Ferguson Regulatory News (FERG)

21 Jan 2008 07:00

Wolseley PLC21 January 2008 NEWS RELEASE 21 January 2008 Wolseley plc Pre-Close Period Trading Statement for the five months ended 31 December 2007 Wolseley plc, the world's largest specialist trade distributor of plumbing andheating products to professional contractors and a leading supplier of buildingmaterials, today issues its regular trading statement for the five months ended31 December 2007, prior to entering its close period. The half year results forthe six months ending 31 January 2008 are due to be announced on 17 March 2008. Summary for five months ended 31 December 2007: • Group • Revenue up 2%, c.4% in constant currency • Trading profit down c.25% • Profit before tax and amortisation and impairment of acquired intangibles down almost a third • Decisive management actions taken to further reduce the cost base of the Group • Strong operating cash flow performance • 10 bolt-on acquisitions announced and completed for an aggregate consideration of approximately £170 million. • North America • Revenue down c.10%, c.5% in constant currency • Trading profit down more than 40%, c.40% in constant currency • Previously announced headcount reduction of 3,000 people achieved in year to date, giving annualised savings of £60 million. • Europe • Revenue up c.17%, c.15% in constant currency • Trading profit up 1% • Good performance in UK, Nordic region, Switzerland and the Netherlands offset by lower profits in France, Austria and Italy. • Outlook • Market conditions are likely to worsen • Continuing action to be taken to cut cost base and curtail capital spend. Chip Hornsby, Group Chief Executive of Wolseley, said: "We have acted decisively and rapidly in response to the challenging marketconditions to take cost out of the Group and will continue to do so. We remaincommitted to our strategy and are confident that with our size, scale, financialstrength and operating efficiencies, we will emerge from this slowdown as astronger Group with an excellent platform for future growth." Overview For the five months ended 31 December 2007, the Group's results continued to beaffected by the worsening US housing market, low consumer confidence arisingfrom global credit restrictions and the weakness of the US dollar. Whilst theliquidity squeeze has particularly affected the USA, consumer uncertainty isalso having some impact on European markets. Against this background, the Grouphas taken further action to adjust its cost base and has continued to focus onexploiting opportunities for profitable organic growth, value-enhancingacquisitions and strong cash flow generation. A variety of management actions have been taken to adjust the Group's cost basein response to the deteriorating market conditions. Over the last year, in theUSA, significant headcount reductions in Stock and in Ferguson, have beenachieved. In Europe, more modest headcount reductions have been implemented. InFrance and Central and Eastern Europe, further rationalisation and integrationof businesses has been undertaken. In both continents, there is a generalheadcount freeze and decisions have been taken to reduce discretionary revenuespending and capital spend. As previously announced, action has also been takento streamline central management resource. Group revenue in the five months ended 31 December 2007, including acquisitions,increased by 2% compared to the corresponding period in the prior year. Tradingprofit was down by around 25%. In constant currency, revenue and trading profitwould have been around 2% higher than the reported figures in sterling. The rigorous focus on cash flow and working capital improvement continues.Operating cash flow for the first five months of the year showed a strongincrease compared to the equivalent period in the prior year. As a result, theinterest charge for the first five months is only marginally up on thecorresponding period, despite higher interest rates and the full period impactof financing the acquisition of DT Group. The Group's financial position remains strong, with net debt at 31 December 2007around 15% higher than at 31 July 2007 following bolt-on acquisitions madeduring the period, giving gearing of 82% (31 July 2007: 72%). Interest cover was4.5 times. Further details of market conditions and financial performance in each of theGroup's businesses are set out below. North America In North America, revenue in the five months ended 31 December 2007 in sterling,including acquisitions, decreased by around 10% compared to the correspondingperiod in the prior year. Trading profit was down by more than 40% reflectingthe loss reported by Stock, lower profitability in Ferguson and currencytranslation. In constant currency, the revenue and trading profit decline wouldhave been around 5% and 3% lower, respectively, than for the reported figures insterling. The Group's US results have been affected by the continuing decline in UShousing starts, falling consumer confidence and a weakening US dollar. Ferguson continued to gain market share and, although benefiting from thecommercial and industrial sector that continued to grow, was adversely impactedby a weakening new residential market and a slowing repairs, maintenance