More than 2,200 vehicles
replaced with more
fuel efficient models

Environment

Wolseley UK has formed an Environmental Steering Group comprising senior managers and local board directors. The Group identifies ways in which environmental issues can be captured and improvements made. Wolseley UK has agreed an environmental policy which sets out the company's position to customers, suppliers and other stakeholders in relation to environmental matters. Commitment has been made to continuous improvement in environmental performance, the prevention of pollution and to improving efficiency in the use of resources including energy, water, packaging and other raw materials. During the year Wolseley UK continued to promote the use of energy-efficient products in the boiler market, working closely with power suppliers and major boiler manufacturers to incentivise the installation of high efficiency boilers. Carbon emissions saved through this and other schemes since 2001 are in excess of 180,000 tonnes. Following the establishment of its Environmental Management System in 2004, which structures its approach to environmental matters, Wolseley UK attained ISO 14001 accreditation in May 2005 for three of its branches; this accreditation was maintained in the year ended 31 July 2006 and work is underway to complete the accreditation process at a further three Wolseley UK branches by autumn 2006.

Construction will begin in October 2006 of Wolseley UK's Sustainable Building Center ("SBC"), a 6,800 square feet living, interactive showcase for renewable and sustainable building materials. The products used in the construction of the building and those displayed within it, will be commercially available through Wolseley UK's existing branch network. Wolseley UK intends that the SBC, planned for completion in July 2007, will become the leading UK industry resource for sustainable building products and supporting information as well as the promotion of sustainable building practices.

In common with other businesses within the Group, transport is a key area of focus for Wolseley UK. Tight controls are enforced to ensure that the minimum number of vehicles operate out of each Wolseley UK site and emphasis is placed upon route planning to minimise delivery journeys and the number of kilometres travelled. Progress continues to be made across the whole UK transport fleet to improve this utilisation. During the year, the Group introduced a Groupwide standard for transport management systems, with initial implementation in Wolseley UK. The standard will enable transport management to work in real time to improve route planning and resource scheduling across different business sectors and between multiple sites helping to ensure that while utilisation of commercial vehicles increases, the kilometres covered are reduced. The UK rollout of the transport management system will take place over the next 12 months with the aim to deliver an 8% reduction in kilometres covered, equivalent to 5 million kilometres and reducing carbon emissions by around 2,000 tonnes per annum. The transport management system is an important tool in the Group's drive to support environmentally friendly transport initiatives, alongside a reduction in vehicle sizes and numbers and backloading, which in the UK has saved suppliers over 7,000 journeys each year.

In March 2006, Wolseley UK took part in a fleet efficiency survey of delivery vehicle activities, the results of which will be used by the UK Department for Transport sponsored Freight Best Practice programme in its work towards encouraging fleets to improve their operational efficiency. The survey covered a range of measures including fuel use, number of deliveries and operating costs. A benchmarking report is expected be published by the Freight Best Practice programme in October 2006. The use of high capacity trailers has continued to reduce the number of vehicles operating between each of the UK distribution centres and significant investment continues to be made in distribution warehousing. Multiple stock replenishment deliveries to branches from suppliers have been reduced as loads are consolidated in Wolseley UK's own distribution warehouses for onward delivery. Consolidating loads further reduces the number of supplier vehicles on the road while minimising the local impact around branches. There is a continued focus on pooling branch vehicles across each of the Wolseley UK brands, which will ensure that the fleet eliminates wasteful multiple deliveries and reduces the number of kilometres travelled. During the year, Wolseley UK has continued with its project to improve fuel consumption across its primary distribution fleet, switching its commercial vehicle fuel use to bio-diesel at its three regional distribution centres which now use around two million litres of bio-diesel annually; this is set to increase as the fuel becomes more available within the UK. Further initiatives include individual vehicle monitoring, combined with driver training programmes and the replacement of older, less fuel-efficient vehicles. Some 265 (2005: 216) vehicles were replaced during the year with vehicles that are more than 3% more fuel-efficient. Wolseley UK's transport group also pays continuous attention to servicing programmes which include regular emissions checks to ensure vehicle efficiency and has adopted a reduced emissions and tyre pressure management system for optimal fleet use.

