Grafton Group plc’s half year results cite a strong performance across the Group, including a “notable record contribution from the Woodie’s DIY, Home and Garden business in Ireland” and reference its agreement to divest its Traditional Merchanting Business in Great Britain for an enterprise value of £520 million.
The report shows that the Group achieved a “record half year adjusted operating profit” of £142.4 million (before property profit) alongside a “record Group adjusted operating profit margin” of 13.9% (before property profit).
In the introduction to the report, Chief Executive Officer Gavin Slark commented: “This was a half year of high performance, operational excellence and significant strategic development. The results for the half year highlight the success of our strategy and the exceptional management teams and colleagues across the Group who have again delivered excellent results and outperformance against the backdrop of favourable market conditions.
“We continued to innovate and deliver a great experience for our customers while also investing strategically to develop and grow our businesses.
“Our strategic growth focus is to invest in higher returning businesses with good market positions that have a differentiated customer offering. The end use market for these businesses is primarily the more resilient residential repair, maintenance and improvements (RMI) sector and we saw the benefits of this strategy in the half year.
“We continued to invest in our digital channels to increase traffic to our websites and on-line engagement and transactions with our customers.”
He added: “Despite the disruption caused by the pandemic, we have delivered adjusted operating profit of £142.4 million (before property profit) in continuing operations, which excludes the Traditional Merchanting Business in Great Britain that is now classified as discontinued operations. This level of profitability established a new half year record for Grafton and the adjusted operating profit margin of 13.9% was also a record performance.
“Our colleagues responded with enterprise and agility to the significant pressure on the Group’s supply chains during the half year that was caused by elevated international demand for building materials, disruption to supply and container shipping logistics issues.
“Cashflow generated from total operations, including discontinued operations, for the half year more than doubled to £255.3 million and the Group ended the half year with net cash of £302.5 million before IFRS 16 lease liabilities, up from £181.9 million at the start of the year. On 1 July 2021 the Group completed the IKH acquisition at a cost of €199.3 million.”
On the Group’s strategy to divest its Traditional Merchanting Business in Great Britain, Gavin said: “The decision to divest this business followed a comprehensive strategic review which concluded that exiting this segment of the building materials distribution market in Great Britain would enable the Group to optimise shareholder value. Divestment provides an opportunity to deploy our capital resources towards more differentiated, higher growth potential businesses offering superior returns and greater resilience through the cycle.
“Our very successful Selco Builders Warehouse business now accounts for almost three quarters of our UK distribution activities. The remainder of our UK distribution business now comprises the very successful MacBlair operations in Northern Ireland and the TG Lynes and Leyland SDM specialist distributors which trade in and around London.
“The operating profit margin in the continuing UK distribution business was 13.3% in the half year which marks a significant uplift on the margin of 6.4% returned for the first half of 2019 including the businesses that we have agreed to divest.”
Gavin also restated that the divestment will further “enable increased focus on our international development strategy which will be a key priority over the coming years.” He continued: “Through a combination of organic growth and the acquisition of high potential businesses trading in segments of our markets that exhibit good structural growth drivers, we will continue to allocate capital to those opportunities that allow us to deliver strong and sustainable value and superior returns.”
The full results can be seen here whilst an abridged results presentation document along with an interview with Grafton’s CEO and CFO can be seen online.
