UK: Strong UK sales cement 'encouraging' profit trend at Grafton Group

GRAFTON Group, the building materials supplier that owns outlets such as Woodies DIY and Atlantic Homecare, said its profitability was "well ahead" in the third quarter compared to the corresponding period last year, as sales in the UK strengthened.

Releasing an interim management statement yesterday, Grafton said sales for the quarter to the end of October were up 4.5pc to €546m compared to €522m in the third quarter last year.

The increase followed a comparative rise recorded by the group in the second quarter, when sales climbed to €535m from €520m year on year. In the first quarter of the current year, revenue had fallen 5.5pc year on year to €444m.

Total revenue in the period to the end of October was €1.7bn, up slightly from €1.69bn in the first 10 months of 2009.

Improving trend

The trend of an improvement in profitability has continued into the current quarter.

Grafton's UK merchanting sales for the year to the end of October were up 6pc, compared to a 5pc rise by the end of June. It added that while Irish merchanting sales continue to fall, the rate of decline continued to ease as the year progressed.

Sales in Grafton's retail business in Ireland fell 7pc in the year to the end of October, similar to the performance in the first half of the year, it said.

Group manufacturing sales were 3pc lower in the year to the end of October compared to a 7pc decline in the first six months of 2010. The company added that its Irish merchanting arm has returned to a break-even position.

In the UK, Grafton owns building materials outlets trading under brands such as Plumbase, Buildbase and Jackson, while in Ireland it also operates the Chadwicks and Heiton Buckley outlets.

NCB is forecasting that Grafton's full-year sales will grow 2pc to almost €2.02bn, with UK merchanting sales forecast to advance 7.6pc to €1.4bn.

Davy analyst Flor O'Donoghue said the year-on-year growth in the third quarter was slightly behind the 6pc top-line growth he's expecting for the second half. However, he said the trend is "encouraging".