16th Jul 2007 07:00
Wolseley PLC16 July 2007 NEWS RELEASE 16 July 2007 Wolseley plc Pre-Close Period Trading Statement for 11 months to 30 June 2007 Wolseley plc, the world's largest specialist trade distributor of plumbing andheating products to professional contractors and a leading supplier of buildingmaterials, issues its regular trading statement for the 11 months to 30 June2007, prior to entering its close period. The preliminary results for the 12months ending 31 July 2007 are due to be announced on 24 September 2007. Overview The results announced today demonstrate the benefits of the Group's diversityand its ability to react swiftly to changing market conditions. Although the USnew housing market, which affects around one quarter of Wolseley's revenues, hasslowed significantly, the Group has continued to invest in the business forfuture growth, made acquisitions that further increase diversity andrestructured its operations to reduce costs and improve margins going forward. Against this background, Group revenue for the 11 months to 30 June 2007 was upby almost 15%, after currency translation and including the effect ofacquisitions. Trading profit for the same period was up about 2%. In constantcurrency, revenue and trading profit would have been a further 6% higher. As previously indicated, the Group's results have also been affected by lowerlumber and panel prices in the USA, as well as adverse currency translation andone-off restructuring costs. The effect of these factors has been partiallyoffset by good organic growth in the US plumbing and heating business (Ferguson), an improved performance in continental Europe and the contribution fromacquisitions. Group profit before tax and before amortisation of acquired intangibles for the11 months to 30 June 2007 was around 5% lower than the comparable period in theprior year, reflecting a higher interest charge relating to the recentacquisition spend and increased interest rates. For the 12 months to 31 July2007 the Group's trading profit will be impacted by further one-offrestructuring costs which are expected to be in the region of £9 million. Further details of market conditions and financial performance in each of theGroup's business segments are set out below. North America In North America, revenue for the 11 months to 30 June 2007 in sterling,including acquisitions, decreased by about 4% compared to the correspondingperiod in the prior year. Trading profit in sterling, including acquisitions,was down by around 17%, after charging previously announced one-off costsrelating to headcount reductions and branch closures. In the USA, the new residential market continues to be challenging, but therepairs, maintenance and improvement market ("RMI") and the commercial andindustrial sectors continue to provide opportunities for growth. Aggregate localcurrency revenue from the Group's US businesses, including acquisitions, wasabout 5% higher but US trading profit was down by around 10%. US Dollar weaknesshas led to an 8.5% adverse currency translation impact when US results arereported in sterling. Ferguson produced a strong performance continuing to take market share, withrevenue in local currency for the 11 months to 30 June 2007 up by around 15%, ofwhich approximately 6% was organic growth. Trading profit was up by about 20% onthe equivalent period in the prior year. The higher trading margin reflects thediversity of the business and of the specialist product offering as well as afocus on cost efficiency. At Stock, the US building materials business, revenue and trading profitcontinue to be impacted by the challenging new residential market resulting inincreased price competition and also by the significantly lower lumber andstructural panel prices. Lumber and structural panel prices, which when combinedaccount for approximately 45% of Stock's revenues, have fallen by 21% and 27%,respectively. Including the impact of acquisitions, local currency revenue wasdown nearly 15%. Stock continued to outperform the market with organic salesvolumes down by 15%, compared with average housing starts which were 25% lowerat 1.5 million, compared to 2.1 million in the prior period. Commodity pricedeflation caused revenues to decline a further 10%. Trading profit was down bytwo-thirds, after charging the previously announced one-off costs of some $11million, relating to 22 branch closures and headcount reductions of around 4,500(25% of total employees). In addition, there are one-off charges, arising in July, of $12 millionfollowing the decision to close a further 24 branches, involving a 370 headcountreduction, primarily in the MidWest, and $10 million from the consequentialgoodwill impairment provision required in that region. Stock's remaining branchnetwork will comprise 287 branches across 33 states. Wolseley Canada achieved modest local currency revenue growth, although tradingprofit was lower compared to the equivalent period in the prior year, primarilydue to lower activity levels in the exploration industries in Western Canada.With effect from 1 August 2007, Wolseley Canada will be integrated into Ferguson, operating within the same business group structure which focuses on specificcustomer types, and will benefit from leveraging the US operations, includingthe distribution centre network. Europe In Europe, revenue in sterling, including acquisitions, increased by more than45% in the 11 months to 30 June 2007, whilst trading profit was up by around35%. Excluding DT Group, European revenues and trading profit were up by about15% and more than 5%, respectively. Wolseley UK, including Ireland, achieved strong revenue growth