Grafton Group (LON:GFTU) reported a “resilient” performance in 2025, with management highlighting a return to revenue and profit growth alongside continued investment in leadership, integration work following acquisitions, and ongoing shareholder returns.
2025 results: revenue up 10.4% and profit growth returns
Chief Executive Officer Eric Born said the group delivered revenue growth of 10.4% for the full year, while adjusted operating profit rose 7.1%. He added that adjusted return on capital employed increased by 60 basis points to 10.9%, which he said was “comfortably exceeding” the company’s cost of capital.
Adjusted operating profit before property profit was GBP 184.3 million, up 6.2% from 2024. Including GBP 5.9 million of property profit, adjusted operating profit was GBP 190.2 million, up 7.1%.
Net finance cost was GBP 10.1 million, which David said reflected lower interest income on deposits following rate cuts, lower cash balances due to acquisitions and share buybacks, and a foreign exchange movement. The effective tax rate was 18.2%, below the 19.5% indicated at the half year, reflecting profit mix and a credit tied to updated estimates of prior-year liabilities.
Adjusted earnings per share were 75.4 pence, up 5.1 pence year-over-year, supported by the share buyback program. David said the company has reduced its share count by over 20% since initiating buybacks in 2022, and announced a new GBP 25 million share buyback.
New reporting structure and key revenue drivers
The group adopted a new reporting structure that aligns with its strategy and management focus, organizing results into four geographic segments: Island of Ireland, Great Britain, Northern Europe, and Iberia. Management said comparative figures were restated accordingly.
In terms of revenue bridge items versus 2024, David said:
- Organic revenue increased by GBP 30 million, supported by “modest levels” of product price inflation—contrasting with 2024’s product price deflation that had weighed on sales.
- Acquisitions contributed GBP 195 million of incremental revenue, largely from the full-year impact of Salvador Escoda (reflecting 10 additional months of trading versus 2024).
- The divestment of the non-core MFP piping business in the Republic of Ireland reduced revenue by GBP 5 million, though David noted a larger impact on operating profit because MFP mostly supplied internal customers.
- A stronger euro added GBP 18 million to revenue on translation.
Segment performance: strength in Ireland, pressures in Northern Europe
Island of Ireland: Revenue was GBP 1.07 billion, up 4.3% on a constant currency basis. Average daily like-for-like sales rose 3.5%, with growth across all businesses. Woodie’s growth was led by plants and garden products, driven mainly by increased transaction volumes and modest increases in average transaction value. Chadwicks saw growth across hardware, heating, and plumbing. Gross margin improved 20 basis points, while overheads rose due to inflationary pressures. Adjusted operating profit was GBP 111 million, up 1.8% on a constant currency basis, while operating margin slipped 20 basis points to 10.4%.
Management said integration of HSS Hire Ireland into Chadwicks is progressing, with near-term focus on systems integration. The company described the construction outlook in Ireland as positive, citing an ongoing focus on accelerating housing supply expected to continue for at least the next decade. Northern Ireland was described as more challenging, with modest construction growth in 2025 led by new housing from a low base, and management not expecting a “significant uplift” during 2026.
Great Britain: Revenue of GBP 765 million was broadly unchanged. Average daily like-for-like sales increased 0.4%, with strong growth in manufacturing businesses (helped by softer 2024 comparators) offset by a modest decline in distribution businesses. The company highlighted a 120 basis point improvement in gross margin in a “very competitive” market with subdued volumes, and said like-for-like overhead increases were contained to 1.8%, below general inflation. Adjusted operating profit rose 6.2% to GBP 49.2 million.
Management noted around 60% of Great Britain sales come from London and the South East, which it said have been affected by a weak housing market, including London housing starts at the lowest level in 40 years. Construction activity softened from late Q2 and into the second half, with the U.K. government’s autumn budget weighing on consumer sentiment.
