RNS Number:1002N
Heiton Group PLC
03 July 2003
HEITON GROUP PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
FOR FINANCIAL YEAR ENDED 30TH APRIL 2003
* Turnover Euro479.1m, up 13.4%
* Operating profit (pre-restructuring costs) of Euro23.7m, up 13.8%
* EPS (pre-restructuring costs and goodwill) of 43.1c per share, an increase
of 20%
* Net cash inflow increased to Euro46.1m
* Net debt reduced to Euro63.2m, a gearing level of 46%
* Refocus and reorganisation of Group into three core divisions Heiton
Trade, Heiton UK and Heiton Retail
Commenting on the results, Leo Martin, Chief Executive of Heiton Group said, "A
strong trading performance has been achieved across our Irish operations,
reflecting successful organic and acquisition development, particularly in our
Heiton Trade business. Earnings are well ahead and cash generation has been
very strong.
Trading in the UK remains challenging. However, following a strategic review
and implementation of a restructuring programme, we are well placed to take
advantage of growth opportunities in the drainage segment of the civils market.
Further, the restructuring is anticipated to be cash positive for the UK
business.
We have reorganised the Group into three core divisions Heiton Trade, Heiton UK
and Heiton Retail. This will better balance our portfolio to enable us to
deliver increased efficiencies and synergies across our various businesses.
The current year's trading has begun well. To support the organic growth of our
businesses, we will continue to seek new acquisitions and opportunities to open
new outlets. This coupled with the benefits of the reorganisation, leaves us
optimistic about our future prospects."
-Ends-
3 July 2003
For reference:
Leo Martin Peter Byers
Group Chief Executive Group Finance Director
Heiton Group plc Heiton Group plc
Tel : 01 403 4000 Tel : 01 403 4000
Mobile : 087 2563296 Mobile : 086 2466755
Issued on behalf of Heiton Group by Drury Communications
Contact:
Orla Benson/Billy Murphy
Drury Communications
Tel: 01 260 5000
Mobile : 087 803 3262/087 231 3085
Results
The year ended 30 April 2003 produced a very satisfactory increase in earnings
per share before exceptional items and a strong cashflow for shareholders in
Heiton Group plc. EPS before restructuring costs and goodwill grew to 43.1c per
share, an increase of 20% on the previous year. Net cash inflow from operating
activities nearly doubled to Euro46.1m, as a result of which net debt at year end
was reduced to Euro63.2m, a gearing level of 46%. The latter improvement resulted
from tight control of working capital, a prudent approach to capital expenditure
as well as improved profit performances in the Group.
These results reflect, principally, the successful development during the year
of our Group's core Irish builders merchants business, both organically and by
acquisition. They include contributions from Cork Builders Providers and Wright
Window Systems, both of whose performance exceeded expectations at the time of
acquisition. The results for the second half of the year also benefited from a
stronger performance by Atlantic Homecare.
During the year the Group concluded a major review of its UK businesses which
comprise Cooper Clarke Group ('CCG') and Willis Builders Merchants. While the
performance of Willis has exceeded expectations at the time of acquisition, the
performance of CCG has been disappointing. As a result of this review, the
Board has decided to focus the UK business on the Civils market (concentrating
on drainage products) where it has a strong market position and to integrate the
activities of CCG and Willis. It has also decided to exit those businesses
where the Group has limited competitive advantage and which make a marginal
contribution. Although there are restructuring costs and write down of assets
associated with these businesses amounting to Euro13.1m, asset disposals and the
release of working capital associated with the restructuring are likely to give
rise to a net cash contribution of approximately Euro3m. The Board believes that
as a result of its decision to restructure and refocus the Group's UK
operations, these businesses will be well placed to provide consistent positive
returns in the future. The Board is committed to its restructured UK business
and views its prospects positively.
Dividends
Your Group has had a consistent policy of maintaining dividend cover in a range
between 2.5 and 3.5 times. For this financial year, your Board is recommending
a final dividend of 8.2c which would bring the total dividend for the year to
14.4c. This represents an 8.3% increase over the prior year and a cumulative
growth of 18% per annum over a five-year period.
