Ferguson Enterprises Inc (FERG) 2007 Q2 法說會逐字稿

Okay. If we could get started. Good morning ladies and gentlemen and welcome to Wolseley's interim results announcement for 2007 and also welcome to those of you listening in on the webcast. We're glad you could join us. For those of you in the room, please make sure that your phones are off so that we do not have any distractions. When we get to the questions please wait for the microphone before speaking and give your name and company.

For those of you that don't know me, I'm Chip Hornsby, Wolseley's CEO. With me today is Steve Webster, our CFO, who will go through and review what the businesses have done in the last six months. I will then update you on our strategy for the Group and reaffirm our targets going forward. At the end we'll be delighted to answer your questions.

As is normal Wolseley practice, today we have other executives here to help. For the Continental prospective we have Rob Marchbank, CEO of Europe, Frank Roach, CEO of North America. We also have two gentlemen who have important Group-wide roles, both of whom are on the Executive Committee which provides the leadership and focus for the Group's initiatives. Most of you know Adrian Barden, who most recently was responsible for Wolseley U.K. His role is now to oversee our acquisitions and also driving initiatives to improve our performance in the area of added value or gross margin, with particular emphasis on own brand. A new face with us today is Larry Stoddard, who has been with Ferguson for 26 years where he was responsible for branch operations. Larry is now responsible for business improvement, with particular emphasis on our expense base. Lastly, most of you know Fenton Hord and unfortunately he's unable to join us today because of recent back surgery and unable to make the long trip. I'm sure we all wish Fenton a successful recovery.

Now, as you can see on the chart behind me or on my left, not only our leadership team and what each is responsible for but also the financial targets for the future. After Steve runs through the results I will have plenty more to describe the details of our plans to make this happen but wanted to give you an idea of our targets and our structure.

So let's get started with the overview. In terms of operating highlights, overall revenue is up 16.9% and trading profit up 0.5% [sic - see presentation]. The effect of the U.S. housing slowdown is clear in these figures. As soon as we saw the rate of decline we took decisive action to reduce our cost base to minimize the impact. Stock has reduced around 20% of their headcount since the peak, some 4,200 people and Ferguson another 1,150 people. In fact across the Group we're now very focused on increased efficiency which I will tell you more about after Steve runs through the results.

Although the business is tough right now in the U.S. housing, we're confident we did outperform the market in virtually every market we operate which positions us well for the future. In other parts of the U.S. Ferguson continues to perform well with strong organic growth. The rate has been slowing in recent months but they're clearly outperforming the market, taking share and enjoying a relatively good RMI industrial and commercial markets.

As we've been indicating for a long time, one of the benefits of the Wolseley Group is our diversity by geography, product, business and customers. This period it's Europe's turn to step up to the mark and you can see they've clearly done so through the results. While the short term margins in the U.K. reflect the enormous investment to support the future growth, they've achieved very impressive revenue growth. We are encouraged by the performance in France where although there is still a lot of additional work to do, we're now moving in the right direction. DT Group continues to trade ahead of our expectations and Central and Eastern Europe is coming together nicely and had very strong growth in revenue and profits.

I'll provide you with a lot more detail later on each of these areas. However, we're also pleased to see the increased focus on cash flow and working capital beginning to pay some nice results which of course helps our balance sheet which has been at the higher end of our target but certainly will benefit us as we've put a sharper eye on generating cash.

By our normal standards the first half performance has been challenging. However, as you can see, we're setting our sights for improved performance and we'll describe these to you in more detail later.

Those are the highlights. Steve will now run through the results in more detail and then I'll go through the strategy objectives. Steve.

Thanks Chip and good morning everybody. First the key financial numbers and the highlights for me are shown on this slide, the 16.9% growth in revenue which is actually 23.7% in constant currency. Trading profit, up marginally by 1.3% but up by 7.8% in constant currency. That translates into a trading margin for the Group of 5% compared with the 5.7% last year. Finance costs of course are higher reflecting the higher levels of debt as a result of the increased acquisition spend and also higher interest rates.

