Final Results

RNS Number : 2713E
Grafton Group PLC
27 February 2020
 

 

Grafton Group plc

 

Final Results for the Year Ended 31 December 2019

 

 

£m1

 

 

20192

  Pre IFRS 16

 

Change4

2019

20183

Revenue - total

 

2,924

2,924

2,953

(1%)

 - Revenue - continuing operations

 

2,672

2,672

2,603

+3%

 - Revenue - discontinued operations

 

252

252

350

(28%)

Adjusted5

 

 

Operating profit - continuing operations

 

204.8

194.3

187.6

+4%

Operating profit - discontinued operations

 

6.5

5.4

6.9

(23%)

Operating profit - all operations

 

211.3

199.7

194.5

+3%

 

 

 

 

 

 

Earnings per share - basic (continuing operations)

 

62.8p

66.0p

63.7p

+4%

Statutory results

 

 

Operating profit - continuing operations

 

197.8

187.3

180.5

+4%

Profit before tax - continuing operations

 

172.6

181.8

174.4

+4%

Earnings per share - basic (continuing operations)

 

60.5p

63.7p

60.9p

+5%

Dividend

 

19.0p

19.0p

18.0p

+6%

Net debt/(cash)

 

533.8

(7.8)

53.1

(£60.9m)

Adjusted operating margin pre property profit

 

7.4%

7.0%

7.0%

-

Adjusted operating profit margin

 

7.7%

7.3%

7.2%

+10bps

Return on capital employed

 

12.7%

14.4%

14.7%

(30bps)

             

1 Supplementary financial information in relation to Alternative Performance Measures (APMs) is set out on pages 42 to 53.

2 A bridge between the pre IFRS 16 and the related IFRS impact is set out within the APM's and detail is also in Note 20.

3 2018 has been restated as Plumbase and the Belgium Merchanting business are classified as discontinued operations. Details are set out in the APM's.

4 Change relates to 2019 v 2018 pre any IFRS 16 "Leases" impact.

5 The term "Adjusted" means before exceptional items and amortisation of intangible assets arising on acquisitions in both years.

 

Highlights 

· Revenue in continuing operations up 3% to £2.7 billion - 2.9% growth in constant currency

· Operating profit in continuing operations up 4% to £194.3 million on a pre-IFRS 16 basis

· Strong organic growth in Merchanting and Retailing businesses in Ireland

· Significant growth in profitability in Netherlands business and increase in scale with Polvo acquisition

· Softer trading in UK merchanting business, particularly in H2 on weaker economy and RMI market 

· Reshaped our portfolio with successful disposal of Plumbase and Belgian Merchanting business

· Strong pre-IFRS 16 cash flow from operations of £219.1 million  (2018: £209.2 million) and net cash of £7.8m at year end

· 6% increase in total dividend to 19.00p is consistent with progressive dividend policy

· Implementation of IFRS 16 standard on accounting for leases has no economic impact on Group but has changed the measurement of many aspects of the Group's accounts

 

Gavin Slark, Chief Executive Officer commented:  

 

"2019 saw growth in revenue, profitability and earnings per share alongside continuing progress in evolving and re-shaping our businesses to enhance our value proposition to our customers and drive sustainable growth for our shareholders.  Strong organic growth in our Merchanting and Retailing operations in Ireland and in the profitability of our Netherlands operations helped offset a challenging year in the UK due to political and economic uncertainty.

 

"The outlook for 2020 is of continuing but moderating growth in Ireland and the Netherlands and while reduced uncertainty may lead to some uplift in the UK RMI market, we remain cautious about the speed of any recovery.  Given the strength of our brands we look forward to another year of progress for Grafton and with a strong balance sheet and rigorous financial discipline we are well placed to capitalise on growth opportunities."

   

Webcast Details

 

An analysts and investors results presentation will be hosted by Gavin Slark and David Arnold at 8.30am (GMT) today 27 February 2020 at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.  A live webcast will be available on https://www.graftonplc.com/investors/grafton-group-final-results-2019/ and we recommend you register in advance. A recording of this webcast will also be available to replay later in the day. The results presentation can be viewed/downloaded at http://www.graftonplc.com

 

 

Enquiries:

Grafton Group plc    + 353 1 216 0600

Gavin Slark, Chief Executive Officer

David Arnold, Chief Financial Officer

 

Murray    + 353 1 498 0300

Pat Walsh

 

MHP Communications + 44 20 3128 8549

Tim Rowntree / Rachel Mann

 

Cautionary Statement

Certain statements made in this announcement are forward-looking statements.  Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied by these forward looking statements.  They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of Directors and senior management concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and the businesses operated by the Group. The Directors do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

 

 

 

 

 

Final Results

For the Year Ended 31 December 2019

 

Group Results

 

 

Grafton is pleased to report on a year of further growth and delivery of a number of strategic objectives to improve the quality and sustainability of the Group's earnings and create long term value for shareholders. 

 

The Merchanting and Retailing businesses in Ireland delivered a very good performance increasing operating profit by 9.3 per cent in constant currency.  Operating profit advanced strongly in the Netherlands merchanting business with constant currency growth of 24.3 per cent.  The Group was not immune to weakness in the UK economy in what was the most challenging year for the merchanting market since the global financial crisis and operating profit in continuing operations was marginally down on the prior year.

 

Merchanting

 

Volumes in the UK merchanting business were affected by weakening demand as the year progressed. Households deferred discretionary spending on home improvement projects due to a decline in sentiment and increased uncertainty about the outlook for the economy and housing market. The overall UK merchanting business reported a small increase in average daily like-for-like revenue.  The Selco business was resilient but it was impacted by the weaker trading conditions.  Lower average daily like-for-like revenue and pressure on gross margins in a very competitive market contributed to a decline in profitability in Buildbase.

 

Revenue in the Group's market leading merchanting business in Ireland has increased substantially over the past five years and this trend continued in 2019 albeit at a slower pace in the second half as households responded more cautiously to a weaker international outlook.  Revenue growth was driven by higher volumes in the residential RMI market and a continuation of the gradual recovery in house building. 

 

The Netherlands business experienced a softening of the strong growth trends of recent years particularly in the second half of the year as the economy and construction sector slowed.  The business consolidated its leadership position in the ironmongery, tools and fixings segment of the merchanting market with the acquisition of the 51 branch Polvo business in July.  Strong growth in operating profit in a weaker market was attributed to positive gross margin trends, integration benefits from acquisitions made in prior years and a second half contribution from the Polvo acquisition.

 

Retailing

 

Woodie's market leading DIY, Home and Garden business in Ireland achieved a standout performance as it continued to make strong revenue gains from the business transformation initiatives of recent years including a significant investment in the store network, the introduction of higher quality product ranges and delivery of excellent customer service. 

 

Manufacturing

 

CPI EuroMix, the market leading mortar manufacturing business in Great Britain, reported a small decline in operating profit compared to the exceptional growth and outperformance reported for 2018 in a market where long term demand is underpinned by a shortage of housing.

 

Discontinued Operations

 

We continued to actively manage our portfolio of businesses with the successful disposal of Plumbase and the Belgian Merchanting business in October.  These disposals were in line with our strategy of focusing investment into businesses with good long-term growth prospects that generate high returns.

 

We conducted a strategic review of our operations in Belgium in the context of its future growth prospects that led to a decision to sell the business.  The impact on the income statement of the disposal is an exceptional charge of £29.4 million that is included in the result from discontinued operations. 

 

Property Profit

 

The Group realised a profit of £6.9 million (2018: £4.9 million) and cash proceeds of £15.6 million from the disposal of surplus properties in Ireland and the UK.

 

Cash Flow

 

The Group continued to be very cash generative with pre-IFRS 16 cashflow from operations of £219.1 million (2018: £209.2 million).  The Group had pre-IFRS 16 net cash of £7.8 million on the balance sheet at the year-end having started the year with net debt of £53.1 million. 

 

Dividend

 

A second interim dividend of 12.5p (2018: 12.0p) will be paid to give total dividends for the year of 19.0p  representing an increase of 5.6 per cent on dividends of 18.0p paid for 2018.  This increase is in line with the Board's progressive dividend policy and reflects both the Group's strong cashflow from operations for the year and its pre-IFRS 16 net cash position at the year end.  Dividend cover was 3.5 times (2018: 3.5 times).

 

Board

 

Dr. Rosheen McGuckian was appointed as a Non-Executive Director with effect from 1 January 2020. The Board will benefit greatly from Rosheen's extensive business knowledge, experience and track record in Executive and Non-Executive Director roles in Ireland and we look forward to working with her over the coming years.

 

Sustainability Strategy

 

The Group is mindful of its corporate and social responsibilities and good progress was made during the year on the development of a Group sustainability strategy.  The objective of this strategy is to build a sustainable future for everyone.  This strategy is aligned with the UN Sustainable Development Goals and it identifies five key areas of focus and activity for the Group and its businesses being Customers and Products; People; Resources; Communities; and Ethics.  Further work will be carried out during 2020 to implement this strategy.  In addition, several of our businesses have implemented wellness initiatives to support our colleagues in their work and personal lives.

 

Outlook

 

We expect the UK housing market to benefit from reduced uncertainty, healthy labour market conditions and low interest rates.  We remain cautious however at this stage about the speed of any recovery in the RMI market which may take time to gain traction. 

 

The outlook for the Irish economy continues to be favourable with some moderation in growth anticipated from the high levels of recent years.  Growth in domestic demand is expected to be driven by gains in employment and incomes which should be positive for our merchanting and DIY businesses.  Growth in house building is likely to be constrained by affordability relative to incomes and availability of mortgage finance.

   

Growth in the Netherlands economy is forecast to continue to moderate due to weaker exports while domestic demand is expected to be supported by tax cuts and growth in real wages.  Despite a shortage of homes and an increase in household formations, house building is expected to reduce due to more onerous environmental requirements and a decline in the issue of building permits last year.  The acquisition of Polvo provides an opportunity to realise integration benefits in the enlarged business.

 

Average daily like-for-like Group revenue decreased by 0.4 per cent in the period from 1 January to 23 February. This comprises a decline of 1.5 per cent in UK Merchanting, growth of 2.0 per cent in Irish Merchanting, growth of 1.3 per cent in Netherlands merchanting, a decline of 0.3 per cent in Retailing and growth of 6.7 per cent in Manufacturing.

 

Our overall expectations are positive for our portfolio of strong cash generative businesses and we are confident of continued progress in 2020. We will continue to pursue our focused and disciplined growth strategy.

 

Operating Review - Continuing Operations 

 

 

Merchanting Segment* (89% of Group Revenue)

 

 

 

 

2019

£'m

Pre IFRS 16

** Change

2019

£'m

*Restated

2018

£'m

Revenue

2,387.4

2,387.4

2,326.1

+2.6%

Adjusted operating profit before property profit

168.1

160.5

161.3

(0.5%)

Adjusted operating profit margin before property profit

7.0%

6.7%

6.9%

(20bps)

Adjusted operating profit

175.0

167.4

166.1

+0.8%

Adjusted operating profit margin

7.3%

7.0%

7.1%

(10bps)

* Excludes Plumbase and the Belgium Merchanting business

**Change represents the movement pre IFRS 16 adjustments

 

The merchanting businesses in the UK, Ireland and the Netherlands contributed 89 per cent of Group revenue (2018: 90 per cent).  Overall average daily like-for-like revenue was up by 1.5 per cent with relatively small growth in the UK and Netherlands merchanting markets and good growth in Ireland.

 

UK Merchanting* 

 

 

 

 

2019

£'m

Pre IFRS 16

** Change

2019

£'m

*Restated

2018

£'m

Revenue

1,710.8

1,710.8

1,729.5

(1.1%)

Adjusted operating profit before property profit

105.1

98.0

104.0

(5.7%)

Adjusted operating profit margin before property profit 

6.1%

5.7%

6.0%

(30bps)

Adjusted operating profit

108.0

100.9

108.6

(7.1%)

Adjusted operating profit margin

6.3%

5.9%

6.3%

(40bps)

* Excludes Plumbase business

**Change represents the movement pre IFRS 16 adjustments

 

The UK economy continued to slow through the year as weakness became more broadly based and consumer confidence dropped to its lowest level for five years.  Growth in house prices was subdued with softer demand in London and the South East.  Activity in the UK RMI market which is heavily linked to GDP growth, consumer confidence and transactions in the secondary housing market also weakened. 

 

Against this backdrop, the UK merchanting business reported reasonable growth in average daily like-for-like revenue in the first half and this trend continued into July.  In line with the weakness in the wider economy and the RMI market , trading weakened slightly in August and the deterioration in trading intensified in September and October before stabilising towards the end of the year.  Overall average daily like-for-like revenue for the year increased by 0.5 per cent (£8.3 million) with materials price inflation of circa 2.0 per cent more than offsetting a circa 1.5 per cent decline in volumes.

 

New branches which were principally Selco generated revenue growth of 0.8 per cent (£14.5 million) and the Leyland SDM acquisition contributed incremental revenue growth of 0.3 per cent (£6.1million).  The disposal of two small non-core businesses and branch consolidations reduced revenue by 2.7 per cent (£47.5 million).

 

The combined effect of relatively flat revenue in the like-for-like business, gross margin pressure in a very competitive market and cost increases in the ordinary course of business led to a decline in the adjusted operating profit margin before property profit of 30 basis points to 5.7 per cent.  Lower property profit contributed to a further 10 basis points decline in the margin for adjusted operating profit including property profit.

 

Selco Builders Warehouse reported marginal growth in both average daily like-for-like and total revenue.  The year started favourably with a good level of growth in the first quarter.  Growth eased in the second quarter and was marginally down in the third quarter.  The decline intensified at the start of the fourth quarter but trading ended the year on a firmer note.  The decline in housing transactions and house prices contributed to weakness in the housing RMI market in London which accounted for 71 per cent of revenue.

 

Selco's annual revenue was in excess of £0.5 billion and its unique retail style, easy-to-use, self-select, modern warehouse model proved resilient in a weaker market reflecting the benefits of its diversified customer base of generalist and specialist trades people who are primarily focused on projects in the residential RMI market. 

 

Operating profit was marginally lower due to the weaker volumes, investing in more competitive pricing in core heavyside products and completion of a number of strategic and productivity focused initiatives while keeping tight control of the cost base.  The large and very profitable branch in Cricklewood was successfully relocated at the end of its lease in December 2018. 

 

A new branch was opened in Kingston-Upon-Thames at the end of November increasing the estate to 67 including 39 branches in London.  Development plans for the current year will see Selco open new branches in Orpington and Salford, relocate the Bristol branch and expand capacity in the Chessington branch.  Five of the long-established branches in the estate were upgraded as part of a rolling investment programme that will continue in the current year. 

 

We continue to see opportunities for selective expansion of the Selco footprint and, in view of the weaker RMI market in recent years, the business also has a structural growth opportunity to increase revenue and profitability in the 31 branches that were opened between 2016 and 2018.

 

The new delivery-hub that opened in April in Edmonton successfully centralised deliveries for six branches in North East London, increased the utilisation rate of delivery vehicles and freed up capacity in these branches to provide an enhanced experience for customers.  Since the year end, a new distribution centre was opened in Oxford in conjunction with an experienced logistics partner who will provide warehousing and branch fulfilment services for 6,000 lightside products.  This will enable Selco to generate savings from purchasing products in greater volume, increase branch capacity and improve productivity.

