15th Mar 2006 07:00
Grafton Group PLC15 March 2006 Grafton Group plc 2005 Final Results Record Sales, Profits and EarningsGrafton Group plc, the builders merchants and DIY Group with operations in theUK and Ireland, announces its final results for the year ended 31 December 2005. Financial Highlights 2005 2004 ChangeRevenue €2.63 Bn €1.87 Bn UP 40%Operating profit * €215.9 m €159.5 m UP 35%Profit before tax €192.2 m €145.8 m UP 32%Basic earnings per share 70.3 59.1 UP 19%Earnings per share before amortisation 67.8c 56.1c UP 21% of intangibles and property profitShare purchase / redemption 15.75c 13.0c UP 21%Cash flow per share 91.6c 75.4c UP 21%*Before property profit and amortisation of intangibles Operating Highlights Irish merchanting traded strongly aided by positive market conditionsHeitons performed comfortably ahead of pre-acquisition expectationsUK profitability maintained in a challenging marketStore openings increase competition in Irish DIY marketRecord acquisition and development activity in 2005 Commenting on the results today, Michael Chadwick, Chairman said: "Profits advanced significantly in Ireland with out-performance by Heitons andstrong organic growth in merchanting. Trading conditions in the UK weakened during the second half and the overall UK profit outcome was in line with theprevious year. In Ireland the market outlook continues to be strong, althoughconditions remain very competitive especially in the DIY sector. Recenteconomic data in the UK is encouraging with improving consumer confidence and agradual recovery in the RMI market is forecast for the second half of 2006. TheGroup expects to benefit from a healthy pipeline of acquisition and organicgrowth opportunities." 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 reports strong growth in sales, profits and earnings for 2005.This was the Group's fourteenth consecutive year of record results and alsomarked completion of the Heitons acquisition, a significant strategic move andthe Group's largest acquisition to date. Highlights • Sales were up 40 per cent to €2.63 billion (2004: €1.87 billion). • Operating profit increased by 35 per cent to €215.9 million (2004: €159.5 million). • Adjusted earnings per share increased by 21 per cent to 67.8 cent (2004: 56.1 cent). • Basic earnings per share increased by 19 per cent to 70.3 cent (2004: 59.1 cent). • Cash generated from operations was up 26 per cent to €224 million (2004: €178 million). • Heiton Group plc, acquired in January 2005, contributed €48.8 million to Group operating profit for 2005. There was a significant advance in Irish profit for 2005 due to the Heitonacquisition and strong organic growth in the Group's established Irishmerchanting operations. Trading conditions in the UK weakened as the secondhalf developed and overall UK profit for the year was in line with 2004. The results for 2005 demonstrate the benefit to our shareholders of rebalancingof the Group's operations between the UK and Ireland with stronger profits inIreland compensating for the slow down in the UK market. The Group's consistentstrategy of broadening its earnings base and developing strong market positionsand brands in the UK and Ireland enabled the achievement of new record levels ofsales, profits and earnings in 2005. Completion of the acquisition of Heiton Group plc on 7 January 2005substantially increased the scale of the Group's operations with Irish turnovermore than doubling to exceed €1 billion. The acquisition consolidated theGroup's market leadership position in the Irish builders merchanting and DIYmarkets. Heitons performed strongly in 2005 comfortably outperformingpre-acquisition expectations. The Group absorbed the Heiton businesses with asmooth transition on change of ownership to Grafton. In the Republic of Ireland, the economy grew strongly and provided a verypositive backdrop for record levels of residential construction and RMIactivity. Irish turnover increased by 129 per cent to €1,033 million (2004:€452 million) and operating profit increased by 110 per cent to €107.7 million(2004: €51.4 million). An almost full year contribution from Heitons, stronglike for like sales growth in the established merchanting business and new storeopenings in the DIY business resulted in a significant increase in Irish salesand operating profit compared to 2004. The Irish businesses accounted for 39per cent (2004: 24 per cent) of Group turnover and half (2004: 32 per cent) ofGroup operating profit for the year. After a good start to the year, the performance of our UK business wasinfluenced by a slowing UK economy. Despite a more difficult economicbackground, which led to more subdued demand in the repair, maintenance