Grafton Group - Better end to 2019; underlying trading profits to be 4% better than expected

Davy Research
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Grafton’s update indicates that trading profit for last year is now anticipated to be 4% better than our £194m forecast. We are likely to move up our current year forecast to match the 2019 outcome (£202m). This would imply an upgrade of our existing forecast (£200m) despite a circa £3.5m foreign exchange translational hit to reflect the recent strengthening of sterling. The update confirms that Grafton remains in fundamentally good shape with (as ever) a very healthy financial position providing management with capital allocation options. The stock has eased back slightly in the early parts of the year (-1%) but this is after recording an advance of 35% in 2019. Any evidence during the year of a further pick-up in earnings growth momentum would be well received.