Heiton continues to grow with 22% increase in pre-tax profits

 

HEITON Moldings, the builders' merchants and Atlantic DIY group, continues to record good growth, with a 22 per cent rise in pre-tax profit from £3.81 million to £4.65 million in the six months ended October 31st, 1996.

Group turnover grew by 8 per cent from £66.4 million to £71.8 million. The results reflect a strong performance in all the core businesses", said the group's managing director, Mr Richard Hewat.

It also had the benefit of lower interest costs as a result of lower borrowings. If these are excluded the underlying profit growth is a more modest 16 per cent. Nevertheless, profit margins improved from 6.3 per cent to 6.8 per cent.

The interim dividend is being raised from 0.95p to 1.65p. This, Heiton said, represents a 21 per cent increase, and an adjustment of 0.5p, to bring the interim more into line with the final. The higher interim, said the chairman, Mr Stephen O'Connor, "is made possible by the continued growth of the group's earnings (eps rose from 5.36p to 6.47p), and the board's positive views on prospects for the coming year".

The builders' merchants and steel division enjoyed an 11.5 per cent growth in sales from £57.7 million to £64.3 million. In contrast, the retail/DIY side saw a contraction in sales from £8.8 million to £7.5 million, due to a fire at its Coolock store and the closure of the Dun Laoghaire store.

The improved profit margins in builders' merchants and steel is attributed to "focused sales growth and effective cost management". It had the benefit from an extended branch network and investment in other branches.

The steel business "performed strongly" in the first hall, Heiton said, with increased tonnage supplied to the industrial, engineering and agricultural sectors, in addition to the construction sector.

The decline in steel prices experienced in the past 18 months appears to have been arrested".

Profits in the Atlantic Homecare DIY side were "much improved", according to the chairman. Sales were affected by the fire in the Coolock store and, if this is excluded, sales grew by an underlying 5 per cent.

Atlantic, which is expecting to see a higher spend per capita on DIY, is to invest £1.5 million in its Dublin stores. Mr O'Connor expressed confidence that "substantial upside potential will be achieved". Both the Naas Road and Stillorgan stores will see their shelving increased by 20 per cent by the investment, according to Mr Hewat.

The group made two acquisitions, one in Gorey and one in Monaghan, in the first half. It is continuing to look for acquisitions but nothing is imminent.

Heiton has further strengthened its financial position. Net borrowings have fallen from £6.5 million to £2.2 million. This is reflected in the improvement in gearing from 23.5 per cent to 11.2 per cent. Net assets per share have improved from 66.7p to 73.4p

Heiton is confident growth will continue this year. The corporate strategy, Mr Hewat said, is to expand market share. It is also expected to see major benefits from the anticipated 8 per cent growth in private and non-residential construction spending this year.