As a consequence of the 59.5m additional shares issued in the placing and the lower profit before tax, earnings per share are down 11.8% or 3.4% in constant currency. The earnings per share has benefited from a lower tax charge in the first half which is under 26% compared to nearly 28% in the first half of last year. That's partly due to the change in the mix for profits following the DT Group acquisition. And also partly due to higher tax relief on the stock option charge under IFRS.

As Chip's already said, we're very pleased with the strong cash flow performance in the first half with a 73% increase in the operating cash flow. Gearing ended the half nearly 90% and return on capital 15.9% down last year but of course reflecting the initial impact of the DT Group acquisition but still nearly 5% above the Group's pre-tax weighted average cost to capital.

So where did the revenue growth come from? Well, you can see here most of the benefits, 19.5%, was due to acquisitions. Organic growth excluding Stock was 6.8% and that was partly offset by Stock's organic revenue decline, and currency translation removed a further 5.5% of revenue growth. The net organic growth across Group was around 3%.

And this next slide shows the source of the increase in trading profit. Again exchange reduced trading profit by 6%. Stock's organic trading profit decline of GBP53m, or 13.8%, more than offset the organic growth of the rest of the Group of GBP8m. Acquisitions account for another 19% of the growth in trading profit, giving that increase of 1.3% overall.

On profit margin this slide shows where the decline in the Group's trading margin has come from in the first half. You can see that the 70 basis point reduction, 40 basis points was due to Stock, 10 basis points was the initial impact of the DT Group and 20 basis points relates to the U.K. investment and one-off costs.

And then finally in terms of bridge charts, this next chart shows the movement in profit before tax. You can see the impact on the interest charge of the increased interest rates and also the increased debt level arising from that acquisition spend and of course increased CapEx. You'll also see the profit progress the rest of the Group's made excluding the impact of Stock.

So let's move onto the performance of the businesses, starting with U.S. plumbing and heating. Ferguson delivered another strong performance despite the slowdown in that residential market. It achieved constant currency revenue growth of nearly 19% with just over 9% organic revenue growth, at least twice that of the market generally. The trading margin fell 0.3%, reflecting a slightly lower gross margin as we didn't have the benefit this time around from the commodity copper prices that we had in the first half last year. If you recall we had a benefit in the first half of last year from commodity price of around $8m in the first half and also about another $35m in the second half of last year.

The strong market out-performance that Ferguson was able to achieve comes about because of the continued investments in facilities and people and the leadership and focus given to the business segments. Furthermore, there's been an even greater focus on customer service. The slow residential market results in the need to reduce headcount by 1,000 employees in the first half and a further 150 since January 31. The run rate of savings in the second half relating to these headcount reductions will be around $12m. We still expect to invest in new branches, showrooms, around 700 college recruits and two new DCs that should be open over the next two years in Florida and Northern California.

Let's move on to U.S. building materials. As you've already heard, Stock was most affected by the U.S. residential decline as you'd expect, with over 80% of its business dependent upon new housing. Unfortunately it also had significant commodity price deflation to cope with as well. Of the 20% fall in organic revenue, 10% was volume against average housing starts that fell 25%, clearly illustrating Stock's market out-performance. Commodity lumber and panels account for around 43% of Stock's sales and the significant price deflation in lumber of 23% and in panels of 34% reduced revenue by $270m, or around 11%. And also one-off costs in the first half of $11m relating to 22 branch closures and the headcount reductions. Since the peak in June 2006 the headcount's been reduced by around 4,000 people, representing approximately 25% of the total workforce, and a further 500 have left since January 31. The run rate of savings in the second half will be around £40-50m.

Overall local currency revenues for Stock were down by about 3.1% and trading profit was down by just over 48%, after charging those one-off costs of course. Trading margin moved from 6.3% to 3.3%. We would expect to see the benefits of the cost reduction program starting to feed through in the second half.

