13th Sep 2006 07:01
Grafton Group PLC13 September 2006 Grafton Group plc 2006 Interim Results Record Sales, Profits and Earnings Grafton Group plc, the builders merchants and DIY Group with operations in theUK and Ireland, announces its interim results for the six months ended 30 June2006. Financial Highlights 2006 2005 ChangeRevenue €1.43 bn €1.30 bn UP 10%Operating profit* €106.9 m €97.6 m UP 10%Profit before tax €118.3 m €87.4 m UP 35%Basic earnings per share 42.8 c 32.0 c UP 34%Adjusted earnings per share * 33.0 c 30.2 c UP 9%Share purchase 8.25 c 7.25 c UP 14%Cash flow per share 53.6 c 42.2 c UP 27% *Before property profit and amortisation Operating Highlights Irish merchanting traded strongly in a favourable market Heitons continued to perform ahead of pre-acquisition expectations Lower UK profitability in softer merchanting market UK market now strengthening Positive trading conditions in competitive Irish DIY market Operations strongly cash generative Commenting on the results today, Michael Chadwick, Executive Chairman said: "The Irish economy provided a very favourable trading environment for theGroup's Irish merchanting and DIY businesses in the half year and profitabilityincreased strongly. In line with the trends experienced in the second half of2005, demand in the UK merchanting market was generally softer in the half yearcompared with the strong trading levels reported in the first half of 2005. TheGroup remains confident of continued growth in profits and earnings per share in2006 and, with a very strong financial position and healthy cash flow, is wellplaced to take advantage of suitable acquisition and development opportunities." Grafton Group plc Interim Results For the six months ended 30 June 2006 Grafton Group plc is pleased to report on a period of solid progress for theGroup and the achievement of new records for sales, profits and earnings. This was the fifteenth consecutive set of record interim results anddemonstrates the Group's long term track record of profitable growth anddevelopment. Highlights • Sales were up 10 per cent to €1.43 billion (2005: €1.3 billion) • Operating profit increased by 10 per cent to €106.9 million (2005: €97.6 million) • Adjusted earnings per share increased by 9 per cent to 33.0 cent (2005: 30.2 cent) • Basic earnings per share increased by 34 per cent to 42.8 cent (2005: 32.0 cent) The Irish economy provided a very favourable trading environment for the Group'sIrish merchanting and DIY businesses in the half year and profitabilityincreased strongly. In line with the trends experienced in the second half of2005, demand in the UK merchanting market was generally softer in the half yearcompared with the strong trading levels reported in the first half of 2005. This was a positive outcome for the half year in view of market conditions inthe UK, the Group's principal market accounting for fifty nine per cent ofturnover. The results clearly demonstrate the benefit to shareholders ofincreasing the Group's exposure to Ireland in 2005 through the Heitonacquisition which performed ahead of pre-acquisition expectations. The stronglyperforming Irish business compensated for the softer market conditions in theUK. In a buoyant market, Irish turnover increased by 18 per cent to €590.7 million(2005: €500.0 million) and operating profit increased by 31 per cent to €57.1million (2005: €43.5 million). The Irish operating profit margin increased to9.7 per cent from 8.7 per cent. The UK business increased sales by 5.4 per centto €836.5 million (2005: €793.3 million) and operating profit was lower at €49.8million (2005: €54.1 million) as operating margins reduced. Share Purchase The Board has decided to purchase one A ordinary share per Grafton Unit for acash consideration of 8.25 cent on 6 October 2006 (record date). The cashconsideration will be paid on 18 October 2006. This represents an increase of14 per cent on the equivalent share purchase payment of 7.25 cent per GraftonUnit for the half year to 30 June 2005. No interim dividend will be declared. Board The Board is pleased to announce the appointment of Mr. Leo Martin as ChiefOperating Officer with overall responsibility for the Group's Irish and UKBuilders and Plumbers Merchanting operations. Leo was appointed to the Board inJanuary 2005 following the acquisition of Heiton Group plc where he was ChiefExecutive. The Board believes this appointment will bring increased focus andcontinued synergy benefits to the Group's merchanting operations. As previously announced, the Board was pleased to appoint Mr. Roderick Ryan andMr. Peter Wood as Non-Executive Directors with effect from 15th March 2006 and1st July 2006 respectively. Both bring valuable experience to the Board. Development In the UK, the Group continued to benefit in the half year from a steady flow ofbolt-on acquisitions completing seven transactions. The seven businesses