CINCINNATI, Jan. 23 /PRNewswire-FirstCall/ -- Wolseley plc, the
world's largest specialist trade distributor of plumbing and
heating products to professional contractors and a leading supplier
of building materials, issues its regular trading statement for the
five months to December 31, 2005, prior to entering its close
period and announces a further five acquisitions for a total
consideration of approximately 14 million pounds Sterling. These
acquisitions bring Wolseley's total spend on acquisitions, since
the beginning of the financial year, to approximately 436 million
pounds. The interim results for the six months ending January 31,
2006 are due to be announced on March 21, 2006. Trading Update
Overview Business conditions in the Group's principal markets have
been broadly in line with comments made in the AGM statement on
November 17, 2005. The Group's results for the first five months to
December 31, 2005, prepared under International Financial Reporting
Standards (IFRS), show a strong increase in sales and profits
driven by high rates of organic growth in North America and recent
acquisitions. After currency translation and including the effect
of acquisitions, Group sales for the five months to December 31,
2005 were up by approximately 25% and trading profit up by
approximately 20% on the same period in 2004. Currency translation
benefited the reported sterling figures by approximately 3%. The
Group's trading margin for the five month period is slightly lower
than the equivalent period in the prior year primarily due to
commodity price gains last year as well as the impact of
acquisitions and additional investments in the business to position
the Group for further growth. Further details of market conditions
in each of the Group's business segments are set out below. North
American Plumbing and Heating Distribution In the USA, housing
related activity has been strong, with the repairs and remodeling
market benefiting from the positive economic environment. The
commercial and industrial sectors continue to improve. The US
plumbing operations have performed strongly with sales in local
currency for the five months to December 31, 2005 up by more than
35% and trading profit up by around 30% on the equivalent period in
the prior year. The majority of the sales growth was organic. The
slightly lower trading margin is in line with internal targets and
reflects the absence of commodity price gains, the management focus
on achieving strong organic growth in selected markets and the
decision to continue to increase the investment in people,
logistics and new branch openings. In Canada, the construction and
housing markets remain strong. In local currency, Wolseley Canada
achieved a double-digit increase in sales and trading profit was
very slightly down compared to the equivalent period in the prior
year as a consequence of on-going investment in people and regional
supply centers. US Building Materials Distribution In US Building
Materials, local currency sales were up by more than 20% for the
first five months and trading profits up by more than 40% compared
to the equivalent period in the prior year. The continued strength
of the US housing market is illustrated by the level of housing
starts, which remain at around 2 million per annum and the
inventory of unsold houses at around 4.9 months which, although
rising, compares favorably to the long-term average of around 6
months. The strong sales growth in the period reflects high single
digit organic volume growth and the benefit of acquisitions, partly
offset by a 2% net reduction due to changes in lumber and
structural panel prices. Commodity lumber prices, which directly
affect approximately 33% of Stock Building Supply's product range,
were 8.2% lower. For the 5 months to December 31, 2005, average
lumber prices of $369 per thousand board feet compare with $402 per
thousand board feet in the prior comparable period. Structural
panels, which directly affect a further 13% of Stock Building
Supply's product range, increased 3.2% to $415 per thousand square
feet, compared to $402 per thousand board feet in the prior period.
Both the trading margin and the return on capital of Stock Building
Supply are showing substantial increases on the prior year.
European Distribution In European Distribution, sales in the five
months to December 31, 2005 in sterling, including acquisitions,
were up by around 5% compared to the same period in the prior year.
