In its final trading update covering 2023, Grafton Group plc reports that its full year operating profit is set to “slightly exceed top end of analysts’ forecasts.”
Despite a continuation of the “softer market conditions experienced in September and October,” the Group says it delivered a resilient performance in this latest trading period. Group revenue for the year was up by 0.8% to £2.32 billion (2022: £2.30 billion). Furthermore, the geographic spread of its operations and exposure to multiple end-markets are described as core strengths, with 60% of Group revenue for the year generated outside the UK from operations in Ireland, the Netherlands and Finland.
Full year adjusted operating profit is expected to be slightly ahead of the top end of Analysts’ forecasts (Grafton compiled consensus Analysts’ forecasts for 2023 show operating profit of circa £197.3 million and a range of £194.0 million to £201.0 million), supported by the stronger trading of its businesses in Ireland alongside “the timely implementation of previously announced cost reduction measures and ongoing Group-wide cost discipline.”
Overall activity in the Group’s businesses “remained subdued” in November and December with average daily like-for-like revenue down by 2.9% (which was slightly less than the outturn for September and October). The decline was said to be partly driven by “modest product price deflation experienced in the distribution businesses in Ireland and the UK.”
Focusing on the UK, its “markets remained weak… and RMI volumes continued to be under pressure due to lower discretionary spending by households on their homes, the decline in housing transactions and a fall-off in larger home improvement projects.”
Eric Born, Chief Executive Officer of Grafton Group plc, commented: “While the trading environment in the final months of the year continued to be subdued across most of our markets, we are pleased that adjusted operating profit for 2023 is now expected to be slightly ahead of the top end of analysts’ forecasts.
“We made good progress during the year developing and executing our strategy and in starting to build a deeper pool of acquisition opportunities in targeted European markets. We remain confident in the medium-term drivers of demand in our markets and, underpinned by a strong balance sheet, Grafton is well positioned for growth as trading conditions improve.”
Segmental Trading
The table below shows the year-on-year changes in average daily like-for-like revenue and in total revenue:
| Segment | Average Daily Like-for-Like Revenue Growth
in Constant Currency |
Total Revenue Growth | |||
| Constant
Currency |
Sterling | ||||
| Ten Months
to 31 October 2023 |
Two Months to 31 December
2023 |
Year to
31 December 2023 |
Year to
31 December 2023 |
Year to
31 December 2023 |
|
| Merchanting | |||||
| – Ireland | (1.7%) | 1.5% | (1.2%) | 0.1% | 2.1% |
| – UK | (2.8%) | (5.2%) | (3.2%) | (2.4%) | (2.4%) |
| – Netherlands | 2.9% | (0.2%) | 2.3% | 2.3% | 4.4% |
| – Finland | (3.8%) | (13.0%) | (5.6%) | (4.2%) | (2.4%) |
| Retailing | 4.2% | 2.4% | 3.8% | 3.9% | 5.8% |
| Manufacturing | 1.9% | (16.2%) | (0.8%) | (0.1%) | 0.0% |
| Group | (0.8%) | (2.9%) | (1.1%) | (0.4%) | 0.8% |
Share Buybacks
As previously announced, the fourth share buyback programme launched on 31 August 2023 was extended to 31 May 2024 and the maximum aggregate consideration increased from £50 million to £100 million. The Group had completed £47.5 million of the buyback programme by 31 December 2023.
A total of £290.8 million was returned to shareholders through share buybacks between 9 May 2022 and 31 December 2023 “reflecting confidence in the Group’s trading prospects and its strong balance sheet and cash generative operations while also retaining significant capacity to invest in strategic growth opportunities.”
