Irish builders' merchant and DIY group Grafton has sold its specialist plumbing and heating business Plumbase to UK firm Plumbing and Heating Investments Limited for an enterprise value of £66.75 million (€75 million).
Grafton said that after allowing for adjustments for debt-like items and working capital, the net cash proceeds from the sale was £60.7 million.
The company said the sale follows a strategic review of the group’s assets. “Consistent with Grafton’s recent corporate activity, including the acquisition of Polvo on July 1st, 2019 for €131 million and the agreement to sell the group’s Belgian operations, today’s announcement follows a strategic review culminating in a decision to divest Plumbase,” it said.
“ The disposal of Plumbase is in line with the group’s strategy of orientating towards higher returning businesses with good long-term growth prospects,” the company added.
Plumbase generated sales of £257.8 million and operating profit of £6 million last year .
“The sale of Plumbase to PHIL secures future opportunities for Plumbase, its employees and other stakeholders as part of an enlarged specialist plumbing and heating business,” Gavin Slark, Grafton chief executive said.
“This transaction represents a very positive outcome for Grafton and enables us to continue to focus our capital and resources on attractive growth opportunities that generate appropriate returns for our shareholders,” he said.
Davy analyst Flor O’Donoghue said the sale was a positive for Grafton.
“Grafton’s strategy in recent years has been a relentless focus on improving the margin and profile of the group,” he said in a note to clients. “This has involved acquiring higher margin businesses and selling lower margin and return operations.
“The sale of Plumbase, operating in the structurally low margin, low growth UK plumbing and heating sector, is wholly consistent with this strategy.”
He noted that Plumbase accounted for 13 per cent of Grafton’s UK merchanting business and 9 per cent of overall group sales.
However, at an implied 2.3 per cent, its gross trading margin was well below Grafton’s underlying group trading margin of around 6.5 per cent.
