29th Nov 2006 07:01
Wolseley PLC29 November 2006 NEWS RELEASE 29 November 2006 Wolseley plc AGM Statement and Acquisitions Update Wolseley plc, the world's largest specialist trade distributor of plumbing andheating products to professional contractors and a leading supplier of buildingmaterials, is issuing its usual update on current trading conditions in relationto holding its Annual General Meeting at noon today, at Haberdasher's Hall, 18West Smithfield, London, EC1A 9HQ. Overview Business conditions in the Group's principal markets outside the USA have beenbroadly in line with comments made in the Preliminary Results statement for theyear ended 31 July 2006, issued on 25 September 2006. In the USA, the Group hasseen a further softening in the US housing market and also weaker lumber pricesthan originally expected. This has impacted sales and profits from the USBuilding Materials business ("Stock") in the three months of the financial yearto 31 October 2006. In response to the slowing market, a significant programmeof cost reduction has been implemented. Elsewhere, the Group has benefited fromhigh rates of organic growth in the US Plumbing and Heating business ("Ferguson"), the contribution from acquisitions, including DT Group and also fromimproving trends from a number of European businesses including the UK andFrance. After currency translation and including the effect of acquisitions, Grouprevenue for the three months to 31 October 2006 was up by more than 15% on thecorresponding period in 2005, including around 5% organic growth. Trading profitwas up by around 9%. In constant currency, revenue and trading profit would havebeen higher by around 4%. Group profit before tax and amortisation of acquired intangibles for the threemonths to 31 October 2006 was up only marginally as a consequence of the higherinterest charge relating to the recent acquisition spend and increased interestrates. Further details of market conditions in each of the Group's business segmentsare set out below. North America In North America, revenue in the three months to 31 October 2006 in sterling,including acquisitions, increased by around 9% compared to the correspondingperiod in the prior year. Trading profit was marginally up. In the USA, new housing starts have fallen more sharply than expected, but therepairs and remodelling market ("RMI") benefited from the positive economicenvironment and the commercial and industrial sectors continued to improve.Aggregate local currency revenue from the Group's US businesses was more than10% higher and US trading profit was up by around 5%. After a 6% adversecurrency translation impact, US trading profits in sterling were slightly downon the comparable period in the prior year. Ferguson continued to perform well with revenue and trading profit in localcurrency for the three months to 31 October 2006 up by over 20%, includingdouble digit organic growth. The trading margin was slightly lower due to theon-going investment in infrastructure. At Stock, local currency revenue and trading profit have been impacted by thecontinued slowdown in the new residential market and by the significantly lowerlumber and structural panel prices. Housing starts in the USA have fallen froman annual rate of more than 2.0 million in October 2005 to under 1.5 million inOctober 2006 and there continue to be significant regional variations. Lumberand structural panel prices, which when combined account for around 45% ofStock's revenues, have fallen by 23% and 38%, respectively. Including thebeneficial impact of acquisitions, revenue for the first three months of thecurrent financial year was slightly up but trading profit was down by around aquarter. Organic sales volumes were down by around 6% compared to the 27%decline in overall housing starts. Significant management action has been takenwith a major programme of cost reduction, lowering headcount by more than 10%.The cost base will continue to be kept under review in response to changingmarket conditions. In Canada, whilst there has been the anticipated slowing in housing starts andin economic activity levels in Eastern Canada, the RMI market continued to grow.In local currency, Wolseley Canada achieved modest organic revenue growth and adouble digit increase in trading profit compared to the equivalent period in theprior year. Europe In Europe, revenue and trading profit in sterling, including acquisitions,increased by more than 30% in the three months to 31 October 2006. Excluding DTGroup, European revenues and trading profit were up by around 20% and 10%,respectively. Wolseley UK, including Ireland, achieved double-digit revenue growth, includinggood levels of organic growth, reflecting generally improving trading conditionsacross most brands. The trading margin was slightly lower as a result ofslightly more aggressive price competition and the company's on-goinginvestments in people and new branch openings. In France, good levels of organic revenue and profit growth were achieved andsales trends continued to improve. Trading in the Nordic region by DT Group in its first month of Wolseleyownership was encouraging and exceeded expectations. In Central Europe, each of the Group's businesses showed positive revenuegrowth, despite most markets remaining broadly flat. The businesses inSwitzerland and the Netherlands continued to show good increases in tradingprofit. Outlook In the USA, the housing market is expected to continue to soften into 2007, butwith significant regional variations. As the year progresses, the relativeperformance of Stock should improve as the housing starts and lumber/panel pricecomparators become more favourable and the benefits of the cost reductionprogramme are realised. The RMI and commercial and industrial markets areexpected to continue to improve. Ferguson should increase its market share andachieve good levels of organic growth. In the UK, recent sales trends support the Group's view that there will continueto be a gradual improvement in the RMI and housing markets, as the financialyear progresses. Growth in the French RMI market is likely to remain modest,although sales trends are expected to continue to improve. The outlook for themarkets in which DT Group operates remain positive. In Central Europe, most ofthe Group's businesses should continue to show some progress in generally flatmarkets. The