Final Results
Grafton Group PLC
4 March 2002
GRAFTON GROUP plc
Preliminary Announcement of Results
For Year Ended 31st December 2001
Highlights
'The success of the Group's strategy of diversifying its earnings base was
reflected in increased sales and profits from the Group's UK operations. Over
the last five years since 1996, the Group's UK turnover has increased eight fold
to €657.2 million, and UK operating profit has grown 15 times to €40.0 million'.
• Group pre-tax profits increased by 27 per cent to €67.2 million
• Earnings per share before goodwill and property profit up by 21 per cent
to 34.09c
• Dividend per share up by 23 per cent to 8.0c
• EBITDA up 25 per cent to €101.5 million
• Turnover increased by 19 per cent to €988.8 million
• UK operating profit up 37 per cent to €40.0 million accounts for 50 per
cent of Group profits
• An additional 27 trading locations
GRAFTON GROUP plc
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR YEAR ENDED 31 DECEMBER 2001
Grafton Group plc reports record results for the year ended 31st December 2001,
with pre-tax profits growing by 27 per cent to €67.2 million (2000: €52.8
million). Earnings per share, before goodwill and property profit, increased by
21 per cent to 34.09c (2000: 28.06c). It is proposed to pay a final dividend of
4.75c, making a total of 8.0c for the year (2000: 6.5c), an increase of 23 per
cent.
The Group continued to develop and implement its proven strategy in pursuit of
profitable growth in the UK and Ireland, and enhanced its performance in both
markets. The UK now accounts for 66 per cent of Group turnover and 50 per cent
of Group operating profit. UK turnover grew by 26 per cent to €657.2 million,
while UK operating profit increased by 37 per cent to €40.0 million, at an
improved margin of 6.1 per cent (2000: 5.6 per cent). In Ireland, margins
excluding income from financial assets improved to 11.8 per cent (2000: 11.6 per
cent) with profits up 9 per cent to €39.2 million, on turnover up 7 per cent to
€331.6 million.
Group pre-tax profit growth before property profit and dividend income in the
first half was 31 per cent, with continuing strong growth in the second half of
21 per cent. Group turnover grew by 19 per cent to €988.8 million, in trading
from over 230 locations, as Grafton continued to strengthen its market positions
in both the UK and Ireland. Group operating profit grew by 21 per cent to €79.1
million at an improved margin of 8.0 per cent (2000:7.9 per cent)
In the UK, the Group's builders and plumbers merchanting divisions experienced
turnover growth ahead of the market. Five new greenfield locations were opened,
and a further 22 new locations were added as a result of 11 acquisitions made
during the year. The Group's EuroMix mortar business enjoyed strong sales
growth, further penetrating the market, and opened its fifth dry mortar plant at
Bilston, near Birmingham. All UK divisions enjoyed strong like for like sales
growth and increased their contribution to Group profits.
The Group's Irish operations performed well with improved results from all
divisions. This performance was achieved despite a slowdown in growth in the
Irish economy and in the construction sector in particular. Turnover grew by 7
per cent to €331.6 million and operating profit increased by 9 per cent to €39.2
million.
The Group utilised the strong cashflows from its businesses to fund expenditure
of €61.8 million on acquisitions and investments and a further €42.0 million on
capital projects.
EBITDA for 2001 was €101.5 million up 25 per cent. Year end Shareholders' funds
were €264.5 million (2000: €216.5) and net bank debt amounted to €194.9 million
giving a debt to equity ratio of 74 per cent (2000: 71 per cent). EBITDA
interest cover increased to 8.2 from 6.9 times.
OPERATIONS REVIEW UNITED KINGDOM
UK profits increased significantly in 2001 due to organic growth, the benefits
of scale flowing from the Group's growing market presence, and the integration
of acquisitions. The Group traded from over 185 locations in the UK at the end
of 2001. The acquisition of 11 businesses trading from 22 locations and the
greenfield development of a further five locations increased market penetration
and complemented the existing branch network. These initiatives provide a solid
platform for future growth.
The total spend on UK acquisitions was €46 million and annualised turnover from
these at the date of acquisition was €92.4 million (Stg£57.5 million).
The success of the Group's strategy of diversifying its earnings basis was
reflected in increased sales and operating profit contribution from UK
operations. The UK businesses accounted for 66 per cent (2000: 63 per cent) of
Group sales and 50 per cent (2000: 45 per cent) of Group operating profit.
UK sales increased by 26 per cent, including organic growth of 7.8 per cent, to
€657.2 million (Stg£408.7 million). UK operating profit increased by 37 per cent
to €40.0 million (Stg£24.8 million), with similar strong growth in both halves
of the year.
