Wolseley plc announces ninth consecutive year of record results
CINCINNATI, Sept. 26 /PRNewswire-FirstCall/ -- Announcement of
Preliminary Results Wolseley, the world's largest specialist
distributor of plumbing and heating products to professional
contractors and a leading supplier of building materials, is
pleased to announce its ninth consecutive year of record results.
These results reflect strong organic growth, the additional
contribution from acquisitions and increased operational efficiency
and have been achieved while also investing in people, facilities
and technology to secure future growth. On a constant currency
basis, Group sales increased by 14.2% and trading profit by 19.7%.
Currency translation reduced Group sales by pounds Sterling 272.9
million (2.7%) and Group trading profit by 17.2 million pounds
(2.8%), compared to the previous year. After taking account of
currency translation, Group sales increased by 11.2% from 10,128.1
pounds million to 11,257.7 million pounds. Trading profit rose by
16.4% from 619.2 million pounds to 720.8 million pounds. After
deducting goodwill amortization of 43.4 million pounds (2004: 39.0
million pounds), the reported sterling operating profit increased
by 16.8% from 580.2 million pounds to 677.4 million pounds. In the
North American Plumbing and Heating Distribution division, Ferguson
in the USA achieved organic sales growth of more than 15% with
trading profit up nearly 25% and Wolseley Canada contributed a
strong performance with double digit sales and profit growth. The
US Building Materials Distribution division ("Stock") also
performed strongly with an increase in organic sales of over 10%
and trading profit up over 32%. Within the European Distribution
division, the businesses in the UK, the Netherlands, Italy,
Switzerland and Luxembourg also performed well in their respective
markets. Trading margin improvements were achieved in all three
divisions with the Group trading margin up from 6.1% in 2004 to
6.4% in this financial year. Net interest payable was 29.6 million
pounds (2004: 21.1 million pounds), the increase reflecting
acquisition spending and higher interest rates, partly offset by
stronger cash flow. Interest cover was 23 times (2004: 27 times).
Profit before tax and before goodwill amortization increased by
15.6% from 598.1 million pounds to 691.2 million pounds. Profit
before tax increased by 15.9% to 647.8 million pounds (2004: 559.1
million pounds). The increase in earnings per share before goodwill
amortization was 14.8%, from 74.84 pence to 85.93 pence. Basic
earnings per share was up 15.2%, from 68.15 pence to 78.53 pence.
European Distribution The results in the European Distribution
division benefited from strong profit performances from Wolseley
UK, PBM, Wasco and from acquisitions. With the exception of
Brossette, in France, which had marginally lower sales, all of the
Continental European operations increased sales and most achieved
profit improvements, in generally flat markets. Sales for this
division, in sterling, increased by 9.2% from 4,248.0 pounds
million to 4,638.4 million pounds, including 265.7 million pounds
(6.2%) which relates to acquisitions, predominantly Brooks
(Ireland) and Klockner (Austria) in August 2004 and Iser Zauli
(Italy) in January 2005. The organic increase in sales was 2.7%.
Trading profit rose by 11.5% from 263.2 million pounds to 293.4
million pounds. The overall divisional trading margin, after the
allocation of central costs, improved from 6.2% to 6.3% of sales
due to the achievement by PBM (France) of a 6% margin for the first
time and improvements at Tobler (Switzerland), CFM (Luxembourg),
Cesaro (Czech Republic), Electro Oil (Denmark) and Wasco
(Netherlands). In the year, a further net 93 branches were added to
the European network, giving a total of 2,486 locations (2004:
2,393). UK and Ireland Wolseley UK performed strongly against a
slowing UK market. While the fundamentals of the UK economy
remained positive, in terms of relatively low interest rates and
low unemployment, RMI spending slowed in the second half of the
financial year in response to weaker consumer confidence.
