Annual Report and Accounts The best local distributor

Transcription

1 w The best local distributor

2 Contents Strategic overview 01 Highlights 02 Group overview 04 Chairman s statement 06 Chief Executive s review 08 Key performance indicators ( KPIs ) 10 Value creation in action 10 Best customer service 12 Best branch staff 14 Preferred vendor relationships 16 Most efficient operating model Business and performance 18 The business 22 USA 24 Canada 26 UK 28 Nordic region 30 France 32 Central Europe 34 Financial review 38 Risk management and internal control 44 Corporate responsibility Corporate governance 54 Board of Directors 56 Corporate governance report 71 Directors responsibility statement 72 Remuneration report 83 Other statutory information Financial statements 87 Index to financial statements 88 Group income statement 89 Group statement of comprehensive income 89 Group statement of changes in equity 90 Group balance sheet 91 Group cash flow statement 92 Notes to the consolidated financial statements 145 Independent auditors report to the members of (in respect of consolidated financial statements) 146 Company profit and loss account 146 Company balance sheet 147 Notes to the Company financial statements 152 Independent auditors report to the members of (in respect of Company financial statements) Other information 153 Five year summary 155 Pro forma information in United States dollars 156 Principal subsidiary undertakings and their directors 158 Shareholder information 159 Group information 160 Forward-looking statements The easy way to get online Throughout this report you will find several QR codes. Scan these codes using your smartphone to be taken to extra content online. Scanning the code above will take you instantly to the Wolseley Online Annual Report, or visit If you don t have a QR code reader app on your phone, download one free here: scanlife.com

3 Strategic overview Business and performance Corporate governance Financial statements Other information 01 Highlights Despite a weak economic climate, a return to like-for-like growth, together with a continuing focus on improving customer service, cash generation, cost reduction and margin protection have produced a strong set of results. Generated like-for-like growth During the year the Group generated revenue of 13,558 million (2009/10: 13,203 million). This was 5 per cent ahead of last year on a like-for-like basis including strong growth in the USA. Improved gross margin We want each of our business units to make incremental improvements in gross margin every year. In /11, in tough markets the Group s gross margin improved by 0.2 per cent to 27.9 per cent (2009/10: 27.7 per cent). Improved customer service A key objective for each business unit is to improve customer service. Processes for tracking and reporting monthly customer service data by branch are now in place in every business unit. This is helping us drive further improvements in our businesses. Gained market share Our objective for each business unit is to increase market share every year. In /11, three quarters of our business units held or improved market share. Rationalised portfolio During the year we announced our plans to exit five underperforming business units. The significant business disposals planned following last year s strategic review is now largely complete. This will allow us to focus our resources on our strategically strong businesses going forward. Reinstated dividend In March we reinstated ordinary dividends reflecting the strength of the balance sheet and our confidence in the future trading prospects of the Group. The total dividend for /11 was 45 pence per share. For our Financial review see page 34

4 02 Group overview We are the largest specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials to the professional market. Our businesses often hold leading positions in their local markets. USA Canada UK Revenue Revenue Revenue 5,500m +6% 40% of total revenue 811m +6% 6% of total revenue 2,404m 3% 18% of total revenue Trading profit 314m +31% Number of business units 7 Trading profit 39m 5% Number of business units 4 Trading profit 109m +19% Number of business units* 7 Key brands Key brands Key brands Market drivers Revenue contribution Market drivers Revenue contribution Market drivers Revenue contribution 28% 30% 14% 14% 14% 8% 23% 34% 35% 52% 16% 12% 18% 2% USA regional performance see page 22 Canada regional performance see page 24 UK regional performance see page 26 Regional focus Wolseley operates in six geographic regions the United States, Canada, United Kingdom, France, the Nordic region and Central Europe. Within each region the Group operates a number of distinct business units with strong trading brand names, including many with market leading positions in their local markets. Market drivers Our six geographic regions supply customers in the new residential repair, maintenance and improvement ( RMI ), commercial, industrial and construction sectors. The exposure to each market differs by geography and by business unit. Please see above for the contribution to revenue of each market driver by region. Residential RMI Non-residential RMI Residential new construction Non-residential new construction Civil infrastructure * Excluding Build Center and Encon (disposal in progress) ** Excluding Brossette (disposal in progress)

