Grafton reports higher revenues but UK business sees dip

Building materials supplier and DIY retailer Grafton‘s UK business has seen demand drop back from ‘exceptional’ levels seen during the pandemic.

The group, which owns builders merchant Selco and decorators’ specialist Leyland in the UK, said revenues from its continuing operations rose 12 per cent to £1.15billion in the first half of the year.

But like-for-like revenues growth was lower at 3.4 per cent, as sales declined by 2 per cent in the second quarter, after 10.4 per cent growth in the first quarter. 

Decorators’ merchant Leyland is slowly benefiting from a ‘gradual’ return of workers to their offices and ‘investment in the leisure sector’, Grafton said

In Ireland, where it operates Woodies DIY chain and builders merchants Chadwicks, performance was ‘exceptionally strong’ despite trade falling back from the heights of the pandemic and rising prices, particularly for steel and timber.

The company said strong demand was driven by increased spending on materials for house renovations, housebuilding, and an increase in non-residential private and public sector construction.

However, UK performance of its distribution business was more subdued, ‘against strong comparators in 2021’, with Leyland slowly benefiting from a ‘gradual’ return of workers to their offices and ‘investment in the leisure sector’.

UK distribution revenues dipped by 0.2 per cent in the first half. In comparison, the Irish business posted revenue growth of 20 per cent, while the Netherlands saw a 7.5 per cent spike.

‘There was some unwinding of higher margin revenue from retail customers in the distribution businesses in the UK and Ireland in the first half of last year that was driven by exceptional demand for home and outdoor space improvements,’ the group explained.

Retail revenues fell sharply compared to last year –  by 23 per cent – but the company stressed they were still well ahead of pre-pandemic levels. 

‘Customers continued to be strongly engaged in DIY, home and garden projects and revenue for the half year was ahead of the pre-pandemic level in 2019 by 25.6 per cent,’ Grafton said.

Grafton said it would not change its profit outlook ‘at this stage’ despite increased global uncertainty.

Grafton shares were down 3.6 per cent to 736.50p in morning trade on Tuesday. They have fallen by 40 per cent since last year. 

Departing chief executive Gavin Slark, who is standing down at the end of the year, said the business was ‘in a very strong financial position’.

‘The Group’s overall trading performance was good against a very strong comparator in the first half of last year and our operating profit expectations for the full year are unchanged. 

‘Notwithstanding current macro-economic risks, our portfolio of resilient high performing businesses has the flexibility to adapt to changing circumstances and is well positioned to outperform.”

‘Grafton is in a very strong financial position and, with a pipeline of acquisition opportunities, the Group is well positioned to make continued progress on the delivery of its strategy.’