Final Results
Grafton Group PLC
01 March 2007
Grafton Group plc
2006 Final Results
Record Sales, Profits and Earnings
Grafton Group plc, the builders merchants and DIY Group with operations in the
UK and Ireland, announces its final results for the year ended 31 December 2006.
Financial Highlights
2006 2005 Change
Revenue €2.93 Bn €2.63 Bn UP 12%
Operating profit * €244.9 m €215.9 m UP 13%
Profit before tax # €249.4 m €192.2 m UP 30%
Property profit €38.0m €9.6m -
Basic earnings per share 91.0c 70.3c UP 29%
Adjusted earnings per share * 78.0c 67.8c UP 15%
Share purchase 18.75c 15.75c UP 19%
Cash flow per share 114.3c 91.6c UP 25%
Gearing 54% 72% -
* Before property profit and amortisation of intangibles
# Includes property profit
Operating Highlights
• Irish merchanting performed strongly in a favourable market
• Return to like for like sales and profit growth in UK merchanting market
in the second half resulted in growth in full year operating profit
• Heitons continued to out-perform generating investment returns ahead of
expectations
• Irish DIY business returned to like for like sales growth despite
increased competition in sector.
• Phase one of property disposals completed generating significant profit
and cash flow.
Commenting on the results today, Michael Chadwick, Chairman said:
'The Group's Irish business produced excellent results in a strong economy. In
the UK demand improved in the second half resulting in a higher full-year profit
contribution. Business development continued with €159.9 million committed to
bolt-on acquisitions and capital spend. Strong cash generation and property
disposals left the Group in an exceptionally healthy financial position at
year-end and well positioned to take advantage of suitable acquisition and
organic development opportunities. The Group is confident about its future
prospects of achieving above average returns for shareholders.'
Grafton Group plc reports further growth in sales, profits and earnings per
share for 2006.
Highlights
• Sales were up 12 per cent to €2.93 billion (2005: €2.63 billion).
• Operating profit* increased by 13 per cent to €244.9 million (2005: €215.9
million).
• Property profit of €38.0 million achieved during the year (2005: €9.6
million).
• Profit before tax up 30 per cent €249.4 million (2005: €192.2 million).
• Adjusted earnings per share increased by 15 per cent to 78.0 cent (2005:
67.8 cent).
• Basic earnings per share increased by 29 per cent to 91.0 cent (2005: 70.3
cent).
• Cash generated from operations and asset disposals was up 28 per cent to
€329.5 million (2005: €257.3 million).
• Strong balance sheet with shareholders funds increasing 25 per cent to
exceed €1 billion for the first time
• Gearing at eight year low while interest cover increased from 7.2 to 9
times
• Twentieth consecutive year of increased share purchase/dividend payments
* Before property profit and amortisation of intangibles
The Group's Irish business delivered excellent results against a background of a
strongly performing economy. The UK business traded in a softer market in the
first half reporting lower profit but experienced improved demand in the second
half leading to an increase in full year profit.
This is an excellent outcome for the year in view of the less favourable
merchanting market in the UK in the first half. The strength of the overall
performance is a reflection of the Group's successful strategy of broadening its
earnings base and developing strong market positions and brands in the Irish
merchanting and DIY markets and in the UK merchanting and mortar markets.
The acquisition of Heiton Group plc, the Group's largest acquisition to date, in
January 2005 provided the Irish merchanting and DIY businesses with a much
broader trading and geographic platform in a growth market in Ireland. The
results of the business for the past two years have exceeded expectations and
the Group achieved its hurdle rate of return on its original investment.
In the Republic of Ireland, continued high economic growth rates, record levels
of house construction and RMI activity together with increased consumer spending
were the key drivers of demand in the merchanting and DIY businesses. Strong
like for like sales and profit growth in the established Irish business combined
with contributions from acquisitions and new stores resulted in a substantial
advance in profit. Irish turnover increased by 16 per cent to €1.20 billion
(2005: €1.03 billion) and operating profit increased by 21 per cent to €130.4
million (2005: €107.7 million). The Irish business accounted for 41 per cent
(2005: 39 per cent) of Group sales and 53 per cent (2005: 50 per cent) of Group
operating profit.
The UK RMI market progressively weakened during 2005 and this trend continued
into the first half of 2006 before the market staged a gradual recovery in the
second half. The results of the UK business moved generally in line with market
conditions with operating profit increasing strongly in the second half as
trading in the RMI market gathered momentum. UK turnover increased by 9 per cent
to €1.73 billion (2005: €1.60 billion) and UK operating profit increased by 6
per cent to €114.6 million (2005: €108.2 million).
