Final Results
Grafton Group PLC
10 March 2008
Grafton Group plc
2007 Final Results
For further information please contact:
Grafton Group plc + 353 1 216 0600 Murray Consultants + 353 1 498 0300
Michael Chadwick, Executive Chairman Joe Murray
Colm O Nuallain, Finance Director
Citigate Dewe Rogerson + 44 207 282 2945
Ginny Pulbrook
10th March 2008
Record Sales, Profits and Earnings
Grafton Group plc, the builders merchants and DIY Group with operations in the
UK and Ireland, announces its final results for the year ended 31 December 2007.
Financial Highlights
2007 2006 Change
___________________________________________________________________________________________________________
Revenue €3.21 bn €2.93 bn UP 9%
___________________________________________________________________________________________________________
Operating profit * €265.8m €244.9 m UP 9%
___________________________________________________________________________________________________________
Profit before tax # €228.6m €211.4 m UP 8%
___________________________________________________________________________________________________________
Earnings per share (adjusted)* 84.3c 78.0c UP 8%
___________________________________________________________________________________________________________
Share purchase 22.0c 18.75c UP 17%
___________________________________________________________________________________________________________
Cash flow per share # 108.3c 100.4c UP 8%
___________________________________________________________________________________________________________
Net debt €550.4m €550.9m -
___________________________________________________________________________________________________________
Gearing 52% 54% -
___________________________________________________________________________________________________________
* Before property profit and amortisation of intangibles
# Excludes property profit
Operating Highlights
• UK merchanting business performed strongly in a favourable market
• Solid performance from the Irish merchanting business
• Significant growth in the Irish DIY business
• Operations were strongly cash generative
Commenting on the results today, Mr. Michael Chadwick, Chairman said:
'In another record year, the ongoing development of our businesses in the UK and
Ireland has proved its worth. Strong brands in both markets and a healthy
balance sheet leave the Group well positioned to respond to more demanding
market conditions. We will continue to pursue the consistent growth orientated
strategy that has been successful for the past two decades. While maintaining a
focus on closer integration, scale related benefits, lower cost base and product
sourcing gains, Grafton will also take advantage of acquisition and development
opportunities that continue to be available and that represent value and are a
good strategic fit.'
10th March 2008
Grafton Group plc reports good growth in sales, profits and earnings per share
for 2007.
Highlights
• Sales were up 9 per cent to €3.21 billion (2006: €2.93 billion).
• Operating profit increased by 9 per cent to €265.8 million (2006:
€244.9 million).
• Profit before tax and property profit up 8 per cent to €228.6 million
(2006: €211.4 million).
• Adjusted earnings per share increased by 8 per cent to 84.3 cent
(2006: 78.0 cent).
• Adjusted diluted earnings per share up 8 per cent to 83.0 cent (2006:
76.5 cent).
• Cash generated from operations was up 21 per cent to €303.8 million
(2006: €251.9 million).
• Strong balance sheet with shareholders' funds of €1.07 billion.
• Lower net debt, gearing at a nine year low of 52 per cent and interest
cover of 7.8 times.
• Sixteenth consecutive year of increased share purchase / dividend
payments.
• Buyback of 10.5 million Grafton Units.
The Group delivered a good performance for the year against the background of a
strong UK economy and continued expansion in the Irish economy despite some
easing of growth in the second half as the anticipated slowdown in the Irish
housing market materialised.
In the UK, the improvement in market conditions experienced in the second half
of 2006 continued throughout the year. UK profits were at record levels due to
good growth in the established business and contributions from acquisitions.
The business experienced good like for like sales growth and this was reflected
in an increased operating margin in the overall business.
The Irish business outperformed in a market that was influenced by a significant
decline in activity in the new housing market during the year which was
partially offset by continued growth in the repair, maintenance and improvement
and DIY markets.
The overall results for 2007 reflect the benefit of pursuing a consistent
strategy over the past two decades which has led to the creation of businesses
with national or regional leadership positions in the builders merchanting, DIY
and mortar markets in the UK and Ireland.
The UK business increased turnover by 14 per cent to €1.98 billion (2006: €1.73
billion) and operating profit increased by 24 per cent to €142.1 million (2006:
€114.6 million). The record results were driven by good volume growth and
generally positive trading conditions in the merchanting market.
Irish turnover increased by 2 per cent to €1.23 billion (2006: €1.20 billion).
Operating profit declined by 5 per cent to €123.7 million (2006: €130.4
million). 2007 was a satisfactory year for the Irish business despite the
decline in profit from the previous year's record level. The Irish Merchanting
business was, as expected, impacted by the significant decline in new
residential construction.
