In its trading update for the period from 1 November to 31 December 2022, Grafton Group plc states that its full year operating profit is expected to “exceed the top end of analysts’ forecasts.”
The key headlines from the Grafton bulletin include the appointment of Eric Born as CEO (with effect from 28 November 2022) and the launch of a second share buyback programme, whilst the Group ended the year in a strong financial position with adjusted operating profit before property profit expected to be slightly ahead of top end of analysts’ forecasts.
Group average daily like-for-like revenue growth of 2.6% in the final two months of the year was marginally ahead of growth of 1.8% in the four months to the end of October. Group revenue increased by 9.1% to £2.30 billion in 2022 from £2.11 billion in the prior year and by 40.0% from £1.64 billion in 2019. The update also noted that the Group “continued to benefit from the geographic diversity of its markets with over half of revenue generated in Ireland, the Netherlands and Finland.”
Focusing specifically on the Group’s UK distribution (ie: merchant) business, the update noted that “trading conditions continued to soften… although the rate of decline in volumes slowed.”
It added: “Sharp increases in energy costs and inflation contributed to a fall in disposable incomes and consumer confidence and led to a decline in discretionary spending in the housing repair, maintenance and improvement (RMI) market which accounts for a high proportion of Selco’s revenue. The rate of decline in average daily like-for-like revenue in Selco moderated to 2.1% in November and December from 6.1% in the four months to the end of October. Building materials price inflation eased and the decline in volumes moderated.”
Average daily like-for-like revenue in the MacBlair distribution business in Northern Ireland, meanwhile, was flat in the period as “increased revenue from house building offset lower revenue from residential RMI projects.” In addition, the TG Lynes commercial pipe and fittings distributor in London “continued to perform strongly” whilst the Leyland SDM brand “experienced double-digit growth in average daily like-for-like revenue driven by inflation and a return to volume growth.”
In line with the Group’s “disciplined approach to capital allocation and supported by its strong financial position, the second share buyback programme of 2022 was launched during the period” and between 10 November and 31 December 2022, 4.4 million shares were repurchased for cancellation at a total cost of £35.0 million.
CEO Eric Born said: “I am delighted to have joined Grafton and in my first six weeks as CEO I have met with the management teams across our businesses and visited branches, stores and manufacturing facilities in the four countries where we operate. I have been deeply impressed by the heritage and quality of our businesses and by the passion, drive and enthusiasm of our people as well as their extensive knowledge of our markets and customers. Together with my team, I look forward to building on these very solid foundations over the coming years.
“It is pleasing to note that despite mixed macroeconomic and market conditions, we expect full year operating profit to be slightly ahead of the top end analysts’ forecasts for 2022. We look to the future with confidence supported by our market leading businesses and very strong financial position.”
Lastly, the trading update noted that: “Grafton compiled consensus Analysts’ forecasts for 2022 show adjusted operating profit of circa £265 million and a range of £262 million to £268 million. Consensus Analysts’ forecasts for adjusted operating profit before property profit of £18.5 million is circa £246.5 million and the range is from £243.5 million to £249.5 million.”
