WOS Wolseley

Wolseley plc announces a tenth set of record first half results CINCINNATI, March 21 /PRNewswire-FirstCall/ -- Summary of Results Financial highlights Change Half year to Half year to Reported In January 31 January 31 constant 2006 2005 currency mil. pounds mil. pounds % % Group revenue 6,734.5 5,331.9 +26.3 +22.3 Group trading profit (1) 384.9 315.6 +21.9 +17.8 Group operating profit 371.1 314.9 +17.8 +13.7 Group profit before tax, before amortization of acquired intangibles 359.8 297.5 +20.9 +17.1 Group profit before tax 346.0 296.8 +16.6 +12.9 Earnings per share, before amortization of acquired intangibles 43.91p 36.44p +20.5 +17.6 Basic earnings per share 41.58p 36.32p +14.5 +11.7 Interim dividend per share 9.85p 8.80p +11.9 - Group revenue up 26.3%, including organic growth of 12.2%. - Significant increase in Group half year profits: - Operating profit up 17.8% - Trading profit up 21.9% - Profit before tax and before amortization of acquired intangibles up 20.9%. - Operating cash flow of 258.1 million pounds Sterling (2005: 303.1 million pounds). Reduction compared to prior year principally reflects higher rates of organic growth in North America. - Strong financial position with gearing(2) of 68.1% (2005: 58.6%) and interest cover(3) of 15 times (2005: 21 times). - Return on gross capital employed (ROGCE(4)) at 18.8%, well ahead of the Group's weighted average cost of capital and demonstrating significant shareholder value creation. Operating highlights - Record first half results achieved, despite generally flat European markets and significant investment in the business to position the Group for continued growth. - Increased diversity of the business as the Group has expanded into distribution of electrical products and insulation materials, achieved an entry into the Belgian market and increased its presence in installed services in the USA. - North American revenues up 40.1% and trading profit up 39.0%. - European revenues up 7.6% but trading profit marginally down, reflecting the more difficult market environment in the UK and restructuring in France. UK and Ireland revenues up 9.3%, including 1.5% organic growth and trading profit up 5.9%. - Market outperformance in all of the Group's principal markets except France, mainly due to restructuring to accelerate future growth. - Acquisition investment of 436 million pounds for 22 acquisitions completed in the first half, which are expected to add 701 million pounds of revenues in a full year. A further 162 million pounds of investment in the second half so far to bring aggregate investment to 598 million pounds, a record in any one year for the Group. Outlook - Market conditions in North America are expected to remain favorable and Wolseley's North American operations are expected to make good progress in the second half. This is against the background of an improving industrial and commercial market, a growing RMI market and a strong housing market, although the number of starts may show a small decline. - For Europe, overall, it is likely that trading profit for the second half will be broadly flat compared to the equivalent period in the prior year, reflecting the generally flat market conditions. - The UK business expects to see a gradual but steady improvement in the RMI and housing markets as the second half progresses. - The business improvement initiatives relating to information technology, supply chain, sourcing and procurement will continue as the Group pursues its double-digit growth targets. - The acquisition pipeline remains strong and the Group will continue to pursue opportunities for product and geographic diversity. - The Board expects another year of good progress, driven by strong growth in North America and the benefits from recent acquisitions. (1) Trading profit, a term used throughout this announcement, is defined as operating profit before the amortization 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 borrowings, 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. SUMMARY OF RESULTS As at, and for the six months ended January 31 2006 2005 Change Revenue 6,734.5m pounds 5,331.9m pounds +26.3% Operating profit - before amortization of acquired intangibles 384.9m pounds 315.6m pounds +21.9% - amortization of acquired intangibles (13.8)m pounds (0.7)m pounds Operating profit 371.1m pounds 314.9m pounds +17.8% Net finance costs (25.1)m pounds (18.1)m pounds Profit before tax - before amortization of acquired intangibles 359.8m pounds 297.5m pounds +20.9% - amortization of acquired intangibles (13.8)m pounds (0.7)m pounds Profit before tax 346.0m pounds 296.8m pounds +16.6% Earnings per share - before amortization of acquired intangibles 43.91p 36.44p +20.5% - amortization of acquired intangibles (2.33)p (0.12)p Basic earnings per share 