Grafton on course to deliver profit in line with forecasts

(Sharecast News) - Grafton Group said in an update on Thursday that it remains on course to deliver full-year adjusted operating profit in line with expectations after reporting an 11.5% rise in revenue for the 10 months ended 31 October, supported by acquisitions and solid underlying growth across several key markets.

Group revenue reached £2.13bn, up from £1.91bn a year earlier, or 11.2% higher at constant currency.

The FTSE 250 company said the performance benefited from the contributions of HVAC distributor Salvador Escoda, acquired late last year, and five months of trading from HSS Hire Ireland.

Like-for-like revenue growth moderated in recent months, with average daily revenue up 1.6% in the four months to October compared with 2.4% in the first half, reflecting a softening in market activity.

Ireland delivered a 3.3% like-for-like increase in the period, though Chadwicks and Woodie's saw slightly weaker activity in September and October.

Grafton said the broader Irish construction outlook remains positive, supported by strong government backing and the updated National Development Plan, but recent construction PMI data and a dip in housing starts mirror the earlier slowdown in planning consents.

It added that the country's acute housing shortage continues to underpin medium-term demand.

UK distribution revenue fell 0.5% on a like-for-like basis as activity weakened in October, which the company said was likely influenced by consumer and homeowner uncertainty ahead of the November Budget.

The group's UK manufacturing businesses performed more strongly, with like-for-like revenue up 11.1%, helped by modest volume gains and weak comparatives.

In the Netherlands, like-for-like revenue rose 0.7% as market momentum eased, with softer branch and project-related sales partly offset by gains from national key accounts.

Grafton said that in Spain, where it had integrated Salvador Escoda, pro-forma like-for-like revenue grew 5.7% on the back of a strong summer campaign in air-conditioning and ventilation products and supportive market conditions.

Finland remained weak, with IKH's revenue down 6.4%, although the rate of decline improved compared with earlier in the year.

The company completed its seventh share buyback programme on 7 November, repurchasing 2.74 million shares for £25m.

Since May 2022, Grafton had returned £428.3m to shareholders through the buyback of 49.28 million shares, equivalent to 20.5% of the shares in issue at the start of the programme.

"The strength of Grafton's business model is evident in our performance year to date," said chief executive Eric Born.

"Overall revenue increased by over 11 per cent supported by continuing growth in building materials distribution in Ireland, Spain and the Netherlands and in retailing and manufacturing, helping to offset market weakness in the UK and Finland."

Born said that progress in the period meant Grafton was on track to deliver adjusted operating profit for the full year in line with expectations.

"Though momentum has slowed somewhat in the period, the outlook for Grafton remains positive, supported by structural tailwinds, strong market positions in all geographies, significant recovery potential in the UK and Finland, a robust balance sheet and encouraging acquisitions pipeline."

At 1016 GMT, shares in Grafton Group were down 4.1% at 913p.

Reporting by Josh White for Sharecast.com.