tradefrom sixteen branches with an annual turnover of €70 million. The Group strategy of developing organically progressed further with tenprojects completed covering the opening of eight merchanting branches in the UKand two DIY stores in Ireland. These acquisitions and organic developments improve our market positions,increase the number of trading locations to over 500 and provide a platform forthe continued profitable development of the Group. Operations Review - Republic of Ireland Irish turnover increased by 18 per cent to €590.7 million (2005: €500.0 million)and operating profit increased by 31 per cent to €57.1 million (2005: €43.5million). The Irish operating profit margin increased to 9.7 per cent from 8.7per cent. The Irish economic background has been very favourable in 2006. The economycontinued to grow in line with its potential growth rate of around 5 per cent.Growth has been more broadly based than in recent years and is being led byincreased consumer spending and investment. The recovery in consumer spendingin recent years became more established in 2006 supported by high levels of jobcreation and healthy income growth. Economic activity has also been boosted bythe growing population. The volume of building and construction activity in Ireland is forecast toincrease by close to 6 per cent in 2006. The Irish housing market has remainedexceptionally strong supported by a significant increase in the population, highinward migration, strong employment growth, relatively low mortgage rates andthe overall strength of the economy. Further growth in housing output isforecast for 2006 over record completions of 86,000 units in 2005. Significantgrowth beyond 2006 in residential RMI construction activity is also forecast duein part to a boost from the maturing SSIA accounts. Irish Merchanting The Irish merchanting business reported another half year of strong sales andprofit growth. Sales were up 21 per cent to €407.6 million (2005: €337.5million). The first half performance benefited from a strong economy and exposure to thenew housing and RMI markets which operated at record levels. The business alsohas an exposure to the commercial construction market where the prevailing macroeconomic environment resulted in increased activity in the retail, offices andindustrial sectors. Trading from 59 builders merchanting locations nationally mainly under theChadwicks and Heiton Buckley brands, the division delivered strong organicgrowth with like for like sales up 9 per cent. The established Chadwicks and Telfords businesses traded at record levelsoutperforming the overall market and reporting good profit growth. The Heiton Buckley chain and Cork Builders Providers, now under Group ownershipsince January 2005, delivered an excellent performance in the half year. Goodorganic sales growth, a continuing focus on operational efficiencies andpurchasing synergies contributed to improved profits and margins. Theperformance of the business has exceeded the Group's pre-acquisitionexpectations and the quality of the enlarged Irish business reflects the verypositive integration benefits achieved, under a range of headings, by theChadwicks and Heiton Buckley management teams. The Davies and Garvey's businesses acquired in December 2005 traded stronglywith operating profit contributions for the half year ahead of expectations.The Davies business is well positioned to benefit from growth opportunities inbuoyant commercial and infrastructure markets. Garvey's, which is primarilyexposed to RMI activity in the Midlands market, benefited from purchasingsynergies and good sales growth. Heiton Steel, the largest steel stockholding business in the Irish market,continued to effectively manage the lower price environment for steel carriedinto 2006 although prices recovered toward the end of the half year and volumeswere strong. On the development front, the Heiton Buckley branch in Tralee was relocated to anew out of town purpose built facility and a new Heiton Buckley branch openedlast month in Mullingar. Irish Retailing The 46 store Irish retailing business continued to build on the significantincrease in scale achieved in 2005 with turnover growth of 15 per cent to €147.0million (2005: €127.4 million) and increased profitability in the half year.The overall impact of greater competition in the Irish DIY market, due to anincrease in store openings over the past two years, was offset by favourablemarket conditions and like for like sales were flat for the half year. There was a continuing recovery in retail spending following several years ofweak growth due to an increase in the rate of savings. The volume of retailsales is forecast to grow by over 6 per cent in 2006 reflecting continued growthin employment and earnings. The Groups' DIY business is well placed to benefitfrom this trend going forward. The retail business delivered strong organic sales and profit growth despite amore competitive market. Woodie's continued to consolidate its leadership position in the Irish DIYmarket with the successful opening of stores in Castlebar and Navan in the halfyear. Last year's store openings in Carrickmines, South Dublin, Drogheda, Co.Louth and Naas, Co. Kildare traded in line with expectations. In August,Woodie's 25th store in Nenagh opened and a substantial increase in the scale ofthe Waterford store is currently under construction. The sixteen store Atlantic Homecare DIY business continued to focus on cost andefficiency improvements and the introduction of new product ranges which havehad a positive customer response. 