41.58p 36.32p +14.5% Dividend per share 9.85p 8.80p +11.9% Net borrowings 1,670.7m pounds 1,144.0m pounds Gearing 68.1% 58.6% Interest cover (times) 15x 21x Operating cash flow 258.1m pounds 303.1m pounds Charles Banks, Wolseley plc Group Chief Executive said: "We are delighted to report record half-year results for the tenth consecutive time. Overall, revenue increased by more than 26% and trading profit was up more than 21%. We are continuing to invest significantly in further improving our supply chain, sourcing and procurement to deliver growth and enhanced operational efficiency. The business is performing well, we are finding good acquisitions and the economic outlook for the rest of the year gives us confidence going forward." An interview with Charles Banks, Group Chief Executive and Steve Webster, Group Finance Director, in video/audio and text will be available from 0700 on http://www.wolseley.com/ and http://www.cantos.com/ There will be an analyst and investor meeting at 0930 at UBS Presentation Suite, 100 Liverpool Street, London EC2M 2RH. A live audio cast and slide presentation of this event will be available at 0930 on http://www.wolseley.com/. There will be a conference call at 1500 (UK time): UK/European dial-in number: + 44 (0)20 7162 0125 US dial-in number: + 1 334 323 6203 The call will be recorded and available for playback until April 4, 2006 on the following numbers: UK/European replay dial-in number: +44 (0)20 7031 4064 Passcode: 695501 UK-only free phone number: 0800 358 1860 North American replay dial-in number: +1 954 334 0342 Passcode: 695501 North American free phone number: +1 888 365 0240 Announcement of Interim Results Wolseley (NYSE:WOS) (LSE:WOS.L), the world's largest specialist trade distributor of plumbing and heating products and a leading supplier of building materials and services to professional contractors, is pleased to announce another set of record first half results, the tenth consecutive improvement in its interim figures. These results reflect strong organic growth, particularly in North America and the additional contribution from acquisitions. They have been achieved whilst the Group continues to invest in people, facilities and technology to secure future growth. Wolseley's US plumbing and heating business, Ferguson, performed very strongly in the first six months of the year, achieving organic revenue growth of 27.0% and trading profit growth, including acquisitions, up 36.4%. Stock Building Supply ("Stock") achieved growth in revenue, including acquisitions, of 34.0% and trading profit up 59.6%. The businesses in the UK, Ireland, Canada, the Netherlands, Italy and Switzerland also performed well in their respective markets although Brossette in France lost ground mainly due to its restructuring. After taking account of currency translation, Group revenue increased by 26.3% from 5,331.9 million pounds to 6,734.5 million pounds. Trading profit rose by 21.9% from 315.6 million pounds to 384.9 million pounds. After deducting amortization of acquired intangibles of 13.8 million pounds (2005: 0.7 million pounds), operating profit increased by 17.8% from 314.9 million pounds to 371.1 million pounds. On a constant currency basis, Group revenue increased by 22.3% and trading profit by 17.8% for the first six months compared to the previous comparable period. Currency translation increased Group revenue by 175.8 million pounds (3.3%) and Group trading profit by 11.3 million pounds (3.6%) in the six month period. Profit before tax and amortization of acquired intangibles increased by 20.9% from 297.5 million pounds to 359.8 million pounds. Profit before tax, after amortization of acquired intangibles, increased by 16.6% from 296.8 million pounds to 346.0 million pounds. The increase in earnings per share before amortization of acquired intangibles was 20.5%, from 36.44 pence to 43.91 pence. Basic earnings per share were up 14.5%, from 36.32 pence to 41.58 pence. North America Wolseley's North American division performed strongly with significant rises in revenue and profits, maintaining its position as the leading distributor of construction products to the professional contractor in North America. Reported revenue of the division was up 40.1% from 3,076.9 million pounds to 4,309.3 million pounds, reflecting organic growth of 19.2%, acquisitions and the beneficial impact of currency translation. Trading profit, in sterling, increased by 39.1% from 194.2 million pounds to 270.0 million pounds, after North American central costs. Currency translation increased divisional revenue by 181.5 million pounds (5.9%) and trading profit by 11.6 million pounds (6.0%). There was a net increase of 175 branches in North America from 1,434 at July 31, 2005 to 1,609 locations at January 31, 2006. North American central