Grafton profits climb to €131m

Grafton has reported another year of healthy profits, with growth evenly spread across acquisitions and organic expansion.

The UK was again the powerhouse for the DIY and merchanting group, which has become progressively less reliant on the Republic for profits over the past few years.

Group pretax profits climbed by 29 per cent to €131.9 million as sales rose by 25 per cent to €1.9 billion. Operating profits were ahead by 28 cent at €157.4 million before goodwill. Within this, profits in the UK rose by 38 per cent to €108.4 million, while Irish operating profits rose by 9.5 per cent to €49 million.

Grafton now has almost 10 per cent of the UK merchanting market and is actively considering further acquisitions in the region, having already completed two small bolt-on deals in Britain during the year to date.

Grafton's executive chairman, Michael Chadwick, yesterday said there was no reason to believe that Grafton could not maintain its record of completing one acquisition per month over coming years. The firm's balance sheet is solid, with cash flow remaining strong and interest cover comfortable.

Mr Chadwick was upbeat on Grafton's prospects for 2005, saying the firm was "well-placed to continue its successful development strategy". Analysts are expecting earnings growth of at least 20 per cent this year.

The biggest task for Grafton in 2005 will be the integration of smaller Irish competitor Heiton, which it officially acquired in January for €398 million.

Few details on the integration strategy were revealed yesterday but Mr Chadwick said the group had no immediate plans for radical change in the Heiton operations. The deal will help to push Grafton's turnover above the €2.5 billion mark and is expected to deliver significant cost savings for the enlarged group.

"Heiton has come into the group at a higher level of profitability than we expected, so it's performing well," said Grafton finance director Colm Ó Nualláin. Grafton reported good growth within its Irish merchanting division for 2004, but sales and margins in its well-known Woodies DIY network were less buoyant, particularly in the second half of the year.

Mr Chadwick attributed this to an increase in competition and also highlighted some "cannibalisation" from new Woodies stores.

In the UK, merchanting sales grew by 28 per cent to €1.4 billion, boosted by acquisitions completed in both 2003 and 2004.

Grafton's manufacturing division posted sales of €96 million, up 6 per cent on a like-for-like basis or 12 per cent when operations added over the year are considered.

At group level, the results were boosted by an exceptional gain of €7.5 million on the sale and leaseback of a Grafton site on Dublin's Naas Road. The site was purchased by Goodbody Stockbrokers on behalf of pension clients.

Grafton will not pay a dividend but, instead, will instead buy back one of the special A shares it issued to shareholders last year for 7 cents.

This lifts the total 2004 cash return per share to 13 cents, up 24 per cent on 2003.

Shares in Grafton fell by 20 cents to close at €9.70 last night. They have been consistently strong so far this year.