Development
The Group continued to actively pursue its long term development strategy based
on growth through acquisitions and branch development. The spend on acquisitions
was €87.1 million including deferred acquisition consideration relating to prior
year transactions of €11.9 million. This was lower than the record expenditure
of €477.7 million in 2005 which included €359 million to acquire the remaining
71 per cent of the shares in Heiton Group plc. Capital expenditure on
development projects increased to €72.8 million (2005: €56.3 million) and the
total spend on acquisitions and development capital expenditure was €159.9
million.
Sixteen bolt-on merchanting acquisitions were completed in the UK continuing the
steady flow of transactions which has over time enabled the Group to build a
strong position in the merchanting market. These businesses trade from 27
locations with annual sales of over €120 million. The businesses acquired were
well established operations trading from locations which expand and compliment
coverage of the UK merchanting market.
Organic growth initiatives have traditionally been an important element of the
Group's development strategy and the pace of activity in 2006 was similar to
2005 with the completion of 18 projects. In the UK, twelve merchanting branches
were opened and one new dry mortar plant. In Ireland, three Woodie's DIY
stores, one builders merchanting branch and one In House at the Panelling store
were opened.
The addition of the 45 locations, referred to above, to the existing branch
network increases the scale and market presence of the Group as well as
providing a good basis for further sales and profit improvement in 2007 and
beyond.
Once again in 2006, the trading operations were highly cash generative and the
Group ended the year in an exceptionally strong financial position with
shareholders funds exceeding €1 billion for the first time. Group gearing of 54
per cent at the year end was at its lowest level since 1998. This leaves the
Group with the financial strength to take advantage of suitable acquisition and
organic development opportunities which present a good strategic fit and are
based on the achievement of acceptable long term returns for shareholders.
Share Purchase
The Company purchased one A ordinary share per Grafton Unit for a cash
consideration of 8.25 cent which was paid on 18 October 2006. The board
approved the purchase of a further A ordinary share per Grafton Unit for a cash
consideration of 10.50 cent (2006: 8.50 cent) payable on 28 March 2007.
The total share purchase payments to shareholders for 2006 amount to 18.75 cent
per Grafton Unit. This is an increase of 19 per cent on total share purchase
payments for 2005 of 15.75 cent per Grafton Unit. This is the twentieth
consecutive year for the Group to increase its share purchase / dividend payment
to shareholders and is achieved while maintaining a high level of cover. The
increase over last year reflects the strong financial position of the Group and
the Board's confidence in its future prospects.
Board
As previously announced, the Board appointed Mr. Leo Martin as Chief Operating
Officer with overall responsibility for the Group's Irish and UK builders and
plumbers merchanting operations with effect from 12 September 2006. The Board
also appointed Mr. Roderick Ryan and Mr. Peter Wood as Non-Executive Directors
with effect from 15 March 2006 and 1 July 2006 respectively.
Operations Review - Republic of Ireland
Irish turnover increased by 16 per cent to €1.20 billion (2005: €1.03 billion).
Operating profit increased by 21 per cent to €130.4 million (2005: €107.7
million). The operating profit margin increased to 10.9 per cent (2005: 10.4 per
cent).
The Irish businesses traded at record levels of activity against a positive
economic background. The economy grew broadly in line with its long run
potential growth rate continuing a period of expansion dating back to the mid
1990's which has been exceptional by European standards. Consumer spending was
a key contributor to growth sustained by rising real incomes, lower taxes,
employment growth and significant immigration.
Activity in the construction sector was strong throughout 2006. Investment in
the housing market continued at a high level with completions reaching 88,200
units. The rate of growth in house prices eased in the second half in response
to rising interest rates and increased supply.
Non-residential construction also enjoyed very good demand during 2006. In
particular, the housing repair, maintenance and improvement sector was very
busy. Private and public sector non-residential construction including civil
and infrastructural engineering projects also delivered strong volume growth.
Irish Merchanting
Sales increased by 18 per cent to €816.6 million (2005: €690.5). The Irish
merchanting business delivered another year of good growth in sales and
operating profit with the benefit of a strongly performing economy driving
demand in the residential, new build and RMI markets. These conditions
supported continued high levels of demand in the merchanting sector.
The performance of Heitons since acquisition in January 2005 has exceeded
expectations and the Group achieved its hurdle rate of return on this investment
in 2006.