Against a background of recent problems in the sub-prime mortgage lending market it's probably just worth me reminding you that Stock's construction loans are all fully secured against real estate. Whilst the [AG] of the construction loan receivables has gone out a little bit, as you'd expect in a softer market, the recent performance of the portfolio is good with the overall LTV ratios improving. They're now about 68.3% compared with 69.2% a year ago. And we've achieved an overall profit on the disposal of foreclosed properties. Total construction loans outstanding at January 31 2007 were GBP293m compared to GBP313m at July 31 2006. We will continue to adopt a cautious approach to further lending in these more challenging markets.

Now on to Canada. In Canada the warmer weather, lower gas prices and higher gas inventories meant the business was slower in the industrial and commercial sector that services the energy sector in Western Canada. On the other hand, the residential market held up well in Western Canada but slowed in the East. Overall, Canada's constant currency revenues and profits were virtually unchanged compared with the prior year, and both gross margin and net margin were up slightly.

There continues to be ongoing investment in Canada with four new branches opened and also a new regional distribution center serving the Ontario market. There was also a move to close a number of regional purchasing offices and those have now been consolidated in two shared purchase centers which should lead to improved inventory management in Canada.

Now let's move on to Europe. Wolseley U.K. grew strongly in the first half, achieving organic growth of 11%, well ahead of the market which grew around 2%. Trading margin was lower, reflecting the planned investment in that business. We continue to invest in the new DC at Leamington Spa which opened in the autumn. The regional distribution center in Chorley is under construction right now. And also in the first half 68 new branches were added and there were some integration costs of the acquisitions we made last year. As a result of those investments and integration costs the trading margin fell from 7.1% to 6%.

Business improvements continue to be made with the central branch replenishment now fully rolled out to Plumb and Parts branches. We're now assessing how it could be implemented for the other U.K. brands. Several of the core brands have been integrated at the managerial level and the Irish business is now run under one management team.

One-off costs in the U.K. business in the first half were around GBP5m, including those relating to the step-up in branch openings. There will be further one-off rationalization costs of about GBP6m relating to branch closures and headcount reductions in the second half. The emphasis in the U.K. in the second half will be on margin improvement.

Let's move on to France. In France the new residential market remained positive although there were signs of slowing in that market towards the end of the period. And RMI, which of course is the principal driver of Brossette and PBM, is still showing only marginal growth. Despite that background, both PBM and Brossette, which now operate under one management team in France, showed strong growth and underlying trading margin improvement.

Overall constant currency revenue for Wolseley France was up by 12.8% to GBP889m including over 7% organic growth which was slightly in excess of the market growth. Trading profit was 14.9% higher and the trading margin increased from 4.5 to 4.6%. Remember last year benefited by some one-off gains for PBM from wood tax rebate which were partly offset by Brossette's competition fine. So the underlying improvement was actually greater than it appears here.

PBM grew local currency revenue by 15.9%, half of which was organic. Both the gross margin and the net margin improved after adjusting for those one-off items last year. PBM's expansion plans continue as they opened five new locations, 19 hire centers and 13 tiling centers now operating.

The restructuring of Brosssette continues and it's good to see the resulting improvement in business performance there. Brosssette's local currency revenue increased by 8.2%, 6.1% of which was organic growth. Underlying trading profit was up by 12.8% and the benefits from centralization of a number of functions, including purchasing and logistics, are beginning to come through. The majority of the regional management team's now in place and so the restructuring over the next couple of years will focus on the distribution and branch networks.

Now on to that excellent start from DT Group in the Nordic region. We've been very pleased with DT's performance which is ahead of our expectations at the time of the acquisition. The integration plans are also ahead of plan and we should have completed that process before the end of the financial year. As expected, the Nordic regions continue to enjoy good economic growth and favorable weather during the winter period also helped the business performance. DT completed four bolt-on acquisitions in the first half. With revenue equivalent to GBP621m and trading profit of GBP31m, the DT Group achieved a trading margin of 4.9%. We will expect that margin to be much higher in the second half as the second half is always the busier period for the obvious seasonal reasons.

