Grafton Group, the builders merchants and DIY retailing business, said it returned to operating profit growth in the UK in the first half of the year, for the first time since 2021 through self-help measures as the home improvements market remained weak.
The Dublin-based, but London-listed group said its overall operating profit rose by 9.5 per cent to £91 million (€104.9 million) to meet market expectations, driven in large part by its acquisition of Spanish air conditioning and heating products distributor Salvador Escoda last autumn.
It said that its Chadwicks distribution business and Woodie’s DIY unit in Ireland each performed well. The Irish distribution unit was alone in its four long-standing markets to post like-for-like sales growth during the period.
Grafton said that it remains cautious about the near-term outlook for home repair, maintenance and improvement demand in the UK.
While improvement is unlikely this year, especially amid speculation around property taxes, higher household savings and pent-up demand are expected to progressively support increased investment in home improvement projects once confidence returns, it said. UK like-for-like sales dipped 0.2 per cent in the first half.
Sales in the Netherlands fell 1.1 per cent, while they slumped 9 per cent in Finland amid “historically weak market conditions and adverse weather”, it said.
Group revenue rose 10.1 per cent to £1.252 million, while its operating margin remained unchanged at 7.3 per cent, with management efforts to improve margins offset by inflationary pressures and higher labour costs.
Grafton has launched a fresh £25 million share buyback programme and said that it had a strong balance sheet – with £245.8 million in net cash – that gives it “significant firepower to capitalise on organic and inorganic development opportunities”. Inorganic opportunities usually refers to deals.
Chief executive Eric Born described the overall trading performance in the first half as “resilient”.
“Following the platform acquisition of Salvador Escoda, non-UK markets now account for approximately 64 per cent of the group’s turnover. Given our ambition to be a leading player in the European building materials distribution market and our exposure to the growing and fragmented Iberian market, we would expect that diversification trend to continue,” he said.
“Whilst we saw an easing of trading momentum towards the end of May and into June, the start of the second half has seen a return to growth of group average daily like-for like revenue.
“Outlook for the full year varies by market, but in the round, and with the important autumn trading months to come, we expect full year adjusted operating profit to be broadly in line with analysts’ expectations.”
The consensus view among analysts is that operating profit will rise £184 million from £177.5 million in 2024.