of more than 15%,including around 10% organic growth, reflecting market share gains across mostbrands. Trading profit, including acquisitions, was up more than 5%. The tradingmargin was lower as a result of competitive market conditions in the first halfand the effect of the previously announced one-off costs and investments in thebusiness, but has shown the expected upward trend in the second half. Wolseley France achieved double-digit revenue growth, approximately half ofwhich was organic. Its underlying trading margin improved slightly, afteradjusting for the net impact of one-off items in the current and prior year. DT Group's trading in the Nordic region in its first nine months of Wolseleyownership continues to exceed expectations at the time of acquisition. Over thatperiod, revenue increased by approximately 15% and trading profit increased bymore than 20%, compared to the comparable period in the prior year. Central and Eastern European businesses showed strong revenue growth, despitemost principal markets remaining broadly flat. Overall, in sterling, revenue wasup more than 20%, with double digit organic growth, and the trading margin alsoimproved. There will be a one-off charge of around £3 million in July, relatingto restructuring in Italy following the opening of the new distribution centre. Financial Since 1 August 2006, a total of 41 bolt-on acquisitions have been completed foran aggregate consideration of approximately £374 million. These 41 acquisitionsare expected to add approximately £656 million to Group revenue in a full year.In addition, on 25 September 2006, the Group completed the acquisition of DTGroup for a consideration of £1,339 million which brings aggregate acquisitionspend for the year to £1,713 million. As expected, the interest charge is running at almost twice the level incurredin the corresponding period in the prior year due to the higher level of averageborrowings as a result of recent acquisitions and interest rate rises. The Group's financial position remains strong with Group gearing, as at 30 June2007, of around 78% at current exchange rates (89.6% as at 31 January 2007),reflecting a strong improvement in operating cashflow during the period to date. Outlook There are no signs of any upturn in the US housing market and the timing of anyrecovery remains uncertain. The RMI and commercial and industrial markets areexpected to continue to provide good opportunities for growth. In the UK, recent sales trends have been positive although the market signalsare difficult to interpret following the recent interest rate rises. Housingstarts in Ireland are expected to continue to slow from the extremely highlevels seen in recent years. Markets across Continental Europe and the Nordic region are expected to begenerally positive and Wolseley's operations in those areas are expected to showfurther progress. The Group will continue to target margin improvement by pursuing the initiativesrelating to supply chain, sourcing and private label and by ensuring thatmaximum benefits are derived from the investments in facilities, technology andpeople, whilst continuing to focus on the cost base. The Group is wellpositioned to benefit from any recovery in the US new housing market and expectsto continue to make good progress in other markets which account for aroundthree-quarters of the Group's revenue. Chip Hornsby, Group Chief Executive of Wolseley, said: "The Group has reacted swiftly and decisively to the difficult conditions in theUS housing market and will continue to pursue its strategy to create competitiveadvantage and shareholder value from its leading market positions and excellentplatform for future growth." Exchange Rates The average profit and loss account translation rate for the first 11 months was$1.95 to the £1 compared to $1.78 for the comparable period last year, a fall of8.5%, and €1.48 to the £1 compared to €1.46, a fall of 1.6%. Trading profit, a term used throughout this announcement, is defined asoperating profit before amortisation and impairment of acquired intangibles.Trading margin is the ratio of trading profit to sales stated as a percentage. There will be an analyst/investor meeting today at 9.30 a.m. taking place atUBS, 1 Finsbury Avenue, London, EC2M 2PP. A dial-in facility will be available for this meeting: UK Toll Free dial-in 0800 559 3272 International dial-in +44 (0)207 138 0814 ID Wolseley Slides to accompany the call will be available from 09.15 a.m. onwww.wolseley.com. A replay facility will be available until 29th July 2007 by dialling: UK Toll Free 0800 559 3271 International +44 (0)207 806 1970 US Toll Free +1 866 883 4489 Replay Passcode 3268424# ENQUIRIES: Guy Stainer +44 (0) 118 929 8744Group Investor Relations Director +44 (0) 7739 778187 John English +1 513 771 9000Vice President, Investor Relations, North America +1 513 328 4900 Brunswick +44 (0)20 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 revenue for theyear ended 31 July 2006 was approximately £14.2 billion and operating profit,before amortisation and impairment of acquired intangibles, was £882 million.Wolseley has around 78,000 employees operating in 28 countries namely: UK, USA,France, Canada, Ireland, Italy, The Netherlands, Switzerland, Austria, CzechRepublic, Hungary, Belgium, Luxembourg, Denmark, Sweden, Finland, Norway, SlovakRepublic, Poland, Romania, Croatia, San Marino, Panama, Puerto Rico, Trinidad &Tobago, Mexico, Barbados and Greenland. Wolseley is listed on the London and NewYork Stock Exchanges (LSE: WOS, NYSE: WOS) and is in the FTSE 100 index oflisted companies. - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ferguson