Grafton Group says builders merchanting being hit by Brexit doubts

Group revenue for the six months to 30 June increased by 13.3% to £1.23bn and by 11.7% in constant currency.

But average daily LFL revenue growth fell from 6.2% in the first quarter to 2.4% in the second, with the UK merchanting business slumping from 5.3% to 1.6% and even the strong growth in Ireland's merchanting arm dipping from 12.3% to 10.9% and Belgium's declines also accelerating.

UK merchanting business, which primarily services the residential repair, maintenance and improvement (RMI) market, progressively weakened and was negative in June.

On the bright side, Selco Builders Warehouse maintained favourable LFL growth through the second quarter, with new branches and acquisitions also contributing to revenue gains in the first half of the financial year.

But chief executive Gavin Slark said the EU referendum decision "has created uncertainty about the near term outlook and prospects for the economy and this is likely to weigh on demand in the new housing and RMI markets over the remainder of the year".

He remained confident about Selco's resilient model and said this side of the business continued to be the focus for development capital in the UK, while growth in the Irish and the Netherlands merchanting markets was expected to continue broadly in line with recent trends.

"The group's financial strength and geographic diversity leave it well positioned to take advantage of any opportunities that may emerge across the markets in which it operates."

Retailing, which is 6% of group sales, saw the sales recovery in Ireland continue into the half year, supported by momentum in consumer spending that was reflected in strong revenue growth in the Woodie's DIY business.

The mortar manufacturing business, 2% of group revenue, benefitted from what were said to be stable conditions in the new housing market during the period, and also from increased revenue from packaged mortar products following the acquisition of Carlton in August 2015.