Booming trading conditions in the construction industry, and profits from acquisitions in Northern Ireland and the Isle of Man have lifted Readymix's pre-tax profit by 62 per cent, from £3.9 million to £6.3 million, in the six months ended June 30th, 1997.
Buoyant trading is continuing, said the managing director, Mr John McNerney. July has shown a similar pattern to the first half and August has been steady, he said. The company is continuing to look for acquisitions. It made two small acquisitions in the midlands and one in the south-east in the first half.
"We would like to make a large acquisition and we have the financial strength to do it. But we are on the top of the market. There is very little for sale, reflecting the buoyant market." Readymix benefited from a six months contribution from the RMC-Catherwood businesses in Northern Ireland and the Isle of Man, compared with two months in the first half of last year. Excluding a pro-rata contribution, it appears that the core business in the Republic grew its profits by more than one-third.
Group sales rose by 81 per cent from £30.18 million to £54.54 million, partly reflecting a contribution from the acquisitions. Northern Ireland and the Isle of Man accounted for £27.78 million, or 51 per cent of the total. However, Northern Ireland and the Isle of Man only account for about one-third of profits, reflecting the lower margins.
Group operating margins fell from 14.5 per cent to 11.8 per cent. However, these margins do not reflect the underlying position. The figures are distorted by the contribution from Northern Ireland where the margins are a good deal lower. Making an adjustment for the distortion indicates a small increase in the operating margins.
Reflecting real growth, earnings per share have risen by 24 per cent from 7.89p to 9.75p. Shareholders are to partly benefit from the good results with a 20 per cent rise in the interim dividend from 1.30p net per share to 1.56p.
The group continues to generate substantial cash flow from operations. This amounted to £5.87 million in the first half, up from £4.63 million. It has net borrowings of only £4.5 million, representing a gearing of just 11 per cent.
Reviewing the latest results, Readymix said all areas of construction activity in the Republic remained strong with the exception of agricultural contracting. Volume growth in the Republic has been in the "high teens" but this was down to a "couple of percent" in Northern Ireland and the Isle of Man, said Mr McNerney. Readymix, involved in a number of major projects in the greater Belfast area, also has ongoing developments in the Isle of Man. In particular, those associated with the financial services area in Douglas "have resulted in satisfactory demand for ready mixed concrete and other products supplied by our builder's merchants' business on the island".
Despite the buoyant trading conditions, Readymix has noted the continued intensity of price competition. This has led to a "continuing emphasis on cost control".
