Grafton keen to expand after sales hit £2.5bn
Builders merchanting group Grafton has ditched its outlets in Poland but remains interested in expanding its geographic footprint in Europe, according to chief executive Gavin Slark.
The group is also opening three more ‘Chadwicks Express’ outlets in Ireland this year, a move designed to take advantage of the gradual increase in housebuilding around the capital. More such outlets could be opened depending on how the initial stores perform.
Shares in the FTSE-250 company raced ahead as much as 10pc yesterday after it reported record revenue of £2.5bn (€2.88bn) for 2016 and a 12pc jump to £142m (€164m) in its adjusted operating profits. The performance of its builders merchanting businesses in Ireland and the UK surged. Group revenue was 13pc higher and the results were better than expected.
Speaking to the Irish Independent, Mr Slark, pictured, confirmed that the group had sold its two Polish outlets to management there.
“Even if you decided Poland was a great place to expand, our business in Poland wasn’t the right starting point for that,” he said. “The right thing to do was to sell that business. It just takes away a management distraction of two branches in quite a remote location and we can focus on the businesses that are closer to home.”
He said that while any return to the Polish market was a “long way off”, general expansion within Europe was “very much part of the plan”.
Grafton generated about 70pc of its revenue and profits in the UK last year. It owns chains there including builders merchanting business Selco, for which it has significant expansion plans. It incurred a £19.7m exceptional charge last year – £16.1m of it related to the closure of 47 of its plumbing, heating and contracts branches in the UK.
In late 2015, Grafton agreed to buy Dutch firm Isero, a specialist distributor of tools and fixings, for €91.5m. It contributed £9.1m in operating profits to Grafton last year. Last January, Grafton acquired Guners en Meuser, an ironmongery and tools firm with 14 outlets in the greater Amsterdam area.
Mr Slark said that while the Netherlands offered expansion potential for Grafton via organic growth and further acquisitions, Grafton was also poised to benefit from the improving economy in Ireland.
Its merchanting business here – which operates under Chadwicks and Heiton Buckley – posted revenue of £347.7m last year, a 12pc increase on a constant currency basis. Operating profits at the unit rose 27pc to £27.1m on a constant currency basis.
There will be a total of four Chadwicks Express outlets this year. Grafton’s merchanting network in Ireland will hit 47 branches, 20 of them around Dublin.
Grafton’s retail arm – which trades as Woodies DIY – also performed strongly, notching up a 5.6pc increase in revenue to £157.1m on a constant currency basis. Operating profits at the chain were 91pc higher at £7.3m on a constant currency basis.
Twelve Woodies outlets have been refurbished and eight more are also in line for a makeover. One of the focuses for the revamped outlets is kitchen sales.
Mr Slark said since the kitchen business was introduced 18 months ago “thousands” of kitchens had been sold by the Woodies chain.
He also said the UK economy remained resilient despite the prospect of Brexit.
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