European builders merchant and DIY retailer Grafton (GFTU) kept its FY26 profit guidance but warned of a weak UK market. The firm operates in Ireland, the UK, Northern Europe and Iberia through Chadwicks, Selco, Leyland, Woodie’s and other brands.
UK activity turning negative
Ahead of its AGM, the firm reported flat LFL sales for the first four months of 2026. Growth in Ireland, Northern Europe and Iberia was ‘fully offset’ by weaker UK sales.
UK LFL revenue was down 5% reflecting a further weakening in construction markets. The Middle East conflict has led to rising cost inflation and weaker consumer confidence, and activity is now expected to contract this year.
Ireland on the other hand saw 1.8% LFL sales growth driven by Chadwicks, which saw a pick-up in construction activity. The acquisition of Cygnum, which makes timber frames to order for developers and contractors, will broaden Grafton’s offering in the growing new-build market.
Northern Europe registered 1.6% LFL sales growth driven by strong demand in Finland and ‘modest’ growth in the Netherlands. Iberian LFL sales were up 5%, and the acquisition of Mercaluz expands the group’s presence in the important HVAC market.
The firm kept its FY26 adjusted operating profit target of £190 million to £200 million versus the consensus of £190.8 million. Profit from the Cygnum and Mercaluz acquisitions are expected to offset the weakness in the UK.
Grafton is the third firm to flag weakness in the UK construction market in recent weeks after Marshalls (MSLH) and Travis Perkins (TPK). Its shares are down 14% on the year but Marshalls and Travis Perkins have come off more.
We see no reason to own UK housebuilders or housing-related stocks, regardless of how cheap everyone thinks they are. Growth is likely to be in the low single digits, if that, and now we can add political uncertainty to economic uncertainty.
There is plenty of value in the UK market, as demonstrated by the number of takeovers at hefty premiums already this year. Some stocks, however, are cheap for a reason, and they can stay cheap for longer than investors realise.
Read the press release here:
https://www.graftonplc.com/investors
