Annual profit surges 28% to £11 million at Heiton Holdings

Heiton Holdings, the Atlantic Homecare DIY group, is looking for further strong growth in the years ahead, following better-than-expected results. These showed a 28.1 per cent rise in pre-tax profit to £11.0 million, in the year to April 30th 1998.

The company expects a fall in the number of houses built, from an estimated 40,000 this year, to 38,000 next year. That is a "very sustainable level . . . from 2000 and beyond", said Mr Leo Martin, managing director of the merchanting and steel business. Heiton is continuing to look for acquisitions. The company "has done a lot of work" in negotiations, said Mr Richard Hewat, group chief executive. However, he noted that top prices are being sought in Britain and Northern Ireland and "we don't believe in jumping in".

The UK is the most likely area for acquisitions. However, Mr Peter Byers, group finance director, said the group would only be interested in "some niche areas where we would have some competitive edge". Heiton's focus is on expanding its market share in builders merchants, steel and hire, on growing sales and homecare, and having a focus on cash and asset utilisation. It is also to continue with its policy of closing the small DIY units and opening newer ones. The optimum size is seen as 30,000 square feet.

The three units of 15,000 square feet are scheduled for closure. The group noted that total shareholder returns (share price plus retained dividends) grew by an average of 28 per cent in the ten years to 1997.

The latest results show an 18 per cent rise in turnover from £140.4 million to £165.7 million. The operating profit margins grew from 6.6 per cent to 7.3 per cent. Earnings per share increased by 29.9 per cent from 12.33p to 16.02p. Shareholders are to benefit from the good results, with the final dividend being raised from 2.25p to 2.8p, bringing the total to 4.9p, representing an increase of 25.6 per cent. By far the largest division is builders merchants and steel, which registered an 18 per cent increase in sales to £149.4 million.

The chairman, Mr Stephen O'Connor, said the completion of the Sam Hire purchase, and its swift integration into the group, has broadened its range. Two new Sam Hire branches were opened and there was an investment of £1.6 million to expand its range of products. There are now 11 branches, 5 of which are adjacent to Heitons or Buckleys branches.

Mr O'Connor said the strong demand in the leisure industry remains, while retail sector growth with new shopping centres and new entrants continued in 1998 and will continue next year. "Such developments yield good opportunities for the Heiton product range." The Atlantic Homecare division increased sales by 16 per cent to £16.3 million and margins improved. Heiton said the DIY market offers "significant potential for growth". It completed the renovations at the three Dublin stores. The Coolock outlet "regained much of the market share" it held prior to a fire in 1996.

Gearing grew from 8.3 per cent to 20 per cent as a result of the Sam Hire acquisition. Heiton has noted that is a seasonally low level and that the average was 39 per cent, close to its target of 40 per cent. Net debt rose from £3 million to £7.9 million. Heiton generates strong cash flow from its operations. This increased from £8.8 million to £11.0 million but after capital expenditure, acquisitions and the payment of tax and dividends, there was a net cash outflow of £3.8 million.