Grafton’s full-year results likely to meet expectations

Builders' merchant and DIY group Grafton, which announced the bolt-on acquisition of TG Lynes in the UK last week, is due to publish final results for 2014 tomorrow.

Guidance provided in a trading statement in January indicated that the group’s performance last year was very much in line with expectations, with revenue growing by 9.5 per cent to £2.08 billion (€2.64 billion).

Tomorrow’s figures will provide all the additional details for the year – most notably, it will drill down into the group’s profit results by division.

Florence O’Donoghue, an analyst at Davy stockbrokers, said 2014 was a “cracking year” for Grafton, with good organic growth topped up with margin expansion “as all the hard work in keeping a tight rein on costs paid off”.

Analysts will be watching the numbers closely for a steer on the extent of recovery in Irish merchanting profits, with particular interest in the “drop-down margins” in merchanting – ie how much of the additional revenue dropped through to operating profit.

A very strong result is expected for the group’s manufacturing operation thanks to strength in the UK new housing market.

However, Irish retail had a year of transition in 2014 as Grafton refocused the operation on its core DIY offering. and so its profits are expected to be modest.

"Belgium is still at its early stage of evolution for Grafton but it will be interesting to see the revenue base now," said Florence, noting that markets will also be looking out for indications of what the outlook is like for the current year.

“The strength in sterling will hurt Irish profitability but I would think Grafton will remain positive about underlying markets, although the general election in the UK will bring some uncertainty.”

Traders will also be watching for any comments regarding Grafton’s mergers and acquisitions pipeline, and also for confirmation of dividends, which Davy forecasts could be up 25 per cent.

Elsewhere on the corporate earnings front, Irish engineering group Mincon is due to release full-year results today, while Datala Hotel Group's full-year numbers are expected tomorrow.