andimprovement market, sales increased by 12 per cent to €1.60 billion (2004: €1.42billion) and operating profit of €108.2 million matched the record levelachieved in 2004. Development To date the Group's successful acquisition strategy has been primarily based onthe completion of small and medium sized bolt-on transactions. The successfulacquisition of Heitons, a business turning over €608 million from 67 branches,demonstrated the Group's ability to undertake large transactions which are agood strategic fit and deliver shareholder value. The Group continued tobenefit from a steady flow of bolt-on acquisitions in recent years completingsixteen transactions in 2005. In the UK, the Group acquired fourteen buildersand plumbers merchanting businesses trading from nineteen branches with annualsales of €85 million. These transactions primarily improve our market coveragein the North West and South East. In Ireland, in addition to the Heitontransaction, the Group acquired two businesses, trading from three branches withannual sales of €47 million, which provided the Group with a significantopportunity to expand its product portfolio and geographic coverage in thebuilders and plumbers merchanting market. The Group continued its strategy of developing organically completing nineteenprojects with the opening of fourteen merchanting branches and a new dry mortarplant in the UK and four DIY stores in Ireland. The 2005 acquisition program together with organic developments substantiallyincreased the scale of the Group's operations, improved our market positions andprovided a sound platform for the continued long term development of the Group.In January 2006 the Group acquired the remaining shares in Heiton's Polishbusiness. The Group used its healthy cashflow from operations and strong balance sheet tofund its record spend of €571.4 million (2004: €173.80 million) on acquisitionsand capital projects while retaining financial strength and balance sheetflexibility to continue to implement the Group's ongoing development strategy. Share Purchase The Company purchased one A ordinary share per Grafton unit for a cashconsideration of 7.25 cent paid on 7 October 2005. The Board has decided topurchase a further A ordinary share per Grafton unit for a cash consideration of8.5 cent payable on 31 March 2006. The total share purchase payments to shareholders for 2005 amount to15.75 centper Grafton Unit, an increase of 21 per cent on total share purchase /redemption payments for 2004 of 13 cent per Grafton Unit. Board The Board is pleased to announce the appointment of Roderick Ryan (49) as anon-executive Director. Mr. Ryan is a Chartered Accountant by profession andGroup Executive Director of Glen Dimplex. He was formerly Managing Partner ofArthur Andersen in Ireland and, as a member of the European Executive Committee,he directed the industry section of Andersen's practice in the European Area.The Board is at an advanced stage in the appointment of a further non-executiveDirector. International Financial Reporting Standards The results for 2005 have been prepared in accordance with the Group's policiesunder International Financial Reporting Standards (IFRS). The transition datefor implementation of IFRS by the Group was 1 January 2004. The financialstatements for the year ended 31 December 2004, which were prepared inaccordance with accounting practices generally accepted in the Republic ofIreland, have been restated under IFRS with effect from the transition date. Full details of the accounting policies adopted by the Group on implementationof IFRS were published on 6 July 2005 and are available on the Group's websitewww.graftonplc.com. Operations Review - United Kingdom UK sales increased by 12 per cent to €1.60 billion (2004: €1.42 billion) andoperating profit was in line with last year's record level of €108.2 million.The operating margin declined to 6.8 per cent (2004: 7.6 per cent). The UK has been a very favourable trading and operating environment since themid 1990s enabling the Group to develop leading positions in the merchanting andmortar markets. The performance of the UK economy has been impressive over thisperiod. Growth slowed however to 1.7 per cent in 2005 which, although belowtrend in the toughest year for the economy since the mid 1990's, was higher thangrowth in both the Euro area and European Union. A series of interest rate rises, at a time of historically high household debt,and a slow down in the housing market weakened consumer confidence and the paceof consumer spending slowed. There was also a fall in the volume of propertytransactions and a drop in mortgage equity withdrawal. The combined effect ofthese factors