 

The new "Click 'N' Deliver" service introduced in April for bulky building materials was well received by customers and complements the existing Click & Collect service.

 

Leyland SDM, the largest specialist decorators' merchant in London that trades from a unique portfolio of high street locations in the city, performed strongly despite flat market conditions.  The business was acquired in  February 2018 and made an incremental contribution to operating profit in 2019.  Procurement gains made a significant contribution to the result for the year and the operating profit margin was well ahead of the pre-acquisition level.  The Camden, London Bridge and Shoreditch branches were upgraded and the first new branches under Grafton ownership were opened in Maida Vale and Streatham and we continue our search for opportunities to grow the branch network in London. 

 

Buildbase had an encouraging start to the year with strong growth in average daily like-for-like revenue in the first quarter.  Trading conditions started to weaken in the second quarter and the rate of decline on the prior year intensified through to the year end.  Subdued economic growth and political uncertainty contributed to weak consumer sentiment leading households to hold off on spending on RMI projects.  Lower volumes and more competitive pricing resulted in a reduction in operating profit.  The business moved to address its cost base and is now better positioned to take advantage of evolving market conditions. 

 

The back-office modules of the new ERP system were successfully implemented and the first branches have gone live with rollout to the entire estate scheduled to occur on a phased basis over the next 12 to 18 months.

 

Civils & Lintels, a distributor of heavyside building materials, increased revenue and profitability from supporting its groundworks and civils sub-contractor customer base who operate in the new housing market.  It also made gains in the distribution of steel and concrete lintels where it has a market leadership position.  The new Leeds branch that opened in 2018 performed strongly growing market share in the North of England. 

 

In Scotland, the Buildbase branches were carved out and together with PDM, the market leader in the Civils market, now trade as PDM Buildbase Scotland.  This streamlined business has seen a marked improvement in performance and provides a strong foundation for future growth in the region.

 

MacBlair, the Northern Ireland merchanting business, reported modest growth in revenue with a strong performance in the provincial branches more than offsetting weakness in the Belfast area branches.  Modest revenue growth, targeted product mix improvements, procurement gains and tight cost control combined to deliver an excellent set of results for the year most notably a record operating profit margin.

 

TG Lynes, a leading distributor of commercial pipes and fittings in London, made further gains despite encountering tougher trading conditions than experienced in recent years.  Revenue growth was mainly sustained by existing projects as uncertainty about the outlook for the economy delayed investment decisions. An increase in revenue and operating profit marked the fifth consecutive year of growth since the business was acquired by Grafton in early 2015.

 

Irish Merchanting 

 

 

 

  2019

£'m

Pre IFRS 16

 

*Change

*Constant Currency Change

2019

£'m

2018

£'m

Revenue

464.8

464.8

441.1

+5.4%

+6.2%

Operating profit before property profit

43.1

42.8

41.3

+3.7%

+4.8%

Operating profit margin before property profit

9.3%

9.2%

9.4%

(20bps)

 

Operating profit

47.1

46.9

41.5

+12.9%

+12.9%

Operating profit margin

10.1%

10.1%

9.4%

+70bps

 

* Change represents the movement pre IFRS 16 adjustments

 

The merchanting business in Ireland continued to grow and extend its competitive advantage.  The focus on organic growth and using the branch estate to leverage the structural growth opportunity that has been a feature of the market in recent years saw like-for-like revenue grow by 6.2 per cent in constant currency.  The business performed very strongly in the first half with average daily like-for-like revenue growth of 8.3 per cent.  While volumes recovered in the seasonally important month of November, international uncertainty saw a softening of trading and sentiment in the second half with like-for-like revenue growth of 4.2 per cent.

 

Revenue growth in 2019 benefitted from an increase in the supply of new housing with completions up 18 per cent to an estimated 21,200 units.  Chadwicks branch network benefitted from strong growth in housing supply in the Midlands, the West and the Dublin commuter belt counties which alone account for a quarter of national housing building output.  The construction of single homes and scheme houses grew by 13 per cent and accounted for over 80 per cent of units completed.  This segment of the new build market generates greater demand through the merchanting market than apartment building which increased at a faster rate from a low base. 

 

The completion of new houses continued to run well behind annual demand which is estimated at 35,000 units.  On the basis of recent trends, it will take at least three years for annual supply and demand to be aligned and much longer for pent-up demand to be satisfied following a decade of under supply.  The rate of growth in house prices softened to around one per cent nationally due to constrained affordability relative to incomes combined with tight regulatory oversight of mortgage lending.

 

Residential RMI, an end-use market that contributes more than half of revenue, continued to grow despite a small decline in housing transactions.  This reflected weakness in Dublin that was concentrated at the top end of the market while growth continued in the remainder of the country.  Activity in the non-residential end-use market was focused on supporting a range of infrastructure and leisure projects.

 

In September 2019, the business announced that all merchanting brands in Ireland except for three large destination branches would be aligned as Chadwicks with refreshed and updated branding.  The Chadwicks brand has been in existence for more than a century in Ireland where it enjoys strong recognition and is synonymous with the merchanting of high-quality products, great service and product knowledge. 

 

The rebranding is part of a programme of investment that will modernise and upgrade the branch network over a period of three years.  Twelve branches were upgraded and rebranded during the year.  A key first step in the rebranding was the successful migration in the first half of the entire branch network onto a single trading system from four discrete systems.  This has provided customers with the flexibility to trade with all branches using a single account.  This investment and modernisation programme is intended to provide a stronger platform to drive organic growth and increase the scale and competitive advantage of the business.

 

There was a small contraction in the gross margin due to competitive market conditions for delivered, higher volume transactions in the new build segment of the market.  Growth in overheads was partly driven by the full year impact of the recruitment of 50 colleagues in 2018 and a further 29 in 2019 that included deepening the management resource available to lead the business during its next phase of growth and development.

 

Netherlands Merchanting 

 

 

 

2019

£'m

Pre IFRS 16

 

* Change

*Constant Currency Change

2019

£'m

  2018

£'m

Revenue

211.8

211.8

155.5

+36.2%

+37.3%

Adjusted operating profit

19.9

19.6

16.0

+23.0%

+24.3%

Adjusted operating profit margin

9.4%

9.3%

10.3%

(100bps)

 

* Change represents the movement pre IFRS 16 adjustments

 

2019 was a transformative year for the Netherlands business, a market that Grafton entered in 2015.  The acquisition of the 51 branch Polvo business was completed in July and in August Isero relocated to a new distribution centre that doubled capacity and strengthened its supply chain and logistics functions.  Rollout of the Isero ERP system to the 14 branch Amsterdam based Gunters en Meuser commenced and is on track to be completed in the first quarter of 2020.  These developments are in line with our strategy to generate long term value in a market leading business where we see further integration benefits from our increased scale and other growth opportunities.

 

The backdrop to trading was positive as the Netherlands economy performed relatively well although it grew at a lower but stable pace compared to 2018 driven mainly by increased domestic spending.  Housing transactions were unchanged having declined in 2018 and the rate of growth in average prices slowed to six per cent in a tight market with the number of houses for sale at an historically low level.  Affordability improved due to lower fixed rate mortgages, higher incomes in a strong labour market and tax reductions.  The supply of new houses however continued to lag strong demand due to the limited supply of land available for development and a shortage of skilled labour. 

 

Average daily like-for-like revenue increased by 0.6 per cent in the established Isero business.  Trading was uneven during the year with strong growth in the first half and an overall decline in the second half that incorporated more stable conditions in November and December when performance was in line with the prior year. 

 

The impact of softer trading conditions in Isero, following three years of strong growth, was largely offset by procurement gains and integration benefits.  Operating profit in the Isero business, excluding the Polvo acquisition, was very marginally ahead of 2018.

 

Polvo contributed revenue of £52.5 million and operating profit of £3.8 million, an operating margin of 7.2 per cent, in the six-month period under Grafton ownership.  Polvo was successfully transitioned to the same buying Group as Isero at the year end to facilitate harmonisation of procurement terms. The Polvo branch locations are geographically complementary to the Isero branch network and the acquisition consolidates the Group's leadership position in this attractive segment of the Netherlands merchanting market.

 

Kooning, a single branch business located near Schiphol Airport that was acquired in November, strengthens our position in the complementary workwear and personal protective equipment market.  The two single branch businesses acquired last year performed in line with expectations.  Revenue growth in the branches that were opened last year in the cities of Almere and Dordrecht provided the business with an increased presence in these two important markets.

Five regional businesses that already traded as part of an integrated branch network were rebranded as Isero, the umbrella brand for these family brands, under a new logo, brand promise and corporate identity which creates a more unified business and identity for colleagues, customers and other stakeholders.

 

Grafton ended the year trading from 113 branches in the Netherlands compared to 62 at the end of 2018 .

 

Retail Segment (8% of Group Revenue)

 

 

 

2019

£'m

Pre IFRS 16

* Change

*Constant Currency Change

2019

£'m

2018

£'m

Revenue

205.5

205.5

198.2

+3.7%

+4.7%

Operating profit

22.6

19.9

16.8

+18.8%

+20.5%

Operating profit margin

11.0%

9.7%

8.5%

+120bps

 

* Change represents the movement pre IFRS 16 adjustments

 

2019 was the fourth consecutive year of strong growth in revenue and profitability for the Woodie's DIY, Home and Garden business in Ireland.  The business gained significant momentum over this period supported by investment in the branch network and the introduction of new product ranges.  A multi-year programme of investment in colleagues helped to deliver great service and an improved shopping experience for customers.  Woodie's is the clear market leader in its sector and it continued to improve its position over the year relative to competitors.

 

Revenue growth across the thirty-five-branch estate increased from 2.9 per cent in the first half to 6.4 per cent in the second half.  The first half performance compared to growth of 13.4 per cent in the prior year driven by exceptional demand for seasonal products.  The economic backdrop was generally positive despite some softening of consumer sentiment as the year progressed.  A rise in disposable income was sustained by wage growth that became more broadly based across most sectors and regions of the Irish economy.

 

The number of customer transactions increased by 1.5 per cent to over 8.4 million while an improvement in product ranges contributed to growth of 3.2 per cent in average transaction values.

 

Good revenue growth was achieved from market share gains in the garden products category and from the launch of a new lighting and textile ranges.  The business continued to develop a strong presence in the kitchens market and ended the year with a strong performance in its Christmas category driven by range innovation.

 

On-line revenue grew by 51 per cent and contributed 1.5 per cent of total revenue, up from 1.1 per cent as more customers availed of the flexibility and choice in how they shop with Click & Collect a popular and convenient option for their changing needs.

 

Woodie's new format was rolled out in a further three stores increasing the number of stores upgraded to thirty.  The upgraded stores contributed almost ninety per cent of annual revenue and a major redevelopment of the Sallynoggin store in South Dublin, which trades from a freehold property, is scheduled for the current year.

 

Woodie's improved its position in the Great Place to Work engagement survey for the fourth consecutive year making it one of Ireland's best workplaces benchmarked against major domestic and international businesses operating in Ireland.  Woodie's also made a positive difference to the community raising €400,000 for four children's charities from running its "Heroes" campaign in stores across the country.

 

Earlier this month, Woodie's commenced transitioning to an upgrade of its established ERP system.  This development is proceeding as planned and when completed in March 2020 will deliver the latest retail technology at the point of sale and an updated platform for the supply chain and financial management of the business. 

 

Woodie's operates in a highly competitive market and maintained its gross margin in line with the prior year while investing in competitive prices and offering value for money to its customers. Overheads were very tightly controlled while continuing to drive growth of the business.  Operating profit increased by 18.8 per cent to £19.9 million (2018: £16.8 million) and the operating profit margin increased by 120 basis points building on growth of 230 basis points in 2018 and 150 basis points in 2017.

 

Manufacturing Segment (3% of Group Revenue)

 

 

 

 

2019

£'m

Pre IFRS 16

* Change

*Constant Currency Change

2019

£'m

2018

£'m

Revenue

79.4

79.4

78.8

+0.7%

+0.8%

Operating profit

18.6

18.6

19.2

(3.4%)

(3.3%)

Operating profit margin

23.4%

23.4%

24.4%

(100bps)

 

*Change represents the movement pre IFRS 16 adjustments

 

CPI EuroMix, the market leading mortar manufacturing business that operates nationally from ten plants in Great Britain, continued to benefit from its industry leading reputation for product quality and service in the dry mortar market.  Mortar volumes supplied to the new housing market increased marginally while a small contraction in other segments of the market, from record levels of output in the prior year, was partly driven by the completion of a number of non-recurring projects.

 

Despite an increasingly uncertain backdrop for the housing market as the year progressed, overall demand was resilient although there were some regional variations in output.  The fundamentals of the housing market continued to be attractive due to a prolonged period of under supply.  Strong underlying demand is supported by an aspiration for home ownership, a competitive mortgage market, a low interest rate environment and the Help to Buy scheme.

 

Raw materials price increases were recovered in a competitive market and the gross margin was maintained. The decline in volumes and a modest increase in operating costs contributed to a small decline in operating profit. 

 

High levels of service were supported by maintaining the number of silos placed on customers sites at last year's record levels.  A number of planned plant refurbishment projects were delivered on schedule while maintaining overall plant output at normal levels.  The plants remain well invested and it is planned to modernise and upgreade the ERP system over the course of the next two years.

 

Operating Review - Discontinued Operations

 

 

Belgium Merchanting & Plumbase Business

 

 

 

 

2019

£'m

Pre IFRS 16

* Change

2019

£'m

2018

£'m

Revenue

251.8

251.8

349.6

(28.0%)

Operating profit pre exceptional items

6.5

5.4

6.9

(23.0%)

Operating profit margin

2.6%

2.1%

2.0%

+10bps

* Change represents the movement pre IFRS 16 adjustments

 

On 1 October 2019 the Group completed the disposal of Plumbase, the specialist UK plumbing and heating business, to Plumbing and Heating Investments Limited ("PHIL"), a UK company engaged in the distribution of plumbing and heating products, for an enterprise value of £66.75 million.  After allowing for adjustments for debt-like items and working capital, the net cash proceeds and receivables due were £62.5 million.  The sale of Plumbase to PHIL secures future opportunities for Plumbase, its employees and other stakeholders as part of an enlarged specialist plumbing and heating business.  This transaction represented a very positive outcome for Grafton and enables it to continue to focus its capital and resources on growth opportunities.

 

Plumbase generated operating profit of £6.0 million on revenue of £258.0 million for the year ended 31 December 2018. 

 

On 7 October 2019, the Group completed the sale of its Belgium merchanting business for an enterprise value of £11.0 million to an affiliate of Aurelius Equity Opportunities SE & Co. KGaA, a private equity firm listed in Germany.  Freehold properties with a book value of £8.8 million were retained by Grafton as part of the transaction and are expected to be sold in due course.  The overall business was valued at circa £28.0 million including £4.5 million realised from the disposal of the St. Vith branch in October 2018.

 

The Belgian merchanting business generated operating profit of £0.8 million in 2018 on revenue of £91.6 million.

 

Financial Review

 

 

The Group achieved a good set of results for the year supported by excellent cash generation.  Pre-IFRS 16 cash flow from operations was £219.1 million (2018: £209.2 million) and the Group ended the year with pre-IFRS 16 net cash on the balance sheet of £7.8 million having started the year with net debt of £53.1 million.