UK Builders Merchanting
The Group's UK builders merchanting division made solid progress during the
year. Its market position was strengthened with the acquisition of nine
businesses trading from eighteen locations and the opening of one new branch
taking the divisional total to 85. The most significant acquisitions were G A
Day, a Portsmouth based builders merchant which trades from seven locations
mainly on the South Coast, and BSG a heavyside builders merchant trading from
three locations in London and Essex. The Group also acquired its first branch in
Scotland.
The division increased sales and operating profit as a result of like for like
growth, maximising buying efficiencies and continued improvement in the
performance of prior year acquisitions.
Buildbase is now a well recognised brand in the UK builders merchanting sector
enjoying a strong market position in the South and Midlands. The business
improved the operating profit margin of its established branches and continued
the re-branding and integration of acquisitions.
In Northern Ireland, Macnaughton Blair had another good year achieving
significant growth in sales and operating profit at higher operating margins.
Macnaughton Blair grew sales and profits strongly in its established branches
and also benefited from the successful integration of the three branch Lowden
acquisition made in November 2000. Macnaughton Blair is a leading builders
merchant in Northern Ireland trading from nine locations and is well placed to
take advantage of further expansion opportunities which may arise.
Plumbers Merchanting
Plumbase achieved significant growth in sales and operating profit aided by like
for like growth and the incremental effect of two substantial acquisitions,
Thompsons and Essex Heating, made during the first half of 2000. Operating
profit margins were also higher due to the successful integration of
acquisitions, and the benefits of scale associated with the enlarged business,
including purchasing benefits and improved efficiencies.
Plumbase is the leading regional plumbers merchanting business in the South and
Midlands trading from 93 branches at year end. Plumbase strengthened its branch
network with the opening of four new branches during the year and a further
three since the year-end. Four branches were added to the network through two
bolt-on acquisitions.
UK Manufacturing
EuroMix, producing a range of silo based mortars using the latest technology,
strengthened its market leadership position with the opening of a fifth dry
mortar plant in Bilston near Birmingham. The business is well positioned to
achieve further market penetration and to service customer demand in a growing
market on a nationwide basis. EuroMix is now an established supplier of silo
mortar to the UK's leading building and construction companies. All plants
enjoyed strong volume growth which was reflected in significantly higher sales
and operating profit.
Operations Review - Republic of Ireland
In Ireland, the inevitable return to more normal and sustainable levels of
economic growth continued throughout the year. In the construction sector, the
first six months of 2001 continued to show real growth, with a slowdown
occurring in the second half. HomeBond registrations have been declining since
August 2000 and it is estimated that private residential completions in 2001
fell while publicly funded housing completions increased. The DIY and Repair,
Maintenance and Improvement (RMI) markets remained buoyant.
Against this background, Irish results were strong. Irish turnover grew by 7 per
cent to €331.6 million, and margins improved to 11.8 per cent (2000:11.6 per
cent), resulting in an increase of 9 per cent in operating profit to €39.2
million, compared to €36.1 million in 2000. Strong double digit profit growth
was experienced in the first half with modest single digit growth in the second
half. These results were further improved by a property profit of €2.3 million
on the sale by Chadwicks of its Kilkenny branch property, prior to relocation in
2002.
Irish Merchanting
Chadwicks builders and plumbers merchanting business continued to concentrate on
profitable growth in 2001. Turnover grew by 2.4 per cent to €216.5 million, and
operating profit improved considerably as a result of Group synergies,
management's focus on the R.M.I. market and credit management. During the year a
new Chadwicks Plumb Centre at Navan was opened and work progressed well on
Chadwicks relocation programme for its Clonmel and Kilkenny branches. Towards
the year-end, Grafton acquired Pulsar Direct, a Cork based business serving the
plumbing trade.
Irish Retailing
Woodie's achieved strong turnover growth of 19 per cent to €85.2 million,
growing like for like sales by 16 per cent in a favourable but competitive
market. Woodie's development programme included the refurbishment of its Swords
and Lucan stores, and increases in the size of its stores in Cork and Waterford.
Woodie's increased further its product offering to the public. Expansion plans
for further stores in Newbridge and Tralee are well underway. Woodie's
contributed strongly to the successful performance of the Group's Irish
operations.
Irish Manufacturing
Manufacturing turnover increased by 9 per cent to €29.9 million, compared to
€27.4 million in 2000. CPI, serving the greater Dublin market, grew its concrete
and EuroMix silo mortar turnover and operating profit in a highly competitive
market, developing its product range and increasing its average number of silos
on site throughout the year. MFP increased its plastics business and improved
its profitability, despite weak selling prices in the market.