costs increased by 4.9 million pounds, reflecting the creation of the new North American management structure with effect from August 1, 2005. US Plumbing and Heating Ferguson produced an outstanding performance generating strong organic growth from its focus on selected markets, from new branch openings and driving further commercial advantage from its distribution centre ("DC") network. These factors contributed to significant market outperformance in the first half. Local currency revenue in the US plumbing and heating operations rose by 37.8% to $4,530.5 million (2005: $3,287.1 million) with trading profit up by 29.5%. Organic revenue growth was 27.0%. Gross margin fell slightly due to the absence of commodity price benefits in the first half compared to the prior year, partly offset by the continuing benefits from the distribution centre network, a focus on organic growth and operational leverage. As expected, the trading margin of 6.5% was marginally lower in the first half compared to the prior year's first half margin of 6.9%, which included one-off commodity price gains. Volumes through the DC network grew by 44% in the first half compared to the first half last year and more than 50% of branch sales now go through the DC network. Further investment continues in the DC's and in the first half an additional 200,000 square feet of capacity was added through the expansion of the DC in McGregor, Texas. Further expansion of the DC network is planned in the current financial year to build on Ferguson's competitive advantage and Board approval has recently been given for new DC's in Florida and northern California. Of the markets in which Ferguson operates, housing related activity remained strong with the more positive economic environment benefiting the repairs, maintenance and improvement ("RMI") sector. RMI is becoming an increasingly important element of overall construction spend in the USA. To benefit from this opportunity, Ferguson is rolling out both the XpressNet branch format and also continuing to expand its very successful showrooms. Furthermore, greater emphasis is being placed on opening new specialist branches for heating, ventilation, and air-conditioning (HVAC) and waterworks and this focus should lead to further growth opportunities. The commercial and industrial sectors continue to show signs of improvement. Investment in people and IT continued during the period. More than 2,500 people joined the business and the rollout of the new warehouse management system to large branches started. This should lead to better customer service as a result of faster and more accurate product picking and more accurate and efficient inventory management. Ferguson's total branch numbers increased by 156 during the first half to 1,097 locations (July 31, 2005: 941). US Building Materials The strong performance of Stock benefited from improved market focus which was brought about by the recent business restructuring and from strong organic growth, partly offset by lower lumber prices. Reported figures also benefited from currency translation and slightly higher structural panel prices. In local currency, Stock's revenue was up 27.2% to $2,497.2 million (2005: $1,962.9 million) with trading profit up by 51.5% from $104.0 million to $157.3 million. Organic revenue growth was 7.9% reflecting some commodity price deflation in lumber and structural panels. These commodity price movements had the effect of decreasing Stock's local currency revenue by $39 million (2.0%) in the first half compared to the first half of last year. Acquisitions contributed $378 million (19.3%) to revenue growth. Stock's trading margin increased significantly from 5.3% to 6.3% primarily due to a more favorable sales mix arising from increased value added products and installed services. New housing, which accounted for 87% of the activity in this business in the first half, has generally continued to be a bright spot in the US economy. Aggregate housing starts during the period continued at a high annual rate of around two million. Whilst the inventory of unsold new homes has been rising recently, reaching 5.2 months in January 2006, it remains below the long term average of around 6 months, demonstrating the current strength of the housing market. There continue to be significant variations in regional housing markets in which Stock operates. The markets in Florida, Georgia, Utah and the Carolinas have been strong. Texas and California have enjoyed an improving trend although Michigan, Ohio, Indiana, Colorado and the North East have been more challenging. Plans to increase the range of value-added products and services being offered and increase the penetration of the RMI and commercial markets continue to be implemented. Value-added sales were up 41%, installed