1st Mar 2007 07:03
Grafton Group PLC01 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 theUK and Ireland, announces its final results for the year ended 31 December 2006. Financial Highlights 2006 2005 ChangeRevenue €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. Inthe UK demand improved in the second half resulting in a higher full-year profitcontribution. Business development continued with €159.9 million committed tobolt-on acquisitions and capital spend. Strong cash generation and propertydisposals left the Group in an exceptionally healthy financial position atyear-end and well positioned to take advantage of suitable acquisition andorganic development opportunities. The Group is confident about its futureprospects of achieving above average returns for shareholders." Grafton Group plc reports further growth in sales, profits and earnings pershare 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 astrongly performing economy. The UK business traded in a softer market in thefirst half reporting lower profit but experienced improved demand in the secondhalf leading to an increase in full year profit. This is an excellent outcome for the year in view of the less favourablemerchanting market in the UK in the first half. The strength of the overallperformance is a reflection of the Group's successful strategy of broadening itsearnings base and developing strong market positions and brands in the Irishmerchanting and DIY markets and in the UK merchanting and mortar markets. The acquisition of Heiton Group plc, the Group's largest acquisition to date, inJanuary 2005 provided the Irish merchanting and DIY businesses with a muchbroader trading and geographic platform in a growth market in Ireland. Theresults of the business for the past two years have exceeded expectations andthe Group achieved its hurdle rate of return on its original investment. In the Republic of Ireland, continued high economic growth rates, record levelsof house construction and RMI activity together with increased consumer spendingwere the key drivers of demand in the merchanting and DIY businesses. Stronglike for like sales and profit growth in the established Irish business combinedwith contributions from acquisitions and new stores resulted in a substantialadvance 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 €130.4million (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 Groupoperating profit. The UK RMI market progressively weakened during 2005 and this trend continuedinto the first half of 2006 before the market staged a gradual recovery in thesecond half. The results of the UK business moved generally in line with marketconditions with operating profit increasing strongly in the second half astrading in the RMI market gathered momentum. UK turnover increased by 9 per centto €1.73 billion (2005: €1.60 billion) and UK operating profit increased by 6per cent to €114.6 million (2005: €108.2 million). Development The Group continued to actively pursue its long term development strategy basedon growth through acquisitions and branch development. The spend on acquisitionswas €87.1 million including deferred acquisition consideration relating to prioryear transactions of €11.9 million. This was lower than the record expenditureof €477.7 million in 2005 which included €359 million to acquire the remaining71 per cent of the shares in Heiton Group plc. Capital expenditure ondevelopment projects increased to €72.8 million (2005: €56.3 million) and thetotal spend on acquisitions and development capital expenditure was €159.9million. Sixteen bolt-on merchanting acquisitions were completed in the UK continuing thesteady flow of transactions which has over time enabled the Group to build astrong position in the merchanting market. These businesses trade from 27locations with annual sales of over €120 million. The businesses acquired werewell established operations trading from locations which expand and complimentcoverage of the UK merchanting market. Organic growth initiatives have traditionally been an important element of theGroup's development strategy and the pace of activity in 2006 was similar to2005 with the completion of 18 projects. In the UK, twelve merchanting brancheswere opened and one new dry mortar plant. In Ireland, three Woodie's DIYstores, one builders merchanting branch and one In House at the Panelling storewere opened. The addition of the 45 locations, referred to above, to the existing branchnetwork increases the scale and market presence of the Group as well asproviding a good basis for further sales and profit improvement in 2007 andbeyond. Once again in 2006, the trading operations were highly cash generative and theGroup ended the year in an exceptionally strong financial position withshareholders funds exceeding €1 billion for the first time. Group gearing of 54per cent at