FINANCIAL REVIEW
Like for like sales growth of 6 per cent in Ireland and 7.8 per cent in the UK,
together with improved operating margins in both Ireland and the UK, resulted in
a strong increase in like for like operating profit in both the UK and Ireland.
The Group's results were further enhanced by the improved profitability of
businesses acquired in the year 2000, with significant contributions to Group
operating profit coming from Essex Heating Supplies Ltd and E J Thompson &
Company. The Group's EuroMix mortar manufacturing business also made a strong
contribution to Group operating profit growth.
The growth in operating profit produced a material increase in cash generated by
the Group. Net cash inflow from operating activities, having taken account of
the increase in working capital (required to support the increase in activity
levels), was up €16.4 million or 25 per cent to €82.4 million.
The Group's ongoing development programme resulted in €47.2 million being
invested in new acquisitions and €42.0 million being spent on a range of capital
expenditure projects. During 2001 the Group's capital programme represented 4.2
per cent of turnover and just over 2.2 times depreciation.
Although the Group continues to utilise its debt capacity at higher levels to
part fund the Group's acquisition activity, improved operating profits and
margins together with lower interest rates have once again increased the Group's
interest cover to 6.7 from 5.7 times.
During 2001, both euro and sterling based interest rates were reduced on a
number of occasions and the Group benefited significantly. The Group's net debt
increased by 26 per cent to €194.9 million, while net interest costs only
increased by 5 per cent to €12.4 million. At the end of the year, the Group's
net debt represented gearing of 74 per cent (2000: 71 per cent). Shareholders'
funds increased by 22 per cent to €264.5 million. EBITDA for the year increased
by 25 per cent to €101.5 million.
Strong cash flow and high interest cover are expected to continue to underpin
the financing of continuing bolt-on acquisitions and organic developments.
During the year the Group increased its stake in Heiton Group plc from 14.4 per
cent to 23.8 per cent. This investment which cost €33.5 million or an average of
€2.84 per share continues to be treated as a financial asset on the face of the
balance sheet, with only dividend income of €1.3 million included in the profit
and loss account.
As stated at the time of our interim results, the Group has adopted the policy
of converting the UK results at the average rate of exchange for the year rather
than the year end rate as in previous years. Accordingly the UK results have
been converted at the average rate of exchange of Stg62.2p to the euro. Had the
previous policy been maintained and UK earnings converted at the closing rate
the UK operating profit reported would have been circa €0.9 million or 2 per
cent higher and Group profit before tax would have been circa €0.5 million
higher. The euro / sterling exchange rate at 31 December 2001 was Stg60.8p (31
December 2000: Stg62.4p).
OUTLOOK
The Group's consistent and focused strategy in building strong market positions
and brands across the UK and Ireland has created a broadly diversified earnings
base as a sound platform for continuing growth. The contribution of UK
operations to Group turnover and profitability has been increasing rapidly, now
accounting for 66 per cent of turnover and 50 per cent of profits.
In the UK, trading conditions in a sound economy have been favourable. The
significant exposure of the Group's UK merchanting businesses to the Repair,
Maintenance and Improvement (RMI) markets provides opportunities for both
organic and like for like growth. There remains scope for the Group to continue
to be value acquirers through bolt-on acquisitions in a market that remains
fragmented. The Group's EuroMix silo mortar business enjoys market leadership
nationally, and is seeking suitable sites for further market penetration.
In Ireland, the pace of economic growth has slowed and in the construction
sector, housing starts, which first began to decline in the second half of 2000,
continued to decline throughout 2001. The partial reversal in Budget 2002 of
measures that penalised the residential investor are expected to improve the new
residential market later in 2002. Prospects for continuing growth in the RMI and
DIY market are positive.
Overall the Group remains confident that its sound finances, strong market
positions, and diversified earnings base provide opportunities for further
profitable growth in the year ahead.
