10th Mar 2008 07:01
Grafton Group PLC10 March 2008 Grafton Group plc 2007 Final Results For further information please contact:Grafton Group plc + 353 1 216 0600 Murray Consultants + 353 1 498 0300Michael Chadwick, Executive Chairman Joe MurrayColm O Nuallain, Finance Director Citigate Dewe Rogerson + 44 207 282 2945 Ginny Pulbrook 10th March 2008 Record Sales, Profits and Earnings Grafton Group plc, the builders merchants and DIY Group with operations in theUK and Ireland, announces its final results for the year ended 31 December 2007. Financial Highlights 2007 2006 Change___________________________________________________________________________________________________________Revenue €3.21 bn €2.93 bn UP 9%___________________________________________________________________________________________________________Operating profit * €265.8m €244.9 m UP 9%___________________________________________________________________________________________________________Profit before tax # €228.6m €211.4 m UP 8%___________________________________________________________________________________________________________Earnings per share (adjusted)* 84.3c 78.0c UP 8%___________________________________________________________________________________________________________Share purchase 22.0c 18.75c UP 17%___________________________________________________________________________________________________________Cash flow per share # 108.3c 100.4c UP 8%___________________________________________________________________________________________________________Net debt €550.4m €550.9m -___________________________________________________________________________________________________________Gearing 52% 54% -___________________________________________________________________________________________________________* Before property profit and amortisation of intangibles # Excludes property profit Operating Highlights • UK merchanting business performed strongly in a favourable market • Solid performance from the Irish merchanting business • Significant growth in the Irish DIY business • Operations were strongly cash generative Commenting on the results today, Mr. Michael Chadwick, Chairman said: "In another record year, the ongoing development of our businesses in the UK andIreland has proved its worth. Strong brands in both markets and a healthybalance sheet leave the Group well positioned to respond to more demandingmarket conditions. We will continue to pursue the consistent growth orientatedstrategy that has been successful for the past two decades. While maintaining afocus on closer integration, scale related benefits, lower cost base and productsourcing gains, Grafton will also take advantage of acquisition and developmentopportunities that continue to be available and that represent value and are agood strategic fit." 10th March 2008 Grafton Group plc reports good growth in sales, profits and earnings per sharefor 2007. Highlights • Sales were up 9 per cent to €3.21 billion (2006: €2.93 billion). • Operating profit increased by 9 per cent to €265.8 million (2006: €244.9 million). • Profit before tax and property profit up 8 per cent to €228.6 million (2006: €211.4 million). • Adjusted earnings per share increased by 8 per cent to 84.3 cent (2006: 78.0 cent). • Adjusted diluted earnings per share up 8 per cent to 83.0 cent (2006: 76.5 cent). • Cash generated from operations was up 21 per cent to €303.8 million (2006: €251.9 million). • Strong balance sheet with shareholders' funds of €1.07 billion. • Lower net debt, gearing at a nine year low of 52 per cent and interest cover of 7.8 times. • Sixteenth consecutive year of increased share purchase / dividend payments. • Buyback of 10.5 million Grafton Units. The Group delivered a good performance for the year against the background of astrong UK economy and continued expansion in the Irish economy despite someeasing of growth in the second half as the anticipated slowdown in the Irishhousing market materialised. In the UK, the improvement in market conditions experienced in the second halfof 2006 continued throughout the year. UK profits were at record levels due togood growth in the established business and contributions from acquisitions.The business experienced good like for like sales growth and this was reflectedin an increased operating margin in the overall business. The Irish business outperformed in a market that was influenced by a significantdecline in activity in the new housing market during the year which waspartially offset by continued growth in the repair, maintenance and improvementand DIY markets. The overall results for 2007 reflect the benefit of pursuing a consistentstrategy over the past two decades which has led to the creation of businesseswith national or regional leadership positions in the builders merchanting, DIYand mortar markets in the UK and Ireland. The UK business increased turnover by 14 per cent to €1.98 billion (2006: €1.73billion) and operating profit increased by 24 per cent to €142.1 million (2006:€114.6 million). The record results were driven by good volume growth andgenerally positive trading conditions in the merchanting market. Irish turnover increased by 2 per cent to €1.23 billion (2006: €1.20 billion).Operating profit declined by 5 per cent to €123.7 million (2006: €130.4million). 