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 in the half year. Thebusiness has been ideally positioned to benefit from buoyant demand particularlyin the RMI market. The fifth store in Galway opened at the end of the half yearand further store openings are planned. Irish Manufacturing CPI's EuroMix division increased volumes in a growth market for residential andcommercial construction. The Wright window and door manufacturing business performed to expectationsaided by positive market conditions. United Kingdom Despite softer market conditions, the UK business achieved sales growth of 5.4per cent to €836.5 million (2005: €793.3 million) through contributions from2005 and current year acquisitions and brownfield branch developments.Operating profit was lower at €49.8 million (2005: €54.1 million) due to adecline in like for like sales of 1.7 per cent benchmarked against strong growthin a more favourable market in the first half of 2005. The operating profitmargin reduced to 6 per cent (2005: 6.8 per cent) due to the impact of lowersales in a more competitive market, some dilution from brownfield branchopenings in 2005 and 2006 and a competitive mortar market. The RMI market progressively weakened during 2005 following a prolonged periodof growth supported by a strong economy, rising house prices and lower interestrates. These key drivers of demand weakened in 2005 leading to an overall fallin residential RMI activity for the year. This slowdown continued into thefirst half of 2006 although market conditions improved in the second quartersupported by broadly based growth in the economy, stable interest rates, a pickup in house price inflation and a sharp increase in mortgage approvals andhousing transactions. UK Builders Merchanting The UK builders merchanting division has grown rapidly in recent years andfurther improved its overall market position in the half year with acquisitionand brownfield led sales growth. Lower like for like sales in a weaker marketresulted in a decline in profits from the record levels achieved in the firsthalf of 2005. The impact of lower volumes on profitability in the establishedbusiness was partly offset by overhead efficiencies and contributions fromacquisitions. Market coverage improved with the completion of four bolt-on acquisitionstrading from 11 branches and the opening of two brownfield branches increasingthe number of merchanting locations to 195 at the end of the half year. Buildbase, whose business primarily services the RMI market, reported overallunchanged sales in a weaker market compared with strong trading levels in thefirst half of 2005. Trading improved in the second quarter following the slowstart to the year. The profit impact of lower activity levels was partiallymitigated by the implementation of measures to reduce costs. The five bolt-onacquisitions completed in 2005 were smoothly integrated into the Buildbasebranch network. Heiton's UK business was fully integrated into the newly formedBuildbase Civils and Lintels division which was established to more effectivelyservice the needs of the civil engineering and ground works contracting market.Buildbase has successfully established a Partnering initiative, in conjunctionwith the Group's other UK businesses, to provide a structured approach todeveloping long term supply chain relationships with Local Authorities and thelarger companies operating in the construction and related markets. Theacquisition at the end of the half year of Fleming Holdings, the leadingindependent builders and timber merchant in Scotland where it trades from eightbranches, substantially strengthens the position of Buildbase in that market. Jacksons delivered a robust performance in the half year despite the morecompetitive trading conditions in the East Midlands market. Macnaughton Blair, the leading merchant in the Northern Ireland market where ittrades from thirteen branches, had an excellent half year in a generallyfavourable market and delivered a good increase in sales and operating profit.MFBP, a leading builders merchant on the Isle of Man, and Houtman, a longestablished scaffolding business based in Belfast, which were acquired during2005 performed well in the half year making