REG - Grafton Group PLC - Trading Update

GraftonAnnouncement

14/01/2025 07:00

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RNS Number : 1449T  Grafton Group PLC  14 January 2025

Grafton Group plc

Trading Update

Group traded in line with expectations for 2024

 

Grafton Group plc ("Grafton" or "the Group"), the international building
materials distributor and DIY retailer, issues this trading update for the
period from 1 November 2024 to 31 December 2024, ahead of reporting full year
results for the year ended 31 December 2024, on 6 March 2025.

 

Highlights

 

·    Full year traded in line with expectations(1) despite challenging
macro backdrop in certain markets

·   Group returned to average daily like-for-like sales growth of 1.0 per
cent in final two months of 2024

·    Strong performance in Ireland while the rate of decline continues to
ease in the UK

·    Cost discipline remains a key focus in the face of cost inflation and
a muted outlook for near term growth

·    Integration of the Salvador Escoda platform acquisition in Spain is
on track

 

Eric Born, Chief Executive Officer of Grafton Group plc commented:

 

"We are pleased to have delivered in line with expectations in 2024, despite a
challenging market backdrop in several of our markets, particularly the UK and
Finland. Our Irish businesses continue to perform strongly with a positive
outlook for continuing growth.

 

"The integration of Salvador Escoda is progressing well with this platform
further extending our geographic diversification and exposure to a new growth
market. Grafton will support the existing management team to capitalise on
ongoing organic expansion and, in due course, the execution of inorganic
opportunities in the attractive and fragmented Iberian marketplace.

 

"Whilst the timing of recovery in certain geographies remains uncertain, our
medium term outlook is positive, supported by strong demand fundamentals
underpinned by housing shortages in many of our key markets."

 

Trading and Performance

 

Group revenue for the year was £2.28 billion (2023: £2.32 billion), down 1.6
per cent from the prior year and broadly in line in constant currency.  A
weaker euro during the 2024 financial year has slightly reduced the level of
reported results as compared to the prior financial year.

 

Since our last trading update at the end of October 2024, overall conditions
improved slightly in the last two months of the year compared with the same
period last year.  Average daily like-for-like revenue was 1.0 per cent
higher, in constant currency, in the period (by comparison with 3.4 per cent
lower in October year to date) supported by growth in Ireland, Finland and in
our manufacturing segment.  As expected, against easier comparators in the
second half of last year when sales were more acutely impacted by lower
volumes and product deflation, the rate of decline in UK Distribution has
continued to moderate approaching year end.

 

The following table shows the changes in average daily like-for-like revenue
and in total revenue compared to the same periods in the prior year.

 

 

 Segment                 Average Daily Like-for-Like Revenue Change             Total Revenue Change

                          in Constant Currency
                         Constant                          Sterling

                         Currency
                         Ten Months       Two Months       Year to              Year to              Year to

                         to 31 October    to 31 December    31 December 2024     31 December 2024     31 December 2024

                         2024             2024
 Distribution
      - Ireland          1.0%             5.1%             1.6%                 3.0%                 0.3%
      - UK               (6.4%)           (3.1%)           (5.9%)               (4.6%)               (4.6%)
      - Netherlands      (1.6%)           (4.0%)           (2.0%)               (1.3%)               (4.0%)
      - Finland          (6.6%)           2.3%             (5.2%)               (3.1%)               (5.7%)
 Retailing               2.9%             6.4%             3.6%                 3.9%                 1.1%
 Manufacturing           (18.0%)          4.7%             (15.0%)              (9.8%)               (10.0%)
 Group                   (3.4%)           1.0%             (2.7%)               0.0%                 (1.6%)

 

Distribution

 

In Ireland, Chadwicks delivered like-for-like revenue growth of 1.6 per cent
during the year, which benefitted from a strong trading performance in the
last two months with average daily like-for-like revenue up 5.1 per cent.
Materials pricing in the period was broadly flat on the same period last year
as timber and steel pricing continued to stabilise.  Housing completions in
2024 are now expected to be broadly in line with 2023 after a pick-up in
activity in the final months of the year. The outlook for growth in
construction remains positive in Ireland with an increase in housing supply
being a key priority for the incoming government.

 

In the UK, like-for-like revenue declined 5.9 per cent during the year
although was down by 3.1 per cent in the period as RMI demand continues to be
weak.  Materials prices in Selco were broadly flat in the period with timber
prices trending positively in December for the first time since April 2023.
Consumer confidence in the UK has weakened in recent weeks and the outlook for
short term growth in the economy remains subdued. The medium term fundamentals
are still strong supported by Government plans to increase new housing
activity.

 

In the Netherlands, like-for-like revenue declined by 2.0 per cent during the
year although was down by 4.0 per cent in the last two months as early signs
of recovery in the third quarter did not continue. Weak demand and a slowdown
in project related activity contributed to lower sales in comparison to the
prior year.  Nevertheless, the outlook for construction in 2025 and beyond is
improving with housing transactions and house prices trending strongly ahead
of the prior year, constrained by a shortage of houses for sale.

 

In Finland, IKH's average daily like-for-like revenue declined by 5.2 per cent
during the year although was 2.3 per cent higher in the period despite
continued weakness in the domestic economy which is slowly emerging from
recession. Growth in sales in the final months of the year was largely due to
strong seasonal sales of winter related products, sell through of aged
inventory and higher online sales.