Government spending, feeding through into the construction market,
remains a bright spot and the industrial sector continues to
improve. Against this more challenging background, Wolseley UK
recorded an 11.7% increase in sales to 2,353.9 million pounds
(2004: 2,106.9 million pounds). Organic growth at more than 5%
outperformed the market generally with the plumbing, heating, pipe
and bathroom businesses performing particularly well. Wolseley UK's
trading profit increased by more than 11% compared to the prior
year after taking account of gains from sales of properties of 11
million pounds (2004: 3 million pounds). Trading margin fell
slightly from 7.8% to 7.7%, reflecting the previously announced
impact of including Brooks for the first time and the higher
pension, restructuring and rebranding costs in the UK business. In
addition, there were some initial costs of the investment in the
new national and regional distribution center ("DC"). The new
national DC in Leamington Spa, which is to be located alongside
Wolseley UK's new headquarters, is expected to be operational by
autumn 2006 and the regional distribution center, in the North
West, should open around a year thereafter. These investments and
the current initiatives to centralize control of transport and
branch inventory management, should enhance customer service and
support continued growth in the business. Branch service levels
continue to show improvements following the ongoing investment in
the supply chain. In Ireland, which again experienced strong growth
in the economy, Heatmerchants produced very strong organic growth
of more than 20% and Brooks, the timber and builders merchant, also
traded well ahead of expectations in its first year within
Wolseley. During the year, 57 net new locations were added in the
UK and Ireland taking the total number of branches for Wolseley UK
to 1,570 (2004: 1,513), including 18 branches added as a result of
the Brooks acquisition. As a consequence of the step up in the
implant program, 20% of locations now offer a broader product range
through a multi-brand offer. France In France, government tax
incentives continue to underpin growth in the new residential
market, but repairs, maintenance and improvement ("RMI"), the
principal driver for both Brossette and PBM, continue to show only
marginal improvement against the background of little growth in the
overall economy, weak consumer confidence and continued high levels
of unemployment. Wolseley's French operations generated a 1.2%
increase in sales to euro 2,401 million. Local currency sales and
trading profit in Brossette were marginally down on the prior year.
The results reflect the ongoing disruption as a result of the
reorganization of the district, branch and management structures.
During the period, Brossette made a significant number of
management changes, has commenced the roll-out of its national
product range and is moving towards centralized purchasing. Plans
for a new regional distribution center network continue to be
developed to enhance customer service and facilitate future
expansion. The first customer delivery center opened in June 2005
in the Alps region. PBM performed above expectations held at the
time of the acquisition with local currency sales up 1.9% and
trading profit up 13.8% and achieved a 6% trading margin for the
first time. PBM is continuing to develop its tool hire business,
with four locations having been opened, is expanding the number of
joint sites with Brossette and seeking opportunities to benefit
from sharing of best practice and common supplier arrangements. PBM
has made further progress during the year in improving its working
capital efficiency. Rest of Europe The Group's other Continental
European operations enjoyed generally good results despite broadly
flat markets. OAG in Austria, with its acquisition of Klockner,
achieved an increase in sales of 13.9% although trading profit fell
due to competitive pressure on prices, as a consequence of
difficult housing and RMI markets. This was further exacerbated by
extremely poor weather conditions with very cold temperatures
preventing construction for several weeks early in 2005. In Hungary
and the Czech Republic, local market conditions remained difficult
but both businesses improved sales, with Cesaro in the Czech
Republic also increasing trading profit. In Italy, despite a weak
economy and a fall in the overall construction and renovation
markets, Manzardo's branch opening program helped to achieve
organic sales growth of almost 6%. Organic trading profit was up
7.5%. Iser Zauli, which was acquired in January 2005, traded in
line with expectations and this acquisition makes Manzardo one of
the largest companies in the Italian sanitary/heating market.
During the year the decision was taken to invest euro 20 million in
a new central distribution center in northern Italy to support the
growing business there. These facilities are expected to be
completed around autumn 2006. The difficult economy in The
Netherlands continued to affect the construction and new housing
markets but, despite this, Wasco made good progress expanding its
product range, developing its offering to the more profitable RMI
market and focusing on cost control. Wasco achieved organic sales
growth of almost 10% and trading profit was up even more. In
Luxembourg, CFM increased sales by more than 2% and trading profits
by more than 5% although the market has become more competitive.