good contributions to operatingprofit. UK Plumbers Merchanting Trading levels in Plumbase were generally weaker in the first quarter butimproved as the second quarter progressed. Despite less favourable marketconditions, the half year was a period of healthy growth in sales and operatingprofit for Plumbase. The improved performance of the business reflected theimpact of contributions from the seven plumbers merchanting businesses acquiredin 2005 and the positive impact of measures taken to control costs. Development of the Plumbase network continued with the opening of six branchesand the acquisition of four branches expanding the network to 177 tradinglocations at the end of the half year. UK Mortar EuroMix consolidated its leadership position in the UK mortar market with goodsales growth in a stable residential and commercial construction market. Thebusiness continued to expand its market position based on the sustained successof its dry mortar products and service offering which has an almost nationalreach. The competitive environment in the mortar market has evolved over thepast two years with expansion in capacity as the sector moves to a more maturestage of development. The more competitive trading environment in the half yearresulted in the business absorbing increased energy related raw materials anddistribution costs leading to some margin erosion and lower operating profit.The Bristol plant which opened in mid 2005 traded in line with expectations andmarket coverage improved in July with the opening of the ninth plant near Leeds. Finance The Group ended the half year in a very strong financial position. Cashflowgenerated from operations and property disposals amounted to €144.4 million(2005: €114.7 million) substantially ahead of the comparative period. Despite an active acquisition and development program in the half year, theGroup's very healthy cashflow resulted in a reduction of €40.2 million in netdebt to €543.9 million. Shareholders' funds increased by €93.0 million, after spending €20.2 million onthe purchase of A ordinary shares in March 2006. The ratio of net debt to shareholders funds at 30 June 2006 was down to 60 percent from 72 per cent at 31 December 2005. Interest cover improved to 8.6 times (2005: 6.9 times). Group spending on acquisitions and capital projects amounted to €91.1 million inthe half year (2005: €446.9 million). This was down on the comparable half yearwhich included the cost of the Heitons acquisition. Acquisitions andinvestments made during the half year cost €40.6 million including acquireddebt. Capital expenditure of €48.2 million (2005: €58.4 million) comprisedroutine replacement expenditure of €23.4 million and development expenditure of€24.8 million which is intended to support the continued profitable growth ofthe Group and included expenditure associated with the opening of ten newlocations in the half year. The Group continued to realise significant value from its property portfoliowith the disposal of three properties in Ireland, including the AtlanticHomecare property in Stillorgan, Co. Dublin, and three in the UK. The Groupalso realised part of its joint venture interest in the Blackwater Retail Parkdevelopment in Navan, Co. Meath. The total proceeds receivable from thesetransactions amounted to €64.1 million and the profit on disposals anddevelopment profit was €28.1 million. Outlook In Ireland, trading has remained strong since the end of the half year and themedium term prospects for the economy are expected to remain favourable.Consumer spending is expected to continue to grow supported by increasedemployment and disposable incomes and a contribution from the maturing SSIAaccounts. Prospects for the Irish housing market continue to be positive supported bystrong demographics, high levels of job creation and growth in disposableincomes although interest rate rises may lead to some moderation in the currentstrong level of demand. The favourable economic background should continue to sustain strong demand inthe residential construction and RMI markets which are serviced by the HeitonBuckley and Chadwicks merchanting businesses. Strong consumer spending should continue to be supportive of good levels ofdemand in the Irish DIY market although the benefit of the favourable marketwill be partly offset by the addition of significant capacity in the sector inrecent years. The Group's Irish DIY business will also benefit from currentyear store openings in Castlebar, Navan and Nenagh. In the UK, the improving market conditions identified in the second quarter havebeen sustained into the second half. After a period of below trend growth, theeconomy is expected to grow at close to its trend rate over the past decade. The housing market has improved significantly and is expected to perform wellfollowing a significant pick up in transactions and mortgage lending. These conditions