Slower housing growth may be better – Grafton
A SLOWER pace of house building because of construction cost inflation could benefit companies such as Grafton, according to its chief executive, Gavin Slark.
The group, which in Ireland owns the Woodies DIY chain as well as builders merchanting outlets Chadwicks and Heiton Buckley, noted yesterday that medium-term demand for housing units here is about 40,000 per annum.
Just 18,000 were completed last year.
“It’s pretty widely recognised that a normalised Irish housing market is probably somewhere between 35,000 and 40,000 homes a year,” Mr Slark told the Irish Independent.
“Last year the number was 18,000. If it increases at a slightly lower rate, that possibly even makes it more sustainable going forward,” he added. “One of the things we need to avoid in the economy of Ireland is what I would call the Hollywood peaks and troughs that maybe we saw during the Celtic Tiger years.
“If we see more gentle, sustained growth then that makes it a better bet in terms of the medium term,” said Mr Slark.
He said that the underlying fundamentals in Ireland are “pretty well set” for the medium to long term, despite the risks from Brexit or issues over labour supply.
The Irish construction sector is suffering from a lack of tradespeople as it still emerges from the nadir it experienced during the downturn.
Mr Slark was speaking as Grafton reported a robust set of full-year results.
Its revenue jumped 8pc on a constant currency basis to £2.95bn (€3.43bn).
Its operating profit, stripping out gains from a prop- erty disposal, was 18pc higher at £189.6m (€221m).
Grafton generated about 68pc of its revenue last year in the UK, with Ireland accounting for £639m, or about 22pc of revenue.
The remainder is generated by its operations in the Netherlands and Belgium.
Revenue at its Woodies DIY chain soared 8.8pc on a constant currency basis to £198.2m (€231m), with its adjusted operating profit climbing 48.7pc on the same basis to £16.8m (€19.6m).
Grafton said 2018 saw Woodies experience its third consecutive year of revenue and profit growth.
It’s been lifted by a strong economy and a business transformation programme.
Mr Slark said that expansion of the chain is unlikely, given that it effectively has the required footprint.
He added that that any expansion by the group is more likely to be targeted at the UK, where Grafton owns chains such as Selco and Plumbase.
Grafton’s UK arm performed well last year given the challenges the economy is facing.
Mr Slark said that he did not believe Brexit will have any material impact on the group’s business there given the size of the market.