Tobler, in Switzerland, which was acquired on 1 December 2003,
performed ahead of expectations with organic sales up more than 5%
and organic trading profits up more than 17% on the prior year. The
European Distribution division has made further progress during the
year in implementing its strategy to manage the businesses in a
more integrated way across Europe. A number of initiatives are
underway to share best practice across operating companies in areas
such as branch format and product/service offerings. Work began to
rationalize the number of suppliers across Europe and identify
suppliers who will work with Wolseley to remove costs from the
supply chain. Areas of focus include product rationalization and
standardization and logistics collaboration. Progress is also being
made in sourcing from low cost countries and around 30 product
programs are currently underway. All of these initiatives are
designed to enable the Group to benefit from cross-border synergies
and accelerate growth in Europe. North American Plumbing and
Heating Distribution The North American Plumbing and Heating
division performed strongly with significant rises in sales and
profits and the highest ever trading margin, which increased from
6.6% to 6.8%, after the allocation of central costs. Reported sales
of the division were up 13.9% from 3,836.4 million pounds to
4,370.4 million pounds despite the adverse impact of currency
translation. Trading profit, in sterling, increased by 17.7% from
252.0 million pounds to 296.5 million pounds. Currency translation
reduced divisional sales by 172.5 million pounds (4.5%) and trading
profit by 11.6 million pounds (4.6%). There was a net increase of
171 branches in North American Plumbing and Heating Distribution to
1,179 locations (2004: 1,008). Ferguson In the USA, Ferguson
produced an outstanding performance generating strong organic
growth from its focus on selected markets, from new branch openings
and driving further commercial advantage from its DC network. These
factors contributed to significant market outperformance in the
year. Of the sectors in which Ferguson operates, housing related
activity remained strong with the more positive economic
environment benefiting the RMI sector. RMI is becoming an
increasingly important element of overall construction spend in the
USA and, with the new XpressNet branch format being introduced and
the emphasis being placed on opening new specialist heating,
ventilation, and air-conditioning (HVAC) branches, should lead to
further growth opportunities. The commercial sector, particularly
smaller hotels, offices and support businesses for residential
construction, continues to improve and although the industrial
segment remains the weakest, it is gradually improving. Local
currency sales in the US plumbing operations rose by 20.2% to
$7,143.7 million (2004: $5,941.1 million) with trading profit up by
24.8%. Organic sales growth was 15.2%, including the beneficial
effects of commodity price inflation in products such as copper,
steel and plastics in the first half, although, as predicted, the
commodity price inflation did not continue in the second half. As
previously reported, around $12 - $15 million of the organic
increase in trading profit was commodity price driven in the first
half of this year, compared with around $30 million in the second
half of the prior year. The rest of the profit growth reflects an
increase in the gross margin as a result of continuing benefits
from the distribution center network, a focus on organic growth and
operational leverage. The trading margin, at 7.1%, was ahead of the
prior year's margin of 6.8%. The increased margin reflects the
benefits of commodity price inflation and the change in the
treatment of the revenues of the Integrated Supply Division
referred to below, partly offset by the additional costs of
infrastructure investment to support future growth. During the
year, Ferguson added an additional 3,700 employees including 1,000
new college graduates. Further investment in the DCs continues and
an additional 1.2 million square feet of capacity has been added
since August 2004. Two of Ferguson's existing DCs were expanded,
one was relocated, two new ones were opened, and one small DC in
North Carolina was closed. The new DCs are a 600,000 square feet
facility in Waterloo, Iowa which opened in May 2005 and a 120,000
square feet pipe yard in Stockton, California which commenced
operation in September 2005. Volumes through the DC network grew by
36% in the year compared to the prior year and around 50% of branch
sales now go through the DC network. Further expansion of the DC
network is planned in the current financial year to build on
Ferguson's competitive advantage and Board approval has recently
been given for new DCs in Florida and northern California.
Following last year's successful pilot of five small ("XpressNet")
branches, the target roll-out program of 50 new locations to be
opened during the year was exceeded, with 60 open by July 31, 2005.
The target is to open at least another 60 in the current financial
year. Ferguson's total branch numbers increased by 168 during the
year to 941 locations (2004: 773). As previously reported, the
recorded sales value in Ferguson's Integrated Supply Division
represents the gross profit rather than the gross sales value which
was recorded in the year to July 31, 2004. This change is the
result of a review of revised contractual arrangements. The effect
of this change in the year to July 31, 2005, which has no impact on
profit, is to reduce sales by $203 million. There is, consequently,
a positive impact on the trading margin of Ferguson for the period
of 0.2%. Wolseley Canada In Canada, the construction and housing
markets continued to remain strong with low interest rates
supporting a strong residential market and the buoyant energy
sector in Western Canada helping sales in the industrial and
commercial business. Local currency sales increased by 12.5% to
C$1,177.1 million (2004: C$1,046.3 million). More than 10% of the
sales growth was organic, ahead of the market generally. Local
currency trading profit rose by 11.8%. Gross margins were affected
by competitive pricing pressure in some product areas and a change
in business mix. Investment in Wolseley Canada continues in order
to support a growing business. The costs of restructuring the
Industrial Products Group affected profits in that business during
the year, although the reorganization and management changes
resulted in an increase in sales. Across the company, more than 160
new posts were filled in order to sustain future growth. Further
investments were made in new mobile warehouses which are used
primarily to supply plumbing products to commercial projects and
the first of three regional supply centers for larger items was
opened in Burlington, Ontario. Further locations will be added in
due course. These regional supply centers should lead to lower
inventory levels and enable the branch footprint to be utilized
more effectively. US Building Materials Distribution The
performance of Stock benefited from the improved market focus which
was brought about by the recent business restructuring and from
strong organic growth. However, the small benefit from higher
average lumber prices was more than offset by lower structural
panel prices and the division was also negatively impacted by
currency translation. Reported sales of the division, in sterling,
grew by 10.0% to 2,248.9 pounds million (2004: 2,043.7 million
pounds) despite an adverse currency impact of 109.5 million pounds
(5.4%). The division's trading profit was up by 25.9% at 130.9
million pounds (2004: 104.0 million pounds), after an adverse
currency impact of 5.9 million pounds (5.7%). The divisional
trading margin, after the allocation of central costs, increased to
5.8%, from 5.1% in the prior year. The trading margin for Stock,
before the allocation of central costs, increased from 5.4% to
exceed its target of 6.0% and return on gross capital employed was
also substantially higher. In local currency, sales were up 16.3%
to $4,163.7 million (2004: $3,581.0 million) with trading profit up
by 32.4% before central costs. Organic sales growth was 10.7%.
