The trend in Grafton's (GFTU or IE: GN5) half-year results is very encouraging, doing something to underpin the 63 per cent year-to-date gain in the builders' merchant's share price. Like-for-like sales in the UK wholesale business - which provides the overwhelming majority of Grafton's profits - were virtually flat in the first four months, but then increased by 4.7 per cent year on year in May and June and 5.5 per cent in July and August (to date).
Chief executive Gavin Slark admits the sun may have something to do with this apparent bounce. "It's very early to call a trend in the recovery. The weather has been much better this summer," he warns. On the other hand, growth in mortgage approvals and housing transactions - historically leading indicators for the kind of repair and maintenance activity that help builders' merchants - suggests the good news may continue.
The group's first-half numbers were also boosted by cost-cutting. Grafton is the top DIY store in Ireland, and this business managed to turn a €3.5m (£3m) operating loss a year ago into a €0.3m profit despite a 3.4 per cent fall in sales. At the group level, underlying operating profits were up 17.1 per cent to €36.6m. The reported numbers are skewed by a one-off pension credit - the result of a renegotiation of terms for the group's defined-benefit schemes.
Pending upgrades, broker Davy expects full-year pre-tax profit of €73.4m, giving EPS of 25¢ (from €33.5 and 17.7¢ in 2012).
GRAFTON (GFTU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 640¢ | MARKET VALUE: | €1.48bn | |
| TOUCH: | 640-641¢ | 12-MONTH HIGH: | 643¢ | LOW: 302¢ |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 430¢* | NET DEBT: | 17% | |
| Half-year to 30 Jun | Turnover (€bn) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 1.06 | 15.8 | 4.84 | 3.00 |
| 2013 | 1.07 | 60.5 | 20.6 | 3.50 |
| % change | +1 | +283 | +326 | +17 |
Ex-div: 4 Sep Payment: 4 Oct *Includes intangible assets of $569m, or 245¢ a share £1=€1.16 | ||||
