Grafton Group plc has issued its trading update for the period from 1 January 2022 to 17 April 2022.
The headline details from the report note that the Group has started the year “in line” with its plan, “with positive trading in favourable end markets”. In addition, a £100m share buyback reflects its “strong balance sheet and free cash flow generation” whilst proceeds of £24m have been received from property disposals.
Total Group revenue is up by 17.5% in constant currency with average daily like-for-like revenue growth of 7.2%. The distribution and manufacturing businesses continued to benefit from broadly favourable markets whilst revenue in the retailing business in Ireland “normalised as expected, relative to the comparative period that saw exceptional gains while trading as an essential retailer during the Covid lockdown”.
Building materials price inflation continued to be a key driver of revenue growth across the Group.
Group total revenue increased by 15% to £645.3m in the period to 17 April 2022 from £561.1 million in the same period in 2021, excluding the traditional merchanting business in Great Britain that was divested on 31 December 2021.
The table below shows the changes in average daily like-for-like revenue and in total revenue in continuing operations for the period from 1 January 2022 to 17 April 2022 compared to the same period in 2021:
|Segment||Average Daily Like-for-Like Revenue Growth*||Total Revenue|
|Period to 17 April
2022 v 2021
|Period to 17 April
2022 v 2021
2022 v 2021
Focusing on its UK merchant operations (‘UK Distribution’), the Group report notes “growth in average daily like-for-like revenue was driven by building materials price inflation across core ranges”. Selco, meanwhile, “continued to make good progress with its differentiated customer offer” and it continued to invest in the brand with the recent opening of a branch in Exeter.
The update also stated that footfall in the Leyland SDM specialist decorators’ business in central London began to recover as workers and visitors started to return to the city. Lastly, the MacBlair distribution business in Northern Ireland “continued to perform at record levels of activity”.
As part of the sale of its traditional merchanting business in Great Britain, Grafton retained the freeholds of a small number of properties. In the first quarter, the Group completed the disposal of two of these properties which together generated cash proceeds of £24.0 million and realised a profit of £18.2 million. Property profit guidance at the time of the full year results was £3.0 million.
In line with the Group’s “disciplined approach to capital allocation and supported by its balance sheet and strong ongoing free cash flow generation”, the Board has announced it intends to introduce a programme to buy back ordinary shares in the Company for an aggregate consideration of up to £100 million.
Gavin Slark, Grafton Group plc CEO, said: “We have seen a positive start to the year and generally good underlying demand conditions in the residential RMI and new build markets that we serve. While there is some uncertainty about how the squeeze on disposable incomes will impact demand, we remain agile and responsive to any trading patterns that may emerge over the remainder of the year.
“Our cash generative businesses and disciplined approach to capital allocation provide us with the opportunity to return free cashflow from operations to shareholders through a share buyback programme. This will enable us to increase capital returns to shareholders while maintaining good operational and strategic flexibility.
“At the same time, we retain significant balance sheet capacity to invest in our businesses and in strategic growth opportunities that meet our investment criteria.”
He concluded: “The Group’s portfolio of high performing businesses gives us a resilient platform to outperform our markets and, with a strong balance sheet and continuing investment opportunities, we are confident about making further progress on the delivery of our medium-term strategy.”
For more information, visit www.graftonplc.com