Acquisitions added $199.3 million of sales. Commodity lumber
prices, which directly affect approximately 33% of Stock's product
range, held up well. For the year, average lumber prices of $400
per thousand board feet were 6% up on the prior year average of
$378 per thousand board feet. Structural panel prices, however,
which directly affect a further 13% of Stock's product range,
decreased by 19% to $403 per thousand square feet (2004: $496).
Together, these commodity price movements had the effect of
reducing Stock's local currency sales by $16.4 million (0.5%) in
the year compared to the prior year. Both lumber and structural
panel prices are expected to continue their recent trend downwards
over the coming year towards their long term averages of around
$340 - $370 per thousand board feet and $325 per thousand square
feet, respectively. New housing, which accounted for 84% (2004:
88%) of the activity in this division, has generally continued to
be a bright spot in the US economy. Aggregate housing starts during
the period continued at a high level of around two million. In
addition, the inventory of unsold new homes at 4 months in July
2005, compared to the longer term average of around 6 months,
further demonstrates the overall strength of the housing market.
Market share was expanded or maintained in nearly all major cities.
There continues to be significant variations in regional housing
markets where Stock operates. The markets in Florida, the
Carolinas, California, Washington DC and Boston have been strong,
whereas Texas, Colorado, and the Midwest have been more
challenging. Stock's plans to increase the range of value-added
products and services being offered and to increase the penetration
of the RMI market, continue to be implemented. As well as achieving
this through its existing branch network, Stock's acquisition of
Vegas General Construction ("Vegas") also contributed. Vegas is a
turnkey supplier of construction materials and services to the
residential builder in the large, Las Vegas, housing market and
gives Stock additional installed service expertise. Overall,
value-added sales in Stock were up 25% on the previous year and,
included within this figure, installed business sales rose around
50%. Stock's branch numbers increased by 19 during the year to 255
locations (2004: 236). Acquisitions provided entry to three states
(Connecticut, New Mexico and Nevada). Stock now operates in 30
states in total (2004: 27). International Integration and
Infrastructure Developments The creation, with effect from August
1, 2005, of the North American management team will facilitate a
closer relationship across the businesses, develop and use a common
infrastructure, create synergies and drive future growth. In
support of the Group's ambitious growth targets and as part of its
continuous improvement program, Wolseley is bringing about greater
cohesion across its operating units through leveraging its
international purchasing, international sourcing and supply chain
efficiencies. To achieve this, the Group continues to make
investments in its infrastructure in terms of people, systems and
logistics. Employee numbers increased from 50,000 to 60,000 during
the course of the year. Work on the common IT platform continues.
The financial management system, which will generate financial data
in a common and consistent format across the Group, is now live at
Wolseley Canada, Wolseley UK and Stock, with the remaining
companies scheduled to follow in the next six months. A number of
other common applications are being developed and piloted including
packages for warehouse management, human resources, budgeting,
customer relationship management and business intelligence.
Significant benefits are expected to arise over the next few years
from the Group's continuous improvement programs enabled by the
common technology platform. Through its investments today, the
Group is committed to creating a sustainable competitive advantage
to meet customers' changing needs. This will be built around strong
human resources, supported by efficient processes and technology
driven supply chain management and logistics. Financial Review Net
interest payable of 29.6 million pounds (2004: 21.1 million pounds)
reflects an increase in Group debt as a result of acquisitions and
an increase in interest rates, partly offset by strong cashflow.