The overall increase in sales and profitability of the division resulted from
good organic growth, acquisition contributions and improved underlying operating
profit due to purchasing benefits and tight control of overheads.
The sixty branch national merchanting chain trading primarily under the
Chadwicks and Heiton Buckley brands had healthy volume growth in the housing,
RMI and civils sectors. Like for like merchanting sales increased by 8 per cent
although the pricing and trading environment remained competitive.
Chadwicks had an excellent year creating new records for sales and profits. The
business benefited from an increased focus on sales growth in the plumbing and
heating product category in its specialist Plumb Centre and general merchanting
branches. Trading in the Naas, Co. Kildare branch benefited from a major
refurbishment and expansion programme.
The Heiton Buckley business out-performed expectations due to positive market
conditions and increased profitability derived from purchasing synergies, a
rigorous focus on cost efficiencies, changes in product mix and greater focus on
growth in attractive product segments. The business also made progress on the
development front relocating the Tralee branch to an out of town purpose built
facility and opening a new branch in Mullingar. Trading indications to date
have been very encouraging at both locations.
Cork Builders Providers had a very good year of sales and profit growth with the
benefit of a buoyant new build and RMI market in Cork City and also due to
expansion of its civils and drainage division. Telfords increased sales and
profits in a favourable Midlands market supported by significant investment in
the Portlaoise branch.
The Davies and Garveys businesses, acquired in December 2005, traded ahead of
pre-acquisition expectations. Davies, a specialist plumbing, heating and
drainage merchant benefited from its exposure to growth in the non-residential
and infrastructure markets. The Garvey's general merchanting business reported
solid sales growth in its Midlands based RMI market and also benefited from
Group purchasing synergies.
The Heiton Steel stockholding business performed satisfactorily despite a
difficult pricing environment. The benefit of good volume growth in a positive
market was offset by lower prices and greater competition in the cutting and
bending market.
Sam Hire, the leading player in the small plant and tool hire market, improved
market coverage with the opening of branches in Dublin and Mullingar.
Irish Retailing
Sales increased by 14 per cent to €311.7 million (2005: €272.6 million). The
Irish retailing business, trading under the Woodie's DIY, Atlantic Homecare and
In House at the Panelling Centre brands, had a very good year reporting
increased sales and operating profit and an improvement in the operating margin.
This very positive outcome was achieved despite tougher competition due to a
doubling of capacity in the sector over the past three years and higher property
costs.
The business traded against a background of strong volume growth in consumer
spending continuing the trend established in 2005. This was sustained by growth
in employment and earnings and the impact of maturing SSIA accounts. Consumer
spending in the DIY sector was also supported by an increase in the housing
stock, rising house prices and equity releases.
Increased profitability came from a good performance in the established stores
and contributions from Woodie's store openings in 2005 and 2006. Like for like
sales in the DIY stores were on an improving trend as the year developed and
showed low single digit gains for the year. Like for like sales compared even
more favourably with the 2005 performance when account is taken of the movement
of some business to new Woodie's stores where catchment areas overlap.
The Woodie's DIY brand has a clear leadership position in the Irish DIY market
where it currently trades from 25 stores. The store network was expanded
further during 2006 with the opening of new stores in Castlebar, Co. Mayo and
Navan, Co. Meath in the first half and in Nenagh, Co. Tipperary in the second
half. Store openings in 2005 in Naas, Co. Kildare, Carrickmines, South Dublin
and Drogheda, Co. Louth together with the relocated Cork City and Bray, Co.
Wicklow stores contributed increased profitability in 2006. The 2005 and 2006
store openings and relocations exceeded trading expectations.
The sixteen store Atlantic Homecare DIY business successfully increased profit
through improved trading from its enhanced ranges and targeted promotions.
The five store In House at the Panelling Centre business which markets a range
of high quality kitchen and bedroom panelling products to trade and retail
customers, achieved excellent sales and profit growth due to good market demand
in its four established stores boosted by strong consumer spending, significant
top up and house mover mortgage activity and the impact of maturing SSIA
accounts. A fifth branch was successfully opened in Galway and further
expansion of the format is planned.
Irish Manufacturing
CPI's EuroMix division increased mortar volumes supplied into a strong
residential and commercial construction market in the greater Dublin area and
also expanded sales volumes of its value added product range.
Wrights, a manufacturer of windows and external doors, commissioned a new timber
window manufacturing plant prior to the year end to meet a significant increase
in demand.