Strategy Implementation
Refocus and Reorganisation of Group Divisions
Our strategy is to strengthen and grow all of our businesses both organically
and through acquisition in the markets in which we operate. Key to the delivery
of this, has been extracting cost efficiencies throughout the Group and ensuring
that important synergies can be delivered across our portfolio. To ensure that
we continue to deliver on this strategy, we have made the important decision
this year to restructure and reorganise the Group into three core divisions:
Heiton Trade, Heiton Retail and Heiton UK.
This reorganisation will ensure that the businesses:
- clearly and cohesively communicate and execute their plans;
- deliver a full range of products to our customers;
- operate in a cost effective manner; and
- optimise the availability of synergies.
Group Operations
A summary of the Group turnover is set out below:
2003 2002 % Change
Eurom Eurom
Heiton Trade 314.6 259.0 +21.4
Heiton Retail 85.3 81.7 +4.4
Ireland 399.9 340.7 +17.3
Heiton UK 79.2 81.9 (3.2)
Total 479.1 422.6 +13.4
Heiton Trade
Heiton Trade comprises HeitonBuckley, Cork Builders Providers, Wright Windows,
Heiton Steel, Sam Hire and Hardwoods. The division will be headed by Eddie
Kelly who has been Managing Director of the Merchanting division for the last
two years. Following their grouping into Heiton Trade, these business units
will seek to extract benefits from the significant overlap in their customer
bases and to source increased sales opportunities across Heiton's strong
geographic presence.
We are confident that Heiton Trade will bring us closer to delivering on our key
objective of becoming a full solutions provider to the construction industry.
Our concentration will be on gaining a larger share of the growing RMI (Repairs,
Maintenance and Improvements) sector of the market and we believe that the newly
focused Heiton Trade will be in an ideal position to tap into this market.
The HeitonBuckley business has had an outstanding year with turnover benefiting
from our strong position in the housing and RMI segments of the construction
market. A number of significant developments were achieved across our
merchanting business to greatly improve our product and service offering leading
to an increase in market share and strengthening our position as the No 1
builders merchant business in Ireland. These developments included the
completion of new showrooms in a number of our branches around the country and
the planned construction of a new purpose built unit at Ballyshannon, Co.
Donegal.
We are also very pleased with the contribution that has been made by Cork
Builders Providers, acquired last year. The business has now been successfully
integrated into the merchanting division. Our Cork business has also benefited
from the amalgamation of all the Cork region merchanting businesses under one
management team.
The Steel business has had a good year with like for like turnover growth being
underpinned by excellent customer service. Recent product introductions include
a new security fencing range, the continued expansion of the shot-blasting
facility which commenced business in January 2002 and the roll-out of the Bamtec
system, which produces reinforcing steel to highly specified standards, into a
new development in Smithfield. The Steel business will benefit from its
consolidation into the Heiton Trade business by virtue of the significant
overlap in its customer base with the merchanting business, as well as assisting
the sales effort of the merchanting division which has steel as a significant
product category within the branch network.
Wright Window Systems has been an excellent addition to the Heiton Group with
sales well ahead of its prior year and yielding strong returns on our
investment. Wrights have gained during last year from the strength of the Irish
housing market, in particular the apartment sector, and retains a good pipeline
of future projects. One of the key synergies which is being delivered from the
addition of Wrights to the Heiton Group is the opportunity to use the
merchanting branch network to expand its sales outlets. To this end, Wrights
has worked hard during the last year to ensure that production capacity is
expanded and is now positioned to take advantage of increased sales leads across
the Group's network.
Sam Hire has also performed satisfactorily this year. Sales have been
increasing steadily in the last number of months although not quite sufficiently
to offset the decline in the first half of the year. Nevertheless, the earnings
performance has been good, gross margin has grown and cost containment has been
well managed resulting in another strong year of return on capital employed for
the Hire division. The relocation of the Galway hire branch to the merchanting
site and a proposed move of the Hire unit in North Dublin to the merchanting
site in Santry represent further examples of the synergies that can be gained
through close links between those divisions which supply the construction
sector.
For the division as a whole our vision is to be a full solutions provider to the
construction industry in Ireland. We aim to continue to be No. 1 in turnover
and market share targeting the highest return on capital employed in the
industry.
