Interim Results

Grafton Group PLC 31 August 2000 Grafton Group plc Interim Results for the Six Months Ended 30 June 2000 Highlights - Pre-tax Profits increase by 34% to EUR20.6 m - Adjusted EPS up 32% to 111.5c - Interim Dividend increased by 32% to 24.7c - EBITDA grew by 37 per cent to EUR34.1 m. - UK contributes 45% of Operating Profits - Irish Operating Profit up 19% to EUR15.1 m - UK Operating Profit up 72% to EUR12.2 m - Eight acquisitions in first half - EUR24.9 million London site sale agreed, August 2000. Commenting on the results, Michael Chadwick, Executive Chairman said: 'We are very pleased at the progress we have made in building a balanced and diversified earnings base between the Irish and UK economies. We expect to see further strong growth for our businesses in both economies in the second half of the year. We continue to examine opportunities in the UK market and expect to benefit further from acquisitions and synergies in our operations there. In Ireland, we are well placed to benefit from strong brands and market leadership positions in a favourable construction market.' Grafton Group Plc Announcement of Interim Results Six Months Ended 30 June 2000 Grafton Group plc announces an increase in Pre-tax Profits of 34 per cent to EUR20.6 million for the half year ended June 30th 2000 compared to EUR15.4m in the first half of 1999. EPS was 32 per cent higher at 111.5c, before goodwill amortisation, against 84.4c previously. EBITDA increased to EUR34.1m, up 37 per cent on last year's interim EUR24.9m. An interim dividend of 24.7c has been declared, a rise of 32 per cent on the 1999 payment of 18.7c. Turnover for the half year grew by 37 per cent to EUR391.9m (1999: EUR285.1m). The Group's ongoing acquisition programme and the synergies of integration produced a 55 per cent growth in UK turnover to EUR238.5m and a 72 per cent increase in Operating Profits and improved margins in the UK market. UK Operating Profit at EUR12.2m accounted for 45 per cent of Group Operating Profits before goodwill, compared with 36 per cent in 1999, making a major contribution towards the Group objective of achieving a balanced spread of earnings through diversified profitable growth in both the UK and Ireland. A further eight acquisitions in the first half added 46 new trading locations to the Group's UK builders and plumbers merchanting businesses. Operating from more than 150 locations, the Group's Buildbase, Plumbase and other outlets have firmly established Grafton as a leading regional player in the UK, principally in the South and Midlands. Grafton is now ranked fourth overall in the national UK market for building and plumbing supplies and is the market leader in silo mortar under the EuroMix brand. The Group's leadership position in the Irish market supported continued strong growth in its builders merchanting and wholesaling, DIY retailing and manufacturing operations. Irish turnover grew by 17 per cent to EUR153.4m while operating profits were 19 per cent higher at EUR15.1m. In a very competitive environment, Grafton's strong market positions enabled it to capitalise on favourable trading conditions in a growing economy. The Group's improved profitability and ongoing strong cash flow facilitated the investment of a further EUR53m in acquisitions and ?17.6m in capital expenditure projects during the period under review. Shareholders funds at June 30th were EUR195.3m and net debt amounted to EUR156.8m or 80 per cent gearing. Interest cover was 4.9 times. Review of Operations Six Months to Six Months to Percentage 30 June 00 30 June 99 Improvement (unaudited) (unaudited) EUR millions EUR millions Turnover Republic of 153.4 131.3 17% Ireland Great Britain & 238.5 153.8 55% Northern Ireland --------- --------- --------- Total 391.9 285.1 37% ========= ========= ========= Operating profit Republic of 15.1 12.7 19% Ireland Great Britain & 12.2 7.1 72% Nth. Ireland --------- --------- --------- Total 27.3 19.8 38% ========= ========= ========= Operations - Republic of Ireland The Group's Irish operations continue to capitalise on strong market positions in a very competitive environment, and to take advantage of favourable trading conditions in a growing economy. Irish turnover grew by 17 per cent to EUR153.4m. The Group achieved growth of 19 per cent in Irish operating profit to EUR15.1m. Operating margins were 9.8 per cent compared to 9.7 per cent in 1999. Irish merchanting and wholesaling turnover grew by 15 per cent to EUR105.9m. Chadwicks consolidated its market leadership position with organic development and strong like-for-like sales growth of 14 per cent. Hire Centres performed well, and the Powered Access Division continued to invest in new equipment. Irish manufacturing