Grafton Group plc has issued its trading update for the period from 1 January 2023 to 30 June 2023 ahead of the release of Interim Results on 31 August 2023.
The headlines from the report sees Grafton noting that due to a “resilient first half performance in line with expectations” the business says that “full year operating profit guidance (is being) maintained.” On this, the Grafton-compiled consensus Analysts’ forecasts for 2023 show operating profit of circa £205 million and a range of £194.6 million to £223.0 million.
The business launched its third share buyback programme for up to £50 million in May 2023 and concludes that the Group “remains well positioned due to the strength of its market leading brands, geographic diversity and exceptionally strong balance sheet”.
Performance and Trading
The update states that the Group’s overall first half performance was in line with expectations with revenue up by 3.2% in the period at £1.19 billion from £1.15 billion in the prior year. Average daily Group like-for-like revenue in the second quarter was “slightly stronger” against the prior year than the performance in the first quarter. Grafton says it “continued to benefit from the geographic diversity of its markets” with 60% of revenue generated in Ireland, the Netherlands and Finland.
First half volumes were “lower in the distribution businesses in Ireland, the UK and Finland albeit broadly unchanged in the Netherlands.” This, it says, reflected the impact of the cost-of-living increases and rising interest rates. Lower volumes and sharp falls in timber and steel prices also contributed to more competitive markets and margin pressure in the distribution businesses in Ireland and the UK.
Focusing on the UK, Selco “continued to experience challenging trading conditions in the residential RMI market as households reduced investment on home improvements and discretionary spending on repairs and maintenance.” Furthermore, Selco opened a new branch in Peterborough and Leyland SDM opened a new store in Hammersmith whilst the MacBlair business in Northern Ireland completed two single branch bolt-on acquisitions.
Segmental Trading
The table shows the changes in average daily like-for-like revenue and in total revenue for the period from 1 January 2023 to 30 June 2023 compared to the same period in the prior year:
| Segment |
Average Daily Like-for-Like Revenue Growth* |
Total Revenue | |||
| Constant
Currency |
Actual
(Sterling) |
||||
| Quarter 1 to
31 March 2023 v 2022 |
Quarter 2 to
30 June 2023 v 2022 |
Half Year to
30 June 2023 v 2022 |
Half Year to
30 June 2023 v 2022 |
Half Year to
30 June 2023 v 2022 |
|
| Merchanting | |||||
| – Ireland | (0.5%) | (4.5%) | (2.6%) | (1.0%) | 2.9% |
| – UK | (3.8%) | (0.9%) | (2.3%) | (2.3%) | (2.3%) |
| – Netherlands | 4.8% | 2.6% | 3.7% | 5.2% | 9.4% |
| – Finland | (1.6%) | (0.1%) | (0.8%) | 0.1% | 4.2% |
| Retailing | (4.0%) | 14.1% | 6.3% | 6.3% | 10.4% |
| Manufacturing | 12.0% | 9.9% | 10.9% | 10.1% | 10.4% |
| Group | (0.7%) | 0.8% | 0.1% | 0.8% | 3.2% |
*Constant currency
Share Buyback
In May 2023, a third programme was launched to buy back ordinary shares in the Company for an aggregate consideration of up to £50 million, reflecting “confidence in the Group’s trading prospects, strong balance sheet and cash generative operations, while retaining significant capacity to invest in strategic growth opportunities.” By 30 June 2023, the Group had completed £22.8 million of the buyback programme.
Eric Born, Chief Executive Officer of Grafton Group plc commented: “Grafton achieved a resilient first half trading performance against the backdrop of challenging market conditions and a strong prior year comparator. We are maintaining our guidance for the year while mindful of the potential impact of the macro-economic environment on trading. Our management teams’ focus in the second half will be on supporting customers in our market leading businesses, tightly managing the cost base and responding quickly to evolving trading conditions.
“Grafton has a portfolio of high-quality cash generative businesses operating in diverse markets that have attractive demand fundamentals. We remain committed to growing both organically and through acquisitions and are maintaining our momentum in evaluating and engaging with potential vendors. We are focused in particular on potential platform acquisition opportunities in fragmented segments of the building materials distribution market in Europe. Grafton has the balance sheet strength and resources to invest in organic and acquisitive growth opportunities that will increase shareholder value over the medium term.”
