Grafton Group tops expectations despite some market weakness

7th Mar 2024 09:53

(Sharecast News) - Grafton Group reported a strong set of final results on Thursday, with the building materials distributor announcing a full-year adjusted operating profit of £205.5m, surpassing analysts' expectations.

The FTSE 250 company said that robust performance was supported by a strong free cash flow of £205.6m, up from £163.3m year-on-year.

Shareholders benefited from the return of £228.3m through dividend payments and share buybacks during the year, with the fourth share buyback programme doubled from £50m to £100m in December.

Additionally, dividend growth reached 9.1% per share for the full year, thanks to a lower number of shares in circulation following buybacks.

Despite market challenges, Grafton said it had maintained a healthy financial position, with net cash standing at £379.7m as of 31 December, before IFRS 16 lease liabilities.

Operationally, Grafton said it continued to benefit from strong underlying demand in its repair, maintenance, and improvement (RMI) and new housing markets.

Geographic diversification and cost reduction measures also played a role in supporting the company's performance.

Although facing lower volumes in challenging distribution markets, the group's Woodie's DIY, Home, and Garden retail business performed well.

Grafton Group said it also saw a strong performance from its UK manufacturing businesses despite volume declines.

Investments totalling £49.3m were made in acquisitions and development capital expenditure, reflecting the company's commitment to growth.

"Despite challenging market conditions, Grafton has succeeded in delivering full year adjusted operating profit above the top end of analysts' forecasts," said chief executive officer Eric Born.

"This is testament to our resilient market leading positions, responsive management teams and portfolio of high-returning businesses.

"We generated excellent free cashflow of £205.6m from operations and returned £228.3m to shareholders during the year in the form of share buybacks and dividends, making a total of £437.2m which we have returned to shareholders over the past two years."

Born said that looking ahead, Grafton expected to continue to benefit from the group's spread across four geographies and exposure to a broad range of end-markets.

"Our strong balance sheet and record of cash generation will stand us in good stead.

"We will allocate capital as required to ensure that the Group's brands continue to support their customers and strengthen their market positions.

"In parallel, we will continue to evaluate opportunities in existing markets and new geographies, building on the progress we have made, with a view to progressing possible growth opportunities that can create enduring value for our shareholders."

While trading conditions were expected to remain challenging, Eric Born said demand fundamentals were supported by a structural under supply of new homes and an ageing housing stock that required upgrading including energy conservation measures.

"With a somewhat improving economic backdrop, we are confident that Grafton is exceptionally well positioned to benefit as the cycle turns, markets normalise and consumer confidence improves."

At 0926 GMT, shares in Grafton Group were down 1.77% at 947.6p.

Reporting by Josh White for Sharecast.com.