profit margins to 3.5 per cent pushed up underlying operating profits by 32 per cent to €75.2m (£65m). Grafton has for years made the vast majority of its sales in the UK, mercifully insulating it from the oversupplied Irish housing market. UK merchanting sales increased by an underlying 3.1 per cent to €1.61bn - 74 per cent of the group total - despite the flatlining economy. Management put this down to not chasing high volume, low-margin business from the big housebuilders and concentrating instead on independent contractors where quality and service is more important.
Chief executive Gavin Slark said economic conditions will shape Grafton's fortunes this year. "We don't expect the market to do us any favours, but at some point the historic lows in housebuilding in the UK and Ireland will reverse."
Broker Goodbody forecasts adjusted EPS of 24.8¢ this year, up from 19.5¢.
GRAFTON (GFTU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 501¢ | MARKET VALUE: | €1.16bn | |
| TOUCH: | 500-501¢ | 12-MONTH HIGH: | 512¢ | LOW: 245¢ |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 430¢* | NET DEBT: | 20% | |
| Year to 31 Dec | Turnover (€bn) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 2.67 | 64.1 | 25.1 | 15.0 |
| 2009 | 1.98 | 13.6 | 5.8 | 5.0 |
| 2010 | 2.00 | 25.6 | 27.7 | 7.0 |
| 2011 | 2.05 | 10.3 | 1.1 | 7.5 |
| 2012 | 2.17 | 33.5 | 17.7 | 8.5 |
| % change | +6 | +225 | +1509 | +13 |
Ex-div: 13 Mar Payment: 12 Apr *Includes intangible assets of €583m, or 251¢ a share | ||||
