Final Results
Grafton Group PLC
8 March 2001
Grafton Group plc
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR YEAR ENDED 31 DECEMBER 2000
HIGHLIGHTS
'Results in 2000 demonstrate that building on the strength of our core
businesses while diversifying the Group's earning base geographically is a
successful strategy which has generated excellent returns for shareholders.'
* Group pre-tax profits increased by 38 per cent to Euro52.8 million
* Earnings per share before goodwill up by 36 per cent to 280.6c
* Dividend per share up by 35 per cent to 65.4c
* EBITDA up 38 per cent to Euro81.1 m
* Turnover increased by 34 per cent to Euro830 million
* UK operating profit up 76 per cent to Euro29.2 million accounts for 44
per cent of Group profits
Grafton Group plc
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR YEAR ENDED 31 DECEMBER 2000
Grafton Group plc announces an increase of 38 per cent in pre-tax profits to
Euro52.8 million for the year ended December 31st, 2000 compared with Euro
38.2m the previous year. Earnings per share, before goodwill, grew by 36 per
cent to 280.6c from 206.9c. A final dividend of 40.3c is proposed, giving a
total of 65c for the year.
Grafton's strategy remains focussed on organic and bolt-on growth combined
with an active acquisition and integration programme in the UK. During the
period under review, major growth was achieved in the UK, which now accounts
for 63 per cent of Group turnover, while the Irish operations continued to
perform strongly.
Operating profits in the UK increased by 76 per cent to Euro29.2m on turnover
which was 51 per cent higher at Euro520m. The UK business generated 44 per
cent of Group operating profits. In Ireland operating profits grew by 20 per
cent to Euro36.9m on turnover which was 13 per cent up at Euro310.4m. Margins
were further improved in both markets, with UK operating margins increasing to
5.6 per cent from 4.8 per cent and Irish operating margins improving from 11.2
to 11.9 per cent.
Grafton is now a leading regional force and the fourth largest builders and
plumbers merchants in the UK. Trading from over 160 locations in the UK, the
Group enjoyed strong like for like sales growth and the benefits of
integration, synergies and scale which generated improved buying terms. Twelve
acquisitions were made during the year, bringing to 29 the number of UK
acquisitions completed over the past 3 years. The Group is also the largest
operator in the rapidly growing UK silo mortar market.
Against the background of a positive economic landscape, and in a demand
driven construction market, the Group's Irish operations produced excellent
results for the year in a highly competitive market. Chadwicks' Merchanting
and Wholesaling Division continued its strong performance while the Woodie's
DIY chain opened its 12th store and grew turnover by 26 per cent. The
Manufacturing Division traded well, growing its mortar and plastics businesses
successfully.
Strong cash generation is a core strength of the Group. After adjustments to
exclude non- cash items associated with depreciation and goodwill, the Group
generated Euro69.3m or Euro4.0 cash per share. EBIDTA for the year was Euro
81.1m. At the end of the year, the Group's net debt was Euro154.1m with
gearing at 71 per cent. Interest and dividend cover were respectively 5.7 and
4.3 times.
OPERATIONS REVIEW - REPUBLIC OF IRELAND
Against the background of a positive economic landscape, and in a demand
driven construction market, the Group's Irish operations performed well. In a
highly competitive market, the Group's concentration on profitable growth
resulted in Irish turnover increasing by 13 per cent to Euro310.4 million,
compared to Euro275.7 million in 1999. Operating profit grew by 20 per cent to
Euro36.9 million from Euro30.9 million in 1999. Irish operating margins
improved to 11.9 per cent from 11.2 per cent in 1999.
Irish merchanting and wholesaling division
With management emphasis on profit improvement and buying synergies in a
market which saw strong growth in RMI (Repairs, Maintenance and Improvements)
and consumer spending, but a lower level of growth in new housing starts,
turnover increased by 9 per cent to Euro211.5 million for the year with
improved operating margins. This division made a major contribution to the
significant growth of 20 per cent in Irish operating profits. During the year,
developments included the relocation of the Chadwicks plumb centre in Cork to
a new site, which also incorporates a new hire centre, in order to cope with
demand. The Navan branch has been converted to facilitate the expansion of the
builder centre and the opening of a new bathroom showroom and hire centre.
