Grafton Group (LON:GFTU) said in an update on Tuesday that trading in November and December was better than expected.
Mr Grafton said the home construction and real estate market remained “sluggish”.
The building materials supplier expects adjusted operating profit to be around £202m in 2019, compared with £194.5m in 2018.
The company added that it expects revenue from continuing operations to be £2.67bn in 2019. This should be a welcome number for shareholders.
In the first half, Grafton generated a total of £1.44 billion in revenue from current operations, but the company highlighted the sale of its UK plumbing and heating specialist business, Plumbase, and its Belgian distribution arm.
Daily like revenue is expected to increase by 1.9% in 2019 compared to a year ago. However, sales in the fourth quarter were down 1.8%.
In the UK, Mr Grafton remained cautious about the property market, which has been hit by both political and economic shocks.
Grafton noted that the market downturn in September and October continued into November and December, but did not get any worse.
Grafton, Ireland’s merchandising division saw volumes pick up in November, with its Chadwick business ending the year on a “strong note”.
Gavin Slark, CEO of Grafton Group plc, commented today:
“2019 was a year of important strategic developments, with our acquisition of Polvo in July, increasing our scale and solidifying our market-leading position in the Netherlands. In October, we successfully sold Plumbase and our Belgian merchandising business and restructured our business portfolio.
“While we remain cautious about the timing of a recovery in the UK secondary market at this early stage of the new year, our expectations for 2020 remain positive for the whole group and we are optimistic about growth opportunities. Backed by our business and strong balance sheet, we are well positioned to continue successfully executing our development strategy.”
Progress since October update
In October, the company issued a statement warning shareholders that profits could be significantly lower than expected.
Grafton has announced a weaker-than-expected full-year profit as the UK construction sector faces Brexit uncertainty.
The Irish company added that trading was weak despite strong performance in the domestic market.
In addition, Grafton said demand for the material has been hit by Dutch legislation restricting nitrogen emissions. This has resulted in delays in granting permits for new construction periods.
Grafton, which operates in the retail, retail and manufacturing sectors, is expected to make full-year profits of £193.5m, well below expectations.
FTSE 250 companies concluded that after a strong start and signs of recovery, trading towards the end of the quarter was affected by dismal activity.
How are your competitors performing?
B&Q, owned by Kingfisher plc (LON:KGF), has also had a difficult time trading over the past few months.
The FTSE 100-listed company said trading in the three months to October was “disappointing”, with sales down 3.7% to £2.96bn.
Underlying sales decreased by 3.7%. Kingfisher said this “reflects continued disruption from new product introductions, reduced promotional activity and ongoing operational challenges in France, and softening market conditions in our key markets.” Ta.
B&Q sales fell 3.5% year-on-year to £820m, slightly offset by an 8% rise in Screwfix sales to £477m.
Additionally, Barratt Developments (LON:BDEV) reported lower sales and lower home sales prices in its October trading update.
Mr Barratt said he expected home sales volumes to increase towards the end of the medium- to long-term target range of 3% to 5% annually.
Total sales increased to 12,963 units from 12,903 units at the beginning of this year.
However, this was offset by a 2.4% fall in the value of these homes to £3.07bn.
Interest rates remain low by historical standards, creating an opportunity for new homeowners to jump on the opportunity.
Looking at the real estate market situation, Grafton has shown a relatively strong performance, and shareholders do not have much to worry about as political uncertainty continues to hit the real estate market.
Grafton shares are trading at 899p (+4.84%). 14/1/20 11:16BST.
