DAVY VIEW

Grafton’s customary start-of-year update confirms that 2021 was an exceptional 12 months for the group. Underlying operating profits for the year are now expected to have increased by over 55% to around £276m (the top end of current forecasts). This is above its last guidance (£265-270m) and some 2% above our forecast of £270m. Moreover, the year concluded with the completion of the sale of its traditional Great Britain merchanting business, leaving Grafton with enviable capital allocation options. To be sure, 2021 will be hard to match, but Grafton remains well positioned. We consider the prospects for the group at odds with its recent share price performance (down over 10% since the start of November) and are happy to reiterate our ‘Outperform’ recommendation.