5 Strategic overview Business and performance Corporate governance Financial statements Other information 03 Group revenue 13,558m +3% Group trading profit 622m +38% Nordic region France Central Europe Revenue Revenue Revenue 2,128m +6% 16% of total revenue 1,943m +0% 14% of total revenue 772m 9% 6% of total revenue Trading profit 113m +12% Number of business units 7 Trading profit 53m +77% Number of business units** 4 Trading profit 30m +233% Key brands Key brands Key brands Number of business units 4 Market drivers Revenue contribution Market drivers Revenue contribution Market drivers Revenue contribution 51% 14% 21% 11% 38% 16% 31% 13% 28% 9% 30% 27% 3% 2% 6% Nordic regional performance see page 28 France regional performance see page 30 Central Europe regional performance see page 32 Number of branches 3,837 Number of vendors >100,000 Number of customers >1m Number of employees 45,888 Number of countries 23

6 04 Chairman s statement In summary Strong financial results. Dividend reinstated. Successful redomiciliation to Switzerland. Board refreshed with three new appointments. Delivering shareholder value I am pleased to present my first statement to shareholders as Chairman of Wolseley and to report on a year of substantial progress across the Group. A return to like-for-like revenue growth, together with a continuing focus on improving customer service, cash generation, cost reduction and margin protection have produced a strong set of results despite a weak economic climate. Our Executive team, led by Ian Meakins, has also made robust and encouraging progress during the year on strategic initiatives, in particular in refocusing Wolseley on those businesses where we have or can create leading market positions. Several disposals of non-core businesses have been announced in the year. At the same time, in the core business the leadership teams have continued to impose greater rigour on the management and execution of strategy at the business unit level, which will serve us well in the future. Group results I am particularly pleased to report a strong set of financial results for /11. Like-for-like revenue growth for the year ended 31 July was 5 per cent and headline earnings per share was strongly ahead at pence (: 74.1 pence). We continue to place a high degree of emphasis on generating cash. Our balance sheet remains strong and our adjusted net debt position at 31 July improved by 490 million to 705 million. Dividend In view of the Group s improved prospects and strengthened financial position, the Board is recommending a final dividend of 30 pence per share. Together with an interim dividend of 15 pence per share paid in May, the total dividend for financial year /11 will amount to 45 pence per share, costing 127 million. Our policy is to grow the dividend over time, taking into account the significant opportunities for investment in profitable organic growth and selected bolt-on acquisitions. The Group will continue to target adjusted net debt in the range of 1x and 2x EBITDA, consistent with investment grade credit metrics. For our Corporate governance report see page 56