Operations Review United Kingdom
UK sales increased by 9 per cent to €1.73 billion (2005: €1.60 billion) and
operating profit increased by 6 per cent to €114.6 million (2005: €108.2
million). The UK operating margin declined to 6.6 per cent from the 6.8 per
cent recorded in 2005.
The UK economy continued to provide a favourable background for development of
the Group's merchanting and mortar businesses. Growth slowed to below trend in
2005 against the backdrop of interest rate increases. The economy strengthened
in 2006 and growth returned to its long term trend rate. UK GDP has now expanded
in 58 consecutive quarters, the longest ongoing expansion amongst all OECD
countries. So far this decade, the UK has successfully achieved lower inflation
and higher growth than most of its major competitors.
The UK housing market showed a sustained recovery during 2006 with rising
property transactions and mortgage approvals and strong growth in house price
inflation. The weaker housing market and slow down in consumer spending that
occurred in 2005 caused the RMI market to progressively weaken. This weakness
continued into the first half of 2006, although market conditions improved in
the second quarter and the pickup in activity was sustained over the second
half. Against this background, like for like sales were down 1.7 per cent in the
first half but grew at a similar rate in the second and were marginally ahead
for the year.
Operating profit declined by 8 per cent in the first half due to the combined
effect of a weaker market and a demanding comparative result but increased by 20
per cent in the second half in a recovering market. The stronger trading
performance in the second half enabled the business to achieve operating profit
growth of 6 per cent for the year. The operating profit margin was 7.2 per cent
in the second half, up from 6.7 per cent in the comparative half year.
UK Builders Merchanting
Buildbase had a satisfactory year reporting similar profits. Sales increased due
to acquisitions and new branch openings in 2005 and 2006.
Heitons UK business and the Group's heavyside merchanting branches were
successfully integrated into a newly formed Buildbase Civils and Lintels
division which was established to more effectively focus on the civil
engineering and ground works contracting market. Five bolt-on acquisitions
completed in 2005 were integrated into the Buildbase branch network. Four
branches at Erith, Greater London; Gloucester, Gloucestershire; Stevenage,
Hertfordshire and Haverhill, Suffolk were relocated to modern purpose built
facilities and major refurbishment was undertaken at the Rotherham, South
Yorkshire and Sandy, Bedfordshire branches. A number of smaller branch
redevelopment projects were also completed.
Buildbase acquired four businesses trading from eleven branches including
Fleming Holdings, the leading independent builders and timber merchant trading
from eight branches in Scotland. A second Buildbase branch was opened in Oxford
and since the year end two new branches were opened at Melksham, Wiltshire and
Stowmarket, Suffolk.
Jacksons, a long established regional merchanting business with a leadership
position in the East Midlands market, grew profits despite subdued trading
conditions in an increasingly competitive market. Profit growth was attributed
to improved sourcing arrangements and tight control of costs in all areas. The
business also expanded its position in the East Midlands market completing three
bolt-on acquisitions trading from five locations.
Macnaughton Blair, Northern Ireland's leading merchanting business, achieved
another year of strong sales and profit growth due to an improvement in the
underlying business and the impact of acquisitions. The business was well
placed to benefit from an improving local economy and exposure to a housing
market which outperformed all other regions of the UK in 2006. The Houtman and
MFBP acquisitions completed in 2005 achieved early success reporting profits
well ahead of pre-acquisition levels. Two small acquisitions undertaken in the
second half had a very limited impact on the results but give the business an
initial presence and platform for future growth in Larne and Lisburn, Co.
Antrim. Macnaughton Blair traded from sixteen branches at the year end.
Selco, a trade-only warehouse formula combining traditional merchanting with a
modern self-service environment, is focused on supplying trades people involved
in small RMI projects. Five new stores were opened in 2006 increasing the
network to seventeen. The new stores are located in London, Manchester and
Reading.
UK Plumbers Merchanting
Plumbase is the UK's fourth largest plumbers merchanting chain with a network of
179 branches concentrated in the South East, West Country, Midlands, East Anglia
and Scotland.
Good sales and operating profit growth was achieved through a significant
contribution from the seven businesses acquired during 2005 and organic growth.
Underlying profit increased against an improving trading background as the year
developed and due to measures taken to reduce overheads.
Market coverage by Plumbase improved with the acquisition of four businesses
trading from six branches and the opening of six new branches.
