Grafton reported their full-year results on Thursday for the Year-end, 31st December 2022.
Grafton operates in the UK, Ireland, Netherlands, and Finland. The leading UK business is Selco (it’s where the trades go). I like looking at companies I use and have given Selco my business for several years, mainly due to the geographic location from my house. You need a business account to register with them. I don’t know why? As the company doesn’t operate as a wholesaler and prices pretty much reflect all other building merchants, maybe it’s to make you feel special while collecting your purchase data.
Selco seems to be well stocked, always finding what I need, and the staff are friendly, laughing and joking with customers. I think this always shows a happy work environment (unlike the miserable customer service I received at Mcdonald’s yesterday)
The one thing I don’t like about Selco is the Website, it lacks many products you can find in-store, and the layout is not good. I asked about this in-store and was told, “We don’t really bother with the website that much”, strange practice in 2023.
The Business operates in a very competitive market mainly dominated by Kingfisher (B&Q and Screwfix). I mostly find that the more professional DIYers will visit Selco.
Grafton has seen inflation ravage the building products it sells but expects a brighter future ahead, with predictions of inflation moderating around 6-8% in 2023.
The UK business is experiencing lower volumes as consumers hold back on discretionary spending; this is expected to continue this year, but Grafton sees a more favourable outlook elsewhere in The Netherlands, Finland and Ireland. It’s times like this that diversification matters the most.
The company has cash of £456.2m and has decided it wants to hold less, so looking for opportunities. In the past year, the company has seen declining prices for businesses in its sector, but rather than seek an acquisition, it states it sees more value in its own business, so it decided to buy back its shares. I’d rather see the company expand and seek to gain market share, as I discussed here. A company should buy back shares only when it is cheap, and there’s nothing else to buy, I think there’s plenty to buy now.
Grafton feels optimistic about the future and sees past short-term headwinds; it’s in a brilliant position to sail the storm with an excellent balance sheet.
The chart looks good. After the DIY hype of 2021, the chart pulled back in a stage 4 downtrend, with the sector back to 2019-2020 levels, erasing the gains made through the stimulus period. The chart formed a double bottom in October 2022 and gave the impression of a stage 1 market cycle which has just entered a Stage 2 Uptrend and recently formed a bull flag with the potential to break up further.
This chart represents the emotions of the crowds which reflect what I’m seeing with many friends planning projects now they see brighter clouds emerging in the distance. Maybe there’s much pent-up demand from a year of DIYers holding back repairs. I know I have some damage from a windy winter.
In conclusion, I like Grafton or Selco. I like the positive tone in these results, which see a bright future ahead, with lower energy prices and inflation potentially increasing consumer spending but mindful of a slowing housing market.
I would like to know if the management is buying back shares for their interests and whether that money would have been better spent on acquisitions. Will the large cash pile be spent on gaining market share soon? I hope so.
Removing the extreme activity in post covid 2021, I get an average PE since 2013 of around 13x.
With EPS coming in today at 89.2p, that gives a short-term target of 1159p, a 25% upside.
The management has not changed the outlook on future earnings, which a set to decline to 68p for FY23, giving a price target of 884p, a mark the stock price seems to be hovering too.
With a bright outlook in Ireland, Netherlands and Finland and the UK with the potential to surprise, I think this FY23 Est EPS could be revised up at some point, especially if we have a good summer where we all build new BBQs. The sentiment seems to be changing, but I could be completely wrong.
Grafton reported their full-year results on Thursday for the Year-end, 31st December 2022.
Grafton operates in the UK, Ireland, Netherlands, and Finland. The leading UK business is Selco (it’s where the trades go). I like looking at companies I use and have given Selco my business for several years, mainly due to the geographic location from my house. You need a business account to register with them. I don’t know why? As the company doesn’t operate as a wholesaler and prices pretty much reflect all other building merchants, maybe it’s to make you feel special while collecting your purchase data.
Selco seems to be well stocked, always finding what I need, and the staff are friendly, laughing and joking with customers. I think this always shows a happy work environment (unlike the miserable customer service I received at Mcdonald’s yesterday)
The one thing I don’t like about Selco is the Website, it lacks many products you can find in-store, and the layout is not good. I asked about this in-store and was told, “We don’t really bother with the website that much”, strange practice in 2023.
The Business operates in a very competitive market mainly dominated by Kingfisher (B&Q and Screwfix). I mostly find that the more professional DIYers will visit Selco.
Grafton has seen inflation ravage the building products it sells but expects a brighter future ahead, with predictions of inflation moderating around 6-8% in 2023.
The UK business is experiencing lower volumes as consumers hold back on discretionary spending; this is expected to continue this year, but Grafton sees a more favourable outlook elsewhere in The Netherlands, Finland and Ireland. It’s times like this that diversification matters the most.
The company has cash of £456.2m and has decided it wants to hold less, so looking for opportunities. In the past year, the company has seen declining prices for businesses in its sector, but rather than seek an acquisition, it states it sees more value in its own business, so it decided to buy back its shares. I’d rather see the company expand and seek to gain market share, as I discussed here. A company should buy back shares only when it is cheap, and there’s nothing else to buy, I think there’s plenty to buy now.
Grafton feels optimistic about the future and sees past short-term headwinds; it’s in a brilliant position to sail the storm with an excellent balance sheet.
The chart looks good. After the DIY hype of 2021, the chart pulled back in a stage 4 downtrend, with the sector back to 2019-2020 levels, erasing the gains made through the stimulus period. The chart formed a double bottom in October 2022 and gave the impression of a stage 1 market cycle which has just entered a Stage 2 Uptrend and recently formed a bull flag with the potential to break up further.
This chart represents the emotions of the crowds which reflect what I’m seeing with many friends planning projects now they see brighter clouds emerging in the distance. Maybe there’s much pent-up demand from a year of DIYers holding back repairs. I know I have some damage from a windy winter.
In conclusion, I like Grafton or Selco. I like the positive tone in these results, which see a bright future ahead, with lower energy prices and inflation potentially increasing consumer spending but mindful of a slowing housing market.
I would like to know if the management is buying back shares for their interests and whether that money would have been better spent on acquisitions. Will the large cash pile be spent on gaining market share soon? I hope so.
Removing the extreme activity in post covid 2021, I get an average PE since 2013 of around 13x.
With EPS coming in today at 89.2p, that gives a short-term target of 1159p, a 25% upside.
The management has not changed the outlook on future earnings, which a set to decline to 68p for FY23, giving a price target of 884p, a mark the stock price seems to be hovering too.
With a bright outlook in Ireland, Netherlands and Finland and the UK with the potential to surprise, I think this FY23 Est EPS could be revised up at some point, especially if we have a good summer where we all build new BBQs. The sentiment seems to be changing, but I could be completely wrong.
