Company overview and performance monitoring

Company overview

Wolseley's business is the distribution of construction materials and the provision of related services primarily to a specialist market of professional contractors. The Group is the world's number one distributor of heating and plumbing products to professional contractors and a leading supplier of building materials to the professional market. The Group is an international business, operating 4,658 branches in 19 countries and employing over 70,000 people.

Revenue growth by division

Branch numbers

Wolseley plc is a holding company and its subsidiaries are organised into two geographic divisions - Europe and North America. Divisional management are primarily responsible for the profits of the operating companies they oversee and for driving organic growth, which includes additional sales from existing branches, new branch openings, expansion into new geographies as well as expansion into new customer types and product areas.

The divisional teams are supported by global functional teams such as acquisitions, sourcing, supply chain and business improvement. This structure allows the Group to focus on the key competencies by which the business is driven forward. These key competencies and the business model are described in the Group Chief Executive's review.

The principal activities of the Group are:

• the distribution of plumbing, heating and air conditioning equipment within Europe and North America;
• the distribution of building materials in the UK, Ireland, France and USA;
• the distribution of electrical components and supplies in the UK, France and USA;
• the distribution of pipes, valves, fitting and waterworks in Europe and North America.

Wolseley's products

The Group supplies materials used in the construction industry. The range of products used in construction is broad and the Group continually seeks opportunities to widen that choice to its customers. The main product categories supplied to customers are set out below.

Plumbing, heating & air conditioning

Baths, showers and accessories
Sanitaryware
Brassware
Bathroom furniture
Boilers and burners
Radiators and valves
Hot water cylinders and flues
Control equipment
Ventilation/ air conditioning equipment

Electrical

Cables and cabling accessories
Controls and switchgear
Wiring accessories
Lighting
Data networking supplies
Cable management

Building materials

Insulation
Plaster and plasterboard
Roofing materials
Bricks, blocks and aggregates
Tiles and flooring
Timber products
Doors and frames
Glass
Beams, trusses and frames
Hardware

Civils/waterworks, industrial & commercial

Tanks and treatment plants
Sheet material
Drainage pipes, associated supplies and covers
Underground pressure pipes
Small bore pressure pipes and fittings
Other pipes, valves and fittings

In North America, the Group also provides construction services to house builders. This consists of the provision of labour to assist with house construction and commercial lending to house builders secured on properties under construction or completed homes.

Wolseley's customers

The Group has a wide range of customers operating in different industry sectors that range from the individual plumber or builder through to national contractor chains or house builders and include large industrial and commercial organisations. Wolseley's primary customer focus is on professional contractors. These contractors work with households, governments, property developers and industrial companies in the construction of new homes, offices and industrial buildings or in the repair and maintenance of existing premises. Increasingly the Group has structured around core business groups or brands allowing its local companies to put real focus on these sectors, whilst enhancing customer service and developing further product expertise.

Competitive environment

The Group aims to be a leading distributor in each of the markets in which it operates. The markets where the Group operates are typically fragmented with a few large players and a significant portion of the market is supplied by small local operations. In certain markets the Group competes with the large DIY chains which have increased their offerings to professional contractors.

The opportunities for organic and acquisitive growth in these fragmented markets are substantial. The environment for acquisitions has become marginally more competitive over the last year in certain markets and the competition for large acquisitions from private equity investors has also increased. However for the majority of acquisitions which are smaller businesses, financial purchasers are few and there has been no significant change in the competition for these acquisitions.

Other market factors

The changing demographics of the European and North American markets, with a generally ageing population and increasing immigration, suggests that demand for new housing will continue at relatively high levels over the long term. As the housing stock ages, it will increase demand in the repair and remodelling sector. The Group's business model gives it the flexibility and agility to respond to changes of this nature.

While the Group does not operate in a regulated industry, the performance of the Group can be impacted by Government legislation. The key regulatory influences centre on environmental legislation and stipulations imposed when building or remodelling buildings. Such changes in legislation present an opportunity for growth in response to increasing demand as customers or end users respond by changing their buying habits.