Northern Europe: Revenue of GBP 469.7 million fell 1.1% on a constant currency basis, while average daily like-for-like sales declined 0.5%. The Netherlands posted moderate growth that was more than offset by a pronounced decline in Finland. Management said Finland was impacted by difficult market conditions, unfavorably mild weather early in the year, and temporary operational issues disrupting internal supply chain, which eased in the second half following management actions. Gross margin improved 90 basis points, but overhead pressure persisted due to inflation, a high settlement under collective labor agreements in the Netherlands, and strategic investments to strengthen the Finnish business. Adjusted operating profit was GBP 29.6 million, down 17.2% on a constant currency basis, and operating margin fell 120 basis points to 6.3%.
Iberia: Salvador Escoda integration and margin ambitions
Grafton said its platform acquisition Salvador Escoda, acquired at the end of October 2024, performed in line with pre-acquisition expectations in its first full year under Grafton ownership. The business reported revenue of GBP 212.9 million and adjusted operating profit of GBP 13.6 million, an adjusted operating margin of 6.4%.
On a pro forma basis, management said average daily like-for-like revenue was 6.1% higher year-over-year, driven by strong growth in air conditioning, ventilation, and refrigeration, alongside a favorable market backdrop. Management described Spain as among Europe’s fastest-growing economies, with GDP expected to have grown by approximately 3% in 2025, and forecast Spanish construction market growth of around 3%–4% in 2026. It pointed to HVAC as well-positioned due to tighter energy efficiency rules, rising consumer focus on efficiency, and higher temperatures across the Iberian Peninsula.
Born said the company spent 2025 strengthening Salvador Escoda’s “infrastructure” (including finance, HR, health and safety, and property capabilities) to enable faster branch rollout and the ability to absorb bolt-on acquisitions. He said a new CEO for the Iberian Peninsula, Mario, started in January to focus on broader growth ambitions, while Salvador Escoda continues to be led by managing director Marta Escoda.
Asked about margins, Born said the company believes there is room to improve Salvador Escoda’s margins over time and indicated an expected “margin corridor” of between 7% and 10% across the cycle in Spain.
Cash flow, capital allocation, and early 2026 trading
Grafton generated free cash flow of GBP 168 million in 2025, representing 88% conversion of adjusted operating profit into cash, and management said the group has generated more than GBP 700 million of free cash flow over the last four years. David said net working capital fell by GBP 12 million during the year despite higher sales, and the group invested GBP 41 million in replacement and development capex.
Net M&A investment was GBP 14.3 million (HSS Hire Ireland acquisition partly offset by proceeds from the MFP divestment). The company returned GBP 128 million of capital to shareholders net of shares issued under incentive schemes, including GBP 72.6 million in dividends. Management proposed a 2% increase in the full-year dividend to 37.75 pence per share, noting dividend cover was two times and stating an intention to move dividend cover more firmly into a two to three times range over time.
At year-end, net debt was GBP 123 million, with a lease-adjusted net debt to EBITDA ratio just under 0.4 times. Adjusted ROCE was 10.9%.
On early 2026 trading, Born said it was “early in the year” and that key months were still to come. He cited wet weather as impacting trading in the Island of Ireland and Great Britain, while noting modest growth in Northern Europe (with strong Finland performance offset by softer Netherlands trading due to holiday timing) and “ongoing strong momentum” in Iberia. For 2026, management said it expects modest market growth in Great Britain in the second half, a gradual recovery in the Netherlands during the year, and no meaningful improvement in Finland until the second half.
Grafton also announced it will hold a capital markets event on May 20 in London focused on the group’s strategy and medium-term growth ambitions.
About Grafton Group (LON:GFTU)
Grafton Group plc engages in the distribution, retailing, and manufacturing businesses in Ireland, the Netherlands, Finland, and the United Kingdom. Its Distribution segment distributes building materials, paint, tools, ironmongery, fixings, and accessories, workwear and PPE, and spare parts; materials and plant for mechanical services, heating, plumbing, and air movement; and trade, DIY, and self-build markets with building materials, timber, doors and floors, plumbing and heating, bathrooms, and landscaping products under the Selco, Leyland SDM, Chadwicks, MacBlair, Isero, Polvo, Gunters en Meuser, TG Lynes, and IKH brands.