Irish retailing
Turnover at Woodie's DIY increased by 26 per cent to Euro71.6 million from
Euro56.8 million in 1999. Developments included the refurbishment of the
Sandyford store allowing for a wider range of products, the opening of a
Woodie's store in Bray, and the successful launch of its 12th store in
Athlone. Woodie's continued to grow its sales per square foot, enjoying strong
like-for-like sales growth. The expansion of Woodie's is set to continue with
two further stores planned for Tralee and Newbridge.
Irish manufacturing division
Manufacturing turnover grew by 13 per cent to Euro27.4 million, up from Euro
24.2 million in 1999. In the concrete market, CPI, operating out of its
manufacturing facility at Lucan, grew its readymix and block volumes in the
face of strong price competition. EuroMix continued to lead the market for
silo mortar, enjoying strong turnover growth and extending its catchment area
to include many of the rapidly growing towns throughout Leinster.
MFP's plastic business produced strong results, despite severe cost increases
for polymer raw materials. Volumes were well ahead of last year. Eavemaster
roofline products continued to grow ahead of the market and exports to the UK
increased.
Operations Review United Kingdom
The Group continued to reinforce its presence in the UK market, enjoying
strong like-for-like sales growth, and making 12 acquisitions, bringing to 29
the number of UK acquisitions over the last 3 years.
Trading from over 160 UK locations, the Group is now a significant regional
builders and plumbers merchant. UK turnover, which now accounts for 63 per
cent of total Group turnover, grew by 51 per cent to Euro520 million (Stg£325
million). UK operating profit, now contributing 44 per cent of Group profits,
increased by 76 per cent to Euro29.2 million from Euro16.6 million in 1999.
The Group's EuroMix mortar business is the market leader in the rapidly
growing silo mortar market. The benefits of integration, synergies and scale
continue to generate improved buying terms, with operating margins growing to
5.6 per cent (1999:4.8 per cent).
builders merchanting
The Group's UK builders merchanting network of 67 branches, including seven
branches acquired and one new branch opening in 2000, performed well, enjoying
strong like-for-like sales growth. Buildbase is now firmly recognised as a
leading regional merchant in London, the Southeast and the Midlands. During
the year Buildbase continued to make substantial investments in developing its
branch network, bolting on new activities and continuing to improve its level
of service to customers. The substantial integration benefits from the Group's
acquisition programme during recent years continued to be realised during the
year.
In Northern Ireland, Macnaughton Blair increased its market penetration
significantly with the acquisition in November of Lowdens Builders Merchants
in Belfast, Craigavon and Derry. Simpsons in Cookstown was also acquired and
relocated to new premises. Macnaughton Blair now trades from eight locations
in Northern Ireland. During the period Macnaughton Blair increased both its
operating profit and margin and strengthened its position as a leading
merchant in Northern Ireland.
Plumbers merchanting
During 2000 Plumbase traded strongly and made two strategically important
acquisitions which on an annualised basis more than doubled its turnover. The
acquisition of EJ Thompson & Company in the Southwest in February and Essex
Heating Supplies Ltd., in East Anglia in May considerably strengthened and
expanded Plumbase in new regions in the Southwest and Southeast, adding 40 new
trading locations to the network. Both of these businesses traded successfully
post acquisition, and enhanced Group earnings. During the year, Plumbase
opened eight new branches which have traded in line with expectations.
Plumbase is the leading regional plumbers merchant in the South and Midlands
and now trades from x88 branches. (1999: 40).
UK Manufacturing
In response to growing market demand for silo mortar, prior to the year-end
the new plant in Irlam near Manchester commenced production and since
year-end, a new EuroMix plant in Bilston near Birmingham was opened. Trading
from five production locations, EuroMix dry mortar commands a leadership
position in silo mortar. All plants continue to trade ahead of expectations.