UK Mortar
EuroMix manufactures a range of mortars for use in block and brick laying. The
business supplies key residential, commercial and public sector construction
projects from its network of nine plants in England and Scotland. EuroMix has a
clear leadership position in the UK dry mortar market and has established a
significant reputation as a preferred supplier due to the quality of its range
of mortars and customer support.
EuroMix strengthened its market position with good sales and volume growth.
Operating profit was lower as the business was unable to recover energy related
raw materials and distribution price increases due to more intense competition
in the sector. Significant capacity has come on stream since Grafton pioneered
the use of on-site dry mortar technology in the late 1990's and the market is
now moving towards a more mature stage in its development. The Bristol plant
which opened in mid 2005 traded in line with expectations and full coverage of
the market in England was achieved in July with the opening of the ninth plant
near Leeds.
Finance
The merchanting, DIY and manufacturing businesses yet again produced strong
profits and cash flow and the Group ended the year in a very healthy financial
position. The Group operating profit margin increased to 8.3 per cent (2005: 8.2
per cent). Cash flow generated from operations and asset disposals amounted to
€329.5 million (2005: €257.3 million) substantially outperforming the previous
year.
Control of working capital continued to be a high priority across the Group and
the related investment moved in line with the increasing scale of the Group's
operations.
Shareholders' funds increased by €200.5 million (25 per cent), exceeding €1
billion for the first time. The increase arose from the retention of after tax
profit net of the €39.9 million returned to shareholders through the purchase of
two A ordinary shares per Grafton Unit.
The total cash outflow on acquisitions and capital projects was €199.6 million
(2005: €571.5 million). Sixteen bolt on acquisitions involved an investment of
€75.2 million (2005: €470.9 million) in the UK merchanting business. Capital
expenditure increased to €124.4 million (2005: €100.6 million) reflecting
routine replacement expenditure of €51.6 million and investment of €72.8 million
in the branch network across the Group including the opening of 17 new branch
locations and a mortar plant together with initiatives intended to meet customer
demand and support the continued profitable development of Group locations in
the UK and Ireland.
Net borrowings at 31 December 2006 were €550.9 million (31 December 2005: €584.2
million) equivalent to a gearing ratio of 54 per cent (31 December 2005: 72 per
cent). Interest cover was 9.0 times (2005: 7.2 times)
Pension administration was streamlined with the merger of eight defined benefit
schemes in both Ireland and the UK. In association with these mergers, a
special contribution of €17.5 million (€14.1 net of tax) was made to the Group's
defined benefit schemes. The deficit (after deferred tax) on the Group's defined
benefit pension schemes reduced to €27.3 million (31 December 2005: €48.4
million). On an ongoing IFRS basis, the overall assets in the Group's defined
benefit pension schemes represent 87 per cent of accrued liabilities (31
December 2005: 75 per cent). This improvement is a result of the special
contribution, good investment returns achieved during the year and an increase
in the discount rates used to value liabilities which are based on very volatile
AA Corporate Bond Rates. The positive impact of these factors was partially
offset by an allowance for increased life expectancy.
This was the Group's sixth consecutive year to report property profits.
Significant value and cash flow was realised from the disposal of four
properties in Ireland and four in the UK. These included three properties
acquired with the Heiton Group including the Atlantic Homecare property in
Stillorgan, Co. Dublin. The Group also realised part of its joint venture
development of Blackwater Retail Park in Navan, Co. Meath where Woodie's DIY is
anchor tenant. The profit on disposal of properties was €38.0 million. Total
proceeds receivable from all asset disposals amounted to €77.7 million.
Outlook
Trading since the start of the year in the seasonally quieter winter months has
been satisfactory
In Ireland, growth in the economy is forecast to remain strong in 2007.
Expansion should be underpinned by increased consumer spending supported by
continued growth in employment and earnings. Disposable incomes will also be
boosted by the impact of maturing SSIA accounts and lower taxes.
Some softening from current record levels of house building is generally
expected in 2007 as activity in the sector moderates over time to more
sustainable long term levels. A healthy economy, favourable demographics and a
more modest pace of growth in house prices should continue to support good
underlying demand.
The repair, maintenance and home improvement market in Ireland is expected to
remain buoyant against a background of strong consumer spending. The strong
economy has boosted activity in the commercial and industrial new build sector
where investment is expected to remain robust. The National Development Plan
should continue to underpin a high level of capital investment in infrastructure
and other public sector projects.
