DIY and building materials distributor Grafton Group has reported revenues of £1.25 billion for the six months to the end of June, a 10% increase on the same time last year.
In a trading update, the owner of Chadwicks and Woodies said it saw particularly strong growth in its retailing business, adding that sales were also higher in its manufacturing and distribution operations.
Grafton said, despite macroeconomic uncertainty, its outlook remained positive – partly because the ongoing shortage of housing was encouraging spend on renovations and extensions.
The company said its Woodie’s DIY, Home and Garden business in Ireland had a strong start to the year with average daily like-for-like revenue up 7.6% helped by growth in both the number of transactions and average transaction values.
It noted that favourable weather conditions underpinned a particularly strong performance in plants and garden related products with some seasonal demand pulled forward into the spring trading months.
Meanwhile, Chadwicks delivered like-for-like revenue growth of 3.7% in the six month period as trading activity continued to recover from the impact of Storm Éowyn in January.
Grafton said the outlook for growth in the construction sector remains positive, supported by strong policy continuity and backing from the new Government to boost housing completions.
“However, persistent external challenges, including planning delays, utility connection issues, and labour shortages, continue to constrain the pace of supply expansion,” it added.
Average daily like-for-like revenue in its UK Distribution division was 0.2% higher supported by a slight pick up in product price inflation to about 2%.
Grafton said that Repair, Maintenance and Improvement (RMI) demand remains soft, especially in and around the London area, as consumer confidence remains weak, but added that the medium-term fundamentals remain positive, underpinned by the UK government’s plans to significantly increase new housing activity.
Meanwhile, average daily like-for-like revenue in the Netherlands rose by 2.8%, mainly driven by strong branch-related sales supported by growth from sales to national key accounts.
In Finland, IKH’s average daily like-for-like revenue declined by 4.2% in the first half, with performance significantly weaker in May and June.
Grafton also said the integration of Salvador Escoda in Spain continues to progress well. On a pro-forma basis, average daily like-for-like revenue in the period was up 6.9%, supported by the timing of strong project-related sales and favourable market conditions, it added.
Looking ahead, Grafton said that despite macroeconomic uncertainty, the medium-term outlook for the company remains positive, supported by housing shortages across all its markets and an anticipated recovery in RMI demand.
“We continue to invest in and strengthen our market positions supported by a robust balance sheet and strong cash flow generation,” it added.
Eric Born, the chief executive of Grafton Group, said the company was pleased that its trading performance was in line with its expectations for the first half.
“Trading activity recovered strongly after a subdued start to the year however there was a slow down in momentum from mid-May and into June as a spike in geopolitical uncertainty appeared to dent consumer confidence in the period. Though we remain cautious about the timing of a broader recovery, particularly in the UK and Finland where markets remain challenging, we remain very well positioned to capitalise on our market leading positions as the cycle turns,” the CEO said.
“The integration of our platform acquisition, Salvador Escoda, in Spain is progressing apace, with continuing scope to leverage its scale and national presence in what remains a highly fragmented market. We successfully completed the bolt-on acquisition of HSS Hire Ireland in the first half of the year which will broaden the offering of our Chadwicks business in the Republic of Ireland,” he noted.
“We continue to actively evaluate growth opportunities in all our markets and to strengthen our position both organically and, where appropriate, by acquisition using the strength of our free cash flow conversion and balance sheet,” he added.
