LONDON (ShareCast) - (Sharecast News) - Builders merchant and DIY retailer Grafton reported a slight rise in full-year profit as consumers started to cut back on spending and the boom in home improvement projects during the Covid pandemic tapered off.
The company, with operations in the UK, Ireland, Finland and the Netherlands, posted a 0.8% increase in to £251.7m while operating profit fell almost 2% to £286m. Revenue rose 9% to £2.3bn.

Grafton said trading returned to more normal levels following the exceptional rise in spending on homes during pandemic lockdowns. Supply chain pressures also eased considerably during the year.

"Building materials prices rose sharply for the second successive year as the market absorbed increases in the cost of producing energy intensive products," the company said.

Certain product categories, including timber and steel, saw price deflation following a period of soaring prices caused by a spike in global demand.

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.

"The fall in real disposable incomes will continue to weigh on activity in the repair, maintenance and improvement market and project affordability will be impacted by higher materials and labour costs," Grafton said.

"Interest rate increases are expected to lead to a cooling of demand in new housing markets as affordability reduces. These common themes are likely to impact demand to varying degrees in individual markets."

"Despite these headwinds, we expect some important factors to help mitigate some of the adverse effects on household spending and the current economic outlook appears brighter than many feared in the second half of last year. Strong labour markets with low levels of unemployment and declining energy prices and inflation should have a positive impact on consumer spending."

Reporting by Frank Prenesti for Sharecast.com

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