Development and Finance
The Group continued to consolidate and expand from its existing strong positions
in the UK and Irish merchanting and Irish DIY markets. The spend on acquisitions
in 2007 amounted to €89.2 million (2006: €87.1 million), of which €74 million
related to trading businesses acquired by the Group, including deferred
acquisition consideration of €9.5 million (2006: €11.9 million) relating to
prior year transactions. Capital expenditure on development projects was €55.7
million (2006: €72.8 million). The combined acquisition and development
commitments for the year resulted in expenditure of €144.9 million (2006: €159.9
million).
Thirteen acquisitions in the UK increased scale and further strengthened the
Group's position in the merchanting market through securing a presence in
locations which complement the established branch network as well as providing
enhanced product and additional route to market opportunities. A single branch
acquisition improved coverage in the Irish builders merchanting market. The
businesses acquired in the UK and Ireland trade from thirty three locations with
annual sales of over €100 million.
Considerable resources were also devoted to organic development opportunities to
expand the merchanting and retailing branch networks and to enable the Group to
more effectively serve these markets into the future. Thirteen merchanting
branches were opened in the UK. In Ireland, one DIY store, one builders
merchanting branch and one In House at the Panelling Centre store were opened.
The addition of these forty nine trading locations marked a continuation of a
successful focus and commitment to growth orientated development opportunities
which will contribute to increased profitability in the future.
The Group's operations have traditionally been strongly cash generative and this
trend continued in 2007 leaving the Group in a strong financial position with
lower net debt at the year end. Shareholders' funds were €1.07 billion at the
end of 2007 and gearing was a modest 52 per cent. The Group has retained
financing flexibility by holding significant cash balances and more than
adequate committed facilities are in place to refinance term debt maturing over
the next three years. The Group's overall financial position leaves it well
placed to take advantage of acquisition and development opportunities which
continue to be available and represent good value and are a good strategic fit.
Share Purchase
The Company purchased 1 'A' Ordinary share per Grafton Unit for a cash
consideration of 10.0 cent (2006: 8.25 cent) which was paid on 3 October 2007.
The Board approved the purchase of a further Ordinary share per Grafton Unit for
cash consideration of 12.0 cent (2006: 10.5 cent) payable on 11 April 2008.
The total purchase payments to shareholders for 2007 amount to 22.0 cent per
Grafton Unit. This is an increase of 17 per cent on total share purchase
payments for 2006 of 18.75 cent per Grafton Unit. This is the sixteenth
consecutive year for the Group to increase its share purchase / dividend
payments to shareholders. Group earnings per share cover the share purchase
payments 3.8 times (2006: 4.2 times). The increase in share purchase payments
over the prior year reflects the good results for 2007, strong cash flow from
operations and management's confidence in the Group's future prospects.
Share Buybacks
The Group's highly cash generative trading operations, high interest cover and
low gearing provided the financial strength to complete unit buybacks in the
market while continuing to take advantage of ongoing acquisition and development
opportunities. A total of 10.5 million Grafton Units, equivalent to 4.4 per cent
of the Group's share capital, were bought back at a total cost of €72.8 million.
This will have a positive impact on earnings per share in 2008 and beyond.
Operations Review - United Kingdom
UK sales increased by 14 per cent to €1.98 billion (2006: €1.73 billion) and
operating profit increased by 24 per cent to €142.1 million (2006: €114.6
million). The UK operating margin increased to 7.2 per cent from 6.6 per cent
reported for 2006.
The UK continued to be a good market in which to do business. The economy
experienced stable conditions in 2007 with growth above its trend rate, the
strongest employment growth in a decade and unemployment at a thirty year low.
The supply of housing in the UK continued to be lower than the level of demand
implied by household formation rates. House prices showed good overall growth
for the year although the market weakened in the second half. Mortgage approvals
were also down due to higher interest rates and tighter conditions in the credit
markets.
The residential repair, maintenance and improvement market, which is the primary
end-use market for the Group's UK merchanting sales, enjoyed modest volume
growth in demand in 2007. Like for like sales in the Group's merchanting
business increased by 4.8 per cent.
UK Builders Merchanting
Buildbase had an excellent year reporting strong growth in sales and profit due
to a combination of good trading and operational improvements in the underlying
business together with contributions from acquisitions and greenfield
developments. Volume growth due to reasonable market conditions, a more positive
pricing environment, continued rationalisation of sourcing arrangements and
tight control of overheads contributed to the improvement in profit. Regionally,
all areas of the branch network benefited from the improved trading environment
and internal initiatives to improve profitability although demand was firmer
across the Midlands and South East.
