Presenting its Trading Update for the period from 1 July 2023 to 31 October 2023, Grafton Group plc states that it is “on track to deliver (its) Full Year expectations”.
The document contends that the business “continued to deliver a resilient performance in this latest trading period despite slightly softer than anticipated market conditions in September and October.” Group revenue in the ten months to 31 October 2023 was up by 1.7% to £1.96 billion (2022: £1.93 billion). Accordingly, it “remains on track to deliver full year operating profit in line with expectations” (see footnote) which is “supported by cost reduction measures implemented earlier this year and ongoing cost discipline.”
The summary also notes that a fourth share buyback programme, for up to £50million, was launched on 31 August 2023. The Group had undertaken £36.65 million of the buyback programme by the close of business on 10 November 2023.
Overall Group demand was “more subdued in the four months to the end of October leading to a marginal decline in year-on-year average daily like-for-like revenue with modest price deflation experienced in the Distribution businesses in Ireland and the UK.” This outcome compared to slight growth in average daily like-for-like revenue reported for the first half.
The report also notes that “Grafton continued to benefit from the breadth of its customer relationships in multiple end-markets and geographic spread of operations with 60% of revenue generated from operations outside the UK in Ireland, the Netherlands and Finland.”
Looking at the UK specifically, the trading environment in the UK RMI market remained “challenging for Selco as discretionary spending on the home continued to be under pressure from high inflation and higher interest rates.” In the Netherlands, revenue growth with key account customers engaged on large commercial construction projects “more than offset lower sales to smaller customers and timber factories.” In Finland, the slowdown in economic and construction “activity reduced demand in IKH.”
In Retailing, the report demonstrated that revenue increased in recent months in Woodie’s DIY, Home and Garden business in Ireland “following weaker demand for seasonal products at the start of the second half.” In Manufacturing, CPI Mortars “experienced a decline in volumes as housebuilders reduced housing starts in response to lower reservation rates for new homes.” Revenue was also lower in StairBox, the bespoke staircase manufacturing business that supplies the RMI market, “following a prolonged period of uninterrupted growth.”
Segmental Trading
The table below shows the changes in average daily like-for-like revenue and in total revenue compared to the same periods in the prior year:
| Segment | Average Daily Like-for-Like Revenue Growth
in Constant Currency |
Total Revenue Growth | |||
| Constant
Currency |
Sterling | ||||
| Six Months
to 30 June 2023 |
Four Months to 31 October
2023 |
Ten Months
to 31 October 2023 |
Ten Months
to 31 October 2023 |
Ten Months
to 31 October 2023 |
|
| Merchanting | |||||
| – Ireland | (3.4%) | 0.8% | (1.7%) | (0.1%) | 2.3% |
| – UK | (2.3%) | (3.2%) | (2.8%) | (1.8%) | (1.8%) |
| – Netherlands | 3.7 | 1.7% | 2.9% | 3.8% | 6.4% |
| – Finland | (0.8%) | (7.6%) | (3.8%) | (1.6%) | 0.7% |
| Retailing | 6.3% | 0.8% | 4.2% | 4.2% | 6.7% |
| Manufacturing | 10.9% | (8.2%) | 1.9% | 2.8% | 3.0% |
| Group | 0.1% | (1.5%) | (0.8%) | 0.3% | 1.7% |
Eric Born, Chief Executive Officer of Grafton Group plc, commented: “Despite more challenging markets in recent months, we expect Group operating profit for the year to be in line with expectations. Our strong focus on cost management mitigated some of the impacts of weaker trading and we continue to support our customers with excellent value propositions across our portfolio of businesses.
“Our strong balance sheet and cash generative operations provide us with the resources to develop our businesses organically and to take advantage of acquisition opportunities as they arise. We continue to be actively engaged with potential vendors to build a deeper pool of opportunities in our targeted European markets.”
For further information, visit www.graftonplc.com
Footnote: Grafton compiled consensus Analysts’ forecasts for 2023 show operating profit of circa £198.1 million and a range of £190.5 million to £205.0 million.
