Grafton merchanting grows despite ‘softer market’ in the UK

Revenue grew for Grafton in the first half of 2019, up 2% to £1.4 billion (3% in constant currency).

The owner of Selco, BuildBase, Woodies and – as of April this year – Polvo, saw good growth in Netherlands and operating profit margin was ahead in UK merchanting business in what the group described as a softer market. The merchanting and retailing businesses in Ireland in particular were key contributors to growth with operating profit advancing 11.7% in constant currency.

Merchanting

Selco’s operating profit advances were partially offset by competitive conditions in the traditional builders merchanting business.

Aside from openings and upgrades, Selco has a new delivery-hub in Edmonton to undertake deliveries for four branches in North East London, effectively freeing up capacity in those branches and improving H&S standards in those branches, as well as customer experience, according to Grafton. A new “Click ‘N’ Deliver” service was introduced in April for bulky materials like sand, cement, timber and sheet materials, complementing the existing Click & Collect service.

Ireland’s merchanting business increased revenue organically thanks to the residential RMI market growth and expansion in house building. Operating profit was up 12.5%.

Belgium also saw growth in revenue and profitability but – following a strategic review – Grafton decided to sell the business. A conditional agreement for the sale has been entered into.

Brexit

Grafton tackled Brexit in the H1 2019 statement: “The central scenario for our forecasts is that there is a sensibly negotiated Brexit agreed between the UK and the EU though we expect to experience continued market uncertainty until a clear resolution is agreed. We will continue to manage stock levels as a principal tool to mitigate the potential risk of disruption. In the event of a ‘hard’ Brexit we would expect the UK and Irish macro economic environment to weaken in the short term compared to our central scenario.”

CEO Gavin Slark added: We made good strategic and operational progress in the first half of 2019 which supports the ongoing improvement in the underlying quality of our business.  Despite the uncertainty in the UK, the Group continues to benefit from the strength of Selco’s market position and our higher returning, growth businesses in Ireland and The Netherlands. Our focus remains on delivering growth in shareholder value and a great experience for our customers and colleagues.”