The Irish construction market has performed well in the second half of our
financial year and this trend has continued into the early part of the new year.
In particular, the housing segment and the RMI segment (Repairs, Maintenance and
Improvements) have both performed strongly over the last number of months.
Our outlook for the balance of the calendar year is that this pattern of sales
growth will remain for the next number of months. However, beyond that, the
picture for the housing market is harder to predict. Against that, RMI is
forecast to maintain its growth and, as the construction market matures, assume
an increasing proportion of total Irish construction. It is our intention
therefore to focus increasingly on the strength of the RMI segment.
Heiton Retail
Heiton Retail comprises the Atlantic Homecare and Panelling Centre elements of
our business. The division will be headed by Paul Lynch, who, after a number of
years as Corporate Development Director, has been running Wright Window Systems
since its acquisition in June 2002. The key objective of Heiton Retail is to
meet all expectations of the retail consumer for the DIY and domestic homecare
products, both internal and external. There are clear marketing, merchandising
and sales benefits to be achieved from this consolidation and we are confident
that we can improve operating margins and continue to achieve growth.
As mentioned at the time of the Interim Results, Atlantic Homecare suffered from
a number of difficult factors in the first half of the year. However, I am
delighted to report that the second half resulted in a strong improvement in
both turnover and earnings. The Dundalk store opened in August and has
performed well, generating a positive contribution. Gross margins have improved
and the business has benefited from two good seasons, Christmas and Spring, in
the second half of the year.
The Panelling Centre has had another excellent year with turnover growth and a
very strong earnings contribution. This has occurred despite the adverse impact
of a flood in the Richmond Road facility in November. This caused major
disruption but was well managed by the Panelling Centre team in that they have
now relocated to a new facility in Furry Park in Santry and there has been
minimal disruption to the business subsequent to the flood.
The retail sector within Ireland is a strong, and vibrant, yet highly
competitive, environment. Notwithstanding, Atlantic Homecare has built on its
No. 2 position and continued to grow its business overall, and, through its
closer alignment with the Panelling Centre outlets, will increase its
penetration into the Homecare market with a differentiated product range and
commitment continuously to improve customer service.
Heiton UK
The Heiton UK division comprises all elements of our UK based business. It will
continue to be led by Grahame Hall who joined the Group in August 2002.
Following a strategic review of the entire UK operations, we believe that a
newly refocused and a newly restructured Heiton UK will take advantage of
opportunities that exist in the UK market. This business will focus on drainage
related products for the Civils marketplace. We are confident that Heiton UK
can be a leading player in the drainage segment of the Merchant's market, a
market which is worth over Stg#1bn and we aim to deliver a strong return on
capital employed on the back of organic growth and suitable acquisitions.
Our UK business experienced difficulties in the past year. As reported at the
half year, earnings were down, reversing the positive trend which had been
exhibited in 2001/2002. As a consequence, the UK managing director and his
senior team have now completed a strategic review of the future of the UK
business and their proposals have received the backing of the Board. The
strategy for the UK business is as follows:
* To focus its operations on the core strengths in the Civils (focusing on
the distribution of below ground and surface drainage products) segment of
the construction market with operations presently in Farnworth (North
West), Tamworth (Midlands), Braintree (Essex) and the South.
* To expand the Civils operation through acquisition or organic development
in the same manner as Willis and Tamworth in recent years.
* To exit those businesses which either do not fit with this strategy or are
offering a marginal or negative contribution.
The major restructuring work which was recently completed by the UK executive
team will also result in a one time restructuring cost. There are three
elements to this cost - cash items such as redundancy amounting to Euro2.8m,
non-cash costs associated with the write-down of certain stocks and fixed assets
amounting to Euro1.7m and a write-off of goodwill associated with those businesses
which will either be disposed of or closed as a result of this restructuring
amounting to Euro8.6m. Although the total restructuring cost amounts to Euro13.1m,
only Euro2.8m of this is a cash expenditure. When the benefit of asset
realisations and the release of working capital are included, it is expected
that the project will be cash positive in the amount of Euro3.0m.