7 Strategic overview Business and performance Corporate governance Financial statements Other information 05 Redomiciliation to Switzerland In November, we completed the incorporation of in Jersey, a new holding company for the Group, tax resident in Switzerland, which has a less complex and more certain system of taxation compared to the UK. The business case for redomiciling was compelling and the Board felt strongly that action was required to keep the Group s effective tax rate competitive and that the action was in the best interests of shareholders. The redomiciliation does not make any substantive changes to our corporate governance or to any existing investor protection measures, nor has it had any adverse tax implications for shareholders. I am conscious of the UK coalition Government s publicly stated desire to simplify UK tax law as it applies to multinational corporations such as Wolseley, and the Board will keep the Company s position under review should the UK tax environment change materially. Governance The Board is committed to the highest standards of corporate governance. It recognises that it is accountable to the Company s shareholders for good governance, to facilitate efficient and effective management in order to deliver shareholder value over the long term, within appropriately established risk parameters. The Directors, both individually and collectively, take governance seriously and I am satisfied, as borne out again by this year s Board review, that our Board operates effectively, is properly engaged on critical matters and that all Directors set aside the time required to fulfil their duties. Following the redomiciliation to Switzerland, a new meeting schedule was developed for the Board and its Committees, which has resulted in higher quality discussion of the issues facing the business. Further details are outlined on pages 56 to 70. Board changes I have also reviewed the composition of the Board with the Nominations Committee and we have refreshed the team with three new Non Executive Directors. I am confident that these appointments will ensure that the Board continues to operate with a broad and diverse range of complementary skills and specialised knowledge to take the Company forward. In November, following the redomiciliation, Alain Le Goff stepped down from the Board as a Non Executive Director. The Board and I were sorry to see Alain leave and we wish him well for the future. In January, John Whybrow retired as Chairman having served nearly 13 years as a Non Executive Director, eight of which were as Wolseley Chairman. John steered the Company and the Board through a time of considerable change and we thank him for his steadfast leadership and his wise counsel. We wish him well for his retirement. At the same time Nigel Stein also stepped down as a Non Executive Director as a result of his increasing commitments as Chief Executive of GKN plc and President of the Society of Motor Manufacturers and Traders. He was a valued colleague and we wish him continued success. Andy Duff has assumed responsibility as the Company s Senior Independent Director. In March, Tessa Bamford and Michael Clarke joined the Board as Non Executive Directors. Tessa is a Consultant at search firm Spencer Stuart and is also a Non Executive Director of Barratt Developments plc. Michael was recently appointed as Chief Executive of Premier Foods Plc and was previously President of Kraft Foods, Europe. We recently announced that Karen Witts will join the Board as a Non Executive Director, she brings with her tremendous experience in senior finance roles at Vodafone and BT. The Board and I welcome the findings of the Davies Report Women on Boards which recommends that targets are set for the appointment of women to Boards and Executive Committees. Our recent appointments to the Board mean that we are substantially in line with Lord Davies recommendations. Our objective here is to deliver an optimum level of skills and experience to lead the Company in its future developments. We also continue to put a significant effort into succession planning for Executives, Non Executive Directors and all senior management. People Lastly and most importantly, I would like to thank all our employees and pay tribute to their dedication, professionalism and loyalty to Wolseley; they have delivered a very good set of results for our shareholders. As a service business, at Wolseley our people really do make all the difference. Gareth Davis Chairman

8 06 Chief Executive s review In summary Markets broadly stabilised. Operating performance improving. Exit of non-core businesses largely completed in the year. Improving customer service and employee engagement scores. Focus on organic expansion and bolt-on acquisition. Overview We have delivered a decent performance this year despite the challenging economic conditions. Further improvements in customer service and a return to like-for-like growth contributed to strong trading profit growth. Our ongoing focus on operational efficiency has enabled us to both invest in future growth and deliver another increase in the trading margin of 120 basis points as well as delivering strong cash generation. During the year we announced our intention to exit some businesses and signed or completed most of the major disposals that were planned. This will allow us to focus all our resources on our strategically strong businesses going forward. Group results During the year our markets broadly stabilised, driven principally by improving New Residential construction and the more resilient Repair, Maintenance and Improvement markets. The Group reported revenue up 3 per cent to 13,558 million (: 13,203 million). Like-for-like revenue was ahead by 5 per cent which, coupled with an ongoing focus on protecting gross margins and careful cost control, led to a strong operating performance. We have continued to focus hard on achieving a better mix of products and vendors and despite considerable pressure on selling prices the gross margin was 20 basis points higher at 27.9 per cent (: 27.7 per cent). We also continued to keep the cost base under tight control and operating costs excluding exceptional items were reduced by 45 million. Consequently the Group experienced strong operating leverage from incremental revenue and Group trading profit in the year was up 38 per cent to 622 million (: 450 million). Value creation model Strategy Operational performance Gain share of existing customers and gain new customers Resource allocation Business unit strategies Within business units Crossbusiness unit Best customer service Best branch staff Preferred vendor relationships Profitable growth Most efficient operating model For Value creation in action see pages 10 17

