An impressive year

This has been another outstanding 12 months for the Group, with record results for the 10th year in succession. We are positioning ourselves to make further progress

I was delighted and honoured to take over as Wolseley's Group Chief Executive on 1 August 2006. We enjoyed a great run under Charlie Banks' leadership and I want to put on record my admiration for his tremendous achievements.

Charlie established some fine foundations which are reflected in the figures you see in this Report, with 2005/6 characterised by excellent growth in North America, strong market outperformance in the UK, good performances in Holland, Switzerland and Italy and broadly satisfactory results elsewhere in the Group.

In North America, Stock Building Supply achieved excellent results, outperforming the market and growing sales by 27.4%. Towards the end of the year a reduction in housing starts and a fall in the price of timber affected revenue and this is likely to be continued into the current financial year. Ferguson saw outstanding growth, with a 35.1% increase in top line performance and 40.4% bottom line growth driven by some of the highest fill rates in the industry, our ongoing distribution centre strategy, our market focus and a clutch of successful acquisitions. Wolseley Canada recorded a solid performance and again delivered double-digit growth.

Despite major changes to our UK business, which included the completion of a comprehensive restructuring, the business performed well in a challenging market, with good acquisition performance driving sales up by 14.4%. In continental Europe, the highlights included good progress in Switzerland and Italy, the Benelux countries and also a rewarding performance from our French business, PBM. The results from Wolseley Austria and Brossette were less satisfactory, although we remain confident that both these businesses will deliver improved performance in the coming 12 months.

This time next year, I expect to be reporting results from three new Wolseley countries, after the completion of our acquisition of DT Group, which was agreed just before the year end. At just over £1.3 billion this is the largest single acquisition in Wolseley's history so far. DT Group is the Nordic region's leading distributor of building materials, with a strong presence in Sweden, Norway, Finland and Denmark and significantly broadens our European reach.

Just as the DT Group acquisition will take us into new geographic areas, others have taken us into new product areas. For example, during the year Wolseley UK bought William Wilson and AC Electrical to move into the electrical distribution sector for the first time and moved further into the insulation materials market through the acquisition of Encon. In the USA, Stock Building Supply also entered into the electrical products and services market and strengthened its position in installed services, meeting a clearly emerging need from our major home construction customers.

We invested £914 million on a total of 53 acquisitions in seven countries during the year, as follows:

Our European market: At the end of the financial year we had operations in 13 European countries, having moved into Belgium for the first time. As the new year opened, we were finalising our acquisition of DT Group which gives us a major presence in Sweden, Norway, Finland and Denmark.

Historically, acquisitions have delivered around half of our annual growth and this is an area where our management team are strong. In industry at large, there is always concern that acquisitions fail to deliver the anticipated benefits; at Wolseley a rigorous assessment process and skilful integration into the Group ensures that acquisitions perform in line with expectations and deliver shareholder value.