Positive trading features of last year have been the encouraging progress made
by the new branch in Tamworth and the continued strong performance of the Willis
business which continued its high sales levels throughout the financial year.
The outlook for the UK is for GDP growth of 2.0% in 2003 followed by 2.0% in
2004 with construction growth broadly matching that pattern. This, therefore,
is a good market for our UK division to operate in and we are confident that the
changes presently being made will lead to significant improvement in performance
in this business over the coming year and beyond.
Board of Directors
During the year we announced a non-executive director appointment. Sir John
Gains, Chief Executive of Mowlem Plc, a leading UK construction and support
services group, joined the Board in November 2002. John is past president of
the Construction Federation, the principal representative body of the UK
contracting industry. His experience of the industry generally, and of the UK
in particular, is invaluable.
I am also delighted to announce the appointment of Eddie Kelly, who has just
taken on the position of Managing Director of the Heiton Trade division, to the
Board with effect from today, 3 July 2003.
We will be very sorry to lose the services of John Bourke who will be retiring
from the Board at this year's Annual General Meeting on 18 September 2003. John
has been a member of the Board and has chaired the Audit Committee for many
years, and has been a source of tremendous counsel and advice throughout that
time. We wish John well in the future.
Management and Staff
Our staff throughout all of the businesses within the Group have reacted well to
the challenge presented by the competitive environments in which we operate and
have performed outstandingly well in the year gone by. I would like to thank
them for their commitment and energy and encourage them to continue those
efforts in the coming year.
Other Developments
Property
Our drive to enhance the Group's return on capital employed and to release cash
from under-utilised assets resulted in the disposal during the year of our site
in Mullingar and the Panelling Centre Richmond Road premises. These have been
disposed of at a small surplus to their re-valued amount (as at April 2002).
This programme will continue and we would expect further disposals in the coming
year.
We continue to liaise with the authorities in Cork to obtain the optimum
planning permission for our site in Bishopstown. This has been a long process
but we would expect to be well positioned to complete an appropriate transaction
within the next 24 months. The site received a positive re-zoning in December
2002 under the Cork Regional Development Plan, with an indicative valuation
suggesting that the value of the site has risen by approx. Euro7m.
Poland
We retain our investment with a view to determining its future in 2004. We
remain optimistic that the economic climate in Poland for the latter half of
this decade will be very positive following accession to the European Union.
Outlook
In recent months the trading in Irish Construction and in particular Irish
housing and RMI (Repairs, Maintenance and Improvements) has been buoyant. This
trend has given the Group a very satisfactory start to the new financial year.
It is our expectation that trading will remain positive throughout 2003. The
focus on cost controls, working capital management and containment of capital
expenditure, which has been a feature of the Group over the last year, will
continue.
In the UK, the construction market continues to deliver modest growth. We
believe our streamlined and restructured UK operations are well placed to take
advantage of those growth segments.
The Heiton Group has been successful in identifying, acquiring and integrating
new businesses over the last ten years. To underpin the organic growth of our
businesses, we will continue to seek new acquisitions and opportunities to open
new outlets to help deliver our vision. These factors, coupled with the
benefits of the refocusing and reorganisation of the various divisions, cause us
to be optimistic about the future prospects of your Group.
