October 2013: Grafton Group

Company of the Month | Mon 4 Nov | Author – Business & Finance

Grafton Group plc acquires Belgian merchanting business for €20.5mn which will generate new market opportunities for the firm.

Grafton Group plc, the builders merchanting and DIY group with operations in the UK, Ireland and Belgium, has reached an agreement through a wholly-owned subsidiary, of Saint- Gobain to acquire Binje Ackermans SA, a six branch builders merchanting business based in Brussels and trading under the MPRO brand. The transaction is expected to close in the first quarter of 2014 subject to obtaining approval from the Belgium Competition Authority.

Commenting on the proposed transaction, Gavin Slark, chief executive officer of Grafton Group plc said: “This transaction presents a unique strategic opportunity for Grafton to acquire a business with a leading position in the Brussels market. MPRO’s branches are an excellent geographic fit with the Group’s existing branches which are located in the west of Belgium. The proposed acquisition creates opportunities for scale related benefits and operational synergies in the areas of procurement, central services and the sharing of best practice while also providing a solid base for future growth in the Belgian market.”

Financial highlights

In addition to this latest acquisition for Grafton, stronger financial results are also encouraging with all three segments – merchanting, retailing and manufacturing –showing improved profitability.

Grafton has also noticed a more positive revenue trend developing in merchanting business in the UK over the half year.

“The Group continues to make good progress following several years of challenging market conditions, and the measures we have undertaken to reduce overheads, strengthen gross margins and improve profitability have provided the business with a strong platform from which to build,” Slark explains.

“There are tangible signs of stability returning in our core markets with the recovery in the UK housing market providing a positive backdrop for the Group, although we feel it is prudent to assume that any recovery will be gradual and will involve its own challenges. However, regardless of the wider market conditions, we remain focused on driving further internal improvements in our existing businesses in order to maximise shareholder returns.”

Shareholder profile

Grafton Group plc also announced changes to its listing arrangements which will now see the firm trade solely on the London Stock Exchange, prompted by the fact that the Group has achieved significant growth in scale and geographic diversification since its shares were originally listed on the Dublin and London stock exchanges. Three quarters of the Group’s revenue has for some time been generated in the UK and most of the Group’s development activity is taking place outside Ireland.

In addition, the shareholder profile of Grafton has changed significantly and the majority of the Group’s shares are now held by institutional investors located outside of Ireland.

“The development of Grafton Group has benefited over almost half a century from its listing on the Irish Stock Exchange,” Stark explains. “The listing facilitated Grafton’s successful growth to the point where three quarters of the Group’s revenue and most of its development activity now takes place outside of Ireland.

“The decision to move the listing responds to the new realities facing Grafton, including the significant changes in its shareholder base with the majority of the Group’s shares now held by institutional investors outside Ireland, and will provide the Group with the platform from which to grow the business even further.”

About the CEO

Gavin Slark joined the Grafton Group and the Board as chief executive designate in 2011 and was appointed CEO in July 2013. He was previously Group chief executive of BSS Group plc, a leading UK distributor to specialist trades including the plumbing, heating and construction sectors.

Slark is an experienced CEO having gained extensive strategic, financial, corporate development and capital markets experience as Group chief executive of BSS Group plc, where he successfully led the growth of the business and created significant value for shareholders. He has strong leadership, people management and operational skills gained from working in a range of companies and industries over the past 25 years.

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