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Grafton boosted by new homes

But the repair and maintenance market remains subdued
Grafton boosted by new homes

New housebuilding was the main driver behind a strong first-half performance from building materials supplier Grafton (GFTU). Around 90 per cent of group revenue comes from merchanting business in the UK, Ireland, Belgium and the Netherlands, with a 2.6 per cent rise in like-for-like sales driven by strong growth in Ireland offset slightly by weakness in the Belgian market.

IC TIP: Hold at 812.5p

Revenue in UK merchanting business was up by 7 per cent to £976m, boosted by the acquisition of Leyland SDM in February, which contributed revenue of £18.4m, and the continued roll-out of Selco branches. In addition, an increase in higher margin sales lifted adjusted operating margins from 5.6 per cent to 6 per cent.  However, like-for-like growth was more modest at 1.9 per cent as weak transactional volume in the existing housing market depressed demand in the repair, maintenance and improvement (RMI) sector.

Growth in housebuilding helped to lift turnover in Ireland by 7.6 per cent in constant currency terms, with three new branches opened in Dublin to provide convenient customer collection points.

Net debt grew from £80.2m to £101.7m mainly because of £79.7m spent on acquisitions, although gearing remained low at just 8 per cent.

Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to December 2018 of £170m and EPS of 58.4p (from £157.2m and 55p in 2017).

GRAFTON (GFTU)   
ORD PRICE:812.5pMARKET VALUE:£ 1.93bn
TOUCH:812-813.5p12-MONTH HIGH:851pLOW: 727p
DIVIDEND YIELD:2.0%PE RATIO:14
NET ASSET VALUE:518p*NET DEBT:8%
Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20171.3474.125.55.25
20181.4587.630.06
% change+8+18+18+14
Ex-div:30 Aug   
Payment:28 Sep   
*Including intangible assets of £727m, or 306p a share