Flemings, the leading independent builders and timber merchant trading from
seven branches in Scotland acquired in 2006, was integrated into the Buildbase
network and achieved a good level of profitability through operational
efficiencies and purchasing gains. There were also good incremental
contributions from three single branch acquisitions completed in 2006.
Expansion of the Buildbase branch network continued with the completion of eight
acquisitions adding ten branches. The three Buildbase branch openings in
Melksham, Wiltshire; Yeovil, Somerset and Stowmarket, Suffolk traded in line
with expectations.
Buildbase branches in Poole, Dorset; Belper, Derbyshire and Wakefield, West
Yorkshire were relocated to extensive modern facilities and now offer a wider
range of products. The trading area of the Southend-on-Sea, Essex; Buckingham,
Buckinghamshire and Inverness branches was expanded and new hire centres were
opened in seven branches. A major refurbishment of the Cirencester,
Gloucestershire branch was undertaken as well a number of smaller branch
development projects.
Jacksons, the leading regional merchanting business had a good year increasing
sales and profit despite tougher competition due to significant capacity
expansion in the East Midlands market in recent years. The four locations
acquired in 2006 were integrated into the branch network and provide a sound
basis for future growth in sales and profit. Market coverage improved with the
acquisition of a single branch ironmongery business and the opening of a second
branch in Lincoln. Tool hire centres were added in a number of branches.
In Northern Ireland, activity in the housing and commercial markets was strong
against the backdrop of an improving local economy. Macnaughton Blair reported a
strong advance in sales and profits with all of the gains realised in the
established branch network. Good progress was made in developing a presence in
the Larne and Lisburn, Co. Antrim market following completion of two small
acquisitions at the end of 2006.
Selco, a trade only warehouse format set in a modern self service environment,
benefited from good levels of activity in the small project segment of the RMI
market. Last year's store openings in London, Manchester and Reading traded to
expectations. The opening of three further stores in London increased the
network to twenty stores with the majority of these stores located in major
metropolitan areas.
UK Plumbers Merchanting
The plumbers merchanting division incorporates Plumbase, the UK's fourth largest
plumbers merchanting chain which trades from one hundred and eighty three
branches, and the bathroom products distribution business. The division
delivered a substantial increase in sales and operating profit in a stable but
competitive segment of the merchanting market. Acquisitions contributed very
positively to increased profitability.
Plumbase continued to improve market coverage with the opening of six branches
and the completion of a two branch acquisition.
Progress, a seventeen branch boiler and heating spares business was acquired in
June 2007. The acquisition improves the Group's position in the heating spares
market through a better geographical spread of branches. The Group successfully
entered the internet retail market for bathroom products at the end of 2006 with
the acquisition of plumbworld.co.uk, the UK's largest online retailer of
bathroom products. The business traded in line with demanding pre-acquisition
expectations.
UK Mortar
CPI EuroMix manufactures a range of mortars for use in residential, commercial
and public sector construction projects, which it supplies from a network of
nine plants in England and Scotland. EuroMix consolidated its leadership
position in the silo based mortar market with further growth in volumes and
sales. Operating profit was maintained at last year's level in a good market but
with continuing competitive pricing pressure linked to the introduction of
capacity in the sector in recent years. The Leeds plant that opened in July 2006
successfully increased volumes in the West Yorkshire market and traded
profitably in 2007.
Operations Review - Republic of Ireland
Irish turnover increased by 2 per cent to €1.23 billion (2006: €1.2 billion).
Operating profit was down 5 per cent to €123.7 million (2006: €130.4 million).
The Irish economy performed strongly in 2007 with growth of five per cent driven
by domestic demand and an impressive recovery in export growth. The volume of
consumer expenditure is estimated to have increased by six per cent due to
higher disposable income as a result of growth in employment and earnings and
income tax reductions. Maturing SSIAs also contributed to increased consumer
spending. Employment growth held up well with the rate of job creation
substantially ahead of the euro zone area. Following the slowdown in
construction activity during the year the financial and business services
sectors replaced the construction sector as the principal source of job creation
in the economy.
House building levels adjusted following a long period of strong supply that
reached a level of output which exceeded the economy's medium term requirements.
During 2007 house building levels responded to the weaker demand and pricing
environment. The fall in the market reflected reduced affordability due to
rising interest rates, which were at their highest level for six years, and the
high level of house prices achieved in recent years. Housing output responded to
the changing market conditions with completions falling to 78,000 units from a
peak of 88,000 units in 2006. Housing registrations, an indicator of housing
starts, progressively weakened as the year progressed.