reduced activity in the RMI market particularly during the secondhalf of the year. This is the principal end-use market for the Group'smerchanting sales. The Group's like for like UK merchanting sales were flat in 2005 compared to anincrease of 6.5 per cent in 2004. The increase in first half like for likesales was reversed in the second half in a weaker market. The increase inoverall UK sales in 2005 was derived from acquisitions and branch openings in2004 and 2005. In a more difficult trading environment the Group successfullymaintained UK operating profit in line with the previous year. Consolidation in the UK merchanting market continued in 2005 and the Groupactively participated in that process acquiring fourteen builders and plumbersmerchanting businesses trading from nineteen branches. Our presence in the UKmerchanting market was further strengthened by Heiton's UK business, a sixbranch specialist drainage and ground engineering business, and the opening offourteen greenfield branches. The UK merchanting network ended the year tradingfrom 349 locations. UK Builders Merchanting The UK Builders merchanting division had a satisfactory year increasing salesand operating profit with the benefit of acquisitions. Sales in the second halfof the year trended lower in line with weakening conditions in the RMI market Seven single branch merchants were acquired and a further six branches wereadded from the Heiton deal. Six greenfield branches were opened increasing thedivisions trading locations to 182 by the year end. Buildbase increased sales and profit in a less buoyant and more competitivemarket place. The impact of lower volumes was partly mitigated by successfullyimplementing cost reduction and efficiency measures. At the end of its tenthyear of trading Buildbase is now a key player in the UK merchanting markethaving successfully developed primarily through acquisition. More recentlyBuildbase has in addition grown its network by greenfield developments includingfour branch openings in 2005. Tool and equipment hire centres, trading asHirebase, were added to eight branches. Jacksons, one of the UK's leading regional merchanting brands with a majorpresence in the East Midlands market, had a successful second full year as partof the Group. In Northern Ireland, Macnaughton Blair, the leading merchant in the provincewhere it trades from thirteen branches, increased sales and operating profit.Market conditions in the province continued to be favourable. The buildersmerchanting branch in Coleraine, acquired in 2004, was relocated to a newpurpose built facility in the town. Macnaughton Blair acquired MFBP, a leadingbuilders merchanting business on the Isle of Man and Houtman, a long establishedscaffolding business based in Belfast. UK Plumbers Merchanting Plumbase is the fourth largest plumbers merchanting chain in the UK with astrong branch presence in the South East, West Country, Midlands, East Angliaand Scotland. Market conditions were demanding for the business in 2005. Likefor like sales were down for the year but our confidence in the longer termprospects for the business was demonstrated with the acquisition of sevenplumbers merchanting businesses trading from twelve locations and the opening ofeight greenfield branches increasing the network to 167 locations by the yearend. Cost saving measures and margin improvement partially offset the impact onprofit of lower volumes in the established branch network. Plumbase bathroomshowrooms and the non-trade element of the business were more exposed to theslowdown in retail sales as consumer demand for housing and RMI related productsweakened. UK Mortar EuroMix, the market leader in the supply of dry mortar trades from a network ofeight dry mortar manufacturing plants, produces a range of quality mortars foruse in block and brick-laying. EuroMix supplies the major national andregional building and construction companies involved in residential andcommercial construction projects across England and Scotland. During the yearthe business expanded its range of value added products including baggedproducts and sprayed renders. The business had to contend with lower activity in the new housing market,higher raw materials and transport costs and a more competitive tradingenvironment. EuroMix increased sales due to a strong performance in the Harlowand Southampton plants, both of which continue to develop their market position,and the opening of a plant near Bristol in July to service demand in the WestCountry. The business reported a small decline in operating profit due to amore competitive market and higher input costs. Operations Review - Republic of Ireland Irish turnover increased by 129 