 

Revenue

 

Group revenue from continuing operations increased by 2.7 per cent to £2.67 billion (2018: £2.60 billion) and by 2.9 per cent in constant currency.  Volume and price growth of 1.9 per cent in the like-for-like business increased revenue by £46.4 million.  Acquisitions and new branches contributed revenue of £76.6 million and revenue was reduced by £47.5 million from the disposal of two small non-core UK businesses in 2018 and by branch consolidations.  A currency translation loss due to sterling weakness against the euro reduced revenue by £6.3 million. 

 

Adjusted Operating Profit

 

Adjusted operating profit of £194.3 million (2018: £187.6 million) increased by 3.6 per cent due to increased profitability in the merchanting businesses in Ireland and the Netherlands and in the retailing business in Ireland.  Property profit was also higher and operating profit before property profit increased by 2.6 per cent to £187.4 million (2018: £182.7 million).  The adjusted operating profit margin increased by 10 basis points to 7.3 per cent and was unchanged at 7.0 per cent excluding property profit. 

 

Property

 

The disposal of surplus properties generated cash proceeds of £15.6 million (2018: £9.1 million) and a profit of £6.9 million (2018: £4.9 million).  The proceeds were deployed to generate higher returns elsewhere in the business. 

 

Net Finance Income and Expense

 

The pre-IFRS 16 net finance expense increased by £1.1 million to £6.0 million (2018: £4.9 million).  This primarily related to a £1.2 million increase in interest payable on borrowings to £7.1 million (2018: £5.9 million).  The increase was due to the issue of unsecured senior notes with ten and twelve year maturities in the US Private Placement market in September 2018 at an attractively priced annual coupon of 2.5 per cent.

 

The proceeds of loan notes raised in the US Private Placement in 2018 were used to refinance bank debt which attracted a lower interest rate based on short term money market rates for the euro plus a bank margin.  These notes extended the maturity profile of the Group's debt and provided certainty over the cost of debt for ten and twelve year notes. 

 

The net finance expenses included a foreign exchange translation gain of £1.2 million which compares to a loss of £0.2 million last year.

 

Taxation 

 

The income tax expense of £28.7 million (2018: £29.6 million) is equivalent to an effective tax rate of 16.6 per cent on profit from continuing operations (2018: 17.0 per cent).  This is a blended rate of corporation tax on profits in the various jurisdictions where the Group operates and is slightly lower than the rate of 17.7 per cent guided at the time of our Interim Results due to higher than anticipated reliefs and allowances in the UK. 

 

The tax rate for the Group is most sensitive to changes in the UK rate of corporation tax which is currently 19 per cent.  Legislation was passed in 2016 to reduce this rate by two percent to 17 per cent with effect from 1 April 2020.  This reduction is now expected to be put on hold and the 2016 legislation amended to maintain the rate at its current level of 19 per cent.  As a consequence, the corporation tax rate for 2020 will increase to circa 19.5 per cent to reflect a once-off increase in the deferred tax liability if the legislation is amended as anticipated.

 

Capital Expenditure and Investment in Intangible Assets

 

Gross capital expenditure was £50.4 million (2018: £66.7 million) and there was also a spend of £2.1 million (2018: £6.9 million) on computer software that is classed as intangible assets.  Proceeds of £17.4 million (2018: £10.9 million) were received on disposal of fixed assets and the investment on capital expenditure and intangible assets net of disposal proceeds was £35.1 million (2018: £62.7 million). 

 

The total spend on development capital expenditure was £23.1 million (2018: £34.1 million) of which almost half was incurred by Selco on new stores, upgrading the existing Selco estate and the opening of a new delivery-hub in London.  Development projects in the Netherlands included the opening of the Isero distribution centre in Waddinxveen, branch upgrades and a new branch in Almere.  The Group also opened two new Leyland SDM stores and upgraded Chadwicks and Woodie's stores in Ireland.

 

Asset replacement capital expenditure of £27.3 million (2018: £32.7 million) compares to the pre-IFRS 16 depreciation charge for the year of £44.2 million and related principally to replacement of the distribution fleet that supports delivered revenue, replacement of equipment, forklifts, plant and tools for hire by customers and other assets required to operate the Group's branch network.

 

An investment of £2.1 million (2018: £6.9 million) was made on the new IT platform in Buildbase and on other software development projects.

 

Pensions

 

The IAS 19 deficit on defined benefit pension schemes was £21.2 million at 31 December 2019, an increase of £1.0 million from £20.2 million at 31 December 2018.  The return on scheme assets of £230.7 million, at 1 January 2019, was 15.0 per cent or £34.7 million.  These gains were mainly offset by an actuarial loss on scheme liabilities due to changes in financial assumptions.  There was a significant drop in the discount rates used to discount scheme liabilities in line with declines in corporate bond rates. The rate used to discount UK liabilities fell by 80 basis points to 2.10 per cent and the rate used to discount Irish liabilities fell by 75 basis points to 1.05 per cent.

 

Net Debt

 

The Group started the year with net debt of £53.1 million and ended the year with pre-IFRS 16 net cash of £7.8 million.  The Group remains in a very strong financial position with pre-IFRS 16 EBITDA interest cover of 39.9 times (Year ended 31 December 2018: 46.6 times).  The Group's policy is to maintain its current investment grade credit rating while investing in organic developments and acquisition opportunities that are expected to generate attractive returns and maintain a progressive dividend policy.

 

Financing 

 

The Group had bilateral loan facilities of £476.7 million with six relationship banks at 31 December 2019. The amount drawn on these facilities was £205.3 million.  The Group had debt obligations of £136.1 million from the issue of unsecured senior notes in the US Private Placement market.

 

The average maturity of the committed bank facilities and unsecured senior notes at 31 December 2019 was 4.6 years.

 

The Group's key financing objective continues to be to ensure that it has the necessary liquidity and resources to support the short, medium and long term funding requirements of the business.  At 31 December 2019 the Group had undrawn bank facilities of £271.4 million (31 December 2018: £356.8 million) and cash balances and deposits of £348.8 million (31 December 2018: £223.0 million).  These resources together with strong cash flow from operations provide good liquidity and the capacity to fund investment in working capital, routine capital expenditure and development activity including acquisitions.

 

The Group's gross debt is drawn in euros and provides a hedge against exchange rate risk on euro assets in the businesses in Ireland and the Netherlands.

 

IFRS 16 Leases 

 

On 1 January 2019, the Group implemented IFRS 16 Leases, which replaces IAS 17 Leases.  The new standard brings most leases on to the balance sheet for lessees and eliminates the distinction between operating and finance leases.  Under IFRS 16, a lessee recognises a right-of-use asset and a lease liability.  The right-of-use asset is treated in a similar way to a non-financial asset and is depreciated.  The lease liability is initially measured at the present value of the stream of lease payments over the lease term, discounted at the incremental borrowing rate. 

 

IFRS 16 has changed the measurement of many aspects of the Group's accounts including operating profit, earnings per share, net debt and return on capital employed. 

 

All leases except for leases with a duration of less than one year and low value assets are recognised on the balance sheet as lease liabilities.  The corresponding right of use asset is an amount equal to the lease liability on transition, adjusted for any prepaid or accrued lease payments and any onerous lease provision. 

 

The Group implemented IFRS 16 from 1 January 2019 by applying the modified retrospective approach meaning that the comparative figures in the financial statements for the year ended 31 December 2019 are not restated to show the impact of IFRS 16.

 

The operating leases that are recorded on the balance sheet for the first time principally relate to merchanting and DIY branch properties, office buildings, cars and distribution vehicles.  The Group decided to reduce the complexity of implementation by availing of a number of practical expedients on transition on 1 January 2019.

 

On initial application of IFRS 16, the Group recognised assets and liabilities for leases previously classified as operating leases under IAS 17.  This resulted in the recognition of right-of-use assets of £561.7 million and lease liabilities of £574.9 million.  Further details of the impact of the initial application of IFRS 16 on 1 January 2019 are disclosed in note 22.

 

The adoption of IFRS 16 reduced profit before tax by £9.1 million and profit after tax by £7.6 million for continuing operations.  It should be noted that the overall impact on the Income Statement of adopting IFRS 16 will be neutral over the life of a lease but will result in a higher charge in the earlier years following implementation and a lower charge in the later years.  The overall effect on profit before tax is expected to be neutral after approximately four to five years, then becoming positive moving towards the end of the leases. 

 

The right-of-use asset in the balance sheet at 31 December 2019 was £522.2 million and lease liabilities were £543.4 million.

 

IFRS 16 does not change overall cashflows or the economic effect of the leases to which the Group is a party.  Similarly, there is no effect on Grafton's existing banking covenants as a result of the implementation of IFRS 16.

 

Shareholders' Equity

 

The Group's balance sheet strengthened with shareholders' equity up by £66.1 million.  Profit after tax increased shareholders' equity by £119.2 million.  Shareholders equity was reduced by the payment of dividends in the amount of £44.0 million and the buy-back of 664,961 shares to offset the dilutive effect of share awards at a cost of £6.1 million.  Other movements decreased shareholders' equity by a net £3.0 million.

 

Return on Capital Employed

 

Return on Capital Employed reduced by 30 basis points to 14.4 per cent (2018: 14.7 per cent).  The decline reflects a weaker performance in the UK merchanting business and increased investment in the Netherlands business.

 

 

Principal Risks and Uncertainties 

 

The primary risks and uncertainties affecting the Group are set out on pages 48 to 51 of the 2018 Annual Report and will be updated in the 2019 Annual Report. These risks are expected to remain the same for the remainder of the year, subject to the comments in the outlook on Brexit.

 

 

Grafton Group plc

 

Group Income Statement

For the year ended 31 December 2019

 

 

Notes

 

2019

£'000

 

2018

Restated

£'000

Revenue

2

 

2,672,281

 

2,603,120

Operating costs

 

 

(2,481,392)

 

(2,427,445)

Property profits

3

 

6,894

 

4,854

Operating profit

 

 

197,783

 

180,529

Finance expense

4

 

(27,391)

 

(7,071)

Finance income

4

 

2,249

 

944

Profit before tax

 

 

172,641

 

174,402

Income tax expense

17

 

(28,717)

 

(29,619)

Profit after tax for the financial year from continuing operations

 

 

143,924

 

144,783

(Loss)/profit after tax from discontinued operations

14

 

(24,692)

 

5,620

Profit after tax for the financial year

 

 

119,232

 

150,403

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

Owners of the Company

 

 

119,232

 

150,403

Profit attributable to:

 

 

 

 

 

Continuing operations

 

 

143,924

 

144,783

Discontinued operations

 

 

(24,692)

 

5,620

 

 

 

 

 

 

Earnings per ordinary share (continuing operations) - basic

5

 

60.5p

 

60.9p

Earnings per ordinary share (continuing operations)  - diluted

5

 

60.3p

 

60.8p

Earnings per ordinary share (discontinued operations) - basic

5

 

(10.4p)

 

2.4p

Earnings per ordinary share (discontinued operations) - diluted

5

 

(10.3p)

 

2.4p

 

Earnings per ordinary share (total) - basic

 

 

 

50.1p

 

 

63.3p

 

Earnings per ordinary share (total) - diluted

 

 

 

50.0p

 

 

63.1p

 

 

 

Grafton Group plc

 

Group Statement of Comprehensive Income

For the year ended 31 December 2019

 

 

Notes

 

2019

£'000

 

2018

£'000

Profit after tax for the financial year

 

 

119,232

 

150,403

Other comprehensive income

 

 

 

 

 

Items that are or may be reclassified subsequently to the income statement

 

 

 

 

 

Currency translation effects:

 

 

 

 

 

- on foreign currency net investments

 

 

(8,474)

 

1,775

- on disposal of Group businesses

 

 

(664)

 

-

 

 

 

(9,138)

 

1,775

Fair value movement on cash flow hedges:

 

 

 

 

 

- effective portion of changes in fair value of cash flow hedges

 

 

(90)

 

92

- net change in fair value of cash flow hedges transferred from equity

 

 

151

 

337

Deferred tax on cash flow hedges

 

 

(9)

 

(45)

 

 

 

(9,086)

 

2,159

Items that will not be reclassified to the income statement

 

 

 

 

 

Remeasurement (loss)/gain on Group defined benefit pension schemes

13

 

(1,291)

 

1,205

Deferred tax on Group defined benefit pension schemes

 

 

373

 

(386)

 

 

 

(918)

 

819

Total other comprehensive income

 

 

(10,004)

 

2,978

Total comprehensive income for the financial year

 

 

109,228

 

153,381

Total comprehensive income attributable to:

 

 

 

 

 

Owners of the Company

 

 

109,228

 

153,381

Total comprehensive income for the financial year

 

 

109,228

 

153,381

 

 

 

Grafton Group plc - Group Balance Sheet as at 31 December 2019

 

 

Notes

 

 

31 Dec 2019

 

 

 

31 Dec 2018

ASSETS

 

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

Goodwill

15

 

657,845

 

646,198

Intangible assets

16

 

103,268

 

79,809

Property, plant and equipment

9

 

500,924

 

521,631

Right-of-use asset

8

 

522,245

 

-

Investment properties

9

 

12,526

 

15,048

Deferred tax assets

 

 

7,600

 

9,395

Lease receivable

10

 

2,417

 

-

Retirement benefit assets

13

 

756

 

1,469

Other financial assets

 

 

127

 

123

Total non-current assets

 

 

1,807,708

 

1,273,673

 

 

 

 

 

 

Current assets

 

 

 

 

 

Properties held for sale

9

 

16,274

 

11,595

Inventories

10

 

317,632

 

350,061

Trade and other receivables

10

 

388,023

 

451,245

Lease receivable

10

 

297

 

-

Cash and cash equivalents

11

 

348,787

 

222,984

Derivative financial instruments

11

 

7

 

49

Total current assets

 

 

1,071,020

 

1,035,934

 

 

 

 

 

 

Total assets

 

 

2,878,728

 

2,309,607

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Equity share capital

 

 

8,516

 

8,514

Share premium account

 

 

213,719

 

213,430

Capital redemption reserve

 

 

621

 

621

Revaluation reserve

 

 

12,954

 

13,146

Shares to be issued reserve

 

 

12,889

 

11,220

Cash flow hedge reserve

 

 

9

 

(43)

Foreign currency translation reserve

 

 

70,142

 

79,280

Retained earnings

 

 

1,047,698

 

974,271

Treasury shares held

 

 

(3,897)

 

(3,897)

Total equity attributable to owners of the Parent

 

 

1,362,651

 

1,296,542

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Interest-bearing loans and borrowings

11

 

339,261

 

273,476

Lease liabilities

11

 

487,999

 

1,774

Provisions

 

 

15,785

 

21,651

Retirement benefit obligations

13

 

21,939

 

21,632

Derivative financial instruments

11

 

-

 

-

Deferred tax liabilities

 

 

47,109

 

42,444

Total non-current liabilities

 

 

912,093

 

360,977

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Interest-bearing loans and borrowings

11

 

-

 

332

Lease liabilities

11

 

55,368

 

435

Derivative financial instruments

11

 

-

 

103

Trade and other payables

10

 

511,855

 

608,659

Current income tax liabilities

 

 

27,461

 

33,036

Provisions

 

 

9,300

 

9,523

Total current liabilities

 

 

603,984

 

652,088

 

 

 

 

 

 

Total liabilities

 

 

1,516,077

 

1,013,065

 

 

 

 

 

 

Total equity and liabilities

 

 

2,878,728

 

2,309,607

 

 