Investment in non-residential building increased with good levels of activity in
the commercial, industrial, civils and infrastructure markets. The housing
repair, maintenance and improvement market benefited from increased spending and
continued to grow.
Irish Merchanting
Sales were marginally higher at €819.2 million (2006: €816.6 million). The Irish
merchanting business has developed rapidly having almost tripled its turnover
over the past three years. 2007 was a satisfactory year for the business despite
a small decline in profits from the record levels achieved in 2006. The business
benefited from reasonably positive market conditions in the first half with
relatively flat new housing activity and good growth in the non-residential
construction segments of the market. Market conditions became more challenging
in the second half due to the significant decline in housing starts and
completions. Weakness in the housing market was partially offset by the
continuing growth in the residential RMI and non-residential new build markets.
Like for like sales declined by one per cent for the year.
The Heiton Buckley and Chadwicks brands delivered a good performance in a market
that experienced a sharp decline in volumes. The mix of the business benefited
from a significant exposure to the housing repair maintenance and improvement
and non-residential markets. More subdued house building related demand in a
number of the Dublin branches was largely offset by better trading in the
provincial branches which continued to experience positive trading conditions
and less of an impact from a reduction in scheme house and apartment
development. These branches experienced good demand in the RMI and one-off
housing segments of the market.
Irish merchanting grew through both acquisition and organic development. The
business gained a presence in the Mid West market through the purchase of Market
Hardware in Ennis. The opening of a new branch in South Dublin City provided an
important base to grow market share within a catchment area that offers
significant development opportunities in the years ahead. The branch in
Mullingar, which opened in the second half of 2006, had a successful year and
now has a well established presence in the Midlands market. Relocation of the
Tullamore branch to a new purpose built facility enabled the branch to expand
its product offering and strengthen its market leading position in the region.
The business continued to focus on margin improvement making gains from
purchasing efficiencies and tight control of costs. The opening of a Chadwicks
Plumb Centre in Sligo provides a base for sales growth in the plumbing and
heating products category. The Athlone
branch was relocated from the town centre continuing the programme of branch
relocations designed to increase capacity and improve customer service.
Cork Builders Providers achieved higher sales despite the more challenging
market place. This reflected the benefit of measures taken to expand turnover in
the one-off housing and non-residential markets helping the business to overcome
the impact of a volume reduction in residential development schemes. Davies, the
Dublin based specialist plumbing, heating and civils merchant continued to
benefit from positive market conditions in the commercial and infrastructure
markets. Telfords, the Midlands based merchant, performed well benefiting from a
solid customer base and investment in its Portlaoise branch.
Heiton Steel, the market leading steel stock-holding business, had a
satisfactory year. Strength in the civils and commercial markets and improved
pricing helped to offset softness in housing related volumes. The Cork branch
relocated to a new facility to enable it to offer a wider range of products and
achieve operational efficiencies.
Chadwicks Hire Centres and Sam Hire, the plant and tool hire business, continued
to increase market coverage with the opening of branches in Tullamore and
Limerick. The Group now trades from thirty four hire locations primarily sharing
facilities with builders merchanting branches.
Irish Retailing
Sales increased by 9 per cent to €339.8 million (2006: €311.7 million). The
Irish retailing business trades from forty one stores under the Woodie's DIY and
Atlantic Homecare brands and from six In House at the Panelling Centre stores.
The trading environment for the business was very positive. Retail sales volumes
showed the highest rate of growth since 2000. Against this favourable
background, the business achieved significant sales and profit growth.
The increase in profitability was due to strong trading in the established
stores and good contributions from store openings in 2006. This outcome was
achieved despite absorbing increased property costs. Like for like sales growth
for the year was 5.3 per cent. The first half benefited from very favourable
trading in the gardening season measured against more subdued prior year
trading.
Store openings in 2006 in Castlebar, Co. Mayo, Navan, Co. Meath and in Nenagh,
Co. Tipperary traded in line with expectations making good profit contributions
for the year.
The strong internal growth strategy for developing the Irish retailing business
was sustained with the opening of a new Woodie's DIY store in Limerick and
relocation of the Woodie's DIY store in Tallaght to a facility which doubles the
store's trading area. The capacity of Woodie's DIY Waterford store was
substantially expanded. These initiatives support the geographic development of
the retail customer base and enable the marketing of a wider range of products.
The Woodie's and Atlantic Homecare support offices and management were
successfully merged during the year.
