Grafton's revenue rises as it expands Selco brand in UK

Irish building materials company Grafton Group’s revenue rose as it expanded the Selco merchanting brand in the UK.

Revenue surged 13.4% in the year ended 31 December to £2.51bn, compared to last year, and increased 10.4% in constant currency.

For the merchanting sector, which accounts for 92% of total revenue, the UK’s revenue rose 6.6% as Selco outperformed the merchanting market in the country with seven branches opened in the year including in Croydon and Wembley in December, which increases the network to 47, with further openings planned in 2017.

The FTSE 250 company said the rate of revenue growth picked-up in the last quarter in the UK merchanting business was mainly under the Buildbase and Plumbase brands, although the market remained price competitive.

In Ireland, revenue climbed 26.7% for the third successive year, or 11.9% in constant currency, as the mercantile business “outperformed a recovering construction market”, driven by growth in residential repair, maintenance and improvement activity.

Meanwhile Isero, the Netherlands merchanting business the company bought in November 2015, performed well supported by economic growth and a recovery in the residential new build and repair, maintenance and improvement markets.

The company recently bought Gunters en Meuser, a distributor of tools fixings and ironmongery from 14 branches, in order to provide the Netherlands business with a presence in the greater Amsterdam area where Gunters en Meuser is the market leader.

However, the Belgian merchanting business continued to experience difficult market conditions, as overall revenue in the country rose just 0.9% due to softening demand, especially for larger project work.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said that if there is a slump in construction, the repair market would help make the company resilient.

He said: “Builders merchant Selco has outperformed the wider sector, and the focus on the repair, maintenance and improvement market should help make it more resilient in the event of a downturn in new builds.”

In the retailing sector, which accounts for 6% of total revenue, the Woodie's DIY business in Ireland reported an increase in volumes due to a more favourable retail market.

The manufacturing sector, which accounts for 2% of total revenue, saw the UK mortar manufacturing business experience stronger demand in the second-half of the year from its house builder customer base and also increased revenue from a 2015 acquistion of a packaged mortar products business.

Chief executive Gavin Slark, said: "The group finished the year on a more positive note and saw the benefit during 2016 of its exposure to multiple markets. We had an active year on the development front with the opening of seven new Selco branches, the completion of two bolt-on acquisitions in the UK and we agreed to acquire Gunters en Meuser in the Netherlands.

“A strong balance sheet and excellent cash generation from operations support these developments and our ongoing strategic initiatives."

Shares in Grafton were up 7.53% to 581.17p at 1318 GMT.