For reference:
Michael Chadwick
Executive Chairman
Grafton Group plc
Telephone: (++353) (01) 2160600
Joe Murray / Grainne O'Brien
Murray Consultants
Telephone: (++353) (01) 6326400
Ginny Pulbrook
Citigate
Telephone: (++44) (0207) 2822945
Grafton Group plc
Group Profit and Loss Account
For the year ended 31 December 2001
2001 2000
€'000 €'000
Turnover
Continuing operations 944,150 830,456
Acquisitions 44,640 -
------- -------
Total turnover 988,790 830,456
------- -------
Operating profit before goodwill amortisation
Continuing operations 79,470 66,332
Acquisitions (331) -
------- -------
79,139 66,332
Goodwill amortisation 3,096 2,495
------- -------
Operating profit 76,043 63,837
Profit on disposal of property 2,262 -
------- -------
Trading profit 78,305 63,837
Income from financial assets 1,317 768
Interest payable (net) 12,386 11,825
------- -------
Profit on ordinary activities before taxation 67,236 52,780
8,741 6,889
Taxation on profit on ordinary activities
------- -------
Profit on ordinary activities after taxation 58,495 45,891
Dividends on ordinary shares
- paid 5,679 4,293
- proposed 8,321 6,973
------- -------
14,000 11,266
------- -------
Profit retained for the financial year 44,495 34,625
======= =======
Earnings per share 33.61c 26.61c
======= =======
Adjusted earnings per share* 34.09c 28.06c
======= =======
Diluted earnings per share 32.99c 26.12c
====== ======
Adjusted diluted earning per share* 33.47c 27.57c
======= =======
* Before goodwill amortisation and property profit
Grafton Group plc
Group Balance Sheet
As at 31 December 2001
2001 2000
€'000 €'000
Fixed assets
Intangible assets - goodwill 62,541 51,671
Tangible assets 251,484 209,580
Financial assets 33,554 18,949
------- -------
347,579 280,200
------- -------
Current assets
Stocks 133,453 115,248
Debtors 181,955 158,512
Cash and short term bank deposits 89,081 79,071
------- -------
404,489 352,831
Creditors (amounts falling due within one year) 264,593 234,763
------- -------
Net current assets 139,896 118,068
------- -------
Total assets less current liabilities 487,475 398,268
------- -------
Creditors (amounts falling due after more than one year) 206,117 166,823
Provisions for liabilities and charges 16,891 14,948
------- -------
223,008 181,771
------- -------
264,467 216,497
======= =======
Capital and reserves
Share capital 8,804 8,711
Share premium account 34,836 32,982
Revaluation reserve 41,537 42,938
Profit and loss account 179,290 131,866
------- -------
Shareholders' funds - equity 264,467 216,497
======= =======
Grafton Group plc
Group Cash Flow Statement
For the year ended 31 December 2001
2001 2000
€'000 €'000
Net cash inflow from operating activities 82,365 65,958
Returns on investments and servicing of finance (11,764) (11,093)
Taxation (5,273) (2,782)
------- -------
65,328 52,083
------- -------
Capital expenditure and financial investment:
Purchase of tangible fixed assets (42,003) (43,151)
Disposal of tangible fixed assets 9,852 6,379
------- -------
(32,151) (36,772)
Purchase of financial fixed assets (14,310) -
Sale of financial fixed asset 84 -
------- -------
(46,377) (36,772)
------- -------
Acquisitions
Acquisition of subsidiary undertakings and businesses (28,955) (41,779)
Net (debt) acquired with subsidiary undertakings (2,957) (3,311)
Deferred acquisition consideration (164) (402)
------- -------
(32,076) (45,492)
------- -------
Equity dividends paid (12,652) (9,323)
------- -------
Cash outflow before use of liquid resources and financing (25,777) (39,504)
------- -------
Cash outflow from increase in liquid resources (10,300) (17,027)
------- -------
Financing
Issue of ordinary share capital 2,109 625
Increase in term debt 26,879 46,280
Capital element of finance leases repaid (874) (643)
Redemption of loan notes payable (1,270) (324)
Financing from sale and leaseback 1,471 -
------- -------
28,315 45,938
3315
------- -------
(Decrease) in cash in the year (7,762) (10,593)
------- -------
Grafton Group plc
Group Cash Flow Statement
For the year ended 31 December 2001
Reconciliation of Net Cash Flow to Movement in Net Debt
2001 2000
€'000 €'000
(Decrease) in cash in the year (7,762) (10,593)
Cash inflow from increase in debt and lease financing (26,206) (45,313)
Cash flow from management of liquid resources 10,300 17,027
-------
------- -------
Change in net debt resulting from cash flows (23,668) (38,879)
Loan notes issued on acquisition of subsidiary undertakings (11,671) (10,413)
Finance leases acquired with subsidiary undertakings (947) (598)
Translation adjustment (4,511) 3,142
------- -------
Movement in net debt in the year (40,797) (46,748)