Net interest receivable on construction loans amounted to 8.7
million pounds (2004: 8.7 million pounds). Interest cover was 23
times (2004: 27 times). The effective tax rate reduced marginally
from 27.1% to 27.0%. On a UK GAAP basis, it is expected that this
rate would have remained unchanged for the year to July 31, 2006.
However, the 2006 financial statements will be reported in
accordance with International Financial Reporting Standards
("IFRS"). Further guidance will be provided on the likely tax rate
on an IFRS basis at the announcement, referred to below, on 22
November 2005. Before goodwill amortization, earnings per share
increased by 14.8% from 74.84 pence to 85.93 pence. Basic (FRS 3)
earnings per share were up by 15.2% to 78.53 pence (2004: 68.15
pence). The average number of shares in issue during the year was
587.2 million (2004: 582.6 million). Net cash flow from operating
activities increased from 325.2 million pounds to 763.6 million
pounds, due to higher operating profit and an improved working
capital performance. Capital expenditure increased by 84.0 million
pounds (54.2%) on the prior year to 238.9 million pounds (2004:
154.9 million pounds) reflecting continued investment in the
business. During the period the DC and branch network in the USA
was expanded, investment continued in the new head offices in the
UK and France and further expenditure was incurred on the common IT
platform. Cash received on the sale of fixed assets increased from
19.3 million pounds to 73.9 million pounds, primarily due to the
sale of properties acquired as part of the Brooks acquisition.
Acquisition spend during the period, including any deferred
consideration and debt, amounted to 430.6 million pounds (2004:
123.5 million pounds). In a full year these acquisitions are
expected to add over 770 million pounds in sales. There have been 5
additional acquisitions, for a combined consideration of 21.3
million pounds, since July 31, 2005. Further details regarding
acquisitions are included in note 7. The Group's branch network has
been extended through acquisitions and branch openings by a net
total of 283, bringing the total to 3,920 at July 31, 2005 (2004:
3,637). Net borrowings, excluding construction loan borrowings, at
July 31, 2005 amounted to 1,143.5 million pounds compared to 941.4
million pounds at July 31, 2004, giving gearing of 49.6% compared
to 49.5% at the previous year-end and down from 55.1% at the half
year. Construction loan receivables, financed by an equivalent
amount of construction loan borrowings, were 263.9 million pounds
compared to 187.7 pounds million at July 31, 2004. The increase is
due to an expanding loan book partly offset by the weaker US
dollar. New markets entered include Fredericksburg, Virginia and
San Antonio, Texas along with new locations in Salt Lake City, Utah
and Greenville/Spartanburg, South Carolina. The Group's employee
benefit trusts purchased two million shares for 18.6 pounds million
during the period in order to allow greater flexibility in the
settlement of long term employee incentives. Return on gross
capital employed increased strongly from 18.4% to 19.1% as a result
of the significant organic growth in profit and the improved
working capital performance. Provisions for liabilities and charges
(note 6) in the balance sheet include the estimated liability for
asbestos claims on a discounted basis. This liability has been
determined as at July 31, 2005 by independent professional
actuarial advisors. The asbestos related litigation is fully
covered by insurance and accordingly an equivalent insurance
receivable has been included in debtors. The level of insurance
cover available significantly exceeds the expected level of future
claims and no profit or cash flow impact is therefore expected to
arise in the foreseeable future. There were 235 (2004: 308) claims
outstanding at the year end. Final Dividend The board is
recommending a final dividend of 17.6 pence per share (2004: 16.0
pence per share) to be paid on November 31 2005 to shareholders
registered on October 7, 2005. The total dividend for the year of
26.4 pence per share is an increase of 10.9% on last year's 23.8
pence. Dividend cover is 2.9 times. The increase in dividend for
the year reflects the Board's confidence in the future prospects of
the group and its strong financial position. The dividend
reinvestment plan will continue to be available to eligible
shareholders. Board Changes In a separate announcement today, the
Company has announced that following Charlie Banks' retirement on
July 31, 2006, Chip Hornsby will take over as Group Chief
Executive. A replacement for Chip as Chief Executive North America
will be announced in due course. John Stegeman, currently Chief
Operating Officer of Ferguson, is named as its new President and
Chief Executive Officer, with immediate effect. International
Accounting Standards Under current European legislation the Group
is required to adopt International Financial Reporting Standards
('IFRS') and International Accounting Standards ('IAS') in the
preparation of its financial statements from August 1, 2005
onwards. The announcement on July 18 2005 restating the financial
results for six months to January 31, 2005 under IFRS (available on
the Wolseley plc website http://www.wolseley.com/), showed that
there was no significant impact on the Group's financial position
as a consequence of the accounting rule changes in relation to the
half year. The results announced today for the year to July 31,
2005 will be restated under IFRS and released on November 22, 2005.
