RNS No 2972p
GRAFTON GROUP PLC
1st March 1999
GRAFTON GROUP PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR YEAR ENDED 31ST DECEMBER 1998
Highlights
- Pretax profits grew by 22% to Euro28.2 million / IR#22.2
million (1997: IR#18.3 million)
- E.P.S. increased by 22% to 149.7c / IR 117.9p (1997:
IR96.9p)
- Dividend up by 22% to 35.0c / IR27.56p (1997: IR22.5p)
- Turnover up by 31% to Euro427.6 million / IR#336.8
million (1997: IR#258.0 million)
- Irish Operating profit up 34% to Euro27.4 million /
IR#21.6 million (1997: IR#16.1 million)
- U.K. Operating profit up 37% to Euro7.2 million / IR#5.6
million (1997: IR#4.1 million)
(Before integration and rationalisation costs of Euro1.5
million / IR#1.2 million)
- Irish property portfolio revalued
- Net asset value per share up by 74% to Euro8.49 / IR# 6.69
(1997:IR#3.84)
GRAFTON GROUP PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR YEAR ENDED 31ST DECEMBER 1998
Grafton Group plc, the building supplies and DIY Group,
announces its results for 1998 with an increase of 22% in
pretax profits to Euro28.2 million (IR#22.2 million),
compared to IR#18.3 million for the previous year.
Earnings per share grew by 22% to 149.7c (IR117.9p) compared
to IR96.9 p in 1997.
It is proposed to pay a second interim dividend of 21.67c
(IR17.06p) to enable shareholders to benefit from the
associated tax credit, which will not be available after 5th
April 1999. The total dividend for the year will be 35.0c
(IR27.56p), an increase of 22%. This is covered 4.3 times.
(1997: 4.3 times).
Turnover grew for the 15th consecutive year, increasing by 31%
to Euro427.6 million (IR#336.8 million) compared to IR#258.0
million in 1997.
Operating profit increased by 29% to Euro33.1 million (IR#26
million) compared to IR#20.2 million in 1997.
The growth in turnover and profits is based on strong
performances from all the Group's divisions in Ireland and the
United Kingdom. The Group continued to build on its market
leadership positions in the Irish market and to strengthen its
operations in the U.K. At the end of 1998, annualised
turnover in the U.K. accounted for 50% of the Group's total
turnover.
Operations Republic of Ireland
In Ireland the Group's operations out performed the market as
a result of a strong demand, and organic developments.
Turnover increased by 17% to Euro240.3 million (IR#189.2
million), compared to IR#161.5 million in 1997. Operating
profit grew strongly by 34% to Euro27.4 million (IR#21.6
million) compared to IR#16.1 million in 1997. Operating
margins improved to 11.4% (1997: 9.9%).
Irish Merchanting and Wholesaling
Turnover for the division increased by 21% to Euro167.9
million (IR#132.2 million) ahead of IR#109.5 million in 1997.
Chadwicks improved its market share and strengthened its
national branch network by successfully opening new Builder
Centres at Walkinstown, Dublin in April, and Punches Cross,
Limerick in June. Both new branches traded profitably in
their first year. The Limerick branch incorporates a builder
centre, hire centre, plumb centre, bathroom and tile centre
and flooring centre under one roof. Other branches continue
to be upgraded. Hardwood flooring and panelling centres were
also introduced.
During the year, Circle Paints and Multy Products consolidated
their wholesaling businesses together at Walkinstown, offering
a wider product range to its customers.
Irish Manufacturing
Underlying manufacturing turnover for CPI's concrete and MFP's
plastic businesses grew positively by 7.6% in 1998. Overall
Irish manufacturing turnover declined by 7% to Euro23.2
million (IR#18.2 million) for the year as a result of Circle
Paints closing its manufacturing operation for water based
paints and sourcing all its products on a long term contract
basis.
CPI, operating in the greater Dublin concrete market, invested
in improved delivery, production, silos and bulk storage
facilities, and in particular enjoyed strong sales and market
share growth for EuroMix Dry Mortar.
MFP plastics built on its strong national market position with
further turnover growth for its Classic gutter and Eavemaster
roofline product ranges. A new extrusion line and injection
moulding equipment were installed in June.
Irish Retailing
Woodie's, the Group's DIY market leader, gained further market
share, and profitably grew its turnover for the year by 19% to
Euro 49.2 million (IR#38.8 million), ahead of IR#32.5 million
in 1997.
Woodie's opened its tenth DIY superstore in Waterford in
October 1997 and its successful trading has contributed to the
increase in Woodie's turnover and profits. Woodie's overall
sales per sq. ft. increased and like-for-like turnover for the
year was significantly up. A new garden centre opened in
Tallaght, and a further 6,400 sq. ft. of retail selling space
was added to the store at Swords.
