Period ended 31 July 2011
2. Company accounting policies continued
Financial instruments
The Wolseley plc consolidated financial statements for the year ended 31 July 2011 contain financial instrument disclosures required by IFRS 7 (Financial Instruments: Disclosures and Presentation) and these would also comply with the disclosures required by FRS 29 (Financial Instruments: Disclosures and Presentation). Accordingly, the Company has taken advantage of the exemption in FRS 29 and has not presented separate financial instrument disclosures.
Financial guarantees
Financial guarantee contracts are recognised as assets and liabilities measured at fair value as at the reporting date. Fair value is estimated by discounting expected cash flows at a market rate. Changes in fair value are recognised in the profit and loss account.
Cash at bank and in hand
Cash at bank and in hand includes cash in hand and deposits held at call with banks. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet to the extent that there is no right of offset and practice of net settlement with cash balances.
Share capital
The Company has one class of shares, ordinary shares, which are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax.
Where the Company or the Company’s trust purchases the Company’s equity share capital, the consideration paid, including any directly attributable incremental costs (net of tax), is deducted from equity attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity
attributable to the Company’s equity holders.
Borrowings
Borrowings are recognised initially at the fair value of the consideration received net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the profit and loss account over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Share-based payments
Share-based incentives are provided to employees under the Company’s executive share option, long-term incentive and share purchase schemes. The Company recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured using Black-Scholes, Binomial and Monte Carlo valuation methodologies. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes, the fair value is determined at the date of grant and is re-measured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognised on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or achieve non-market performance conditions.
Dividends payable
Dividends on ordinary shares are recognised in the Company’s financial statements in the period in which the dividends are approved by the shareholders of the Company (generally in the case of the final dividend) or paid (in the case of interim dividends).
3. Fixed asset investments
Cost £m On incorporation – Scheme of arrangement 4,989 Additions 2,545Dividends in specie from Group undertakings (2,544)
At 31 July 2011 4,990
All of the above investments are in unlisted shares. The Directors believe that the carrying value of the investments is supported by their underlying assets.
Following the Scheme of Arrangement on 23 November 2010 the Company recorded the cost of its investment in Old Wolseley, which changed its name to Wolseley Limited, at the fair value at that date of £4,989 million.
Other significant transactions since the date of incorporation include:
On 1 December 2010, 100 per cent of the ordinary shares of Wolseley Finance sp.z o.o were transferred from Wolseley Limited to Wolseley plc as a dividend in specie at a value of £178 million.
On 15 December 2010, the Company received a dividend in specie from Wolseley Limited comprising loans and loan notes to other Group companies and immediately contributed the loans and loan notes to Wolseley Finance sp.z o.o in exchange for shares valued at £2,358 million.
On 25 March 2011, 100 per cent of the ordinary shares of Wolseley Insurance Limited were transferred from Wolseley Limited to Wolseley plc as a dividend in specie at a value of £8 million.
The dividends in specie received from Wolseley Limited in the period have been considered to be a return of capital and have been allocated against the Company’s cost of investment in Wolseley Limited.
The Company’s direct holdings in subsidiary undertakings as at 31 July 2011 were as follows:
Company Country of registration and operation Principal activity
Percentage of ordinary shares held
Wolseley Finance sp.z o.o Poland Finance 100%
Wolseley Limited England and Wales Investment 100%
Wolseley Insurance Limited Isle of Man Insurance 100%
Details of the principal subsidiary undertakings of the Company, including those that are held indirectly, are listed on pages 156 and 157 of the Annual Report.
During the period the Company received a dividend of £50 million from Wolseley Limited.
4. Creditors: amounts falling due within one year
2011 £m
Bank overdraft 1
Amounts due to Group companies 3
4
The fair value of amounts included in creditors approximates to book value. Amounts due to Group companies due within one year are not interest bearing and are payable on demand.
5. Share capital
Details of the Company’s share capital are set out in note 29, on page 120, to the Wolseley plc consolidated financial statements.
Notes to the Company financial statements continued
Period ended 31 July 2011
6. Share premium account
£m
On incorporation –
Scheme of arrangement 4,961
Capital reduction (4,961)
New share capital subscribed 6
At 31 July 2011 6
On 6 December 2010, the Royal Court of Jersey approved the capital reduction of the Company, whereby the share premium at that date was transferred to the profit and loss reserve. The effect of the capital reduction was to reduce share premium by £4,961 million and to increase the profit and loss reserve by £4,961 million.
7. Profit and loss account
£m
On incorporation –
Capital reduction 4,961
Profit for the period 43
Dividends paid (42)
Equity-settled employee share options 3
At 31 July 2011 4,965
8. Reconciliation of movements in equity shareholders’ funds
2011 £m
On incorporation –
Scheme of arrangement 4,989
New share capital subscribed –
Share premium on new share capital subscribed 6
Profit for the period 43
Dividends paid (42)
Equity-settled employee share options 3
Closing shareholders’ funds 4,999
9. Share-based payments
Details of share options granted by Group companies to employees, and that remain outstanding, over the Company’s shares are set out in note 30 on page 121 to the Wolseley plc consolidated financial statements. The Company recognised an equity- settled share-based payment charge of £nil in the year.
10. Contingent liabilities
Provision is made for the Directors’ best estimate of known legal claims and legal actions in progress. The Company takes legal advice as to the likelihood of success of claims and actions and no provision is made where the Directors consider, based on that advice that the action is unlikely to succeed or a sufficiently reliable estimate of the potential obligation cannot be made. In addition the Company has given certain banks authority to transfer at any time any sum outstanding to its credit against or towards satisfaction of its liability to those banks of certain subsidiary undertakings.
The Company has given indemnities and warranties to the purchasers of businesses from the Company and certain Group companies in respect of which no material liabilities are expected to arise.
2011 2011
11. Employees, employee costs and auditors’ remuneration
The average number of employees of the Company in the period ended 31 July 2011 was one. Other employees of Group companies were seconded or assigned to the Company in the period, in order to fulfil their duties or to carry out the work of the Company. Each of the Non-Executive Directors of the Company has an appointment letter with the Company, and the Executive Directors and certain other senior managers of the Group have assignment letters in place with the Company. Total employment costs of the Company for the period, including Non-Executive Directors and seconded employees, were £1 million.
Fees payable to the auditors for the audit of the Company’s financial statements are set out in note 3, on page 99, to the Wolseley plc consolidated financial statements.
12. Dividends
Details of the Company’s dividends are set out in note 9, on page 102, to the Wolseley plc consolidated financial statements.
13. Related party transactions
The Company has taken advantage of the exemption available under FRS 8 “Related party disclosures” to dispense with the requirement to disclose transactions with fellow subsidiaries, all of whose voting rights are held within the Group, and which are included in the consolidated financial statements of Wolseley plc.