turnover enjoyed strong growth of 19 per cent to EUR14.0m. CPI, the Group's concrete operation, servicing the Leinster region, performed well, with blocks, concrete and EuroMix mortar achieving strong growth at the half year. MFP, the Group's plastic manufacturing operation, increased its volumes significantly in a buoyant market. MFP continues to invest in new products and technology, and performed well in a market made difficult by changing raw material costs. Woodie's DIY, the Group's retailing flagship, strengthened its market leadership position with excellent turnover growth of 23 per cent to EUR33.5m. Woodie's opened new stores in Bray in January and in Athlone in June, increasing its network nationally to 12. Like-for-like turnover grew by 19 per cent. Operations - United Kingdom Now firmly established as a leading regional player and ranked fourth in the UK Merchanting market for building and plumbing supplies, and the leader in the fast-growing market for silo mortar, Grafton's UK operations achieved turnover growth of 55 per cent to EUR238.5m in the first half, with 11 per cent growth in like-for-like sales. UK operating profit, before goodwill amortisation, grew by 72 per cent to EUR12.2m, with the operating margin increasing to 5.1 per cent from 4.6 per cent. UK operations now account for 45 per cent of the Group's operating profit, up from 36 per cent. The Group acquired 8 UK builders and plumbers merchanting businesses comprising 46 additional trading locations in the first half at a cumulative cost of EUR53m, and now trades from over 150 UK locations, principally in the South and Midlands. The phased integration of acquired businesses continues to progress satisfactorily and all divisions improved profitability. The Group's UK Builders Merchanting business grew its turnover with strong like-for-like sales growth. Buildbase consolidated its market position with a further 4 acquisitions. Continuing investment in acquired businesses, together with the benefits of improved Group buying resulted in improved operating margins. The Group's Northern Ireland builders merchanting business traded satisfactorily. Plumbase, more than doubled its annualised turnover with the acquisitions of E. J. Thompson & Company in the Southwest in February, and Essex Heating Supplies Ltd., in East Anglia in May. Four greenfield branches were also opened. With 84 branches, Plumbase is now established as the largest regional plumbers merchant in the UK. Grafton's UK based silo mortar business traded strongly with significant increases in sales. The recently opened plant in Beaconsfield, west of London, performed ahead of expectations. Given the continued success of the EuroMix silo mortar business in the UK, the Group is constructing two further plants in the Manchester and Birmingham areas. Finance Improving profitability and strong cash flows continue to support the Group's expansion organically and by acquisition both in Ireland and the UK. The Group's acquisition and capital expenditure programme advanced with a further EUR53m investment in 8 acquisitions and EUR17.6m in capital expenditure projects. The principal acquisitions in the first half which between them cost EUR41m were the two plumbers merchanting businesses, E. J. Thompson & Company and Essex Heating Supplies Ltd. The Group continues to invest in organic expansion of existing operations. The principal investments during the period related to the twelfth new Woodie's store in Athlone, and the additional EuroMix dry mortar plants. EBITDA increased to EUR34.1m for the six months, up 37 per cent on the EUR24.9m in the same period in 1999. Goodwill amortisation charges arising from acquisitions increased to EUR1.1m for the period (1999, EUR415,000) and Group depreciation charges rose to EUR6.9m for the six months up from EUR5.1m in 1999. Shareholders' funds at the 30 June were EUR195.3m and net debt amounted to EUR156.8m or 80 per cent gearing (1999: 54 per cent). Interest cover was 4.9 times. Terms for the sale of Orchard Wharf, a surplus site on 3.3 acres in London's Dockland, were agreed last week which should result in the realisation of EUR24.9 million at the end of October 2000. The UK results have been converted at the period end rate of Stg 63.23 pence to the Euro (30 June 1999, Stg 65.63 pence and 31st December 1999 Stg 62.17 pence). Outlook The Group's Irish operations are well placed to continue to benefit from strong brands and market leadership positions in a positive economy and a favourable construction market. In the UK, the strong regional positions of Buildbase and Plumbase ensure that Grafton's merchanting businesses continue to benefit from ongoing acquisition opportunities and the synergies of