Grafton Group plc publishes Final Results for Year Ended 31 December 2023

Grafton Group plc publishes Final Results for Year Ended 31 December 2023

Grafton Group plc says it has delivered “a resilient set of results in challenging markets and measured against what was a strong comparative performance in the prior year.”

The results were “supported by relatively stronger trading in Ireland and the Netherlands compared to the UK and Finland” whilst the business was also said to have “benefitted from the timely implementation of cost reduction measures that enabled us to deliver full year adjusted operating profit consistent with the raised guidance in January 2024.”

Eric Born, Chief Executive Officer, commented: “Despite challenging market conditions, Grafton has succeeded in delivering full year adjusted operating profit above the top end of Analysts’ forecasts. This is testament to our resilient market leading positions, responsive management teams and portfolio of high-returning businesses.

“We generated excellent free cashflow of £205.6 million from operations and returned £228.3 million to shareholders during the year in the form of share buybacks and dividends, making a total of £437.2 million which we have returned to shareholders over the past two years.”

Eric continued: “Looking ahead, we expect to continue to benefit from the spread of the Group’s operations across four geographies and exposure to a broad range of end-markets. Our strong balance sheet and record of cash generation will stand us in good stead. We will allocate capital as required to ensure that the Group’s brands continue to support their customers and strengthen their market positions. In parallel, we will continue to evaluate opportunities in existing markets and new geographies, building on the progress we have made, with a view to progressing possible growth opportunities that can create enduring value for our shareholders.

“While trading conditions are expected to remain challenging, demand fundamentals are supported by a structural under supply of new homes and an aging housing stock that requires upgrading including energy conservation measures. With a somewhat improving economic backdrop, we are confident that Grafton is exceptionally well positioned to benefit as the cycle turns, markets normalise and consumer confidence improves.”

Operating review: UK Distribution (35.3% of overall Group Revenue, 2022: 36.5%)

  2023 2022  
£’m £’m  Change*
Revenue 818.1 838.6 (2.4%)
Adjusted operating profit before property profit 47.3 81.8 (42.3%)
Adjusted operating profit margin before property profit 5.8% 9.8% (400bps)
Adjusted operating profit 47.7 106.2 (55.1%)
Adjusted operating profit margin 5.8% 12.7% (690bps)

*Change represents the movement between 2023 v 2022 and is based on unrounded numbers

Focusing on the Group’s UK merchant operations (reported as its UK Distribution segment and incorporating Selco, Leyland SDM, MacBlair and TG Lynes), the report notes how “Cost-of-living pressures driven by high inflation and interest rate rises led to reduced spending by households on home improvements and weakened demand for new homes as affordability became stretched. Volumes in the distribution businesses were therefore lower in these weaker markets.

“Building materials price inflation gradually declined before turning to deflation in the closing months of the year. There were sharp falls in steel and timber prices from record highs, partly reversing the post pandemic spike. Lower timber prices resulted in reduced revenue and gross profit in the Distribution businesses in Ireland and the UK.”

The report continued: “The medium and long-term underlying demand fundamentals of the Group’s markets remain strong and Grafton is well positioned to benefit from favourable structural trends as its markets recover and demand normalises. Upgrading and deep retrofitting an aging housing stock to reduce carbon emissions and improve energy efficiency are positive drivers of medium-term activity in the housing Repair, Maintenance and Improvement (RMI) market. House building volumes are well supported by demographic trends and a prolonged period of under supply that has created pent-up demand.”

Click here to read the full report, including a detailed segment-by-segment appraisal of Grafton Group’s individual UK merchant brands and its wider businesses across Europe.

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