Trading profit was marginally lower before the net benefit of the
matters unrelated to normal trading, referred to below. Wolseley
UK, including Ireland, increased sales by more than 5% and achieved
positive organic growth. Trading profit is marginally higher. In
view of continued consumer caution, the first five months have
proved to be more challenging than the prior year although the
commercial sector, including government spending, continues to show
a positive trend. The trading margin was slightly lower due to
acquisitions and the initial costs of the new distribution center
infrastructure. The new national distribution center in Leamington
Spa is on schedule to be opened by September 2006. In France, the
results of PBM and Brossette reflect ongoing reorganizations and
investment to accelerate future growth. For the 5 months to
December 31, 2005 local currency sales in Brossette were up around
2% and trading profit was also very slightly up, before taking
account of the anticipated fine from the French Competition
Authorities, detailed below. PBM achieved an increase in sales of
around 2% in local currency with reported trading profit lower,
after restructuring and other one off costs and before the benefit
of the customs settlement, outlined below. However, the underlying
trading profit is broadly flat compared to the equivalent period in
the prior year. In the rest of Continental Europe nearly all of the
Group's businesses showed sales growth, despite most markets
remaining broadly flat. Financial The results for the period to
date have benefited from a net 5 million pounds at the trading
profit level and 3 million pounds on the interest line relating to
matters unrelated to normal trading. An outstanding claim with the
French customs authorities relating to import duties has been
settled in PBM's favor resulting in a benefit to trading profit and
interest of euro 13 million (9 million pounds) and euro 5 million
(3 million pounds), respectively. In addition, Brossette (together
with many other French businesses) is awaiting a decision from the
French Competition Authorities which is expected to result in a
fine of not more than euro 5.8 million (4 million pounds). A
provision for this fine has been charged against the trading profit
in the period but relates to matters which took place more than ten
years ago. The Group's financial position remains strong with group
gearing, as at December 31, 2005, of more than 65% at current
exchange rates (compared to 50.6% at July 31, 2005). The higher
gearing reflects cash acquisition spend of over 400 million pounds
in the five months to December 31, 2005 offset by operating cash
flow. The interest charge, before the one-off benefit from the
customs settlement, is notably higher than the corresponding period
in the prior year due to interest rate rises and the higher level
of average borrowings as a result of recent acquisitions. Outlook
Market conditions in North America are expected to remain strong
for the foreseeable future. Although the market in the UK has
slowed in recent months, the Group expects its UK business to
continue to show modest growth. In France, the reorganization of
Brossette's logistics network and organizational structure will
continue in the second half with some associated additional costs.
Growth in the French RMI market is likely to remain modest,
although there are tentative signs that sales trends are improving.
In the rest of Continental Europe, most of the Group's business
should show some progress in generally flat markets. The Group is
well positioned for further growth in the second half of the
financial year. Exchange Rates The average profit and loss account
translation rate for the first five months was $1.76 to the 1 pound
compared to $1.85 for the comparable period last year, a rise of
5.1%, and euro 1.46 to the 1 pound, unchanged compared to the prior
year. Trading profit, a term used throughout this announcement, is
defined as operating profit before amortization of acquired
intangibles. Trading margin is the ratio of trading profit to sales
stated as a percentage. Acquisitions Update Since Wolseley's last
acquisitions update announcement on November 22, 2005, an
additional five distribution businesses in Europe and North America
have been acquired for an aggregate consideration of approximately
14 million pounds in cash. These acquisitions bring Wolseley's
total spend on acquisitions, including debt acquired, since the
beginning of the financial year, to approximately 436 million
pounds. In total, the 22 acquisitions completed to date are
expected to add approximately 697 million pounds to Group turnover
in a full year. Goodwill and acquired intangibles related to these
22 acquisitions is estimated to be around 148 million pounds.
European Distribution In January 2006, PBM in France acquired
Charpentes Calonge ("CC") from the Calonge family (Didier, Joelle,
Christophe and Sandra) and Bigmat Boismat ("Boismat") from Daniel
Leroux. CC fabricates roof trusses and other traditional timber
frameworks and is based in south west France. In the year ended
December 31, 2004, CC had sales of euro 2.5 million (1.7 million
pounds) and had gross assets of euro 0.8 million (0.5 million
pounds) at that date. Boismat is a builders' merchant operating
from three branches in the Loire region of France. In the year
ended December 31, 2004, Boismat had sales of euro 7.1 million (4.9
million pounds) and had gross assets of euro 2.9 million (2.0
million pounds) at that date. Also in January, Tobler in
Switzerland acquired Friosol from PanGas. Friosol is a distributor
of pipes, valves, fittings (PVF), insulation and gases for the
refrigeration and air conditioning markets. In the year ended
December 31, 2004, Friosol had sales of CHF11.4 million (5.0
million pounds) and had gross assets of CHF3.9 million (1.7 million
pounds) at that date. North American Plumbing and Heating
Distribution In November 2005, Ferguson acquired South Tahoe
Plumbing Supply ("S. Tahoe") from B. G. Solley and M. Solley. S.
