Profit dips at Grafton but recovery at Woodies ‘extraordinary’
Trading at DIY chain since reopening is up 35% on same period last year
Gavin Slark, Grafton Group chief executive
Profit and revenue at Grafton Group dipped in the first six months of the year as the coronavirus pandemic shuttered its businesses.
The builders’ merchants said revenue fell 19 per cent, and operating profit from continuing operations was 61 per cent lower as measures to slow the spread of Covid-19 hit.
But the gradual relaxation of restrictions has seen recovery in Grafton’s markets. In Ireland, its Woodies chain of DIY shops, which suspended trading for 51 days aside from digital transactions, showed exceptional performance when it reopened. The company said despite the closure, it reported a similar level of profit to the previous year.
Mr Slark said the performance for the DIY chain had been extraordinary, and had allowed the company to repay €2.5 million to the State, which he described as the “right and proper” thing to do.
Trading at Woodies is 35 per cent up on the same period last year, with record trading levels on certain days. Patio furniture, barbecues and decorating materials are among the top-performing categories. “It’s symptomatic of people spending more time at home,” he said.
The impact on its Chadwicks unit, which provides supplies to the building trade, has been more pronounced, with the group not yet in a position to repay the wage subsidies it has received from the State, he said. “We’ll see what [the trading performance] looks like at the end of the year and take another look at that,” he said.
In terms of outlook, Mr Slark said he was “confident but not complacent” about the recovery, given the risk of further lockdowns, with scenario planning for 2021 “very difficult” because of the uncertainty.
In the UK the reopening of the economy has seen a recovery in Grafton’s distribution and mortar manufacturing businesses in May and June, a recovery that continued into July and August. However, it has been slower to regain momentum, primarily because more of its business is involved with large-scale new builds, a sector that hasn’t been as quick to recover. The repair, maintenance and improvement sector in the UK has seen similar levels of recovery to Ireland, Mr Slark said.
In the Netherlands, its distribution business was classed as essential and as such remained open, with social distancing implemented. It saw increased scale and profitability following the acquisition of Polvo more than a year ago.
The company recorded strong cash flow from operations of £121.5 million (€140 million), down from £157.2 million in 2019. Its liquidity was £693.4 million at the end of June, compared with £628.6 million in the same period of 2019.
Grafton also recorded an encouraging start to the second half, with average daily like-for-like revenue up by 3.8 per cent.
“Grafton’s resilience, market positioning and geographic diversity, together with its low debt and strong liquidity, leaves the group well positioned for continuing progress,” said Mr Slark.
“We are very encouraged by the performance of the group in recent months as it emerged in a strong position from the Covid-19 lockdown, and based on current trends, the group should deliver a similar level of adjusted operating profit in the second half to the comparable period last year.”
However, Grafton said the outlook for its businesses remained uncertain as the Covid-19 pandemic continued, with social-distancing measures likely to remain in place for some time. Possible local or national lockdowns being reintroduced would impact sentiment, trading and the broader economic environment over the remainder of the year.
It expected a gradual recovery of house building in the UK to continue, but it would be affected by a number of factors, including consumer confidence, employment prospects after the furlough scheme ends and the availability of mortgage finance.