per cent to €1,033 million (2004: €452 million). Operating profit increased by 110 per cent to €107.7 million (2004: €51.4million). The operating profit margin was 10.4 per cent (2004: 11.4 per cent).The overall reduction in margin reflected an increased margin in the establishedmerchanting business and margin dilution arising from integration of the lowermargin, heavy end market emphasis of the Heiton business. The Irish economy has been one of the fastest growing economies in the developedworld for well over a decade. In recent years the rate of growth has moderatedin line with the economy's long term growth potential estimated at 4/5 per centbut is still significantly ahead of the average growth rate in the Euro area andEU. The growth profile of the economy changed in 2005 with strong growth inexports, a pick up in consumer spending and greater infrastructure and businessinvestment. Consumer spending is believed to have been the principal source ofeconomic growth in the year increasing by more than 5 per cent and supported bysolid growth in incomes and employment. Job creation was at record levels withtotal employment reaching 2 million due to strong immigration from the new EUmember states. The construction sector in Ireland continued to be very buoyant in 2005. Therate of growth in residential construction slowed, as widely anticipated, toaround 5 per cent with house completions for the year at a record 81,000 units(2004: 77,000 units). The strong increase in employment and the population hascreated a new stream of demand in the residential property market. Irish Merchanting 2005 was an excellent year for the Group's Irish builders merchanting divisionwith sales up 141 per cent to €690.5 million (2004: €286.1 million). Theacquisition of Heiton's in January 2005 substantially strengthened the Group'sbuilders merchanting interests in Ireland and consolidated Chadwicks and Heitonsposition as the largest builders merchanting business in the Irish market. The Heiton Buckley network of 25 branches is a unique fit with Chadwicks 31branches with limited overlap and provides the Group with a presence in townsand cities across the country where Chadwicks was not previously representedincluding Cork City and along the Western Seaboard. Heitons Irish merchantingoperations also incorporate Heiton Steel, Ireland's largest steel stockholdingbusiness, and Sam Hire, the leading player in the small plant and tool hirebusiness trading from 14 branches. The Irish residential construction and repair and maintenance markets performedstrongly throughout 2005 aided by low interest rates, high levels of jobcreation and strong growth in real disposable incomes. This very positive macro economic background was stronglysupportive of sales and profit growth in the Irish merchanting business. Heitons merchanting business performed strongly making an operating profitcontribution well ahead of pre-acquisition expectations. Chadwicks the Group'score merchanting business also had an exceptional year. Like for like sales inthe Heiton Buckley and Chadwicks merchanting branches were up 7 per cent for theyear. While both merchants enjoyed good volume growth, there was vigorouscompetition in the market from the national chains and independents. Cork Builders Providers and Telfords, two strong regional merchants, producedexcellent results for the year increasing sales and operating profit strongly. The performance of Heiton Steel in 2005 was influenced by a fall in steel pricesinternationally. The business successfully managed its response to the fall inprices achieving very solid profitability in line with its long term trendperformance. Heitons Sam Hire business achieved significant profit improvement due primarilyto operating cost reductions. The business opened its fourteenth branch atSantry, Dublin and relocated its Naas Road, Dublin branch to Tallaght during2005. Three further branch openings in Dublin, Mullingar and Tullamore areplanned for 2006. The Heiton and Chadwicks management teams worked closely and successfully torealise substantial purchasing and overhead efficiencies in 2005 which willbenefit the Group on an ongoing basis. The Group acquired Davies plumbing, heating and drainage business and Garvey'sbuilders merchants on 1 December 2005. The acquisition of Davies, which tradesfrom 2 branches in the greater Dublin area, enables the division to broaden itsproduct portfolio into an area which offers strong growth opportunities whileGarvey's provides the Group with a strong merchanting presence in Roscommon, animportant Midlands town. Irish Retailing The scale of the Group's Irish retailing operations increased substantiallyduring 2005 due