Grafton Group plc’s Trading Update for the period from 1 January 2023 to 23 April 2023 presents a “resilient Q1 performance in line with expectations.”
Highlights
- Performance in the first quarter in line with expectations
- Maintaining full year operating profit guidance
- Third share buyback programme for up to £50 million announced
- Grafton remains in a very strong position due to its robust balance sheet, geographic diversity and market leading positions
The report noted that the Group’s overall performance in the first quarter of the financial year was in line with expectations, with Group revenue in the period to 23 April 2023 at £704.3 million, up 2.8% from £685.4 million in the prior year. March trading was described as being “a little softer than anticipated with sales of seasonal products in Ireland and the UK adversely affected by wet weather conditions.”
Volumes were “lower than in the same period last year in the Group’s distribution markets in the UK, Ireland and Finland and were ahead in the Netherlands” however “timber and steel price deflation contributed to a moderation in the rate of building materials inflation in our Irish and UK distribution businesses.”
Segmental Trading
The table below shows the changes in average daily like-for-like revenue and in total revenue for the period from 1 January 2023 to 23 April 2023 compared to the same period last year.
| Segment | Average Daily Like-for-Like Revenue Growth* | Total Revenue | |
| Constant
Currency |
Actual
(Sterling) |
||
| Period to 23 April
2023 v 2022 |
Period to 23 April
2023 v 2022 |
Period to
23 April 2023 v 2022 |
|
| Merchanting | |||
| – UK | (4.3%) | (4.1%) | (4.1%) |
| – Ireland | (2.2%) | (1.0%) | 4.5% |
| – Netherlands | 5.4% | 6.5% | 12.4% |
| – Finland | 0.0% | 1.2% | 6.8% |
| Retailing | (1.1%) | (2.0%) | 3.5% |
| Manufacturing | 10.0% | 9.9% | 10.3% |
| Group | (1.0%) | (0.5%) | 2.8% |
*Constant currency
UK Distribution
Looking specifically at the Group’s UK merchanting operations, revenue declined in Selco “in a more challenging macroeconomic environment as households cut back on discretionary spending including non-essential RMI projects.”
The rate of building materials price inflation moderated to 5.5% in the first quarter, whilst a new Selco store was opened in Peterborough in April bringing the estate to 75.
Leyland SDM was shown to have delivered “a strong performance building on the progress made in the second half of 2022.” A new Leyland SDM store was opened in Hammersmith in February and a new store in Crystal Palace is scheduled to open later this year.
Revenue declined in the MacBlair distribution business in Northern Ireland against the backdrop of a weaker economic environment and lower activity in the new housing and RMI markets.
Share Buyback
The Trading Update also stated that the Board has announced its intention to introduce a third programme to buy back ordinary shares in the Company for an aggregate consideration of up to £50 million, “reflecting its confidence in the prospects for the Group, strong balance sheet and cash generation from operations, while at the same time retaining significant capacity to invest in strategic growth opportunities.”
Subject to shareholder approval of the resolution proposed at its recent Annual General Meeting to buy back up to 10% of the Company’s ordinary shares, the share buyback programme is expected to complete during 2023 “though the actual timing will be based on an ongoing assessment of general market conditions and further details will be announced in due course.”
The report further noted that while the Group remains alert to the macroeconomic headwinds impacting its markets, it is “maintaining our operating profit expectations at this relatively early stage of the year.”
Eric Born, Chief Executive Officer of Grafton Group plc, commented: “Our resilient Q1 performance reflects the strength of Grafton’s diversified businesses and proximity to customers through its federated structure. The experienced management teams across the Group’s portfolio of high-quality businesses have the capability to respond effectively to any changes in trading patterns that may emerge as the year develops.
“Since joining the Group five months ago, I have spent significant time working with colleagues in our businesses to refine our development plans whilst also visiting many potential acquisition opportunities in European markets and I remain confident about the medium-term prospect of increasing shareholder value.”
To see the full Q1 2023 Trading Update, visit www.graftonplc.com