 

The integration of Salvador Escoda, the recently acquired leading distributor
of air conditioning, ventilation, heating, water and renewable products in
Spain, is on track. The existing management team have remained with the
business and are being supported under Grafton ownership to drive further
growth in the business.  On a pro-forma basis, in the last two months of the
year, average daily like-for-like revenue was down 5.5 per cent with some
disruption related to flooding in the Valencia region in November.

Retailing

 

Woodie's DIY, Home and Garden business in Ireland had a strong end to the year
with average daily like-for-like revenue up 6.4 per cent in the period helped
by growth in both the number of transactions and average transaction values.

 

Manufacturing

 

In Manufacturing, average daily like-for-like revenue was 4.7 per cent higher
in the period with all businesses showing growth against easier comparators.
CPI Mortars reported stronger sales supported by a slowly recovering new
housing sector.

 

Share Buyback

 

A fifth programme was launched on 29 August 2024 to buy back ordinary shares
in the Company for an aggregate consideration of up to £30 million. The Group
had purchased £28.39 million shares by the close of business on 31 December
2024 and the programme completed on 8 January 2025.

 

Cash of £371.7 million has been returned to shareholders through share
buybacks completed between 9 May 2022 and 31 December 2024 reflecting the
repurchase of 43.08 million ordinary shares at an average price of £8.63 per
share. The number of shares bought back by the end of the year amounted to
17.9 per cent of the shares in issue when the first buyback programme
commenced on 9 May 2022.

 

Outlook

 

The Group delivered a trading performance in the full year in line with
expectations(1), despite weak market conditions outside of Ireland and the
pressure of continued cost headwinds experienced across its operations.

 

Whilst trading in November and December showed modest growth overall, helped
by easier comparators and a strong performance in Ireland, we remain cautious
in terms of the timing of a broader recovery. Against the backdrop of
relatively insipid economic growth across many of our key markets, we are not
anticipating a significant pick up in volumes this year. While elements of
product deflation affecting 2024 have stabilized, growth in product pricing is
likely to be very modest against such a backdrop and likely to be lower than
the general level of cost inflation being imposed on the business,
particularly as regards labour costs. We continue to manage our business with
a tight focus on efficiency and cost control.

 

Notwithstanding the potential macro economic challenges this year, the medium
term fundamentals continue to remain positive with housing shortages across
all of our geographies and the natural investment cycle in RMI likely to
become increasingly supportive as the over-investment made by consumers in
2020 and 2021 starts to require further upgrading. The Group ends the year in
a strong financial position, with a healthy balance sheet, and remains well
positioned to continue to invest in organic and inorganic opportunities to
support future growth and development.

 

(1) Grafton compiled consensus Analysts' forecasts for 2024 show operating
profit (pre property profits) of circa £169.1 million

 

Ends

 

 

For further information please contact:

 Investors                                   Media

 Grafton Group plc  +353 1 216 0600          Murray         pwalsh@murraygroup.ie (mailto:pwalsh@murraygroup.ie)

 Eric Born          Chief Executive Officer  Pat Walsh      +353 1 498 0300/+353 87 226 9345
 David Arnold       Chief Financial Officer
                                             Burson         GraftonGroup@buchanancomms.co.uk

                                             Buchanan

                                             Helen Tarbet   +44 (0) 7872 604 453

                                             Toto Berger    +44 (0) 7880 680 403

 

About Grafton

 

Grafton Group plc is an international distributor of building materials to
trade customers and has leading regional or national positions in the
distribution markets in the UK, Ireland, the Netherlands, Finland and Spain.
Grafton is also the market leader in the DIY, Home and Garden retailing market
in Ireland and is the largest manufacturer of dry mortar and bespoke timber
staircases in the UK.

 

Grafton trades from circa 450 branches and has circa 10,000 colleagues. The
Group's portfolio of brands includes Selco Builders Warehouse, Leyland SDM,
MacBlair, TG Lynes, CPI EuroMix and StairBox in the UK; Chadwicks and Woodie's
in Ireland; Isero and Polvo in the Netherlands; IKH in Finland and Salvador
Escoda in Spain.

 

 

For further information visit www.graftonplc.com (http://www.graftonplc.com)

Forward-looking statements

This press release may include forward-looking statements. These
forward-looking statements can be identified by the use of forward-looking
terminology, including the terms "outlook," "believe(s),"expect(s),"
"potential," "continue(s)," "may," "will," "should," "could," "would,"
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and other words and terms of similar meaning or the negative versions of such
words or other comparable words of a future or forward-looking nature. These
forward-looking statements include all matters that are not historical facts
and include statements regarding Grafton's or its affiliates' intentions,
beliefs or current expectations concerning, among other things, Grafton's or
its affiliates' results of operations, financial condition, liquidity,
prospects, growth, strategies and the industries in which they operate. By
their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. Readers are cautioned that forward-looking statements are
not guarantees of future performance and that Grafton's or its affiliates'
actual results of operations, financial condition and liquidity, and the
development of the industries in which they operate may differ materially from
those made in or suggested by the forward-looking statements contained in this
press release. In addition, even if Grafton's or its affiliates' results of
operations, financial condition and liquidity, and the development of the
industries in which they operate are consistent with the forward-looking
statements contained in this press release, those results or developments may
not be indicative of results or developments in subsequent periods. The
directors do not undertake any obligation to update or revise any
forward-looking statements, whether because of new information, future
developments or otherwise.

 

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