Grafton Group plc - Group Cash Flow Statement

For the year ended 31 December 2019 

 

Notes

31 Dec 2019

£'000

31 Dec 2018

£'000

Profit before taxation from continuing operations

 

 

173,084

 

174,402

(Loss)/profit before taxation from discontinued operations

 

 

(24,450)

 

6,923

Profit before taxation

 

 

148,634

 

181,325

Finance income

 

 

(2,249)

 

(944)

Finance expense (continuing and discontinued)

 

 

27,391

 

7,071

Operating profit

 

 

173,776

 

187,452

Depreciation

8,9

 

105,137

 

41,875

Amortisation of intangible assets

16

 

9,634

 

7,118

Share-based payments charge

 

 

6,171

 

6,193

Movement in provisions

 

 

4,876

 

(1,525)

Asset impairment and fair value gains/losses

 

 

2,425

 

1,159

Goodwill written off on disposal of Group businesses

 

 

-

 

3,580

(Profit)/loss on sale of property, plant and equipment

9

 

(672)

 

577

Property profit

9

 

(6,894)

 

(4,854)

Loss on disposal of Group businesses

14

 

19,828

 

(1,649)

Contributions to pension schemes in excess of IAS 19 charge

 

 

116

 

(2,565)

(Increase) in working capital

10

 

(23,261)

 

(28,153)

Cash generated from operations

 

 

291,136

 

209,208

Interest paid

 

 

(25,911)

 

(6,628)

Income taxes paid

 

 

(31,752)

 

(24,299)

Cash flows from operating activities

 

 

233,473

 

178,281

Investing activities

 

 

 

 

 

Inflows

 

 

 

 

 

Proceeds from sale of property, plant and equipment

9

 

2,651

 

7,350

Proceeds from sale of properties held for sale

9

 

14,705

 

2,614

Proceeds from sale of investment properties

9

 

-

 

934

Proceeds from sale of Group businesses (net)

14

 

66,513

 

12,951

Interest received

 

 

1,059

 

944

 

 

 

84,928

 

24,793

Outflows

 

 

 

 

 

Acquisition of subsidiary undertakings (net of cash)

14

 

(92,583)

 

(73,815)

Investment in intangible asset - computer software

16

 

(2,059)

 

(6,859)

Purchase of property, plant and equipment

9

 

(50,375)

 

(66,713)

 

 

 

(145,017)

 

(147,387)

Cash flows from investing activities

 

 

(60,089)

 

(122,594)

Financing activities

 

 

 

 

 

Inflows

 

 

 

 

 

Proceeds from the issue of share capital

 

 

291

 

1,283

Proceeds from borrowings

 

 

116,256

 

244,910

 

 

 

116,547

 

246,193

Outflows

 

 

 

 

 

Repayment of borrowings

 

 

(59,590)

 

(294,233)

Dividends paid

6

 

(43,986)

 

(38,598)

Treasury shares purchased

 

 

(6,080)

 

-

Payment on lease liabilities

 

 

(52,835)

 

(433)

 

 

 

(162,491)

 

(333,264)

Cash flows from financing activities

 

 

(45,944)

 

(87,071)

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

127,440

 

(31,384)

Cash and cash equivalents at 1 January

 

 

222,984

 

253,659

Effect of exchange rate fluctuations on cash held

 

 

(1,637)

 

709

Cash and cash equivalents at the end of the year

 

 

348,787

 

222,984

Cash and cash equivalents are broken down as follows:

 

 

 

 

 

Cash at bank and short-term deposits

 

 

348,787

 

222,984

 

Grafton Group plc - Group Statement of Changes in Equity

 

 

Equity share capital

Share premium account

Capital redemption reserve

Revaluation reserve

Shares to be issued reserve

Cash Flow hedge reserve

Foreign currency translation reserve

Retained earnings

Treasury shares

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Year to 31 December 2019

 

 

 

 

 

 

 

 

 

 

At 1 January 2019

8,514

213,430

621

13,146

11,220

(43)

79,280

974,271

(3,897)

1,296,542

Profit after tax for the financial year

-

-

-

-

-

-

-

119,232

-

119,232

Total other comprehensive income

 

 

 

 

 

 

 

 

 

 

Remeasurement loss on pensions (net of tax)

-

-

-

-

-

-

-

(918)

-

(918)

Movement in cash flow hedge reserve (net of tax)

-

-

-

-

-

52

-

-

-

52

Currency translation effect on foreign currency net investments

-

-

-

-

-

-

(9,138)

-

-

(9,138)

Total other comprehensive income

-

-

-

-

-

52

(9,138)

(918)

-

(10,004)

Total comprehensive income

-

-

-

-

-

52

(9,138)

118,314

-

109,228

Transactions with owners of the Company recognised directly in equity

Dividends paid

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(43,986)

 

-

 

(43,986)

Issue of Grafton Units

2

289

-

-

-

-

-

-

-

291

Share based payments charge

-

-

-

-

6,171

-

-

-

-

6,171

Tax on share based payments

-

-

-

-

485

-

-

-

-

485

Transfer from shares to be issued reserve

-

-

-

-

(4,987)

-

-

4,987

-

-

Purchase of treasury shares

-

-

-

-

-

-

-

-

(6,080)

(6,080)

Cancellation of treasury shares

-

-

-

-

-

-

-

(6,080)

6,080

-

Transfer from revaluation reserve

-

-

-

(192)

-

-

-

192

-

-

 

2

289

-

(192)

1,669

-

-

(44,887)

-

(43,119)

At 31 December 2019

8,516

213,719

621

12,954

12,889

9

70,142

1,047,698

(3,897)

1,362,651

 

 

 

 

 

 

 

 

 

 

 

 

Year to 31 December 2018

 

 

 

 

 

 

 

 

 

 

At 1 January 2018

8,494

212,167

621

13,327

8,744

(427)

77,505

858,053

(3,897)

1,174,587

Profit after tax for the financial year

-

-

-

-

-

-

-

150,403

-

150,403

Total other comprehensive income

 

 

 

 

 

 

 

 

 

 

Remeasurement gain on pensions (net of tax)

-

-

-

-

-

-

-

819

-

819

Movement in cash flow hedge reserve (net of tax)

-

-

-

-

-

384

-

-

-

384

Currency translation effect on foreign currency net investments

-

-

-

-

-

-

1,775

-

-

1,775

Total other comprehensive income

-

-

-

-

-

384

1,775

819

-

2,978

Total comprehensive income

-

-

-

-

-

384

1,775

151,222

-

153,381

Transactions with owners of the Company recognised directly in equity

 

 

 

 

 

 

 

 

 

 

Dividends paid

-

-

-

-

-

-

-

(38,598)

-

(38,598)

Issue of Grafton Units

20

1,263

-

-

-

-

-

-

-

1,283

Share based payments charge

-

-

-

-

6,193

-

-

-

-

6,193

Tax on share based payments

-

-

-

-

(304)

-

-

-

-

(304)

Transfer from shares to be issued reserve

-

-

-

-

(3,413)

-

-

3,413

-

-

Transfer from revaluation reserve

-

-

-

(181)

-

-

-

181

-

-

 

20

1,263

-

(181)

2,476

-

-

(35,004)

-

(31,426)

At 31 December 2018

8,514

213,430

621

13,146

11,220

(43)

79,280

974,271

(3,897)

1,296,542

 

 

 

 

 

 

 

 

 

 

 
                             

 

Grafton Group plc

Notes to Final Results for the year ended 31 December 2019

 

1.  General Information

 

Grafton Group plc ("Grafton" or "the Group") is an international distributor of building materials to trade customers who are primarily engaged in residential repair, maintenance and improvement projects and house building.

 

The Group has leading regional or national market positions in the merchanting markets in the UK, Ireland and the Netherlands. Grafton is also the market leader in the DIY retailing market in Ireland and is the largest manufacturer of dry mortar in Great Britain.

 

The Group's origins are in Ireland where it is headquartered, managed and controlled.  It has been a publicly quoted company since 1965 and its Units (shares) are quoted on the London Stock Exchange where it is a constituent of the FTSE 250 Index and the FTSE All-Share Index.

 

The financial information presented in this preliminary release does not constitute full statutory financial statements. The Final Results Announcement was approved by the Board of Directors. The annual report and financial statements will be approved by the Board of Directors and reported on by the auditors in due course. Accordingly, the financial information is unaudited. The Annual Report for the year ended 31 December 2018 has been filed with the Irish Registrar of Companies. The audit report on those statutory financial statements was unqualified.

 

Basis of Preparation, Accounting Policies and Estimates

 

(a)  Basis of Preparation and Accounting Policies

 

The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards ('IFRS') issued by the International Accounting Standards Board ('IASB') as adopted by the European Union ('EU'); and those parts of the Companies Act 2014 applicable to companies reporting under IFRS.

 

The financial information in this report has been prepared in accordance with the Group's accounting policies. Full details of the accounting policies adopted by the Group are contained in the consolidated financial statements included in the Group's Annual Report for the year ended 31 December 2018 which is available on the Group's website; www.graftonplc.com .

 

The accounting policies and methods of computation and presentation adopted in the preparation of the Group financial information are consistent with those described and applied in the annual report for the year ended 31 December 2018, except for those noted below.  The financial information includes all adjustments that management considers necessary for a fair presentation of such financial information. All such adjustments are of a normal recurring nature. Certain tables in the financial information may not add precisely due to rounding.

 

(b)  Estimates

In preparing the Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2018. Actual results may differ from estimates calculated using these judgements and assumptions.

 

 

Basis of Preparation, Accounting Policies and Estimates (continued)

 

Impacts of standards and interpretations in issue but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for the current reporting period and have not been early adopted by the Group.  These standards are not expected to have a material impact on the Group in the current or future reporting periods or on transactions in the foreseeable future.

 

Impacts of standards effective from 1 January 2019

 

IFRS 16 - Leases (effective date: financial year beginning 1 January 2019)

IFRS 16 introduces significant changes to lessee accounting by removing the distinction between operating and finance leases, requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, with a practical expedient for short-term leases and leases of low value assets.

The Group has applied IFRS 16 using the modified retrospective approach from 1 January 2019, without restatement of the comparative information and the Group has elected to measure its right of use assets arising from leases using the approach set out in IFRS 16.C8(b)(ii).

The Group has a large number of property, vehicle and equipment leases as well as a small number of leases where the Group acts as a lessor. The standard has a material impact on the presentation of the Group's accounts with the recognition of lease liabilities and right of use assets.  The overall impact on the Income Statement of adopting IFRS 16 will be neutral over the life of a lease but will result in a higher charge in the earlier years following implementation and a lower charge in the later years.

Further details on the impact of adopting IFRS 16 are set out in note 20 to these financial statements and in the bridges that are contained within the APM's.

 

Identification of leases

The identification of leases involves judgement as IFRS 16 defines a lease as a contract (or part of a contract) that, for a period of time in exchange for consideration, conveys the right to:

• control an identified asset;

• obtain substantially all economic benefits from use of the asset; and

• direct the use of the asset

The Group has availed of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and the guidance in IFRIC 4 will continue to be applied to those leases entered into or modified before 1 January 2019.

 

Lease term

The lease term is the non-cancellable period for which the Group has the right to use an underlying asset together with:

• periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option; and

• periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option.

This assessment involves the exercise of judgement by the Group.

 

Initial measurement of lease liability

The lease liability is initially measured at the present value of the lease payments that are payable for the lease term, discounted using the incremental borrowing rate. The Group's weighted average (by lease liability) incremental borrowing rate applied to lease liabilities as at 1 January 2019 was 3.5%.

Lease payments included in the measurement of the lease liability comprise:

• fixed lease payments (including in-substance fixed payments)

• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

• the amount expected to be payable by the lessee under residual value guarantees (e.g. if the fair value of the asset at the end of the lease term is below an agreed amount, the lessee would pay to the lessor an amount equal to the difference between the fair value and agreed amount);

• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability does not include variable elements which are dependent on external factors, e.g. payments that are based on turnover. Instead, such variable elements are recognised directly in the income statement.

Judgements applied include determining the lease term for those leases with termination or extension options and the discount rate used which is based on the incremental borrowing rate. Such judgements could significantly impact the lease term, the resultant lease liability and right of use asset recognised.

Where a lease agreement contains a clause to restore the asset to a specified condition i.e. dilapidation costs, the Group recognises a provision for dilapidations under IAS 37 in its balance sheet.

Initial measurement of right of use asset

The right-of-use asset comprises the amount of the initial measurement of the lease liability, adjusted for:

• any lease payments made at or before the commencement date, less any lease incentives

• any initial direct costs incurred by the Group

In addition, where the Group subleases a headlease (or part thereof) to a third party and such sublease is deemed by the Group to be a finance sublease, the right of use asset relating to sublease is derecognised and a finance lease receivable is recognised.

Subsequent measurement of lease liability

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

• the lease term has changed or there is a change in the assessment concerning the exercise of an option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

 

• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The Group did not make any material adjustments outlined above during the periods presented.

Subsequent measurement of right of use asset

After initial measurement, the right of use assets are measured at cost less accumulated depreciation, adjusted for:

• any impairment losses in accordance with IAS 36 Impairment of Assets

• any remeasurement of the lease liability.

Right-of-use assets are depreciated over the shorter period of the lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset that reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

Lease modifications

A lease modification is a change to the original terms and conditions of the lease. The effective date of the modification is deemed to be the date when both parties agree to a lease modification.

A lease modification is accounted for as a separate lease if:

• the modification increases the scope of the lease by adding the right to use one or more underlying assets; and

• the consideration for the lease increases by an amount commensurate with the standalone price for the increase in scope of the lease.

If both criteria are met, the Group adopts this accounting policy on the initial recognition and measurement of lease liabilities and right-of-use assets.

If a change in the lease terms does not meet the test outlined above, the Group must modify the initially recognised components of the lease contract.

Sublease accounting

Where the Group acts as a lessor, the sublease is classified as a finance lease or an operating lease.

A lease is deemed to be a finance lease where the lease transfers substantially all the risks and rewards incidental to the ownership of the underlying asset. Otherwise, the lease is deemed to be an operating lease.

Where the Group subleases an asset, it accounts for its interests in the head lease and the sublease separately. If the head lease is not a short-term lease or low-value lease and the sublease is deemed to be a finance lease, the Group recognises a lease liability relating to the head lease but does not recognise a corresponding right of use asset. Instead, the Group recognises a finance lease debtor relating to the sublease.

 

IFRIC 23 - Uncertainty over Income Tax Treatments (effective date: beginning 1 January 2019)

This IFRIC did not have a material impact on the Group in the current year.

Amendments to IAS 19 - Plan Amendment, Curtailment or Settlement (effective date: beginning 1 January 2019)

This amendment did not have a material impact on the Group in the current year.

 

 

2.  Segmental Analysis

The amount of revenue and operating profit under the Group's reportable segments of Merchanting, Retailing and Manufacturing is shown below. Segment profit measure is operating profit before exceptional items and amortisation of intangible assets arising on acquisitions. The impact of IFRS 16 "Leases" on the individual CGU's is set out in Note 22 and within the APM's.

