Grafton makes €250m profit in 2006

The Dublin-listed company that owns the Woodies and Atlantic Homecare DIY chains had profits of almost €250 million last year. Grafton Group plc, the builders' merchant and DIY operation, reported yesterday that turnover in 2006 grew 12 per cent to €2.9 billion from €2.6 billion in 2005.

The company made pre-tax profits of €249.4 million in 2006, a 30 per cent increase on the €192.2 million surplus recorded the year before. Earnings per share (EPS) increased 15 per cent to 78 cent in 2006, from 67.8 cent a year earlier. In line with a policy established five years ago, the company intends buying one A share per Grafton unit for 10.50 cent. The purchase will go ahead in four weeks. This will be in addition to an interim share purchase already completed in October, bringing the final amount per Grafton unit to 18.75 cent, a 19 per cent increase on 2005.

Grafton made a profit of €38 million on the sale of some of its properties, including the Atlantic Homecare site in Stillorgan, in 2006. The board yesterday signalled that it would be willing to part with further properties in Cork, Dublin, Navan, Co Meath and Orchard Wharf, London. However, finance director Colm Ó Nualáin said the group was "not in any hurry" to sell the sites, but would consider a disposal if the price was right.

Chairman Michael Chadwick indicated that potential buyers had approached the company regarding its 16-acre site on Dublin's Naas Road. The group's figures show that the balance sheet is in a healthy state. Debt stood at 54 per cent of total equity, which was over €1 billion. Its businesses generated over €250 million of free cash flow during the year, compared with €177 million in 2005.

The UK builders' supplies business was responsible for €1.7 billion of the total turnover. Ireland generated the remaining €1.2 billion.

In 2006, sales from the Irish business grew 16 per cent, while those in the UK increased by 9 per cent. However, trade in the UK improved in the second half.

Irish operating profits were €130.3 million out of a total of €244.9 million. The UK was responsible for €114.6 million. Irish operating margins hit 10.9 per cent while those in Britain were 6.6 per cent. Group margins were 8.3 per cent.

Analysts reacted positively to the results yesterday. John Sheehan of NCB set a target price for the end of this year of €13.50. The stock opened yesterday at €11.92. He predicted that EPS this year would reach 87 cent, an increase of 11 per cent.

"Irish activity remains strong and any residential slowdown should be partly mitigated by an SSIA-fuelled DIY market and good commercial demand," he said. He said he believed UK margins should recover in the 2007- 2009 period.