Building boom boosts Grafton profits

Grafton, the Woodies DIY group, continues to benefit from the booming construction sector, with a 26 per cent rise in pre-tax…

Grafton, the Woodies DIY group, continues to benefit from the booming construction sector, with a 26 per cent rise in pre-tax profit from £6,627,000 to £7,112,000 in the six months to June 30th, 1997.

Growth came from all its operations in Ireland and Britain. Shareholders are to receive a big boost with a 31 per cent rise in the interim dividend to 8.5p net per share. And they will receive their dividends quicker than in previous years if they elect to be paid by electronic funds transfer (EFT). Grafton has initiated the new method of payment, which involves the payment of the dividends directly into shareholders' accounts on the dividend payment date. Details of the EFT facility will be circulated to shareholders on September 22nd.

British shareholders had made representation to Grafton over the high dividend cover, said executive chairman, Mr Michael Chadwick. The increased interim dividend is covered 4.5 times by earnings compared with cover of between two and three times by similar companies in Britain. Mr Chadwick said the group would maintain the dividend cover, but dividends would reflect the growth in earnings over the short-term. Earnings per share grew by 34 per cent to 37.7p in the first half.

Group sales grew by 29.6 per cent from £90.2 million to £116.8 million. Some of this was due to acquisitions but underlying growth was still 23.5 per cent. Sales in the Irish businesses increased by 12.7 per cent to £76.6 million from £68 million while the British operations grew by 81.2 per cent to £40.2 million from £22.2 million, mainly reflecting acquisitions.

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Operating profit in the Republic rose by 12 per cent to £6.3 million. A breakdown of sales in the Republic shows a rise from £46.1 million to £51.8 million in the merchanting and wholesaling division, the largest area of business. Chadwicks continued to upgrade its facilities.

Irish manufacturing increased turnover by 17 per cent to £9.6 million. CPI, despite stiff price competition, experienced good growth across its product range. MFP Plastics also grew its sales, following the launch of the Eavemaster range of roof-line products. Woodies, its superstore chain, increases sales by 12 per cent to £15.3 million. It continued to extend its range during the first six months.

The British operations were helped by the acquisition of six merchanting businesses with annualised sales of £40 million sterling from 11 branches, and operating profits jumped by 147 per cent to £1.5 million.

The British plumbing and heating business increased both sales and profits. Johnsons and Bond & White, its builders merchants business acquired last year, "very significantly improved profitability". Macnaughton Blair, its Belfast builders merchant, increased both sales and profits. The mortar business in Scotland "traded well". The group's gearing has risen from 12 per cent to 43 per cent. Mr Chadwick said that, with increased cash-flow in the second half, this should be cut by between 15 and 20 points by the year-end.

Grafton is looking for continued growth in the second half. The group should continue to benefit from the buoyancy in both the Irish and British markets and earnings per share should rise from 82.7p to more than 95p in the full year.