Ferguson in the USA has been using a transportation management system for its fleet of more than 2,000 diesel powered delivery vehicles. The system optimises the delivery of goods from distribution centres to branches as well as directly to customers, thereby reducing handling and transport costs together with vehicle emissions. Ferguson has a policy of sourcing vehicles from a supplier with a leading reputation in environmentally friendly diesel technology. The engines for all replacement vehicles are certified to meet the US Government's standards for particulate emissions. Approximately 508 vehicles or 25% of the fleet replaced during the year were equipped with emissions technology that meets such standards. Ferguson is also seeking to take full advantage of new digital valve technology to improve air quality and fuel economy throughout its entire distribution network. In the previous financial year Ferguson purchased a hybrid electric/petrol vehicle to assess the benefits of improved fuel economy and reduced emissions which such vehicles may be able to offer compared to conventional vehicles. The assessment revealed that the reduction in fuel consumption is minimal and concluded that the particular vehicle is commercially unviable. However, further work continues both within Ferguson and Stock Building Supply to identify suitable alternatives.

As part of Stock Building Supply's transport management programme, many suppliers back-load their delivery vehicles to avoid wasteful return journeys. This initiative is part of a modernisation programme that also includes investment in a national fleet management, fuel and servicing system aimed at achieving optimal fleet efficiency and curbing excessive emissions and which has also ensured that an appropriate level of capital expenditure is invested in new environmentally friendly vehicles. These vehicles incorporate emission and fuel economy technologies which already comply with, or exceed, forthcoming US Government standards. During the year ended 31 July 2006, over 420 such vehicles were replaced (a little under 11%) (2005: 300 or a little over 8% of such vehicles). These new vehicles are approximately 70% more fuel-efficient than the ones they replaced. In common with other Wolseley companies, Stock Building Supply's maintenance programme seeks to improve both safety and fuel-efficiency by increasing reliability through the direct purchase of spare parts and also by rigorous tyre management. In 2004 Stock Building Supply successfully tested a GPS (Global Positioning System) pilot programme, which indicated that further efficiencies could be achieved and would allow the company to plan more efficient delivery routes to enhance customer service and further reduce the number of kilometres driven. The pilot also demonstrated that safety could be improved as drivers' speed can be monitored. Stock Building Supply has now rolled out the initiative such that in the year ended 31 July 2006, 371 vehicles benefited from the GPS programme (2005: 225). The initiative, having estimated the avoidance of over 350,000 additional kilometres being driven in the last year, is expected to be rolled out to a further 150 vehicles in the next year. Stock Building Supply's regional distribution centres were designed to facilitate product delivery by rail. More than 70% (2005: 55%) of deliveries to the distribution centres are made in this way, with over 17,000 wagon loads (equivalent to some 68,800 (2005: 60,000) lorry loads) received during the last year alone. Delivery by rail continues to be encouraged and is expected to continue to grow with our investment in distribution centres designed to receive more product in this way.

Brossette's new organisational structure has reduced the number of warehouses and has regrouped branches to improve productivity and customer service while at the same time reducing the number of delivery journeys and transport costs. Brossette has a national fleet maintenance programme in place, which seeks to secure optimal use of its delivery vehicles while minimising the impact on the environment. Brossette seeks to take advantage of technological improvements when renewing its fleet to both reduce emissions and to optimise fuel consumption. All new vehicles are fitted with the latest software technology to improve efficiency and to reduce the number of kilometres driven. Some 170 vehicles (around 13% of such vehicles) (2005: 102, around 10%) were replaced during the year. PBM has continued with its fleet renewal programme to increase fuel efficiency, improve safety and reduce both emissions and transport costs. In the year to 31 July 2006, 872 vehicles were replaced (2005: 486) representing a little over 22% of PBM's fleet (2005: 13%). Fleet efficiency is underpinned by a national fleet management programme, which ensures uniform operating standards. PBM ensures that its drivers' training is maintained and seeks ways of encouraging responsible driving.