The In House at the Panelling Centre business, which markets a range of quality
kitchen and bedroom panelling products to trade and retail customers, benefited
from strong volume growth in consumer spending, a good level of housing
transactions and solid demand in the replacement market. The business achieved
good sales and profit growth. The Galway store that opened at the end of 2006
traded in line with expectations and prior to the year end a sixth store was
successfully opened in Waterford. Further store openings are planned.
Irish Manufacturing
The Irish manufacturing business delivered a resilient performance in the first
half but second half trading conditions became more challenging and volumes
declined in line with the slowdown in new house building activity.
Finance
Record profits and cash flows were generated in the merchanting, DIY and
manufacturing businesses. Cash flow from operations amounted to €303.8 million
(2006: €251.9 million).
Working capital was well controlled with a modest additional net investment of
€14.4 million (2006: €26.1 million) required to finance the increased activity
levels across the Group.
Shareholders' funds at the year end were €1.07 billion (31 Dec 2006: €1.01
billion). Retained profit after taxation for the year was €205.2 million. Year
end shareholders' funds are stated after accounting for the cost of the 10.5
million units bought back during 2007 which reduced reserves by €73 million.
Revenue reserves were reduced by €43.8 million due to exchange rate movements
during 2007. Sterling weakness reduced the euro equivalent of the Group's net
investment in the UK business on translation at the year end rate of exchange.
The purchase of two 'A' Ordinary shares per Grafton Unit resulted in the return
of €49.0 million (2006: €39.9 million) to shareholders and this amount was also
written-off against revenue reserves.
Net borrowings at 31 Dec 2007 of €550.4 million (31 Dec 2006: €550.9 million)
were marginally down despite a total spend of €266.7 million on acquisitions,
routine replacement and development capital expenditure and share buybacks. Net
debt was reduced by €36 million due to the favourable translation impact of
converting sterling debt to the euro at the weaker year end exchange rate of
Stg73.34p compared to the rate of Stg67.15p at 31 Dec 2006.
Net assets and actuarial liabilities of the Group's defined benefit pension
schemes are included in the balance sheet in accordance with IAS 19. At the end
of 2007 the net retirement benefit obligation, after deferred taxation, reduced
to €12.6 million (31 Dec 2006: €27.3 million). The reduction of €14.7 million in
the net liability was due to employer contributions, an increase in the discount
rates used to value liabilities and investment income which were partially
offset by more conservative assumptions concerning life expectancy.
Outlook
UK sales continued to increase in the first two months of 2008 albeit at a
slightly lower rate than achieved in 2007. Sales were lower in the Irish
merchanting business due to the much weaker new housing market.
In Ireland, economic growth is expected to be lower than the record levels of
recent years but still good by international standards. The Irish housing
market will continue to adjust to a more sustainable supply and pricing
environment in response to more moderate demand. Underlying demand for housing
is however expected to remain strong due to favourable demographics and growth
in employment and incomes. Affordability has been improving due to lower house
prices and rising incomes and the current interest rate tightening cycle appears
to have come to an end. The strength of demand for rented accommodation has
pushed up rents and this should begin to translate into an improvement in
housing starts.
Growth in the repair, maintenance and improvement market and the non-residential
and infrastructure markets is expected to continue through 2008 and should
mitigate some of the impact of lower output in the new housing market. The Irish
merchanting business will encounter weaker trading conditions with the prospect
that there may be some improvement in housing starts later in the year.
A clear focus is now in place within Irish Merchanting to achieve closer
integration, thereby driving further scale related benefits, a lower cost base,
and product sourcing gains. Our policy of being the preferred first choice
supplier to our trade customers is both resilient and consistent and we expect
to gain further benefit from the success of this policy in 2008.
Volume growth in consumer spending is forecast although at a somewhat lower
level than the very high growth rates of recent years. The Irish retailing
business will also benefit from the internal initiatives and developments
undertaken in 2007. A new Woodie's store in Carrick-on-Shannon was successfully
opened earlier this month.
UK economic growth is expected to moderate from a rate of expansion that has
been at or above trend for over two years. Consumer spending and investment in
housing is easing on the back of interest rate increases and generally tighter
conditions in the credit markets. The residential repair, maintenance and
improvement market has historically been less cyclical and we expect to see
continued growth and development opportunities in the merchanting sector. The
recent sterling interest rate reduction combined with further interest rate cuts
expected in 2008 should help stimulate activity in the merchanting sector as we
move into the last quarter and early 2009. The continuing weakness of sterling
will reduce the value of the Group's earnings when translated into euro for
reporting purposes if the current exchange rate continues throughout 2008.