2007 was a satisfactory year for the Irish business despite thedecline in profit from the previous year's record level. The Irish Merchantingbusiness was, as expected, impacted by the significant decline in newresidential construction. Development and Finance The Group continued to consolidate and expand from its existing strong positionsin the UK and Irish merchanting and Irish DIY markets. The spend on acquisitionsin 2007 amounted to €89.2 million (2006: €87.1 million), of which €74 millionrelated to trading businesses acquired by the Group, including deferredacquisition consideration of €9.5 million (2006: €11.9 million) relating toprior year transactions. Capital expenditure on development projects was €55.7million (2006: €72.8 million). The combined acquisition and developmentcommitments for the year resulted in expenditure of €144.9 million (2006: €159.9million). Thirteen acquisitions in the UK increased scale and further strengthened theGroup's position in the merchanting market through securing a presence inlocations which complement the established branch network as well as providingenhanced product and additional route to market opportunities. A single branchacquisition improved coverage in the Irish builders merchanting market. Thebusinesses acquired in the UK and Ireland trade from thirty three locations withannual sales of over €100 million. Considerable resources were also devoted to organic development opportunities toexpand the merchanting and retailing branch networks and to enable the Group tomore effectively serve these markets into the future. Thirteen merchantingbranches were opened in the UK. In Ireland, one DIY store, one buildersmerchanting branch and one In House at the Panelling Centre store were opened. The addition of these forty nine trading locations marked a continuation of asuccessful focus and commitment to growth orientated development opportunitieswhich will contribute to increased profitability in the future. The Group's operations have traditionally been strongly cash generative and thistrend continued in 2007 leaving the Group in a strong financial position withlower net debt at the year end. Shareholders' funds were €1.07 billion at theend of 2007 and gearing was a modest 52 per cent. The Group has retainedfinancing flexibility by holding significant cash balances and more thanadequate committed facilities are in place to refinance term debt maturing overthe next three years. The Group's overall financial position leaves it wellplaced to take advantage of acquisition and development opportunities whichcontinue to be available and represent good value and are a good strategic fit. Share Purchase The Company purchased 1 'A' Ordinary share per Grafton Unit for a cashconsideration of 10.0 cent (2006: 8.25 cent) which was paid on 3 October 2007.The Board approved the purchase of a further Ordinary share per Grafton Unit forcash consideration of 12.0 cent (2006: 10.5 cent) payable on 11 April 2008. The total purchase payments to shareholders for 2007 amount to 22.0 cent perGrafton Unit. This is an increase of 17 per cent on total share purchasepayments for 2006 of 18.75 cent per Grafton Unit. This is the sixteenthconsecutive year for the Group to increase its share purchase / dividendpayments to shareholders. Group earnings per share cover the share purchasepayments 3.8 times (2006: 4.2 times). The increase in share purchase paymentsover the prior year reflects the good results for 2007, strong cash flow fromoperations and management's confidence in the Group's future prospects. Share Buybacks The Group's highly cash generative trading operations, high interest cover andlow gearing provided the financial strength to complete unit buybacks in themarket while continuing to take advantage of ongoing acquisition and developmentopportunities. A total of 10.5 million Grafton Units, equivalent to 4.4 per centof the Group's share capital, were bought back at a total cost of €72.8 million.This will have a positive impact on earnings per share in 2008 and beyond. Operations Review - United Kingdom UK sales increased by 14 per cent to €1.98 billion (2006: €1.73 billion) andoperating profit increased by 24 per cent to €142.1 million (2006: €114.6million). The UK operating margin increased to 7.2 per cent from 6.6 per centreported for 2006. The UK continued to be a good market in which to do business. The economyexperienced stable conditions in 2007 with growth above its trend rate, thestrongest employment growth in a decade and unemployment at a thirty year low. The supply of housing in the UK continued to be lower than the level of demandimplied by household formation rates. House prices showed good overall growthfor the year although the market weakened in the second half. Mortgage approvalswere also down due to higher interest rates and tighter conditions in the creditmarkets. The residential repair, maintenance and improvement market, which is the primaryend-use market for the Group's UK merchanting sales, enjoyed modest volumegrowth in demand in 2007. Like for like sales in the Group's merchantingbusiness increased by 4.8 per cent. UK Builders Merchanting Buildbase had an excellent year reporting strong growth in sales and profit dueto a combination of good trading and operational improvements in the underlyingbusiness together with contributions from acquisitions and greenfielddevelopments. Volume