Shares in builders merchanting and DIY group Grafton rose today after it reported record operating profits and margins as well as record cash generation for the six months to the end of June.
Grafton also reported a record profit contribution from its Woodie's DIY, Home and Garden retail business in Ireland.
Grafton said its half year revenue jumped by just over 46% to £1.028 billion from £704m the same time last year, while its adjusted profit before tax soared by 340% to £148.6m from £33.8m last year.
It also said its Chadwicks business here experienced exceptional demand in the residential RMI and new build markets from the middle of April.
Half year profitability at Chadwicks was materially higher than the pre-pandemic result for the first half of 2019, the company added.
Chadwicks performed at its highest level of activity in May and June since 2008 which contributed to overall growth in average daily like-for-like revenue of 11.7% for the half year compared to 2019.
Grafton said that Woodie’s "outstanding performance" in the second half of 2020 continued during the first half 2021 as the business delivered record half year revenue and operating profit while more than doubling the operating profit margin to 21.6%.
But it noted that the rate of growth in revenue moderated, as anticipated, following the full re-opening in May of non-essential retail in Ireland that had been closed since the beginning of the year.
The chief executive of Grafton, Gavin Slark, told Business on Morning Ireland that the group is "staggered" by the response of Irish consumers.
"I think as people have spent more time at home, certainly in terms of the DIY market, we've not only seen people spending more money on their homes and their gardens, we've also seen people buying better quality products as well," he said.
"I think we are seeing the benefit of people spending more time in their home and looking to improve that environment whether that be on the DIY side or by using professional trades people," he added.
The group, however, is seeing the impact of the growth in cost inflation.
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"If you look at a business like Woodie's as an example, we bring a lot of product in from the Far East and the cost of moving the product from the Far East to Ireland in terms of shipping containers has increased by more than 10 times over the past 12 months so there is not just the cost inflation in terms of the raw materials but also the cost of transportation," Gavin Slark said.
"We need to make sure we can mitigate against that in the best way possible so that the price for the consumer doesn't get affected too much," he added.
Many businesses across a range of sectors are reporting difficulties recruiting staff, but it has not been a problem in the Irish market.
"We are seeing it as a challenge in the UK in particular, things like drivers which has been pretty well signposted. But in terms of Woodie's and Chadwicks, we have recruited significantly into Woodie's over the past 12 months and I think Woodie's is seen as a good retailer to work for in Ireland as well."
Grafton's board has decided to pay an interim dividend for 2021 of 8.5 pence per share in the amount of about £20.4m.
It said this interim dividend is in line with its progressive dividend policy and reflects both the group's strong profitability and cashflow from operations for the half year and its net cash position at 30 June 2021.
Grafton's continuing distribution business in the UK now comprises Selco, Leyland SDM, MacBlair and TG Lynes after the deal to sell the Traditional Merchanting Business there.
It said the continuing business fully recovered from the impact of the lockdown in the first half of last year and average daily like-for-like revenue in the first half 2021 was 16.7% ahead of the first half of 2019.
There was also a "strong advance" in operating profit in the continuing business and the operating profit margin of 13.3% was up from 10.2% in 2019.
"The strategic investment made to develop the Selco branch network, which accounted for almost three quarters of UK distribution revenue in the half year, was well rewarded as its self-select operating model and well stocked branches were ideally placed to support an increased level of spending on home and garden improvement projects," Grafton added.
In the Netherlands, the Isero ironmongery, tools and fixings business, which was allowed to continue operating as an essential distributor during 2020, reported good growth in revenue and profitability for the half year.
Grafton said that Dutch trading conditions were generally favourable as the economy recovered faster than expected.
Grafton has put together a sustainability agenda in each of its businesses. It plans to hold a capital markets event in November, when it will lay out its full sustainability strategy.
"In every one of our businesses, this really is driven by the colleagues in the business, who see sustainability as a key issue for their employers now. It is certainly front and centre of our thoughts as we sit here today," the CEO said.