As in previous years the focus in the UK will be on closer integration of the
merchanting business in order to achieve further scale related benefits
including operational efficiencies and product sourcing gains. The Group also
expects to continue making progress in developing its position in the
merchanting market with a good pipeline of organic development opportunities and
acquisitions. The further strengthening of the UK business in 2008 should
result in financial rewards coming through in 2009 and beyond.
The Group's strong brands in the UK and Ireland and its healthy financial
position leave it well placed to respond to more demanding market conditions
while continuing to pursue the consistent growth orientated strategy that has
been successful for the past two decades.
A copy of this statement is also available on our website www.graftonplc.com
Grafton Group plc
Group Income Statement
For the year ended 31 December 2007
Twelve months Twelve months
to 31 Dec 2007 to 31 Dec 2006
(Audited) (Audited)
€'000 €'000
Revenue 3,205,026 2,933,937
Operating costs (2,941,481) (2,691,206)
___________ ____________
Operating profit before property profit 263,545 242,731
Property profit 7,254 37,989
___________ ____________
Operating profit 270,799 280,720
Finance expense (61,569) (52,886)
Finance income 26,603 21,522
___________ ____________
Profit before tax 235,833 249,356
Income tax expense (30,658) (32,418)
___________ ____________
Profit after tax for the financial year 205,175 216,938
=========== ============
Profit attributable to:
Equity holders of the Company 205,175 216,938
=========== ============
Basic earnings per share 86.16c 91.03c
=========== ============
Adjusted earnings per share 84.32c 77.97c
=========== ============
Diluted earnings per share 84.78c 89.34c
=========== ============
Group Statement of Recognised Income and Expense
For the year ended 31 December 2007
2007 2006
€'000 €'000
Items of income and expense recognised directly within equity:
Currency translation effects - on foreign currency net investments (44,583) 8,584
- on foreign currency borrowings 829 (396)
Actuarial gain on Group defined benefit pension schemes 12,573 4,939
Deferred tax liability on Group defined benefit pension schemes (2,599) (44)
Fair value movement on cash flow hedges:
- Fair value gains 521 1,875
- Included in finance costs (1,784) (353)
Deferred tax on cash flow hedge 158 (191)
___________ __________
Net income / (expense) recognised directly in equity (34,885) 14,414
Profit after tax for the financial year 205,175 216,938
___________ __________
Total recognised income and expense for the financial year 170,290 231,352
=========== ==========
Attributable to:
Equity holders of the Company 170,290 231,352
=========== ==========
Movement on Group Retained Earnings 2007 2006
€'000 €'000
At 1 January 662,726 475,380
Retained profit for the financial year 205,175 216,938
Purchase of 'A' Ordinary shares (49,048) (39,920)
Actuarial gain on pensions (net of tax) 9,974 4,895
Deferred tax on share based payments (2,078) 1,832
Shares bought back and cancelled (67,090) -
Transfer from revaluation reserve 205 3,601
___________ ___________
At 31 December 759,864 662,726
=========== ===========
Group Statement of Changes in Equity 2007 2006
€'000 €'000
At beginning of period 1,014,339 813,811
Shares bought back and cancelled (67,090) -
Treasury shares acquired (5,746) -
Issue of Grafton Units (net of issue expenses) 2,553 4,000
Adjustment for share based payments expense 4,465 3,264
Deferred tax on share based payments (2,078) 1,832
Purchase of 'A' Ordinary shares (49,048) (39,920)
Total recognised income and expense for the financial year 170,290 231,352
___________ ___________
Closing shareholders' funds - equity 1,067,685 1,014,339
=========== ===========
Grafton Group plc
Group Balance Sheet As At 31 December 2007
2007 2006
(Audited) (Audited)
€'000 €'000
ASSETS
Non-current assets
Goodwill 600,793 582,861
Intangible assets 11,095 13,307
Property, plant and equipment 703,737 686,165
Deferred tax assets 27,309 34,865
Financial assets 850 414
_________ _________
Total non-current assets 1,343,784 1,317,612
_________ _________
Current assets
Inventories 386,179 390,400
Trade and other receivables 535,695 542,110
Derivative and other financial instruments 584 1,847
Cash and cash equivalents 204,489 231,519
_________ _________
Total current assets 1,126,947 1,165,876
_________ _________
Total assets 2,470,731 2,483,488
========= =========
EQUITY
Capital and reserves attributable to the Company's equity holders
Equity share capital 11,569 12,082
Share premium account 287,458 284,945
Capital redemption reserve 875 322
Revaluation reserve 32,768 32,973
Other reserve - shares to be issued 10,920 6,455
Cash flow hedge reserve 511 1,616
Foreign currency translation reserve (30,534) 13,220
Retained earnings 759,864 662,726
Treasury shares held (5,746) -
_________ _________
Total equity 1,067,685 1,014,339
_________ _________
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 523,311 671,617
