Purchases help push Grafton's profits up 27%

Pre-tax profits climbed 27 per cent to €102 million at Grafton Group last year, with the growth supported by a strong first-time contribution from acquisitions.

The merchanting group drew particular benefit from expansion in the UK, where sales rose by 37 per cent to €1.1 billion. This accounted for 74 per cent of Grafton's total turnover of €1.5 billion, a figure 30 per cent ahead of 2002 levels.

Sales in the Republic increased by 12 per cent to €385 million over the year.

Grafton chairman Mr Michael Chadwick said the results had been "accelerated" by a €289 million spend on acquisitions and on organic expansion, including the purchase of Jackson's Building Centres in Britain last March for €131 million.

He said overall trading had started well in 2004 and confidently looked ahead to "another year of progress and improved earnings".

Mr Chadwick said Jackson's, Grafton's largest ever acquisition, had performed ahead of expectations. He added that further bolt-on buys could be expected this year, but acknowledged that Jackson's 18-branch network was "pretty unique" in scale.

Grafton has repeatedly stated an intention to lead consolidation in the British merchanting market, where some 30 per cent of businesses remain in independent hands and half the market is shared by the three largest operators.

Mr Chadwick said that, if the firm continued to acquire at levels of the past few years, it would raise its share of the UK market by one percentage point each year. It currently holds an 8 per cent share but, in fourth position, is the fastest-growing player.

Grafton bought a total of 10 companies in Britain and Ireland last year, with a similar number of businesses likely to be added in 2004. The group has made three acquisitions so far this year - one in England and two in Northern Ireland.

This active acquisition strategy was in clear evidence at the operating profit line last year, with new buys contributing €16 million to total operating profits (before goodwill amortisation) which, at €123.3 million, were up 34 per cent on 2002.

Operating profits advanced 46 per cent to €79 million in the UK and 16 per cent to €45 million in the Republic, where the housing market was again a key driver. Grafton expects single-digit growth in the Irish repair and maintenance market for 2004, and is conscious that the overall construction market in the Republic may weaken.

Mr Chadwick described the Irish retail environment as "fairly weak".

The group's full-year results were well-received by analysts but failed to impress an increasingly critical market, with Grafton shares down almost 3 per cent at €6.05 by the close.

The company will not pay a final dividend but will redeem one redeemable share of each Grafton unit (the group issued 10 redeemable shares for each share in 2002) for six cents per share. This brings the full-year payout to 10.5 cents per share, a rise of 24 per cent on 2002.

The company said it would redeem the remaining six redeemable shares in March for five cents per share instead of paying an interim dividend in 2004.