Prior to being bought by Wolseley, DT Group had a year end of January 31 and its performance for the year to January 31 2007 showed a 12.9% increase in revenue over the prior year and a 28% improvement in trading profit, underlining its quality and potential for further growth. We continue to believe that we're well on track for hitting our normal hurdle rate for the return on capital for this strategic acquisition.

In the rest of Continental Europe we encountered generally flat markets but most of the businesses made very good progress, generally outperforming their markets. Overall constant currency revenue was up 23.8% reflecting organic growth of 13.8%. Trading profit increased by 50% with trading margin jumping from 3.9 to 4.8%.

The Benelux region made excellent progress again and is really starting to benefit from the increased critical mass in that region. Revenue there was up by more than 30% and trading profit up by more than 60%.

Austria also saw an improvement this half following a number of management and structural changes over the past 18 months. Organic revenue growth was more than 16% and the trading margin also improved.

In Switzerland, Tobler continued to perform well, achieving over 11% organic growth -- organic revenue growth and nearly 20% trading profit growth.

In Italy the new DC in Northern Italy impacted the costs in the first half, as we expected, as it started to roll out the branch delivery program. All branches should be served by the DC within the next nine or 10 months.

And in Eastern Europe the acquisition of Woodcote which took us into four new countries is performing extremely well. And we're delighted with the quality of the management team we've acquired there since we've actually given them extra responsibility for our operations in Hungary and the Czech Republic.

Now let's have a look at that strong cash flow performance. As Chip mentioned, we've put increased focus on improving cash flow and this will continue in the second half and beyond. Consequently we've had a very strong cash flow performance for the first half with a particular focus on improved inventory management, where the increase in working capital was much lower than in the equivalent period in the prior year. The result was that cash flow from operating activities is up by 73% from 258m to 447m.

Below the cash flow from operating activities line you will see the significant increase in the cash acquisitions spend, from 420m to just under GBP1.7b. You'll also see the significant increase in CapEx from 144m to 206m, reflecting the expansion of the DC network in the U.K. and Italy, the step-up in the branch opening program and of course expenditure on the common IT platform that's part of the business change program we have in place. We do expect CapEx in the second half to be at a similar level to that in the first half.

The end result of all those cash flows and following the share placing which raised GBP655m is the increase in net debt of 967m, primarily of course relating to that acquisition spend. Gearing is almost 90%.

So finally, turning to the outlook. In the U.S.A. there are still mixed signals and we still think it's too early yet to call the bottom of the housing market. We do believe the new residential market is likely to continue to remain soft for the remainder of the calendar year. The RMI in the commercial industrial markets are expected to continue to hold up so Ferguson should continue to achieve good levels of organic revenue growth, albeit it might be at a slightly more modest rate than the first half. If markets do show signs of weakening further prompt action will continue to be taken to reduce the cost base.

In the U.K. the fundamentals of the U.K. economy are expected to remain positive, although it's still too early to assess the full impact that recent interest rate increases may have on consumer and housing related expenditure. Against this background the U.K. business is expected to show improved trading profit and underlying margin growth in the second half.

Although growth in the French RMI market is likely to remain modest, we are encouraged by the stronger performance of the French operations and would expect that to continue. A number of initiatives will be implemented to reorganize the French businesses and the investment in Brossette will continue as it refines its branch and logistics network.

The outlook for the markets in which DT Group operates remains generally positive and the second half profit contribution will benefit from its seasonal bias. Central and Eastern European operations are expected to continue to progress well.

So overall we should increasing benefits in the second half from the cost reduction initiatives we've already taken. Although this year is clearly going to be a tough one for us, the actions we've taken on costs and working capital efficiency should position us well going into the next financial year to achieve our growth objectives and we remain confident of our ability to outperform the markets in which we operate. And with that I'll hand back to Chip.

