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Grafton Group Reports Strong Second Half Recovery

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Grafton Group plc ("Grafton"), the building materials distributor and DIY retailer with operations in the UK, Ireland and the Netherlands, is pleased to announce its final results for the year ended 31 December 2020. 

Financial Highlights

• Revenue in continuing operations down 6% to £2.5 billion, reflecting the impact of first half branch closures in response to the pandemic

• Operating profit in continuing operations down 6% to £193.3 million and 4% before property profit, exceeding management expectations outlined in January trading update

• Strong recovery in profitability in second half with adjusted operating profit up 47%, reflecting robust residential repair, maintenance and improvement markets in the UK and Ireland:
- Exceptional performance by Woodie’s DIY, Home and Garden business in Ireland
- Particularly strong second half recovery by Chadwicks in Ireland and Selco in the UK
- Strong second half recovery in Buildbase aided by increased margin and cost control

• Netherlands business traded successfully through the pandemic and Polvo acquisition increased scale and profitability

• Over 90% of Group profit derived from businesses with reported operating margin in excess of Group’s 7% target

• Record cash generated from operations of £377.7 million included the benefit of strong day-to-day management of working capital

Operational Highlights

• Safe trading environment maintained in branches and stores for customers and colleagues

• Accelerated our investment into e-commerce capabilities

• Three acquisitions completed in the second half of 2020 and another two this year, in line with our strategy of acquiring specialist high quality businesses with attractive returns

• Good progress advancing sustainability agenda

Gavin Slark, Chief Executive Officer of Grafton Group plc commented:

“Grafton today is a stronger, more resilient, more digitally and sustainability savvy business than it was before the outset of the Covid-19 pandemic. That evolution reflects not just the commitment and hard work of our colleagues and the agility and resolve of our businesses in a challenging year, but also our multi-year transformation and investment journey principally targeting the more resilient construction sectors of repair, maintenance and improvement, underpinned by an improved customer proposition across all of our businesses.

We are very encouraged by the Group’s strong performance through the second half of last year and while we remain cautious about first half revenue trends in our markets in light of Covid uncertainty, we expect to make further progress in the current year and are confident that our 11,000 colleagues will continue to deliver for our customers.

We finished last year in an excellent financial position that provides a strong platform for the future growth and development of our Group.”

Commentary & Analysis - Steve Collinge

Grafton has delivered a good set of preliminary results, with full year Operating profit  around 5% ahead of analysts expectations at £193.3m, driven by an exceptional profit performance at Woodies (+79%) and good profit growth in the Netherlands following the Polvo acquisition.

The UK housing RMI market benefited in 2020 from pent-up demand, home working and reduced spending on travel, leisure and hospitality. We believe that this trend is likely to continue in the coming months given the phased exit from lockdown with longer-term demand driven by broader economic fundamentals. In Ireland, the lifting of the current restrictions on the construction sector should see activity in Chadwicks revert to the pre-lockdown level. The revenue trends in the DIY, Home and Garden market seen in the final months of last year have continued in the current year and the near-term outlook remains positive for Woodie's.

See the full results presentation here.

Source : Grafton Group

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25 February 2021

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