andimprovement (RMI) market. Revenue in local currency for the five months ended 31December 2007 was up around 3% due to acquisitions, with organic revenue growthbeing down around 3%. Trading profit was also around 3% lower. Since 1 August2007 headcount has been reduced by 1,500 which will give rise to annualisedsavings of £38 million. At Stock, local currency revenue and trading profit have been impacted by thecontinuing slowdown in the new residential market, which has also createdincreased price competition. Housing starts in the USA have fallen 26% from anaverage annual rate of around 1.614 million in the five months ended 31 December2006 to 1.196 million in the five months ended 31 December 2007. Stock's revenue is down by just over 25%, principally reflecting a 26% declinein organic sales volumes, including the effect of previous branch closures (4%)and price fluctuations in lumber and panels. Despite reducing headcount by afurther 1,500 in the first quarter, Stock's trading loss for the five monthperiod was just over £25 million compared to a trading profit of around £45million in the comparable period in the prior year. These headcount reductionswill give rise to annual savings of £22 million. Acquisitions contributed around£20 million (2%) to revenue growth. Stock has made progress in diversifying itsbusiness, both organically and by acquisition, and continues to outperform inmost of its major markets. The Canadian residential market continued to hold up well and has not beensignificantly impacted by the factors affecting the US housing market. WolseleyCanada achieved local currency revenue growth of more than 3%, although tradingprofit was around 15% lower, due to branch closure costs of around C$4 million(£2 million) and the inclusion of property gains in the comparative period. Europe The global liquidity squeeze has had some impact on European consumerconfidence, although the effect has not been as significant as that in the USA.Revenue in sterling for Europe, including acquisitions, increased by around 17%in the five months ended 31 December 2007, whilst trading profit was up 1%.Excluding DT Group, which was acquired on 25 September 2006, European revenueswere up by around 4% whilst trading profit was almost 20% lower due to adisappointing performance in France and some initial disruption, nowdiminishing, caused by the IT systems implementation in Austria and the newdistribution centre (DC) in Italy. Revenue for the UK and Irish businesses increased by 3%, the majority of whichwas organic growth with a positive performance in the UK being partly offset bytougher trading conditions in Ireland where housing starts were around 50% lowerand the RMI market is also weaker. Overall trading profit was up by around 1%but the trading margin was slightly lower, as a result of the lowerprofitability in Ireland. There are increasing signs that the UK housing market is slowing in response tothe lower availability and increased cost of mortgage financing. In addition,the rate of growth in the UK RMI market has been weakening in response todeteriorating consumer sentiment and tighter credit conditions. Governmentexpenditure on social housing, health and education remains positive. Wolseley France had a slower start to the financial year, partly reflectingpreviously announced internal restructuring and start up issues at the newnational DC in Orleans, but also reflecting a generally less positive businessenvironment, including the effect of French national industrial disruption.However, the performance of the DC continues to improve. Constant currencyrevenue for the five months ended 31 December 2007 was marginally up on theprior year and trading profit is down by around 35%, including previouslyannounced restructuring costs of €4 million (£3 million) relating to headcountreductions. Overall, markets in the Nordic region have generally held up well. The Danishnew housing and DIY markets continued to slow in response to higher interestrates and the recent rate of growth in the professional market has been moremodest. The Swedish DIY market has also started to slow but other markets in theNordic region remained robust. DT Group continues to perform well with growth inrevenue and trading margin compared to last year. For the five months ended 31December 2007 reported revenue, in sterling, was £879 million with a tradingmargin of just over 6%. This reflects the seasonal nature of the businesscompared to the trading margin of more than 7% reported for the first threemonths. The Group's Central and Eastern European businesses showed modest revenue growthdue to acquisitions. Trading profit was higher in Switzerland and theNetherlands, with strong market outperformance, but was down in the otherregions. Overall for the division, trading profit in the period was almost halfthat in the comparable period as a result of lower than expected revenue growth,business disruption associated with the new IT systems implementation in Austriaand adjusting the infrastructure to accommodate the DC in Italy. During thecontinuing integration process there will be further rationalisationopportunities and subsequent cost reductions. Acquisition Update Since the beginning of the financial year on 1 