integration. The Group's EuroMix silo mortar business continues to expand rapidly and will benefit from the substantial capital investment in additional capacity in a growing market. The Group's sound and consistent strategy, which has created a broadly based business across the Irish and UK economies and delivered strong earnings per share growth during the nineties, continued to produce strong results in the first half year of the new millennium. Trading to date has been ahead of last year in the second half, and we look forward with confidence to the opportunities for further profitable growth. For reference: Michael Chadwick, Joe Murray, Executive Chairman Murray Consultants Grafton Group plc Tel: (++353) (01) 632 6400 Tel: (++353) (01) 216 0600 Ginny Pulbrook Citigate Dewe Rogerson Tel: (++44) (0207) 282 2945 This statement is also available on our web site www.graftonplc.com Grafton Group Plc Group Profit & Loss Account For the Half Year Ended 30 June 2000 Twelve Months to Six Six 31 Dec 99 Months to Months to 30 June 00 30 June 99 (audited) (unaudited) (unaudited) EUR'000 EUR'000 EUR'000 Turnover 587,241 Continuing operations 353,840 285,111 32,931 Acquisitions 38,032 - --------- -------- --------- 620,172 Total turnover 391,872 285,111 ========= ========= ========= Operating profit 44,766 Continuing operations 25,670 19,784 2,677 Acquisitions 1,618 - --------- --------- --------- 47,443 27,288 19,784 1,126 Goodwill amortisation 1,084 415 --------- --------- --------- Total operating 46,317 profit 26,204 19,369 8,155 Interest payable (net) 5,620 3,959 --------- --------- --------- Profit on ordinary activities before 38,162 taxation 20,584 15,410 4,586 Taxation 2,470 2,003 --------- --------- --------- Profit on ordinary activities after 33,576 taxation 18,114 13,407 8,237 Dividend 4,289 3,207 --------- --------- --------- 25,339 Profit retained 13,825 10,200 ========= ========= ========= 200.2c Earnings per share 105.2c 81.87c Earnings per share before goodwill 206.9c amortisation 111.5c 84.40c Dividend per 48.0c Share 24.70c 18.70c Grafton Group Plc Consolidated Balance Sheet As at 30 June 2000 31 Dec 99 30 June 00 30 June 99 (audited) (unaudited) (unaudited) EUR'000 EUR'000 EUR'000 Fixed assets Intangible assets 31,714 - goodwill 51,905 20,570 175,847 Tangible assets 190,203 157,135 19,045 Financial assets 18,953 15,533 ------- ------- ------- 226,606 261,061 193,238 ------- ------- ------- Current assets 84,759 Stock 105,881 79,226 125,034 Debtors 165,590 109,985 Cash at bank 67,536 and in hand 60,899 58,318 ------- ------- ------- 277,329 332,370 247,529 ------- ------- ------- Creditors (amounts falling due within 173,246 one year) 225,151 176,341 ------- ------- ------- 104,083 Net current assets 107,219 71,188 ------- ------- ------- Total assets less current 330,689 liabilities 368,280 264,426 ------- ------- ------- Creditors (amounts falling due after 135,440 more than one year) 159,028 91,147 Provision for liabilities 13,910 and charges 13,947 7,314 ------- ------- ------- 149,350 172,975 98,461 ------- ------- ------- 181,339 195,305 165,965 ======= ======= ======= Capital and reserves 8,644 Share capital 8,690 8,634 32,424 Share premium account 32,786 32,495 43,221 Revaluation reserve 43,079 43,504 Profit and loss 97,050 account 110,750 81,332 ------- ------- ------- Shareholders' 181,339 funds - equity 195,305 165,965 ======= ======= ======= Grafton Group Plc Group Cash Flow Statement For the Half Year Ended 30 June 2000 Twelve Six Six Months Months Months To To To 31 Dec 99 30 June 00 30 June 99 (audited) (unaudited) (unaudited) EUR'000 EUR'000 EUR'000 Net cash inflow from operating 54,115 activities 23,112 15,709 Servicing of (8,962) finance (5,559) (4,546) (3,273) Taxation (1,919) (1,417) ------- ------- -------- 41,880 15,634 9,746 ------- ------- -------- Capital expenditure and financial investment Purchase of tangible fixed (29,517) assets (17,613) (12,105) Sale of tangible 8,962 fixed assets 3,404 3,411 Sale (purchase) of financial (18,814) fixed assets 1 (15,305) ------- ------- ------- (39,369) (14,208) (23,999) ------- ------- ------- Acquisitions and disposals Acquisition of subsidiary undertakings and (48,155) businesses (37,499) (22,168) Net (debt) cash acquired with 3,962 subsidiary undertakings (3,331) 2,176 ------- ------- ------- (44,193) (40,830) (19,992) ------- ------- ------- (6,746) Equity dividends paid (5,056) (3,540) ------ ------- ------ Cash outflow before use of liquid resources (48,428) and financing (44,460) (37,785) ------- ------- ------- Management of liquid resources Decrease/(Increase) (622) in short term deposits 630 212 Financing Issue of ordinary 15,450 share capital 408 15,511 Increase in term 38,884 debt 30,173 