Against this very positive economic background, the Heiton Buckley and Chadwicks
merchanting businesses should continue to benefit from anticipated stable demand
in the residential construction market and growth in the RMI market. High
levels of consumer spending and a slowdown in new capacity in the Irish DIY
market should enable the Woodie's DIY and Atlantic Homecare businesses to make
further progress and also to benefit from last years store openings in
Castlebar, Navan and Nenagh.
In the UK, the economy is forecast to grow at around trend rate in 2007. The
improvement in the RMI market over the second half of 2006 is expected to
continue with the benefit of a strong housing market. The level of mortgage
approvals and housing transactions, lead indicators of RMI demand, is also
encouraging. The fundamentals of the RMI market are firm, supported by a
stable economy, solid underlying demand, consumer confidence and employment
growth. These factors should sustain good levels of RMI activity although the
recent round of interest rate increases may lead to some moderation in demand.
The focus of the UK merchanting business will be on the continued integration of
acquisitions made in 2006 and on achieving scale related synergies in the
overall business. The Group also expects to benefit from its relatively
healthy pipeline of potential acquisition and organic growth opportunities.
Competitive conditions in the UK mortar market are expected to continue in a
growing market as new mortar plants mature.
The Group is confident about its future prospects and continues to pursue a
consistent strategy, based on the achievement of above average long-term
returns, which has rewarded shareholders over the past two decades.
Analysts' Conference Call
Grafton will host an analyst call today 1 March 2007 at 08.30 (GMT). A dial-in
facility will be available for the call as follows:
Ireland: +353 1 439 0432
UK: +44 207 769 6432
International: +353 1 439 0432
A replay facility will be available on our website www.graftonplc.com.
Ends. Thursday 1st March 2007
For further information please contact:
Grafton Group plc + 353 1 216 0600 Murray Consultants + 353 1 498 0300
Michael Chadwick, Executive Chairman Joe Murray
Colm O Nuallain, Finance Director
Citigate Dewe Rogerson + 44 207 282 2945
Ginny Pulbrook
A copy of this statement is also available on our website www.graftonplc.com
Grafton Group plc
Group Income Statement
For the year ended 31 December 2006
Twelve months Twelve months
to 31 Dec 2006 to 31 Dec 2005
(Audited) (Audited)
€'000 €'000
Revenue 2,933,937 2,629,464
Operating costs (2,691,206) (2,415,694)
Operating profit before property profit 242,731 213,770
Property profit 37,989 9,640
Operating profit 280,720 223,410
Finance expense (52,886) (48,803)
Finance income 21,522 17,574
Profit before tax 249,356 192,181
Income tax expense (32,418) (26,102)
Profit after tax for the financial year 216,938 166,079
Profit attributable to:
Equity holders of the Company 216,938 166,079
Basic earnings per share 91.03c 70.26c
Adjusted earnings per share 77.97c 67.80c
Diluted earnings per share 89.34c 68.80c
Group Statement of Recognised Income and Expense
For the year ended 31 December 2006
2006 2005
€'000 €'000
Items of income and expense recognised directly within equity:
Currency translation effects - on foreign currency net investments 8,584 7,999
- on foreign currency borrowings (396) (811)
Actuarial gain / (loss) on Group defined benefit pension schemes 4,939 (8,946)
Deferred tax (liability) / asset on Group defined benefit pension (44) 1,944
schemes
Fair value movement on cash flow hedges:
- Fair value gains/(losses) 1,875 (761)
- Included in finance costs (353) (571)
Deferred tax on cash flow hedge (191) 167
Net income / (expense) recognised directly in equity 14,414 (979)
Profit after tax for the financial year 216,938 166,079
Total recognised income and expense for the financial year 231,352 165,100
Attributable to:
Equity holders of the Company 231,352 165,100
Movement on Group Retained Earnings 2006 2005
€'000 €'000
At 1 January 475,380 347,044
Retained profit for the financial year 216,938 166,079
Purchase of A ordinary shares (39,920) (33,751)
Actuarial gain / (loss) on pensions (net of tax) 4,895 (7,002)
Deferred tax on share based payments 1,832 157
Transfer from revaluation reserve 3,601 2,853
