Grafton on course to report solid profits for 2004

THE strengthened Grafton Group is expected to report solid profits for 2004 with no surprises in store for the markets.

Much of the interest in the group will be how much it gains from the integration of Heiton, completed in January.

Even with Heiton on board, Britain will still account for 55% of profits in 2005. Heiton of course has little exposure to Britain, on the other hand.

Analysts expect that the synergies between the two groups have to be pretty significant going forward. Combined, the DIY/builders providers have a total of 430 outlets across Ireland and Britain.

For 2004, the group, which owns both Atlantic Homecare and Woodies DIY stores, is due to report figures in line with market expectations when it publishes its annual results on 9 March.

Without Heiton the group has been a pretty solid performer for several years. Proof of that has been the compound growth in earnings of 22% over the past five years.

In a recent note, Goodbody Stockbrokers said the earnings outlook has improved significantly in view of the Heiton’s deal and has adjusted earnings per share of 2005 by 10%.

The general expectation is that the group will produce profits before tax of €130m up from €102m.

From 2006 onwards the impact of the Heiton operations will add further to earnings, said Goodbody, broker to the group.

Davy Stockbrokers is expecting no surprises either but believes the real challenge going forward will be how well the two group’s, in which Grafton held a minority 26% stake for several years, actually integrate.

Kingspan a supplier of building components to the construction sector reports on 9 March and has already indicated that after-tax profits will be up 30%.

Pre-tax the figures are expected to come in at around €86m for the year.

Strong growth is expected to be sustained also into the current year on the back of solid growth in its core British/US markets.

New product lines in the composite panel market and good US demand for raised flooring are important to growth in the current year. At a PE of 16, the stock is trading above its long term average, but reflects the fact that investors still like the stock and see it as having more to offer in the medium term, analysts said.