Net debt at 1 January (154,108) (107,360)
------- -------
Net debt at 31 December (194,905) (154,108)
======= =======
Grafton Group plc
Notes to the Profit and loss Account
Year ended 31 December 2001
1. Turnover:
The amount of turnover by class of activity is as follows:
2001 2000
€'000 €'000
Irish merchanting and wholesaling 216,513 211,451
DIY retailing 85,207 71,589
Irish manufacturing and related activities 29,866 27,386
------- -------
Total turnover from Irish activities 331,586 310,426
UK merchanting and other activities 657,204 520,030
------- -------
988,790 830,456
======= =======
2. Operating Profit and Trading Profit
2001 2000
€'000 €'000
Republic of Ireland 39,187 36,092
Great Britain and Northern Ireland 39,952 29,213
------- -------
79,139 65,305
Goodwill amortised (3,096) (2,495)
Profit on disposal of property 2,262 -
Deposit forfeited on aborted property sale - 1,027
------- -------
Trading profit 78,305 63,837
Income from financial assets 1,317 768
------- -------
79,622 64,605
------- -------
3. Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
2001 2000
€'000 €'000
Operating profit 76,043 63,837
Depreciation 18,756 14,008
Goodwill amortisation 3,096 2,495
Investment impairment - 6
Profit on disposal of fixed assets (1,436) (1,460)
Increase in working capital (14,058) (12,928)
Profit on disposal of financial fixed assets (36) -
------- -------
Net cash inflow from operating activities 82,365 65,958
======= =======
Increase in working capital 2001 2000
€'000 €'000
Stock 3,586 11,928
Debtors 9,924 19,647
Creditors 548 (18,647)
------- -------
14,058 12,928
======= =======
4. Earnings Per Share
The computation of basic and diluted earnings per share is set out below:
2001 2000
Profit on ordinary activities after taxation (€'000) 58,495 45,891
------- -------
Weighted average shares outstanding during the year 174,034,644 172,451,100*
--------- ----------
Earnings per share 33.61c 26.61c
------- --------
Number of dilutive shares under option 8,554,850 7,225,190
Number of shares that would have been issued at fair value (5,286,600) (4,010,300)
-------- --------
Dilutive potential ordinary shares 3,268,250 3,214,890
-------- --------
Number of shares for calculating diluted earnings per share and
adjusted diluted earnings per share 177,302,894 175,665,990
---------- ----------
Diluted earnings per share 32.99c 26.12c
======= =======
*Adjusted to reflect the ten for one share split which took effect on 14 May
2001.
Earnings per share, of 33.61c (2000: 26.61c) have been calculated on profits
after taxation of €58,495,000 (2000: €45,891,000) and the weighted average
number of shares of 174,034,644 (2000: 172,451,100).
The calculation of adjusted earnings per share of 34.09c (2000: 28.06c) is
arrived at after eliminating goodwill of €3,096,000 and property profit of
€2,262,000 from profit after taxation of €58,495,000.
Diluted earnings per share of 32.99c (2000:26.12c) have been calculated on
profits after taxation of €58,495,000 (2000: €45,891,000) and the weighted
average number of shares in issue during the year adjusted for the dilutive
effect of outstanding share options.
The calculation of adjusted diluted earnings per share of 33.47c (2000: 27.57c)
uses the same earnings figure as for adjusted earnings per share and the
weighted average number of shares as adjusted to reflect the dilutive effect of
outstanding share options.
5. Dividends
The Board is recommending the payment of a final dividend of 4.75c per share to
be paid, subject to shareholder approval, on 2 May 2002 to shareholders
registered at close of business on 15 March 2002.
6. Year End Exchange Rates
The year end euro / sterling exchange rate was Stg60.8p (2000: Stg62.4p) and the
average euro / sterling exchange rate was Stg62.2p (2000: Stg60.9p).
Grafton Group plc
Financial Overview 2001
2001 2000 Change
Turnover (€'000) 988,790 830,456 +19%
EBITDA (€'000) 101,474 81,108 +25%
Operating profit before goodwill amortisation (€ 79,139 65,305 +21%
'000)
Profit before taxation (€'000) 67,236 52,780 +27%
Adjusted earnings per share 34.09c 28.06c +21%
Dividend per share 8.0c 6.5c +23%
Dividend cover (times) 4.3 4.3 -
Interest cover (times) 6.7 5.7 -
Cash flow per share 46.2c 36.2c +28%
Net assets per share 150.2c 124.3c +21%
Net debt to shareholder's funds 74% 71% -
Depreciation charge (€'000) 18,756 14,008 -
Goodwill amortisation (€'000) 3,096 2,495 -
Acquisition and investment expenditure (€'000) 61,842 56,646 -
Capital expenditure (€'000) 42,003 43,151 -
This information is provided by RNS
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