Revenue £2,128m (16% of Group) Trading profit £113m Trading margin 5.3% Business units 7 Branches 288 Employees 6,754
• The largest distributor of building materials in the Nordic region with number one market positions in Denmark and Sweden.
• A leading retailer in Denmark and Sweden.
• Return to like-for-like revenue growth in all geographies in the year.
Business unit portfolio and profile
Wolseley’s Nordic business principally operates in Denmark, Finland, Sweden and Norway.
Stark is the leading distributor of heavy building materials, tools, hardware, timber and panels in Denmark. Stark’s customers include both professional contractors and DIY builders with around half of stores having a dedicated DIY section. Stark’s market leadership and its efficiencies of scale have historically delivered strong results. During the year we made two small acquisitions and Stark continued to focus on growing its market share.
Beijer is the leading distributor of building materials in Sweden. About half its revenue comes from local building contractors and another third from retail consumers. As the Swedish market is very fragmented, Beijer’s reach is valuable to vendors, and by maintaining efficiencies of scale and working capital management it has delivered good results over time.
Starkki is a Finnish chain of builders’ merchants with a business model based on large stores and well-trained specialist staff. Whilst local building contractors are the largest single customer segment, consumers and small retail stores generate nearly 50 per cent of its revenue. Starkki has a strong record of profitability based on efficiency and a low cost base.
Silvan is a DIY and retail chain in Denmark. Its specialist DIY market, focused on tools and hardware, is driven by RMI. The majority of Silvan’s product range overlaps with other businesses in the Nordic region and therefore the business delivers significant synergies by taking advantage of these economies of scale.
Regional KPIs
2011 2010 +/- Like-for-like revenue growth 4% (7)% +11% Trading margin 5.3% 5.0% +0.3%
Business unit contribution
% of total 2010/11 revenue Denmark (building materials) 35% Sweden (building materials) 22% Finland (building materials) 21% Norway (building materials) 7% Denmark (DIY) 9% Other 6%
Revenue by market driver
% of total 2010/11 revenue Residential new construction 21% Residential RMI 51% Non- residential new construction 11% Non- residential RMI 14% Infrastructure 3%
Five year performance £m
2011 2010 2009 2008 2007 1,678 2,299 2,124 2,012 2,128 103 160 97 101 113 Revenue Trading profit
Quarterly like-for-like revenue growth
Q1 Q2 Q3 Q4 2011 2010 Q1 Q2 Q3 Q4 10% 0% –10%
The smaller business units managed in the region include: • Neumann Bygg, a distributor of building materials
in Norway;
• Cheapy, a DIY chain in Sweden; and
• Woodcote, a building materials distribution business operating in Eastern Europe.
Market position and competitive environment
The market positions of the main business units are estimated as follows:
Market position
Denmark (building materials) 1
Sweden (building materials) 1
Finland (building materials) 2
Denmark (DIY) 2
The Stark and Beijer brands are market leaders in Denmark and Sweden respectively, with Silvan the number two DIY retailer in Denmark and Starkki the second largest builders’ merchant in Finland.
Each country in the Nordic region is a distinct market with its own national, regional and local competition. However, there are several major competitors operating across the region in the building materials and DIY markets. The markets in the Nordic region tend to be fragmented and there are significant opportunities to consolidate our market positions across the region.
Operating performance
In the Nordic region revenue was 4 per cent ahead on a like-for-like basis. The building materials business in Denmark returned to like-for-like revenue growth in the period, although market conditions remained subdued as a result of low levels of construction activity and poor consumer confidence. In contrast our building materials businesses in Sweden, Finland and Norway all generated good like-for-like revenue growth, with Finland performing strongest. Overall, we held market share in Denmark and Sweden and improved market share in Finland and Norway.
Trading profit in the year of £113 million was £12 million higher than last year benefiting from revenue growth and an improvement in gross margin, offset by a 6 per cent increase in operating costs at constant currency. The underlying performance was better as last year’s results included a one-off credit of £4 million.
During the year we completed two small bolt-on acquisitions in Denmark.
The trading margin was higher at 5.3 per cent (2010: 5.0 per cent).
Stark targets a new market
Stark is the market leader in the building materials market in Denmark. They identified an opportunity to use their excellent knowledge and position as market leader in the professional market to help private house owners with their building projects and improve the value of their property through the right choices of building materials. Stark now offers private house owners the same service and product advice as they offer professional customers in Denmark. More than 200 Stark employees have received training in order to better understand the private customer’s needs. A dedicated area has been introduced in the branch for the self build customer with product displays, marketing and product literature. A special membership scheme has also been created for these customers with benefits including member offers and discounts, home visits and access to project advice and prices. Since this concept was introduced in 2010, a total of 71,000 people have become members in Denmark.
