DAVY VIEW

Grafton has reported a solid set of first-half results with, as expected, the improvement (of 10%) in adjusted operating profit boosted by the initial contribution from Salvador Escoda. As usual, Grafton is backboned by a very strong financial position – net cash ex-leases of £246m at end-June – and this has prompted a fresh £25m share buyback without compromising the group’s willingness to invest inorganically. The share buyback makes even more sense as the stock is currently around 20% lower than at this stage last year. We view this as extremely harsh as it leaves Grafton trading unjustifiably at a depressed multiple (around 12x) of what we reckon are near bottom-of-the-cycle earnings.