14,138 Capital element of finance (644) leases repaid (215) (305) Redemption of (616) loan notes payable (259) (255) ------ ------ ------ 52,452 30,737 29,301 ------ ------ ------ (Decrease)/increase 4,024 in cash in the period (13,723) (8,484) ===== ======== ======= Reconciliation of net cash flow to movement in net debt (Decrease)/increase 4,024 in cash in the period (13,723) (8,484) Cash inflow from increase in debt (37,624) and lease financing (29,699) (13,578) Cash flow from management of 622 liquid resources (630) (212) ------- ------- ------- Change in net debt resulting (32,978) from cash flows (44,052) (22,274) Loan notes issued on acquisition of subsidiary (72) undertakings (10,413) (72) Finance leases acquired with (13) subsidiary undertakings (589) (13) Translation (15,583) adjustment 5,643 (7,950) -------- ------- ------- Movement in net debt in the (48,646) period (49,411) (30,309) Net debt at (58,714) 1 January (107,360) (58,714) -------- -------- -------- Net debt at (107,360) 30 June (156,771) (89,023) ======== ======== ======== Notes 1. Movements in Group Shareholders' Funds Twelve Six Six Months Months Months To To To 31 Dec 99 30 June 00 30 June 99 (audited) (unaudited) (unaudited) EUR'000 EUR'000 EUR'000 Profit on ordinary activities after 33,576 taxation 18,114 13,407 8,237 Dividends 4,289 3,207 ------ ------ ------ 25,339 13,825 10,200 Issue of ordinary 15,450 share capital 408 15,511 Currency translation adjustment - on foreign 7,041 currency net investments(1,159) 3,949 - on foreign currency (6,299) borrowings 892 (3,503) ------ ----- ------ Net movement on shareholders' 41,531 funds 13,966 26,157 Opening 139,808 shareholders' funds 181,339 139,808 ------- ------- ------- Closing 181,339 shareholders' funds 195,305 165,965 ======= ======= ======= 2. Dividends An interim dividend at the rate of 24.70c per ordinary share (1999: 18.70c) is payable on 22 September 2000 to shareholders on the register at the close of business on 15 September 2000. 3. Earnings Per Share The calculation of earnings per ordinary share is based on the profit on ordinary activities after taxation. The weighted average number of ordinary shares in issue during the period amounted to 17,215,696 (1999: 16,376,881). Adjusted earnings per share is calculated on the same basis but excluding amortisation of goodwill. 4. Exchange Rates Financial statements of the Group's United Kingdom subsidiaries are translated at the rate of exchange prevailing at the balance sheet date. The Euro / Sterling exchange rate at 30 June 2000 was Stg63.23p (30 June 1999: Stg65.63p and 31 December 1999: Stg62.17p) 5. Turnover The amount of turnover by class of activity is as follows: Twelve Six Six Months Months Months To To To 31 Dec 99 30 June 00 30 June 99 (audited) (unaudited) (unaudited) EUR'000 EUR'000 EUR'000 Irish merchanting 194,670 and wholesaling 105,857 92,370 Irish manufacturing 24,248 and related activities 14,047 11,755 56,813 DIY retailing 33,512 27,171 ------- ------ ------- Total turnover from 275,731 Irish activities 153,416 131,296 UK merchanting and 344,441 other activities 238,456 153,815 ------- ------ ------- 620,172 391,872 285,111 ====== ====== ====== 6. Operating Profit Twelve Six Six Months Months Months To To To 31 Dec 99 30 June 00 30 June 99 (audited) (unaudited) (unaudited) EUR'000 EUR'000 EUR'000 30,856 Republic of Ireland 15,055 12,663 Great Britain and 16,587 Northern Ireland 12,233 7,121 ------ ------ ----- 47,443 27,288 19,784 (1,126) Goodwill amortisation (1,084) (415) ------- ------ ------ 46,317 26,204 19,369 ====== ====== ====== 7. Interim statement The interim figures for the half year to 30 June 2000 and the comparative figures for the half year to 30 June 1999 are unaudited. The figures shown for the year ended 31 December 1999 have been extracted from the Financial Statements for the year. A copy of these Financial Statements, on which the Auditors have issued an unqualified report, has been delivered to the Registrar of companies. This statement will be sent by post to all registered shareholders. Non shareholders may obtain copies from the company's registered office at Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18. Independent Review Report to Grafton Group plc Introduction We have been instructed by the company to review the financial information set out on pages 6 to 10 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' Responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Irish and London Stock Exchanges require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express and audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2000. KPMG Chartered Accountants Dublin 30 August 2000

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