growth due to reasonable market conditions, a more positivepricing environment, continued rationalisation of sourcing arrangements andtight control of overheads contributed to the improvement in profit. Regionally,all areas of the branch network benefited from the improved trading environmentand internal initiatives to improve profitability although demand was firmeracross the Midlands and South East. Flemings, the leading independent builders and timber merchant trading fromseven branches in Scotland acquired in 2006, was integrated into the Buildbasenetwork and achieved a good level of profitability through operationalefficiencies and purchasing gains. There were also good incrementalcontributions from three single branch acquisitions completed in 2006. Expansion of the Buildbase branch network continued with the completion of eightacquisitions adding ten branches. The three Buildbase branch openings inMelksham, Wiltshire; Yeovil, Somerset and Stowmarket, Suffolk traded in linewith expectations. Buildbase branches in Poole, Dorset; Belper, Derbyshire and Wakefield, WestYorkshire were relocated to extensive modern facilities and now offer a widerrange of products. The trading area of the Southend-on-Sea, Essex; Buckingham,Buckinghamshire and Inverness branches was expanded and new hire centres wereopened in seven branches. A major refurbishment of the Cirencester,Gloucestershire branch was undertaken as well a number of smaller branchdevelopment projects. Jacksons, the leading regional merchanting business had a good year increasingsales and profit despite tougher competition due to significant capacityexpansion in the East Midlands market in recent years. The four locationsacquired in 2006 were integrated into the branch network and provide a soundbasis for future growth in sales and profit. Market coverage improved with theacquisition of a single branch ironmongery business and the opening of a secondbranch in Lincoln. Tool hire centres were added in a number of branches. In Northern Ireland, activity in the housing and commercial markets was strongagainst the backdrop of an improving local economy. Macnaughton Blair reported astrong advance in sales and profits with all of the gains realised in theestablished branch network. Good progress was made in developing a presence inthe Larne and Lisburn, Co. Antrim market following completion of two smallacquisitions at the end of 2006. Selco, a trade only warehouse format set in a modern self service environment,benefited from good levels of activity in the small project segment of the RMImarket. Last year's store openings in London, Manchester and Reading traded toexpectations. The opening of three further stores in London increased thenetwork to twenty stores with the majority of these stores located in majormetropolitan areas. UK Plumbers Merchanting The plumbers merchanting division incorporates Plumbase, the UK's fourth largestplumbers merchanting chain which trades from one hundred and eighty threebranches, and the bathroom products distribution business. The divisiondelivered a substantial increase in sales and operating profit in a stable butcompetitive segment of the merchanting market. Acquisitions contributed verypositively to increased profitability. Plumbase continued to improve market coverage with the opening of six branchesand the completion of a two branch acquisition. Progress, a seventeen branch boiler and heating spares business was acquired inJune 2007. The acquisition improves the Group's position in the heating sparesmarket through a better geographical spread of branches. The Group successfullyentered the internet retail market for bathroom products at the end of 2006 withthe acquisition of plumbworld.co.uk, the UK's largest online retailer ofbathroom products. The business traded in line with demanding pre-acquisitionexpectations. UK Mortar CPI EuroMix manufactures a range of mortars for use in residential, commercialand public sector construction projects, which it supplies from a network ofnine plants in England and Scotland. EuroMix consolidated its leadershipposition in the silo based mortar market with further growth in volumes andsales. Operating profit was maintained at last year's level in a good market butwith continuing competitive pricing pressure linked to the introduction ofcapacity in the sector in recent years. The Leeds plant that opened in July 2006successfully increased volumes in the West Yorkshire market and tradedprofitably in 2007. Operations Review - Republic of Ireland Irish turnover increased by 2 per cent to €1.23 billion (2006: €1.2 billion).Operating profit was down 5 per cent to €123.7 million (2006: €130.4 million). The Irish economy performed strongly in 2007 with growth of five per cent drivenby domestic demand and an impressive recovery in export growth. The volume ofconsumer expenditure is estimated to have increased by six per cent due tohigher disposable income as a result of growth in employment and earnings andincome tax reductions. Maturing SSIAs also contributed to increased consumerspending. Employment growth held up well with the rate of job creationsubstantially ahead of the euro zone area. Following the slowdown inconstruction activity during the year the financial and business servicessectors replaced the construction sector as the principal source of job