 

 

2019

 

 

2019

Pre-IFRS 16

 

2018

Restated

 

 

£'000

 

£'000

 

£'000

Revenue

 

 

 

 

 

 

UK merchanting

 

1,710,829

 

1,710,829

 

1,729,508

Ireland merchanting

 

464,784

 

464,784

 

441,106

Netherlands merchanting

 

211,820

 

211,820

 

155,519

Total merchanting - continuing

 

2,387,433

 

2,387,433

 

2,326,133

Retailing

 

205,465

 

205,465

 

198,174

Manufacturing

 

92,362

 

92,362

 

91,992

Less: inter-segment revenue - manufacturing

 

(12,979)

 

(12,979)

 

(13,179)

Total revenue from continuing operations

 

2,672,281

 

2,672,281

 

2,603,120

 

 

 

 

 

 

 

Segmental operating profit before exceptional items and intangible amortisation arising on acquisitions

 

 

 

 

 

 

UK merchanting

 

105,145

 

98,047

 

104,004

Ireland merchanting

 

43,051

 

42,802

 

41,294

Netherlands merchanting

 

19,915

 

19,632

 

15,958

Total merchanting - continuing

 

168,111

 

160,481

 

161,256

Retailing

 

22,641

 

19,936

 

16,785

Manufacturing

 

18,633

 

18,590

 

19,248

 

 

209,385

 

199,007

 

197,289

Reconciliation to consolidated operating profit

 

 

 

 

 

 

Central activities

 

(11,522)

 

(11,594)

 

(14,588)

 

 

197,863

 

187,413

 

182,701

Property profits

 

6,894

 

6,894

 

4,854

Operating profit before exceptional items and intangible amortisation arising on acquisitions

 

204,757

 

194,307

 

187,555

 

 

 

 

 

 

 

Profit on the disposal of Group businesses

 

-

 

-

 

1,649

Goodwill written off on disposal of Group businesses

 

-

 

-

 

(3,580)

Amortisation of intangible assets arising on acquisitions

 

 

(6,974)

 

 

(6,974)

 

 

(5,095)

Operating profit

 

197,783

 

187,333

 

180,529

 

 

 

 

 

 

 

Finance expense

 

(27,391)

 

(7,800)

 

(7,071)

Finance income

 

2,249

 

2,249

 

944

Profit before tax

 

172,641

 

181,782

 

174,402

 

 

 

 

 

 

 

Income tax expense

 

(28,717)

 

(30,245)

 

(29,619)

Profit after tax for the financial year from continuing operations

 

143,924

 

151,537

 

144,783

 

 

 

 

 

 

 

(Loss)/profit after tax from discontinued operations

 

 

(24,692)

 

 

(25,135)

 

 

5,620

Profit after tax for the financial year

 

119,232

 

126,402

 

150,403

 

 

 

2.  Segmental Analysis

The amount of revenue by geographic area is as follows:

 

2019

£'000

2018

Restated

£'000

Revenue*

 

 

 

 

United Kingdom

 

1,785,451

 

1,803,976

Ireland

 

675,010

 

643,625

Netherlands

 

211,820

 

155,519

Total revenue - continuing operations

 

2,672,281

 

2,603,120

 

*Service revenue, which is recognised over time, amounted to £35.9 million for the year (2018: £38.3 million)

 

Segment assets and liabilities for 2019 increased as a result of the adoption of IFRS 16 "Leases".  Lease liabilities are now included in segment liabilities, whereas finance lease liabilities were previously excluded from segment liabilities.

 

Operating segment assets are analysed below:

 

31 Dec 2019

£'000

31 Dec 2018

£'000

Segment assets

 

 

 

 

Merchanting

 

2,259,418

 

1,965,869

Retailing

 

213,167

 

64,260

Manufacturing

 

48,866

 

45,458

 

 

2,521,451

 

2,075,587

Unallocated assets

 

 

 

 

Deferred tax assets

 

7,600

 

9,395

Retirement benefit assets

 

756

 

1,469

Other financial assets

 

127

 

123

Derivative financial instruments (current and non-current)

 

7

 

49

Cash and cash equivalents

 

348,787

 

222,984

 

 

 

 

 

Total assets

 

2,878,728

 

2,309,607

 

Operating segment liabilities are analysed below:

 

31 Dec 2019

£'000

31 Dec 2018

£'000

Segment liabilities

 

 

 

 

Merchanting

 

858,124

 

574,209

Retailing

 

203,684

 

48,344

Manufacturing

 

18,499

 

17,280

 

 

1,080,307

 

639,833

Unallocated liabilities

 

 

 

 

Interest bearing loans and borrowings (current and non-current)

 

339,261

 

273,808

Finance lease liabilities

 

-

 

2,209

Retirement benefit obligations

 

21,939

 

21,632

Deferred tax liabilities

 

47,109

 

42,444

Current income tax liabilities

 

27,461

 

33,036

Derivative financial instruments (current and non-current)

 

-

 

103

 

 

 

 

 

Total liabilities

 

1,516,077

 

1,013,065

 

 

 

 

 

 

 

 

 

3.  Operating Profit

 

The property profit of £6.9 million (2018: £4.9 million) relates to the disposal of seven properties in the UK and three properties in Ireland (2018: seven UK properties and two Irish properties).

 

 

4.  Finance Expense and Finance Income

   

 

2019

£'000

2018

£'000

 

Finance expense

 

 

 

 

 

Interest on bank loans, US senior notes and overdrafts

 

7,101

*

5,865

*

Net change in fair value of cash flow hedges transferred from equity

 

151

 

337

 

Interest on lease liabilities

 

19,728

*

-

*

Interest on obligations under finance leases

 

-

*

165

*

Net finance cost on pension scheme obligations

 

411

 

503

 

Foreign exchange loss

 

-

 

201

 

 

 

27,391

 

7,071

 

 

 

 

 

 

 

Finance income

 

 

 

 

 

Interest income on bank deposits

 

(1,059)

*

(944)

*

Foreign exchange gain

 

(1,190)

 

-

 

 

 

(2,249)

 

(944)

 

 

 

 

 

 

 

Net finance expense

 

25,142

 

6,127

 

 

* Net bank/loan note interest of £6.0 million (2018: £4.9 million). Including interest on lease liabilities, this amounts to £25.8 million (2018: £5.1 million).

 

 

 

5.  Earnings per Share

 

The computation of basic, diluted and underlying earnings per share is set out below. 

 

 

Year Ended 31 Dec 2019

 

£'000

Year Ended 31 Dec 2018

Restated

£'000

Numerator for basic, adjusted and diluted earnings per share:

 

 

 

 

 

 

 

 

 

Profit after tax for the financial year from continuing operations

 

143,924

 

144,783

(Loss)/profit after tax for the financial year from discontinued operations

 

(24,692)

 

5,620

 

 

 

 

 

Numerator for basic and diluted earnings per share

 

119,232

 

150,403

 

 

 

 

 

 

Profit after tax for the financial year from continuing operations

 

143,924

 

144,783

Amortisation of intangible assets arising on acquisitions

 

6,974

 

5,095

Tax relating to amortisation of intangible assets arising on acquisitions

 

 

(1,474)

 

 

(1,025)

Goodwill written off on disposal of Group businesses

 

-

 

3,580

Profit on disposal of Group businesses

 

-

 

(1,649)

Tax relating to profit on disposal of Group businesses

 

-

 

488

Numerator for adjusted earnings per share

 

149,424

 

151,272

 

 

 

 

 

 

 

Number of Grafton Units

 

Number of Grafton Units

Denominator for basic and adjusted earnings per share:

 

 

 

 

 

 

 

 

 

Weighted average number of Grafton Units in issue

 

237,785,154

 

237,626,735

 

 

 

 

 

Dilutive effect of options and awards

 

797,483

 

664,353

 

 

 

 

 

Denominator for diluted earnings per share

 

238,582,637

 

238,291,088

 

 

 

 

 

Earnings per share (pence) - from total operations

 

 

 

 

- Basic

 

50.1

 

63.3

- Diluted

 

50.0

 

63.1

 

 

 

 

 

Earnings per share (pence) - from continuing operations

 

 

 

 

- Basic

 

60.5

 

60.9

- Diluted

 

60.3

 

60.8

 

 

 

 

 

Earnings per share (pence) - from discontinued operations

 

 

 

 

- Basic

 

(10.4)

 

2.4

- Diluted

 

(10.3)

 

2.4

 

Adjusted earnings per share  (pence) - from continuing operations

 

 

 

 

- Basic

 

62.8

 

63.7

- Diluted

 

62.6

 

63.5

 

 

6.  Dividends

 

The payment in 2019 of a second interim dividend for 2018 of 12.00 pence on the 'C' Ordinary shares in Grafton Group (UK) plc from UK-sourced income amounted to £28.5 million.  A 2019 interim dividend of 6.50 pence per share was paid on 11 October 2019 on the 'C' Ordinary shares in Grafton Group (UK) plc from UK-sourced income and amounted to £15.5 million.

 

A second interim dividend for 2019 of 12.50 pence per share will be paid on the 'C' Ordinary Shares in Grafton Group (UK) plc from UK-sourced income to all holders of Grafton Units on the Company's Register of Members at the close of business on 6 March 2020 (the 'Record Date').  The dividend will be paid on 6 April 2020. A liability in respect of this second interim dividend has not been recognised at 31 December 2019, as there was no present obligation to pay the dividend at the year-end.

 

7.  Exchange Rates

 

The results and cash flows of subsidiaries with euro functional currencies have been translated into sterling using the average exchange rate for the year.  The balance sheets of subsidiaries with euro functional currencies have been translated into sterling at the rate of exchange ruling at the balance sheet date.

 

The average sterling/euro rate of exchange for the year ended 31 December 2019 was Stg87.78p (2018: Stg88.47p).  The sterling/euro exchange rate at 31 December 2019 was Stg85.08p (2018: Stg89.45p).

 

 

8.  Right-Of-Use Asset

 

Right-of-use asset

 

£'000

Recognised at 1 January 2019

561,684

Additions

40,787

Acquisitions (Note 14)

17,782

Depreciation

(60,974)

Disposal of Group businesses (Note 14)

(23,916)

Disposals

(36)

Currency translation adjustment

(13,082)

As at 31 December 2019

522,245

 

Initial guidance indicated that the opening right-of-use asset would be within the range of £565 million to £585 million at transition. The variance to the above opening position relates principally to the offset of the opening onerous lease provisions (£8.2 million) and a net £3.1 million in respect of the opening prepayments and accruals.

Further detail on the impact of IFRS 16 "Leases" is set in within the APM's and also in Note 20.

 

 

 

9.  Property, Plant and Equipment, Properties Held for Sale and Investment Properties

 

 

Property, plant and equipment

Properties

held for sale

Investment properties

 

£'000

£'000

£'000

Net Book Value

 

 

 

As at 1 January 2019

521,631

11,595

15,048

Derecognition of finance lease assets

(2,541)

-

-

At 1 January 2019 (revised)

519,090

11,595

15,048

Additions

50,375

-

-

Acquisitions (note 14)

15,704

-

-

Depreciation

(44,163)

-

-

Disposals

(1,718)

(8,072)

-

Disposal of Group businesses (note 14)

(16,527)

-

-

Impairments & property revaluations

(2,874)

-

-

Transfer to properties held for sale

(11,094)

13,189

(2,095)

Transfer to investment properties

-

-

-

Currency translation adjustment

(7,869)

(438)

(427)

As at 31 December 2019

500,924

16,274

12,526

 

 

10. Movement in Working Capital

 

 

 

Inventories

Trade

and other receivables

Trade and other

payables

 

 

Total

 

£'000

£'000

£'000

£'000

 

 

 

 

 

At 1 January 2019

350,061

451,245

(608,659)

192,647

IFRS 16 impact on opening balances

-

(7,869)

10,992

3,123

At 1 January 2019 (revised)

350,061

443,376

(597,667)

195,770

Currency translation adjustment/other

(7,764)

(7,831)

11,269

(4,326)

Consideration receivable on disposals (note 14)

-

1,953

-

1,953

Disposal of Group businesses (note 14)

(49,819)

(60,881)

63,041

(47,659)

Acquisitions (note 14)

18,415

19,532

(13,146)

24,801

Working capital movement in 2019

6,739

(8,126)

24,648

23,261

At 31 December 2019

317,632

388,023

(511,855)

193,800

 

 

Lease receivable under IFRS 16

 

 

 

 

 

Included in current assets

-

297

-

297

Included in non-current assets

-

2,417

-

2,417

At 31 December 2019

-

2,714

-

2,714

          

 

 

 

11. Interest-Bearing Loans, Borrowings and Net debt

 

 

31 Dec 2019

£'000

 

31 Dec 2018

£'000

Non-current liabilities

 

 

 

 

Bank loans

 

203,814

 

131,138

US senior notes

 

135,447

 

142,338

Total non-current interest-bearing loans and borrowings

 

339,261

 

273,476

 

 

 

 

 

Current liabilities

 

 

 

 

Bank loans

 

-

 

332

Total current interest-bearing loans and borrowings

 

-

 

332

 

 

 

 

 

Leases

 

 

 

 

Included in non-current liabilities

 

487,999

 

1,774

Included in current liabilities

 

55,368

 

435

Total non-current interest-bearing loans and borrowings

 

543,367

 

2,209

 

 

 

 

 

Derivatives

 

 

 

 

Included in current assets

 

(7)

 

(49)

Included in current liabilities

 

-

 

103

Total derivatives

 

(7)

 

54

 

 

 

 

 

Cash and cash equivalents

 

(348,787)

 

(222,984)

Net debt

 

533,834

 

53,087

 

The following table shows the fair value of financial assets and liabilities including their level in the fair value hierarchy. It does not include fair value information for financial assets and liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

 

31 Dec 2019

 

31 Dec 2018

 

£'000

 

£'000

 

Assets/liabilities measured at fairvalue

Designated as hedginginstruments

Interest rateswaps and other derivatives (Level 2)

(7)

 

54

 

Liabilities not measured at fairvalue

Liabilities at amortisedcost

Bankloans

205,295

 

133,911

US senior notes

136,128

 

143,120

Leases

543,367

 

2,209

 

884,790

 

279,240

 

Financial assets and liabilities recognised at amortised cost

Except as detailed above, it is considered that the carrying amounts of financial assets and liabilities including trade payables, trade receivables, net debt and deferred consideration, which are recognised at amortised cost in the year-end financial statements, approximate to their fair values.

 

Financial assets and liabilities carried at fair value

All of the Group's financial assets and liabilities which are carried at fair value are classified as Level 2 in the fair value hierarchy. There have been no transfers between levels in the current year. Fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows based on the terms and maturity of each contract and using forward currency rates and market interest rates as applicable for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty where appropriate.

 

 

12. Reconciliation of Net Cash Flow to Movement in Net Debt

 

The impact of IFRS 16 on net debt is also set out within the APM's.

