HALF YEAR REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018
Revenue up 9% to £1.45 billion – 8% increase in constant currency
Further positive progress towards medium term financial objectives with the operating margin increasing by 50 bps to 6.4% and ROCE by 80bps to 14.0%
Strong organic growth in Irish and Netherlands Merchanting
Excellent performance by Woodie’s Retailing in Ireland and Mortar Manufacturing in the UK
Strong cash flow of £109.7 million from operations
Continued investment to support future profit growth with £120.1 million spend on Leyland SDM acquisition and capital projects
14% increase in dividend in line with progressive dividend policy
Gavin Slark, Chief Executive Officer commented:
“We are pleased to report a strong first half performance across the Group with all segments reporting double digit growth in profitability. Excellent organic growth in key markets has been complemented by the positive impact of self-help measures and development activity. The geographic diversity of our operations continues to be an important strength of the Group. We made further progress towards our medium term financial objectives and invested £120 million on the Leyland SDM acquisition and capital projects to support future growth in profitability.”
Grafton is pleased to report further progress in these half year results with all segments contributing to strong growth in revenue, profitability and earnings per share. Organic growth in the established businesses and a good contribution from the Leyland SDM acquisition were the key drivers of the improved performance. The Group also benefitted from its exposure to multiple geographic markets reporting double digit growth in UK operating profit and growth of over 20 per cent in both Ireland and the Netherlands.
The UK merchanting business strengthened its market position through revenue growth in new Selco branches and the acquisition of Leyland SDM in February. Despite relatively flat underlying activity in the market, the overall business increased profitability from realising self-help benefits complemented by a good contribution from the Leyland SDM acquisition.
The market leading merchanting business in Ireland delivered a strong performance in a favourable market that saw house building increase from a low base and non-residential construction gain momentum.
Strong growth in profitability in the Netherlands specialist merchanting business resulted from good like-for-like revenue growth, supported by positive market conditions, and profit initiatives in the established Isero and Gunters en Meuser businesses.
The Belgian merchanting business, which contributed three per cent of Group revenue, faced reduced demand in its market and operating profit was lower.
The Woodie’s DIY, Home and Garden retailing business in Ireland celebrated its 30th anniversary recording exceptional growth in revenue and profitability with a particularly strong performance from seasonal products. The operating profit margin increased by 190 basis points to 7.5 per cent.
CPI EuroMix, the market leading mortar business in the UK, reported excellent growth in profitability and the manufacturing segments operating profit margin increased by 220 basis points to 23.5 per cent. The success of the business in recent years has made it a significant contributor to Group profitability.
Property profit of £4.5 million was slightly above our expectations and any further disposals in the second half are unlikely to contribute materially to profitability.
The Group continued to be very cash generative with cash flow from operations of £109.7 million in the period. A cash outflow of £120.1 million on the Leyland SDM acquisition and capital projects contributed to a modest increase in net debt to £101.7 million.