Interim Results - 6 Months to 31 January 2000
Wolseley PLC
14 March 2000
Wolseley announces strong results
for the half year to 31 January 2000:
- Sales up by 17%
- Profit before tax up by 13%
- Earnings per share up
- before goodwill amortisation
and exceptionals by 9%
- total by 21%
- Interim dividend up by 10%
31
January
2000 1999 Change
Sales £3,037m £2,602m +16.7%
Profit before tax
- before goodwill amortisation
and exceptionals £155.6m £142.5m +9.2%
- exceptionals - £ (7.7)m
- goodwill amortisation £ (5.3)m £ (1.9)m
- total £150.3m £132.9m +13.1%
Earnings per share
- before goodwill amortisation
and exceptionals 18.13p 16.63p +9.0%
- tax 1.05p -
- other - (1.24)p
- goodwill amortisation (0.93)p (0.33)p
- total 18.25p 15.06p +21.2%
Dividend per share 4.125p 3.75p +10.0%
Net borrowings £492.3m £219.4m
Gearing 42.1% 21.3%
- 17% increase in group sales, including organic sales growth of 5%.
- 16% increase in group trading profit before goodwill amortisation and
exceptionals.
- Increase in trading profit margin in both European and US distribution
divisions.
- Profit before tax up 13%.
- Earnings per share up
- before goodwill amortisation and exceptionals up 9%
- total up 21%.
- Interim dividend per share up 10%.
- Sustained high level of acquisition spend (£153 million) on top of record
acquisition spend last year (£310 million).
'This has been a good first half for the group with substantial growth in
sales, profits and earnings per share. We expect further real growth over the
remainder of this financial year.'
Richard Ireland
Group Chairman
'We are pleased with the strong underlying performance of our major building
distribution companies. They have managed to increase their trading margin
whilst integrating new companies into the Group. We continue to drive the
business forward by acquisitions and strong organic growth, combining the
resources of an international group with an extensive network of local
operations.'
John Young
Group Chief Executive
FOR FURTHER INFORMATION PLEASE CONTACT:
Steve Webster - Group Finance Director
- c/o London Underwriting Centre until midday
(Telephone 0171 617 5066)
- After midday (0802) 913485 (Mobile)
Tony Knox - Financial Dynamics (Telephone 0171 831 3113)
The unaudited results for the half year ended 31 January 2000
We are pleased to report results for the half year demonstrating substantial
growth in sales, profits and earnings per share.
Group sales increased by 16.7% from £2,602 million to £3,037 million,
including organic growth of 5.2%. Trading profit before goodwill amortisation
and exceptionals rose by 16.1% from £143.8 million to £167.0 million. Profit
before tax, goodwill amortisation and exceptionals increased by 9.2% from
£142.5 million to £155.6 million. The increase in earnings per share before
goodwill amortisation and exceptionals was 9.0% and 21.2% once these are taken
into account.
Boosted by acquisitions and strong organic growth, our European and US
Distribution divisions increased sales by over 16% and 19% respectively. The
equivalent increases in trading profits were over 19% and 20%. The trading
margin was slightly higher in both divisions, despite the integration of a
record level of acquisitions over the last eighteen months.
Sales in the manufacturing division increased but profits reduced after
charging costs incurred in relation to actions taken to dispose of the energy
businesses.
The higher level of recent acquisition spend has resulted in an increase in
goodwill amortisation and the interest charge. Goodwill amortisation
increased from £1.9 million to £5.3 million. Interest was also affected by
rate rises and increased from £1.3 million to £11.4 million.
Currency translation had little overall effect on the group results for the
half year.
An exceptional credit relating to the disposal of a business in a prior year
reduced the tax charge for the first half by £6 million.
Building Distribution - Europe
Sales for the division increased by £154.1 million (16.5%), including an
organic increase of 4.9%. Approximately £120 million of the sales increase
relates to the incremental effect of acquisitions made in the previous
financial year, principally Hall & Co, British Fittings and Broughtons in the
UK, Heatmerchants in Ireland and Porcher in France.
