Business

Grafton Group profits drop by more than a quarter

Building supplier and DIY firm sees margins squeezed as consumers pull back

The Woodie's business 'performed well', Grafton said. Photograph: Nick Bradshaw

Peter Flanagan
Thu Mar 7 2024 - 07:34

Profits at Grafton Group fell 28 per cent last year but still came in ahead of analysts forecasts, as the DIY supplier saw consumers pulling back from expensive home improvements and dealing with stretched housing affordability.

The owner of Woodie’s, Chadwicks and other brands posted adjusted operating profit for 2023 of £205.5 million (€240 million), compared with £285.9 million a year earlier, the firm said in a statement. Revenue rose 0.8 per cent to £2.32 billion.

Chief executive Eric Born said the year had shown a “solid” performance. “It was slightly tougher as a year from a macro perspective. We still delivered in terms of absolute profitability, cash generation and so on where we expected to be,” he said. “It has been, from my perspective, a very, very solid performance and a strong performance in Ireland.”

Mr Born said although trading conditions were expected to remain challenging, demand fundamentals were supported by a structural undersupply of new homes and an ageing housing stock that requires upgrading including energy-conservation measures.

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“There is a need to increase new builds in Ireland, without a shadow of a doubt, but at the same time the housing stock is ageing and there needs to be reinvestment into the existing stock,” he said. “It will happen over time. You need to be ready, because at some stage people will want to spend that money and the grants are available.”

Grafton shares fell 2 per cent in London to 945 pence at 9am before recovering to 975 pence.

The drop in earnings was in part due to cost-of-living pressures driven by high inflation and interest rate rises, which led to reduced spending by households on home improvements and weakened demand for new homes as affordability became stretched, the company said. That led to lower volumes in its key distribution business. Building materials prices started to fall in the closing months of the year, it added, with significant deflation in steel that weighed on the business.

Its Woodie’s business in Ireland “performed well”, increasing revenue despite what it called “the most challenging economic conditions encountered by customers for some time and sustained a slight dip in profitability”.

Adjusted operating margin fell 2.5 percentage points, while the company said it would hike its dividend 9.1 per cent to 36 pence per share.

Looking ahead, Mr Born said the company may execute a platform acquisition, either in a new or in an existing market.

Peter Flanagan

Peter Flanagan

Peter Flanagan is an Assistant Business Editor at The Irish Times

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