Provisions 10,228 4,468
Retirement benefit obligations 15,323 34,163
Derivative financial instruments 14,967 22,126
Deferred tax liabilities 50,439 49,408
_________ _________
Total non-current liabilities 614,268 781,782
_________ _________
Current liabilities
Interest-bearing loans and borrowings 213,624 88,585
Trade and other payables 504,203 521,265
Current income tax liabilities 55,427 52,393
Derivative financial instruments 3,560 1,898
Provisions 11,964 23,226
_________ _________
Total current liabilities 788,778 687,367
_________ _________
Total liabilities 1,403,046 1,469,149
_________ _________
Total equity and liabilities 2,470,731 2,483,488
========= =========
Grafton Group plc
Group Cash Flow Statement for the year ended 31 December 2007
2007 2006
€'000 €'000
Profit before taxation 235,833 249,356
Finance income (26,603) (21,522)
Finance expense 61,569 52,886
________ ________
Operating profit 270,799 280,720
Depreciation 56,792 53,163
Intangible amortisation 2,212 2,212
Goodwill written-off on termination 88 243
Share based payments charge 4,465 3,264
Property profit (7,254) (37,989)
Profit on sale of plant and equipment (3,226) (3,401)
Contributions to pensions in excess of IAS 19 charge (5,639) (20,249)
Increase in working capital (14,417) (26,111)
________ ________
Cash generated from operations 303,820 251,852
Interest paid (50,445) (43,224)
Income taxes paid (10,564) (14,594)
________ ________
Cash flows from operating activities 242,811 194,034
________ ________
Investing activities
Proceeds from sale of property, plant and equipment 22,128 77,664
Interest received 14,416 12,216
________ ________
36,544 89,880
________ ________
Outflows
Acquisition of subsidiary undertakings and businesses (84,350) (70,621)
Net cash acquired with subsidiary undertakings 7,689 777
Deferred acquisition consideration (9,461) (11,958)
Purchase of property, plant and equipment (104,650) (124,401)
Purchase of financial assets (452) (90)
________ ________
(191,224) (206,293)
________ ________
Cash flows from investing activities (154,680) (116,413)
________ ________
Financing activities
Proceeds from the issue of share capital 2,553 4,000
Proceeds from long term borrowings 66,742 -
________ ________
69,295 4,000
________ ________
Outflows
Repayment of long term borrowings - (117,170)
Shares bought back and treasury shares acquired (72,836) -
Purchase of 'A' Ordinary shares (49,048) (39,920)
Payment of finance lease liabilities (1,883) (1,850)
Redemption of loan notes payable (19,216) (18,087)
________ ________
(142,983) (177,027)
________ ________
Cash flows from financing activities (73,688) (173,027)
________ ________
Net increase/(decrease) in cash and cash equivalents 14,443 (95,406)
Cash and cash equivalents at 1 January 201,764 291,844
Effect of exchange rate fluctuations on cash held (12,718) 5,326
________ ________
Cash and cash equivalents at 31 December 203,489 201,764
======== ========
1. Revenue and Operating Profit by Geographic Segment
The amount of revenue by geographic segment is as follows:
Twelve months Twelve months
to 31 Dec 2007 to 31 Dec 2006
€'000 €'000
Revenue
Republic of Ireland 1,227,375 1,200,639
United Kingdom 1,977,651 1,733,298
__________ _________
3,205,026 2,933,937
========== =========
Operating profit before property profit and intangible amortisation
Ireland 123,651 130,371
United Kingdom 142,106 114,572
__________ _________
265,757 244,943
Intangible amortisation - Republic of Ireland (2,212) (2,212)
__________ _________
263,545 242,731
========== =========
Operating profit before property profit
Ireland 121,439 128,159
United Kingdom 142,106 114,572
__________ _________
263,545 242,731
========== =========
Property profit
Ireland 1,050 30,056
United Kingdom 6,204 7,933
__________ _________
7,254 37,989
========== =========
Operating profit
Ireland 122,489 158,215
United Kingdom 148,310 122,505
__________ _________
270,799 280,720
Finance costs (net) (34,966) (31,364)
__________ _________
Profit before tax 235,833 249,356
========== =========
2. Analysis of Revenue by Business Segment
Twelve months Twelve months
to 31 Dec 2007 to 31 Dec 2006
€'000 €'000
Revenue
UK merchanting 1,905,378 1,664,856
Irish merchanting 819,164 816,602
Irish DIY 339,849 311,680
Irish and UK manufacturing 140,635 140,799
__________ _________
3,205,026 2,933,937
========== =========
3. Reconciliation of Net Cash Flow to Movement in Net Debt
2007 2006
For the year ended 31 December €'000 €'000
Net increase/(decrease) in cash and cash equivalents 14,443 (95,406)
Cashflow from (increase)/decrease in debt and lease financing (45,643) 141,317
__________ __________
Change in net debt resulting from cash flows (31,200) 45,911
Loan notes issued on acquisition of subsidiary undertakings (81) (1,653)
Finance leases acquired with subsidiary undertakings (404) (95)
Bank loans and loan notes acquired with subsidiary undertakings (2,581) (3,579)
Translation adjustment 36,000 (8,784)
