Grafton eyes British expansion after listing switch

DUBLIN Fri Sep 27, 2013 6:03am EDT

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DUBLIN (Reuters) - Irish building supplies group Grafton GRF_u.I will focus expansion on the recovering British market once it switches its listing to London next month, Chief Executive Gavin Slark said on Friday.

Grafton, which announced its move to the London Stock Exchange (LSE.L) last week, already makes three quarters of its more than 2 billion euros of annual revenue in Britain.

It is the third-largest building supplies merchant in Britain, operating under the Selco and Buildbase brands. After the financial crisis, the company cut its workforce by a quarter and more than halved its net debt.

Slark, the former boss of British plumbing and heating firm BSS, plans to expand Grafton beyond Britain, Ireland and its other main market of Belgium, which it entered only recently.

"I've probably got a list of 120 towns in the UK where potentially we should have a presence so there is real potential for us to carry on growing in the UK and the availability of cash is not an issue," Slark said in a telephone interview.

"We still plan to develop our Belgian business but our biggest market is the UK so it's a fair assumption to say that's where most of the development activity will take place."

Top of the agenda is expanding by a third the company's profitable Selco warehouse network, which Slark says has become the merchant of choice for "white van man", the general, jobbing British tradesman.

After seeing underlying operating profit for the first half of the year rise by 17 percent, mainly due to a sustained end to the recession, Slark is comfortable with the 85 and 88 million euros that he said analysts are expecting for 2013 as a whole.

Operating profit collapsed to just 5 million euros in 2009 as the company grappled with the business downturn.

Slark said Grafton's operating margin - operating profit as a percentage of sales - in Britain could rise above 6 percent from just under 5 percent at the end of June, even without a large-scale recovery there.

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Grafton sees a recovery taking hold across much of the country, but Slark warned against raising expectations too high.

"Although there will be growth, I think we just need to temper the enthusiasm a little bit. The summer was just a little bit euphoric for me," said Slark, who took charge two year ago.

"England had won the Ashes (cricket series), the Lions had won the rugby, a British bloke had won Wimbledon and all of a sudden economic woes were on the back burner. As long as everyone keeps check on that enthusiasm, the UK recovery is pretty sustainable."

Grafton has been helped by the government's 'Help to Buy' housing scheme and an imminent relaxation of planning restrictions on house extensions which Slark said would start to have a substantial impact on business this time next year.

British parliamentary elections, due in 2015, were perfectly timed to keep the debate over how to stimulate the economy on the agenda, Slark added, pointing to the leader of Britain's Labour opposition party's pledge to more than double the number of new homes built annually to 200,000 by 2020.

After seeing its first-half revenue grow by 1 percent in Ireland, the first year-on-year growth in six years, Slark said he was now confident Grafton's home market had stopped getting worse.

"If we could get to the end of the year and the revenue for 2013 be basically the same as it was for 2012, we would take that as a massive positive," Slark said.

(Editing by Tom Pfeiffer)

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