Shareholders in Grafton Group, the Irish building materials company, will receive bumper dividends after the company outperformed expectations.
Dividends rose 20 per cent to 4.5p per share, as Grafton announced strong half-year results, including a rise in pre-tax profits, up 26 per cent to £57.9 million.
The company, which owns Woodie’s and a number of builders’ merchants, is benefiting from increased construction activity in its key markets. Group revenue was up 7 per cent to £1.08 billion as it received a boost from new acquisitions, particularly in Britain. The company also reported profit growth in Ireland.
“The pace of growth in the construction market accelerated and extended into the commercial property and civil engineering sectors as the [Irish] economy rebounds,” Grafton said in its results. “Positive trends in the labour market and increased earnings saw the start of a recovery in consumer spending in Ireland, which began to slowly extend into the DIY market. The Irish retail business experienced modest growth in revenue and improved profitability from a low base.”
In Britain, Grafton delivered a good performance in positive economic conditions and increased activity in residential house building, it said. Shares in the company rose by more than 6 per cent, to £7.18, on the London Stock Exchange.
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“The first half of 2015 has seen the group deliver a strong performance across key financial metrics as it continues to execute its strategic plans,” Gavin Slark, the group’s chief executive, said. “The overall outlook for Grafton is positive and despite current challenges, the group is well placed to make further progress in the second half towards delivery of its medium-term targets of a 7 per cent operating margin and 15 per cent return on capital employed.”
The company said its net debt had fallen to £51.1 million, its lowest level for nearly 20 years, despite investment of £42.9 million on acquisition and capital expenditure this year.
“Grafton has announced an impressive set of interim results which provide considerable reassurance,” Davy, the stockbroker, said in a note issued yesterday. “Earnings growth of over 30 per cent in the first half of the year was 14 per cent better than we expected. Fears that the group’s momentum was faltering look overdone. In addition, the group has the support of a very strong financial position with net debt at extremely low levels.”