Financial Review
Strong cash generation is a core strength supporting the Group's development
and expansion. Group profit before tax, adjusted to exclude non-cash items
associated with depreciation and goodwill, generated Euro69.3 million or Euro
4.00 cash per share. These funds have been reinvested in capital expenditure
projects amounting to Euro43.2 million and have part financed acquisition
expenditure of Euro56.6 million during the year. The Group's significant
capital expenditure, which includes substantial expansion projects, represents
5 per cent of turnover and 3 times depreciation.
The proposed sale of the Group's Orchard Wharf development site located close
to London City Airport, and opposite the Millennium Dome, was not completed by
the purchaser and the deposit of Stg £750,000 was forfeited. Having taken into
account costs associated with this transaction a profit of Stg £650,000 has
been realised and is reported separately in the Group results. The Group
continues to review opportunities to maximise the return from this valuable
site.
The Group put in place an additional Euro68.2 million of committed facilities
to fund developments during the year. In addition the Group holds significant
cash balances which are all deposited on a short term basis. 78 per cent of
the Group's gross debt matures after more than one year. At the year-end the
Group's net debt was Euro154.1 million and earnings before interest, tax,
depreciation and amortisation (EBITDA) for the year was Euro81.1 million. The
Group's net debt represented gearing of 71 per cent. Interest and dividend
cover remain strong at 5.7 and 4.3 times respectively.
Outlook
The economic picture in the U.S. and the strengthening of the Euro provide the
background against which a strong Irish economy with healthy public finances
will perform in 2001, and beyond. Inflation and interest rates, having peaked
in 2000, are on the way down. Ireland's infrastructural deficit, labour cost
increases and labour supply constraints provide a counter balance. The Irish
economy, following levels of extraordinary growth in the second half of the
nineties, is heading for a soft landing, with lower levels of sustainable
economic growth into the future.
The outlook in Ireland for construction output and consumer spending remains
positive, driven by economic growth and the National Development Plan. The
residential market should continue to be demand driven. The market for RMI and
DIY will continue to be buoyant, favouring Chadwicks builders merchants and
Woodie's DIY businesses.
The UK's strong public finances and sound economy in an election year, will
provide a positive backdrop to Grafton's UK operations which now account for
almost half the Group's profits. Grafton's builders and plumbers merchanting
businesses concentrate significantly on the growing RMI market. Following 29
acquisitions in the last three years, the Group will continue to acquire and
actively participate in the consolidation taking place in the market. Grafton
is now a leading regional merchant under the Buildbase and Plumbase brands,
which are well positioned for further profitable growth.
Building on its leadership position in the silo mortar market, EuroMix is well
established with architects and leading builders and will continue to grow its
business profitably.
The year 2000 marked the end of a decade of considerable achievement. Since
becoming an independent public company in 1987, the Group has diversified its
earnings base, generating 44 per cent of its operating profits in the UK while
growing earnings per share at an annualised 29 per cent from 9.4c in 1987 to
280.6c in 2000.
Results in 2000 demonstrate that building on the strength of our core
businesses while diversifying the Group's earning base geographically is a
successful strategy which has generated excellent returns for shareholders.
Ends.