creationin the economy. House building levels adjusted following a long period of strong supply thatreached a level of output which exceeded the economy's medium term requirements.During 2007 house building levels responded to the weaker demand and pricingenvironment. The fall in the market reflected reduced affordability due torising interest rates, which were at their highest level for six years, and thehigh level of house prices achieved in recent years. Housing output responded tothe changing market conditions with completions falling to 78,000 units from apeak of 88,000 units in 2006. Housing registrations, an indicator of housingstarts, progressively weakened as the year progressed. Investment in non-residential building increased with good levels of activity inthe commercial, industrial, civils and infrastructure markets. The housingrepair, maintenance and improvement market benefited from increased spending andcontinued to grow. Irish Merchanting Sales were marginally higher at €819.2 million (2006: €816.6 million). The Irishmerchanting business has developed rapidly having almost tripled its turnoverover the past three years. 2007 was a satisfactory year for the business despitea small decline in profits from the record levels achieved in 2006. The businessbenefited from reasonably positive market conditions in the first half withrelatively flat new housing activity and good growth in the non-residentialconstruction segments of the market. Market conditions became more challengingin the second half due to the significant decline in housing starts andcompletions. Weakness in the housing market was partially offset by thecontinuing growth in the residential RMI and non-residential new build markets.Like for like sales declined by one per cent for the year. The Heiton Buckley and Chadwicks brands delivered a good performance in a marketthat experienced a sharp decline in volumes. The mix of the business benefitedfrom a significant exposure to the housing repair maintenance and improvementand non-residential markets. More subdued house building related demand in anumber of the Dublin branches was largely offset by better trading in theprovincial branches which continued to experience positive trading conditionsand less of an impact from a reduction in scheme house and apartmentdevelopment. These branches experienced good demand in the RMI and one-offhousing segments of the market. Irish merchanting grew through both acquisition and organic development. Thebusiness gained a presence in the Mid West market through the purchase of MarketHardware in Ennis. The opening of a new branch in South Dublin City provided animportant base to grow market share within a catchment area that offerssignificant development opportunities in the years ahead. The branch inMullingar, which opened in the second half of 2006, had a successful year andnow has a well established presence in the Midlands market. Relocation of theTullamore branch to a new purpose built facility enabled the branch to expandits product offering and strengthen its market leading position in the region. The business continued to focus on margin improvement making gains frompurchasing efficiencies and tight control of costs. The opening of a ChadwicksPlumb Centre in Sligo provides a base for sales growth in the plumbing andheating products category. The Athlone branch was relocated from the town centre continuing the programme of branchrelocations designed to increase capacity and improve customer service. Cork Builders Providers achieved higher sales despite the more challengingmarket place. This reflected the benefit of measures taken to expand turnover inthe one-off housing and non-residential markets helping the business to overcomethe impact of a volume reduction in residential development schemes. Davies, theDublin based specialist plumbing, heating and civils merchant continued tobenefit from positive market conditions in the commercial and infrastructuremarkets. Telfords, the Midlands based merchant, performed well benefiting from asolid customer base and investment in its Portlaoise branch. Heiton Steel, the market leading steel stock-holding business, had asatisfactory year. Strength in the civils and commercial markets and improvedpricing helped to offset softness in housing related volumes. The Cork branchrelocated to a new facility to enable it to offer a wider range of products andachieve operational efficiencies. Chadwicks Hire Centres and Sam Hire, the plant and tool hire business, continuedto increase market coverage with the opening of branches in Tullamore andLimerick. The Group now trades from thirty four hire locations primarily sharingfacilities with builders merchanting branches. Irish Retailing Sales increased by 9 per cent to €339.8 million (2006: €311.7 million). TheIrish retailing business trades from forty one stores under the Woodie's DIY andAtlantic Homecare brands and from six In House at the Panelling Centre stores.The trading environment for the business was very positive. Retail sales volumesshowed the highest rate of growth since 2000. Against this favourablebackground, the business achieved significant sales and profit growth. The increase in profitability was due to strong trading in the establishedstores and good contributions from store openings in 2006. This outcome wasachieved despite absorbing