FD of Wolseley discusses company's preliminary results

Could you give me a breakdown of the key numbers, and split out the
difference which acquisitions have made?

Yes, certainly. Well, first of all, we’re delighted with the performance. It
was another record year, which makes it a decade of continuous growth. In
overall terms, the sales were up by around 25% and the profits around a similar
number. We’re delighted with the rate of organic growth, which was just over 10%
for the year.

This year we had a little bit of a benefit, for a change, from the currency
translation, which added a further 2.5% to sales and profits, and the benefit
from acquisitions was around 12%.

To what extent are your various margin and growth targets under
pressure overall, given the slowing US housing starts, a soft UK market, and a
stagnant Europe; what does the bigger picture look like? Is it all as bad as it
seems?

No, we’re still looking for a good year, that’s the important thing to say.
Obviously it is slightly more difficult in the USA but many of the revenue
investments we’ve been putting into the business in North America and Europe
over the last three or four years have come good.

Presumably your equity placing is to sort out the record gearing of
128% following the DT Group acquisition?

Well, it’s actually to help finance the recent acquisitions, and of course
we’ve had a record acquisition spend in the year of over £900m.

We’re about to complete the DT Group acquisition of just under £1.4bn, so
yes, it is indeed to help finance part of that acquisition spend over the last
year or so, and to restore gearing to levels that we feel give us the capacity
and the headroom to go forward, to pursue our growth opportunities and to
continue with bolt-on acquisitions.

And could you give me the key details as to what it’s all
about?

Yes, we’re issuing 10% additional shares today. It’s expected to raise arou
nd £700m, and following the equity issue, we expect our gearing to be restored
to similar levels to those on the 31 July 2006.

We expect our interest cover to be back above 13-14 times, so that restores
the very strong financial position that we have.

So have you got the balance sheet as you would like it again, and
does it give you the necessary firepower for those all-important bread and
butter bolt-ons?

Yes, it does and that’s very important to us, to have the balance sheet
structure that allows us to go forward and do those bolt-ons. It does restore
that capability, and the acquisition pipeline remains strong right now as well.

You’ve just delivered the larger acquisition which you promised us,
but some say you paid too much for DT Group. How do you see the
transaction?

Well, we’re obviously very happy with that transaction, very happy with their
response to coming into the Wolseley Group. We do expect to meet our normal
hurdle rates for a strategic acquisition.

It’s a great company, that’s shown a great record of growth, great management
team. They and we believe we can grow the business together. We can improve the
working capital. We can get into a wider product range, so we see that as a good
growth opportunity, that will meet our normal hurdle rates for acquisitions.

So in your terms, you haven’t financially overpaid for it?

No, we haven’t. It reflected the market rate. There was a lot of competition
for that particular transaction. We’re delighted that we got there. We’re
delighted it was a price that we could afford, and gives us the return we need.

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