HEITON Holdings, the builders' merchants and Atlantic DIY group, has recorded strong growth with a 72 per cent rise in pre tax profit from Pounds 4 million to Pounds 6.9 million in the year to April 30th, 1996.
The results are better than expected and shareholders will benefit partly from the upsurge. The final dividend is being raised from 1.7p net a share to 2.15p, making a total of 3.1p, compared with 2.5p previously. The dividend cover goes up from 2.0 to 3.1.
Continued profit growth is anticipated but at a slower rate. The outlook for all the group's businesses remained optimistic, said its chief executive, Mr Richard Hewat.
However, there is "very likely" to be a "small drop in sales" from the Atlantic DIY following the destruction of its Coolock store in Dublin in a fire last month. The group "may lose market share" in 1996/97 but this is expected to be temporary, pending the rebuilding of the 30,000 sq ft unit.
Atlantic was fully covered by insurance so there would be no loss in profits, he said. Restricted trading was taking place from a small store adjoining the Coolock site.
Overall, the group expects continued benefits from low interest rates and the low inflation environment. Heiton, in common with other building products companies, sees new house building growth in Dublin of just 1 per cent with 10 per cent in the rest of the country. There should be significant business from the repair and maintenance industry, driven both by urban renewal schemes and higher spending on both private improvements and business premises upgrading.
Mr Hewat said Heiton would continue to push for growth through a mixture of organic growth, continued expansion of its product range and by "appropriate" acquisitions. These acquisitions are expected to be in Ireland.
The latest results show a 9 per cent rise in group turnover from Pounds 118 million to Pounds 128.4 million. Costs went up by the lower rate of 6.6 per cent, leading to an improvement in profit margins from 3.4 per cent to 5.4 per cent. A lower tax charge was partly responsible for the 93 per cent gain in earnings per share from 5.1p to 9.8p.
The group has further strengthened its financial position and gearing has fallen from 25 per cent to 5 per cent. Net operating cash inflow jumped from Pounds 2.1 million to Pounds 8.5 million while negative working capital of Pounds 3.4 million was turned into positive working capital of Pounds 900,000.
Reviewing the latest results, Heiton said that sales in builders merchants and the steel division rose by 10.8 per cent to Pounds 112 million. Profits were "well ahead" but these have not been quantified. Builders merchanting has continued to gain benefits from an integration of its businesses. Steel prices fell but this was compensated by buoyancy in the industry.
Turnover in Atlantic Homecare, which has eight stores, fell by 3 per cent due to the closure of two small stores but there was 3.4 per cent growth on a continuing basis. Operating profits were "in line with expectations". Heiton said it had increased its market share in the DIY retailing sector.
Mr Hewat welcomed the greater marketability of the shares following DCC's sale of its 24 per cent stake. These were placed with 16 institutions.
Heiton has not made any specific forecast for this year. However, earnings per share should rise to around 10.5p. On this basis, the shares at 104p, up 1p yesterday (12 month high 105p low 72p), are on a prospective price/earnings ratio of 9.9.