principally to the acquisition of Heitons retailing businesswhich trades under the Atlantic Homecare and In House at the Panelling Centrebrands. At the time of acquisition the Atlantic Homecare DIY chain traded from15 stores and In-house at the Panelling Centre, which markets a range of highquality kitchen and bedroom panelling products to trade and retail customers,traded from four stores. Sales in the division were up 110 per cent to €272.6 million (2004:€129.8million). The division's operating profit increased strongly, particularlyduring the second half, with contributions from the Atlantic Homecare, and InHouse at the Panelling Centre businesses and a good performance from Woodie's2004 and 2005 store openings. Like for like sales in the Atlantic Homecare andWoodie's stores were down 2 per cent for the year reflecting an improvement intrading in the second half. Growth in consumer spending picked up in 2004. This trend continued throughout2005 with the benefit of income tax reductions, income growth and an increase inemployment and the population and record levels of new house building. Whilethis was an ideal economic background for retailing, there was also asignificant increase in retail capacity across the country with the opening ofnew retail centres. There has been a particularly marked increase in the retailarea devoted to DIY superstores with an increase in capacity of 83 per cent overthe past two years. Woodie's had its most active year ever on the development front with the openingof three stores in Naas, County Kildare in the first half and Carrickmines,South Dublin and Drogheda, County Louth in the second half. The Cork and Bray,County Wicklow stores were relocated in order to substantially expand thecapacity of both stores to support a wider product offering and to providegreater choice for customers. The Woodie's stores opened in 2004 and 2005 andthe two relocated stores performed strongly. Sales in a number of Woodie'sestablished branches were lower due to the more competitive market place. Atlantic Homecare increased its store network to sixteen with the opening of anew store in Limerick and prior to the year end extended the Mullingar store. Woodie's Castlebar will officially open on 16th March 2006. Construction ofstores in Navan and Nenagh is well advanced with openings expected from Spring2006. In House at the Panelling Centre increased sales and profits strongly. Plansare well advanced to continue the growth of this business with the opening of afifth store in Galway and relocation of the Dun Laoghaire store to a largerfacility in Spring 2006. Irish Manufacturing CPI's EuroMix division benefited from a buoyant residential construction marketgrowing dry mortar volumes in the greater Dublin area. Wright, a business engaged in the manufacture and installation of uPVC,aluminium and timber, windows and external doors, was also a beneficiary of thestrong housing market increasing sales and profit for the year. Finance Cashflow from operating activities increased to €224.5 from €178.2 millionprincipally due to higher operating profit. The cost of acquisitions completed during the year including acquired debt was€470.9 million (2004: €84.9 million). This included expenditure of €359.0million to acquire the remaining 71 per cent of the shares in Heiton's notalready owned by the Group and €111.9 million on sixteen bolt-on acquisitions.Deferred consideration paid in the year on prior year acquisitions amounted to€6.8 million (2004: €3.7million). The total consideration paid for Heiton's of€359.0 million comprised the issue of 21.4 million Grafton Units valued at€173.6 million to shareholders in Heiton's, the payment of €100.2 million incash under the cash element of the offer, debt acquired at completion of €75.2million and expenses of €10 million associated with the offer. The Group issued a total of 24 million Grafton Units during the year comprisingthe Units issued in connection with the Heiton offer, 1.2 million Units issuedto UK employees under the Grafton Group (UK) plc Savings Related Share OptionScheme and 1.4 million Units issued under the Group's executive share schemes. Capital expenditure increased to €100.6 million from €88.9 million in 2004reflecting routine replacement expenditure of €44.3 million and expenditure of€56.3 million on continued investment in the enlarged business including theopening of 19 new branches and various development initiatives supporting thecontinued profitable growth of the Group. The Group realised a profit of €9.6 million mainly on the sale of surplus Irishand UK properties. The proceeds on disposal of these properties amounted to€23.2 million. Net interest payable of €31.2 