A feature of the first half has been the strong underlying performance of
existing companies despite the integration of new companies into the group.
This has resulted in trading profit increasing by £10.3 million and an
increase in the trading margin from 5.7% (before exceptionals) to 5.8%.
The domestic market in the UK has remained solid despite recent interest rate
rises although the industrial sector weakened in the last quarter. UK
distribution sales increased by 20.9%, including an organic increase of 4.2%.
UK trading profits increased by over 36% compared to the corresponding period
in the previous year which was affected by £3.8 million of one-off costs
relating to the integration of Hall & Co. The UK trading margin at 6.4% of
sales was unchanged compared to last year's margin (before taking account of
the Hall & Co integration costs last year).
The UK lightside division reported a substantial increase in sales and
profits, after costs associated with the merger of Broughtons and Crangrove.
The UK heavyside division also showed good increases in sales and profits and
is realising the expected benefits from the Hall & Co acquisition with its
increased national presence and size. Trading profit in the commercial and
industrial division in the UK was marginally lower on increased sales. The
British Fittings acquisition is now fully integrated with Pipeline Center but
is yet to make any significant contribution to profits. A gradually improving
profit trend is expected over the coming months. The spares division reported
a good increase in sales and profits.
In France, Brossette benefited from an improved market and the end of a
successful sales incentive programme. Local currency sales, assisted by the
Porcher acquisition in the previous year, increased by over 12%. However, the
increase in sterling sales was just under 4%, reflecting the strengthening of
sterling against the Euro. Trading profit was substantially higher than the
previous year (which was adversely affected by £1.7 million of one-off costs
relating to the Porcher acquisition), which enabled Brossette to raise its
trading margin above 6% once again.
Conditions in Austria showed some improvement towards the end of the first
half but local currency profits were down on marginally increased sales.
Acquisitions in Italy and Luxembourg continue to develop in line with
expectations.
The European network of branches has been expanded by a net 37 (2.7%)
resulting in 1,394 at the end of the half year. All but two of the increase
related to new branch openings.
Building Distribution - USA
The results in this division reflect a continuation in the strong market
conditions throughout the first half. Sales increased by 19.1% including an
organic increase of 5.8%. Trading profit increased by over 20% giving a
slightly improved trading margin.
Sales in the plumbing and heating companies increased by over 15%, including
organic growth of 4.7%. The corresponding increase in trading profit was
11.8%. Both Ferguson and Familian Northwest achieved improvements in their
added value percentages.
The core Ferguson business moved ahead strongly and continues to derive
benefits from its ongoing investment in IT and distribution centres.
Substantial progress was made last year in relation to the Familian Corp
business following its integration with Ferguson. Although the progress
achieved in the first half of this year has been somewhat slower than
expected, all the Familian Corp systems have now been fully integrated with
Ferguson's. Management attention has been refocused on securing additional
sales from the Californian market-place which remains buoyant.
Familian Northwest produced a double digit growth in sales and trading
profits, securing additional growth through opening five new branches and
adding a further ten through acquisition.
Carolina Holdings, the lumber distribution business, achieved another period
of outstanding growth in a more favourable pricing environment. Both sales
and trading profit increased by over 18%. The organic growth in sales was
8.1%. An integral part of Carolina's strategy is to continue to add production
capacity to deliver a wider range of value added product to meet customer
demands. Greater geographic diversity remains a further important feature to
consolidate its position as the market leader in supplying building materials
to the professional contractor. Acquisitions made by Carolina in the first
half include entries into the new markets of California and Florida which
added wall panel and roof truss production capacity.
The US branch network has increased by a net 90 during the first half to 725
including 72 from acquisitions.
Manufacturing
Sales relating to continuing operations in the division increased marginally
from £188.6 million to £190.7 million. Trading profit was down by just over
£2 million, after charging costs of £1.9 million relating to the aborted
disposal of the energy businesses. These costs have been expensed through
trading profit rather than treated as exceptional despite their one-off
nature. Sales and trading profits of the division represent 6.3% (7.4%) and
8.1% (10.8%) of the group total.
