UPDATE 1-Grafton says UK market a little more settled

Wed Aug 29, 2012 3:28am EDT

* Op profit 31.3 mln euros vs 26.2 mln yr ago

* CEO says outlook in UK uncertain, less so than yr ago

* Not seeing Irish market changing very much at all

DUBLIN, Aug 29 (Reuters) - Irish building and home improvement supplies group Grafton said prospects in its main British market were a little better than a year ago, as it posted a 19 percent rise in first-half operating profit.

Grafton, which said last month its revenue for the first half had risen by four percent to 1.05 billion euros, added on Wednesday that underlying operating profit had increased to 31.3 million euros from 26.2 million a year earlier as a result.

That compared to profits of 124.4 million euros made in the first half of 2007 before construction activity collapsed in Ireland following the bursting of a property bubble that made the Dublin-based group loss-making in 2009.

Grafton has weathered the sustained hiatus in housebuilding activity in Ireland due to expansion in Britain, which now accounts for over three quarters of turnover, and the group said the economic environment there remained challenging.

"Although we still see the outlook as a little bit uncertain and it's still a bit challenging, there is certainly more stability in the UK market than there was this time last year," chief executive Gavin Slark told Reuters in an interview.

"There is still a degree of uncertainty, as there is right across Europe and I think the UK is included in that."

Slark said the company was still targeting double-digit operating profit growth for the year as a whole.

The group's stock was flat and little traded just after the market opened.

Britain's fourth-largest building merchant, which competes with the likes of Travis Perkins and Wolseley, said like-for-like sales in the UK were up 1.4 percent for the six months to end-June and had been flat since then.

Travis Perkins, Britain's largest distributor of building materials, has continued to grow gross margin and gain like-for-like market share across its divisions, posting a 7.3 percent rise in weather-hit half-year profit.

Slark backed a call made last month by Travis Perkins' CEO for the British government to do more to boost activity in construction and said anything Dublin or London can do to stimulate construction would be a good thing.

In Ireland, where Grafton operates under the "Woodie's DIY" brand, turnover declined by a further 8.7 percent and despite continuing to improve its market position, average daily merchanting revenues were down 12.5 percent in July and August.

Grafton has cut its staff by a quarter in response to the crisis in Ireland and said it could not yet see a bottoming out of the construction market there.

"I wouldn't say it was despair but I wouldn't say there was much in the way of hope. We're really not seeing the Irish market changing very much at all from what it has been over the last couple of years," Slark said.

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