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Wolseley plc announces another record year, achieving a decade of continuous growth

25 September 2006

Highlights:

* Group revenue up 25.8%, including organic growth of 10.9%
* Significant increase in Group profits:
* Trading profit up 24.7%
* Profit before tax and before amortisation of acquired intangibles up 21.8%
* Cash flow from operations up 11.1% from £765 million to £850 million
* Strong financial position with gearing(2) of 75.2% (2005: 50.8%) and interest cover(3) of 14 times (2005: 23 times), before the acquisition of the DT Group
* Return on gross capital employed (ROGCE(4) at 18.8% (2005: 19.1%), well ahead of the Group’s weighted average cost of capital and demonstrating continuing significant shareholder value creation

* Increase in dividend of 11.4% for the full year to 29.40 pence per share reflecting the Board’s confidence in the future prospects of the Group.

Operating highlights

Tenth consecutive year of record results achieved, while continuing with significant investment in the business to position the Group for further growth.

Increased diversity as the Group has expanded its activities in the distribution of electrical products, insulation materials and tool hire in the UK, achieved an entry into the Belgian market and increased its presence in installed services in the USA.

North American revenues up 36.1% and trading profit up 41.5%. Ferguson achieved strong organic revenue growth of 24.3% and increased trading margin to 7%. Stock Building Supply’s (“Stock”) improved market focus and business mix helped trading margin rise significantly from 5.9% to 6.5%.

European revenues up 11.1% and trading profit up 2.9%, reflecting acquisitions offset by the more difficult market environment in Austria and restructuring of Brossette in France. Revenues in Wolseley UK were up 14.4%, including 2.1% organic growth.

Market outperformance by all of the Group’s principal businesses except Brossette, which is continuing to restructure to accelerate future growth.

Record acquisition investment of £914 million for 53 completed acquisitions which are expected to add £1,418 million of revenues in a full year.

Acquisition of DT Group, announced on 24 July 2006, is expected to complete today. This £1.35 billion acquisition of the leading Nordic distributor of building materials with revenues of £1.7 billion in the year to 30 June 2006, diversifies the Group into three new countries.

Outlook

Although the economic background in the USA is uncertain, the repairs, maintenance and improvement (“RMI”) and industrial and commercial markets should continue to grow and more than outweigh the softening in the new residential market. The outlook for Stock will be more challenging but the diversity of the Group’s US operations should enable them to outperform the market and make good progress overall.

In Canada, the overall environment is expected to remain positive.

The UK market is expected to continue to show a gradual improvement with Wolseley UK also benefiting from recent acquisitions, product expansion and enhanced supply chain efficiency.

In France, growth in the RMI market is likely to remain modest; both Brossette and PBM are expected to show sound progress.

The Nordic region is expected to remain positive and whilst the majority of markets in the rest of continental Europe are likely to remain broadly flat, Wolseley’s operations are expected to show growth relative to their respective markets.

There are a number of business improvement initiatives in place that should improve performance. The Group will continue to aim for, on average, double-digit sales and profit improvements through a combination of organic growth and acquisitions.

The 10% placing of new ordinary shares, announced today, will enable the Group to continue to pursue its growth strategy and its programme of bolt-on acquisitions.

The Board expects another year of good progress benefiting from its geographic, product and customer diversity.

Chip Hornsby, Wolseley plc Group Chief Executive said:

“Achieving a decade of continuous growth is a fantastic achievement by the Wolseley Group and reflects the benefits of our customer, product and geographic diversity. More importantly, the fragmented nature of the construction materials distribution market in Europe and North America gives us confidence that we can look forward to many more years of substantial growth. Although the slowing US housing market may bring us challenges next year, we will continue to pursue our double-digit growth targets through a combination of organic and acquisitive growth, utilising our competitive advantages of our scale, people, supply chain and reaping the rewards of our commitment to delivering customer solutions.”

Full details of the results announcement can be seen here.

(1) Trading profit, a term used throughout this announcement, is defined as operating profit before the amortisation 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 2006 and the incremental impact of acquisitions in 2005.
(2) Gearing ratio is the ratio of net debt, excluding construction loan borrowings, to shareholders’ funds.
(3) Interest cover is trading profit divided by net finance costs, excluding net pension related finance costs.
(4) Return on gross capital employed is the ratio of trading profit (before loss on disposal of operations and goodwill) to the aggregate of average shareholders’ funds, minority interests, net debt and cumulative goodwill written off.

Media Enquiries on this announcement should go to the following:

Penny Studholme +44 (0)118 929 8886

+44 (0)7860 553 834
Director of Corporate Communications

Brunswick +44 (0)20 7404 5959
Andrew Fenwick
Nina Coad

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