Woodie’s sales jump 41% as much of Irish retail left in lockdown
Grafton Group expansion beyond Ireland, UK and Netherlands on hold amid Covid-19
Grafton Group chief executive Gavin Slark. ‘While we remain cautious about first half revenue trends in our markets in light of Covid uncertainty, we expect to make further progress in the current year,’ he said on Thursday on the publication of its full year results. Photograph: Nick Bradshaw
Grafton Group, the builders merchants and DIY retailer, said sales in its Woodie’s stores in the Republic are up 41 per cent so far this year, as consumers are limited in where they can spend their money while non-essential retail stores remain in lockdown due to the Covid-19.
Still, sales across the group’s Irish distribution business, mainly operating under the Chadwicks brand, are down almost 13 per cent so far in 2021, a trend that group chief executive Gavin Slark sees continuing in the near term as construction remains restricted until at least April.
Mr Slark said Woodie’s revenues, which hit record levels last year as households pressed ahead with painting and garden jobs after the first lockdown last spring before splashing out on Christmas lighting towards the end of the year, are likely to ease back as the Government eases restrictions in the coming months.
“But certainly in the first half of this year, there will still be a significant amount of spending on homes and gardens,” Slark told The Irish Times after the group reported full-year results.
“There’s a possibility that people will look to spend money going further afield when travel reopens. But that will not just be down to the situation in the UK and Ireland at the time, but also the situation in holiday destinations like Spain and Portugal and France. How ready will they be to receive people in the first half of this year?”
Mr Slark said that households may turn their attention to bigger household projects, such as replacing kitchens, as children return to school and people working from home start to go back to their offices.
Grafton Group posted a 3.6 per decline in operating profit to £190.7 million (€221.7 million), as a result of branch closures during the first half of last year amid Covid-19.
Still, the result was better than the group and analysts expected, with Woodie’s and Chadwicks in Ireland and its Selco builders suppliers business in the UK in particular turning in strong performances in the second half of 2020 as they benefitted from pent-up demand.
Woodie’s, reported as the group’s retail segment, posted a 20 per cent surge in revenue to £246.6 million, while its operating profit jumped 86 per cent to £42 million.
“The real star of 2020 was undoubtedly Woodie’s,” group chief financial officer David Arnold told analysts on a call.
Still, the Dublin-based by London-listed group is proposing to cut its dividend by almost 24 per cent to 14.5p as uncertainty over the economic outlook prevails.
“Grafton today is a stronger, more resilient, more digitally and sustainability savvy business than it was before the outset of the Covid-19 pandemic,” said Mr Slark. “We are very encouraged by the group’s strong performance through the second half of last year and while we remain cautious about first half revenue trends in our markets in light of Covid uncertainty, we expect to make further progress in the current year.”
Ahead of estimate
Goodbody Stockbrokers analyst David O’Brien said the group’s operating profit figure was 5 per cent ahead of his estimate, driven by the Irish business and UK merchanting.
“As has become a hallmark of Grafton’s results, cash generation is stellar with net cash (pre-leases) of £182 million well ahead of our £130 million forecast,” Mr O’Brien said.
While Grafton Group has been looking to acquire businesses beyond its existing markets in Ireland, Britain and Netherlands, Mr Slark said that Covid-19 restrictions have forced it to put geographical expansion on the back burner.
“We like to really get to know the management teams of businesses we are looking to acquire,” he said, adding that it will be a “few months yet” before it will be able to lift the pause button. He said the group has the financial flexibility to spend as much as £300 million to £400 million on deals over the coming years, if the right opportunities come along.
Mr Slark said Brexit has, so far, presented very limited supply issues, the group having worked closely with suppliers to get necessary paperwork in order before the end of last year and with most of the its Woodie’s products coming from Europe and Asia, rather than Britain.