9 Strategic overview Business and performance Corporate governance Financial statements Other information 07 During the year we continued to manage the balance sheet conservatively. Cash was tightly controlled enabling us to invest in additional capital expenditure of 93 million (: 84 million). Strategy update Our strategy remains unchanged: focusing Wolseley through a top down resource allocation process on those businesses which already have, or are capable of market leadership which will give us the best returns in the long term. Alongside this we have developed bottom up detailed business unit strategies to make sure we grow these businesses faster than the competition. In short, we are driving a parallel path of resource allocation and performance management to generate profitable growth which is outlined in our value creation model opposite. In addition, you can read about the progress we are making on delivering the strategy on pages 10 to 17. Resource allocation During the year we have re-run the resource allocation process and we have disposed of a number of underperforming businesses which we felt had insufficient scale or no clear economic synergies with our major businesses. These Performance Builder businesses included Brandon Hire and Electric Center in the UK and the plumbing and heating business in Italy. In July we also announced the sale of Build Center in the UK and exclusive negotiations for the sale of Brossette, our French plumbing and heating business. Both transactions are subject to clearance from the relevant competition authorities. On completion the total consideration for the two transactions is expected to be 310 million. Completion of the above transactions will conclude Wolseley s significant business disposals planned following last year s strategic review. Our business model also remains unchanged: we believe that delivering excellent customer service will allow us to deliver attractive levels of organic revenue growth whilst driving sustainable profit and margin improvement. In combination with disciplined capital investment and tight control over working capital, this will result in strong cash flows. Our markets are typically highly fragmented and have some really exciting growth prospects. We have some excellent businesses with strong market positions. We will continue to invest, both organically and in value creating bolt-on acquisitions where we can generate synergies. With acquisitions, our strong preference is for small to medium sized businesses in our existing geographies, so that we can integrate them rapidly into our strong businesses and deliver attractive returns. In line with this approach we made three small bolt-on acquisitions this year, including a small Waterworks business in the USA and two small building materials businesses in Denmark. Overall, we believe this focused approach will deliver real value to our shareholders. Operational performance Our objective for each business unit strategy is to improve customer service by developing and training our staff so that we can win market share from our competition. Therefore in every branch we want to gain a greater share of our existing customers business and also attract new customers by providing the best local customer service, delivered by the best branch staff in the industry. Underpinning this is an efficient operating model which ensures we are competitive and can attract favourable terms from our vendors. Here we have focused on establishing preferred partnership relationships to achieve the most competitive costs. Underpinning this is a performance review process which continues to gain traction. We now have good visibility down to business unit level and also down into our 3,837 branches. For example, in Ferguson for each branch we now have a dashboard of performance for customer service, product availability, local market share performance and branch manager performance as well as key financial data. Regular customer feedback is now embedded in every business unit and it is informing our thinking and decisions every day. There is a clear correlation in our business between engaged employees delivering excellent customer service and strong financial results in a branch. We are now therefore measuring employee engagement on a regular basis. This has improved in the last year even in the tough markets we have had to contend with. So having the right staff, properly trained and developed and with a clear view on how we can build their careers long term is fundamental to our future success. We are also beginning to share best practices across our business units and have increased our IT investment in projects that will deliver better front line performance. This includes sales force productivity, pricing and trade terms management, and product availability at the branch level. Priorities Looking forward, we are well placed to exploit the significant growth opportunities in our chosen distribution markets. The performance of the business is improving and we are now getting good visibility down to a branch level across all the key performance measures. We know we still have great opportunities for the future. Lastly, I would like to reiterate Gareth s comments about all our staff. I am very proud and lucky to lead this great organisation. So I would like to take this opportunity to thank our staff their commitment during another tough year has made all the difference to our results. Ian Meakins Chief Executive