Richard Keatinge
Chairman
3 July 2003
Heiton Group plc
GROUP PROFIT AND LOSS ACCOUNT
Year Ended 30 April 2003
2003 2002
Euro'000 Euro'000
Turnover
Continuing operations 457,837 422,630
Acquisitions 21,240
479,077 422,630
Operating profit before exceptional item
Continuing operations 25,283 23,988
Acquisitions 2,021 -
Total operating profit before exceptional item 27,304 23,988
Exceptional goodwill write-off and restructuring costs (13,098) (4,320)
Operating profit 14,206 19,668
Interest payable (5,083) (4,123)
Profit before taxation 9,123 15,545
Taxation (3,214) (2,620)
Profit for the financial year 5,909 12,925
Dividends paid (3,056) (2,881)
Dividends proposed (4,029) (3,705)
Retained for the year (1,176) 6,339
Basic earnings per share in cents 11.99 25.84
Diluted earnings per share in cents 11.97 25.81
Basic earnings per share pre-exceptional items in cents 38.33 32.87
Pre-goodwill and pre-exceptional items earnings per share in cents 43.08 35.85
On behalf of the Board
R Keatinge
LJ Martin
Heiton Group plc
GROUP BALANCE SHEET
30 April 2003
2003 2002
Euro'000 Euro'000
Fixed assets
Tangible assets 128,987 129,048
Intangible assets 30,641 38,540
Financial assets 2,831 2,790
162,459 170,378
Current assets
Stocks 62,650 62,756
Debtors 99,796 93,273
Cash at bank and in hand 17,965 19,196
180,411 175,225
Creditors - amounts falling due within one year (133,177) (122,060)
Net current assets 47,234 53,165
Total assets less current liabilities 209,693 223,543
Creditors - amounts falling due after more than one year (71,257) (82,983)
Provisions for liabilities and charges
Deferred taxation (868) (741)
137,568 139,819
Capital and reserves
Called-up share capital 15,869 15,954
Share premium 15,506 15,423
Revaluation reserve 35,698 38,007
Capital redemption reserve fund 560 456
Profit and loss account 69,935 69,979
137,568 139,819
Equity shareholders' funds 137,424 139,672
Non-equity shareholders' funds 144 147
137,568 139,819
On behalf of the Board
R Keatinge
LJ Martin
Heiton Group plc
GROUP CASH FLOW STATEMENT
Year Ended 30 April 2003
2003 2002
Euro'000 Euro'000
Net cash inflow from operating activities 46,088 23,805
Returns on investments and servicing of finance:
Interest and preference dividends paid (4,904) (4,137)
Taxation paid: Corporation tax (5,422) (8,386)
Capital expenditure and financial investment (5,375) (3,480)
Acquisitions and disposals: Purchase of new undertakings (5,082) (27,575)
Equity dividends paid (6,752) (5,765)
Net cash inflow/(outflow) before financing 18,553 (25,538)
Financing
(Purchase of own shares)/issue of new share capital (685) (2,751)
(Decrease)/increase in debt (14,268) 32,373
(14,953) 29,622
Increase in cash 3,600 4,084
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Year Ended 30 April 2003
2003 2002
Euro'000 Euro'000
Increase in cash above 3,600 4,084
Decrease/(increase) in debt above 14,268 (32,373)
New finance leases (849) (411)
Finance leases acquired with new undertakings (22) (30)
Debt acquired with new undertakings (207) (808)
Change in net debt 16,790 (29,538)
Net debt at beginning of year (80,005) (50,467)
Net debt at end of year (63,215) (80,005)
On behalf of the Board
R Keatinge
LJ Martin
Heiton Group plc
NOTES TO THE FINANCIAL STATEMENTS
1 Segmental analysis
2003 2002
Euro'000 Euro'000
Turnover
Heiton Trade 314,522 259,026
Heiton Retail 85,317 81,712
Total Ireland 399,839 340,738
Heiton UK 79,238 81,892
Total 479,077 422,630
Operating profit before goodwill amortisation and restructuring costs
Ireland 28,944 23,348
United Kingdom 698 2,128
29,642 25,476
The group operates in the Republic of Ireland and the United Kingdom.
Additional segmental information analysed by class of business or
geographic location, under Statement of Standard Accounting Practice No.25
Segmental Reporting, is not disclosed because in the opinion of the
Directors the disclosure of such information would be prejudicial to the
interests of the Group.
DIVIDENDS
ORDINARY SHARES
Final Dividend proposed: Euro8.2c gross per share
Dividend payment date: 19 September 2003
Ex Dividend date: 9 July 2003
Record date: 11 July 2003
6% CUMULATIVE PREFERENCE SHARES
Dividend: Euro3.81c gross per share in respect of the
half-year period 1 April 2003 to 30
September 2003
Dividend payment date: 1 October 2003
Ex Dividend date: 9 July 2003
Record date: 11 July 2003
The Annual General Meeting will be held on 18th September 2003 at 12 noon at
Jurys Hotel, Ballsbridge, Dublin 4.
3 July 2003
Richard Keatinge
Chairman
This information is provided by RNS
The company news service from the London Stock Exchange
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