the year end was at its lowest level since 1998. This leaves theGroup with the financial strength to take advantage of suitable acquisition andorganic development opportunities which present a good strategic fit and arebased on the achievement of acceptable long term returns for shareholders. Share Purchase The Company purchased one A ordinary share per Grafton Unit for a cashconsideration of 8.25 cent which was paid on 18 October 2006. The boardapproved the purchase of a further A ordinary share per Grafton Unit for a cashconsideration 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 centper Grafton Unit. This is an increase of 19 per cent on total share purchasepayments for 2005 of 15.75 cent per Grafton Unit. This is the twentiethconsecutive year for the Group to increase its share purchase / dividend paymentto shareholders and is achieved while maintaining a high level of cover. Theincrease over last year reflects the strong financial position of the Group andthe Board's confidence in its future prospects. Board As previously announced, the Board appointed Mr. Leo Martin as Chief OperatingOfficer with overall responsibility for the Group's Irish and UK builders andplumbers merchanting operations with effect from 12 September 2006. The Boardalso appointed Mr. Roderick Ryan and Mr. Peter Wood as Non-Executive Directorswith 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: €107.7million). The operating profit margin increased to 10.9 per cent (2005: 10.4 percent). The Irish businesses traded at record levels of activity against a positiveeconomic background. The economy grew broadly in line with its long runpotential growth rate continuing a period of expansion dating back to the mid1990's which has been exceptional by European standards. Consumer spending wasa 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 inthe housing market continued at a high level with completions reaching 88,200units. The rate of growth in house prices eased in the second half in responseto rising interest rates and increased supply. Non-residential construction also enjoyed very good demand during 2006. Inparticular, the housing repair, maintenance and improvement sector was verybusy. Private and public sector non-residential construction including civiland infrastructural engineering projects also delivered strong volume growth. Irish Merchanting Sales increased by 18 per cent to €816.6 million (2005: €690.5). The Irishmerchanting business delivered another year of good growth in sales andoperating profit with the benefit of a strongly performing economy drivingdemand in the residential, new build and RMI markets. These conditionssupported continued high levels of demand in the merchanting sector. The performance of Heitons since acquisition in January 2005 has exceededexpectations and the Group achieved its hurdle rate of return on this investmentin 2006. The overall increase in sales and profitability of the division resulted fromgood organic growth, acquisition contributions and improved underlying operatingprofit due to purchasing benefits and tight control of overheads. The sixty branch national merchanting chain trading primarily under theChadwicks and Heiton Buckley brands had healthy volume growth in the housing,RMI and civils sectors. Like for like merchanting sales increased by 8 per centalthough the pricing and trading environment remained competitive. Chadwicks had an excellent year creating new records for sales and profits. Thebusiness benefited from an increased focus on sales growth in the plumbing andheating product category in its specialist Plumb Centre and general merchantingbranches. Trading in the Naas, Co. Kildare branch benefited from a majorrefurbishment and expansion programme. The Heiton Buckley business out-performed expectations due to positive marketconditions and increased profitability derived from purchasing synergies, arigorous focus on cost efficiencies, changes in product mix and greater focus ongrowth in attractive product segments. The business also made progress on thedevelopment front relocating the Tralee branch to an out of town purpose builtfacility and opening a new branch in Mullingar. Trading indications to datehave been very encouraging at both locations. Cork Builders Providers had a very good year of sales and profit growth with thebenefit of a buoyant new build and RMI market in Cork City and also due toexpansion of its civils and drainage division. Telfords increased sales andprofits in a favourable Midlands market supported by significant investment inthe Portlaoise branch. The Davies and Garveys businesses, acquired in December 2005, traded ahead ofpre-acquisition expectations. Davies, a specialist plumbing, heating anddrainage merchant benefited from its exposure to growth in the non-residentialand infrastructure markets. The Garvey's general