10 08 Key performance indicators ( KPIs ) The Group has used the following performance indicators to assess its development against its strategy and financial objectives during the year. The Group gives prominence to different indicators as the economic environment changes. Like-for-like revenue growth % Gross margin % Definition The total increase or decrease in revenue for the year, excluding the effect of currency exchange, trading days, new acquisitions, disposals, branch openings or closures in the year, and the incremental effect of acquisitions, branch openings and branch closures in the prior year. The Group expects changes in like-for-like revenue in each of its markets to exceed that achieved by the remainder of the market. Performance Group like-for-like revenue growth was 5.0 per cent for the year, compared to a reduction of 6.0 per cent in the previous year. Definition The ratio of gross profit excluding exceptional items to revenue. Performance Gross margin improved to 27.9 per cent as a result of a continued focus on improving customer service and product mix despite competitive market conditions. Trading margin Average cash-to-cash days % No. of days Old calculation method New calculation method Definition The ratio of trading profit to revenue. Over the cycle, the Group seeks to achieve a growth in trading profit higher than the growth in revenue as a result of increasing the efficiency of operations and benefiting from its economies of scale and strong market positions. Performance Group trading margin increased from 3.4 per cent to 4.6 per cent as the Group grew revenue at a faster rate than overheads. Definition Cash-to-cash days are defined as the average number of days from payment for items of inventory to receipt of cash from customers. The Group uses the 12 month average number of cash-to-cash days, excluding the benefit of factored receivables, to monitor working capital efficiency throughout the year. Performance A change in calculation method took place in to include rebates receivable and net rather than gross trade receivables within the calculation. After excluding the estimated impact of year-end working capital measures, the Group has improved its average cash-to-cash day performance in the year using this new measure.

11 Strategic overview Business and performance Corporate governance Financial statements Other information 09 Return on gross capital employed % Return on capital employed % Labour cost as % of gross profit % Definition Return on gross capital employed is the ratio of trading profit to the average year-end aggregate of shareholders funds, adjusted net debt and cumulative goodwill written off. Performance Return on gross capital employed increased from 7.1 per cent to 10.6 per cent. Definition Return on capital employed is the ratio of trading profit to the average year-end aggregate of shareholders funds and adjusted net debt, excluding goodwill and other acquired intangible assets. Performance Return on capital employed improved from 16.4 per cent to 25.4 per cent. Definition Total labour cost as a percentage of gross profit, excluding exceptional items. Performance Labour cost as a percentage of gross profit improved from 51.0 per cent to 49.0 per cent in the year. Customer service Definition Different types of customer have different requirements, or different priorities in ranking their requirements. Each business unit needs to understand what these requirements are and how its service performance is perceived relative to the competition. Regular customer surveys have been introduced in all business units to establish a base point from which progress can be measured. Performance Processes for tracking and reporting of customer service KPIs differ by geography and by business unit. Supply chain There are numerous supply chain initiatives around the Group. Some are monitored by financial measures, such as annualised savings in transportation costs, and others by non-financial measures such as inventory turns and, for the Group s distribution centres, the fill rate achieved. This is the proportion of orders that can be fulfilled from inventory on hand at the time of the order. Employees and health and safety The safety of Wolseley s people is paramount and lost time incident rates are monitored closely in each of our businesses. The Group s health and safety performance is monitored using three standard KPIs: medical injury frequency, lost workdays and vehicle collision frequency. More information is provided in the Corporate responsibility report on page 48. In addition, all of our business units measure employee engagement levels on a regular basis.

