NEW! Investment Companies Centre

Wolseley (WOS)

Sector:

Support Services

Index:

FTSE 100

Market Cap

£1,780.75m

Change Today

Price Up8.00p ()

Share Price

269.00p

Final Results

RNS Number : 9242D
Wolseley PLC
22 September 2008
 



NEWS RELEASE

22 September 2008



Wolseley plc 

Final Results Announcement for the Year Ended 31 July 2008



Summary of Results


Financial highlights




Change



Year to

31 July 2008


Year to

31 July 2007

Reported

In constant currency(1)



£m


£m

%

%


Group revenue

16,549


16,221

2.0

0.0









Group trading profit(2) 

683


877

(22.1)

(23.7)


Exceptional restructuring costs

(76)


-




Amortisation and impairment of acquired intangibles

(306)


(124)




Group operating profit

301


753

(60.1)

(60.8)









Group profit before tax, before exceptional items and amortisation and impairment of acquired intangibles

527


758

(30.5)

(31.4)


Group profit before tax

145


634

(77.1)

(77.3)









Earnings per share, before exceptional items and amortisation and impairment of acquired intangibles

56.58p


87.80p

(35.6)

(36.6)


Basic earnings per share

11.33p


73.52p

(84.6)

(84.8)









Total dividend per share 

(interim paid, no final proposed in 2008)

11.25p


32.40p

(65.3)



 

Overview
·     Wolseley has continued to increase market share, reduce working capital and increase cash conversion, against a backdrop of significant market deterioration.
·     Aggressive cost cutting resulted in £76 million of exceptional restructuring charges, but saved £47 million in the year. Full-year benefits of £176 million are expected from the restructuring and business improvement initiatives being undertaken.
·     Closure of 270 branches and headcount reduced by 7,100.
·     Actions taken have enabled the Group to improve working capital cash to cash days(3) by 11.4% to 45.9 days and achieve cash conversion(4) of 185% (2007: 148%).
·     Capex reduced to £317 million (2007: £396 million) and acquisition spend significantly curtailed, with no acquisitions since March 2008.
·     Sale of property and non-core businesses generated cash of £102 million.
·     Net debt virtually unchanged at £2,469 million, despite £321 million adverse currency translation effect, due to strong cash flow and other targeted management actions. Group operating well within its banking covenants with net debt : EBITDA(5) of 2.7 times (2007: 2.2 times).
·     No final dividend to be paid, to conserve £150 million of cash.


 

 
Further actions since the year end to reduce costs and net debt, including:
·     Headcount further reduced by 600.
·     Property and business disposals of £46 million have been realised.
·     Target set to reduce working capital cash to cash days by more than 10%, in 2009.
·     Significant reduction in anticipated 2009 capex to an estimate of £180 million, compared to £317 million in 2008, as Business Change Programme deployment is slowed and non-essential capex is curtailed.
·     Plans being developed to carry out additional restructuring and cost reductions. In particular, a fundamental review being undertaken to reduce Stock’s impact on Group results. 
 
Operating highlights
 
·    Group
§ Group revenue up by 2% but trading profit down by 22%.
§ Market outperformance by Ferguson and DT Group.
§ Gross margin relatively unchanged at 27.7% (2007: 27.9%).
§ Trading profit down 22.1%, but down 3.2%, excluding Stock.
§ Group headcount reduced by 7,100.
§ Impairment charges of £186 million, primarily relating to Stock and Wolseley Ireland, and £22 million in net finance costs, relating to an equity investment.
 
·   North America
§ Revenue down 7.3% and trading profit down 37.4%.
§ Strong performance from Ferguson with a trading margin over 7% and trading profit virtually unchanged at $794 million (2007: $800 million).
§ Further new housing decline and increased provisions for construction loan and accounts receivable impacted Stock Building Supply.
 
·   Europe
§ Tougher trading conditions across most countries, particularly in the UK and Ireland.
§ Revenue up 12.7% and trading profit down 1.2%.
§ Wolseley UK and Ireland increased gross margin, although trading profit was lower. Organic revenue growth, excluding Ireland, of 1.8%.
§ DT Group performed well ahead of the market with 2% annual organic revenue growth, higher gross margin and a 7.2% trading margin.
§ Improved second half in Wolseley France, following a poor start to the year.
§ Significant working capital improvement with spot cash to cash days reduction of 13.6 days.
 
Outlook
·   US commercial and industrial markets are likely to remain stable for the next few months, although a number of markets in which the Group operates are expected to deteriorate in the short term.
·   Continue to focus on the necessary cost reduction and cash maximisation actions appropriate in difficult markets, to achieve increased productivity and efficiency, with further restructuring being undertaken.
·   Although headcount in Stock has already been reduced by more than 40%, further deterioration in the US new housing market has necessitated a fundamental review of the business, in order to reduce its impact on Group results.    
·   Board remains confident that it will continue to be compliant with its banking covenants over the year ending 31 July 2009, and beyond.
·   No plans to raise equity or renegotiate banking covenants, although these remain options should market conditions deteriorate very dramatically.
 
