Grafton remains in a very strong place due to its robust balance sheet, geographic diversity and market leading positions.
Grafton Group plc, the international building materials distributor and DIY retailer, has issued its trading update for the period 1 January 2023 to 23 April 2023 on the day of its Annual General Meeting (Thursday 4 May).
Highlights:
Performance and trading
The Group’s overall performance in the first quarter of the financial year was in line with expectations, with Group revenue in the period to 23 April 2023 at £704.3 million, up 2.8% from £685.4 million in the prior year.
March trading was a little softer than anticipated with sales of seasonal products in Ireland and the UK adversely affected by wet weather conditions.
Volumes were lower than in the same period last year in the Group’s distribution markets in the UK, Ireland and Finland and were ahead in the Netherlands.
Timber and steel price deflation contributed to a moderation in the rate of building materials inflation in the Group's Irish and UK distribution businesses. Lower demand for plants and gardening products contributed to a small decline in revenue in the retailing business in Ireland.
Strong revenue growth in the UK manufacturing business was driven by volume gains and the recovery of increased input costs.
While Grafton Group remains alert to macroeconomic headwinds impacting our markets, we are maintaining our operating profit expectations at this relatively early stage of the year.
UK distribution
Revenue declined in Selco in a more challenging macroeconomic environment as households cut back on discretionary spending including non-essential RMI projects.
The rate of building materials price inflation moderated to 5.5% in the first quarter. A new Selco store was opened in Peterborough in April bringing the estate to 75.
Leyland SDM delivered a strong performance building on the progress made in the second half of 2022. A new Leyland SDM store was opened in Hammersmith in February and a new store in Crystal Palace is scheduled to open later this year.
Revenue declined in the MacBlair distribution business in Northern Ireland against the backdrop of a weaker economic environment and lower activity in the new housing and RMI markets.
Ireland distribution
Chadwicks operated at high levels of activity in a market that continued to be supported by strong demand fundamentals.
New build activity was more resilient in the scheme housing and commercial construction markets with a softening of demand experienced for materials supplied for the construction of single homes and RMI projects.
Retailing
Revenue was marginally lower in the Woodie’s DIY, Home and Garden business in Ireland reflecting a positive start to the year and lower demand for seasonal categories in March.
Manufacturing
Double digit revenue growth in CPI Mortars was driven by the recovery of input cost increases. Demand was resilient for dry mortars supplied to the new housing market and volumes held up well while demand was somewhat weaker for packaged ready-to-use products supplied to the residential RMI market.
StairBox continued to outperform and increased the volume of bespoke staircases supplied to the secondary housing market.
Share buyback
The Board also intends to introduce a third programme to buy back ordinary shares in the Company for an aggregate consideration of up to £50 million, reflecting its confidence in the prospects for the Group, strong balance sheet and cash generation from operations, while at the same time retaining significant capacity to invest in strategic growth opportunities.
The share buyback programme is expected to complete during 2023 though the actual timing will be based on an ongoing assessment of general market conditions and further details will be announced in due course.
Eric Born, Chief Executive Officer of Grafton Group plc, said: "Our resilient Q1 performance reflects the strength of Grafton’s diversified businesses and proximity to customers through its federated structure. The experienced management teams across the Group’s portfolio of high-quality businesses have the capability to respond effectively to any changes in trading patterns that may emerge as the year develops.
“Since joining the Group five months ago, I have spent significant time working with colleagues in our businesses to refine our development plans while also visiting many potential acquisition opportunities in European markets and I remain confident about the medium-term prospect of increasing shareholder value.”
