Grafton Group maintains operating profit guidance

Building materials distributor and DIY retailer Grafton Group maintained a steady course in the first four months of the year, with group revenue rising almost 3 per cent, in line with expectations.

The group, which owns the Woodie’s DIY chain, said it was maintaining its operating profit guidance for the year, despite wet weather hitting expected sales of seasonal products and lower volumes in its distribution markets in the UK, Ireland and Finland.

In a trading update for the period from January 1st to April 23rd 2023, the group said revenue was £704.3 million (€799.5 million), up from £685.4 million a year earlier. A decline in UK merchanting revenue of 4.1 per cent was offset by rises in manufacturing revenue of more than 10 per cent and better performance in the Netherlands.

The group said it remained in a “very strong position” due to its robust balance sheet and geographic diversity.

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The distribution market saw some decline in volumes. In Ireland, the company’s Chadwicks brand saw high levels of activity, with resilient new build activity in the scheme housing and commercial construction markets against a softening of demand for materials supplied for the construction of single homes and renovation and maintenance projects.

The UK distribution market was also softer, falling 4.1 per cent in revenues, with the challenging macroeconomic environment hitting revenue at Selco and the MacBlair distribution business in Northern Ireland.

Meanwhile the price of timber and steel fell, which helped moderate building materials inflation in the Irish and UK distribution markets.

There was also flat like for like revenues in the Finland distribution market on stalling economic growth and slower house building. Actual revenues were up almost 7 per cent for the period.

The Netherlands saw strong performance despite a slowdown in new home construction and a decline in existing housing transactions. The 12.8 per cent increase in revenue was attributed to repair and maintenance projects, while revenue from key account customers in large commercial construction projects was also higher.

After the normalisation of revenues in the wake of the pandemic, the retail business in Ireland was hit by lower demand for plants and gardening products, leading to a small decline in like for like revenue of 1.1 per cent.

Chief executive Eric Born said the resilient first quarter reflected the strength of Grafton’s diversified businesses and proximity to customers.

“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,” he said. .

“Since joining the group five months ago, I have spent significant time working with colleagues in our businesses to refine our development plans whilst also visiting many potential acquisition opportunities in European markets and I remain confident about the medium-term prospect of increasing shareholder value.”

Grafton also announced a new £50 million share buyback programme, which will be put to shareholders at the annual general meeting held in Dublin on Thursday. Further details will be announced at a later date.