Covering the period from 1 January 2021 to 30 June 2021 and in advance of its half year results which will be released on 25 August 2021, Grafton Group plc has reported “strong trading… and increased operating profit guidance for continuing operations”.
Having recently announced the disposal of its Traditional Merchanting business in Great Britain to Huws Gray for an enterprise value of £520 million, Grafton’s update recorded revenue growth ahead of expectations in May and June whilst the Group’s Adjusted operating profit for the year in continuing operations has been upgraded to circa £240 million.
Confirming that all branches, stores and manufacturing plants are now fully operational,the statement showed that Group revenue for the half year was £1.55 billion, an increase of 46.5% from £1.06 billion in the first half of 2020. Given that this was a period that was impacted by the temporary closure of many of its outlets, Group revenue was shown to be 18.0% higher than the same period in 2019.
The strong revenue growth trends, in continuing operations, that developed in March and April were shown to have been sustained in May and June “led by Woodie’s in Ireland and Selco in the UK” and fuelled by healthy “underlying demand in the residential repair, maintenance and improvement and new housing markets”.
The update noted that this outcome was achieved “despite pressure on supply chains caused by increased international demand for building materials, limitations on manufacturing capacity, a shortage of certain raw materials and container shipping logistics issues that affected the movement of goods internationally”. It continued: “These procurement challenges resulted in shortages of core building materials, an extension of delivery lead times, certain products being placed on allocation and a sharp increase in product price inflation across a range of categories in the UK and Ireland”.
In particular reference to the deal made with Huws Gray, Grafton’s Traditional Merchanting business in Great Britain will be classified as a discontinued operation in the Half Year and Full Year results in line with International Financial Reporting Standards. Revenue in the Discontinued Operations increased by 47.4% to £522.9 million on the first half of 2020 and was up by 0.3% on the first half of 2019. According to the update, there was a “solid recovery in trading in the half year with average daily like-for-like revenue ahead of the first half of 2019 by 5.2%”.
Group total revenue from Continuing Operations when excluding the Discontinued Operations was said to have increased by 46.1% to £1.03 billion from £703.7 million in the first half of 2020, and up by 29.6% from £792.2 million in the first half of 2019.
Looking specifically at continuing UK Distribution, Selco performed strongly in the half year with average daily like-for-like revenue up 74.4% on the prior year (noting the impact of the initial branch closures in late March and gradual reopening during May and June). Average daily like-for-like revenue increased by 18.4% compared to the first half of 2019, reflecting the strong growth momentum from March through to the end of June which saw trading in the Regions outperform the Greater London Area.
Early indications of trading in the new Liverpool branch that was opened in April are said to be very encouraging, and two further branch openings are “scheduled before the year end”.
Gavin Slark, Chief Executive Officer of Grafton Group plc commented: “I again wish to acknowledge the exceptional commitment of colleagues across the Group and to thank them for safely supporting high levels of customer demand in our branches, stores and manufacturing operations.
“We made significant progress implementing our strategy in the period that resulted in agreement to divest the Traditional Merchanting business in Great Britain on favorable terms and completion of the value enhancing IKH acquisition in Finland. Grafton traded ahead of expectations in the first half and, despite some ongoing uncertainty caused by the pandemic and sector-wide supply chain pressures, the Group has increased current year profit guidance for continuing operations supported by its market leading businesses and strong financial position.”