merchanting business reportedsolid sales growth in its Midlands based RMI market and also benefited fromGroup purchasing synergies. The Heiton Steel stockholding business performed satisfactorily despite adifficult pricing environment. The benefit of good volume growth in a positivemarket was offset by lower prices and greater competition in the cutting andbending market. Sam Hire, the leading player in the small plant and tool hire market, improvedmarket 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). TheIrish retailing business, trading under the Woodie's DIY, Atlantic Homecare andIn House at the Panelling Centre brands, had a very good year reportingincreased sales and operating profit and an improvement in the operating margin.This very positive outcome was achieved despite tougher competition due to adoubling of capacity in the sector over the past three years and higher propertycosts. The business traded against a background of strong volume growth in consumerspending continuing the trend established in 2005. This was sustained by growthin employment and earnings and the impact of maturing SSIA accounts. Consumerspending in the DIY sector was also supported by an increase in the housingstock, rising house prices and equity releases. Increased profitability came from a good performance in the established storesand contributions from Woodie's store openings in 2005 and 2006. Like for likesales in the DIY stores were on an improving trend as the year developed andshowed low single digit gains for the year. Like for like sales compared evenmore favourably with the 2005 performance when account is taken of the movementof 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 marketwhere it currently trades from 25 stores. The store network was expandedfurther during 2006 with the opening of new stores in Castlebar, Co. Mayo andNavan, Co. Meath in the first half and in Nenagh, Co. Tipperary in the secondhalf. Store openings in 2005 in Naas, Co. Kildare, Carrickmines, South Dublinand Drogheda, Co. Louth together with the relocated Cork City and Bray, Co.Wicklow stores contributed increased profitability in 2006. The 2005 and 2006store openings and relocations exceeded trading expectations. The sixteen store Atlantic Homecare DIY business successfully increased profitthrough improved trading from its enhanced ranges and targeted promotions. The five store In House at the Panelling Centre business which markets a rangeof high quality kitchen and bedroom panelling products to trade and retailcustomers, achieved excellent sales and profit growth due to good market demandin its four established stores boosted by strong consumer spending, significanttop up and house mover mortgage activity and the impact of maturing SSIAaccounts. A fifth branch was successfully opened in Galway and furtherexpansion of the format is planned. Irish Manufacturing CPI's EuroMix division increased mortar volumes supplied into a strongresidential and commercial construction market in the greater Dublin area andalso expanded sales volumes of its value added product range. Wrights, a manufacturer of windows and external doors, commissioned a new timberwindow manufacturing plant prior to the year end to meet a significant increasein demand. Operations Review United Kingdom UK sales increased by 9 per cent to €1.73 billion (2005: €1.60 billion) andoperating profit increased by 6 per cent to €114.6 million (2005: €108.2million). The UK operating margin declined to 6.6 per cent from the 6.8 percent recorded in 2005. The UK economy continued to provide a favourable background for development ofthe Group's merchanting and mortar businesses. Growth slowed to below trend in2005 against the backdrop of interest rate increases. The economy strengthenedin 2006 and growth returned to its long term trend rate. UK GDP has now expandedin 58 consecutive quarters, the longest ongoing expansion amongst all OECDcountries. So far this decade, the UK has successfully achieved lower inflationand higher growth than most of its major competitors. The UK housing market showed a sustained recovery during 2006 with risingproperty transactions and mortgage approvals and strong growth in house priceinflation. The weaker housing market and slow down in consumer spending thatoccurred in 2005 caused the RMI market to progressively weaken. This weaknesscontinued into the first half of 2006, although market conditions improved inthe second quarter and the pickup in activity was sustained over the secondhalf. Against this background, like for like sales were down 1.7 per cent in thefirst half but grew at a similar rate in the second and were marginally aheadfor the year. Operating profit declined by 8 per cent in the first half due to the combinedeffect of a weaker market and a demanding comparative result but increased by 20per cent in the second