Profits in the energy businesses were down from the corresponding period in
the previous year, primarily due to difficult conditions in a number of
markets, particularly Switzerland. The motors division reported profits
slightly up on marginally lower sales. The problems in the agricultural
industry continue to adversely affect our agricultural businesses and the
further strengthening of sterling against the Euro has been an additional
unhelpful factor. These businesses did well to increase sales and marginally
increase profits. The photographic businesses continued to show an improving
trend with a significant improvement in trading profit on sales up by nearly
10%.
Interim dividend
The board has decided to pay an interim dividend of 4.125 pence per share
compared with 3.75 pence per share; an increase of 10%. The dividend
reinvestment plan, introduced last year, will continue to be available to
shareholders.
Finance
Net cash flow from operating activities was £132.5 million compared to
£137.5 million. Working capital increased by £68 million, partly reflecting
less efficient working capital management in acquired businesses.
Capital expenditure has increased substantially from £35.7 million to £58.4
million. This reflects the ongoing investment in distribution centres and IT
in the USA which is designed to enhance service levels to customers and
branches and should result in increased operating efficiency within our
businesses.
Consideration, including debt, for acquisitions amounted to £153.3 million
(£190 million). A further £35 million has been spent since the end of the
half year. In aggregate, in a full year, these acquisitions should add
approximately £549 million to group turnover. Further details of acquired
businesses are set out in note 7 to this statement. The majority of this
acquisition spend has been in the USA, with £60 million relating to the
plumbing and heating businesses and £79 million relating to lumber
distribution. The acquisitions in Europe include the group's first entry into
Luxembourg.
The branch network has been extended through acquisition and new branch
openings by a total of 127 (6.4%).
Net borrowings, excluding construction loan borrowings, at 31 January 2000,
amounted to £492.3 million compared to £309.0 million at 31 July 1999,
reflecting a high level of acquisitions and increased capital expenditure.
Gearing is 42.1% compared to 28.2% at 31 July 1999.
E-commerce
The group has been further developing its e-business strategy over the last
six months. A small but growing proportion of sales are now transacted
through e-commerce web sites (for example www.plumbcenter.co.uk) and we are
experiencing an increasing use of this new sales channel. Group companies
also have plans for more electronic interface with customers and for greater
involvement with third party middle-ware providers, particularly in the USA,
for the selling of goods through the internet. E-procurement will also play
an increasing role in our supply chain.
The building distribution companies have the infrastructure in place to
support and adapt to these developments in e-commerce business to business
activities on the internet.
The group's market leadership positions, world-class logistics operations and
unique pan European and US coverage will enable it to benefit from e-commerce
opportunities as they evolve.
Outlook
The group has made a sound start to the second half. The trading outlook for
the group's principal markets for the remainder of the financial year
continues to be positive. Despite recent interest rate rises in Europe and
the USA, markets are expected to remain reasonably strong.
The group's building materials' distribution business should continue to
achieve real growth, both organically and by acquisition. Further benefits
from the recent step up in the rate of acquisition spend will materialise in
the second half. Accordingly, the group has grounds to be optimistic that it
will achieve further good progress over the remainder of this financial year.
