Table of Contents
- The construction materials sector is affected by high interest rates and weak consumer strength
Grafton Group is set to cut more jobs this year after profits fell by more than a fifth in the first half amid a weak UK property market.
The Dublin-based building materials company posted a 20.9 per cent drop in adjusted operating profit to £83.1m for the six months to June 30, while revenue fell 4.4 per cent to just over £1.1bn.
FTSE 250-listed Grafton told investors on Thursday that the decline “reflects weaker market conditions” outside its home market of Ireland.
In addition to its online offering, Grafton owns four brick-and-mortar businesses: Woodie’s DIY, Civils and Lintels, Selco and Jacksons.
The building materials sector has seen a substantial slowdown in trading as higher interest rates and weak consumer strength have hit demand for new homes and home improvements, with rivals Marshalls, Ibstock and Travis Perkins also reporting falling profits.
Grafton said: ‘In the UK, our markets remained weak and repair, maintenance and upgrade volumes were under pressure due to lower household discretionary spending.
‘Trade was also negatively impacted by wet weather during the important spring trading months.’
However, the company said its UK manufacturing business had shown a “resilient” performance thanks to “active cost management to partially offset volume declines in the UK housing market”.
Cost base management has led to job losses, mainly within Grafton’s UK distribution business.
Grafton said it would “continue” to reduce its workforce during the second half of the year.
But while Grafton remains “cautious” on the UK in the near term, he said there are “positive signs of an improvement in consumer confidence due to reductions in inflation and interest rates, as well as an expected increase in real disposable income”.
He added: ‘In addition, the new UK Government’s determination to rapidly implement policies to encourage housebuilding should boost activity and increase construction demand, which should improve the prospects for a recovery in volumes across our business.
Chief Operating Officer Eric Born said: ‘While near-term uncertainties remain, our medium-term outlook remains positive, supported by strong demand fundamentals, particularly in demand for new homes as markets normalise and consumer confidence improves.
‘At this point in the year, and with the important autumn trading season still ahead, we continue to anticipate delivering adjusted operating profit for 2024 in line with analyst expectations.’
Grafton shares rose 0.9 percent to 10.60 pounds in early trading.
DIY INVESTMENT PLATFORMS
AJ Bell
AJ Bell
Easy investment and ready-to-use portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free investment ideas and fund trading
interactive investor
interactive investor
Flat rate investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading commissions
Trade 212
Trade 212
Free treatment and no commissions per account
Affiliate links: If you purchase a product This is Money may earn a commission. These offers are chosen by our editorial team as we believe they are worth highlighting. This does not affect our editorial independence.