March 8, 2001
For reference:
Michael Chadwick
Executive Chairman
Grafton Group plc
Telephone: (++353) (01) 216 0600
Joe Murray / Grainne O'Brien
Murray Consultants
Telephone: (++353) (01) 632 6400
Ginny Pulbrook
Citigate Dewe Rogerson
Telephone: (++44) (0207) 282 2945
This statement is also available on our web site www.graftonplc.com
Group Profit and Loss Account
For the year ended 31 December 2000
2000 1999
Euro'000 Euro'000
Turnover
Continuing operations 722,360 620,172
Acquisitions 108,096 -
_______ _______
Total turnover 830,456 620,172
Operating profit before goodwill amortisation
Continuing operations 61,142 47,443
Acquisitions 5,958 -
_______ ______
67,100 47,443
Goodwill amortisation 2,495 1,126
Operating profit 64,605 46,317
Interest payable (net) 11,825 8,155
_______ ______
Profit on ordinary activities before taxation 52,780 38,162
6,889 4,586
Taxation on profit on ordinary activities
_______ _______
Profit on ordinary activities after taxation 45,891 33,576
Dividends on ordinary shares
- paid 4,293 3,207
- proposed 6,973 5,030
11,266 8,237
Profit retained for the financial year 34,625 25,339
Earnings per share 266.1c 200.2c
Earnings per share before goodwill amortisation 280.6c 206.9c
Diluted earnings per share 261.2c 195.9c
Group Balance Sheet
As at 31 December 2000
2000 1999
Euro'000 Euro'000
Fixed assets
Intangible assets - goodwill 51,671 31,714
Tangible assets 209,580 175,847
Financial assets 18,949 19,045
______ ______
280,200 226,606
______ ______
Current assets
Stock 115,248 84,759
Debtors 158,512 125,034
Cash and short term bank deposits 79,071 67,536
_______ _______
352,831 277,329
Creditors (amounts falling due within one year) 234,763 173,246
_______ _______
Net current assets 118,068 104,083
_______ _______
Total assets less current liabilities 398,268 330,689
_______ _______
Creditors (amounts falling due after more than one year) 166,823 135,440
Provisions for liabilities and charges 14,948 13,910
______ ______
181,771 149,350
_______ _______
216,497 181,339
Capital and reserves
Share capital 8,711 8,644
Share premium account 32,982 32,424
Revaluation reserve 42,938 43,221
Profit and loss account 131,866 97,050
_______ ______
Shareholders' funds - equity 216,497 181,339
Group Cash Flow Statement
For the year ended 31 December 2000
2000 1999
Euro Euro
'000 '000
Net cash inflow from operating activities 66,392 54,115
Servicing of finance (11,527) (8,962)
Taxation (2,782) (3,273)
______ ______
52,083 41,880
______ ______
Capital expenditure and financial investment
Purchase of tangible fixed assets (43,151) (29,517)
Disposal of tangible fixed assets 6,379 8,962
(36,772) (20,555)
Purchase of financial fixed assets - (18,814)
______ ______
(36,772) (39,369)
______ ______
Acquisitions
Acquisition of subsidiary undertakings and (41,779) (48,155)
businesses
Net (debt) / cash acquired with subsidiary (3,311) 3,962
undertakings
Deferred acquisition consideration (402) -
_______ _______
(45,492) (44,193)
______ ______
Equity dividends paid (9,323) (6,746)
______ ______
Cash outflow before use of liquid resources and (39,504) (48,428)
financing
______ ______
Cash outflow from increase in liquid resources (17,027) (622)
______ ______
Financing
625 15,450
Issue of ordinary share capital
Increase in term debt 46,280 38,884
Capital element of finance leases repaid (643) (644)
Redemption of loan notes payable (324) (616)
______ ______
45,938 53,074
______ ______
(Decrease)/increase in cash in the year (10,593) 4,024
______ ______
Group Cash Flow Statement
For the year ended 31 December 2000
Reconciliation of Net Cash Flow to Movement in Net Debt
2000 1999
Euro Euro
'000 '000
(Decrease)/increase in cash in the year (10,593) 4,024
Cash inflow from increase in debt and lease (45,313) (37,624)
financing
Cash flow from management of liquid resources 17,027 622
_______ ______
Change in net debt resulting from cash flows (38,879) (32,978)
Loan notes issued on acquisition of (10,413) (72)
subsidiary undertakings
Finance leases acquired with subsidiary (598) (13)
undertakings
Translation adjustment 3,142 (15,583)
_____ ______
Movement in net debt in the year (46,748) (48,646)