 

 

 

  

Chip Hornsby, Wolseley plc Group Chief Executive said: 

"We have continued to take action to reduce costs and drive working capital improvements in response to challenging market conditions. While these conditions have impacted many of our businesses significantly during the year, our employees have done a good job at responding to the tough markets and we are seeing the benefits of our actions with market outperformance in many areas. Financial discipline in terms of cost reduction and cash flow enhancement remains our primary focus to ensure the Group remains compliant with our banking covenants and is well positioned for any market recovery."



SUMMARY OF RESULTS









As at, and for the year ended 

31 July





2008


2007


Change








Revenue


£16,549m


£16,221m


+2.0%








Operating profit







- before exceptional items and amortisation    and impairment of acquired intangibles

- exceptional restructuring costs

- amortisation and impairment of acquired intangibles



£683m

£(76)m

£(306)m



£877m

-

£(124)m



-22.1%








Operating profit


£301m


£753m


-60.1%

Net finance costs


£(156)m


£(119)m










Profit before tax







- before exceptional items and amortisation and impairment of acquired intangibles

- exceptional restructuring costs

- amortisation and impairment of acquired intangibles



£527m

£(76)m

£(306)m



£758m

-

£(124)m



-30.5%








Profit before tax


£145m


£634m


-77.1%








Earnings per share







- before exceptional items and amortisation and impairment of acquired intangibles

- exceptional restructuring costs

- amortisation and impairment of acquired intangibles



56.58p

(7.62)p

(37.63)p



87.80p

-

(14.28)p



-35.6%








Basic earnings per share


11.33p


73.52p


-84.6%








Dividend per share


11.25p


32.40p


-65.3%















Net debt


£2,469m


£2,467m










Gearing(6)


73.5%


71.5%










Interest cover(7) (times)


5x


7x










Operating cash flow


£1,262m


£1,299m




(1)   Constant currency percentage changes are calculated by retranslating prior year amounts at the exchange rates used in the preparation of the financial statements for the year ended 31 July 2008.

(2)   Trading profit, a term used throughout this announcement, is defined as operating profit before exceptional items and the amortisation and impairment of acquired intangibles. Trading margin is the ratio of trading profit to revenues expressed as a percentage. Organic change is the total increase or decrease in the year adjusted for the impact of exchange rates, new acquisitions in 2008 and the incremental impact of acquisitions in 2007.

(3)   Spot cash to cash days is the net of spot inventory days plus spot receivables days less spot payables days.

(4)   Cash conversion is the ratio of operating cash flow to trading profit.

(5)   Net debt : EBITDA is the ratio of net debt to trading profit plus depreciation and the amortisation of software and a full year trading profit of subsidiaries acquired in the period less the trading profit of subsidiaries disposed of in the period.

 (6)   Gearing ratio is the ratio of net debt, excluding construction loan borrowings, to shareholders' funds. 

(7)   Interest cover is trading profit divided by net finance costs, excluding net pension related finance costs and the impairment of available for sale investments.




ENQUIRIES:


Investor relations:


Guy Stainer

+44 (0)118 929 8744

Group Investor Relations Director

+44 (0)7739 778187



John English

+1 513 771 9000

Vice President, Investor Relations, North America

+1 513 328 4900


Media:


Mark Fearon

+44 (0)118 929 8787

Director of Corporate Communications




Brunswick

+44 (0)20 7404 5959

Andrew Fenwick


Kate Miller






An interview with Chip Hornsby, Group Chief Executive and Steve Webster, Group Finance Director, in video/audio and text will be available from 0700 on www.wolseley.com and www.cantos.com


There will be an analyst and investor meeting at 0930 at UBS Ground Floor Presentation Suite, 1 Finsbury Avenue, London EC2M 2PP. A live audio cast and slide presentation of this event will be available at 0930 on www.wolseley.com.



There will also be a conference call at 1500 (UK time): 

UK free phone dial-in number:

0800 028 1299

US free phone dial-in number:                  

1888 935 4577

Rest of the World dial-in number:            

+44(0)20 7806 1955

Password:

Wolseley

                

The call will be recorded and available for playback until 28th September 2008 on the following numbers: 

UK free phone number:

0800 559 3271

US free phone number:    

1866 239 0765

Rest of the world dial-in number:

+44 (0)20 7806 1970

                     


Photographs of Chip Hornsby, Group Chief Executive and Steve Webster, Group Finance Director are available at: www.newscast.co.uk and