Grafton Group plc delivered revenue of £1,137m in the the six months ended 30 June 2024, 4.4% down on the same period in 2023.
Financial highlights
- First half adjusted operating profit was £83.1million (H1 2023: £105.1million) reflective of weaker market conditions outside the Group’s home market in Ireland.
- Cashflow generated from operations of £161.1 million (H1 2023: £191.3 million).
- £104.8 million (H1 2023: £132.7 million) returned to shareholders in dividend payments and share buybacks in the first half.
- New share buyback programme for up to £30m will commence on 29th August, complementing dividend growth of 5.0%.
- Adjusted return on capital employed of 11.1%.
Operational Highlights
- All markets experienced sales declines, with Finland at -7.6%, the UK at -5.9% and The Netherlands at -5.1% the toughest areas.
- Ireland at -0.3% and Retailing at -0.4% has the best sales performances and both grew Adjusted Operating Profit.
- Adjusted Operating profit in the UK declined by 47.1%, in Finland by -32.9% and The Netherlands by -25.7%.
- Overall Group gross margin broadly unchanged.
- Product price deflation had a negative impact overall on sales in the Irish and UK Distribution businesses but the adverse effect is moderating.
- Volumes lower across the UK, Netherlands and Finland
Commentary on markets:
Ireland
- Positive growth outlook
- Strong government support for new housing continues – new commencements reached post GFC high in H1
- Positive trading performance in H1 as volumes grew by 5.4% offsetting price deflation of 4.9%
- Gross margin improved supported by active price management
- New bulk distribution centre opened in East Wall in H1
United Kingdom
- Frank Elkins appointed as CEO of Selco & GB Distribution
- Continued price deflation and volume declines in H1 due to weak RMI demand and wet weather
- Gross margin was 60bps lower – competitive market & investment in pricing to deliver strong value proposition
- Tight cost control with actions implemented in 2023 continuing to generate savings; new headcount reductions in Selco in H1
- Leyland SDM opened its 34th store in South Kensington
The Netherlands
- Continued pressure on gross margins due to price declines in several product categories and change in sales mix
- Pressure on operating cost base particularly as a result of wage inflation driven by collective labour agreements
- Two new branches opened in February 2024 are performing wel
Finland
- Mika Salokangas has now assumed operational responsibility for IKH
- Performed well against overall Finnish market as economy remains in mild recession
- Active measures being taken to reduce costs to partially offset
declines in gross margin
- Focus on reducing inventory – €5.8m reduction in H1
- New branch opened in Helsinki – takes own store network to 15
Eric Born, Chief Executive Officer Commented:
“This has been a robust first half performance despite challenging conditions in several of our markets. We are pleased with the performance and outlook of our Irish businesses in particular, and we continue to drive efficiencies and innovations in our other markets to capitalise on what we see as significant positive operating leverage opportunities as these markets turn.
“Whilst uncertainties remain in the short term, our medium-term outlook remains positive, supported by strong demand fundamentals, not least in the demand for new housing as markets normalise and consumer confidence improves. At this point in the year, with the important Autumn trading season yet to come, we continue to anticipate delivering adjusted operating profit for 2024 in line with analysts’ expectations.
“The Group has continued to be highly cash generative through a challenging period in the cycle, which has enabled us to return cash to shareholders whilst preserving a strong balance sheet to invest in organic and inorganic development opportunities. We continue to actively pursue opportunities to strengthen our existing market positions as well as platform acquisitions, and we remain optimistic that we can execute on some of these opportunities in the near term.”
Source: Grafton Group