business sales up more than 100% and sales to commercial and RMI contractors increased by 10%. As well as achieving this through its existing branch network and acquisitions, Stock opened a number of new facilities and has expanded its turnkey supply model from the Las Vegas market into Denver. These initiatives further complement Stock's installed service expertise. Stock's branch numbers increased by 17 during the first half to 272 locations (July 31, 2005: 255). Since January 31, 2006, the branch opening program has continued so that Stock currently operates in 33 states. The latest is a joint facility with Ferguson in New Orleans, which takes Stock into Louisiana for the first time. Wolseley Canada In Canada, the construction and housing markets remained strong with the buoyant energy sector in Western Canada helping sales in the industrial and commercial sector. Local currency revenue increased by 14.9% to C$655.8 million (2005: C$570.7 million). More than 11% of the revenue growth was organic, ahead of the market generally. Local currency trading profit rose by 4.4% reflecting pricing pressure and the investment to position the business for future growth. Work continued to consolidate back offices, recruit additional people to fill management and trainee positions and to improve logistics. The second of three regional supply centres for larger inventory items was opened in Quebec in October 2005. These regional supply centres should lead to lower inventory levels and enable the branch network to be utilized more effectively. Wolseley Canada's total branch numbers increased from 238 to 240 locations. Europe The markets in Europe showed very little growth in the first half. Nonetheless, with the exception of CFM in Luxembourg, which had marginally lower revenue, all of the Continental European operations increased revenue and most achieved profit improvements. The results in Europe also benefited from acquisitions and from the net benefit of the matters unrelated to normal trading in France, described below. Reported revenue for this division increased by 7.6% from 2,255.0 million pounds to 2,425.2 million pounds, of which 2% was from organic growth. Recent acquisitions accounted for 129.8 million pounds (5.8%) of revenue growth, including William Wilson and Encon (UK) in October 2005 and Iser Zauli (Italy) in January 2005. Trading profit, after the allocation of European central costs, fell 3.0% from 139.3 million pounds to 135.2 million pounds. European central costs rose by 2.7 million pounds due to the planned expansion of the European infrastructure to drive future growth initiatives. The overall divisional trading margin, after the allocation of central costs, reduced from 6.2% to 5.6% of revenue, primarily due to acquisitions and the lower trading margins in Brossette and Austria. Margin improvements were achieved in PBM (France), Manzardo (Italy), Cesaro (Czech Republic), Electro Oil (Denmark) and Wasco (Netherlands). In the first six months a further net 146 branches were added to the European network, giving a total of 2,632 locations (July 31, 2005: 2,486). UK and Ireland Wolseley UK's performance held up well against a UK market which is estimated to be around 4% down on the prior period. Whilst the fundamentals of the UK economy remained positive, with relatively low interest rates and low unemployment, RMI spending slowed in the first half of the financial year in response to weaker consumer confidence. Government spending remains a relative bright spot although there have been noticeable delays on planned social housing expenditure. Against this more challenging background, Wolseley UK, which includes Ireland, recorded a 9.3% increase in revenue to 1,262.1 million pounds (2005: 1,155.0 million pounds). Organic growth of 1.5% outperformed the market generally, with Bathstore, the retail bathroom offering, and Heatmerchants and Brooks, the Irish businesses, performing particularly well. Wolseley UK's trading profit increased by 5.9% in the first half compared to the equivalent period in the prior year mainly as a result of the acquisitions of William Wilson and Encon in October 2005, both of which have outperformed expectations at the time of acquisition. Although the trading margin increased before taking account of the dilutive effect of acquisitions, Wolseley UK's overall reported trading margin fell slightly from 7.3% to 7.1%. The new national DC in Leamington Spa, which is to be located alongside Wolseley UK's new headquarters, is expected to be operational by autumn 2006. The regional DC, in the North West, should open around a year later. These investments and the current initiatives to centralize control of transport and branch inventory management, should enhance customer service and support continued growth in the business. Early trials from the central branch replenishment program were very encouraging with improved inventory turn and increased stock availability in the branches. Within Wolseley UK, the Irish businesses, Heatmerchants and Brooks, both produced double digit organic revenue growth, benefiting from a strong local economy. During the first six months, 100 net new locations were added in the UK and Ireland taking the total number of branches for Wolseley UK to 1,670 (July 31, 2005: 1,570), including 67 branches added as a result of the William Wilson and Encon acquisitions. 