At 31 December 662,726 475,380
Group Statement of Changes in Equity 2006 2005
€'000 €'000
At beginning of period 813,811 550,962
Elimination of fair value reserve arising on acquisition of Heiton - (49,535)
Group plc
Issue of Grafton Units (net of issue expenses) 4,000 178,658
Adjustment for share based payments expense 3,264 2,220
Deferred tax on share based payments 1,832 157
Purchase of A ordinary shares (39,920) (33,751)
Total recognised income and expense for the financial year 231,352 165,100
Closing shareholders' funds - equity 1,014,339 813,811
Grafton Group plc
Group Balance Sheet As At 31 December 2006
2006 2005
(Audited) (Audited)
€'000 €'000
ASSETS
Non-current assets
Goodwill 582,861 532,323
Intangible assets 13,307 15,519
Property, plant and equipment 686,165 623,228
Deferred tax assets 34,865 25,980
Financial assets 414 256
Total non-current assets 1,317,612 1,197,306
Current assets
Inventories 390,400 356,647
Trade and other receivables 542,110 499,308
Derivative and other financial instruments 1,847 5,708
Cash and cash equivalents 231,519 334,023
Total current assets 1,165,876 1,195,686
Total assets 2,483,488 2,392,992
EQUITY
Capital and reserves attributable to the Company's equity holders
Equity share capital 12,082 12,037
Share premium account 284,945 281,038
Capital redemption reserve 322 274
Revaluation reserve 32,973 36,574
Other reserve - shares to be issued 6,455 3,191
Cash flow hedge reserve 1,616 285
Foreign currency translation reserve 13,220 5,032
Retained earnings 662,726 475,380
Total equity 1,014,339 813,811
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 671,617 713,712
Provisions 4,468 500
Retirement benefit obligations 34,163 59,032
Derivative financial instruments 22,126 -
Deferred tax liabilities 49,408 42,932
Total non-current liabilities 781,782 816,176
Current liabilities
Interest-bearing loans and borrowings 88,585 209,278
Trade and other payables 521,265 487,027
Current income tax liabilities 52,393 50,610
Derivative financial instruments 1,898 923
Provisions 23,226 15,167
Total current liabilities 687,367 763,005
Total liabilities 1,469,149 1,579,181
Total equity and liabilities 2,483,488 2,392,992
Grafton Group plc
Group Cash Flow Statement For the year ended 31 December 2006
2006 2005
€'000 €'000
Profit before taxation 249,356 192,181
Finance income (21,522) (17,574)
Finance expense 52,886 48,803
Operating profit 280,720 223,410
Depreciation 53,163 48,248
Intangible amortisation and goodwill write - off 2,455 2,176
Share based payments charge 3,264 2,220
Property profit (37,989) (9,640)
Profit on sale of plant and equipment (3,401) (2,564)
Contributions to pension schemes in excess of IAS 19 charge (20,249) (10,888)
Increase in working capital (26,111) (28,485)
Cash generated from operations 251,852 224,477
Interest paid (43,224) (39,233)
Income taxes paid (14,594) (15,226)
Cash flows from operating activities 194,034 170,018
Investing activities
Inflows
Proceeds from sale of property, plant and equipment 77,664 32,793
Interest received 12,216 7,738
89,880 40,531
Outflows
Acquisition of subsidiary undertakings and businesses (70,621) (395,451)
Net cash acquired with subsidiary undertakings 777 22,897
Deferred acquisition consideration (11,958) (6,844)
Purchase of property, plant and equipment (124,401) (100,559)
Purchase of financial assets (90)
-
(206,293) (479,957)
Cash flows from investing activities (116,413) (439,426)
Financing activities
Inflows
Proceeds from the issue of share capital 4,000 178,658
Proceeds from long term borrowings - 373,078
4,000 551,736
Outflows
Repayment of long term borrowings (117,170) (35,673)
Purchase of A ordinary shares (39,920) (33,751)
Payment of finance lease liabilities (1,850) (2,061)
Redemption of loan notes payable (18,087) (25,237)
(177,027) (96,722)
Cash flows from financing activities (173,027) 455,014
Net (decrease)/increase in cash and cash equivalents (95,406) 185,606
Cash and cash equivalents at 1 January 291,844 105,822
Effect of exchange rate fluctuations on cash held 5,326 416
Cash and cash equivalents at 31 December 201,764 291,844
1. Revenue and Operating Profit by Geographic Segment
The amount of revenue by geographic segment is as follows:
Twelve months Twelve months
to 31 Dec 2005 to 31 Dec 2006
€'000 €'000
Revenue
Republic of Ireland 1,200,639 1,032,899