Board remains confident of the Group's ability to outperform the markets inwhich its principal businesses operate. The Group will continue to manage itscost base in response to prevailing market conditions in order to maximiseprofitability. The Board continues to expect the Group to make progress for thecurrent financial year as a whole but the first half is likely to be the mostchallenging. In accordance with normal practice, we will be issuing a pre-close half yeartrading update on 22 January 2007. Acquisitions Since the beginning of the financial year on 1 August 2006, a total of 19bolt-on acquisitions in Europe and North America have been completed for anaggregate consideration of approximately £235 million, against the targetedspend on bolt-on acquisitions of approximately £400 million for the currentfinancial year. These 19 acquisitions are expected to add approximately £387million to Group revenue in a full year. Goodwill and intangible assets relatedto these acquisitions is estimated to be around £157 million. In addition, on 25 September 2006, Wolseley plc completed the acquisition of DTGroup for an estimated consideration of £1,353 million which brings aggregateacquisition spend for the year to £1,588 million. Details of the three acquisitions not previously announced are outlined below. Europe On 9 October 2006, DT Group acquired the business and assets of AdelgaardByggeforum ("AB") from Udviklingsselskabet f 15.juni 2004 A/S. Based inHillerod, north of Copenhagen, the business operates from a showroom offering arange of RMI products such as ceramic tiles, flooring, windows, doors, taps,showers and other plumbing related products. In the year ended 31 December 2005,AB had revenue of DKK5.2 million (£0.6 million) and had gross assets of DKK2.5million (£0.7 million) at that date. On 2 November 2006, Brossette acquired Ditac SAS ("Ditac") from FinanciereCelsius. Ditac is a leading distributor of spare parts and accessories forheating equipment, bathroom appliances and air conditioning, as well as toolsused by installers and service providers. In the year ended 31 December 2005,Ditac had revenue of €17.7 million (£11.9 million) and gross assets of €5.2million (£3.5 million) at that date. North America On 20 November 2006, Stock acquired Kempsville Building Materials, Inc.("Kempsville") from Kempsville Building Materials, Inc. Employee Stock OwnershipPlan, Scott Gandy, Bobby Johnson and Brenda Onley. Kempsville is the leadingindependent distributor of building materials in the Greater Hampton Roadsregion of eastern Virginia. From three locations, the Company offers traditionalbuilding materials as well as value-added products and services such as roof andfloor trusses, wall panels, staircases and doors. In the year ended 31 December2005, Kempsville had revenue of $66.1 million (£34.8 million) and had grossassets of $8.6 million (£4.5 million) at that date. The divisional split of the total acquisition spend since 1 August 2006 is: Division No. of Acquisitions Spend £ Million Europe 9 63North America 10 172TOTAL BOLT-ONS 19 235Acquisition of DT Group 1 1,353TOTAL ACQUISITION SPEND 20 1,588 Exchange Rates The average profit and loss account translation rate for the three months to 31October 2006 was $1.8878 to the £1 compared to $1.7733 for the comparable periodlast year, a weakening of 6.1%, and €1.4803 to the £1 compared to €1.4625, aweakening of 1.2%, compared to the prior year. The following exchange rates have been used for the acquisitions noted above:£1 = $1.9, £1 = €1.49, £1 = DKK7.5. Trading profit, a term used throughout this announcement, is defined asoperating profit before amortisation of acquired intangibles. Trading margin isthe ratio of trading profit to revenue stated as a percentage. ENQUIRIES: Investors/Analysts: Guy Stainer 0118 929 8744Head of Investor Relations 07739 778187 John English 001 513 771 9000Director, Investor Relations North America 001 513 328 4900 Media:Penny Studholme 0118 929 8886Director of Corporate Communications 07860 553834 Brunswick 020 7404 5959Andrew FenwickNina Coad Certain statements included in this announcement may be forward-looking and mayinvolve risks, assumptions and uncertainties that could cause actual results todiffer materially from those expressed or implied by the forward lookingstatements. Forward-looking statements include, without limitation, projectionsrelating to results of operations and financial conditions and the Company'splans and objectives for future operations including, without limitation,discussions of the Company's business and financial plans, expected futurerevenues and expenditures, investments and disposals, risks associated withchanges in economic conditions, the strength of the plumbing and heating andbuilding materials market in North America and Europe, fluctuations in productprices and changes in exchange and interest rates. All forward-lookingstatements in this respect are based upon information known to the Company onthe date of this announcement. The Company undertakes no obligation to publiclyupdate or revise any forward-looking statement, whether as a result of newinformation, future events or otherwise. It is not reasonably possible toitemise all of the many factors and events that could cause the Company'sforward-looking statements to be incorrect or that could otherwise have amaterial adverse effect on the future operations or results of the Company. Notes to Editors Wolseley plc is the world's largest specialist trade distributor of plumbing andheating products to professional contractors and a leading supplier of buildingmaterials in North America, the UK and Continental Europe. Group revenues forthe year ended 31 July 2006 were approximately £14.2 billion and operatingprofit, before amortisation of acquired intangibles, was £882 million. Wolseleyhas around 80,000 employees operating in 27 countries namely: UK, USA, France,Canada, Ireland, Italy, The Netherlands, Switzerland, Austria, Czech Republic,Hungary, Belgium, Luxembourg, Denmark, Sweden, Finland, Norway, Slovak Republic,Poland, Romania, Croatia, San Marino, Panama, Puerto Rico, Trinidad & Tobago,Mexico and Barbados. Wolseley is listed on the London and New York StockExchanges (LSE: WOS, NYSE: WOS) and is in the FTSE 100 index of listedcompanies. -- ENDS -- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ferguson