should continue to support a gradual recovery in the RMI marketbut possibly at a more moderate pace of growth than experienced in recent years.The UK merchanting business will continue to focus on realising scale relatedsynergies and efficiencies. The continued development of the branch network isexpected to be supported by further bolt-on acquisitions and brownfielddevelopments. The UK mortar market is anticipated to remain competitive due tothe increased capacity in the sector. The Group remains confident of continued growth in profits and earnings pershare in 2006 and, with a very strong financial position and healthy cash flow,is well placed to take advantage of suitable development opportunities and ahealthy pipeline of potential acquisitions. Analyst Meeting There will be an analyst meeting today at 08.45 (BST) in Dublin. A dial-infacility will be available for this meeting: Ireland: +353 1 439 0432UK: +44 207 769 6432Other: +353 1 439 0432 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 Grafton Group plc Group Income StatementFor the six months ended 30 June 2006 Six months Six months Twelve months to 30 June 2006 to 30 June 2005 to 31 Dec 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 Revenue 1,427,158 1,293,329 2,629,464 Operating costs (1,321,334) (1,196,779) (2,415,694) Operating profit before property profit 105,824 96,550 213,770 Property profit 28,123 5,928 9,640 Operating profit 133,947 102,478 223,410 Finance costs (27,123) (20,641) (48,803) Finance income 11,450 5,552 17,574 Profit before tax 118,274 87,389 192,181 Income tax expense (16,558) (12,081) (26,102) Profit after tax for the financial period 101,716 75,308 166,079 Profit attributable to:Equity holders of the company 101,716 75,308 166,079 Basic earnings per share 42.77c 31.99c 70.26c Adjusted earnings per share 33.00c 30.21c 67.80c Diluted earnings per share 41.90c 31.25c 68.80c Group Statement of Recognised Income and ExpenseFor the six months ended 30 June 2006 Six months to Six months Twelve 30 June 2006 to 30 June months to 31 2005 Dec 2005 •'000 •'000 •'000Items of income and expense recognised directly within equity:Currency translation effects - on foreign currency net (3,815) 13,501 7,999 investments - on foreign currency borrowings 189 (2,145) (811)Actuarial gain/(loss) on Group defined benefit pension schemes 12,378 (10,828) (8,946)Deferred tax on Group defined benefit pension schemes (2,219) 1,726 1,944Fair value movement in cash flow hedge 1,052 (1,937) (1,332)Deferred tax on cash flow hedge (132) 242 167Net income / (expense) recognised directly in equity 7,453 559 (979) Profit after tax for the financial period 101,716 75,308 166,079 Total recognised income and expense for the period 75,867 165,100 109,169Attributable to:Equity holders of the company 109,169 75,867 165,100 Movement on Group Retained Earnings 30 June 30 June 31 Dec 2006 2005 2005 •'000 •'000 •'000 At 1 January 475,380 347,044 347,044Retained profit for the financial period 101,716 75,308 166,079Purchase of A ordinary shares (20,204) (16,542) (33,751)Actuarial gain/(loss) on pensions (net of tax) 10,159 (9,102) (7,002)Deferred tax on share based payments 258 260 157Transfer from revaluation reserve 3,530 120 2,853At end of period 570,839 397,088 475,380 Group Statement of Changes in Equity 30 June 30 June 31 Dec 2006 2005 2005 •'000 •'000 •'000 At beginning of period 813,811 495,538 495,538Impact of adoption of IAS 32 & IAS 39 - 55,424 55,424At beginning of period as adjusted 813,811 550,962 550,962 Elimination of fair value reserve arising on acquisition of - (49,535) (49,535)Heiton Group plcIssue of Grafton Units (net of issue expenses) 2,011 178,107 178,658Adjustment for share based payments expense 1,807 839 2,220Deferred tax on share based payments 258 260 157Purchase of A ordinary shares (20,204) (16,542) (33,751)Total recognised income and expense for the period 109,169 75,867 165,100Closing shareholders' funds - equity 906,852 739,958 813,811 Grafton Group plc Group Balance Sheet as at 30 June 2006 30 June 2006 30 June 2005 31 Dec 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000ASSETSNon-current assetsProperty, plant and equipment 629,388 596,494 623,228Intangible assets - goodwill 543,258 482,672 532,323Intangible assets - other 14,422 16,635 15,519Financial assets 267 234 256Deferred tax assets 27,567 31,123 25,980Total non-current assets 1,214,902 1,127,158 1,197,306 Current assetsInventories 370,473 337,867 356,647Trade and other receivables 564,325 495,061 499,308Derivative and other financial instruments 1,377 3,291 5,708Cash and cash equivalents 255,250 396,748 334,023Total current assets 1,191,425 1,232,967 1,195,686 Total assets 2,406,327 2,360,125 2,392,992 EQUITYCapital and reserves attributable to the Company's equityholdersEquity share capital 12,061 12,042 12,037Share premium account 283,001 280,505 281,038Capital redemption