August 2007, a total of 10bolt-on acquisitions in Europe and North America have been announced andcompleted for an aggregate consideration of approximately £170 million. These 10acquisitions are expected to add approximately £219 million to Group revenue ina full year and will be beneficial to the Group's trading margin in the currentfinancial year. Outlook The Board expects business conditions in a number of the Group's markets tobecome more challenging over the next few months. Action will continue to betaken in the remainder of the current financial year to reduce the Group's costbase and to curtail capital expenditure. In the USA, the housing market is likely to deteriorate further until thecurrent high levels of unsold inventory have declined and the full effects ofproblems in the sub-prime market have been assimilated. These conditions,together with reduced availability of credit, are expected to put furtherpressure on the RMI market. The commercial and industrial market is expected toshow modest growth for the majority of the current financial year given thelonger lead times of many large projects within this sector. The Group expectsto continue to drive competitive advantage and increased market share from thedistribution centre network, customer focus and to exploit opportunities arisingfrom the impact that weakening markets will have on competitor positions. There are signs of further weakening in some European markets as a result oflower consumer confidence, credit pressures and the increased cost of credit.The majority of the Group's activity in Europe is driven by the RMI andcommercial and industrial segments which are expected to be more robust,although the rate of growth in RMI activity is likely to slow. Management will continue to focus on opportunities for profitable growth whilstachieving strong cash flow generation and an efficient cost base, appropriate tothe market conditions. The Board is confident that the Group will emerge fromthe downturn as a stronger organisation with an excellent platform for futuregrowth. There will be an analyst and investor meeting at 0930 (UK time) today at UBS, 1Finsbury Avenue, London, EC2M 2PP. The meeting can also be accessed byconference call: UK free phone dial-in number: 0800 032 4094US free phone dial-in number: 1866 239 0750Rest of the World dial-in number: + 44 (0)20 7138 0809 Password: Wolseley/4115336 Slides relating to the meeting will be available on www.wolseley.com. The meeting will be recorded and available on www.wolseley.com after the event.It will also be available for playback until 28 January 2008 on the followingnumbers: UK free phone number: 0800 559 3271 4115336#US free phone number: 1866 883 4489 4115336#UK/European replay dial-in number: +44 (0)20 7806 1970 4115336# Exchange Rates The average profit and loss account translation rate for the five months ended31 December 2007 was $2.03 to the £1 compared to $1.91 for the comparable periodlast year, a weakening of 5.9%, and €1.43 to the £1 compared to €1.48, astrengthening of 3.4%, compared to the prior year. Trading profit, a term used throughout this announcement, is defined asoperating profit before the amortisation and impairment of acquired intangibles.Trading margin is the ratio of trading profit to revenue stated as a percentage. ENQUIRIES: Analysts/Investors: 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 Media: Mark Fearon +44 (0)118 929 8787Director of Corporate Communications Brunswick +44 (0)20 7404 5959Andrew FenwickKate Miller 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 2007 was approximately £16.2 billion and operating profit,before amortisation and impairment of acquired intangibles, was £877 million.Wolseley has around 77,000 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 StockExchange (LSE: WOS) and is in the FTSE 100 index of listed companies. Certain information included in this release is forward-looking and involvesrisks and uncertainties that could cause actual results to differ materiallyfrom those expressed or implied by forward-looking statements. Forward-lookingstatements include, without limitation, projections relating to results ofoperations and financial conditions and the Company's plans and objectives forfuture operations, including, without limitation, discussions of expected futurerevenues, financing plans and expected expenditures and divestments. Allforward-looking statements in this release are based upon information known tothe Company on the date of this report. The Company undertakes no obligation topublicly update or revise any forward-looking statement, whether as a result ofnew information, future events or otherwise. It is not reasonably possible to itemise all of the many factors and specificevents that could cause the Company's forward-looking statements to be incorrector that could otherwise have a material adverse effect on the future operationsor results of an international Group such as Wolseley. Information on somefactors which could result in material difference to the results is available inthe Company's Annual Report to shareholders for the year ended 31 July 2007. - ENDS - This information is provided by RNS The company news service from the London Stock Exchange