Grafton Group plc has reported a “good half-year trading performance” in its update for the period from 1 January 2022 to 30 June 2022 ahead of half year results to be released on 25 August 2022.
The Group is described as being in a “very strong financial position with resources available to create value” whilst a £100m share buyback programme commenced in May. Overall Group total revenue was up by 13.9% in constant currency with average daily like-for-like revenue growth of 3.4% reported, complemented by a “significant contribution” from acquisitions in Finland, the UK, Ireland and the Netherlands.
The distribution businesses in Ireland and the Netherlands “performed strongly in good markets” however performance in the UK Distribution business said to be “more subdued, against strong comparators in 2021” with there being “some unwinding of higher margin revenue from retail customers in the distribution businesses in the UK and Ireland in the first half of last year that was driven by exceptional demand for home and outdoor space improvements”.
Group revenue increased by 12.1% to £1.15 billion in the half year from £1.03 billion in first half of 2021, excluding the traditional merchanting business in Great Britain that was divested on 31 December 2021. The table below shows changes in average daily like-for-like revenue and in total revenue in continuing operations compared to the same periods in 2021.
| Segment | Change in Average Daily Like-for-Like Revenue in Constant Currency | Change in Total Revenue | |||
| Constant
Currency |
Sterling | ||||
| Three Months to 31 March 2022 | Three Months to 30 June
2022 |
Six Months
to 30 June 2022 |
Six Months
to 30 June 2022 |
Six Months
to 30 June 2022 |
|
| Merchanting | |||||
| – UK | 4.6% | (4.0%) | (0.2%) | 3.6% | 3.6% |
| – Ireland | 41.9% | 4.3% | 19.5% | 22.8% | 19.4% |
| – Netherlands | 8.2% | 7.0% | 7.5% | 17.8% | 14.4% |
| Retailing | (23.8%) | (22.1%) | (22.8%) | (22.8%) | (24.9%) |
| Manufacturing | 24.7% | 20.4% | 22.3% | 21.3% | 21.1% |
| Group | 10.4% | (2.0%) | 3.4% | 13.9% | 12.1% |
Overall trading across the Group was “in line with plan for the half year” and the report further noted: “While the international macro-economic outlook has weakened in recent months and created increased uncertainty, we see no reason to adjust our full year operating profit expectations at this stage.”
In addition, the report stated: “In line with 2021, well over half of the Group’s operating profit for the six months was generated outside of the UK reflecting the Group’s strategy of diversifying its earnings base geographically and divestment of the traditional merchanting business in Great Britain.”
UK Distribution
Focusing on the Group performance in the UK merchant market, the trading update recorded that in Selco, “revenue trends in quarter one and quarter two of this year developed against the backdrop of Covid-19 restrictions in the first quarter of 2021 and a surge in activity in the second quarter of 2021 leading to record demand for building materials as households increased spending on the home.”
It continued: “In the first half of the current financial year, the UK trading environment saw significant double digit product price inflation for building materials. In response, Selco focused on maintaining a strong offering for its customers and operational excellence. A new branch was opened in Exeter in April and a new branch in Cheltenham is scheduled to open before the year end which will take the estate to 74. We continue to progress a good pipeline of new branch opportunities that are at various stages of development.”
The MacBlair distribution business in Northern Ireland, meanwhile, “performed well with an increase in house building offsetting reduced spending on outdoor projects compared with last year’s record levels”. The TG Lynes commercial pipe and fittings distributor in London “grew revenue strongly” and Leyland SDM, the specialist decorators’ merchant in London, “benefitted from a gradual return of workers to their offices and investment in the leisure sector”.
Share Buyback
Said to reflect the Group’s “disciplined approach to capital allocation and supported by its strong financial position”, a share buyback programme of up to £100 million commenced in May to be completed by the end of the year. As at 30 June 2022, the Group had completed £43.8 million of the buyback programme.
CEO Gavin Slark (who is to step down from the role later this year), commented: “The Group’s overall trading performance was good against a very strong comparator in the first half of last year and our operating profit expectations for the full year are unchanged. Notwithstanding current macro-economic risks, our portfolio of resilient high performing businesses has the flexibility to adapt to changing circumstances and is well positioned to outperform.
“Grafton is in a very strong financial position and, with a pipeline of acquisition opportunities, the Group is well positioned to make continued progress on the delivery of its strategy.”
For further information and to view the full report, visit www.graftonplc.com