half in a recovering market. The stronger tradingperformance in the second half enabled the business to achieve operating profitgrowth of 6 per cent for the year. The operating profit margin was 7.2 per centin 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 dueto acquisitions and new branch openings in 2005 and 2006. Heitons UK business and the Group's heavyside merchanting branches weresuccessfully integrated into a newly formed Buildbase Civils and Lintelsdivision which was established to more effectively focus on the civilengineering and ground works contracting market. Five bolt-on acquisitionscompleted in 2005 were integrated into the Buildbase branch network. Fourbranches at Erith, Greater London; Gloucester, Gloucestershire; Stevenage,Hertfordshire and Haverhill, Suffolk were relocated to modern purpose builtfacilities and major refurbishment was undertaken at the Rotherham, SouthYorkshire and Sandy, Bedfordshire branches. A number of smaller branchredevelopment projects were also completed. Buildbase acquired four businesses trading from eleven branches includingFleming Holdings, the leading independent builders and timber merchant tradingfrom eight branches in Scotland. A second Buildbase branch was opened in Oxfordand since the year end two new branches were opened at Melksham, Wiltshire andStowmarket, Suffolk. Jacksons, a long established regional merchanting business with a leadershipposition in the East Midlands market, grew profits despite subdued tradingconditions in an increasingly competitive market. Profit growth was attributedto improved sourcing arrangements and tight control of costs in all areas. Thebusiness also expanded its position in the East Midlands market completing threebolt-on acquisitions trading from five locations. Macnaughton Blair, Northern Ireland's leading merchanting business, achievedanother year of strong sales and profit growth due to an improvement in theunderlying business and the impact of acquisitions. The business was wellplaced to benefit from an improving local economy and exposure to a housingmarket which outperformed all other regions of the UK in 2006. The Houtman andMFBP acquisitions completed in 2005 achieved early success reporting profitswell ahead of pre-acquisition levels. Two small acquisitions undertaken in thesecond half had a very limited impact on the results but give the business aninitial 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 amodern self-service environment, is focused on supplying trades people involvedin small RMI projects. Five new stores were opened in 2006 increasing thenetwork to seventeen. The new stores are located in London, Manchester andReading. UK Plumbers Merchanting Plumbase is the UK's fourth largest plumbers merchanting chain with a network of179 branches concentrated in the South East, West Country, Midlands, East Angliaand Scotland. Good sales and operating profit growth was achieved through a significantcontribution from the seven businesses acquired during 2005 and organic growth.Underlying profit increased against an improving trading background as the yeardeveloped and due to measures taken to reduce overheads. Market coverage by Plumbase improved with the acquisition of four businessestrading 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. Thebusiness supplies key residential, commercial and public sector constructionprojects from its network of nine plants in England and Scotland. EuroMix has aclear leadership position in the UK dry mortar market and has established asignificant reputation as a preferred supplier due to the quality of its rangeof 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 relatedraw materials and distribution price increases due to more intense competitionin the sector. Significant capacity has come on stream since Grafton pioneeredthe use of on-site dry mortar technology in the late 1990's and the market isnow moving towards a more mature stage in its development. The Bristol plantwhich opened in mid 2005 traded in line with expectations and full coverage ofthe market in England was achieved in July with the opening of the ninth plantnear Leeds. Finance The merchanting, DIY and manufacturing businesses yet again produced strongprofits and cash flow and the Group ended the year in a very healthy financialposition. The Group operating profit margin increased to 8.3 per cent (2005: 8.2per cent). Cash flow generated from operations and asset disposals amounted to€329.5 million (2005: €257.3 million) substantially outperforming the previousyear. Control of working capital continued to be a high priority across the Group andthe related investment moved in line with the increasing scale of the Group'soperations. Shareholders' funds increased by €200.5 million (25 per cent), exceeding €1billion for the first time. The increase arose from the retention