Net debt at 1 January (107,360) (58,714)
_______ _______
Net debt at 31 December (154,108) (107,360)
Notes to the profit and loss account
1. Turnover
The amount of turnover by class of activity is as follows:
2000 1999
Euro'000 Euro'000
Irish merchanting and wholesaling 211,451 194,670
DIY retailing 71,589 56,813
Irish manufacturing and related activities 27,386 24,248
--------- -------
Total turnover from Irish activities 310,426 275,731
UK merchanting and other activities 520,030 344,441
--------- --------
830,456 620,172
======== =======
2. Operating Profit
2000 1999
Euro'000 Euro'000
Republic of Ireland 36,860 30,856
Great Britain and Northern Ireland 29,213 16,587
------- -------
66,073 47,443
Goodwill amortisation (2,495) (1,126)
Profit on property at Orchard Wharf 1,027 -
------- -------
64,605 46,317
======= =======
3. Reconciliation of operating profit to net cash inflow from operating
activities
2000 1999
Euro'000 Euro'000
Operating profit 64,605 46,317
Depreciation 14,008 11,475
Goodwill amortisation 2,495 1,126
Investment impairment 6 -
Profit on disposal of fixed assets (1,460) (1,592)
Increase in working capital (13,262) (3,211)
--------- --------
Net cash inflow from operating activities 66,392 54,115
======= =======
Increase in working capital 2000 1999
Euro'000 Euro'000
Stock 11,928 6,041
Debtors 19,981 20,139
Creditors (18,647) (22,969)
--------- --------
13,262 3,211
======= =======
4. Earnings per Share
Earnings per share of 266.1c (1999: 200.2c) have been calculated on
profits after taxation of Euro45,891,000 (1999: Euro33,576,000) and a
weighted average number of shares of 17,245,110 (1999 : 16,771,393).
Diluted earnings per share have been calculated on profits after taxation
of Euro45,891,000 (1999 : Euro33,576,000) and the weighted average number
of shares in issue during the year adjusted for the number of dilutive
shares deemed to have been issued under the Grafton Group Share Option
Scheme and the 1999 Grafton Group Share Scheme for no consideration.
2000 1999
Profit on ordinary activities after taxation (Euro'000) 45,891 33,576
---------- ---------
Weighted average shares outstanding during the year 17,245,110 16,771,393
Earnings per share 266.1c 200.2c
--------- ---------
Number of dilutive shares under option 722,519 643,799
Number of shares that would have been issued at fair (401,030) (272,368)
value
--------- --------
Dilutive potential ordinary shares 321,489 371,431
--------- ---------
Number of shares for calculating diluted earnings per
share 17,566,599
17,142,824
--------- ---------
Diluted earnings per share 261.2c 195.9c
========= =========
Earnings per share, adjusted for goodwill, of 280.6c (1999:206.9c) is
based on profit after taxation of Euro45,891,000 (1999: Euro33,576,000)
plus goodwill of Euro2,495,000 (1999: Euro1,126,000) and a weighted
average number of shares in issue of 17,245,110 (1999: 16,771,393)
The number of shares in issue at 31 December 2000 was 17,421,574 including
120,000 treasury shares.
5. Dividends
The Board is recommending the payment of a final dividend of 40.3c per
share to be paid, subject to shareholder approval, on 3 May 2001 to
shareholders registered at close of business on 17 April 2001.
6. Year End Exchange rates
The year end Euro / Sterling exchange rate was STG62.4p (1999: STG62.2p)
and the equivalent Irish Pound / Sterling rate was STG79.2p (1999:
STG78.9p).
Statistics
2000 1999 Change
Turnover (Euro'000) 830,456 620,172 +34%
EBITDA (Euro'000) 81,108 58,918 +38%
Operating profit (£'000) 67,100 47,443 +41%
Profit before taxation (Euro'000) 52,780 38,162 +38%
Earnings per share before goodwill amortisation 280.6c 206.9c +36%
Dividend per share 65.0c 48.0c +35%
Dividend cover (times) 4.3 4.3 -
Interest cover (times) 5.7 5.8 -
Cash flow per share 362c 275c 32%
Net assets per share 1,243c 1,049c +18%
Net debt to shareholders' funds 71% 59% -
Depreciation charge (Euro'000) 14,008 11,475 -
Goodwill amortisation (Euro'000) 2,495 1,126 -
Acquisition and investment expenditure (Euro'000) 41,779 66,969 -
Capital expenditure (Euro'000) 43,151 29,517 -
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