Revenue rises at Grafton but inflation continues to loom

Building materials distributor and DIY retailer Grafton Group said business continued to normalise in the first six months of the year, with supply chains improving and building materials shortages easing.

Revenue for the six months was £1.15 billion (€1.35 billion), up 12 per cent from the prior year. However, adjusted operating profit fell 4.4 per cent to £151.1 million, and adjusted operating profit before property profit was 7 per cent lower at £132.6 million.

Adjusted pretax profit for the first half of the year was £143.4 million, down just over 3.5 per cent year on year. The period also saw a decline in adjusted earnings per share, falling 1.9 per cent to 49.5 pence.

Dividends were higher at 9.25 pence, almost 9 per cent up on the 8.5 pence from the first half of 2021.

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The group’s Irish retail business normalised in the first half of the year following the exceptional spike caused by the pandemic, but revenue and profit remained ahead of pre-Covid levels. Trading in the Woodie’s DIY business saw lower than anticipated revenue and operating profit, compared with the exceptional Covid-related gains seen in the first six months of 2021 when it was classed as an essential retailer. Its operating profit margin for the first six months of 2022 was 11.7 per cent.

“If you look at the first half of this year, from a group perspective you have to take into account what happened in terms of Woodie’s last year and what happened in terms of Woodie’s this year,” said chief executive Gavin Slark. “In the first half of 2021 Woodie’s was deemed an essential retailer and there was very few stores open. “In the first half of last year, Woodie’s made €34m, and in the first half of this year Woodies made €14 million. Now €14 million compared to 2019 is still a really good profit, it’s showing really good growth. But you’ve got a €20 million difference in one business and that really is where the impact has been terms of the margin and the profit downturn.”

Distribution business Chadwicks showed a strong performance, Grafton said, despite the return to more normal trading conditions. Revenue and operating profit grew strongly and the operating profit margin advanced by 80 basis points to 12.4 per cent. The group said demand was driven by higher spending on house maintenance and improvements, an acceleration in the construction of housing, and a rise in non-residential private and public sector construction.

The period also included the impact of the Sitetech business acquired at the end of February 2022, which Grafton said made an “excellent contribution” to profit.

Mr Slark said the company’s acquisition strategy, which is supported by the board, is likely to continue, and there could be further deals done before the end of the year. “It’s been part of Grafton’s DNA for a long time and I’m sure it will be part of the DNA going forward,” he said. “We’re continuing to look at acquisitions now there may well be something beforr the end of the year. "

Grafton’s UK residential repair, maintenance and improvement was also relatively subdued compared with the previous year, with like-for-like revenue lower and volumes down. Acquisitions and new branches contributed to overall revenue growth for the period. Operating profit was also lower, but its operating margin was strong at 11 per cent.

The impact of inflation had been significant on the business, Mr Slark said, and in how it was managed.

“The whole pricing and inflation environment, it’s like having a huge giant jigsaw on the table in front of you and all the pieces are constantly moving around. We spend a huge amount of time in trying to get the pricing right to make sure we protect the business from rising costs but also give the consumer a good deal.”

In its statement the group said it expects its full-year adjusted profit to be in line with expectations.

Mr Slark is stepping down from the business later this year after more than a decade in charge. “I think the time is probably right for someone else to look at the long term of Grafton,” he said. “It felt the time was just right; I’m very happy that I’m leaving Grafton at a time when operationally, financially, strategically the business is in a really good position and should have a really good future.”