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Grafton Group’s Earnings Call: Profit Growth and Challenges

Grafton Group’s Earnings Call: Profit Growth and Challenges

Grafton Group plc ((GB:GFTU)) has held its Q2 earnings call. Read on for the main highlights of the call.

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Grafton Group plc’s recent earnings call painted a generally positive picture, with the company showcasing a return to profit growth, strong capital returns, and robust performances in Ireland and Spain. Despite these highlights, challenges in Finland and ongoing weakness in the UK market, particularly in the RMI demand, were noted as areas of concern.

Return to Profit Growth

Grafton Group reported a significant milestone with a nearly 10% increase in adjusted operating profit and a 6.5% rise in adjusted earnings per share. This marks a return to profit growth, a positive development for the company after several challenging years.

Strong Capital Returns

The company demonstrated its commitment to shareholder value by returning GBP 81 million through dividends and share buybacks. Additionally, Grafton announced a new buyback program worth GBP 25 million, further emphasizing its strong capital return strategy.

Revenue Growth

Grafton Group’s revenue reached GBP 1.25 billion, marking a 10.1% increase compared to the same period last year. The company also improved its gross margin by 60 basis points, reflecting efficient operational management.

Strong Performance in Ireland and Spain

The Irish distribution business delivered a 7.3% increase in adjusted operating profit, while Spain’s Salvador Escoda achieved a 6.9% increase in like-for-like revenue. These regions continue to be strong performers for Grafton Group.

Challenges in Finland

In Finland, Grafton faced a revenue decline of 5.8%, coupled with significant gross margin pressure and operational challenges. This highlights the need for strategic adjustments in this market.

Weaker UK Market Conditions

The UK market, particularly in London and the Southeast, continues to struggle with weak RMI demand, impacting Grafton’s distribution business. This remains a critical area for the company to address.

Forward-Looking Guidance

Looking ahead, Grafton Group remains optimistic about its financial performance, with expectations of continued profit growth. The company reported strong free cash conversion and a solid balance sheet with net cash of GBP 246 million at the end of June. While growth is anticipated in Ireland and Spain, the outlook for the UK and Finland remains cautious due to challenging market conditions.

In summary, Grafton Group’s earnings call reflects a positive sentiment with a return to profit growth and strong capital returns. While the company faces challenges in Finland and the UK, its robust performance in Ireland and Spain provides a solid foundation for future growth.

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