U.S. Residential Market Slows Wolseley Annual Sales

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September 25, 2007

U.S. Residential Market Slows Wolseley Annual Sales

Global HVAC, plumbing and building materials distributor Wolseley plc reports there are no signs yet of any upturn in the U.S. housing market; it is also seeing the repairs, maintenance and improvement market starting to soften. A weaker dollar and price deflation in lumber and panels has also hurt its North American building materials business.

In its preliminary results report for the year ended July 31, 2007, Wolseley had sales of 16.2 billion pounds (US$32.7 billion), up 14.6% from the previous year. Operating profit fell slightly.

North American revenues declined slightly overall, reflecting slow sales by Stock Building Supply hit by the weak U.S. residential market. Ferguson, the plumbing/HVAC business, had 5.5% organic growth. Operating profit in North America was down 19% due to Stock's lower profitability and the effect of currency translation. Ferguson's trading margin of 7.2% is a record for the business.

Wolseley expects the commercial and industrial market to remain positive, albeit at lower rates of growth.

Revenue growth of 46.8% in Europe included 31.4% from the acquisition of DT Group and 8.8% organic growth. Operating profit was up 36.9%, of which 31.4% was DT Group. Trading margin was lower, reflecting restructuring charges in UK and Italy.

France saw a 10.3% increase in local currency revenue and 13.1% in operating profit, with Brossette achieving 1 billion euros of revenue for the first time.

Central and Eastern Europe had a 22.4% increase in revenue, including 11.7% organic growth.

A total of 638 new branches have been added during the fiscal year. Bolt-on acquisition investment was 379 million pounds for 43 acquisitions completed, which are expected to add 671 million pounds of revenues in a full year. This is in addition to the acquisition of DT Group completed in September 2006.

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