- Revenue & Profit Growth: 10.4% revenue increase to £2.52 billion and 7.1% adjusted operating profit rise to £190.2 million, with ROCE of 10.9% exceeding cost of capital by 2 ppts.
- Free Cash Flow & Returns: £168 million free cash flow (88% conversion of adjusted operating profit), £25 million share buyback program, and 2% dividend increase to 37.75p/share.
- Segment Performance: Iberia revenue grew 6.1% (like-for-like), while Northern Europe saw -1.1% revenue and -17.2% adjusted operating profit, contrasting with 6.2% profit growth in Great Britain.
- Strategic Acquisitions & Margin Gains: Successful integration of Salvador Escoda (ROCE > cost of capital) and 120 bps UK gross margin improvement driven by customer-focused tactics.
- Capital Allocation Discipline: Over £700 million in free cash flow (2022–2025), allocating £721 million to dividends/share buybacks, £100 million in CapEx, and £160 million in acquisitions.
Segment Performance
The Island of Ireland segment delivered revenue growth of 4.3% to £1.07 billion, with adjusted operating profit up 1.8% to £111 million. Great Britain revenue was flat at £765 million, but adjusted operating profit rose by 6.2% to £49.2 million. Northern Europe revenue declined by 1.1% to £469.7 million, with adjusted operating profit down 17.2% to £29.6 million. Iberia's revenue was £212.9 million, with adjusted operating profit of £13.6 million. The group's diverse geographic presence helped mitigate the impact of challenging markets.
Outlook and Strategy
Grafton expects modest market growth in 2026, driven by a positive outlook for the Island of Ireland and a gradual recovery in the Netherlands. The company is focused on organic and inorganic growth, with a strong pipeline of potential new branch locations in Iberia. The construction market is expected to grow 3-4% in 2026, and Grafton's product segments are well-positioned to perform well. The company's strategy is centered on European markets with long-term growth characteristics, building strong positions in each market, and distributing construction-related products and solutions to trade customers.
Valuation and Metrics
With a P/E Ratio of 12.96 and an EV/EBITDA of 6.97, the market appears to have priced in a reasonable level of growth. The Dividend Yield of 4.05% is attractive, and the Free Cash Flow Yield of 12.49% suggests that the company is generating significant cash. The ROIC of 8.75% indicates a decent return on invested capital. Analysts estimate revenue growth of 4.0% for the next year, which is slightly below this year's performance. Overall, Grafton's diversified business, strong cash generation, and attractive valuation metrics make it an interesting investment opportunity.