Detailing the impact of the Covid-19 pandemic, Grafton Group plc has provided a trading update for the six months to 30 June 2020 ahead of the release of its results for the half year on 27 August 2020.
Noting that its “number one priority since reopening branches and stores has been the health and safety of our colleagues and customers”, the Grafton Group statement explained that the company has “implemented procedures and protocols, in line with the guidance provided by Governments and health authorities, to ensure that all our locations have the highest health and safety safeguards in place”.
It added: “We are pleased that these measures are working effectively in practice. At the end of June, almost all trading locations across the Group were open for business and the vast majority of colleagues had returned to work.”
Trading Performance
Across the Group – including its matunfacturing and retailing divisions as well as merchnating, and covering its operations in Ireland and the Netherlands in addition to the UK – revenue in continuing operations for the six months to 30 June 2020 was £1.06 billion, down 19.4% from £1.31 billion in the same period last year due to the impact on trading of the Covid-19 pandemic.
Trading in the month of June was said to be “more resilient than anticipated” with Group revenue in continuing operations of £247.8 million. This was 11.4% ahead of June 2019 revenue of £222.4 million with the benefit of two additional trading days in the distribution (merchanting) and manufacturing businesses and revenue from the acquisition of Polvo in July 2019. Average daily like-for-like revenue in June was down by 1.1% on the prior year.
Strong demand in June in its businesses in Ireland and Netherlands, and in Selco in the UK, was reported to be partly offset by a slower pace of recovery in the traditional distribution and manufacturing businesses in the UK.
The statement continued: “While we were encouraged by the improved performance in June, trading during the month is likely to have been influenced by pent-up demand as Covid-19 restrictions were lifted and we remain cautious about revenue trends in the second half of the year.”
UK merchanting
June average daily like-for-like revenue in the UK distribution business was circa 90% of the prior year level. Selco completed the reopening of all branches on a full self-select service basis on 22 June 2020, having initially reopened for Click & Collect and Click & Delivery only trading. The traditional UK merchanting businesses expanded its operations to a full in-service branch offering during the month of June having initially operated pre-arranged branch collections and on-site deliveries.
Gavin Slark, Chief Executive Officer of Grafton Group plc, commented: “I would like to express our gratitude to all of our colleagues for their continued commitment to the business and for providing a safe environment for each other and our customers. While we face many challenges in the months ahead, we are encouraged by the Group’s trading and financial performance in the month of June which represented an important milestone on the road to recovery. Grafton is in a strong financial position and our resilient portfolio of market leading businesses is emerging stronger from this crisis and remains well positioned for future growth.”
David O’Brien, Equity Analyst at Goodbody, said: “Grafton Group has had an encouraging rate of recovery as its operations reopen. Having managed the balance sheet prudently through the cycle, while continuing to execute its expansion strategy, the company is left with enviable financial flexibility and attractive exposure to the RMI market alongside regional diversification. All of this leaves the company well positioned to navigate the challenging operating environment over the medium term.
“A key highlight from its update is the strong cash performance of the business with the group’s liquidity position improving by c. £80m since May 11 to the end of June. Indeed, it is a positive sign that the group has felt comfortable to repay £263m of the debt drawn down in April. While management understandably remains cautious on the outlook as we all try to decipher what is pent up demand and true underlying demand, the company is looking in good shape.”
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