GROUP PROFIT AND LOSS ACCOUNT (UNAUDITED)
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
_____________________________________________________________________________
£m £m £m
Turnover
5,505.0 Continuing operations 2,938.9 2,602.1
- Acquisitions 98.2 -
________ _______ _______
5,505.0 3,037.1 2,602.1
________ _______ _______
Trading profit before goodwill
330.2 amortisation and exceptionals 167.0 143.8
(5.5) Goodwill amortisation (5.3) (1.9)
(11.6) Exceptional items (note 3) - (5.5)
Trading profit
__________ _______ __________
313.1 Continuing operations 158.8 136.4
- Acquisitions 2.9 -
__________ _______ __________
__________ _______ __________
Profit on ordinary activities
313.1 before interest 161.7 136.4
(3.1) Loss on disposal of operations - (2.2)
__________ _______ __________
310.0 Profit before interest 161.7 134.2
(3.6) Net interest payable (11.4) (1.3)
__________ _______ __________
Profit on ordinary activities
306.4 before tax 150.3 132.9
Taxation (note 4)
(107.7) Ordinary activities (51.4) (47.0)
0.7 Exceptional credit 6.0 0.6
__________ _______ _________
(107.0) (45.4) (46.4)
__________ _______ _________
199.4 Profit after tax 104.9 86.5
(0.5) Minority interests (0.2) (0.2)
__________ ________ _________
Profit for the period
attributable to ordinary
198.9 shareholders 104.7 86.3
(78.9) Dividends (note 6) (23.7) (21.5)
________ ________ _________
120.0 Profit retained 81.0 64.8
Earnings per share (note 5)
Before exceptionals and
38.08 p goodwill amortisation 18.13 p 16.63 p
(0.96)p Goodwill amortisation (0.93)p (0.33)p
(2.43)p Exceptionals 1.05 p (1.24)p
________ _________ _________
34.69 p FRS 3 basis 18.25 p 15.06 p
________ _________ _________
34.65 p Diluted earnings per share 18.21 p 15.05 p
13.75 p Dividends per share (note 6) 4.125 p 3.75 p
Translation rates (note 2)
1.6360 US dollars 1.6250 1.6650
9.6942 French francs 10.3000 9.5500
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
_________ _____________ _____________
£m £m £m
198.9 104.7 86.3
6.1 Profit for the period (7.3) 0.7
_________ _____________ _____________
205.0 Currency translation 97.4 87.0
_________ difference on foreign _____________ _____________
investments
SUMMARISED BALANCE SHEET (UNAUDITED)
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
_________ _________ ___________
£m £m £m
179.0 Intangible assets 238.3 122.0
417.0 Tangible fixed assets 460.6 362.2
_________ _________ ___________
826.9 Stocks 886.7 737.5
Debtors and property awaiting
1,022.2 disposal 1,022.1 886.0
Construction loans receivable
158.0 (secured) 161.1 154.9
(865.8) Creditors (810.4) (690.6)
Construction loan borrowings
(157.7) (unsecured) (161.1) (154.9)
________ _________ ____________
983.6 Net operating assets 1,098.4 932.9
________ _________ ____________
(309.0) Net group borrowings (492.3) (219.4)
(49.2) Net liabilities for tax (42.1) (76.4)
(57.4) Dividend (23.7) (21.5)
Provisions for liabilities and
(66.4) charges (66.4) (65.8)
________ _________ ____________
1,097.6 TOTAL NET ASSETS 1,172.8 1,034.0
======== ========= ============
297.8 Capital and share premium 298.8 294.0
account
796.7 Reserves 870.9 737.1
________ __________ ____________
1,094.5 Shareholders' funds 1,169.7 1,031.1
3.1 Minority interests 3.1 2.9
________ _________ ____________
1,097.6 1,172.8 1,034.0
======== ========= ============
Translation rates
1.6200 US Dollars 1.6209 1.6428
9.9287 French Francs 10.8674 9.4889
______________________________________________________________________________
RECONCILIATION OF MOVEMENTS IN CAPITAL AND RESERVES
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
___________ _______________ ______________
£m £m £m
120.0 Profit retained 81.0 64.8
6.1 Other recognised gains and (7.3) 0.7
losses
3.2 New share capital subscribed 1.0 0.2
6.9 Goodwill written back 0.5 7.1
___________ ______________ ______________
136.2 Net addition to shareholders' 75.2 72.8
funds
958.3 Opening shareholders' funds 1,094.5 958.3
___________ ______________ ______________
1,094.5 Closing shareholders' funds 1,169.7 1,031.1
========= ========== ==========
SUMMARISED GROUP CASH FLOW STATEMENT
