Grafton Group Posts Solid H1 Profit Growth Amid Mixed Market Conditions

Grafton Group (LON:GFTU), the international building materials distributor and DIY retailer, reported a 9.5% increase in first-half adjusted operating profit, reaching £91.0 million, surpassing expectations despite a varied market backdrop.

Revenue climbed 10.1% year-over-year to £1,252 million, demonstrating robust top-line growth. Adjusted earnings per share also saw a healthy increase of 6.5%, rising to 35.5p. The group maintained its operating margin at 7.3%, mirroring the prior year's performance.

Grafton's strong balance sheet, featuring £245.8 million in net cash (before lease liabilities), provides substantial financial flexibility for both organic and inorganic growth initiatives.

The company has announced a 2.4% increase in the interim dividend and a further £25.0 million share buyback program, signaling confidence in its financial health and commitment to shareholder returns.

The integration of Salvador Escoda, acquired by Grafton, is progressing well, offering further opportunities for expansion in the attractive Iberian market.

Ireland continues to be a strong performer, with the acquisition of HSS Hire Ireland complementing Chadwicks' hire business, and Woodie's delivering notable results. In the UK, the distribution segment returned to profit growth for the first time since 2021, despite ongoing challenges in the repair, maintenance, and improvement (RMI) market.

Key Growth Drivers:

• Salvador Escoda Acquisition: The integration is boosting performance and opening doors to further Iberian expansion.
• Irish Market Strength: Strategic acquisitions and strong performance from Woodie's drive growth.
• Margin Management: A focus on margin improvement effectively offset inflationary pressures and higher labour costs.

CEO Eric Born commented, “Grafton delivered a resilient performance in the first half, with revenue and profit approximately 10 per cent higher than the same period last year, driven by strong contributions from Spain and Ireland… our strong balance sheet and liquidity leaves Grafton in an excellent position to execute our growth strategy.”

Despite cyclical lows in some regions, Grafton's strategic investments and diversification efforts position it well for future growth.

Full-year adjusted operating profit is expected to align with analysts' forecasts of approximately £185.1 million, but any deviation from this will likely affect short term price action. Investors should closely monitor the upcoming autumn trading data.