Grafton sees sustained Irish recovery as profits jump

Wed Mar 5, 2014 6:26am EST

By Padraic Halpin

DUBLIN, March 5 (Reuters) - Building supplies group Grafton said renewed activity in Irish construction appeared to be sufficient to support a sustained recovery, after it reported a 27 percent rise in operating profit last year.

Grafton, which has cut its workforce by a quarter and more than halved its net debt over the past five years, responded to the crisis in Ireland by building up its business in Britain, where it is now the third largest building supplies merchant.

Grafton said on Wednesday that its operating profit rose to 77.2 million euros last year from revenues of 1.9 billion euros, three quarters of which came from Britain where the economy has been performing strongly for a year.

However, the group's main merchanting business returned to growth in Ireland in the second half and grew by another 7 percent in the first two months of the year, catching up with the near 10 percent seen in Britain.

Ireland's economy has been gradually improving since it became the first euro zone country to complete a bailout in December and is expected to grow by about 2 percent in 2014.

"The UK didn't crash and burn by anything like the scale we had in Ireland, but you're probably something like a year behind where the cycle is," Chief Executive Gavin Slark told Reuters in an interview.

"The most important thing about the Irish numbers for us, is that growth and the beginning of the recovery seems to be sustained. Hopefully as we go through 2014 and beyond, we can see sensible, sustained growth patterns in Irish construction."

Slark, the former boss of British plumbing and heating firm BSS, said the main pick-up in Ireland was among smaller builders - one and two-man businesses - and that the recovery was spreading to major towns and cities outside Dublin.

He added that Grafton was looking at further acquisitions in Belgium, a market it entered recently, and potentially at other opportunities further afield.

"Acquisitions are something that is absolutely on the agenda."

Grafton announced a 21 percent dividend increase to 8.5 pence per share for 2013. Grafton shares were trading 4.0 percent higher at 1125 GMT.

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