Warm weather adds sunshine to Grafton Group profits despite flat expectations
Builders’ merchanting business Grafton Group posted a nine per cent revenue rise in the first half of 2018, despite warning that overall conditions in the UK market were set to remain flat for the rest of the year.
Revenue climbed to £1.45bn in the six months leading up to the end of June, as the Irish-based business reported growth in all segments of the business.
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The FTSE 250 firm, which distributes building materials to trade customers involved mainly in residential repair and house building, also reported a 19 per cent rise in pre-tax profit to £57.6m.
Grafton said that the merchanting division, which accounts for 90 per cent of group revenue, led the overall rise in growth, delivering revenues of £1.31bn, jumping 7.7 per cent from the previous year.
However, in its half-year report the company also warned that "overall conditions in the UK merchanting market are expected to remain relatively flat over the remainder of the year amid ongoing competitive pressure".
Chief executive of Grafton Group Gavin Slark told Morning Wire: "Right now the London market in terms of repair and maintenance seems robust. The warm spell in weather has also been good for construction – when we announced results earlier in the year we were wading through snow to get to the London Stock Exchange!"
But Slark added that he was "not expecting many changes to conditions until after 29 March 2019", when Britain is scheduled to leave the European Union.
"Earnings have comfortably beaten expectations, allowing investors to be rewarded with a hefty increase in the dividend," according to Cityindex market analyst Fiona Cincotta.
Cincotta added: "In the early months of the second half, the rate of revenue growth has slowed and management has again warned of pricing pressures in the UK market. But some sort of slowdown was to be expected after construction surged during May and June to make up for weather-related delays earlier in the year."