Ratios analysis and Comparison of Wolseley group



Ratios analysis and Comparison of Wolseley Group

Company Overview

Wolseley plc is specialized in trade distributing of plumbing products and heating products to professional supplier and contractors of building materials to the professional markets. Wolseley plc is listed on the London Stock Exchange (LSE: WOS) and is in the FTSE 100 index of listed companies. Wolseley PLC is engaged in international business with around 3,837 branches and 45,888 employees across 23 countries. Wolseley is also engaged in local business with majority of her customers operating in a region around 20 miles from the branch.

Table 1

USA

Canada

UK

Nordic Region

France

Central Europe

Revenue

£ 5,500 m

£ 811 m

£ 2,404 m

£ 2,128 m

£ 1,943 m

£ 772 m

% of Total Revenue

40

6

18

16

14

6

Trading Profit

£ 314 m

£ 39 m

£ 109 m

£ 113 m

£ 53 m

£ 30 m

No. of Business Units

7

4

7

7

4

4

SOURCE: Wolseley PLC 2011 Annual Report

Table 1 shows a distribution of Wolseley Group by Geography. Wolseley PLC made the highest Revenue in the USA, this is because about 40% of its business comes from the US Construction and Building Industry. The US also recorded the highest trading profit for the Group in the year ending July 31, 2011.

Figure 1: Five years sales trend

Extracted from Wolseley, 2011 Annual Report

The sales have fluctuated over the last five years. The sales increased substantially from 2007 to 2008 (7 %) but the increase dropped 3% from 2008 to 2009. Sale further decreased by 9 % in 2009 to 2010 and rose up in again in 2010 to 2011 by 3 %. The Group encountered drastic loss in 2007 to 2008 (225 % loss) and in 2008 and 2009, there was a greater alarming loss recorded (245 % of the preceding accounting year). The losses accounted for from 2007 to 2009 are triggered by the severe global downturn (macro-economic condition) caused by the United States housing market, which spread to the financial services industry and the broader economy. However, in 2009 to 2010, the group recovered from the recession with a resilient performance and began to make profit again, with substantial increase in 2010 to 2011 (541 % of the preceding year). In 2009, construction industry in Europe and North America that that Wolseley served was significantly adversely affected by the situation and consequently many of the businesses dealt with peak to trough declines in activity levels. Another obvious explanations for the losses made between 2007/08 and 2009/09 as recorded in the report are the huge losses totaling to £ 441 m and £ 168 m respectively. Also there was a sharp loss of £ 732 m in 2009 (Wolseley, Annual Report, 2009-11).

Figure 2: Five years Profit/ (Loss) trend

Extracted from Wolseley, 2011 Annual Report

Key Performance Indicators

2007

2008

2009

2010

2011

Like for like revenue growth (%)

5.1

-2.3

-13.9

-6.0

5.0

Gross margin (%)

28.3

28.2

27.7

27.7

27.9

Trading margin (%)

6.0

5.3

3.1

3.4

4.6

Average cash-to-cash days(days)

57

50

53

50

54

Return on gross capital employed (%)

15.6

12.5

6.9

7.1

10.6

Return on capital employed (%)

26.9

24.3

14.4

16.4

25.4

Labour cost as % of gross profit (%)

46.7

47.0

50.9

51.0

49.0

Extracted from Wolseley, 2011 Annual Report

The group recorded 5.0 % like-for-like growth for the year 2011, compared to a reduction of 6.0 % in 2010. The groups' gross margin increased by ...