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
_________ ___________ _____________
£m £m £m
NET CASH FLOW FROM OPERATING
338.6 ACTIVITIES* 132.5 137.5
Net cash flow from returns on
investments and servicing of
2.4 finance (4.4) (1.0)
(130.4) Taxation paid (52.8) (42.5)
(104.2) Capital expenditure (58.4) (35.7)
(297.4) Acquisitions (145.2) (185.8)
7.3 Disposals 1.5 6.7
(73.1) Equity dividends paid (57.4) (51.6)
3.2 Financing - Issue of shares 1.0 0.2
________ _______ __________
(253.6) Change in net debt resulting from (183.2) (172.2)
cash flows
(11.3) New loans and finance leases (5.1) (8.3)
(2.5) Translation difference 5.0 2.7
________ _______ __________
(267.4) Movement in net debt in period (183.3) (177.8)
(41.6) Opening net debt (309.0) (41.6)
________ _______ __________
(309.0) Closing net debt (492.3) (219.4)
________ _______ __________
* RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
__________ ___________ ____________
£m £m £m
313.1 Operating profit 161.7 136.4
61.9 Depreciation charges 33.8 29.6
5.5 Goodwill amortisation 5.3 1.9
(49.7) (Increase)/decrease in stocks (26.6) 7.8
(59.4) Decrease/(increase) in debtors 46.6 38.8
(Decrease)/increase in
66.8 creditors and provisions (88.6) (77.8)
Decrease in net construction
0.4 loans 0.3 0.8
________ _________ _________
Net cash flow from operating
338.6 activities 132.5 137.5
________ _________ _________
ANALYSIS OF RESULTS
Half year to Half year to
Year to 31 January 31 January
31 July 2000 1999
1999
________ ____________ _____________
£m £m £m
TURNOVER BY ACTIVITY
Building Distribution - Europe
1,733.8 Continuing operations 1,074.4 873.3
212.9 Acquisitions 16.5 63.5
________ _______ ______
1,946.7 1,090.9 936.8
________ _______ ______
Building Distribution - USA
3,063.7 Continuing operations 1,673.8 1,446.3
117.2 Acquisitions 81.7 27.5
________ _______ _______
3,180.9 1,755.5 1,473.8
________ _______ _______
Manufacturing
373.1 Continuing operations 190.7 188.6
0.6 Acquisitions - -
3.7 Discontinued - 2.9
________ _______ _______
377.4 190.7 191.5
________ _______ _______
5,505.0 TOTAL 3,037.1 2,602.1
========= ======= =======
TRADING PROFIT BY ACTIVITY
(BEFORE GOODWILL AMORTISATION
AND EXCEPTIONALS)
Building Distribution - Europe
111.7 Continuing operations 62.9 53.8
8.5 Acquisitions 0.9 (0.3)
________ ______ ______
120.2 63.8 53.5
________ ______ ______
Building Distribution - USA
170.1 Continuing operations 87.0 73.7
7.7 Acquisitions 2.7 1.0
________ ______ ______
177.8 89.7 74.7
________ ______ ______
Manufacturing
32.3 Continuing operations 13.5 15.8
- Acquisitions - -
(0.1) Discontinued - (0.2)
________ ______ ______
32.2 13.5 15.6
________ ______ ______
330.2 TOTAL 167.0 143.8
======== ====== ======
ANALYSIS OF RESULTS (Continued)
ANALYSIS OF MOVEMENT IN SALES
Movement
New Acquis- in Sales
Acqu- itions in
1999 Ex- isit- Increment Discon- Organic 2000
change ions 1999 tinued Change
2000 Operations
£m £m £m £m £m £m % £m
Building
Distribution
Europe 936.8 (27.6) 16.5 120.3 - 44.9 4.9 1,090.9
USA 1,473.8 36.3 81.7 76.7 - 87.0 5.8 1,755.5
Manufacturing 188.6 (2.1) - 1.1 - 3.1 1.7 190.7
_______________________________________________________________
2,599.2 6.6 98.2 198.1 - 135.0 5.2 3,037.1
Discontinued
Operations 2.9 - - - (2.9) - - -
_______________________________________________________________
2,602.1 6.6 98.2 198.1 (2.9) 135.0 - 3,037.1
===============================================================
ANALYSIS OF MOVEMENT IN TRADING PROFIT
(BEFORE GOODWILL AMORTISATION AND EXCEPTIONALS)
Movement
New Acqui- in Profit
Acquis- sitions in Dis-
1999 Ex- itions Increment continued Organic 2000
change 2000 1999 Operations Change
£m £m £m £m £m £m % £m
Building
Distribution
Europe 53.5 (1.2) 0.9 1.3 - 9.3 17.8 63.8
USA 74.7 1.9 2.7 5.1 - 5.3 6.9 89.7
Manufacturing 15.8 (0.3) - - - (2.0) (12.6) 13.5
_________________________________________________________________
144.0 0.4 3.6 6.4 - 12.6 8.7 167.0
Discontinued
Operations (0.2) - - - (0.2) - - -
__________________________________________________________________
143.8 0.4 3.6 6.4 (0.2) 12.6 - 167.0
Goodwill of £0.7 million arises on the acquisitions made in the half year.
