Against an uncertain UK macroeconomic backdrop, keeping a watch on margins has become even more important for Grafton (GFTU). In short, the building materials supplier expects volume and pricing pressure in its home merchanting market to continue. However, maintaining a tight rein on operating costs meant the adjusted operating margin – excluding property profits – rose to 6.9 per cent during the first half of 2019, up from 6.3 per cent the prior year, and closing in on a 7 per cent target.
Like-for-like average daily revenue for the core UK merchanting business rose 2.8 per cent, as a weaker May and June took the shine off the buoyant start to the year. The renovation, maintenance, improvement (RMI) market has faltered in recent months as homeowners have been reluctant to spend on discretionary improvements.
The Irish and Netherlands merchanting businesses put in a stronger performance, with the former boosting operating profits by 13 per cent, excluding property profits. Management also decided to sell its low-margin, non-core Belgium business to a German private equity company.
Analysts at Peel Hunt expect adjusted pre-tax profits of £191m and EPS of 65.5p for the year to December 2019, up from £188m and 66p the prior year.
| GRAFTON (GFTU) | ||||
| ORD PRICE: | 741p | MARKET VALUE: | £1.76bn | |
| TOUCH: | 739.5-741.5p | 12-MONTH HIGH: | 939p | LOW: 627p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 552p* | NET DEBT: | £0.1m** | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 1.40 | 87.6 | 30.0 | 6.0 |
| 2019 | 1.44 | 88.2 | 30.5 | 6.5 |
| % change | +2 | +1 | +2 | +8 |
| Ex-div: | 26 Sep | |||
| Payment: | 11 Oct | |||
| *Includes intangible assets of £715m, or 301p a share **Excludes lease liabilities of £1.12bn | ||||
