Grafton Group H1 Earnings Call Highlights

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Thu, September 3, 2026 at 1:02 PM GMT+3 7 min read

GFTU.L -0.30%

Key Points

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Strong first-half financial performance: Revenue rose 6.7% to £1.34 billion, adjusted operating profit increased 8.2% to £98.5 million, and adjusted EPS grew 10.8% to 39.4 pence. Grafton raised its interim dividend to 11 pence and maintained full-year profit guidance of £190 million to £200 million.
Acquisitions and regional growth offset weakness in Great Britain: Cygnum and Mercaluz added £56 million in revenue and £10.4 million in adjusted operating profit, while Ireland and Iberia delivered solid growth. Great Britain revenue fell 5.1% and adjusted operating profit declined nearly 30% amid weak construction and home-improvement demand.
Outlook and capital position remain solid: Grafton generated £70.7 million in free cash flow, ended June with lease-adjusted net debt below one times EBITDA, and returned £75.5 million to shareholders through dividends and buybacks. Management expects continued strength in Ireland and Spain, but broadly unchanged conditions in Great Britain and the Netherlands.

Grafton Group (LON:GFTU) reported higher first-half revenue, profit and adjusted earnings per share, supported by acquisitions and stronger trading in Ireland and Iberia, while weak construction and home-improvement markets continued to weigh on its Great Britain operations.

The company said revenue rose 6.7% year over year to £1.34 billion, while adjusted operating profit increased 8.2% to £98.5 million. Adjusted operating margin before property profits improved by 10 basis points to 7.4%. Adjusted earnings per share rose 10.8% to 39.4 pence.

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Management increased the interim dividend by about 2% to 11 pence per share and reaffirmed full-year adjusted operating profit guidance of £190 million to £200 million.

Acquisitions Drive Sales and Profit Growth

CFO David Arnold said acquisitions were the principal contributor to first-half sales growth, adding £56 million in revenue and £10.4 million in adjusted operating profit. The company completed two acquisitions during the period: Cygnum, an Irish supplier of made-to-order offsite timber-frame solutions, and Mercaluz, a Spanish distributor focused primarily on heating, ventilation and air-conditioning products.

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Mercaluz contributed £6.5 million of the acquisition-related operating-profit increase, benefiting from its inclusion during May and June, which management described as seasonally important months for the business. Arnold said Mercaluz's first-half operating margin was "super normal" because of that seasonal timing, though he said the business would ordinarily be expected to produce a mid-teens margin.

In Ireland, Cygnum's first-half sales increased 18.3% on a pro forma basis from the prior year, driven by production capacity added shortly before the acquisition completed. Management said Cygnum expands Chadwicks' offering in the new-build housing market and provides procurement and customer-access opportunities.

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The company said integration of both businesses was progressing well and that their trading was in line with expectations. Mercaluz's average daily like-for-like sales rose 6.7% on a pro forma basis during May and June.

Ireland and Iberia Offset Great Britain Weakness

The Island of Ireland segment delivered revenue of £579.4 million, up 7.5% at constant currency, with like-for-like revenue up 3.4%. Adjusted operating profit rose 7.3% at constant currency to £60.6 million. Arnold said Chadwicks traded strongly, while Woodie's recorded modest growth against difficult comparisons. Trading improved in the second quarter as construction activity increased and weather conditions improved.

Grafton continued to expand its Irish network, opening a Woodie's store in Ennis, County Clare, in June and a Chadwicks specialist hub in Ravenhill, Belfast, in July.

Iberia was the company's fastest-growing segment. Revenue increased 35.5% at constant currency to £145.1 million, while adjusted operating profit reached £14.1 million, representing a 9.7% margin. Salvador Escoda generated 6.6% average daily like-for-like sales growth, aided by demand across air conditioning, refrigeration and ventilation products and record first-half temperatures in Spain.

Salvador Escoda opened five branches in the first half, with two additional openings planned during the year. Management said the branches generally require modest investment and are typically expected to contribute to profit within 12 months. Mercaluz also opened one branch after joining the group.

By contrast, Great Britain revenue declined 5.1% to £367.2 million, with average daily like-for-like revenue also down 5.1%. Adjusted operating profit fell almost 30% to £17.5 million as lower volumes hurt operating leverage.

Arnold said U.K. private repair, maintenance and improvement activity and new-build housing markets weakened further amid affordability pressures and low consumer and business confidence. While Great Britain businesses achieved a slight improvement in gross margin through pricing discipline, overheads and competitive pressure remained challenging.

Management said it would continue to assess the Great Britain estate site by site, including whether consolidation would make economic sense. It remains committed to the market over the long term and is investing in a centralized Selco distribution center expected to be operational next year. Arnold said the facility should become a significant efficiency improvement once fully operational in 2028 and 2029.

In Northern Europe, revenue increased 0.7% at constant currency to £244.2 million. Like-for-like sales rose 0.8%, as an improving performance in Finland offset weaker conditions in the Netherlands. Adjusted operating profit increased to £16.3 million, with the margin unchanged at 6.7%.

Cash Flow, Capital Returns and Outlook

Grafton generated £70.7 million in free cash flow, equal to 72% of adjusted operating profit. The company invested £22 million in net working capital, reflecting product-price inflation and inventory measures taken in response to developments in the Middle East, and spent £23 million on replacement and development capital expenditures.

Net debt stood at £315 million at the end of June, or just under one times lease-adjusted net debt to EBITDA. The company returned £75.5 million to shareholders through dividends and buybacks, including £25.6 million in share repurchases during the first half.

Arnold said product-price inflation was broadly flat in the first quarter but accelerated during the second quarter, particularly in heavy building products in Great Britain and Ireland. He said inflation in those categories was running at roughly 3% to 4% in the second quarter and was closer to 4% exiting the period.

For the second half, management expects continued strong performance in the Republic of Ireland and Spain. It expects market conditions in Great Britain and the Netherlands to remain broadly similar to the first half, while Finland's gradual recovery is expected to continue. The company said the U.K. autumn budget could be important for consumer confidence.

Management reiterated its longer-term objectives of more than £850 million in cumulative free cash flow through 2030, adjusted EPS compound annual growth above 10%, and return on capital employed of at least 13% in normalized markets by 2030.

About Grafton Group (LON:GFTU)

Grafton Group plc engages in the distribution, retailing, and manufacturing businesses in Ireland, the Netherlands, Finland, and the United Kingdom. Its Distribution segment distributes building materials, paint, tools, ironmongery, fixings, and accessories, workwear and PPE, and spare parts; materials and plant for mechanical services, heating, plumbing, and air movement; and trade, DIY, and self-build markets with building materials, timber, doors and floors, plumbing and heating, bathrooms, and landscaping products under the Selco, Leyland SDM, Chadwicks, MacBlair, Isero, Polvo, Gunters en Meuser, TG Lynes, and IKH brands.

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