Operations - United Kingdom
There were major developments in the Group's UK operations
during the year. The Group continued to build its presence in
the market, with the acquisition of seven builders and
plumbers merchanting businesses during the year. UK turnover
increased by 53% to Euro187.3 million (IR#147.5 million)
(1997:IR#96.6 million). Operating profits increased strongly
by 37% to Euro7.2 million (IR#5.6 million) from IR#4.1
million before absorbing Euro1.5 million (IR#1.2 million) of
integration and rationalisation costs incurred during the
year. At the year end the Euro / sterling exchange rate was
STG#1.137 (1997: STG#1.10) and the IR# / sterling rate was
IR0.896p (1997: IR0.866p).
Plumbers Merchanting
Plumbase opened three new branches in Park Royal, Coventry and
Leyton and integrated six branches previously operated by
British Dredging. Following the acquisition of Unicorn
Plumbers Merchants located in Haslesmere, Surrey, since the
year end, Plumbase now trades from 40 locations in the
Midlands, London and the South.
Builders Merchanting
The Group's UK builders merchanting operations expanded
substantially during the year. The acquisition and integration
of 11 British Dredging builders merchanting branches, and the
single branch Buckingham Builders Merchants Ltd, increased the
number of locations trading under the Buildbase name to 18.
Substantial investment was made in the Group's largest branch
at Oxford which improved customer service, internal
efficiencies and extended the product range. The Peckham,
London branch was enlarged with the purchase of an adjoining
site which has facilitated the extension of the product range.
The six-branch network of Selco builders merchants acquired
with British Dredging continued to trade successfully as a
separate business unit (post acquisition).
During the year the Group acquired the London based Deben
Builders Merchants business of 10 branches including the
remaining share of the four joint venture branches previously
managed by Deben. Since the year end Deben has acquired SAR a
single branch builders merchant in east London. Grafton also
acquired A R Hendricks trading from five branches, and Grays,
a single branch merchant in north London during 1998.
In Northern Ireland, Macnaughton Blair the Groups Belfast
based builders merchants, successfully expanded its operations
with the acquisition of Antrim Building Supplies Ltd, and
McCandless builders merchants in Coleraine, increasing the
number of builders merchant branches in Northern Ireland to
four.
UK Manufacturing
The Group's first UK EuroMix dry mortar plant in Northfleet,
east of London commenced trading in the first half of the
year. In the second half the Group successfully converted its
Scottish operation to EuroMix dry mortar and also acquired its
third UK Silo mortar plant in Manchester with the purchase of
the trade and assets of Whisby Mortars.
Financial Review
1998 was a particularly active year financially. Strong
turnover and profitability once again resulted in a
significant increase in cashflows which together with new
borrowings were used to fund the continued expansion of the
Group both by acquisition and greenfield development.
During the year Euro20.6 million (IR#16.2 million) was
invested in the purchase of both replacement and additional
fixed assets (1997: IR#11.5 million) and Euro44.9 million
(IR#35.4 million) was invested in the acquisition of new
businesses.
The investment activities of the Group have resulted in
significant rationalisation and integration costs, which
during 1998 amounted to Euro1.5 million (IR#1.2 million).
These costs, in line with Group Policy, have been charged
against profits as they were incurred during the year.
Further rationalisation and integration costs of c. Euro1.3
million (IR#1 million) are expected during 1999 when both
Deben and A R Hendricks are integrated with the Group's UK
builders merchanting activities.
Since January 1998 goodwill arising on acquisitions has been
capitalised in accordance with FRS 10 and is being amortised
to the profit and loss account over 20 years. During 1998 the
total goodwill paid on Group acquisitions amounted to Euro9.9
million (IR#7.8 million) and this amount has been added to
intangible fixed assets in the balance sheet.
In December 1998 the Group's portfolio of Irish properties was
re-valued (previous revaluation 1980). The resultant
revaluation surplus of Euro35.4 million (IR#27.9 million) has
been transferred to reserves and increased shareholders'
funds.
After accounting for revaluations and goodwill as indicated
above, the Group's gearing at the end of the year reflected
the high level of investment activity and increased to 42%.
(1997: 30%).
The Group's debt structure was improved after the successful
Private Placement of US$55 million loan notes, which have an
average life of seven years. The original US$ principal and
interest liability were both swapped into sterling at the date
of drawdown to ensure that the Group continued its policy of
matching sterling assets and sterling liabilities and the
resultant variable sterling interest rate applicable to the
outstanding loan notes continues to benefit from recent
reductions in UK rates.