 

 

31 Dec 2019

£'000

 

 

31 Dec 2018

£'000

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

127,440

 

(31,384)

Net movement in derivative financial instruments

 

61

 

430

Bank loans and loan notes acquired with subsidiaries (note 14)

 

(27,420)

 

(7,386)

Bank loans and loan notes disposed (note 14)

 

1,177

 

-

Movement in debt and lease financing

 

(597,924)

 

49,756

Change in net debt resulting from cash flows

 

(496,666)

 

11,416

 

 

 

 

 

Currency translation adjustment

 

15,919

 

(1,597)

Movement in net debt in the year

 

(480,747)

 

9,819

 

 

 

 

 

Net debt at 1 January

 

(53,087)

 

(62,906)

 

 

 

 

 

Net debt at end of the year

 

(533,834)

 

(53,087)

 

 

 

 

 

Gearing

 

(39%)

 

4%

 

 

 

13. Retirement Benefits

 

The principal financial assumptions employed in the valuation of the Group's defined benefit scheme liabilities for the current and prior year were as follows:

 

 

 

Irish Schemes

UK Schemes

 

At 31 Dec 2019

 

At 31 Dec 2018

 

At 31 Dec 2019

 

At 31 Dec 2018

 

 

 

 

%

 

 

 

%

 

Rate of increase in salaries

2.30%

*

2.40%

*

0.00%

**

0.00%

**

Rate of increase of pensions in payment

-

 

-

 

2.90%

 

3.10%

 

Discount rate

1.05%

 

1.80%

 

2.10%

 

2.90%

 

Inflation

1.10%

 

1.20%

 

1.90%

***

2.10%

***

 

 

 

 

 

 

 

 

 

 

*2.30% applies from 2 January 2020 (31 December 2018: 2.40% from 2 January 2019)

** Pensionable salaries are not adjusted for inflation

*** The inflation assumption shown for the UK is based on the Consumer Price Index (CPI)

 

 

The following table provides a reconciliation of the scheme assets (at bid value) and the actuarial value of scheme liabilities:

 

  Assets

  Liabilities

Net asset/(deficit)

 

Year to

31 Dec 2019

Year to 31 Dec 2018

Year to

31 Dec 2019

Year to 31 Dec 2018

Year to

31 Dec 2019

Year to

31 Dec 2018

 

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January

230,671

239,363

(250,834)

(262,842)

(20,163)

(23,479)

Acquired in year

-

-

(227)

-

(227)

-

Disposed in year

(1,575)

-

1,998

-

423

-

Interest income on plan assets

5,352

5,328

-

-

5,352

5,328

Contributions by employer

2,956

5,499

-

-

2,956

5,499

Contributions by members

621

651

(621)

(651)

-

-

Benefit payments

(11,376)

(8,399)

11,376

8,399

-

-

Current service cost

-

-

(2,443)

(2,764)

(2,443)

(2,764)

Other long term benefit expense

-

-

(49)

(33)

(49)

(33)

Past service credit

-

-

-

34

-

34

Settlement cost

-

-

(580)

-

(580)

-

Interest cost on scheme liabilities

-

-

(5,763)

(5,831)

(5,763)

(5,831)

Remeasurements

 

 

 

 

 

 

Actuarial gains/(loss) from:

 

 

 

 

 

 

-experience variations

-

-

1,579

6,270

1,579

6,270

-financial assumptions

-

-

(31,178)

7,848

(31,178)

7,848

-demographic assumptions

-

-

(1,048)

(244)

(1,048)

(244)

Return on plan assets excluding interest income

29,356

(12,669)

-

-

29,356

(12,669)

Translation adjustment

(6,072)

898

6,674

(1,020)

602

(122)

At 31 December

249,933

230,671

(271,116)

(250,834)

(21,183)

(20,163)

Related deferred tax asset (net)

 

 

 

 

3,228

2,926

Net pension liability

 

 

 

 

(17,955)

(17,237)

 

The net pension scheme deficit of £21.2 million is shown in the Group balance sheet as retirement benefit obligations (non-current liabilities) of £21.9 million and retirement benefit assets (non-current assets) of £0.7 million. £10.8 million of the retirement benefit obligations relates to schemes in Ireland and the Netherlands and £11.1 million relates to one UK scheme. £0.3 million of the retirement benefit asset relates to a second UK scheme and £0.4 million to one scheme in Ireland.

 

The 2018 net pension scheme deficit of £20.2 million is shown in the Group balance sheet as retirement benefit obligations (non-current liabilities) of £21.6 million and retirement benefit assets (non-current assets) of £1.4 million. £14.9 million of the retirement benefit obligations relates to schemes in Ireland, Belgium and the Netherlands and £6.7 million relates to one UK scheme. £1.0 million of the retirement benefit asset relates to a second UK scheme and £0.4 million to one scheme in Ireland.

 

 

14.  Acquisitions and Discontinued Operations

 

  Acquisitions

On 1 July 2019, the Group acquired the entire share capital (100%) of Polvo BV ("Polvo"). Polvo is a distributor of ironmongery, tools, fixings and related products that trades from 51 branches in the Netherlands. The business is incorporated in the merchanting segment.

On 25 November 2019, the Group acquired 100% of Schooning Schipol ("Schooning"), a single branch specialist merchant in the Netherlands. The business is incorporated in the merchanting segment.

 

Details of the acquisitions made in 2018 are disclosed in the Group's 2018 Annual Report.

 

The provisional fair value of assets and liabilities acquired in 2019 are set out below:

 

 

Polvo

£'000

Other

£'000

Total

£'000

Property, plant and equipment

15,671

33

15,704

Right-of-use asset

17,782

-

17,782

Intangible assets - customer relationships

31,124

-

31,124

Intangible assets - trade names

2,202

-

2,202

Inventories

18,097

318

18,415

Trade and other receivables

18,998

534

19,532

Trade and other payables

(12,928)

(218)

(13,146)

Lease liability

(17,782)

-

(17,782)

Employee benefits

(227)

-

(227)

Corporation tax asset/(liability)

16

(6)

10

Deferred tax (liability)

(7,315)

-

(7,315)

Deferred tax asset

390

51

441

(Debt) acquired

(27,206)

(214)

(27,420)

Cash acquired

192

59

251

Net assets acquired

39,014

557

39,571

Goodwill

52,636

627

53,263

Consideration

91,650

1,184

92,834

 

 

 

 

Satisfied by:

 

 

 

Cash paid

91,650

1,184

92,834

 

Net cash outflow - arising on acquisitions

 

 

 

 

Cash consideration

 

91,650

 

1,184

 

92,834

Less: cash and cash equivalents acquired

(192)

(59)

(251)

 

91,458

1,125

92,583

 

 

 

The fair value of the net assets acquired have been determined on a provisional basis. Goodwill on these acquisitions reflects the anticipated purchasing and operational synergies to be realised as part of the enlarged Group.

 

Acquisitions contributed revenue of £52.8 million and operating profit of £3.8 million for the period from the date of acquisition to 31 December 2019. If both acquisitions had occurred on 1 January 2019, they would have contributed revenue of £114.7 million and operating profit of £8.9 million in the year. The Group incurred acquisition costs of £0.5 million in 2019 (2018: £0.7 million) which are included in operating costs in the Group Income Statement.

 

 

 

Discontinued Operations - Belgium Merchanting & Plumbase Limited

 

The Group conducted a strategic review of its operations in Belgium in the context of its allocation and reallocation of capital.  This resulted in a decision to divest of the business and a process was initiated to dispose of the operations.  The Group completed the disposal of the Belgian merchanting business on 4 October 2019. The Belgium Group has been reported as a discontinued operation. The related goodwill allocated to the Belgium Group has been written off in the year.

 

On 1 October 2019 the Group completed the disposal of Plumbase, its specialist UK plumbing and heating business, to Plumbing and Heating Investments Limited ("PHIL"), a UK company engaged in the distribution of plumbing and heating products, for an enterprise value of 66.75 million.  After allowing for adjustments for debt-like items and working capital, net cash proceeds of 60.5m were received on completion with an additional £2.0 million due to the Group. The disposal of Plumbase is in line with the Group's strategy of orientating towards higher returning businesses with good long-term growth prospects. Plumbase has been reported as a discontinued operation. The related goodwill allocated to the Plumbase has been written off in the year.

 

The carrying value of assets and liabilities disposed are set out below:

 

Belgium

£'000

Plumbase

£'000

Total

£'000

Property, plant and equipment

4,076

12,451

16,527

Right-of-use asset

9,728

14,188

23,916

Inventories

14,017

35,802

49,819

Trade and other receivables

15,839

45,042

60,881

Trade and other payables

(14,992)

(48,049)

(63,041)

Lease liability

(9,712)

(13,761)

(23,473)

Provisions

-

(1,753)

(1,753)

Employee benefits

(423)

-

(423)

Corporation tax asset/(liability)

25

(527)

(502)

Deferred tax asset

1,161

-

1,161

Deferred tax (liability)

(1,698)

(56)

(1,754)

(Debt) disposed

(1,177)

-

(1,177)

Cash disposed

2,185

8,236

10,421

Goodwill disposed

9,113

19,000

28,113

Net assets disposed

28,142

70,573

98,715

Consideration received

(8,167)

(68,767)

(76,934)

Consideration receivable

-

(1,953)

(1,953)

Loss/(profit) on disposal of Group businesses

19,975

(147)

19,828

 

 

 

 

Net cash movement on disposal of Group businesses

 

£'000

£'000

£'000

Proceeds on disposal

8,167

68,767

76,934

Cash and cash equivalents

(2,185)

(8,236)

(10,421)

Total cash flow movement

5,982

60,531

66,513

 

 

Amounts recognised in the year within discontinued operations

 

£'000

£'000

£'000

Loss/(profit) on disposal of Group businesses

19,975

(147)

19,828

Foreign currency reserve on disposed businesses

664

-

664

Result for the year from discontinued operations

(813)

(3,852)

(4,665)

Disposal costs*

4,892

3,973

8,865

Total amount recognised as discontinued operations

24,718

(26)

24,692

     

    *Disposal costs include professional fees of £4.5 million, asset impairments of £1.0 million, future lease commitment costs of £0.9 million, 

  property registration costs of £1.2 million and other costs related to the divested businesses of £1.3 million.

 

 

Results from discontinued operations

 

 

31 December 2019

(incl IFRS 16)

(unaudited)

 

£'000

31 December 2019

(unaudited)

 

£'000

31 December 2018

(unaudited)

Reported

£'000

Revenue

 

251,792

251,792

349,623

Operating costs

 

(245,297)

(246,442)

(342,700)

Operating profit pre exceptional items

 

6,495

5,350

6,923

Exceptional items (see above)

 

(29,357)

(29,357)

-

Operating (loss)/profit

 

(22,862)

(24,007)

6,923

Net finance costs

 

(702)

-

-

(Loss)/profit before tax

 

(23,564)

(24,007)

6,923

Income tax

 

(1,128)

(1,128)

(1,303)

(Loss)/profit after tax for the financial year

 

(24,692)

(25,135)

5,620

 

 

Impact on Group Income Statement - 2018

 

 

31 December 2018

Continuing

(unaudited)

£'000

31 December 2018

Discontinued

(unaudited)

£'000

31 December 2018

Total

(audited)

£'000

Revenue

 

2,603,120

349,623

2,952,743

Operating costs

 

(2,427,445)

(342,700)

(2,770,145)

Operating profit before property profits

 

175,675

6,923

182,598

Property profits

 

4,854

-

4,854

Operating profit

 

180,529

6,923

187,452

Net finance costs

 

(6,127)

-

(6,127)

Profit before tax

 

174,402

6,923

181,325

Income tax

 

(29,619)

(1,303)

(30,922)

Profit after tax for the financial year

 

144,783

5,620

150,403

 

 

 

15.  Goodwill

 

Goodwill is subject to impairment testing on an annual basis and more frequently if an indicator of impairment is considered to exist. The Board is satisfied that the carrying value of goodwill has not been impaired.

 

Goodwill

£'000

Net Book Value

 

As at 1 January 2019

646,198

Arising on acquisitions (note 14)

53,263

Disposal of Group businesses (note 14)

(28,113)

Currency translation adjustment

(13,503)

As at 31 December 2019

657,845

 

 

16.  Intangible Assets

 

 

 

Computer Software

£'000

Trade Names

£'000

Customer Relationships

£'000

Total

£'000

Net Book Value

 

 

 

 

As at 1 January 2019

36,766

4,129

38,914

79,809

Additions

2,059

-

-

2,059

Arising on acquisitions (note 14)

-

2,202

31,124

33,326

Amortisation

(2,660)

(638)

(6,336)

(9,634)

Currency translation adjustment

30

(186)

(2,136)

(2,292)

As at 31 December 2019

36,195

5,507

61,566

103,268

 

The computer software asset of £36.2 million at 31 December 2019 (2018: £36.8 million) reflects the cost of the Group's investment on upgrading the IT systems and infrastructure that supports a number of UK businesses as part of a multi-year programme of investment. A number of these systems are not yet available for use in the business and are therefore not amortised. 

 

The amortisation expense of £9.6 million (2018: £7.1 million) has been charged in 'operating costs' in the Group Income Statement. Amortisation on acquired intangibles amounted to £7.0 million (2018: £5.1 million).

 

 

17.  Taxation

 

The income tax expense of £28.7 million (2018: £29.6 million) was equivalent to an effective tax rate of 16.6 per cent on profit from continuing operations (2018: 17.0 per cent). The rate is lower than the 17.7 per cent guided at the time of our Interim Results due to higher than anticipated reliefs and allowances in the UK. The rate is based on the prevailing rates of corporation tax and the mix of profits between the UK, Ireland and the Netherlands.  The tax rate is impacted by the disallowance of a tax deduction for certain overheads including depreciation on property.  The tax rate for the Group is most sensitive to changes in the UK rate of corporation tax which is currently 19 per cent as the highest proportion of Group profits are earned in the UK. In 2016 legislation was passed to reduce this rate by two percent to 17 per cent with effect from 1 April 2020.  This reduction is now expected to be put on hold and the 2016 legislation will have to be amended to maintain the rate at its current level of 19 per cent.

 

The liability shown for current taxation includes a liability for tax uncertainties and is based on the Directors' estimate of (i) the most likely amount; or (ii) the expected value of the probable outflow of economic resources that will be required. As with all estimates, the actual outcome may be different to the current estimate.

 

Accounting estimates and judgements

Management is required to make judgements and estimates in relation to taxation provisions and exposures. In the ordinary course of business, the Group is party to transactions for which the ultimate tax determination may be uncertain. As the Group is subject to taxation in a number of jurisdictions, an open dialogue is maintained with Revenue Authorities with a view to the timely agreement of tax returns. The amounts provided/recognised for tax are based on management's estimate having taken appropriate professional advice. If the final determination of these matters is different from the amounts that were initially recorded such differences could materially impact the income tax and deferred tax liabilities and assets in the period in which the determination was made.

 

Deferred tax

At 31 December 2019, there were unrecognised deferred tax assets in relation to capital losses of £1.6 million (31 December 2018: £1.9 million), trading losses of £1.9 million (31 December 2018: £3.3 million) and deductible temporary differences of £2.2 million (31 December 2018: £2.6 million).

 

Deferred tax assets were not recognised in respect of certain capital losses as they can only be recovered against certain classes of taxable profits. The Directors believe that it is not probable that such profits will arise in the foreseeable future. The trading losses arose in entities that have incurred losses in recent years and the Directors believe that it is not probable there will be sufficient taxable profits in the relevant entities against which they can be utilised. Separately, the Directors believe that it is not probable the deductible temporary differences will be utilised.

 

18.  Related Party Transactions

 

There have been no new related party transactions. There were no other changes in related parties from those described in the 2018 Annual Report that materially affected the financial position or the performance of the Group during the year to 31 December 2019.

 

 

19.  Events after the Balance Sheet Date

 

There have been no other material events subsequent to 31 December 2019 that would require adjustment to or disclosure in this report.

 

 

20.  Transition to IFRS 16 "Leases"

 

Summary

 

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off-balance sheet.