Accordingly, the trading profit contribution, after goodwill amortisation,
from these acquisitions is £2.9 million.
NOTES:
1 Basis of preparation
The figures for the year ended 31 July 1999 do not constitute the
company's statutory accounts for that period but have been extracted from
the statutory accounts which have been filed with the Registrar of
Companies. 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. The accounts for the six months ended 31
January 2000 have not been audited, nor were the accounts for the
equivalent period in 1999. They comply with relevant accounting
standards and have been prepared on a consistent basis using accounting
policies set out in the 1999 Annual Report.
2 The results of overseas subsidiaries have been translated into sterling
using average rates of exchange.
3 The exceptional items in the half year to 31 January 1999 relate to the
costs of integration of the Hall & Co acquisition in the UK and Porcher
in France.
4 The tax charge on ordinary activities for the half year has been
calculated at the rate which it is expected will apply for the year
ending 31 July 2000 and comprises the following elements:
Half year to Half year to 31
31 January 2000 January 1999
£m £m
Tax on profit for the year
before exceptional gain
- UK 13.7 12.4
- overseas 37.7 34.6
____ ____
51.4 47.0
Exceptional item:
- Credit relating to the
disposal of a business in a
prior year (1999 tax credit on
exceptional costs) (6.0) (0.6)
____ ____
45.4 46.4
==== ====
5 Earnings per share, calculated on an average of 574.0 (573.0) million
ordinary shares in issue, are as follows:
Earnings per share
Half Year to Half Year to
31 January 2000 31 January 1999
Pence per share Pence per share
Before goodwill amortisation
and exceptionals 18.13 16.63
Goodwill amortisation (0.93) (0.33)
Exceptional tax credit (1999
exceptional acquisition
integration costs) 1.05 (1.24)
_____ ______
Total 18.25 15.06
_____ ______
6 The interim dividend of 4.125 pence (3.75 pence) per share, which will
absorb £23.7 million (£21.5 million) will be paid on 31 July 2000 to
ordinary shareholders on the register on 14 July 2000. The shares will
be quoted ex dividend on 10 July 2000.
7 The following table summarises the acquisitions made during the half
year. In certain cases the consideration is subject to adjustment and
includes net borrowings acquired.
Estimated Expected contribution to
consideration group turnover in a full
Acquisitions including debt year
£m £m
European Distribution 14.3 51.0
US plumbing and
heating distribution 59.5 148.0
US lumber distribution 79.5 254.0
_____ _____
153.3 453.0
===== =====
Since 31 January 2000 further acquisitions in the US and UK Distribution
divisions have been made for an estimated consideration of approximately
£35 million, including debt. In a full year these acquisitions are
expected to contribute a further £96 million of turnover.
8 2000 Preliminary announcement
In accordance with current best practice, Wolseley plc will make
available to shareholders, on request, a copy of its preliminary
announcement for the year ending 31 July 2000, to be issued on or about
26 September 2000. Requests for a copy of this announcement should be
addressed to the Company Secretary, Wolseley plc, PO Box 18, Vines Lane,
Droitwich Spa, Worcestershire, WR9 8ND.
A copy of this Preliminary Announcement, together with copies of other
recent public announcements can be found on Wolseley's web site at
www.wolseley.com.
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