Net movement in derivative financial instruments (1,263) 1,522
__________ __________
Movement in net debt in the year 471 33,322
Net debt at 1 January (550,860) (584,182)
__________ __________
Net debt at 31 December (550,389) (550,860)
========== =========
4. Earnings per Share
The computation of basic and diluted earnings per share is set 2007 2006
out below:
€'000 €'000
Profit after tax for the financial year 205,175 216,938
___________ ___________
Numerator for basic and diluted earnings per share 205,175 216,938
Property profit after tax (6,311) (33,051)
Intangible amortisation after tax 1,935 1,935
___________ ___________
Numerator for adjusted earnings per share 200,799 185,822
=========== ===========
Denominator for basic and adjusted earnings per share:
Weighted average number of Grafton Units in issue 238,145,757 238,324,290
Effect of potential dilutive Grafton Units 3,856,396 4,505,408
___________ ___________
Denominator for diluted earnings per share 242,002,153 242,829,698
=========== ===========
Adjusted earnings per share (cent)
- Basic 84.32 77.97
- Diluted 82.97 76.52
Earnings per share (cent)
- Basic 86.16 91.03
- Diluted 84.78 89.34
5. Share Purchase
The Board has approved the purchase of one 'A' Ordinary share per Grafton Unit
for a cash consideration of 12.0 cent. The purchase of the 'A' Ordinary share
will take effect in respect of Grafton Units on the register at close of
business 25 March 2008 (record date) and the cash consideration will be paid on
11 April 2008.
6. Exchange Rates
The results and cash flows of the Group's United Kingdom subsidiaries have been
translated into Euro using the average exchange rate for the year. The related
balance sheets of the Group's United Kingdom subsidiaries at 31 December 2007
and 31 December 2006 have been translated at the rate of exchange ruling at the
balance sheet date.
The average Euro / Sterling rate of exchange for the year ended 31 December 2007
was Stg68.43p (year ended 31 December 2006: Stg68.17p). The Euro / Sterling
exchange rate at 31 December 2007 was Stg73.34 (31 December 2006: Stg67.15p).
Grafton Group plc
Financial Overview 2007
________________________________________________________________________________________________________________
2007 2006 Change
________________________________________________________________________________________________________________
Revenue (€ million) 3,205 2,934 +9%
________________________________________________________________________________________________________________
EBITDA # (€ million) 322.5 298.1 +8%
________________________________________________________________________________________________________________
Operating profit before amortisation of intangibles and property
profit (€ million) 265.8 244.9 +9%
________________________________________________________________________________________________________________
Profit before taxation # (€ million) 228.6 211.4 +8%
________________________________________________________________________________________________________________
EPS - basic (cent) 86.2 91.0 -
________________________________________________________________________________________________________________
EPS before amortisation of intangibles and property profit 84.3 78.0 +8%
(cent)
================================================================================================================
Share purchase (cent) 22.00 18.75 +17%
________________________________________________________________________________________________________________
Share purchase (times) 3.8 4.2 -
________________________________________________________________________________________________________________
Interest cover (times) 7.8 9.0 -
________________________________________________________________________________________________________________
Cash flow per share # 108.3c 100.4c +8%
________________________________________________________________________________________________________________
Net assets per share (cent) 464.2 424.0 +9%
________________________________________________________________________________________________________________
Net debt to shareholders' funds 52% 54%
================================================================================================================
Depreciation charge (€ million) 56.8 53.2
________________________________________________________________________________________________________________
Intangible amortisation (€ million) 2.2 2.2
________________________________________________________________________________________________________________
Acquisition and investment expenditure (€ million) 89.2 87.1
________________________________________________________________________________________________________________
Capital expenditure (€ million) 104.7 124.4
________________________________________________________________________________________________________________
# Excludes property profit
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