23 new Bathstore branches were opened in the first half and this opening program will continue in the second half, together with new electrical and insulation branch openings and the expansion of the Unifix direct sales offering, through mail order and e-commerce channels to the RMI market. France In France, government tax incentives continue to underpin growth in the new residential market, but RMI, representing approximately two thirds of revenue for both Brossette and PBM, continues to show only marginal improvement against the background of little growth in the overall economy, weak consumer confidence and persistent high levels of unemployment. Wolseley's French operations generated first half revenue up 2.6% to euro 1,170.3 million (2005: euro 1,140.3 million), including organic growth of 1.1%. Trading profit for France was down to euro 52.4 million (2005: euro 59.2 million) as a result of the lower level of profitability in Brossette. As previously announced, the French results for the first half have benefited from matters unrelated to normal trading. An outstanding claim with the French customs authorities relating to wood import duties has been settled in PBM's favor, resulting in a benefit to trading profit and interest of euro 11.5 million (8 million pounds) and euro 5 million (3 million pounds), respectively. In addition, Brossette (together with many other French companies) has been fined by the French Competition Authorities. A provision for euro 7.6 million (5 million pounds) has been charged against trading profit in the period but relates to matters which took place more than ten years ago. Overall, therefore, there was a net 3 million pounds benefit at the trading profit level and 3 million pounds benefit on the interest line arising from matters unrelated to normal trading. Local currency revenue in Brossette was 2.3% up on the first half last year. Trading profit was lower, before taking account of the fine from the French Competition Authorities. Brossette's results reflect the ongoing reorganization of the district, branch and management structures and the move to centralization of purchasing and logistics, all of which are designed to enhance customer service and facilitate future expansion. Another new customer delivery centre opened in the first half. A significant number of management changes have been made with associated one off severance costs. PBM achieved an increase in revenue of 2.9% in local currency, more than half of which was organic growth. The sales trends in PBM improved in the second quarter and this upward momentum is expected to continue. Five new satellites and ten hire locations were added in the first half and a further six satellites and eight hire locations are planned for the second half. The underlying trading profit, before taking account of the wood import duties rebate referred to above and other one off items, showed an improvement, as did the underlying trading margin. PBM is expanding the number of joint sites with Brossette and exploiting opportunities to create purchasing synergies and indirect cost savings in co-operation with other group companies. Central Europe Revenue in the Group's other Continental European operations were up by 14.6% reflecting organic growth of 6.3% and the benefit of acquisitions. Trading profit was down due to the lower level of profitability in Austria. Tobler, in Switzerland, had a strong half with revenue up 20%, including 13% organic growth. Despite competitive market conditions putting some pressure on prices and a change in the business mix to lower margin products, trading profit was up 14%. During the first half, two new branches were opened and three branches from previous acquisitions were rebranded. OAG, in Austria, increased revenue slightly although trading profit fell due to continued competitive pressure on prices as a consequence of difficult housing and RMI markets and business restructuring. In Hungary and the Czech Republic, local market conditions remained difficult but both businesses improved revenue, with Cesaro in the Czech Republic also increasing trading profit. Hungary experienced a higher level of provisions for bad debts reflecting slower payments from