GRAFTON, the Chadwicks and Woodies DIY company, has expanded further in the British building materials and enchanting markets, with the (acquisition of two companies for £55 million sterling.
The builders' merchanting business of R J Johnson and Company, Oxford, has been acquired for £4.5 million cash. The mortar business of PPS Structural which operates in Glasgow and Edinburgh, has been 1p for around £1 million cash.
Johnson, trading as "Johnsons is engaged in the supply of timber and light side building materials. Originating in the mid 19th century, it now operates from a five acre site in Cowley and is the leading independent builders merchant in Oxford.
The businesses being acquired generated an operating profit of £266,000 sterling on sales of £8.9 million in 1994. The assets have a book value of £4.4 million so there will be little goodwill.
However, the consideration represents a high multiple of 16.9 times profits which implies an earnings' dilution on the historic figures. No figures for 1995 have been released, but profits are expected to be lower, according to Graft on executive chairman, Mr Michael Chadwick.
However, Grafton expects Johnson to considerably increase its profitability. This will be effected through adding new products to its range. The introduction of heating products, a speciality of Grafton in Britain will represent a major expansion.
PPS Structural Services, trading as PPS Mortars, having started in 1990, is a comparatively young business. It is the sole supplier of mortar in silos in Scotland and generates an annual profit of around £100,000. This acquisition is earnings neutral on historic profits but Mr Chadwick sees substantial growth in this business.
Grafton is also in discussions to acquire an additional plumbing and heating business in southeast England. If this is finalised, the consideration will be under £500,000.
Grafton will remain in a strong financial position after the acquisitions. By the year end the group's gearing is expected to be under 5 per cent which will leave it in a strong position to expand further by acquisition.