Outlook Market conditions in North America are expected to remain
favorable for at least the remainder of this calendar year and
should enable the Group's North American businesses to achieve
further good progress. It is expected that the US housing market
will remain strong, although the number of housing starts may
reduce as a result of higher interest rates. The positive RMI
market is expected to continue and the strong US economy should
present further opportunities for organic growth. The improvement
in the industrial and commercial sectors is expected to continue.
The upward trend in the performance of the US Building Materials
business should continue as further benefits of its market focus
and restructuring are realized, although some deterioration in
lumber and structural panel prices is anticipated. In Canada, the
overall environment is expected to remain positive, although the
new residential housing market may fall slightly from recent high
levels. In the UK, the private RMI and housing markets are expected
to show modest growth. Positive trends in government spending,
particularly in social housing, health and education, are also
anticipated. In view of current consumer caution, the year is
likely to prove more challenging but, overall, the UK business
should show gains in market share and growth for the year as a
whole. In France, growth in the RMI market is likely to remain
modest. PBM should continue its upward trend and both PBM and
Brossette, following recent initiatives to improve performance,
should see some benefit from the strong but slowing housing market
and progress in the coming year. While the markets in the rest of
Continental Europe are likely to remain broadly flat, Wolseley's
operations are expected to continue the generally good progress
achieved this year. There are a number of business improvement
initiatives in place relating to supply chain, sourcing and
procurement that should deliver increasing benefits to the bottom
line. The Group will continue to pursue its objective of achieving,
on average, double-digit sales and profit improvements through a
combination of organic growth and acquisitions, in new and existing
countries. The Board expects another year of good progress. Certain
information included in this release is forward-looking and
involves risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by the forward
looking statements. Forward-looking statements include, without
limitation, projections relating to results of operations and
financial conditions and the Company's plans and objectives for
future operations, including, without limitation, discussions of
expected future revenues, financing plans and expected expenditures
and divestments. All forward-looking statements in this release are
based upon information known to the Company on the date of this
report. The Company undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise. It is not reasonably
possible to itemize all of the many factors and specific events
that could cause the Company's forward looking statements to be
incorrect or that could otherwise have a material adverse effect on
the future operations or results of an international Group such as
Wolseley. Information on some factors which could result in
material difference to the results is available in the Company's
SEC filings, including, without limitation, the Company's Report on
Form 20-F for the year ended July 31, 2004. FINANCIAL CALENDAR FOR
2005/2006 2005 5 October - Shares quoted ex-dividend 7 October -
Record date for final dividend 9 November - Final date for DRIP
elections 17 November - Annual General Meeting 22 November -
Announcement of 2005 results restated under IFRS 30 November -
Final dividend payment date 2006 23 January - Trading update 21
March - Interim Results for six months to 31 January 2006 29
March(*) - Shares quoted ex-dividend 31 March(*) - Record date for