 

The Group has applied IFRS 16 using the modified retrospective approach, without restatement of the comparative information. In respect of those leases the Group previously treated as operating leases, the Group has elected to measure its right of use assets arising from property leases using the approach set out in IFRS 16.C8(b)(ii). Under IFRS 16.C8(b)(ii) right of use assets are set equal to the lease liability, adjusted for prepaid or accrued lease payments, including un-amortised lease incentives.

 

Impact of IFRS 16 - As a lessee

 

On initial application of IFRS 16 for operating leases, right-of-use assets were generally measured at the present value of the future lease payments. The Group's weighted average (by lease liability) incremental borrowing rate applied to lease liabilities as at 1 January 2019 was 3.5%.

 

As part of the Group's adoption of IFRS 16 the Group has elected to use the following practical expedients:

• a single discount rate has been applied to portfolios of leases with reasonably similar characteristics;

• accounting for short-term leases (leases less than 12 month) or low value asset leases (i.e. where the value of the underlying asset when new is less than £4,000) by recognising the lease payments as an operating expense on a straight-line basis over the term of the lease;

• right-of-use asset has been reduced by the carrying amount of the onerous lease provision at 31 December 2018 instead of performing impairment reviews under IAS 36; and

• hindsight has been used in determining the lease term.

 

Lease incentives (e.g. rent-free periods) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of rental expenses on a straight-line basis over the life of the lease.

 

 

Under IFRS 16:

• right-of-use assets will be tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.

• the Group recognises depreciation of right-of-use assets and interest on lease liabilities in the Group Income Statement. Under IAS 17, operating leases previously gave rise to a straight-line expense in the Group Income Statement.

• the Group separates the total amount of cash paid for leases that are on balance sheet into a principal portion (presented within financing activities) and an interest portion (presented within operating activities) in the Group Cash Flow Statement. Under IAS 17 operating lease payments were presented as operating cash outflows.

Contracts that qualified as leases as defined by IFRS 16 related primarily to property, motor vehicles and office equipment. On transition to IFRS 16, the principal impacts were the recognition of right-of-use assets of £561.7 million and lease liabilities of £574.9 million.

 

Impact of IFRS 16 - As a lessor

The Group was only required to make adjustments on transition to IFRS 16 for leases where it subleases a headlease. At the date of initial application, the Group reassessed subleases that were classified as operating leases under IAS 17 to determine whether these should be reclassified under IFRS 16. The Group concluded that the subleases in existence require classification as finance leases under IFRS 16 and as a result £2.7 million was recognised as finance lease receivables.

 

Impact of IFRS 16 - Former finance leases

 

The main differences between IFRS 16 and IAS 17 with respect to assets formerly held under a finance lease is the measurement of the residual value guarantees provided by the lessee to the lessor. IFRS 16 requires that the Group recognises as part of its lease liability only the amount expected to be payable under a residual value guarantee, rather than the maximum amount guaranteed as required by IAS 17. This change did not have an effect on the Group's Financial Statements.

 

Financial Impact - Opening balance sheet

 

The table below reconciles the relevant assets and liabilities under IAS 17 at 31 December 2018 to those under IFRS 16 at 1 January 2019:

 

 

 

 

31 December 2018

(Audited)

Pre-IFRS 16 Impact

 

1 January 2019

(Unaudited)

IFRS 16 Impact

 

1 January 2019

(Unaudited)

Post-IFRS 16 Impact

ASSETS

 

 

£'000

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

 

 

521,631

 

(2,541)

 

519,090

Right-of-use asset*

 

 

-

 

563,916

 

563,916

Total non-current assets

 

 

521,631

 

561,375

 

1,083,006

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

 

 

451,245

 

(7,869)

 

443,379

Total current assets

 

 

451,245

 

(7,869)

 

443,379

Total assets

 

 

972,876

 

553,506

 

1,526,385

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Interest-bearing loans and borrowings

 

 

275,250

 

(1,774)

 

273,476

Lease liabilities

 

 

-

 

525,495

 

525,495

Provisions

 

 

21,651

 

(6,521)

 

15,131

Total non-current liabilities

 

 

296,901

 

517,200

 

814,102

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Interest-bearing loans and borrowings

 

 

767

 

(435)

 

332

Lease liabilities

 

 

-

 

49,387

 

49,387

Trade and other payables

 

 

608,659

 

(10,992)

 

597,667

Provisions

 

 

9,523

 

(1,654)

 

7,870

Total current liabilities

 

 

618,949

 

36,306

 

655,256

Total liabilities

 

 

915,850

 

553,506

 

1,469,358

 

*Right-of-use asset IFRS 16 impact reflects £561.7 million plus £2.2 million right-of-use asset which is subsequently derecognised as a finance lease receivable

 

Of the total right-of-use assets of £561.7 million recognised at 1 January 2019 is comprised as follows:

 

 

£'000

Property and land leases

546,497

Vehicles

14,604

Other assets

583

Total right-of-use asset recognised at 1 Jan 2019

561,684

 

 

 

Financial Impact - Reconciliation of operating lease commitments at 31 December 2018

 

The table below reconciles the Group's operating lease obligations at 31 December 2018 to the lease obligations recognised on initial application of IFRS 16 at 1 January 2019.

 

 

 

 

£'000

Operating lease commitments at 31 December 2018

 

 

718,414

Additional operating leases identified at 31 December 2018

 

 

19,793

Difference due to extensions, terminations etc.

 

 

16,463

Other adjustments to operating lease commitments

 

 

(756)

Restated 31 December 2018 operating lease commitments

 

 

753,914

Impact of discounting on leases

 

 

(181,241)

Discounted operating leases

 

 

572,673

Finance lease liability at 31 December 2018

 

 

2,209

IFRS 16 lease liability at 1 January 2019

 

 

574,882

 

 

 

21.  Board Approval

 

This announcement was approved by the Board of Grafton Group plc on 26 February 2020.

 

 

Supplementary Financial Information

 

Alternative Performance Measures

 

Certain financial information set out in this consolidated financial statements is not defined under International Financial Reporting Standards ("IFRS"). These key Alternative Performance Measures ("APMs") represent additional measures in assessing performance and for reporting both internally and to shareholders and other external users. The Group believes that the presentation of these APMs provides useful supplemental information which, when viewed in conjunction with IFRS financial information, provides readers with a more meaningful understanding of the underlying financial and operating performance of the Group.


None of these APMs should be considered as an alternative to financial measures drawn up in accordance with IFRS. The key Alternative Performance Measures ("APMs") of the Group are set out below.  As amounts are reflected in £'m some non-material rounding differences may arise. Numbers that refer to 2018 are available in the 2018 Annual Report.

 

Note:Plumbase and the Belgium Merchanting business are now classified as discontinued operations. The revenue and operating profit of both businesses are excluded from the Group.  Revenue and the operating result is reflected in the (loss)/profit after tax from discontinued operations. The prior year comparatives have been updated to conform to the current year presentation.

 

 

APM

Description

 

Adjusted operating profit/EBITA

Profit before amortisation of intangible assets arising on acquisitions, exceptional items, net finance expense and income tax expense.

 

EBITA

Profit before exceptional items, net finance expense, income tax expense and amortisation of intangible assets arising on acquisitions.

 

 

Operating profit/EBITA margin

Profit before net finance expense and income tax expense as a percentage of revenue.

 

Adjusted operating profit/EBITA before property profit

Profit before profit on the disposal of Group properties, amortisation of intangible assets arising on acquisitions, exceptional items, net finance expense and income tax expense.

 

Adjusted operating profit/EBITA margin before property profit

 

Adjusted operating profit/EBITA before property profit as a percentage of revenue.

 

Adjusted profit before tax

Profit before amortisation of intangible assets arising on acquisitions, exceptional items and income tax expense.

 

Adjusted profit after tax

Profit before amortisation of intangible assets arising on acquisitions and exceptional items but after deducting the income tax expense.

 

Capital Turn

Revenue for the previous 12 months divided by average capital employed (where capital employed is the sum of total equity and net debt at each period end).

 

 

Constant Currency

Constant currency reporting is used by the Group to eliminate the translational effect of foreign exchange on the Group's results. To arrive at the constant currency change, the results for the prior period are retranslated using the average exchange rates for the current period and compared to the current period reported numbers.

 

Dividend Cover

Group earnings per share divided by the total dividend per share for the Group.

 

 

 

EBITDA

Profit before exceptional items, net finance expense, income tax expense, depreciation and amortisation of intangible assets arising on acquisitions. EBITDA (rolling 12 months) is EBITDA for the previous 12 months.

 

EBITDA Interest Cover

EBITDA divided by net bank/loan note interest.

 

Gearing

The Group net debt divided by the total equity attributable to owners of the Parent times 100, expressed as a percentage.

 

Like-for-like revenue

Changes in like-for-like revenue is a measure of underlying revenue performance for a selected period. Branches contribute to like-for-like revenue once they have been trading for more than twelve months.  Acquisitions contribute to like-for-like revenue once they have been part of the Group for more than 12 months. When branches close, or where a business is disposed of, revenue from the date of closure, for a period of 12 months, is excluded from the prior year result.

 

Return on Capital Employed

Operating profit divided by average capital employed (where capital employed is the sum of total equity and net debt at each period end) times 100, expressed as a percentage.

 

Adjusted Operating Profit/EBITA before Property Profit   

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Revenue - continuing

 

2,672.3

 

2,672.3

 

2,603.1

 

 

 

 

 

 

 

Operating profit

 

197.8

 

187.3

 

180.5

Property profit

 

(6.9)

 

(6.9)

 

(4.9)

Goodwill written off/profit on disposal of Group businesses

 

-

 

-

 

1.9

Amortisation of intangible assets arising on acquisitions

 

7.0

 

7.0

 

5.1

Adjusted operating profit/EBITA before property profit

 

197.9

 

187.4

 

182.7

Adjusted operating profit/EBITA margin before property profit

 

7.4%

 

 

7.0%

 

7.0%

 

 

 

 

Operating Profit/EBITA Margin      

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Revenue - continuing

 

2,672.3

 

2,672.3

 

2,603.1

 

 

 

 

 

 

 

Operating profit

 

197.8

 

187.3

 

180.5

Operating profit/EBITA margin

 

7.4%

 

 

7.0%

 

6.9%

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Profit/EBITA     

 

 

 

 

 

 

 

 

 

 

 

 

2019

Reported

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

2019

Pre IFRS 16 Impact

£'000

 

 

 

 

 

 

 

 

 

 

 

 

2018

Restated

 

£'000

Revenue - continuing

 

2,672.3

 

2,672.3

 

2,603.1

 

 

 

 

 

 

 

Operating profit

 

197.8

 

187.3

 

180.5

Goodwill written off/profit on disposal of Group businesses

 

-

 

-

 

1.9

Amortisation of intangible assets arising on acquisitions

 

7.0

 

7.0

 

5.1

Adjusted operating profit/EBITA

 

204.8

 

194.3

 

187.6

Adjusted operating profit/EBITA margin

 

7.7%

 

 

7.3%

 

7.2%

 

 

 

 

Adjusted Profit before Tax     

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Profit before tax

 

172.6

 

181.8

 

174.4

Goodwill written off/profit on disposal of Group businesses

 

-

 

-

 

1.9

Amortisation of intangible assets arising on acquisitions

 

7.0

 

7.0

 

5.1

Adjusted profit before tax

 

179.6

 

188.8

 

181.4

 

 

 

 

Adjusted Profit after Tax     

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Profit after tax

 

143.9

 

151.5

 

144.8

Goodwill written off/profit on disposal of Group businesses

 

-

 

-

 

1.9

Tax on profit on disposal of Group businesses

 

-

 

-

 

0.5

Amortisation of intangible assets arising on acquisitions

 

7.0

 

7.0

 

5.1

Related tax on amortisation of intangible assets arising on acquisitions

 

(1.5)

 

 

(1.5)

 

(1.0)

Adjusted profit after tax

 

149.4

 

157.0

 

151.3

 

 

 

 

Reconciliation of Profit to EBITDA     

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Profit after tax

 

143.9

 

151.5

 

144.8

Net finance expense

 

25.1

 

5.6

 

6.1

Income tax expense

 

28.7

 

30.2

 

29.6

Depreciation

 

105.1

 

44.2

 

41.9

Intangible asset amortisation

 

9.6

 

9.6

 

7.1

EBITDA

 

312.6

 

241.1

 

229.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Debt to EBITDA 

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

EBITDA (rolling 12 months)

 

312.6

 

241.1

 

229.5

Net debt/(cash)

 

533.8

 

(7.8)

 

53.1

Net debt to EBITDA - times

 

1.71

 

-

 

0.23

 

 

 

EBITDA Interest Cover   

 

 

 

2019

Reported

 

£'000

 

 

 

2019

Pre IFRS 16 Impact

£'000

 

 

 

2018

Restated

 

£'000

EBITDA

 

312.6

 

241.1

 

229.5

Net bank/loan note interest

 

25.8

 

6.0

 

4.9

EBITDA interest cover - times

 

12.1

 

39.9

 

46.6

 

 

Gearing 

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Total equity

 

1,362.7

 

1,369.6

 

1,296.5

Group net debt/(cash)

 

533.8

 

(7.8)

 

53.1

Gearing

 

39%

 

(1%)

 

4%

 

 

 

Return on Capital Employed

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Operating profit

 

197.8

 

187.3

 

180.5

Goodwill written off/profit on disposal of Group businesses

 

-

 

-

 

1.9

Amortisation of intangible assets arising on acquisitions

 

7.0

 

7.0

 

5.1

Adjusted operating profit

 

204.8

 

194.3

 

187.6

 

 

 

 

 

 

 

Total equity - current period end (continuing operations)

 

1,362.7

 

1,369.6

 

1,276.7

Net debt/(cash) - current period end

 

533.8

 

(7.8)

 

53.1

Capital employed - current period end

 

1,896.5

 

1,361.8

 

1,329.8

 

 

 

 

 

 

 

Total equity - prior period end (continuing operations)

 

1,276.7

 

1,276.7

 

1,154.8

Net debt - prior period end

 

53.1

 

53.1

 

62.9

Capital employed - prior period end

 

1,329.8

 

1,329.8

 

1,217.7

 

 

 

 

 

 

 

Average capital employed

 

1,613.1

 

1,345.8

 

1,273.7

 

 

 

 

 

 

 

Return on capital employed

 

12.7%

 

14.4%

 

14.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Turn

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Total revenue for previous 12 months

 

2,672.3

 

2,672.3

 

2,603.1

Average capital employed

 

1,613.1

 

1,345.8

 

1,273.7

Capital turn - times

 

1.7

 

2.0

 

2.0

 

 

Dividend Cover

 

2019

Reported

 

£'000

 

2019

Pre IFRS 16 Impact

£'000

 

2018

Restated

 

£'000

Group adjusted EPS - basic (pence)

 

62.8

 

66.0

 

63.7

Group dividend (pence)

 

19.00

 

19.00

 

18.00

Group dividend cover - times

 

3.3

 

3.5

 

3.5

 

 

 

 

 

 

Supplementary Financial Information

 

Alternative Performance Measures

 

Impact of IFRS 16 "Leases" & Discontinued Operations on the Group Income Statement

 

 

 

 

 

2019

(Unaudited)

Pre adjusted

 

£'000

2019

(Unaudited)

Discontinued operations

 

£'000

2019

(Unaudited)

Continuing

 

 

£'000

2019

(Unaudited)

IFRS 16

(see below)

 

£'000

2019

(Unaudited)

Reported

 

 

£'000

Revenue

 

2,924,073

(251,792)