increased property costs. Like for like sales growthfor the year was 5.3 per cent. The first half benefited from very favourabletrading in the gardening season measured against more subdued prior yeartrading. Store openings in 2006 in Castlebar, Co. Mayo, Navan, Co. Meath and in Nenagh,Co. Tipperary traded in line with expectations making good profit contributionsfor the year. The strong internal growth strategy for developing the Irish retailing businesswas sustained with the opening of a new Woodie's DIY store in Limerick andrelocation of the Woodie's DIY store in Tallaght to a facility which doubles thestore's trading area. The capacity of Woodie's DIY Waterford store wassubstantially expanded. These initiatives support the geographic development ofthe retail customer base and enable the marketing of a wider range of products. The Woodie's and Atlantic Homecare support offices and management weresuccessfully merged during the year. The In House at the Panelling Centre business, which markets a range of qualitykitchen and bedroom panelling products to trade and retail customers, benefitedfrom strong volume growth in consumer spending, a good level of housingtransactions and solid demand in the replacement market. The business achievedgood sales and profit growth. The Galway store that opened at the end of 2006traded in line with expectations and prior to the year end a sixth store wassuccessfully opened in Waterford. Further store openings are planned. Irish Manufacturing The Irish manufacturing business delivered a resilient performance in the firsthalf but second half trading conditions became more challenging and volumesdeclined in line with the slowdown in new house building activity. Finance Record profits and cash flows were generated in the merchanting, DIY andmanufacturing businesses. Cash flow from operations amounted to €303.8 million(2006: €251.9 million). Working capital was well controlled with a modest additional net investment of€14.4 million (2006: €26.1 million) required to finance the increased activitylevels across the Group. Shareholders' funds at the year end were €1.07 billion (31 Dec 2006: €1.01billion). Retained profit after taxation for the year was €205.2 million. Yearend shareholders' funds are stated after accounting for the cost of the 10.5million units bought back during 2007 which reduced reserves by €73 million.Revenue reserves were reduced by €43.8 million due to exchange rate movementsduring 2007. Sterling weakness reduced the euro equivalent of the Group's netinvestment in the UK business on translation at the year end rate of exchange.The purchase of two 'A' Ordinary shares per Grafton Unit resulted in the returnof €49.0 million (2006: €39.9 million) to shareholders and this amount was alsowritten-off against revenue reserves. Net borrowings at 31 Dec 2007 of €550.4 million (31 Dec 2006: €550.9 million)were marginally down despite a total spend of €266.7 million on acquisitions,routine replacement and development capital expenditure and share buybacks. Netdebt was reduced by €36 million due to the favourable translation impact ofconverting sterling debt to the euro at the weaker year end exchange rate ofStg73.34p compared to the rate of Stg67.15p at 31 Dec 2006. Net assets and actuarial liabilities of the Group's defined benefit pensionschemes are included in the balance sheet in accordance with IAS 19. At the endof 2007 the net retirement benefit obligation, after deferred taxation, reducedto €12.6 million (31 Dec 2006: €27.3 million). The reduction of €14.7 million inthe net liability was due to employer contributions, an increase in the discountrates used to value liabilities and investment income which were partiallyoffset by more conservative assumptions concerning life expectancy. Outlook UK sales continued to increase in the first two months of 2008 albeit at aslightly lower rate than achieved in 2007. Sales were lower in the Irishmerchanting business due to the much weaker new housing market. In Ireland, economic growth is expected to be lower than the record levels ofrecent years but still good by international standards. The Irish housingmarket will continue to adjust to a more sustainable supply and pricingenvironment in response to more moderate demand. Underlying demand for housingis however expected to remain strong due to favourable demographics and growthin employment and incomes. Affordability has been improving due to lower houseprices and rising incomes and the current interest rate tightening cycle appearsto have come to an end. The strength of demand for rented accommodation haspushed up rents and this should begin to translate into an improvement inhousing starts. Growth in the repair, maintenance and improvement market and the non-residentialand infrastructure markets is expected to continue through 2008 and shouldmitigate some of the impact of lower output in the new housing market. The Irishmerchanting business will encounter weaker trading conditions with the prospectthat there may be some improvement in housing starts later in the year. A clear focus is now in place within Irish Merchanting to achieve closerintegration, thereby driving further scale related benefits, a lower cost base,and product sourcing gains. Our policy of being the preferred first choicesupplier to our trade customers is both resilient and consistent