Grafton Group’s operating profit fell 20.9 per cent to £83.1 million (€98.7 million) in the first half of the year, as sales fell across its UK, Dutch and Finnish operations even as its Woodies DIY retailing and Chadwicks builders merchanting business turned in a robust performance.
The Dublin-based, but London-listed, group said that trading conditions are expected to remain “challenging” for the remainder of the year, especially outside of Ireland, even as inflation has eased and central banks have begun to cut interest rates.
Still, Grafton unveiled a fresh share buyback programme, targeting the repurchase of £30 million of stock over the remainder of the year. The group has already returned £343.3 million to shareholders through stock buy-backs since May 2022. It said that it “remains optimistic” that it can also seal acquisitions.
“Whilst uncertainties remain in the short term, our medium-term outlook remains positive, supported by strong demand fundamentals, not least in the demand for new housing as markets normalise and consumer confidence improves,” said chief executive Eric Born.
Mr Born said Grafton expects its full year operating profit to meet market expectations. The consensus call among analysts is for a figure of £170.9 million down from £205.5 million posted last year.
“The group has continued to be highly cash generative through a challenging period in the cycle, which has enabled us to return cash to shareholders whilst preserving a strong balance sheet to invest in organic and inorganic development opportunities,” Mr Born said. “We continue to actively pursue opportunities to strengthen our existing market positions as well as platform acquisitions, and we remain optimistic that we can execute on some of these opportunities in the near term.”
Like-for-like sales in the UK fell by 7.7 per cent in the first half of the year, and fell 6 per cent between the start of July and August 18th, as spending by households on maintaining and improving their homes remained under pressure. Still, Grafton said that there are “tentative signs” of improving consumer confidence in that key market.
The head of the group’s Selco builder suppliers business, Howard Luft, is leaving at the end of the month and will be replaced by Frank Elkins, a building materials distribution veteran who most recently was chief operating officer of Travis Perkins, a UK-listed peer of Grafton.
In the Netherlands, lower revenue from timber factories and from smaller customers were largely offset by revenue growth generated by larger construction projects. A slowdown in the Finnish economy and construction sector continued to impact sales volumes in its IKH business, which sells workwear and personal protective equipment, tools, spare parts and accessories.
However, like-for-like sales edged 0.5 per cent higher in Ireland, even amid deflation of materials such as steel and timber. Chadwicks’s sales volumes rose 5.4 per cent on the year, and its trading profits rose on the year.
“With the support of Irish Government policy, new housing commencements were strongly ahead in the first half reaching a post global financial crisis high,” Grafton said. “While revenue was slightly weaker in the second quarter in our Woodie’s business, excellent margin and cost control management have resulted in an improved operating profit and margin compared against the same period last year.”