2,672,281

-

2,672,281

Operating costs

 

(2,738,284)

246,442

(2,491,842)

10,450

(2,481,392)

Operating profit before property profits

 

185,789

(5,350)

180,439

10,450

190,889

Property profits

 

6,894

-

6,894

-

6,894

Operating profit before exceptional items

 

192,683

(5,350)

187,333

10,450

197,783

Exceptional items

 

(29,357)

29,357

-

-

-

Operating profit

 

163,326

24,007

187,333

10,450

197,783

Finance expense

 

(7,800)

-

(7,800)

(19,591)

(27,391)

Finance income

 

2,249

-

2,249

-

2,249

Profit before tax

 

157,775

24,007

181,782

(9,141)

172,641

Income tax expense

 

(31,373)

1,128

(30,245)

1,528

(28,717)

Profit after tax for the financial year from continuing operations

 

126,402

25,135

151,537

(7,613)

143,924

Result from discontinued operations

 

-

(25,135)

(25,135)

443

(24,692)

Profit after tax for the financial year

 

126,402

-

126,402

(7,170)

119,232

 

 

 

 

 

 

 

 

 

 

 

Supplementary Financial Information

 

Alternative Performance Measures

 

Overall impact of IFRS 16 "Leases"

 

Group Income Statement

For the year ended 31 December 2019

 

 

 

2019

(Unaudited)

Pre IFRS 16 Impact

£'000

 

2019

(Unaudited)

IFRS 16 Impact

£'000

2019

(Unaudited)

Reported

 

£'000

Revenue

 

2,672,281

 

-

2,672,281

Operating costs

 

(2,491,842)

 

10,450

(2,481,392)

Operating profit before property profits

 

180,439

 

10,450

190,889

Property profits

 

6,894

 

-

6,894

Operating profit

 

187,333

 

10,450

197,783

Finance expense

 

(7,800)

 

(19,591)

(27,391)

Finance income

 

2,249

 

-

2,249

Profit before tax

 

181,782

 

(9,141)

172,641

Income tax expense

 

(30,245)

 

1,528

(28,717)

Profit after tax for the financial year from continuing operations

 

151,537

 

(7,613)

143,924

Result from discontinued operations

 

(25,135)

 

443

(24,692)

Profit after tax for the financial year

 

126,402

 

(7,170)

119,232

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

Owners of the Company - continuing operations

 

151,537

 

(7,613)

143,924

Earnings per ordinary share - basic

 

63.7p

 

(3.2p)

60.5p

Earnings per ordinary share - diluted

 

63.5p

 

(3.2p)

60.3p

 

 

 

 

 

Group Balance Sheet as at 31 December 2019

 

 

 

2019

(Unaudited)

Pre IFRS 16

Impact

 

2019 (Unaudited)

IFRS 16 Impact

 

2019 (Unaudited)

Reported

ASSETS

 

£'000

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

 

Goodwill

 

657,845

 

-

 

657,845

Intangible assets

 

103,268

 

-

 

103,268

Property, plant and equipment

 

503,094

 

(2,170)

 

500,924

Right-of-use asset

 

-

 

522,245

 

522,245

Investment properties

 

12,526

 

-

 

12,526

Deferred tax assets

 

7,007

 

593

 

7,600

Lease receivable

 

-

 

2,417

 

2,417

Retirement benefit assets

 

756

 

-

 

756

Other financial assets

 

127

 

-

 

127

Total non-current assets

 

1,284,623

 

523,085

 

1,807,708

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Properties held for sale

 

16,274

 

-

 

16,274

Inventories

 

317,632

 

-

 

317,632

Trade and other receivables

 

396,345

 

(8,322)

 

388,023

Lease receivable

 

-

 

297

 

297

Derivative financial instruments

 

7

 

-

 

7

Cash and cash equivalents

 

348,787

 

-

 

348,787

Total current assets

 

1,079,045

 

(8,025)

 

1,071,020

Total assets

 

2,363,668

 

515,060

 

2,878,728

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Equity share capital

 

8,516

 

-

 

8,516

Share premium account

 

213,719

 

-

 

213,719

Capital redemption reserve

 

621

 

-

 

621

Revaluation reserve

 

12,954

 

-

 

12,954

Shares to be issued reserve

 

12,889

 

-

 

12,889

Cash flow hedge reserve

 

9

 

-

 

9

Foreign currency translation reserve

 

69,962

 

180

 

70,142

Retained earnings (prior years)

 

974,271

 

-

 

974,271

Retained earnings (current year)

 

80,597

 

(7,170)

 

73,427

Treasury shares held

 

(3,897)

 

-

 

(3,897)

Total equity

 

1,369,641

 

(6,990)

 

1,362,651

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Interest-bearing loans and borrowings

 

339,261

 

-

 

339,261

Lease liabilities

 

1,272

 

486,727

 

487,999

Provisions

 

20,985

 

(5,200)

 

15,785

Retirement benefit obligations

 

21,939

 

-

 

21,939

Deferred tax liabilities

 

47,109

 

-

 

47,109

Total non-current liabilities

 

430,566

 

481,527

 

912,093

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Lease liabilities

 

438

 

54,930

 

55,368

Trade and other payables

 

523,381

 

(11,526)

 

511,855

Current income tax liabilities

 

28,396

 

(935)

 

27,461

Provisions

 

11,246

 

(1,946)

 

9,300

Total current liabilities

 

563,461

 

40,523

 

603,984

Total liabilities

 

994,027

 

522,050

 

1,516,077

 

 

 

 

 

 

 

Total equity and liabilities

 

2,363,668

 

515,060

 

2,878,728

 

 

 

 

 

 

Group Cash Flow Statement

 

2019 (Unaudited)

Pre IFRS 16

£'000

2019 (Unaudited)

IFRS 16 Impact

£'000

2019 (Unaudited) Reported

£'000

 

Profit before taxation from continuing operations

 

181,782

 

(8,698)

 

173,084

 

(Loss) before taxation from discontinued operations

 

(24,007)

 

(443)

 

(24,450)

 

Profit before taxation

 

157,775

 

(9,141)

 

148,634

 

Finance income

 

(2,249)

 

-

 

(2,249)

 

Finance expense (continuing and discontinued)

 

7,800

 

19,591

 

27,391

 

Operating profit

 

163,326

 

10,450

 

173,776

 

Depreciation

 

44,163

 

60,974

 

105,137

 

Amortisation of intangible assets

 

9,634

 

-

 

9,634

 

Share-based payments charge

 

6,171

 

-

 

6,171

 

Movement in provisions

 

4,186

 

690

 

4,876

 

Asset impairment / fair value adjustments

 

2,874

 

(449)

 

2,425

 

Profit on sale of property, plant and equipment

 

(672)

 

-

 

(672)

 

Property profit

 

(6,894)

 

-

 

(6,894)

 

Loss on disposal of Group businesses

 

19,385

 

443

 

19,828

 

Contributions to pension schemes in excess of IAS 19 charge

 

116

 

-

 

116

 

(Increase) in working capital

 

(23,180)

 

(81)

 

(23,261)

 

Cash generated from operations

 

219,109

 

72,027

 

291,136

 

Interest paid (continuing and discontinued)

 

(6,320)

 

(19,591)

 

(25,911)

 

Income taxes paid

 

(31,752)

 

-

 

(31,752)

 

Cash flows from operating activities

 

181,037

 

52,436

 

233,473

 

 

Investing activities

 

 

 

 

 

 

 

Inflows

 

 

 

 

 

 

 

Proceeds from sale of property, plant and equipment

 

2,651

 

-

 

2,651

 

Proceeds from sales of properties held for sale

 

14,705

 

-

 

14,705

 

Proceeds from sale of Group businesses (net)

 

66,513

 

-

 

66,513

 

Interest received

 

1,059

 

-

 

1,059

 

 

 

84,928

 

-

 

84,928

 

Outflows

 

 

 

 

 

 

 

Acquisition of subsidiary undertakings (net of cash)

 

(92,583)

 

-

 

(92,583)

 

Investment in intangible asset - computer software

 

(2,059)

 

-

 

(2,059)

 

Purchase of property, plant and equipment

 

(50,375)

 

-

 

(50,375)

 

 

 

(145,017)

 

-

 

(145,017)

 

Cash flows from investing activities

 

(60,089)

 

-

 

(60,089)

 

 

Financing activities

 

 

 

 

 

 

 

Inflows

 

 

 

 

 

 

 

Proceeds from the issue of share capital

 

291

 

-

 

291

 

Proceeds from borrowings

 

116,256

 

-

 

116,256

 

 

 

116,547

 

-

 

116,547

 

Outflows

 

 

 

 

 

 

 

Repayment of borrowings

 

(59,590)

 

-

 

(59,590)

 

Dividends paid

 

(43,986)

 

-

 

(43,986)

 

Treasury shares purchased

 

(6,080)

 

-

 

(6,080)

 

Payment on lease liabilities

 

(399)

 

(52,436)

 

(52,835)

 

 

 

(110,055)

 

(52,436)

 

(162,491)

 

Cash flows from financing activities

 

6,492

 

(52,436)

 

(45,944)

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

127,440

 

-

 

127,440

 

Cash and cash equivalents at 1 January

 

222,984

 

-

 

222,984

 

Effect of exchange rate fluctuations on cash held

 

(1,637)

 

-

 

(1,637)

 

Cash and cash equivalents at the end of the year

 

348,787

 

-

 

348,787

 

 

Reconciliation of Net Cash Flow to Movement in Net Debt

 

 

 

 

2019

(Unaudited)

Pre IFRS 16

Impact

£'000

 

2019 (Unaudited)

IFRS 16 Impact

£'000

 

2019 (Unaudited)

Reported

 

£'000

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

127,440

 

-

 

127,440

Bank loans and loan notes acquired

 

(27,420)

 

-

 

(27,420)

Bank loans and loan notes disposed

 

1,177

 

-

 

1,177

Net movement in derivative financial instruments

 

61

 

-

 

61

Movement in debt and lease financing

 

(56,267)

 

(541,657)

 

(597,924)

Change in net debt resulting from cash flows

 

44,991

 

(541,657)

 

(496,666)

 

 

 

 

 

 

 

Currency translation adjustment

 

15,919

 

-

 

15,919

Movement in net debt in the year

 

60,910

 

(541,657)

 

(480,747)

 

 

 

 

 

 

 

Net debt at 1 January

 

(53,087)

 

-

 

(53,087)

 

 

 

 

 

 

 

Net cash/(debt) at end of the year

 

7,823

 

(541,657)

 

(533,834)

 

 

 

 

 

 

 

 

 

 

 

 

Segmental Analysis

 

 

 

2019

(Unaudited)

Pre IFRS 16

Impact

 

2019 (Unaudited)

IFRS 16 Impact

 

2019 (Unaudited)

Reported

 

 

£'000

 

£'000

 

£'000

Revenue

 

 

 

 

 

 

UK merchanting

 

1,710,829

 

-

 

1,710,829

Ireland merchanting

 

464,784

 

-

 

464,784

Netherlands merchanting

 

211,820

 

-

 

211,820

Total merchanting

 

2,387,433

 

-

 

2,387,433

Retailing

 

205,465

 

-

 

205,465

Manufacturing

 

92,362

 

-

 

92,362

Less: Inter-segment revenue - manufacturing

 

(12,979)

 

-

 

(12,979)

Total revenue

 

2,672,281

 

-

 

2,672,281

 

 

 

 

 

 

 

Segmental operating profit before exceptional items and intangible amortisation arising on acquisitions

 

 

 

 

 

 

UK merchanting

 

98,047

 

7,098

 

105,145

Ireland merchanting

 

42,802

 

249

 

43,051

Netherlands merchanting

 

19,632

 

283

 

19,915

Total merchanting

 

160,481

 

7,630

 

168,111

Retailing

 

19,936

 

2,705

 

22,641

Manufacturing

 

18,590

 

43

 

18,633

 

 

199,007

 

10,378

 

209,385

Reconciliation to consolidated operating profit

 

 

 

 

 

 

Central activities

 

(11,594)

 

72

 

(11,522)

 

 

187,413

 

10,450

 

197,863

Property profits

 

6,894

 

-

 

6,894

Operating profit before exceptional items and intangible amortisation arising on acquisitions

 

194,307

 

10,450

 

204,757

 

 

 

 

 

 

 

Amortisation of intangible assets arising on acquisitions

 

 

(6,974)

 

 

-

 

 

(6,974)

Operating profit

 

187,333

 

10,450

 

197,783

 

 

 

 

 

 

 

Finance expense

 

(7,800)

 

(19,591)

 

(27,391)

Finance income

 

2,249

 

-

 

2,249

Profit before tax

 

181,782

 

(9,141)

 

172,641

 

 

 

 

 

 

 

Income tax expense

 

(30,245)

 

1,528

 

(28,717)

Profit after tax for the financial year from continuing operations

 

151,537

 

(7,613)

 

143,924

 

 

 

 

 

 

 

Result from discontinued operations

 

(25,135)

 

443

 

(24,692)

 

 

 

 

 

 

 

Profit after tax for the financial year

 

126,402

 

(7,170)

 

119,232

 

 

 

 

 

 

Earnings per Share

 

 

 

2019

(Unaudited)

Pre IFRS 16

Impact

 

2019 (Unaudited)

IFRS 16 Impact

 

2019 (Unaudited)

Reported

 

 

£'000

 

£'000

 

£'000

Numerator for basic, adjusted and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit after tax for the financial year from continuing operations

 

 

151,537

 

 

(7,613)

 

 

143,924

(Loss) after tax for the financial year from discontinued operations

 

 

(25,135)

 

 

443

 

 

(24,692)

Numerator for basic and diluted earnings per share

 

126,402

 

(7,170)

 

119,232

 

 

 

 

 

 

 

Profit after tax for the financial year from continuing operations

 

 

151,537

 

 

(7,613)

 

 

143,924

Amortisation of intangible assets arising on acquisitions

 

 

6,974

 

 

-

 

 

6,974

Tax relating to amortisation of intangible assets arising on acquisitions

 

 

(1,474)

 

 

-

 

 

(1,474)

Numerator for adjusted earnings per share - continuing

 

 

157,037

 

 

(7,613)

 

 

149,424

 

 

 

 

 

 

 

 

 

Number of Grafton Units

 

Number of Grafton Units

 

Number of Grafton Units

Denominator for basic and adjusted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Grafton Units in issue

 

237,785,154

 

237,785,154

 

237,785,154

 

 

 

 

 

 

 

Dilutive effect of options and awards

 

797,483

 

797,483

 

797,483

 

 

 

 

 

 

 

Denominator for diluted earnings per share

 

238,582,637

 

238,582,637

 

238,582,637

 

 

 

 

 

 

 

Earnings per share (pence) - from continuing operations

 

 

 

 

 

 

- Basic

 

63.7

 

(3.2)

 

60.5

- Diluted

 

63.5

 

(3.2)

 

60.3

 

 

 

 

 

 

 

Earnings per share (pence) - from discontinued operations

 

 

 

 

 

 

- Basic

 

(10.6)

 

0.2

 

(10.4)

- Diluted

 

(10.5)

 

0.2

 

(10.3)

 

 

 

 

 

 

 

Adjusted earnings per share  (pence) - from continuing operations

 

 

 

 

 

 

- Basic

 

66.0

 

(3.2)

 

62.8

- Diluted

 

65.8

 

(3.2)

 

62.6

 

 

 


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