The Group's effective tax rate at 14% was achieved due to a
combination of the mix of earnings taxable at different rates
of corporate tax, the benefit of non-reversing capital
allowances on investments brought forward from previous years
and the further reduction in the headline rate of Irish
Corporation Tax.
At the end of the year shareholders' funds were Euro140
million (IR#110 million) having increased by Euro61.2 million
(IR#48.2 million) or 78% after property revaluations and the
change in treatment of goodwill on acquisition. As a result
the net asset value per share has increased to Euro8.49
(IR#6.69), up by 74%.
The Group's strong balance sheet with interest cover of 6.8
times leaves the Group well placed to finance higher levels of
debt in the current stable low interest rate environment of
the Euro, and to take advantage of further development
opportunities as they arise.
Year 2000 and the Introduction of the Euro
The Group has given consideration to the likely impact of the
Year 2000 and introduction of the Euro for its business and
operations. A project was initiated by the Board last year to
ensure that any necessary systems modifications are planned
and completed to achieve Year 2000 and Euro compliance. This
project is at an advanced stage and it is not now anticipated
that the cost of any identified changes will be material to
the Group.
Outlook
The demographic and economic factors in Ireland that have
underpinned strong demand for housing and Repair Maintenance
and Improvements (RMI) in recent years are set to continue in
1999, but at more modest sustainable levels. A worldwide slow
down in economic growth may well lead to a soft landing for
the Irish economy, with continuing growth into the new
millennium.
Ireland's entry into the Euro resulting in significantly lower
interest rates, together with ongoing population growth, net
immigration, and favourable demographics is expected to create
a positive environment for the Group's Irish operations, which
will also benefit from the full year effects of new branch
openings in 1998 and the ongoing development of the business.
In the UK, although operating in flat markets for residential
RMI and new housing, the Group expects to benefit from the
full year results of acquisitions made in 1998, together with
rationalisation benefits and cost reductions in the newly
acquired businesses, enhanced by increased buying power. The
Group's Buildbase and Plumbase branch networks will continue
to develop their businesses.
Overall, in the absence of unforeseen economic factors, the
Group looks forward to opportunities for profitable growth in
its Irish and UK markets.
Dividend
A second interim dividend of 21.67c (IR17.06p) will be paid on
31 March 1999 to shareholders on the register at the close of
business on 12 March 1999.
Annual General Meeting / Annual Report and Accounts
The Annual General meeting will be held on 21 April 1999. The
Annual Report and Accounts for 1998 will be posted to
shareholders and will be available from the Secretary from 18
March 1999.
1 March 1999
For Reference Michael Chadwick
Executive Chairman
Grafton Group plc
Telephone: 353 1 295 3377
Joe Murray
Murray Consultants
Telephone: 353 1 661 4666
Ginny Pulbrook
Citigate
Telephone: 171 282 2945
Group Profit and Loss Account
For the year ended 31 December 1998
1998 1997
Euro'000 Euro'000
Turnover
Continuing operations 378,099 327,615
Acquisitions 49,499 -
_______ _______
Total turnover 427,598 327,615
_______ _______
Operating profit
Continuing operations 33,779 25,606
Acquisitions (719) -
_______ _______
Total operating profit 33,060 25,606
Interest payable (net) 4,864 2,405
_______ _______
Profit on ordinary
activities before
taxation 28,196 23,201
Tax on profit
on ordinary activities 3,948 3,469
_______ _______
Profit on ordinary
activities after
taxation 24,248 19,732
Dividends on ordinary
Shares
- paid 2,174 1,721
- proposed 3,540 2,844
_______ _______
5,714 4,565
_______ _______
Profit retained for
the financial year 18,534 15,167
====== =======
Earnings per share 149.7c 123.0c
====== ======
Diluted earnings
per share 146.1c 120.8c
====== ======
Movements on Group Profit and Loss Account
For the year ended 31 December 1998
1998 1997
Euro'000 Euro'000
At beginning of year 55,199 48,190
Retained profit 18,534 15,167
Transfers to reserves (42) (8,158)
______ ______
At end of year 73,691 55,199
====== ======
Statement of Total Recognised Gains and Losses
For the year ended 31 December 1998
1998 1997
Euro'000 Euro'000
Profit for the
financial
year attributable
to Group shareholders 24,248 19,732
Currency translation
Adjustment
- on foreign currency
net investments (1,534) (290)
- on foreign
currency 1,492 -
borrowings _______ _______
Total recognised
gains and losses for
the year 24,206 19,442
====== ======
Historical Cost Profits and Losses
For the year ended 31 December 1998
There is no material difference between the results shown in
the profit and loss account and the results on an unmodified
historical cost basis.
