Grafton Group profit tops analyst forecasts

(Sharecast News) - Grafton Group reported an adjusted operating profit that slightly exceeded analysts' expectations on Thursday, despite a decline from the prior year.# The FTSE 250 building materials distributor and DIY retailer posted an adjusted operating profit of £177.5m, down from £205.5m in 2023.

It credited its diversified business model and operational discipline for helping it navigate challenging market conditions.

Free cash flow remained robust at £178.2m, representing a 100% conversion rate from adjusted operating profit.

Grafton maintained a strong balance sheet with £272.1m in net cash before lease liabilities, positioning the company for future growth through both organic expansion and acquisitions.

The group recently acquired Salvador Escoda, a Spanish HVAC and renewable energy distributor, for €128m, reinforcing its presence in Iberia.

It said the integration of the acquisition was progressing well.

Grafton's board increased the full-year dividend by 2.8% and approved a new £30m share buyback programme.

The company returned £154.1m to shareholders in 2024 through dividends and share repurchases, down from £228.3m the previous year.

Operationally, Ireland remained a strong performer, while the UK market continued to show signs of stabilisation.

Like-for-like daily sales growth returned in the final quarter against softer prior-year comparatives.

Overall gross margin remained steady, with tight control over overheads and a moderation in product price deflation during the second half of the year.

In addition to the announced results, Grafton confirmed the start of a new share buyback programme, with a maximum expenditure of £30m.

"We are pleased to have successfully navigated challenging market conditions in 2024 to deliver adjusted operating profit slightly ahead of analysts' expectations," said chief executive officer Eric Born.

"This resilient performance was supported by our exposure to different geographies, our diversified customer base and the active management of gross margin and costs.

"Highlights in the period included the strong performance of our Irish businesses and completion of the platform acquisition of Salvador Escoda, whilst also returning £154.1 million to shareholders through share buybacks and dividends."

Born said the integration of Salvador Escoda was continuing to progress well, extending the firm's geographic diversification and exposure to a new growth market, presenting an attractive opportunity to build further scale across the Iberian Peninsula in due course.

"Whilst the timing of recovery in certain geographies remains uncertain, the medium term outlook is positive.

"We will continue to strengthen our positions in existing markets and are excited by the development opportunities ahead."

Reporting by Josh White for Sharecast.com.