final dividend 31 May(*) - Interim dividend payment date 17 July(*)
- Trading update for 11 months to 30 June 2006 31 July - Financial
year end 25 September - Announcement of Preliminary results (*)
expected A copy of this Preliminary Announcement, together with
other recent public announcements can be found on Wolseley's web
site at http://www.wolseley.com/. Copies of the Preliminary
Results' presentation given to stockbrokers' analysts are also
available on this site. GROUP PROFIT AND LOSS ACCOUNT Year ended
Year ended July 31, 2005 July 31, 2004 mil. pounds mil. pounds
Turnover (note 3) Continuing operations 10,875.0 10,128.1
Acquisitions 382.7 - 11,257.7 10,128.1 Operating profit before
goodwill amortization (note 4) 720.8 619.2 Goodwill amortization
(43.4) (39.0) Operating profit Continuing operations 659.6 580.2
Acquisitions 17.8 - 677.4 580.2 Profit on ordinary activities
before interest 677.4 580.2 Net interest payable (29.6) (21.1)
Profit on ordinary activities before tax 647.8 559.1 Taxation (note
5) Current tax charge (141.8) (153.0) Deferred tax charge (44.8)
(9.1) (186.6) (162.1) Profit after tax (attributable to ordinary
shareholders) 461.2 397.0 Dividends (155.7) (139.1) Profit retained
305.5 257.9 Earnings per share Before goodwill amortization 85.93p
74.84p Goodwill amortization (7.40)p (6.69)p Basic earnings per
share 78.53p 68.15p Diluted earnings per share 77.71p 67.36p
Dividends per share 26.40p 23.80p Translation rates US dollars
1.8514 1.7522 Euro 1.4587 1.4635 STATEMENT OF TOTAL RECOGNIZED
GAINS AND LOSSES Year Year ended ended July 31, July 31, 2005 2004
mil. pounds mil. pounds Profit for the period 461.2 397.0 Currency
translation differences (net of tax) 85.4 (147.2) Total gains and
losses recognised during the year 546.6 249.8 GROUP BALANCE SHEET
As of As of July 31, July 31, 2005 2004 mil. pounds mil. pounds
FIXED ASSETS Intangible assets 866.1 665.9 Tangible assets 919.5
719.0 1,785.6 1,384.9 CURRENT ASSETS Stocks 1,705.0 1,501.8 Debtors
and property awaiting disposal 2,275.5 1,964.5 Construction loans
receivable (secured) 263.9 187.7 Investments 4.8 6.2 Cash at bank,
in hand and on deposit 381.1 291.3 4,630.3 3,951.5 CREDITORS:
amounts falling due within one year Bank loans, overdrafts and
other loans 440.9 384.0 Construction loan borrowings (unsecured)
263.9 187.7 Corporation tax 70.3 152.5 Proposed dividend 103.9 93.6
Other creditors 1,924.7 1,605.1 2,803.7 2,422.9 NET CURRENT ASSETS
1,826.6 1,528.6 TOTAL ASSETS LESS CURRENT LIABILITIES 3,612.2
2,913.5 CREDITORS: amounts falling due after one year Borrowings
1,088.5 854.9 Other creditors 18.0 - PROVISIONS FOR LIABILITIES AND
CHARGES (note 6) 198.8 156.7 1,305.3 1,011.6 2,306.9 1,901.9
CAPITAL AND RESERVES Called up share capital 148.0 146.3 Share
premium account 241.3 199.9 Profit and loss account 1,917.6 1,555.7
SHAREHOLDERS' FUNDS 2,306.9 1,901.9 Translation rates: US Dollars
1.7564 1.8198 Euro 1.4479 1.5144 SUMMARIZED GROUP CASH FLOW
STATEMENT Year ended Year ended July 31, 2005 July 31, 2004 mil.
pounds mil. pounds CASH FLOW FROM OPERATING ACTIVITIES* 763.6 325.2
Returns on investments and servicing of finance (30.1) (13.4)
Taxation paid (150.7) (128.1) Capital expenditure and financial
investment (238.9) (154.9) Proceeds from disposal of fixed assets
73.9 19.3 Acquisitions (405.5) (123.5) Disposals 4.5 - Equity
dividends paid (145.4) (136.0) Financing - Issue of shares 32.7
17.0 Purchase of shares by Employee Benefit (18.6) - Trusts CHANGE
IN NET DEBT RESULTING FROM CASH FLOWS (114.5) (194.4) New finance
leases and finance leases acquired with subsidiary (24.9) (5.3)
Translation difference (62.7) 85.0 Movement in net debt in period
(202.1) (114.7) Opening net debt (941.4) (826.7) Closing net debt
(1,143.5) (941.4) * RECONCILIATION OF OPERATING PROFIT TO OPERATING
CASH FLOWS Year ended Year ended July 31, July 31, 2005 2004 mil.