Reconciliation of Movements in Group Shareholders' Funds
For the year ended 31 December 1998
1998 1997
Euro'000 Euro'000
Total recognised gains and
Losses for the year 24,206 19,442
Dividends (5,714) (4,565)
Issue of ordinary share
capital 7,364 973
Revaluation of tangible
Fixed assets 35,370 -
Goodwill written off - (7,869)
______ ______
Net addition to
Shareholders' funds 61,226 7,981
Opening shareholders' funds 78,582 70,601
_______
______
Closing shareholders'
Funds - equity 139,808 78,582
====== =====
Group Balance Sheet
As at 31 December 1998
1998 1997
Euro'000 Euro'000
Fixed assets
Intangible assets -
Goodwill 9,763 -
Tangible assets 140,660 61,748
Financial assets 212 12,530
______ ______
150,635 74,278
______ ______
Current assets
Stocks 67,371 44,649
Debtors 87,981 64,075
Cash at bank and in hand 67,407 59,377
______ ______
222,759 168,101
Creditors (amounts
Falling due within
one year) 133,392 111,804
______ ______
Net current assets 89,367 56,297
______ ______
Total assets less
current liabilities 240,002 130,575
______ ______
Creditors (amounts falling
due after more than one
year) 93,005 50,788
Provisions for liabilities
and charges 7,189 1,205
_____ ______
100,194 51,993
______ ______
139,808 78,582
===== =====
Capital and reserves
Share capital 5,225 5,116
Share premium account 17,388 10,133
Revaluation reserve 43,504 8,134
Profit and loss account 73,691 55,199
______ ______
Shareholders'
funds - equity 139,808 78,582
====== =====
Group Cash Flow Statement
For the year ended 31 December 1998
1998 1997
Euro'000 Euro'000
Net cash inflow
from operating activities 28,023 26,535
Servicing of finance (4,114) (1,968)
Taxation (2,473) (1,762)
Capital expenditure
and financial investment
Purchase of tangible
fixed assets (20,621) (14,616)
New finance leases 15 507
________ ________
(20,606) (14,109)
Sale of tangible fixed
assets 3,525 3,185
Purchase of financial
fixed assets (67) (12,412)
________ ________
(17,148) (23,336)
________ ________
Acquisitions and disposals
Acquisition of subsidiary
undertakings (45,275) (15,953)
Net cash/(debt)
acquired with subsidiary
undertakings 387 (709)
Disposal of business held
for resale 7,573 -
________ ________
(37,315) (16,662)
Equity dividends paid (5,018) (3,934)
______ _______
Cash outflow before
use of liquid resources
and financing (38,045) (21,127)
Management of liquid
resources increase in
short term deposits (1,352) (9,632)
Redemption of loan notes
receivable 2,481 -
______ _______
1,129 (9,632)
Financing
Issue of ordinary
share capital 34 973
Increase in term debt 41,932 28,324
Capital element of
finance leases repaid (622) (365)
Redemption of loan notes
Payable (188) (189)
_______ _______
Increase/(decrease) in
cash in the year 4,240 (2,016)
===== =====
Reconciliation of Net Cash Flow to Movement in Net Debt
1998 1997
Euro'000 Euro'000
Increase/ (decrease) in
cash in the year 4,240 (2,016)
Cash inflow from increase
in debt and lease financing (41,122) (27,770)
Cash flow from management
of liquid resources (1,129) 9,632
_____ ______
Change in net debt
resulting from cash flows (38,011) (20,154)
Loan notes issued on
acquisition of subsidiary
undertakings (1,091) (620)
Liquid resources acquired
with subsidiary undertakings 2,481 -
Finance leases acquired
with subsidiary undertakings (1,092) (128)
New finance leases (15) (507)
Translation adjustment 2,948 (4,265)
______ ______
Movement in net debt
in the year (34,780) (25,674)
Net (debt)/cash at 1 (23,934) 1,740
January ______ _____
Net debt at 31 December (58,714) (23,934)
====== =======
Grafton Group plc
Notes to the Profit and loss Account
Year ended 31 December 1998
1. Turnover
The amount of turnover by class of activity is as follows:
1998 1997
Euro'000 Euro'000
Irish merchanting and
wholesaling 167,872 139,030
Irish manufacturing and
related activities 23,170 24,770
DIY retailing 49,224 41,215
______ ______
Total turnover from
Irish Activities 240,266 205,015
UK merchanting and
other activities 187,332 122,600
______ ______
427,598 327,615
====== ======
2. Operating Profit
1998 1997
Euro'000 Euro'000
Republic of Ireland 27,386 20,392
Great Britain and Northern 5,674 5,214
Ireland ______ ______
33,060 25,606
===== =====
END
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