million (2004: €22.8 million) includes the cost ofservicing increased debt associated with the acquisition of Heiton's. Interestcover was 7.2 times (2004: 7.4 times). Net borrowings at 31 December 2005 were €584.2 million compared to €349.2million at 31 December 2004 giving gearing of 72 per cent compared to 70 percent at 31 December 2004. In June 2005, the Group raised $325 million through a private placement of sevenyear and ten year Senior Notes with a group of US investors. The proceeds wereconverted into Sterling and used partly to re-finance existing borrowings withthe remainder held for general corporate purposes. This competitively pricedsource of funds has strengthened the Group's balance sheet and improved thematurity profile of Group debt. Outlook In Ireland, the fundamental factors which have driven strong growth in recentyears remain favourable with the economy expected to perform strongly in 2006.The positive medium term outlook is based on subdued inflation pressure, amodest increase in the Euro interest rate, continued job growth and impressivegrowth in domestic demand helped by maturing SSIA accounts. The prospects of the Irish housing market are also positive. The trend inhousing registrations and planning permissions, leading indicators of housingcompletions, are supportive of a continuation of strong residential constructionactivity supported by both increased employment and immigration. We expect that the favourable macro economic background in Ireland should leadto positive trading conditions for the Heiton Buckley and Chadwicks businessesand that both merchants should be beneficiaries of strong levels of activityanticipated in both the residential construction and RMI markets throughout2006. Consumer spending is expected to be a key driver of economic growth in 2006 andshould be supportive of good demand in the Irish DIY market. We expect thesector to continue to be very competitive as the impact of additional capacityadded in recent years unfolds and development of the market moves towardsmaturity. In the UK, the economy grew below trend in 2005 due to weaker consumer spending,a key component of growth in recent years. Recent economic data is encouragingwith a strong recovery in housing transactions and mortgage approvals. Improvingconsumer confidence should support a gradual recovery in the RMI market but wecontinue to expect lower first half like for like sales in our merchantingbusiness compared to the strong performance in the first half of 2005. The UKdry mortar market is expected to remain competitive due to the increasedcapacity in the sector. In a more difficult market, the UK business continuesto focus on cost control and scale related synergies throughout the merchantingnetwork. The Group also expects to benefit from its healthy pipeline ofpotential acquisition and organic growth opportunities. The Group's strong financial position and substantial cashflows leave it wellplaced to continue to pursue its successful strategy. 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 0433UK: +44 207 769 6433Other: +353 1 439 0433 A copy of this statement is also available on our website www.graftonplc.com Grafton Group plcGroup Income StatementFor the year ended 31 December 2005 Twelve months Twelve months to 31 Dec 2005 to 31 Dec 2004 (Audited) (Audited) •'000 •'000Revenue 2,629,464 1,872,346Operating costs (2,415,694) (1,712,802) _________ _________Operating profit before property profit 213,770 159,544Property profit 9,640 7,521Operating profit 223,410 167,065Income from financial assets - 1,541 Interest expense (48,803) (33,339)Interest income 17,574 10,559Profit before tax 192,181 145,826Income tax expense (26,102) (19,936)Profit after tax for the financial year 166,079 125,890Profit attributable to:Equity holders of the Company 166,079 125,890Basic earnings per share 70.26c 59.14cAdjusted earnings per share 67.80c 56.11cDiluted earnings per share 68.80c 57.69c Group Statement of Recognised Income and Expense For the year ended 31 December 2005 2005 2004 •'000 •'000Items of income and expense recognised directly within equity:Currency translation effects - on foreign currency net investments 7,999 (2,176) - on foreign currency borrowings (811) 20Actuarial loss on Group defined benefit pension schemes (8,946) (11,760)Deferred tax asset on Group defined benefit pension schemes 1,944 1,186Fair value movement on cash flow hedges (1,332) -Deferred tax on cash flow hedge 167 -Net expense recognised directly in equity (979) (12,730)Profit after tax for the financial year 166,079 125,890Total recognised income and expense for the financial year 165,100 113,160Attributable to:Equity holders of the