customers. In Italy, revenue in the first half increased by 49% and profits more than doubled, compared to the comparable period in the prior year, mainly due to the acquisition of Iser Zauli in January 2005. Despite a flat economy, the aggressive branch opening program of the past few years continued to benefit Manzardo with organic revenue and trading profit growth up more than 10%. Three new branches were opened in the first half. Iser Zauli traded ahead of expectations and is currently being integrated into the Manzardo operations. In addition, purchasing synergies between the two companies have exceeded expectations. This acquisition makes Manzardo one of the largest companies in the Italian sanitary/heating market. Progress on the euro 20 million new central DC in northern Italy continues. This facility is expected to be completed around autumn 2006 and will enable further expansion of the business. In The Netherlands, Wasco continued to make good progress expanding its product range into sanitary ware, developing its offering to the more profitable RMI market and focusing on cost control. It achieved organic revenue growth of 10% and trading profit improved by 27%. In Luxembourg, CFM's revenue fell by 6% principally due to the absence of large commercial orders for underground pipe that occurred in the previous year. Centratec, the Belgian business acquired in October 2005, performed in line with expectations and is now working with Wasco and CFM to obtain improvements in sourcing, logistics and inventory management. Interim Dividend The Board has decided to pay an interim dividend of 9.85 pence per share (2005: 8.80 pence per share) to be paid on May 31, 2006 to shareholders on the register on March 31, 2006, which will absorb 58.4 million pounds of cash. This represents an increase of 11.9% over last year's interim dividend and reflects the Board's confidence in the future prospects of the Group and its strong financial position. It is expected that the interim dividend will be approximately one third of the total dividend for the year. The dividend reinvestment plan will continue to be available to eligible shareholders. International Integration and Infrastructure Developments In support of the Group's ambitious growth targets and as part of its continuous improvement program, Wolseley is bringing about greater cohesion across its operating units through leveraging its international purchasing, international sourcing and supply chain efficiencies. To achieve this, the Group continues to make investments in its infrastructure in terms of systems, logistics and people, with employee numbers increasing from 60,000 to more than 64,000 during the first half. With respect to IT systems development, two years ago the Group announced plans to develop a common technology platform. The first phase of this project included the development of common financial applications across the Group and, in parallel, a number of other common applications were to be developed and piloted including packages for a warehouse management system and a human resource application. The implementation of the financial application is well on the way to completion, with most of the Group's operating companies having implemented the new system with the rest expected in the next 6 months. Work on the human resource package, which is at an early stage of development, continues to progress. The warehouse management system ("WMS"), which having been successfully piloted in a Ferguson branch in the US, is currently being rolled out across Ferguson's largest branches and will be used by locations in Europe in due course, including the new DC's in Italy and the UK which will open later this year. The Group continues with initiatives such as global sourcing and creating a more efficient supply chain, supported by the implementation of the WMS, described above. Significant benefits are expected to arise over future years from the Group's continuous improvement programs enabled by the common technology platform. Through its investments today, the Group is committed to creating a sustainable competitive advantage to meet customers changing needs. This will be built around strong human resources, supported by efficient processes, technology driven supply chain management and logistics. Financial Review Net finance costs of 25.1 million pounds (2005: 18.1 million pounds) reflect an increase in Group debt as a result of acquisitions and an increase in interest rates, partly offset by operating cash flow and interest on the French customs refund. Net interest receivable on construction loans amounted to 5.4 million pounds (2005: 4.3 million pounds). Interest cover was 15 times (2005: 21 times). The effective tax rate decreased marginally from 28.3% to 27.9%. The effective tax rate