Irish sales help Grafton's profits to soar 35%

Strong performances by Irish operations helped building supplies and DIY group Grafton report a 35 per cent increase in pretax profit in the first half of the year.

The listed company reported profit of €118.3 million for the six months to June 30th, compared to €87.4 million in the same period last year. At the operating level, before allowing for property disposals and amortisation, profit jumped 9.5 per cent to €106.9 million.

The overall performance cloaked a challenging six months for the group's British operations. Operating profits in the UK slipped 8 per cent to €49.8 million from €54.1 million as like-for-like sales dipped 1.7 per cent and margins narrowed in what was described by company chairman Michael Chadwick as a "softer" market.

The UK business also had to contend with increased competition from rivals in the mortar market.

However, Grafton said market conditions in the UK had improved in the second quarter and this had been sustained into the second half.

The company's Irish business reported a 33 per cent increase in operating profits to €57.1 million, reversing the geographic profit spread of 2005.

Turnover in the Republic was 18 per cent up on the year ago period at €624 million, driven largely by the merchanting business. Operating profit margins grew by a percentage point to 9.7 per cent.

Grafton expects the three Irish divisions will continue to benefit from strong consumer spending and a positive housing market buoyed by favourable economic conditions and maturing SSIAs.

Mr Chadwick was bullish about the group's prospects. "The group remains confident of continued growth in profits and earnings per share in 2006 and, with a very strong financial position and healthy cashflow, is well placed to take advantage of suitable acquisition and development opportunities," he said.

The group says it is continuing a trend that has seen it make acquisitions at the rate of one a month over the last five years, with six deals in the first half of the year at a cost, including acquired debt, of €40.6 million.

Mr Chadwick said it had a "reasonable pipeline of small and medium bolt-on" acquisitions, largely in the builders' merchanting side of the business.

Grafton also invested €48.2 million in capital expenditure.

The group booked profit of €28.1 million on the disposal of €64 million worth of property, including the Atlantic Homecare site in Stillorgan. That allowed it to knock €40.2 million off net debt in the period, reducing the figure to €543.9 million.

In line with policy established in 2002, the company will purchase one A share per Grafton unit at 8.25 cent apiece in lieu of an interim dividend. This represents a 14 per cent rise on the interim share purchase payment last year.

Leo Martin, formerly chief executive of Heiton Group, has been named chief operating officer, with responsibility for the group's builders' and plumbers' merchanting operating in Britain and Ireland.