17th Jul 2006 07:01
Wolseley PLC17 July 2006 NEWS RELEASE 17 July 2006 Wolseley plc Pre-Close Period Trading Statement for 11 months to 30 June 2006 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 June2006, prior to entering its close period. The preliminary results for the 12months ending 31 July 2006 are due to be announced on 25 September 2006. Overview Business conditions in the Group's principal markets have been broadly in linewith comments made in the Interim Results statement on 21 March 2006. Resultsfor the first 11 months to 30 June 2006 show a strong increase in revenue andprofits driven by high rates of organic growth and market outperformance inNorth America and the contribution from acquisitions. After currency translation and including the effect of acquisitions, Grouprevenue for the 11 months to 30 June 2006 was up by around 25% on the sameperiod in 2005, including double digit organic growth. Trading profit was up byaround 20%, although, as expected, the rate of growth has slowed over the secondhalf of the financial year due to the stronger comparators. The favourablecurrency translation effect added approximately £300 million to revenue and £19million to trading profit, representing around 3% of the reported sterlingfigures. Central costs in relation to Wolseley plc, Wolseley Europe and Wolseley NorthAmerica for the second half are at a similar run rate to the six months to 31January 2006. The Group's trading margin is lower than the equivalent period in the prior yearprimarily due to the lower level of commodity price inflation, the initialimpact of acquisitions and continued investment in human resources, facilitiesand technology. Further details of market conditions in each of the Group's business segmentsare set out below. North America The positive economic environment in the USA and Canada has enabled the NorthAmerican business to deliver strong revenue and trading profit growth, insterling, in excess of 30%. In the USA, although new housing starts are beginning to show the expecteddecline from record levels, housing related activity remains good, with therepairs and remodelling market benefiting from the positive economicenvironment. The commercial and industrial sectors continue to improve. The US plumbing operations (Ferguson) have performed particularly well withrevenue in local currency for the 11 months to 30 June 2006 up by around 35% andtrading profit up by around 30% on the equivalent period in the prior year. Themajority of the revenue growth was organic. The slightly lower trading margin isin line with internal targets and reflects the lower level of commodity priceinflation and the initial effect of acquisitions. In US Building Materials, local currency revenue for Stock Building Supply wasup by more than 25% for the first 11 months and trading profits up more than 40%compared to the equivalent period in the prior year. The improvement in tradingmargin was primarily due to a more favourable sales mix arising from increasedvalue added products and installed services, in line with the strategy to expandthe range of products and services offered. The strong revenue growth in the period reflects high single digit organicvolume growth and the benefit of acquisitions, partly offset by a 4% netreduction due to lower lumber and structural panel prices. In Canada, the construction and housing markets remain strong although there hasbeen a slight slowing in housing starts generally and in manufacturing activitylevels in Eastern Canada. In local currency, Wolseley Canada achieveddouble-digit organic growth in revenue and trading profit compared to theequivalent period in the prior year, although the trading margin was slightlylower due to the on-going investment in people and infrastructure. Europe In Europe, revenue in the 11 months to 30 June 2006 in sterling, includingacquisitions, was up by around 10% compared to the same period in the prioryear. Trading profit was up only slightly, held back by the reorganisation inBrossette. Wolseley UK, including Ireland, achieved double-digit revenue growth, includingsome positive organic growth, in the 11 months to 30 June 2006. Continuedconsumer caution has meant that the first eleven months have proved to be morechallenging than the prior year. However, the commercial sector, includinggovernment spending, continues to show a positive trend overall, despite delaysin certain projects. The trading margin was slightly lower. The new nationaldistribution centre in Leamington Spa is to be opened on schedule in September2006. In France, government tax incentives continue to underpin growth in the newresidential market, but repairs, maintenance and improvement ("RMI"), theprincipal driver of both Brossette and PBM, continues to show only modestgrowth. Brossette's results continue to reflect the disruption caused by itsreorganisation of the branch and management structures and distribution network.For the 11 months to 30 June 2006 revenue was up slightly compared to thesimilar period in the prior year, whilst profits were substantially down. Good progress was made by PBM which achieved revenue growth of more than 5% inlocal currency with reported trading profit also higher, after restructuring andother one off costs and before the benefit of the customs settlement, previouslyannounced. The underlying trading margin is up on the equivalent period in theprior year. In Central Europe there was a mixed picture with each of the Group's businessesshowing positive revenue growth, despite most markets remaining broadly flat.The businesses in Italy, Switzerland and the Netherlands all showed goodincreases in trading profit. Financial The Group's financial position remains strong with Group gearing, as at 30 June2006, of around 75% at current exchange rates (compared to 68.1% at 31 January2006). The gearing reflects acquisition spend of £900 million in the 11 monthsto 30 June 2006 and a higher level of capital expenditure, partly offset bystrong operating cash flow. In a full year these 50 acquisitions are expected toadd approximately £1.4 billion to Group revenue. The interest charge is notablyhigher than the corresponding period in the prior year due to interest raterises and the higher level of average borrowings as a result of recentacquisitions. Outlook The US housing market is expected to continue to soften, with significantregional variations, but remain at levels which are good by historicalstandards, presenting further opportunities for growth. Against the backgroundof positive economic conditions in the USA, the RMI and commercial andindustrial markets should continue to improve. In the UK, recent sales trendssupport the Group's view that there will continue to be a gradual improvement inthe RMI and housing markets, as the calendar year progresses. Growth in theFrench RMI market is likely to remain modest, although there are tentative signsthat sales trends are improving. In Central Europe, most of the Group'sbusinesses should show some progress in generally flat markets. Charlie Banks, Group Chief Executive of Wolseley, said: "We are on track to achieve another strong performance across our businessesthis year. Our principal operating companies continue to successfully outperformtheir local markets, take market share and improve their financial performance.We continue to invest in people, infrastructure and technology and have madegood progress on acquisitions in the year to date. Although Europe remains slow,the North American economies are strong and this encourages us for the monthsahead." Exchange Rates The average profit and loss account translation rate for the first 11 months was$1.7820 to the £1 compared to $1.8593 for the comparable period last year, animprovement of 4.3%, and €1.4572 to the £1 compared to €1.4593, an improvementof 0.1%, compared to the prior year. 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. There will be an analyst/investor meeting today at 9.30 a.m. taking place atUBS, 1 Finsbury Avenue, London, EC2. A dial-in facility will be available for this meeting: UK dial-in 020 7162 0025 International dial-in +44 20 7162 0025 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 31st July 2006 by dialling: UK 020 7031 4064 International +44 20 7031 4064 US +1 954 334 0342 Pass code 712828 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 Press: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 and a leading supplier of building materials to professionalcontractors in North America, the UK and Continental Europe. Group revenues forthe year ended 31 July 2005 were approximately £11.3 billion and operatingprofit, before amortisation of acquired intangibles, was £708 million. Wolseleyhas more than 70,000 employees operating in 14 countries namely: UK, USA, France, Canada, Ireland, Italy, The Netherlands, Switzerland, Austria, Czech Republic, Hungary, Belgium, Luxembourg and Denmark. Wolseley is listed on the London and New York Stock Exchanges (LSE: WOS, NYSE: WOS) and is in the FTSE 100 index of listed companies. - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ferguson