and we expectto gain further benefit from the success of this policy in 2008. Volume growth in consumer spending is forecast although at a somewhat lowerlevel than the very high growth rates of recent years. The Irish retailingbusiness will also benefit from the internal initiatives and developmentsundertaken in 2007. A new Woodie's store in Carrick-on-Shannon was successfullyopened earlier this month. UK economic growth is expected to moderate from a rate of expansion that hasbeen at or above trend for over two years. Consumer spending and investment inhousing is easing on the back of interest rate increases and generally tighterconditions in the credit markets. The residential repair, maintenance andimprovement market has historically been less cyclical and we expect to seecontinued growth and development opportunities in the merchanting sector. Therecent sterling interest rate reduction combined with further interest rate cutsexpected in 2008 should help stimulate activity in the merchanting sector as wemove into the last quarter and early 2009. The continuing weakness of sterlingwill reduce the value of the Group's earnings when translated into euro forreporting purposes if the current exchange rate continues throughout 2008. As in previous years the focus in the UK will be on closer integration of themerchanting business in order to achieve further scale related benefitsincluding operational efficiencies and product sourcing gains. The Group alsoexpects to continue making progress in developing its position in themerchanting market with a good pipeline of organic development opportunities andacquisitions. The further strengthening of the UK business in 2008 shouldresult in financial rewards coming through in 2009 and beyond. The Group's strong brands in the UK and Ireland and its healthy financialposition leave it well placed to respond to more demanding market conditionswhile continuing to pursue the consistent growth orientated strategy that hasbeen successful for the past two decades. A copy of this statement is also available on our website www.graftonplc.com Grafton Group plc Group Income Statement For the year ended 31 December 2007 Twelve months Twelve months to 31 Dec 2007 to 31 Dec 2006 (Audited) (Audited) •'000 •'000 Revenue 3,205,026 2,933,937 Operating costs (2,941,481) (2,691,206) ___________ ____________ Operating profit before property profit 263,545 242,731 Property profit 7,254 37,989 ___________ ____________Operating profit 270,799 280,720 Finance expense (61,569) (52,886) Finance income 26,603 21,522 ___________ ____________Profit before tax 235,833 249,356 Income tax expense (30,658) (32,418) ___________ ____________Profit after tax for the financial year 205,175 216,938 =========== ============Profit attributable to:Equity holders of the Company 205,175 216,938 =========== ============ Basic earnings per share 86.16c 91.03c =========== ============Adjusted earnings per share 84.32c 77.97c =========== ============Diluted earnings per share 84.78c 89.34c =========== ============ Group Statement of Recognised Income and Expense For the year ended 31 December 2007 2007 2006 •'000 •'000Items of income and expense recognised directly within equity:Currency translation effects - on foreign currency net investments (44,583) 8,584 - on foreign currency borrowings 829 (396)Actuarial gain on Group defined benefit pension schemes 12,573 4,939Deferred tax liability on Group defined benefit pension schemes (2,599) (44)Fair value movement on cash flow hedges:- Fair value gains 521 1,875- Included in finance costs (1,784) (353)Deferred tax on cash flow hedge 158 (191) ___________ __________Net income / (expense) recognised directly in equity (34,885) 14,414 Profit after tax for the financial year 205,175 216,938 ___________ __________Total recognised income and expense for the financial year 170,290 231,352 =========== ==========Attributable to:Equity holders of the Company 170,290 231,352 =========== ========== Movement on Group Retained Earnings 2007 2006 •'000 •'000 At 1 January 662,726 475,380Retained profit for the financial year 205,175 216,938Purchase of 'A' Ordinary shares (49,048) (39,920)Actuarial gain on pensions (net of tax) 9,974 4,895Deferred tax on share based payments (2,078) 1,832Shares bought back and cancelled (67,090) -Transfer from revaluation reserve 205 3,601 ___________ ___________At 31 December 759,864 662,726 =========== =========== Group Statement of Changes in Equity 2007 2006 •'000 •'000 At beginning of period 1,014,339 813,811Shares bought back and cancelled (67,090) -Treasury shares acquired (5,746) -Issue of Grafton Units (net of issue expenses) 2,553 4,000Adjustment for share based payments expense 4,465 3,264Deferred tax on share based payments (2,078) 1,832Purchase of 'A' Ordinary shares (49,048) (39,920)Total recognised income and expense for the financial year 170,290 231,352 ___________ ___________Closing shareholders' funds - equity 1,067,685 1,014,339 =========== =========== Grafton Group plc Group Balance Sheet As At 31 December 2007 2007 2006 (Audited) (Audited) •'000 •'000ASSETSNon-current assetsGoodwill 600,793 582,861Intangible assets 11,095 13,307Property, plant and equipment 703,737 686,165Deferred tax assets 27,309 34,865Financial assets 850 414 _________ _________Total non-current assets 1,343,784 1,317,612 _________ _________Current