of after taxprofit net of the €39.9 million returned to shareholders through the purchase oftwo 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. Capitalexpenditure increased to €124.4 million (2005: €100.6 million) reflectingroutine replacement expenditure of €51.6 million and investment of €72.8 millionin the branch network across the Group including the opening of 17 new branchlocations and a mortar plant together with initiatives intended to meet customerdemand and support the continued profitable development of Group locations inthe UK and Ireland. Net borrowings at 31 December 2006 were €550.9 million (31 December 2005: €584.2million) equivalent to a gearing ratio of 54 per cent (31 December 2005: 72 percent). Interest cover was 9.0 times (2005: 7.2 times) Pension administration was streamlined with the merger of eight defined benefitschemes in both Ireland and the UK. In association with these mergers, aspecial contribution of €17.5 million (€14.1 net of tax) was made to the Group'sdefined benefit schemes. The deficit (after deferred tax) on the Group's definedbenefit pension schemes reduced to €27.3 million (31 December 2005: €48.4million). On an ongoing IFRS basis, the overall assets in the Group's definedbenefit pension schemes represent 87 per cent of accrued liabilities (31December 2005: 75 per cent). This improvement is a result of the specialcontribution, good investment returns achieved during the year and an increasein the discount rates used to value liabilities which are based on very volatileAA Corporate Bond Rates. The positive impact of these factors was partiallyoffset 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 fourproperties in Ireland and four in the UK. These included three propertiesacquired with the Heiton Group including the Atlantic Homecare property inStillorgan, Co. Dublin. The Group also realised part of its joint venturedevelopment of Blackwater Retail Park in Navan, Co. Meath where Woodie's DIY isanchor tenant. The profit on disposal of properties was €38.0 million. Totalproceeds receivable from all asset disposals amounted to €77.7 million. Outlook Trading since the start of the year in the seasonally quieter winter months hasbeen satisfactory In Ireland, growth in the economy is forecast to remain strong in 2007.Expansion should be underpinned by increased consumer spending supported bycontinued growth in employment and earnings. Disposable incomes will also beboosted by the impact of maturing SSIA accounts and lower taxes. Some softening from current record levels of house building is generallyexpected in 2007 as activity in the sector moderates over time to moresustainable long term levels. A healthy economy, favourable demographics and amore modest pace of growth in house prices should continue to support goodunderlying demand. The repair, maintenance and home improvement market in Ireland is expected toremain buoyant against a background of strong consumer spending. The strongeconomy has boosted activity in the commercial and industrial new build sectorwhere investment is expected to remain robust. The National Development Planshould continue to underpin a high level of capital investment in infrastructureand other public sector projects. Against this very positive economic background, the Heiton Buckley and Chadwicksmerchanting businesses should continue to benefit from anticipated stable demandin the residential construction market and growth in the RMI market. Highlevels of consumer spending and a slowdown in new capacity in the Irish DIYmarket should enable the Woodie's DIY and Atlantic Homecare businesses to makefurther progress and also to benefit from last years store openings inCastlebar, Navan and Nenagh. In the UK, the economy is forecast to grow at around trend rate in 2007. Theimprovement in the RMI market over the second half of 2006 is expected tocontinue with the benefit of a strong housing market. The level of mortgageapprovals and housing transactions, lead indicators of RMI demand, is alsoencouraging. The fundamentals of the RMI market are firm, supported by astable economy, solid underlying demand, consumer confidence and employmentgrowth. These factors should sustain good levels of RMI activity although therecent 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 ofacquisitions made in 2006 and on achieving scale related synergies in theoverall business. The Group also expects to benefit from its relativelyhealthy pipeline of potential acquisition and organic growth opportunities.Competitive conditions in the UK mortar market are expected to continue in agrowing market as new mortar plants mature. The Group is confident about its future prospects and continues to pursue aconsistent strategy, based on the achievement of above average long-termreturns, 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-infacility