17th Jan 2005 07:00
Wolseley PLC17 January 2005 Wolseley plc Pre-Close Period Trading Statement for five months to 31 December 2004 Wolseley plc, the world's largest specialist trade distributor of plumbing andheating products and a leading supplier of building materials to professionalcontractors, issues its regular trading statement for the five months to 31December 2004, prior to entering its close period. The interim results for thesix months ending 31 January 2005 are due to be announced on 21 March 2005. Overview Business conditions in the group's principal markets have been broadly in linewith comments made in the AGM statement on 18 November 2004. The group's results for the first five months to 31 December 2004 show a strongincrease in sales and profits driven by high rates of organic growth in NorthAmerica and the UK and the beneficial impact of commodity price inflation in theUSA. The group's trading margin for the five month period is also substantiallyup on the equivalent period in the prior year. After currency translation and including the effect of acquisitions, group salesfor the five months to 31 December 2004 were up by nearly 10% and trading profitup by more than 25% on the same period in 2003. The adverse currency translationeffect on sales was approximately £242 million and £13 million on tradingprofit. On a constant currency basis, and including the effect of acquisitions,group sales and trading profit for the five months ended 31 December 2004 are upby more than 15% and 30% respectively. Further details of market conditions in each of the group's business segmentsare set out below. North American Plumbing and Heating Distribution The US plumbing operations performed strongly with sales in local currency forthe five months to 31 December 2004 up by more than 15% and trading profit up bymore than 40% on the equivalent period in the prior year. The majority of thesales growth was organic, including the beneficial effects of commodity priceinflation. Approximately $10 million of the increase in trading profit was dueto commodity price increases in products such as copper, steel and plastics. Theyear-on-year benefits of this price inflation are unlikely to continue at thesame rate into the second half due to the generally higher level of commodityprices in the second half of 2004. The trading margin increased substantiallyover the equivalent period last year. US housing related activity held up well and the more positive economicenvironment has benefited the repairs and remodelling market. The commercialsector continues to improve and the industrial sector is showing the initialsigns of improvement. Ferguson's market outperformance continues to be driven by the commercialadvantage gained from its distribution centre network and from management'sfocus on achieving organic growth in selective markets. The next distributioncentre in Iowa is on track for completion in this financial year. In Canada, the construction and housing markets remained strong. In localcurrency, Wolseley Canada achieved a double-digit increase in both sales andtrading profit over the equivalent five month period in the prior year. With effect from 1 August 2004 the recorded sales value in Ferguson's IntegratedSupply Division represents the gross profit rather than the gross sales valuewhich was recorded in the year to 31 July 2004. This change is the result of areview of revised contractual arrangements and following the guidance containedin the recently released Application Note G to FRS5. The effect of this changein the five months to 31 December 2004, which has no effect on profit, is toreduce sales by $84 million. There is a positive impact on the trading margin ofFerguson for the five month period of 0.2%. US Building Materials Distribution In US Building Materials, sales in US$ were up more than 20% for the first fivemonths and trading profits up by more than 30% compared to the equivalent periodin the prior year. Encouragingly, aggregate US housing starts remain robust at around 1.8 millionstarts per annum and the inventory of unsold houses at around 4.5 monthscompares favourably to the long-term average of around 6 months. Recentmanagement action to reorganise the business and improve market focus continuesto have a beneficial effect helping to drive organic volume growth of more than10%. Commodity lumber prices, which directly affect approximately 35% of StockBuilding Supply's product range, held up well in the period. For the five monthsto 31 December 2004, average lumber prices of $402 per thousand board feet were18% up on the prior comparable period average of $340 per thousand board feet.Structural panel prices, however, which directly affect a further 13% of StockBuilding Supply's product range, decreased by 17% to $402 per thousand squarefeet. These commodity price movements had the effect of increasing Stock's localcurrency sales by $58 million (4.1%) in the five-month period compared to theequivalent period in the prior year. Although lumber prices are expected to holdup in coming months, structural panel prices remain above their long termaverage and are, therefore, expected to continue to trend downwards. Both the trading margin and the return on capital of Stock Building Supply areshowing substantial increases on the prior year. European Distribution In European Distribution, sales and trading profit in the five months to 31December 2004 in sterling were both up by more than 10% compared to the sameperiod in the prior year. The UK has been the most positive of the group's European markets in the fivemonths to 31 December 2004, with demand in the repairs, maintenance andimprovement ("RMI") sector remaining strong and the commercial sector, includinggovernment spending, showing signs of improvement. Despite the continuingweakness in the industrial market and the slowing of new residentialconstruction, Wolseley UK's operations recorded double-digit sales and tradingprofit growth in the period, with organic sales growth of more than 8% and animproved trading margin. However, higher pension and restructuring costs, aspreviously announced, will be reflected in the second half trading margin.Brooks, the Ireland based timber and builders merchant acquired in August 2004,is trading in line with expectations. In France, government tax incentives are helping the new residential market, butRMI, the principal driver of both Brossette and PBM, continues to show littlegrowth. PBM