The latest Trading Update from Grafton Group plc reveals a continued “strong trading performance” for the period from 1 July 2021 to 31 October 2021, allowing it to report “Increased Full Year Operating Profit Guidance” .
The report notes that the “positive revenue trends experienced in the first half were sustained in the period, supported by good underlying demand in the Group’s markets and further normalisation of trading conditions as Covid-19 restrictions were lifted”. Furthermore, the “strength of the Group’s brands and trading formats” together with “generally favourable” market conditions were said to have contributed to an encouraging outcome for the period “despite supply chain pressures and heightened price inflation for building materials that was the key driver of revenue growth in the distribution businesses in the UK and Ireland”.
Group total revenue from continuing operations, which excludes the traditional merchanting business in Great Britain that is being divested, increased by 28.3% to £1.76 billion in the ten months to 31 October 2021 from £1.37 billion in the same period in 2020 and by 27.1% from £1.39 billion in the same period in 2019.
The Group reveals that trading in the period was “stronger than anticipated” and it now expects full year Group adjusted operating profit in continuing operations to be in the range of £265 million to £270 million (compared to current consensus Analysts’ forecasts of £256 million).
Segment Trading – Continuing Operations
The table below shows the changes in average daily like-for-like revenue for the four months to the end of October and in total revenue for the ten months in continuing operations compared to the same periods in 2020 and 2019:
| Segment | Average Daily Like-for-Like
Constant Currency Revenue Growth
|
Total Revenue | ||
| Sterling | Sterling | |||
| Period – 1 July to 31 October | Period – 1 January to 31 October | |||
| 2021 vs 2020 | 2021 vs 2019 | 2021 vs 2020 | 2021 vs 2019 | |
| Distribution | ||||
| – UK (Continuing Operations) | 7.0% | 16.6% | 35.4% | 19.8% |
| – Ireland | 8.7% | 20.2% | 19.6% | 14.9% |
| – Netherlands | 3.6% | 7.4% | 3.8% | 41.2% |
| Retailing | (13.9%) | 21.7% | 21.3% | 41.6% |
| Manufacturing | 5.7% | (6.2%) | 67.5% | 21.8% |
| Group (Continuing Operations) | 4.1% | 15.7% | 28.3% | 27.1% |
Focusing specifically on its UK Distribution (ie: merchanting) operations, Selco “performed strongly” with average daily like-for-like growth of 7.1% in the four months to October 2021 measured against a demanding growth rate of 10.8% in the same period last year. The Group recently opened its 71st Selco branch (in Canning Town), following the successful opening of a branch in Liverpool earlier this year.
Discontinued Operations
The Trading Update noted that the disposal of the Group’s traditional merchanting business in Great Britain has been notified by the purchaser to the Competition and Markets Authority and its “review is ongoing at this time”. International Financial Reporting Standards require this business to be treated as discontinued operations and as a deemed disposal at 30 June 2021.
Outlook
The Group reports that “2021 has been an exceptional year for Grafton as the strength of DIY activity and an inflationary surge in building materials prices had a very positive impact on volumes, revenue and gross margins. However, supply chain disruption and pricing pressure remain a challenging backdrop for many of our suppliers and customers. We expect to exit 2021 in good shape and well placed to outperform in our markets.”
Gavin Slark, Chief Executive Officer of Grafton Group plc, commented: “I would like to again thank colleagues across our Group for their untiring commitment to safely supporting high levels of activity in our branches, stores and manufacturing operations. The overall Group delivered a good performance in the period, against strong comparatives, leading to an increase in current year operating profit guidance supported by the strength of our market positions, geographic diversity and strong financial position.”