for the half-year to January 31, 2006 is consistent with the rate expected for the year to July 31, 2006. Before the amortization of acquired intangibles, earnings per share increased by 20.5% from 36.44 pence to 43.91 pence. Basic earnings per share were up by 14.5% to 41.58 pence (2005: 36.32 pence). The average number of shares in issue during the first half was 590.4 million (2005: 585.5 million). Net cash flow from operating activities reduced from 303.1 million pounds to 258.1 million pounds, mainly due to the increase in working capital to support higher organic growth in the USA, partly offset by higher operating profit. Capital expenditure increased from 109.7 million pounds to 143.5 million pounds reflecting continued investment in the business. During the period the DC and branch network in the USA was expanded, investment commenced on DC's in the UK and Italy and further expenditure was incurred on the common IT platform. Brossette and Wolseley UK moved into new corporate offices. Cash received on the sale of fixed assets was 11.2 million pounds, compared with 57.1 million pounds in the comparable period when receipts were higher due to the sale of properties acquired as part of the Brooks acquisition. Investment in acquisitions completed during the first half, including any deferred consideration and net debt, amounted to 436 million pounds (2005: 218 million pounds). These 22 acquisitions are expected to add around 701 million pounds per annum of incremental revenues in a full year. Ten additional acquisitions, for a consideration of 162 million pounds, have been completed since January 31, 2006. Details of the three acquisitions not previously announced are set out below. On March 10, 2006, Ferguson acquired Indiana Plumbing Supply Co., Inc., ("The Plumbers Warehouse") a plumbing wholesaler, from John Muckel and Russ Long. In the year ended December 31, 2004 Indiana had sales of $63.9 million (36.5 million pounds) and gross assets of $12.5 million (7.2 million pounds) at that date. On March 10, 2006, Wolseley Canada acquired Can-Con Industries Inc. ("Can- Con"), a fabricator and distributor of pipe fittings for the natural gas, oil and water industries, from Mark Mercier, Brian Cropley, Garry Pickieson and Scott Toshack. Can-Con has one outlet in Edmonton, Alberta. In the year ended January 31, 2005 it had sales of C$6.6 million (3.3 million pounds) and gross assets of C$3.4 million (1.7 million pounds) at that date. On March 13, 2006, Ferguson acquired the assets of Alamo Pipe and Supply ("Alamo") a plumbing distributor based in Ruidoso, New Mexico. In the year ended December 31, 2004 Alamo had sales of $2.3 million (1.3 million pounds) and gross assets of $0.5 million (0.3 million pounds) at that date. Further details regarding acquisitions are included in note 9. The Group's branch network during the first half has been extended through acquisitions and branch openings by a net of 321 branches, bringing the total to 4,241 (July 31, 2005: 3,920). Net borrowings, excluding construction loan borrowings, at January 31, 2006 amounted to 1,670.7 million pounds compared to 1,170.5 million pounds at July 31, 2005, giving gearing of 68.1% compared to 50.8% at the previous year end and 58.6% at January 31, 2005. The increase principally relates to acquisitions. In the USA, construction loan receivables, financed by an equivalent amount of construction loan borrowings, were 293.7 million pounds compared to 262.0 million pounds at July 31, 2005. The increase is due to an expanding loan book. Return on gross capital employed (ROGCE) fell from 19.1% for the year to July 31, 2005 to 18.8% in the first half of 2006 as a result of acquisitions partly offset by the significant organic growth in profit. The ROGCE remains well above the Group's weighted average cost of capital, demonstrating significant shareholder value creation. Provisions for liabilities and charges in the balance sheet include the estimated liability for asbestos claims on a discounted basis. This liability has been determined by independent professional actuarial advisors. The asbestos related litigation is fully covered by insurance and accordingly an equivalent insurance receivable has been included in debtors. The level of insurance cover available significantly exceeds the expected level of future claims and no profit or cash flow impact is therefore expected to arise in the foreseeable future. There were 235 claims outstanding at July 31, 2005 (July 31, 2004: 308). An update on the estimated liability and number of claims outstanding will be provided with the Group's Preliminary Results announcement. Outlook Market conditions in North America are expected to remain favorable for the remainder of this financial year and should enable the Group's North American