reserve 298 251 274Revaluation reserve 33,044 39,307 36,574Other reserve - shares to be issued 4,998 1,810 3,191Cash flow hedge reserve 1,205 (245) 285Foreign currency translation reserve 1,406 9,200 5,032Retained earnings 570,839 397,088 475,380 Total equity 906,852 739,958 813,811 LIABILITIESNon-current liabilitiesInterest-bearing loans and borrowings 548,315 728,794 713,712Deferred tax liabilities 44,708 39,159 42,932Retirement benefit obligations 44,973 70,651 59,032Provisions 500 1,093 500Total non-current liabilities 638,496 839,697 816,176 Current liabilitiesInterest-bearing loans and borrowings 235,959 209,444 209,278Trade and other payables 552,291 514,409 498,717Current tax liabilities 55,252 51,483 50,610Derivative financial instruments 16,292 1,577 923Provisions 1,185 3,557 3,477Total current liabilities 860,979 780,470 763,005 Total liabilities 1,499,475 1,620,167 1,579,181 Total equity and liabilities 2,406,327 2,360,125 2,392,992 Grafton Group plcGroup Cash Flow StatementFor the six months ended 30 June 2006 Six Months to 30 Six Months to Twelve months to June 2006 30 June 2005 31 Dec 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000Operating profit before property profit 105,824 96,550 213,770Depreciation 24,742 22,980 48,248Intangible amortisation 1,097 1,060 2,176Share based payments charge 1,807 839 2,220Net profit on sale of plant and equipment (1,382) (1,189) (2,564)Contributions to pension schemes in excess of IAS 19 charge (1,526) (639) (10,888)Increase in working capital (26,025) (3,653) (28,485)Cash generated from operations 104,537 115,948 224,477 Interest paid (22,055) (15,522) (39,233)Income taxes paid (2,462) (5,357) (15,226)Cash flows from operating activities 80,020 95,069 170,018 Investing activitiesInflowsProceeds from sale of property, plant and equipment 57,972 18,578 32,793Interest received 6,451 1,093 7,738 64,423 19,671 40,531OutflowsAcquisition of subsidiary undertakings and businesses (39,908) (307,636) (395,451)Net cash acquired with subsidiary undertakings 2,329 15,083 22,897Deferred acquisition consideration (2,284) (5,586) (6,844)Purchase of property, plant and equipment (48,230) (58,400) (100,559) (88,093) (356,539) (479,957) Cash flows from investing activities (23,670) (336,868) (439,426) Financing activitiesInflowsProceeds from the issue of share capital 2,011 178,107 178,658Proceeds from long term borrowings - 346,970 373,078 2,011 525,077 551,736OutflowsRepayment of long term borrowings (109,115) - (35,673)Purchase of A ordinary shares (20,204) (16,542) (33,751)Payment of finance lease liabilities (1,103) (978) (2,061)Redemption of loan notes payable (9,842) (19,872) (25,237) (140,264) (37,392) (96,722) Cash flows from financing activities (138,253) 487,685 455,014 Net (decrease) / increase in cash and cash equivalents (81,903) 245,886 185,606Cash and cash equivalents at the beginning of the period 291,844 105,822 105,822Effect of exchange rate fluctuations on cash held (2,655) 791 416Cash and cash equivalents at the end of the period 207,286 352,499 291,844 Cash and cash equivalents are broken down as follows: 334,023 Cash at bank and short term deposits 255,250 396,748Overdrafts (47,964) (44,249) (42,179) 207,286 352,499 291,844 Grafton Group plcNotes to interim results for the half year ended 30 June 2006 1. General Information and Accounting Policies The interim Financial Statements have been prepared in accordance with theGroup's accounting policies under International Financial Reporting Standards(IFRS) as set out in the Group's 2005 Annual Report. The comparative numbers at30 June 2005 have been restated to reflect final accounting policies adoptedunder IFRS at 31 December 2005. 2. Revenue and Operating Profit by Geographic Segment The amount of revenue by geographic segment is as follows: Six months to Six months to Twelve months to 30 June 2006 30 June 2005 31 Dec 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000RevenueIreland 590,654 499,995 1,032,899 United Kingdom 836,504 793,334 1,596,565 1,427,158 1,293,329 2,629,464 Operating profit before property profit and intangibleamortisationIreland 57,106 43,486 107,702 United Kingdom 49,815 54,124 108,244 Operating profit before property profit and intangibleamortisation 106,921 97,610 215,946 Intangible amortisation - Ireland (1,097) (1,060) (2,176) 105,824 96,550 213,770 Operating profit before property profitIreland 56,009 42,426 105,526 United Kingdom 49,815 54,124 108,244 105,824 96,550 213,770 Property profitIreland 24,104 4,251 7,963 United Kingdom 4,019 1,677 1,677 28,123 5,928 9,640 Operating profitIreland 80,113 46,677 113,489 United Kingdom 53,834 55,801 109,921 133,947 102,478 223,410 Finance costs (net) (15,673) (15,089) (31,229)Profit before tax 118,274 87,389 192,181 3. Analysis of Revenue by Business Segment Six months to Six months to Twelve months to 30 June 2006 30 June 2005 31 Dec 2005 (Unaudited) (Unaudited) (Audited) •'000 •'000 •'000 Revenue UK merchanting 803,121 761,774 1,533,700 Irish merchanting 407,604 337,483 690,549 Irish DIY 147,007 127,383 272,589 Irish and UK manufacturing 69,426 66,689 132,626 1,427,158 1,293,329 2,629,464 4. Reconciliation of Net Cash Flow to Movement in Net Debt For the six months ended 30 June 2006 30 June 30 June 31 Dec 2006 2005 2005 •'000 •'000 •'000 Net (decrease) / increase in cash and cash equivalents (81,903) 245,886 185,606Cash-flow from movement in debt and lease financing 120,060 (326,120) (310,107)Change in net debt resulting from cash flows 38,157 (80,234) (124,501) Loan notes issued on acquisition of subsidiary - (867) (867)undertakingsBank loans and loan notes acquired with subsidiary (89,519)undertakings (2,926) (81,861)Finances leases acquired with subsidiary undertakings (87) (7,652) (7,934)Translation adjustment 4,047 (19,653) (12,457)Net movement in derivative financial instruments 1,052 (1,937) (1,332) Movement in net debt in the period 40,243 (192,204) (236,610) Net debt at 1 January (584,182) (349,229) (349,229)IAS 32/39 adjustment at 1 January 2005 - 1,657 1,657Net debt restated at 1 January (584,182) (347,572) (347,572) Net debt at end of the period (543,939) (539,776) (584,182) 5. Earnings per Share The computation for basic, diluted and adjusted earnings per share is set out inthe table below. Half Year Half Year Year Ended 30 June 2006 30 June 2005 31 Dec 2005 •'000 •'000 •'000 Numerator for basic, adjusted and diluted earnings per share: Profit after tax for the financial period 101,716 75,308 166,079 Numerator for basic and diluted earnings per share 101,716 75,308 166,079 Property profit after tax (24,186) (5,116) (7,731)Intangible amortisation after tax 960 928 1,904 Numerator for adjusted earnings per share 78,490 71,120 160,252 Number of Number of Number of Grafton Grafton Units Grafton Units Units Denominator for basic and adjusted earnings per share: Weighted average number of Grafton Units in issue 237,841,649 235,445,159 236,371,547 Effect of potential dilutive Grafton Units 4,913,765 5,517,180 5,023,349 Denominator for diluted earnings per share 242,755,414 240,962,339 241,394,896 Earnings per share (cent)- Basic 42.77 31.99 70.26- Diluted 41.90 31.25 68.80 Adjusted earnings per share (cent)- Basic 33.00 30.21 67.80 6. Share Purchase The Board has approved the purchase of one A ordinary share per Grafton Unit fora cash consideration of 8.25 cent. The purchase of the A ordinary share willtake effect in respect of Grafton Units on the register at close of business 6October 2006 (record date) and the cash consideration will be paid on 18 October2006. 7. Exchange Rates The results and cash flows of the Group's United Kingdom subsidiaries have beentranslated into Euro using the average exchange rate. The related balancesheets of the Group's United Kingdom subsidiaries at 30 June 2006 and 30 June2005 have been translated at the rate of exchange ruling at the balance sheetdate. The average Euro / Sterling rate of exchange for the six months ended 30 June2006 was Stg68.70p (six months to 30 June 2005: Stg68.59p and twelve months to31 December 2005: Stg68.38p). The Euro / Sterling exchange rate at 30 June 2006was Stg69.21p (30 June 2005: Stg67.42p and 31 December 2005: Stg68.53p). Independent review report to Grafton Group plc Introduction We have been engaged by the Company to review the financial information whichcomprises the Group Interim Income Statement, Group Interim Balance Sheet, GroupInterim Statement of Recognised Income and Expense, Group Interim Cash FlowStatement and related notes. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Irish Stock Exchange and the UK Financial Services Authority. Ourreview has been undertaken so that we might state to the Company those matterswe are required to state to it in this report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility toanyone other than the Company, for our review work, for this report, or for theconclusions we have reached. Directors' responsibilities This interim report, including the financial information contained therein, isthe responsibility of and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules which require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual financial statements except where any changes, and the reasonsfor them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4Review of interim financial information issued by the Auditing Practices Boardfor use in Ireland and the United Kingdom. A review consists principally ofmaking enquiries of Group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review is substantially lessin scope than an audit performed in accordance with Auditing Standards andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMGChartered AccountantsDublin12 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Grafton Group