will be available for the call as follows: Ireland: +353 1 439 0432UK: +44 207 769 6432International: +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 0300Michael Chadwick, Executive Chairman Joe MurrayColm 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 StatementFor 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 ExpenseFor the year ended 31 December 2006 2006 2005 •'000 •'000Items 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) 1,944schemesFair 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) 167Net 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 475,380 347,044Retained profit for the financial year 216,938 166,079Purchase 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 157Transfer from revaluation reserve 3,601 2,853At 31 December 662,726 475,380 Group Statement of Changes in Equity 2006 2005 •'000 •'000 At beginning of period 813,811 550,962Elimination of fair value reserve arising on acquisition of Heiton - (49,535)Group plcIssue of Grafton Units (net of issue expenses) 4,000 178,658Adjustment for share based payments expense 3,264 2,220Deferred tax on share based payments 1,832 157Purchase of A ordinary shares (39,920) (33,751)Total recognised income and expense for the financial year 231,352 165,100Closing shareholders' funds - equity 1,014,339 813,811 Grafton Group plcGroup Balance Sheet As At 31 December 2006 2006 2005 (Audited) (Audited) •'000 •'000ASSETSNon-current assetsGoodwill 582,861 532,323Intangible assets 13,307 15,519Property, plant and equipment 686,165 623,228Deferred tax assets 34,865 25,980Financial assets 414 256Total non-current assets 1,317,612 1,197,306 Current assetsInventories 390,400 356,647Trade and other receivables 542,110 499,308Derivative and other financial instruments 1,847 5,708Cash and cash equivalents 231,519 334,023Total current assets 1,165,876 1,195,686 Total assets 2,483,488 2,392,992 EQUITYCapital and reserves attributable to the Company's equity holdersEquity share capital 12,082 12,037Share premium account 284,945 281,038Capital redemption reserve 322 274Revaluation reserve 32,973 36,574Other reserve - shares to be issued 6,455 3,191Cash flow hedge reserve 1,616 285Foreign currency translation reserve 13,220 5,032Retained earnings 662,726 475,380 Total equity 1,014,339 813,811 LIABILITIESNon-current liabilitiesInterest-bearing loans and borrowings 671,617 713,712Provisions 4,468 500Retirement benefit obligations 34,163 59,032Derivative financial instruments 22,126 -Deferred tax liabilities 49,408 42,932 Total non-current liabilities 781,782 816,176 Current liabilitiesInterest-bearing loans and borrowings 88,585 209,278Trade and other payables 521,265 487,027Current income tax liabilities 52,393 50,610Derivative financial instruments 1,898 923Provisions 23,226 15,167Total 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 plcGroup Cash Flow Statement For the year ended 31 December 2006 2006 2005 •'000 •'000 Profit before taxation 249,356 192,181Finance income (21,522) (17,574)Finance expense 52,886 48,803Operating profit 280,720 223,410 Depreciation 53,163 48,248Intangible amortisation and goodwill write - off 2,455 2,176Share based payments charge 3,264 2,220Property 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 activitiesInflowsProceeds from sale of property, plant and equipment 77,664 32,793Interest received 12,216 7,738 89,880 40,531OutflowsAcquisition of subsidiary undertakings and businesses (70,621) (395,451)Net cash acquired with subsidiary undertakings 777 22,897Deferred 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 activitiesInflowsProceeds from the issue of share capital 4,000 178,658Proceeds from long term borrowings - 373,078 4,000 551,736OutflowsRepayment 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 291,844 105,822Effect 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 •'000Revenue 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 2005For the year ended 31 December •'000 •'000 Net (decrease)/increase in cash and cash equivalents (95,406) 185,606Cashflow 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 ShareThe computation of basic and diluted earnings per share is set 2006 2005out 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 fora cash consideration of 10.50 cent. The purchase of the A ordinary share willtake effect in respect of Grafton Units on the register at close of business 9March 2007 (record date) and the cash consideration will be paid on 28 March2007. 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 2006and 31 December 2005 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 2006was Stg68.17p (year ended 31 December 2005: Stg68.38p). The Euro / Sterlingexchange 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 propertyprofit (• 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 ExchangeRelated Shares:
Grafton Group