assetsInventories 386,179 390,400Trade and other receivables 535,695 542,110Derivative and other financial instruments 584 1,847Cash and cash equivalents 204,489 231,519 _________ _________Total current assets 1,126,947 1,165,876 _________ _________Total assets 2,470,731 2,483,488 ========= =========EQUITYCapital and reserves attributable to the Company's equity holdersEquity share capital 11,569 12,082Share premium account 287,458 284,945Capital redemption reserve 875 322Revaluation reserve 32,768 32,973Other reserve - shares to be issued 10,920 6,455Cash flow hedge reserve 511 1,616Foreign currency translation reserve (30,534) 13,220Retained earnings 759,864 662,726Treasury shares held (5,746) - _________ _________Total equity 1,067,685 1,014,339 _________ _________ LIABILITIESNon-current liabilitiesInterest-bearing loans and borrowings 523,311 671,617Provisions 10,228 4,468Retirement benefit obligations 15,323 34,163Derivative financial instruments 14,967 22,126Deferred tax liabilities 50,439 49,408 _________ _________Total non-current liabilities 614,268 781,782 _________ _________Current liabilitiesInterest-bearing loans and borrowings 213,624 88,585Trade and other payables 504,203 521,265Current income tax liabilities 55,427 52,393Derivative financial instruments 3,560 1,898Provisions 11,964 23,226 _________ _________Total current liabilities 788,778 687,367 _________ _________Total liabilities 1,403,046 1,469,149 _________ _________Total equity and liabilities 2,470,731 2,483,488 ========= ========= Grafton Group plc Group Cash Flow Statement for the year ended 31 December 2007 2007 2006 •'000 •'000 Profit before taxation 235,833 249,356Finance income (26,603) (21,522)Finance expense 61,569 52,886 ________ ________Operating profit 270,799 280,720 Depreciation 56,792 53,163Intangible amortisation 2,212 2,212Goodwill written-off on termination 88 243Share based payments charge 4,465 3,264Property profit (7,254) (37,989)Profit on sale of plant and equipment (3,226) (3,401)Contributions to pensions in excess of IAS 19 charge (5,639) (20,249)Increase in working capital (14,417) (26,111) ________ ________Cash generated from operations 303,820 251,852 Interest paid (50,445) (43,224)Income taxes paid (10,564) (14,594) ________ ________Cash flows from operating activities 242,811 194,034 ________ ________ Investing activitiesProceeds from sale of property, plant and equipment 22,128 77,664Interest received 14,416 12,216 ________ ________ 36,544 89,880 ________ ________OutflowsAcquisition of subsidiary undertakings and businesses (84,350) (70,621)Net cash acquired with subsidiary undertakings 7,689 777Deferred acquisition consideration (9,461) (11,958)Purchase of property, plant and equipment (104,650) (124,401)Purchase of financial assets (452) (90) ________ ________ (191,224) (206,293) ________ ________ Cash flows from investing activities (154,680) (116,413) ________ ________Financing activitiesProceeds from the issue of share capital 2,553 4,000Proceeds from long term borrowings 66,742 - ________ ________ 69,295 4,000 ________ ________OutflowsRepayment of long term borrowings - (117,170)Shares bought back and treasury shares acquired (72,836) -Purchase of 'A' Ordinary shares (49,048) (39,920)Payment of finance lease liabilities (1,883) (1,850)Redemption of loan notes payable (19,216) (18,087) ________ ________ (142,983) (177,027) ________ ________Cash flows from financing activities (73,688) (173,027) ________ ________Net increase/(decrease) in cash and cash equivalents 14,443 (95,406) Cash and cash equivalents at 1 January 201,764 291,844Effect of exchange rate fluctuations on cash held (12,718) 5,326 ________ ________Cash and cash equivalents at 31 December 203,489 201,764 ======== ======== 1. Revenue and Operating Profit by Geographic Segment The amount of revenue by geographic segment is as follows: Twelve months Twelve months to 31 Dec 2007 to 31 Dec 2006 •'000 •'000Revenue Republic of Ireland 1,227,375 1,200,639 United Kingdom 1,977,651 1,733,298 __________ _________ 3,205,026 2,933,937 ========== =========Operating profit before property profit and intangible amortisation Ireland 123,651 130,371 United Kingdom 142,106 114,572 __________ _________ 265,757 244,943 Intangible amortisation - Republic of Ireland (2,212) (2,212) __________ _________ 263,545 242,731 ========== =========Operating profit before property profit Ireland 121,439 128,159 United Kingdom 142,106 114,572 __________ _________ 263,545 242,731 ========== =========Property profit Ireland 1,050 30,056 United Kingdom 6,204 7,933 __________ _________ 7,254 37,989 ========== =========Operating profit Ireland 122,489 158,215 United Kingdom 148,310 122,505 __________ _________ 270,799 280,720 Finance costs (net) (34,966) (31,364) __________ _________Profit before tax 235,833 249,356 ========== ========= 2. Analysis of Revenue by Business Segment Twelve months Twelve months to 31 Dec 2007 to 31 Dec 2006 •'000 •'000 Revenue UK merchanting 1,905,378 1,664,856 Irish merchanting 819,164 816,602 Irish DIY 339,849 311,680 Irish and UK manufacturing 140,635 140,799 __________ _________ 3,205,026 2,933,937 ========== ========= 3. Reconciliation of Net Cash Flow to Movement in Net Debt 2007 2006For the year ended 31 December •'000 •'000 Net increase/(decrease) in cash and cash equivalents 14,443 (95,406)Cashflow from (increase)/decrease in debt and lease financing (45,643) 141,317 __________ __________Change in net debt resulting from cash flows (31,200) 45,911 Loan notes issued on acquisition of subsidiary undertakings (81) (1,653)Finance leases acquired with subsidiary undertakings (404) (95)Bank loans and loan notes acquired with subsidiary undertakings (2,581) (3,579)Translation adjustment 36,000 (8,784)Net movement in derivative financial instruments (1,263) 1,522 __________ __________Movement in net debt in the year 471 33,322 Net debt at 1 January (550,860) (584,182) __________ __________Net debt at 31 December (550,389) (550,860) ========== ========= 4. Earnings per Share The computation of basic and diluted earnings per share is set 2007 2006out below: •'000 •'000 Profit after tax for the financial year 205,175 216,938 ___________ ___________Numerator for basic and diluted earnings per share 205,175 216,938 Property profit after tax (6,311) (33,051) Intangible amortisation after tax 1,935 1,935 ___________ ___________Numerator for adjusted earnings per share 200,799 185,822 =========== ===========Denominator for basic and adjusted earnings per share:Weighted average number of Grafton Units in issue 238,145,757 238,324,290 Effect of potential dilutive Grafton Units 3,856,396 4,505,408 ___________ ___________Denominator for diluted earnings per share 242,002,153 242,829,698 =========== ===========Adjusted earnings per share (cent) - Basic 84.32 77.97 - Diluted 82.97 76.52 Earnings per share (cent) - Basic 86.16 91.03 - Diluted 84.78 89.34 5. Share Purchase The Board has approved the purchase of one 'A' Ordinary share per Grafton Unitfor a cash consideration of 12.0 cent. The purchase of the 'A' Ordinary sharewill take effect in respect of Grafton Units on the register at close ofbusiness 25 March 2008 (record date) and the cash consideration will be paid on11 April 2008. 6. Exchange Rates The results and cash flows of the Group's United Kingdom subsidiaries have beentranslated into Euro using the average exchange rate for the year. The relatedbalance sheets of the Group's United Kingdom subsidiaries at 31 December 2007and 31 December 2006 have been translated at the rate of exchange ruling at thebalance sheet date. The average Euro / Sterling rate of exchange for the year ended 31 December 2007was Stg68.43p (year ended 31 December 2006: Stg68.17p). The Euro / Sterlingexchange rate at 31 December 2007 was Stg73.34 (31 December 2006: Stg67.15p). Grafton Group plc Financial Overview 2007 ________________________________________________________________________________________________________________ 2007 2006 Change________________________________________________________________________________________________________________Revenue (• million) 3,205 2,934 +9%________________________________________________________________________________________________________________EBITDA # (• million) 322.5 298.1 +8%________________________________________________________________________________________________________________Operating profit before amortisation of intangibles and propertyprofit (• million) 265.8 244.9 +9% ________________________________________________________________________________________________________________Profit before taxation # (• million) 228.6 211.4 +8%________________________________________________________________________________________________________________EPS - basic (cent) 86.2 91.0 -________________________________________________________________________________________________________________EPS before amortisation of intangibles and property profit 84.3 78.0 +8%(cent)================================================================================================================Share purchase (cent) 22.00 18.75 +17%________________________________________________________________________________________________________________Share purchase (times) 3.8 4.2 -________________________________________________________________________________________________________________Interest cover (times) 7.8 9.0 -________________________________________________________________________________________________________________Cash flow per share # 108.3c 100.4c +8%________________________________________________________________________________________________________________Net assets per share (cent) 464.2 424.0 +9%________________________________________________________________________________________________________________Net debt to shareholders' funds 52% 54%================================================================================================================Depreciation charge (• million) 56.8 53.2________________________________________________________________________________________________________________Intangible amortisation (• million) 2.2 2.2________________________________________________________________________________________________________________Acquisition and investment expenditure (• million) 89.2 87.1________________________________________________________________________________________________________________Capital expenditure (• million) 104.7 124.4________________________________________________________________________________________________________________ # Excludes property profit This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Grafton Group