performed in line with expectations with local currency sales andtrading profit up more than 7% and it remains on track to achieve its returntargets. Primarily due to some short term disruption following the recentreorganisation of the branch and management structure and distribution network,sales in Brossette for the five months to 31 December 2004 were up only slightlycompared to the similar period in the prior year, whilst profits were marginallydown. In the rest of Continental Europe, nearly all of the group's businesses showedsales and trading profit growth, despite most markets remaining broadly flat. Financial The group's financial position remains strong with group gearing, as at 31December 2004, of around 55% at current exchange rates (compared to 49.5% at 31July 2004). The higher gearing reflects acquisition spend of £183 million in thefive months to 31 December 2004 and increased working capital necessary tosupport strong organic growth, particularly in the USA. For the same reasons,the interest charge is also higher than the corresponding period in the prioryear. The group expects to see a stronger cash inflow in the second half of thefinancial year. Outlook Market conditions in North America and the UK are expected to remain favourablefor the remainder of this financial year and should enable the group to achievefurther good progress, although there is likely to be a lower rate of growth dueto the stronger comparatives in the second half of 2004. In Continental Europe the group's principal markets are likely to remain flatbut the group expects a continuation of the general pattern in the first half ofimproved sales and profits. In France, PBM should continue its upward momentumand Brossette, following recent management action to improve performance, shouldsee an improvement in the second half. The group will continue to pursue its strategy of growing organically and byacquisitions and is well placed to take advantage of the favourable marketconditions in its key trading markets. Charlie Banks, Group Chief Executive of Wolseley said: "We have seen another strong performance for the group over the first fivemonths of the year. The continued strength of our underlying growth emphasisesthe benefits of both our broad geographical reach and diverse product range. Welook forward to the second half with confidence." Exchange Rates The average profit & loss account translation rate for the first five months was$1.85 to the £1 compared to $1.67 for the comparable period last year, a fall of9.7%, and €1.46 to the £1 compared to €1.43 a decline of 2.1%. Trading profit, a term used throughout this announcement, is defined asoperating profit before goodwill amortisation. Trading margin is the ratio oftrading profit to sales stated as a percentage. This Trading Statement contains certain forward-looking statements as definedunder US legislation (Section 21E of the Securities Exchange Act of 1934). Bytheir nature, such statements involve uncertainty; as a consequence, actualresults and developments may differ from those expressed in or implied by suchstatements. Press/Investor Enquiries: Wolseley plc 0118 929 8700Guy StainerHead of Investor Relations Brunswick 020 7404 5959Nina Coad There will be analyst/investor meeting today at 9.30 am taking place at UBS, 1Finsbury Avenue, London, EC2. A dial-in facility will be available for this meeting:UK dial-in 020 7162 0186International dial-in +44 (0)20 7162 0186 A replay facility will be available until 31 January 2005 by dialling:UK freephone 0800 358 1860International +44 (0)20 7031 4064US dial-in +1 954 334 0342Free phone +1 888 365 0240 Passcode 637811 Notes to Editors Wolseley plc is the world's largest specialist trade distributor of plumbing andheating products and a leading supplier of building materials to professionalcontractors in North America, the UK and Continental Europe. Group sales for theyear ended 31 July 2004 were approximately £10.1 billion and operating profit,before goodwill, was £619 million. Wolseley has around 51,500 employeesoperating in 13 countries namely: UK, USA, France, Canada, Ireland, Italy, TheNetherlands, Switzerland, Austria, Czech Republic, Hungary, Luxembourg andDenmark. Wolseley is listed on the London and New York Stock Exchanges (LSE:WOS.L, NYSE: WOS) and is in the FTSE 100 index of listed companies. European Distribution Division In the year ended 31 July 2004 sales in the European Distribution Division wereapproximately £4.2 billion. In the UK, Wolseley UK is the leading plumbing andheating distributor and a leading heavyside building materials distributor withmore than 1,500 locations and around 12,000 employees. In Continental Europe, Wolseley France has around 9,000 employees in over 700locations. Brossette is a leading supplier of plumbing and heating equipment,underground drainage products, pipes, valves and fittings to the professionalcontractor and public authority market. PBM, is the number two supplier inFrance of heavyside building materials and is the leading importer anddistributor of timber. Other European companies include Tobler in Switzerland, Manzardo in Italy, OAGin Austria, Heatmerchants and Brooks in Ireland, CFM in Luxembourg, Cesaro inCzech Republic, Mart in Hungary, Wasco in The Netherlands and Electro-oil inDenmark. North American Plumbing and Heating Distribution In the year ended 31 July 2004 sales in this division were approximately £3.8billion. In the USA, Ferguson Enterprises is the number one wholesaledistributor of plumbing, heating, pipe, valves and fitting ("pvf"), waterworksand fire protection products to professional contractors and industry. It alsooperates a network of bathroom and kitchen showrooms. Ferguson's more than 750locations are in 49 states in the USA and Puerto Rico and it has approximately15,000 employees. Wolseley Canada, with over 200 locations, has approximately 27% of the market indistributing plumbing, heating, pvf, ventilation and air-conditioning,engineered pipes, waterworks and fire protection products. US Building Materials Distribution Sales in this division in the year ended 31 July 2004 were approximately £2.0billion. Stock Building Supply is the number one provider of building materialsand value added products to the house builder and professional contractor in theUSA. It has more than 200 locations across 26 US states and has approximately10,000 employees. - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ferguson