United Kingdom 1,733,298 1,596,565
2,933,937 2,629,464
Operating profit before property profit and intangible amortisation
Ireland 130,371 107,702
United Kingdom 114,572 108,244
244,943 215,946
Intangible amortisation - Republic of Ireland (2,212) (2,176)
242,731 213,770
Operating profit before property profit
Ireland 128,159 105,526
United Kingdom 114,572 108,244
242,731 213,770
Property profit
Ireland 30,056 7,963
United Kingdom 7,933 1,677
37,989 9,640
Operating profit
Ireland 158,215 113,489
United Kingdom 122,505 109,921
280,720 223,410
Finance costs (net) (31,364) (31,229)
Profit before tax 249,356 192,181
2. Analysis of Revenue by Business Segment
Twelve months Twelve months
to 31 Dec 2005 to 31 Dec 2006
€'000 €'000
Revenue
UK merchanting 1,664,856 1,533,700
Irish merchanting 816,602 690,549
Irish DIY 311,680 272,589
Irish and UK manufacturing 140,799 132,626
2,933,937 2,629,464
3. Reconciliation of Net Cash Flow to Movement in Net Debt
2006 2005
For the year ended 31 December €'000 €'000
Net (decrease)/increase in cash and cash equivalents (95,406) 185,606
Cashflow from decrease/(increase) in debt and lease financing 141,317 (310,107)
Change in net debt resulting from cash flows 45,911 (124,501)
Loan notes issued on acquisition of subsidiary undertakings (1,653) (867)
Finance leases acquired with subsidiary undertakings (95) (7,934)
Bank loans and loan notes acquired with subsidiary undertakings (3,579) (89,519)
Translation adjustment (8,784) (12,457)
Net movement in derivative financial instruments 1,522 (1,332)
Movement in net debt in the year 33,322 (236,610)
Net debt at 1 January (584,182) (347,572)
Net debt at 31 December (550,860) (584,182)
4. Earnings per Share
The computation of basic and diluted earnings per share is set 2006 2005
out below: €'000 €'000
Profit after tax for the financial year 216,938 166,079
Numerator for basic and diluted earnings per share 216,938 166,079
Property profit after tax (33,051) (7,731)
Intangible amortisation after tax 1,935 1,904
Numerator for adjusted earnings per share 185,822 160,252
Denominator for basic and adjusted earnings per share:
Weighted average number of Grafton Units in issue 238,324,290 236,371,547
Effect of potential dilutive Grafton Units 4,505,408 5,023,349
Denominator for diluted earnings per share 242,829,698 241,394,896
Adjusted earnings per share (cent)
- Basic 77.97 67.80
Earnings per share (cent)
- Basic 91.03 70.26
- Diluted 89.34 68.80
5. Share Purchase
The Board has approved the purchase of one A ordinary share per Grafton Unit for
a cash consideration of 10.50 cent. The purchase of the A ordinary share will
take effect in respect of Grafton Units on the register at close of business 9
March 2007 (record date) and the cash consideration will be paid on 28 March
2007.
6. Exchange Rates
The results and cash flows of the Group's United Kingdom subsidiaries have been
translated into Euro using the average exchange rate for the year. The related
balance sheets of the Group's United Kingdom subsidiaries at 31 December 2006
and 31 December 2005 have been translated at the rate of exchange ruling at the
balance sheet date.
The average Euro / Sterling rate of exchange for the year ended 31 December 2006
was Stg68.17p (year ended 31 December 2005: Stg68.38p). The Euro / Sterling
exchange rate at 31 December 2006 was Stg67.15 (31 December 2005: Stg68.53p).
Grafton Group plc
Financial Overview 2006
2006 2005 Change
Revenue (€ million) 2,933.9 2,629.5 12%
EBITDA (€ million) 336.3 273.8 23%
Operating profit before amortisation of intangibles and property
profit (€ million) 244.9 215.9 13%
Profit before taxation (€ million) 249.4 192.2 30%
EPS - basic (cent) 91.0 70.3 29%
EPS before amortisation of intangibles and property profit 78.0 67.8 15%
(cent)
Share purchase (cent) 18.75 15.75 19%
Share purchase (times) 4.2 4.3 -
Interest cover (times) 9.0 7.2 -
Cash flow per share 114.3 91.6c 25%
Net assets per share (cent) 424.0 342.8 24%
Net debt to shareholders' funds 54% 72%
Depreciation charge (€ million) 53.2 48.2
Intangible amortisation (€ million) 2.2 2.2
Acquisition and investment expenditure (€ million) 87.1 477.7
Capital expenditure (€ million) 124.4 100.6
This information is provided by RNS
The company news service from the London Stock Exchange
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