Thanks Steve. In September I'd been in this position as new CEO for 45 days and at that point we began to set out the vision and the strategy for the future. I indicated then that this was not a complicated business. We simply buy products, we add value, we go in and we do everything we can to continue to simplify the business all the way through the organization to create returns for our shareholders. We have a lot of experience and we're good at growing the business and particularly taking advantage of the market opportunities.

We've certainly been in the toughest U.S. housing market since the late 80s and early 90s yet we've still made progress. Look at Ferguson's strong organic growth. And yes, even in Stock we continued to outperform the market.

If you look at Europe you find this to be particularly encouraging. France, with a new management team that refocused the business and you should expect to see continued improved results. However I do caution you, we still need to make investments, particularly in infrastructure. For those of you who were involved with us many years ago when we began this, it's a very similar situation to what we had in [inaudible] in California. It took some time, it took some investment but we'd expect to see the same type of results going forward in France.

In addition, in Central and Eastern Europe we've made some real strides. Keith Jones, who is former brand director for Wolseley U.K. moved his entire team to Switzerland. The impact, you can begin to see the results, particularly in markets in Benelux, as well as in Austria. We also strengthened our position in Eastern Europe with Woodcote and of course DT we brought in an outstanding management team which we can continue to build upon. All of this has allowed us to continue to increase our diversity which I'll discuss further.

There's been a severe downturn in the U.S. but we reacted quickly. We've reduced our costs and we're in a situation today where we're confident we're still outperforming the market. We've continued our acquisitions strategy with 36 bolt-ons year to date as well as the DT acquisition which was strategic for us back in September. We've expanded our critical mass and we've positioned ourselves to gain market share for in the future with new products, services and locations. We've continued to invest in CapEx to support the businesses. And this is particularly true in the U.K. where it's probably not as appreciated as much as it needs to be.

To review that very quickly, we created a new head office in Leamington Spa. We closed a dozen offices or so. We built a national DC and we began the integration of strategic acquisitions that were new to us, in electrical, tool hire and installation. And we also continued the very aggressive roll-out of the successful format that we have with Bathstore. All of this has created a centralized management structure to support the branches, particularly for future growth. I do hope that all of you will take the opportunity to come to the site visit at Leamington Spa next month.

We've made some more investments in the Italian DCs, the Canadian DCs and continue to do so in the U.S. And yes, we are beginning to move towards a common IT platform and I'll give you some more details on that in just a few minutes.

We are looking at improved cash flow and it's an indication of our focus on working capital that Steve just indicated. But likely the most exciting thing is the leadership team, not only here on the stage to my left, but particularly in the field. If you look at France with Philippe Gardies. I guess the best point I can make is he gets it. He's 100% French, he'll do it in French format, but he'll drive to meet the Wolseley expectations. Steve Weirsoe, driving the Nordic Group and the management team that he's brought in, as Steve indicated earlier. Keith Jones's commitment to move his team down to Central and Eastern Europe. And in the acquisition of Woodcote, a gentleman by the name of Neville Parry who gives us tremendous confidence in what we're capable of doing in Eastern Europe. I've had the opportunity to be with him, to go from market to market and see what he has in Poland, in Hungary, in Slovakia, in Czech, in Romania, Croatia. I can tell you the tremendous amount of confidence in what he's capable of doing. Rob's already turned over our existing businesses in Hungary and Czech to him, you can begin to see the impact. A very exciting market for us to continue to expand in the future.

Most importantly the teams are beginning to build as a Group. The bench that they have behind them to perpetuate our success. We've had a lot going on and a tremendous amount still to do. We're not radically changing the business. We continue to understand our customers and certainly the moves by our competition. But there's enormous opportunities available for us in the future and we will continue to expand our competitive advantages to the benefits of our employees, our customers, our supply-holders and ultimately our shareholders.

I'll remind you what I said in September, at the top is growth. And this stays the same today. Our intent is to be the supplier of choice for professional contractors. We understand them and we speak their language. In this industry size matters. As we develop more and more critical mass it will allow us to outperform, particularly in scale, but leveraging our purchasing going forward. And supply chains, certainly the heart of our distribution network. And acquisitions will always be a critical component for the Wolseley Group.

