Grafton issued a trading update this morning providing total sales levels for 2013 across the group’s divisions. For the largest division, UK merchanting, revenue increased notably for the first time in five years having experienced a negative to flat run rate over that period. Total group revenue for the twelve month period increased to £1.76 billion (+8.0%) in 2013. <p>

Total revenue for UK merchanting increased by 6.7% (LfL +3.2%) during 2013 reflecting the impact of an increased number of branches and a recovery in the UK housing market. In Ireland, the Irish merchanting business had a stronger second half to the year with sales increasing by 1.9% (LfL +3.6%) during the twelve month period. The Irish retailing operations reported a decline in sales in 2013 of .9% (LfL +1.5%) owing to a reduction in the network of stores and also to an Irish consumer base that remains cautious. The manufacturing segment that is the group’s smallest (2% of group revenue), saw an increase in sales of 6.5%, with mortar demand supported by increased residential new build projects getting under way. <p>

Grafton management note that the group remains on course to report a full year operating profit in line with expectations while also striking a cautious note with regards to 2014 until “such time as activity levels have strengthened further”. <p>

Our view is that this morning’s trading update is in line with expectations with the return to growth across the largest divisions of the group having been well flagged. We expect that 2014 will see a continuation of these themes across the group but that the share price and respective valuation multiples have all ready factored in a continued improvement in Grafton’s end markets.
<p><h5>David Holohan</h5>


Merrion Stockbrokers Limited (registration no. 307878)
is a limited liability company whose registered office is at
Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.