Grafton Group plc has declared a “strong trading performance from a diversified earnings base” with the publication of its final results for the year ended 31 December 2022.
The report notes that Grafton had a successful year and is reporting “a strong financial result ahead of market expectations.” The findings revealed that “despite the macro–economic challenges in its markets, the Group continued to perform well with operating profit close to last year’s record result against a less favourable market backdrop.”
It continued: “Trading returned to more normal levels following the exceptional rise in spending on the home during the pandemic and supply chain pressures eased considerably. Building materials prices rose sharply for the second successive year as the market absorbed increases in the cost of producing energy intensive products. Certain product categories including timber and steel experienced price deflation following a period of soaring prices caused by a spike in global demand.
“Across all geographies, volumes were generally down in residential repair, maintenance and improvement markets as households reduced discretionary spending on the home under pressure from declines in real disposable incomes and rising interest rates. Activity in RMI markets was also affected by the increased cost of building materials and rising labour costs which reduced affordability.”
Accordingly, the Group stated it “remained focused on delivering a strong performance and these results show the strength of our businesses, brands and market positions. In particular, they demonstrate the benefits of the Group’s spread of operations
across multiple geographic markets and sectors that has helped to create a more diversified and resilient earnings base.”
Looking specifically at its performance in the UK, the company said that with volumes in the UK RMI market down compared to the record level of spending the prior year, “Revenue in the like–for–like business ended the year only marginally lower as a decline in volumes was largely offset by double digit materials price inflation.”
Operating profit, meanwhile, was down “when benchmarked against a strong prior year result and the operating margin of 9.8% reflected gross margin pressure in a competitive market and the operational gearing impact of lower volumes. Selco, which accounted for almost three quarters of UK distribution revenue, continued to invest in its business and branch network increasing it to 74.
Accounting for 36.5% of Group Revenue (2021: 39.0%), Grafton’s UK Distribution (ie: merchanting) segment presented Revenue of £838.6m for the year – a 2% change from 2021 (£821.9m). And it must be noted that the 2021 results for the UK distribution business do not include the traditional merchanting business in Great Britain that was divested in 2021 and classified as discontinued operations.
The Revenue growth of 2.0% comprises a decline of 2.0% in the like–for–like business and growth of 4.0% from acquisitions and new branch openings. Average daily like–for–like revenue declined by 1.2%.
New Selco and Leyland SDM branches contributed revenue of £15.9 million and the acquisitions in Northern Ireland of the P. McDermott & Sons branch in Omagh, acquired in 2021, and Woodfloor Warehouse, acquired in 2022, contributed incremental revenue in the year of £17.4 million.
The report noted: “Gross margin was down by 200 basis points reflecting a normalisation of trading as the businesses reverted to a more traditional trade and retail mix as well as the impact of non–recurring inflation related stock gains realised in the prior year, a more competitive trading environment with greater product availability (compared to supply chain pressures in 2021 that resulted in a shortage of core building materials) and investment by Selco in pricing in a competitive market.”
Eric Born, Chief Executive Officer, said: “In my first set of results as Chief Executive, I am pleased to report a strong performance by the Group which is ahead of market expectations. This is a great achievement by my new colleagues across the business and is testament to their dedication and professionalism. It has also confirmed the qualities of the business which
attracted me to join Grafton.
“We still face many of the external challenges that we faced in 2022, but I am encouraged by the quality of the Group’s portfolio of higher margin businesses that are sensibly positioned with both market leading brands and geographic diversity. We now have more than half of our revenues coming from outside the UK in Ireland, Finland and the Netherlands.
“Importantly, with a very strong balance sheet, Grafton is well positioned to invest in future growth opportunities and we look forward with confidence.”
Full details of the results cna be seen via www.graftonplc.com.