Company 165,100 113,160Effect of Change in accounting policyEffect of adoption of IAS 32 and IAS 39 on 1 January 2005 (with 2004 notrestated) on:Fair value reserve 53,974 -Cash flow hedge reserve 1,450 -Deferred tax on cash flow hedge reserve (207) - 55,424 - Movement on Group Profit and Loss Account 2005 2004 •'000 •'000At 1 January 347,044 257,155Retained profit for the financial year 166,079 125,890Redemption of redeemable shares - (23,392)Purchase of A ordinary shares (33,751) (2,131)Actuarial loss on pensions (net of tax) (7,002) (10,574)Dividends - (266)Deferred tax on share based payments 157 123Transfer from revaluation reserve 2,853 239At 31 December 475,380 347,044Group Statement of Changes in Equity 2005 2004 •'000 •'000At beginning of period 495,538 405,651Impact of adoption of IAS 32 & IAS 39 55,424 -At beginning of period as adjusted 550,962 405,651Elimination of fair value reserve arising on acquisition of Heiton (49,535) -Group plcIssue of Grafton Units (net of issue expenses) 178,658 1,501Adjustment for share based payments expense 2,220 892Deferred tax on share based payments 157 123Dividends - (266)Redemption of redeemable shares - (23,392)Purchase of A ordinary shares (33,751) (2,131)Total recognised gains and losses for the year 165,100 113,160Closing shareholders' funds - equity 813,811 495,538 Grafton Group plc Group Balance Sheet As At 31 December 2005 2005 2004 (Audited) (Audited) •'000 •'000ASSETSNon-current assetsProperty, plant and equipment 623,228 406,207Goodwill 532,323 247,155Intangible assets 15,519 -Financial assets 256 47,019Deferred tax assets 25,980 14,313Total non-current assets 1,197,306 714,694Current assetsInventories 356,647 237,680Trade and other receivables 499,308 318,165Derivative and other financial instruments 5,708 -Cash and cash equivalents 334,023 135,868Total current assets 1,195,686 691,713Total assets 2,392,992 1,406,407EQUITYCapital and reserves attributable to the Company's equity holdersEquity share capital 12,037 10,864Share premium account 281,038 103,600Capital redemption reserve 274 227Revaluation reserve 36,574 34,988Other reserve - shares to be issued 3,191 971Cash flow hedge reserve 285 -Foreign currency translation reserve 5,032 (2,156)Retained earnings 475,380 347,044 _______ _______Total equity 813,811 495,538LIABILITIESNon-current liabilitiesInterest-bearing loans and borrowings 713,712 378,401Deferred tax liabilities 42,932 27,968Retirement benefit obligations 59,032 35,597Provisions 500 1,552Total non-current liabilities 816,176 443,518Current liabilitiesInterest-bearing loans and borrowings 209,278 106,696Trade and other payables 498,717 310,786Current income tax liabilities 50,610 45,436Derivative financial instruments 923 -Provisions 3,477 4,433Total current liabilities 763,005 467,351 ________ _______Total liabilities 1,579,181 910,869Total equity and liabilities 2,392,992 1,406,407 Grafton Group plc Group Cash Flow Statement For the year ended 31 December 2005 2005 2004 •'000 •'000 Operating profit 213,770 159,544Property development profit - 6,729Depreciation 48,248 34,626Intangible amortisation 2,176 -Share based payments charge 2,220 892Profit on sale of plant and equipment (2,564) (2,179)Contributions to pension schemes in excess of IAS 19 charge (10,888) (1,791)Increase in working capital (28,485) (19,641)Cash generated from operations 224,477 178,180Interest paid (39,233) (27,111)Income taxes paid (15,227) (7,301) _______ _______Cash flows from operating activities 170,017 143,768Investing activitiesInflowsProceeds from sale of property, plant and equipment 32,793 25,437Interest received 7,738 4,849Dividends received - 2,364 40,531 32,650OutflowsAcquisition of subsidiary undertakings and businesses (395,451) (61,805)Net cash/(debt) acquired with subsidiary undertakings 22,897 718Deferred acquisition consideration (6,844) (3,750)Purchase of property, plant and equipment (100,559) (88,917)Purchase of financial assets (13,351) - (479,957) (167,105)Cash flows from investing activities (439,426) (134,455)Financing activitiesInflowsProceeds from the issue of share capital 178,659 1,288Proceeds from long term borrowings 373,078 69,843 551,737 71,131OutflowsRepayments of long term borrowings (35,673) (5,673)Redemption of redeemable shares - (23,392)Purchase of A ordinary shares (33,751) (2,131)Payment of finance lease liabilities (2,061) (23,834)Redemption of loan notes payable (25,237) (24,758)Dividend paid (53) - (96,722) (79,841)Cash flows from financing activities 455,015 (8,710)Net increase in cash and cash equivalents 185,606 603Cash and cash equivalents at 1 January 105,822 106,557Effect of exchange rate fluctuations on cash held 416 (1,338) ______ ______Cash and cash equivalents at 31 December 291,844 105,822 1. Revenue and Operating Profit by Geographic Segment The amount of revenue by geographic segment is as follows: Twelve months to Twelve months to 31 Dec 2005 31 Dec 2004 •'000 •'000 RevenueRepublic of Ireland 1,032,899 451,742United Kingdom 1,596,565 1,420,604 ____________ ___________ 2,629,464 1,872,346Operating profit before property profit and intangibleamortisationIreland 107,702 51,360United Kingdom 108,244 108,184Operating profit before property profit and intangible 215,946 159,544amortisationIntangible amortisation - Republic of Ireland 2,176 - ___________ ___________ 213,770 159,544Operating profit before property profitIreland 105,526 51,360United Kingdom 108,244 108,184 ____________ ___________ 213,770 159,544Property profitIreland 7,963 6,729United Kingdom 1,677 792 ________ ________ 9,640 7,521Operating ProfitIreland 113,489 58,089United Kingdom 109,921 108,976 ____________ ___________ 223,410 167,065Income from financial assets - 1,541Finance costs (net) (31,229) (22,780) ____________ ____________Profit before tax 192,181 145,826 2. Analysis of Revenue by Business Segment Twelve months Twelve months to 31 Dec 2004 31 Dec 2005 •'000 •'000RevenueUK merchanting 1,533,700 1,359,923Irish merchanting 690,549 286,126Irish DIY 272,589 129,783Irish and UK manufacturing 132,626 96,514 ______________ ______________ 2,629,464 1,872,346 3. Reconciliation of Net Cash Flow to Movement in Net Debt 2005 2004For the year ended 31 December 2005 •'000 •'000Net increase in cash and cash equivalents 185,606 603Cashflow from increase in debt and lease financing (310,107) (15,578)Change in net debt resulting from cash flows (124,501) (14,975)Loan notes issued on acquisition of subsidiary undertakings (867) (9,085)Finance leases acquired with subsidiary undertakings (7,934) (1,388)Bank loans and loan notes acquired with subsidiary undertakings (89,519) -Translation adjustment (12,457) (578)Net movement in derivative financial instruments (1,332) -Movement in net debt in the year (236,610) (26,026)Net debt at 1 January 2005 (349,229) (323,203)IAS 32/39 adjustment at 1 January 2005 1,657 -Net debt restated at 1 January 2005 (347,572) (323,203)Net debt at 31 December 2005 (584,182) (349,229) 4. Earnings per ShareThe computation of basic and diluted earnings per share is set 2005 2004out below: •'000 •'000 Numerator for basic, adjusted and diluted earnings per share Profit on ordinary activities after taxation 166,079 125,890Numerator for basic and diluted earnings per share 166,079 125,890Property profit after tax (7,731) (6,442)Intangible amortisation after tax 1,904 -Numerator for adjusted earnings per share 160,252 119,448Denominator for basic and adjusted earnings per share:Weighted average number of Grafton Units in issue 236,371,547 212,875,181Effect of potential dilutive Grafton Units 5,023,349 5,329,373Denominator for diluted earnings per share 241,394,896 218,204,554Adjusted earnings per share (cent) - Basic 67.80 56.11Earnings per share (cent) - Basic 70.26 59.14 - Diluted 68.80 57.69 5. Share Purchase The Board has approved the purchase of one A ordinary share per Grafton Unit fora cash consideration of 8.5 cent. The purchase of the A ordinary share willtake effect in respect of Grafton Units on the register at close of business 24March 2006 (record date) and the cash consideration will be paid on 31 March2006. 6. 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 31 December 2005 and 31December 2004 have been translated at the rate of exchange ruling at the balancesheet date. The average Euro / Sterling rate of exchange for the year ended 31 December 2005was Stg68.38p (year ended 31 December 2004: 67.86p). The Euro / Sterlingexchange rate at 31 December 2005 was Stg68.53 (31 December 2004: Stg70.51p). Grafton Group plc Financial Overview 2005 2005 2004 ChangeRevenue (• million) 2,629.5 1,872.3 +40%EBITDA (• million) 273.8 203.2 +35%Operating profit before amortisation of intangibles and propertyprofit (• million) 215.9 159.5 +35%Profit before taxation (• million) 192.2 145.8 +32%EPS - Basic 70.3c 59.1c +19%EPS before amortisation of intangibles and property profit 67.8c 56.1c +21%Share purchase / redemption 15.75c 13.0c +21%Share purchase / redemption cover (times) 4.3 4.3Interest cover (times) 7.2 7.4Cash flow per share 91.6c 75.4c +21%Net assets per share 342.8c 232.2c +48%Net debt to shareholders' funds 72% 70%Depreciation charge (• million) 48.2 34.6Intangible amortisation (• million) 2.2 -Acquisition and investment expenditure (• million) 470.9 84.9Capital expenditure (• million) 100.6 88.9 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Grafton Group