Future outlook
In the USA, the new residential housing market, which is expected to account for around 30% of Group revenue, is likely to continue to soften with significant regional variations. Against a more uncertain economic background, but with relatively low unemployment and good levels of business investment, the RMI and industrial and commercial markets should continue to grow and more than outweigh the slowing new residential market. The diversity of the Group's US operations should enable them to outperform the market and make good progress overall. However, for Stock Building Supply, the outlook is more challenging due to the slowing housing market and lumber prices which are likely to remain lower than the equivalent period in the prior year.
In Canada, the overall environment is expected to remain positive and although the new residential housing market is slowing from recent high levels, the industrial and commercial markets are expected to remain strong, driven by a buoyant energy sector.
The UK market is expected to continue to show a gradual improvement into the calendar year 2007, with Wolseley operations in the UK and Ireland also benefiting from the recent acceleration of acquisition activity, product expansion and improved supply chain efficiency.
In France, growth in the RMI market is likely to remain modest. PBM is expected to continue to show good momentum, benefiting from acquisitions, new branch openings and other business improvement initiatives. The reorganisation of Brossette will continue and further investments in the business will be made to create a platform for future growth. Brossette is expected to make progress in the coming year.
The integration of DT Group into Wolseley will provide additional growth and opportunities for synergies against the backdrop of a positive economic outlook in the Nordic region.
Whilst the majority of markets in the rest of continental Europe are likely to remain broadly flat, Wolseley's operations are expected to show solid progress.
There are a number of business improvement initiatives in place relating to supply chain, sourcing and procurement that should deliver enhanced performance. The Group will continue to pursue its objective of achieving, on average, double-digit sales and profit improvements through a combination of organic growth and acquisitions.
The 10% placing of new ordinary shares, announced on 25 September 2006, will enable the Group to continue to pursue its growth strategy and its programme of bolt-on acquisitions.
The Board expects another year of good progress, benefiting from the diversity of the Group in terms of geography, customer and product.