12 10 Value creation in action Best customer service

13 Strategic overview Business and performance Corporate governance Financial statements Other information 11 In order for us to be a supplier of choice for our customers we need to give them the best possible service. All of our business units measure customer service on a regular basis and use the results to drive improved performance. Stark, the leading building materials business in Denmark, surveys all of its customers at least twice a year. Throughout the year they also send out targeted surveys asking customers about a particular initiative or part of their service. They use an online survey tool called My Maze to capture customer feedback and measure satisfaction in every branch. The advantages of this tool are that individual branches can see how they score; they can log into the tool and see the results for their own customers the next day. This means that the branches can take action straight away to follow up on the customer feedback. The surveys ask customers to rate how competitive Stark is and how they feel treated by employees. Depending on the rating that the customer gives Stark, the My Maze survey tool generates a red unhappy, amber or green smiley face. This is a simple way of capturing customer feedback and allows Stark employees to quickly identify the areas in which they need to take action. Gain share of existing customers and gain new customers Best customer service Best branch staff Most efficient operating model For Value creation model see pages Preferred vendor relationships Using your smartphone, scan this code to view a short film about Stark customer service. Or visit: wolseleyplc.com/ Images of staff from Stark, Aalborg, Denmark 1 Kirsten Hedeman, Accounts Manager. 2 Claus Bo Nielsen, Sales Assistant, Hardware. 3 Lars Ersted Nielsen, Sales Manager, Stark Selvbyg. 4 Henning Jørgensen, Sales Assistant, Hardware. 5 Kasper Hansen, Sales Apprentice, Building materials. 6 Kasper Borup Green, Warehouse

14 12 Value creation in action continued 1 Best branch staff 2

15 Strategic overview Business and performance Corporate governance Financial statements Other information There is a direct link in our business between engaged employees delivering excellent customer service and strong financial results in a branch. We want our staff to feel valued and proud to work for us and we want them to have the right skills and knowledge to deliver the best possible service for our customers. All of our businesses measure employee engagement levels. Wolseley UK s most recent employee survey showed a significant improvement in the overall engagement score which increased from 49 per cent in 2008 to 58 per cent in. This was particularly encouraging in view of the restructuring activities that had taken place over the previous two years in response to the downturn in the UK markets. Examples of the specific initiatives that had the biggest impact on the positive engagement score include the Branch Management training programme Addvance and the continuation of the Reward and Recognition programme Wow! Factor. Gain share of existing customers and gain new customers Best customer service Best branch staff Most efficient operating model For Value creation model see pages Preferred vendor relationships Using your smartphone, scan this code to view a short film about Best branch staff in Wolseley UK. Or visit: wolseleyplc.com/ Images of staff from Pipe Center, West Horndon, UK 1 Dave Woodberry, Branch Manager. 2 John Kinchlea, Warehouse. 3 Ron Hughes, LGV Driver. 4 Joe Hainesborough, Trade Counter.

16 14 Value creation in action continued 1 2 Preferred vendor relationships

17 Strategic overview Business and performance Corporate governance Financial statements Other information 15 Wolseley is building strong long-term partnerships with vendors so that we can grow our business with them and benefit from improved terms and pricing. Like many Wolseley businesses, Ferguson has a preferred vendor programme whereby purchasing spend in the USA is prioritised with the vendors that offer the best terms and pricing. While an important aspect of the process is negotiating with vendors to leverage Ferguson s spend nationally, the key to the partnerships being successful is to ensure that front line staff support these vendor programmes to drive higher volumes of more profitable products. Ferguson developed a sales tool for branch managers which showed how they graded vendors depending on profitability by product category. Managers then coached associates on how to promote the most profitable products. Already they have seen improvements in the mix of higher margin products going through the distribution network. This initiative has been shared with the other Wolseley businesses in Europe and is being adopted by our sourcing teams in other countries. Gain share of existing customers and gain new customers Best customer service Best branch staff Most efficient operating model For Value creation model see pages Preferred vendor relationships Using your smartphone, scan this code to view a short film about Preferred vendor relationships at Ferguson. Or visit: wolseleyplc.com/ Images from Ferguson branch, Chantilly, USA 1 Kathy Scull, Branch Manager. 2 Butch Doane, Senior Sourcing Manager and Steve David, Director of Procurement. 3 Lamonta Bailey, Counter Assistant. 3