pounds mil. pounds Operating profit 677.4 580.2 Depreciation charge
113.7 107.7 (Profit)/loss on fixed asset disposals (11.1) 0.2
Goodwill amortization 43.4 39.0 Increase in stocks (54.2) (274.3)
Increase in debtors (181.6) (236.3) Increase in creditors &
provisions 176.0 108.6 Increase in net construction loans - 0.1 Net
cash flow from operating activities 763.6 325.2 NOTES TO THE
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2005 1. The
preliminary results for the year ended 31 July 2005 have been
prepared on the basis of the accounting policies set out in the
Group's 2005 Annual Report and Accounts. 2. The preliminary results
have been extracted from the Group's full accounts for the years
ended 31 July 2004 and 31 July 2005. Statutory accounts for 2004
have been delivered to the Registrar of Companies, and those for
2005 will be delivered following the Annual General Meeting. The
auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 237(2) or
(3) of the Companies Act 1985. 3. Analysis of change in sales New
Acquisitions Acquisitions Increment 2004 Exchange 2005 2004 Organic
Change 2005 mil. mil. mil. mil. mil. mil. pounds pounds pounds
pounds pounds % pounds European Distribution 4,248.0 9.1 211.4 54.3
115.6 2.7 4,638.4 North American Plumbing & Heating
Distribution 3,836.4 (172.5) 120.9 49.9 535.7 14.67 4,370.4 US
Building Materials Distribution 2,043.7 (109.5) 50.4 57.2 207.1
10.7 2,248.9 10,128.1 (272.9) 382.7 161.4 858.4 8.7 11,257.7
Organic change is the total increase or decrease in the year
adjusted for the impact of exchange, new acquisitions in 2005 and
the incremental impact of acquisitions in 2004. 4. Analysis of
change in operating profit before goodwill amortization New
Acquisitions Acquisitions Increment 2004 Exchange 2005 2004 Organic
Change 2005 mil. mil. mil. mil. mil. mil. pounds pounds pounds
pounds pounds % pounds European Distribution 263.2 0.3 9.6 4.5 15.8
6.0 293.4 North American Plumbing & Heating Distribution 252.0
(11.6) 6.4 4.0 45.7 19.0 296.5 US Building Materials Distribution
104.0 (5.9) 5.3 3.6 23.9 24.4 130.9 619.2 (17.2) 21.3 12.1 85.4
14.2 720.8 Goodwill amortization attributable to the above segments
is European Distribution: 23.0 million pounds (2004: 20.3 million
pounds); North American Plumbing & Heating Distribution: 12.6
million pounds (2004: 11.9 million pounds); US Building Materials
Distribution: 7.8 million pounds (2004: 6.8 million pounds). 5.
Taxation Year ended Year ended July 31, 2005 July 31, 2004 mil.
pounds mil. pounds UK current year tax charge 42.2 191.3 - Less:
double tax relief (0.9) (161.6) 41.3 29.7 - UK prior year (3.3)
(2.2) Total UK tax charge 38.0 27.5 Overseas current year tax
charge 108.6 125.6 Overseas prior year (4.8) (0.1) Total overseas
tax charge 103.8 125.5 Total current tax 141.8 153.0 Deferred tax
charge 44.8 9.1 Total tax charge 186.6 162.1 6. Provisions for
Liabilities and Charges As of As of July 31, 2005 July 31, 2004
mil. pounds mil. pounds Pensions 49.0 48.0 Wolseley Insurance 35.0
33.4 Environmental & Legal 33.2 29.4 Deferred Taxation 70.4
31.0 Other 11.2 14.9 198.8 156.7 Environmental and legal
liabilities include known and potential legal claims and
environmental liabilities arising from past events where it is
probable that a payment will be made and the amount of such payment
can be reasonably estimated. Included in this provision is an
amount of 31.7 million pounds (2004: 27.9 million pounds) related
to asbestos litigation involving certain group companies. This
liability is fully covered by insurance and accordingly an
equivalent insurance receivable has been recorded in debtors in
line with FRS 12 'Provisions, contingencies and contingent assets'.
The liability has been determined as at 31 July 2005 by independent
professional actuarial advisors. The provision and the related
receivable have been stated on a discounted basis using a long term
US treasury rate of 4.5% (2004: 5%). The level of insurance cover
available significantly exceeds the expected level of future claims
and no profit or cash flow impact is therefore expected to arise in
the foreseeable future. 7. Acquisitions The following table
summarizes the acquisitions made during the year. In certain cases
the consideration is deferred or subject to adjustment and includes
net borrowings acquired. Expected Consideration full year including
net contribution debt to turnover mil. pounds mil. pounds European
Distribution 171.4 236.9 North American Plumbing & Heating
Distribution 100.1 251.7 US Building Materials Distribution 159.1
283.3 430.6 771.9 Since the year end, there have been a further 5
acquisitions in North American Plumbing & Heating Distribution
division, for a combined consideration of 21.3 million pounds. In a
full year these acquisitions are expected to add around 50 million
pounds in additional sales. 8. Pensions and post-retirement
benefits The following table sets out the funding position of the
defined benefits pension schemes operated by the group and the
adjustment to net assets required were the Group to apply FRS17
instead of its current reporting under SSAP24. As of As of July 31,
July 31, 2005 2004 mil. pounds mil. pounds Market value of pension
liabilities 704.4 582.6 Market value of pension assets (513.7)
(399.7) 190.7 182.9 Pension provisions under current UK GAAP (49.0)
(48.0) Deferred tax asset (44.3) (40.8) FRS 17 reduction in net
assets 97.4 94.1 DATASOURCE: Wolseley plc CONTACT: John R. English,
Director, Investor Relations, North America of Wolseley plc,
+1-513-771-9000 Web site: http://www.wolseley.com/
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