Builders materials and DIY retailer group Grafton has reported a 9% increase in revenue for the 2022 financial year to £2.3 billion.
Pre-tax profits were up 0.8% to £251.7m while there was a near 2% decline in operating profit to just below £286m.
The parent of retailers Woodie's and Chadwicks said group trading returned to more normal levels following the exceptional rise in spending on the home during the pandemic and supply chain pressures eased considerably.
"Building materials prices rose sharply for the second successive year as the market absorbed increases in the cost of producing energy intensive products," the Group said in its results commentary.
It said certain product categories, including timber and steel, experienced price deflation following a period of soaring prices caused by a spike in global demand.
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A reduction in discretionary spending on the home brought about by a decline in disposable incomes and rising interest rates was apparent across all of the group's geographies, it said.
Grafton's Irish operations experienced what it called an 'excellent performance' in its distribution business.
Chadwicks, a disitributor of building materials and the group's most profitable business, delivered a very strong performance in 2022. Revenue for the year rose by 13.6% to £618.3m from £544.3m in 2021 while adjusted operating profit grew by 4.7% to £71.5m from £68.2m.
Grafton said that trading returned to more normal levels following the pandemic.
"Revenue growth was driven by building materials' price inflation and a significant contribution from acquisitions. Volumes declined in the second half as increased costs of materials and labour alongside subdued demand led construction businesses to scale back activity," it added.
Demand was underpinned by residential home improvement spending, housing construction and non-residential construction projects, it added.
Meanwhile, revenue in Woodie's DIY, Home and Garden business in Ireland normalised, as expected.
This was after "exceptional" pandemic related constant currency growth of 19.4% in 2021 when it was treated as an essential retailer and continued to trade during the early months of the year while the country was in lockdown.
"The normalisation of trading was concentrated over the first half which saw revenue decline by 22.8%," Grafton said.
Revenue at Woodie's fell by 13.7% to £244m from £282.8m while operating profits for the year dropped by 35.9% to £32.6m from £50.9m
"Consumers also continued to spend more on leisure activities and experiences and less on other areas, including DIY, home and garden, that boomed during the pandemic," it added.
Grafton said that volumes in the UK RMI market were down compared to 2021 when there was a record level of spending on the home during the pandemic and lower spending in other areas of the economy.
It noted that Selco, which accounted for almost three quarters of its UK distribution revenue, continued to invest in its business and branch network increasing it to 74.
Grafton said a strong underlying performance in its Dutch operations was complemented by a good contribution from acquisitions and benefits realised from implementing performance improvement measures.
In Finland, the IKH business bought in July 2021, had a good first full year under Grafton ownership and posted an operating profit contribution that was in line with pre-acquisition expectations despite more challenging market conditions.
Revenue in the early months of the year was down, on the pre-acquisition comparative period, due to lower demand for a number of weather sensitive product categories and weaker consumer sentiment following the invasion of Ukraine but recovered in the second half and ended the year strongly.
Eric Born, Grafton's recently appointed chief, said that the company still faces many of the external challenges that it faced in 2022.
"But I am encouraged by the quality of the group's portfolio of higher margin businesses that are sensibly positioned with both market leading brands and geographic diversity. We now have more than half of our revenues coming from outside the UK in Ireland, Finland and the Netherlands," the CEO said.
"Importantly, with a very strong balance sheet, Grafton is well positioned to invest in future growth opportunities and we look forward with confidence," he added.
Trade normalising
"What we have seen in Woodie's is revenue normalising relative to the very, very strong Covid revenue," Eric Born, CEO of the Grafton Group, told Morning Ireland.
"We had a very good result with Chadwicks who had more revenue, but most of that was driven by inflation rather than volume," he added.
Mr Born said said there were signs of moderation in materials price inflation but demand had also fallen slightly.
"We have slightly lower volumes but we had before but that's a function of what happens on new house builds and RMI (residential repair, maintenance and improvement) spend, but having said that demand on the other side is stimulated in what we do in Chadwicks. We help people achieve a better rating and help them choose the right solution to be more energy efficient in their homes," he explained.
Eric Born said the UK market had held up well despite the massive inflation and interest rate rises experienced in the economy last year.
"In the great scheme of things, the UK businesses are very strong and have weathered the storm very well," he said.