18 16 Value creation in action continued 1 Most efficient operating model

19 Strategic overview Business and performance Corporate governance Financial statements Other information 17 2 Our objective is to operate the lowest cost, most efficient operating model in our industry. This means ensuring that our distribution activities benefit from national scale and an efficient supply chain either through a network of distribution centres or direct deliveries from our vendors to customers. In November 2009, Ferguson, in the USA, launched an initiative to provide 100 per cent availability of the top 2,000 Stock Keeping Units ( SKUs ) at the branch. They worked with their key vendors to get better support in terms of stock and delivery and marginally increased inventory and delivery frequency to all branches. Ferguson expanded the initiative to the top 3,000 SKUs earlier this year and they are now achieving almost 100 per cent availability. This is a significant competitive advantage and the initiative has been key to improved customer satisfaction scores in Ferguson as well as driving higher share of customer spend and market share gains this year. Gain share of existing customers and gain new customers Best customer service Best branch staff Most efficient operating model For Value creation model see pages Preferred vendor relationships Using your smartphone, scan this code to view a short film about Operational efficiency at Ferguson. Or visit: wolseleyplc.com/ Images from Ferguson branch, Chantilly, USA 1 Eric Huggins, Sales Management Trainee. 2 Mark Fox, Residential Sales Manager.

20 18 The business Wolseley is the world s largest specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials to the professional market. The business model Wolseley is a distributor bridging the gap between over 100,000 vendors and over 1 million customers by bringing together a wide range of products from different vendors that our customers need and providing our vendors with access to these customers cost effectively. Over 100,000 vendors Source We source a wide range of products efficiently and responsibly, bringing together the mix of products from different vendors that our customers need For more information see page 19 Over 1 million p f customers Distribute We distribute them efficiently to our branches and customers, allowing us to provide great product availability levels for our customers For more information see page 20 Business and management structure Sell We sell through a variety of channels including branches, call centres and online, with a strong focus on providing excellent customer service For more information see page 21 Wolseley is an international business, operating 3,837 branches in 23 countries and employing over 45,000 people. The Group s business falls into six geographic regions the United States, Canada, United Kingdom, France, the Nordic region and Central Europe. Revenue split by region Total Group revenue 13.6 billion France 14% Central Europe 6% Within each geography the Group operates a number of distinct business units with strong trading identities, including many with market leading positions in their local markets. The Group has strong management teams in each region. Business units report on operational performance and strategic progress through regular performance review meetings with senior executives. Business unit strategies Business unit strategies are aligned with the Group value creation model as outlined on pages 6 and 7. Each business unit aims to grow profitability faster than the competition through gaining a greater share of its existing customers business and through attracting new customers. To achieve this each business unit focuses on achieving: best customer service; best branch staff; and preferred vendor relationships. Underlying this, Wolseley aims to operate the most efficient operating model in the industry, ensuring its distribution activities benefit from national scale and an efficient supply chain. Synergies The business model offers opportunities for synergies to be achieved by being part of the Group. These include: management synergies such as sharing best practice, management development and corporate finance; and operating synergies in the areas of joint sourcing, own label development and the sharing of costs and infrastructure. Market overview The markets for plumbing and heating and building materials are directly exposed to macroeconomic cycles. Most of the countries in which the Group operates began to return to growth in the second half of last financial year and continued to recover throughout. Further detail by geography is provided in the regional performance overviews on pages 22 to 33. Although our markets are cyclical, the business model is strong and it is underpinned by demographic trends towards ageing populations and smaller households and by the ageing of housing stocks. Nordic region 16% USA 40% UK 18% Canada 6%