businesses to achieve further good progress. It is expected that the US housing market will remain strong, although the number of housing starts may show a small decline as a result of higher interest rates. The positive RMI market is expected to continue and the strong US economy should present further opportunities for organic growth, albeit at a lower rate than the first half. The improvement in the industrial and commercial sectors is also expected to continue. Stock should continue to make further good progress and benefit from a more favorable product mix, allowing continued margin progression. Although lumber and panel prices are expected to hold up relatively well, there is likely to be some price deflation in the second half compared to the comparable period in the prior year. In Canada, the overall environment is expected to remain positive although the new residential housing market may fall slightly from recent high levels. For Europe overall, it is likely that trading profit for the second half will be broadly flat compared to the equivalent period in the prior year, reflecting the generally flat market conditions. The fundamentals of the UK economy are expected to remain positive and there are indicators which would suggest a gradual but steady improvement in the UK RMI and housing markets as the second half progresses. Against this background, the UK business is expected to show modest profit growth in the second half compared to the corresponding period in the prior financial year as the business continues to invest in branch openings and infrastructure, and obtains further benefits from recent acquisitions. In France, growth in the RMI market is likely to remain modest. PBM is expected to show progress compared to the second half, benefiting from acquisitions, new branch openings and other business improvement initiatives. Investments to accelerate future growth will continue. The reorganization of Brossette will continue throughout the second half and further investments in the business will be made to create a platform for future growth. It is unlikely that the trading profit in Brossette will match that of the equivalent period in the prior year. Whilst the markets in the rest of Continental Europe are likely to remain broadly flat and competitive, Wolseley's operations are expected to show solid progress, particularly in Italy, Switzerland and the Netherlands. There are a number of business improvement initiatives in place relating to supply chain, sourcing and procurement that should deliver increasing benefits to the bottom line. The Group will continue to pursue its objective of achieving, on average, double digit sales and profit improvements through a combination of organic growth and acquisitions. The acquisition pipeline remains strong and the Group will continue to pursue opportunities for product and geographic diversity. The Board expects another year of good progress, driven by strong growth in North America and the benefits of recent acquisitions. Certain information included in this release is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by 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 expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this release are based upon information known to the Company on the date of this report. 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 specific 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 an international Group such as Wolseley. Information on some factors which could result in material difference to the results is available in the Company's SEC filings, including, without limitation, the Company's Report on Form 20-F for the year ended July 31, 2005. FINANCIAL CALENDAR FOR 2006 2006 March 29 - Shares quoted ex-dividend March 31 - Record date for final dividend May 31 - Interim dividend payment date July 17 - Trading update for 11 months to June 30, 2006 July 31 - Financial year end September 25* - Announcement of Preliminary results October 4* - Shares quoted ex-dividend October 6* - Record date for final dividend November 9* - Final date for DRIP elections November 29* - Annual General Meeting November 30* - Final dividend payment date (*) expected A copy of this Interim Announcement, together with all other recent public announcements can be found on Wolseley's web site at http://www.wolseley.com/. Copies of the Preliminary Results' presentation given to stockbrokers' analysts are also available on this site. DATASOURCE: Wolseley plc CONTACT: Investors-Analysts, John English, Director of Investor Relations, North America, +1-513-771-9000, or +1-513-328-4900, or Press, Penny Studholme, Director of Corporate Communications, +44 (0)118 929 8886, or +44 (0)7860 553 834, both of Wolseley plc

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