Tahoe distributes plumbing and HVAC equipment primarily for the
residential market from a single branch in South Lake Tahoe,
California. In the year ended December 31, 2004, S. Tahoe had sales
of $1.6 million (0.9 million pounds) and had gross assets of $0.5
million (0.3 million pounds) at that date. In January 2006,
Ferguson acquired the assets of Colgan Distributors, Inc. and
Colgan Cabinets, Inc. ("Colgan"). Colgan distributes heating,
ventilation and air conditioning (HVAC) products and residential
cabinets in Louisiana. In the year ended December 31, 2004, Colgan
had sales of $11.0 million (6.2 million pounds) and had gross
assets of $3.7 million (2.1 million pounds) at that date. The
divisional split of the total acquisition spend since August 1,
2005 is: Division No. of Spend Acquisitions million pounds European
Distribution 8 251 North American Plumbing & Heating
Distribution 12 111 US Building Materials Distribution 2 74 TOTAL
22 436 The following exchange rates have been used for the
acquisitions noted above: 1 pound = euro 1.46, 1 pound = CHF2.26, 1
pound = $1.77. Charlie Banks, Group Chief Executive of Wolseley,
said: "We have seen another strong performance for the Group as a
whole over the first five months of the year. Although Europe
remains slow, the US businesses enjoyed a strong start to the year
and this encourages us for the months ahead. Furthermore, the
acquisitions and other investments we have made position us well
for further growth in the second half." There will be an
analyst/investor meeting today at 9:30 a.m. taking place at UBS, 1
Finsbury Avenue, London, EC2. A dial-in facility will be available
for this meeting: UK dial-in 020 7162 0125 European dial-in + 44 20
7162 0125 International dial-in +1 33 4323 6203 A replay facility
will be available until February 6, 2006 by dialing: UK freephone
0800 358 1860 (UK only) UK & International +44 (0)20 7031 4064
Pass code 689126 US dial-in +1 954 334 0342 Free phone +1 888 365
0240 Passcode 689126 Following the FTSE's decision to move Wolseley
from the Construction and Building Materials sector to the Support
Services sector, Wolseley will be hosting a teach-in for analysts
and investors who are unfamiliar with the company but would like to
know more. The meeting will be held on February 1 at 14:00 in
London. For further details please contact Margaret Nunn, Wolseley
Investor Relations at () or by telephoning +44 (0)1189 298788.
Certain statements included in this announcement may be
forward-looking and may involve risks, assumptions 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 the Company's business and
financial plans, expected future revenues and expenditures,
investments and disposals, risks associated with changes in
economic conditions, the strength of the plumbing and heating and
building materials market in North America and Europe, fluctuations
in product prices and changes in exchange and interest rates. All
forward-looking statements in this respect are based upon
information known to the Company on the date of this announcement.
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 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 the Company. About Wolseley plc Wolseley
plc is the world's largest specialist trade distributor of plumbing
and heating products and a leading supplier of building materials
to professional contractors in North America, the UK and
Continental Europe. Group sales for the year ended July 31, 2005
were approximately 11.3 billion pounds and operating profit, before
amortization of intangibles, was 708 million pounds. Wolseley has
around 63,000 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.L)(NYSE:WOS) and is in the FTSE 100 index of listed
companies. First Call Analyst: FCMN Contact: DATASOURCE: Wolseley
plc CONTACT: Investors-Analysts, John R. English, Director,
Investor Relations, North America, +1-513-771-9000, or Press, Penny
Studholme, Director of Corporate Communications, +0118 929 8886,
both of Wolseley plc Web site: http://www.wolseley.com/
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