Stark’s Health and Wellbeing pilot programme
The Stark business in Denmark has introduced a pilot health and wellbeing programme in some of its stores. It is aimed at raising awareness of employees’ health and physical wellbeing, advising on all aspects including diet, sleep, exercise and general lifestyle. Whilst providing positive benefits for employees, it is also hoped that it will reduce sickness absence rates.
Regional performance continued
France
Revenue £1,943m (14% of Group)
Trading profit £53m
Trading margin 2.7%
Ongoing business units* 4
Ongoing branches* 322
Ongoing employees* 5,421
* Excludes Brossette: 368 branches, 2,651 employees (in disposal).
• A leading distributor of building materials and wood products.
• Disposal of plumbing and heating distributor Brossette agreed.**
• Improved market conditions and recovery in financial performance in the year.
** Subject to competition clearance.
Business unit portfolio and profile
Wolseley France operates three divisions; building materials, import and wood solutions, and plumbing and heating. During the year the Group announced that it had entered into exclusive negotiations to dispose of the plumbing and heating business, Brossette, which contributed 32 per cent of revenue for France in 2011.
The building materials division comprises Réseau Pro, the number two integrated distributor in France, selling building materials, roofing, insulation, timber and flooring, and Panofrance, focused on timber, panels and interior design. The businesses have efficiencies in both sourcing and shared services.
The Import and Wood Solutions division includes Softwood, the market leader in specialist sawn and processed woods and the structural wood business which manufactures trusses and other carpentry systems.
Regional KPIs
2011 2010 +/- Like-for-like revenue growth 4% (8)% +12% Trading margin 2.7% 1.5% +1.2%
Business unit contribution
% of total 2010/11 revenue Building materials 55% Plumbing and heating 32% Import and wood solutions 13%
Revenue by market driver
% of total 2010/11 revenue Residential new construction 31% Residential RMI 38% Non- residential new construction 13% Non- residential RMI 16% Civil infrastructure 2%
Five year performance £m
2011 2010 2009 2008 2007 1,872 2,116 2,144 1,937 1,943 101 103 32 30 53 Revenue Trading profit
Quarterly like-for-like revenue growth
Q1 Q2 Q3 Q4 2011 2010 Q1 Q2 Q3 Q4 10% 0% –10%
Market position and competitive
environment
The market positions of the two core divisions in France are estimated as follows:
Market position
Import and wood solutions 1
Building materials 2
In addition to the two large corporates (including Wolseley France) there are also two buying groups that operate in France, accounting for a large proportion of the market.
Operating performance
Revenue in France was 4 per cent ahead on a like-for-like basis principally due to commodity price inflation. New residential construction markets continued to recover. Gross margins were higher as the business was successful in mitigating continued pricing pressure through improvements in supplier mix. Trading profit of £53 million was £23 million ahead of last year, of which £15 million relates to Brossette and other disposed businesses and £8 million arose from ongoing operations through good conversion of increased revenue to trading profit. There was a net £2 million one-off credit in the period.
Reseau Pro, our building materials business, performed in line with the market and improved its trading performance. Import and Wood Solutions generated good profit growth, improved its productivity and continued to protect market share.
The trading margin was higher at 2.7 per cent (2010: 1.5 per cent).
“Eco Chantiers” renewables model
Following a successful pilot study last year, Wolseley France is extending its “Eco Chantiers” renewables model to more branches across France. The model provides a turnkey management tool for craftsmen, offering a range of sustainable products (such as timber, organic insulation and photovoltaic cells).
After completion of a specialist training programme, over 250 employees are now able to provide expert advice on energy efficiency and global renovation solutions to allow customers to meet new regulatory standards, and assistance with financial assessments including renovation costs, savings forecasts and advice on tax incentives.
Launch of e-learning in Wolseley France
With the introduction of a new enterprise resource planning system in 217 branches of the wood and building materials division of Wolseley France, approximately 1,700 managers and sales staff needed to be trained rapidly on the new system in order to maintain and improve the quality of customer service. Training time was reduced by a third as colleagues worked together and used a new e-learning platform, which was tailored to the business. The training programme also proved to be stimulating, resulting in greater employee engagement, less time away from the customer and immediately improved service standards. The programme will continue over the next year.