But it's not just size, it's our diversity. We're in 28 different countries today, all with different local factors. As well as the industry segments moving in different cycles, different customer types with different customer needs. But it's only the beginning of a huge opportunity for us to grow.

The Wolseley way to competitive advantages. These are important to us. These are the five key areas, these are our investments for the future. Human resources. This is a relationship business. Decisions are made at the local level. Knowledgeable and customer-focused employees is critical. Why? Because that's what our customers want. We've invested heavily in this area as you're well aware in North America. We're expanding that into Europe.

Growth is who we are, it's our DNA. We're not by any means moving away from that. But it is a combination of organic and acquisition growth. Expect this to continue well into the future. The one area that I will draw attention to is additional focus on like for like sales.

Sourcing. 72% of everything we do is cost of goods sold. That equates to GBP14b spend. Our intent is to leverage this through our supply chain, our distribution network. This is being led by Mike Grunkemeyer. He'll work closely with our branded suppliers but we're also drawing a high degree of focus on own brand which is being driven by Adrian Barden.

Supply chain. We have a good DC network as you're aware in U.S. and North America. We need further investments in Europe. Being led by Al Byrd. Our objective is the same as it's been in the past, the most efficient path to market for our suppliers and a broad product offering with high fill rates for our customers.

Then this area of business improvement. Yes, we are moving forwards on a common IT platform. This is led by Larry Stoddard and Ron England in the back. Our objective is to have access to more information about our customers, our products and our suppliers. This will drive more efficiency and lead to higher degrees of profitability. By tying all these in together we will improve the value to our customers and ultimately our performance.

So where do we go from here? Well after 180 days began to determine that we're capable of performing at higher levels. How? By creating a sharper strategic focus on key initiatives. Hence, a few of the management changes you see here today. So what are these initiatives? We call them earn, turn and grow. Let me repeat that. Earn, turn and grow. In that order. Let's go through each one of these.

Over the last several years we've had incredible top line growth rates. Last year alone was 25%. However, our profit before tax only grew 18. We want to continue to focus on growth but at a different level where we put more emphasis on the bottom line to grow at a faster rate. That becomes a very high priority for us going forward. However, don't think for a minute we're not going to grow this business by any means.

Let's go through each of these initiatives. Under earn, grow profits faster than sales. How? By focusing on two key components, gross margin or added value and our expenses. On gross margins, our expectation is to further leverage our purchasing power, to put more emphasis to be certain that the DC networks are in place to become again the most efficient path to market. By buying and forecasting in bulk we have a huge opportunity to leverage this further and bring benefit to our suppliers. We also have 5,000 locations which provide a huge opportunity for path to market for many of the products our suppliers manufacture. And again we will also have a higher degree of focus on own brand.

Expenses, or cost control if you will. No, this is not a knee-jerk reaction to what's going on in the U.S. by any means. These are longer-term initiatives to improve our overall efficiency. Areas of focus. Our variable cost structure. We want to maximize sales through our existing operations. We call it sweating the bricks to get the most we can out of the facilities that we have today. Indirect spend. The billions of dollars, billions of pounds that we spend annually to support our business. Not emotional to us. Opportunities to go in and leverage that even further. And yes of course labor cost. Far and away our largest expense. We want to begin to benchmark both internally and externally and set measurement targets to drive productivity further and position ourselves for best in class.

Dealing with the turn. Focus on cash flow and working capital. How? Three improvement areas. Inventory management, higher turns, longer supplier payments and focusing on customers who have payment practices that are quicker than what we have today. Three key areas will have an impact and you can see some of that's already been demonstrated. Our objective to free up more cash, to support our investments in acquisitions and CapEx and to support our continued growth and certainly pay down some of our debt.

Growth. Again our initiative is to double in sales every five to seven years. Expect about 5% from acquisitions on an ongoing basis. Again also expect a heavy emphasis on like for like sales which has the opportunity to create additional profits for us out of our existing locations. Looking out we may pick the pace up a little but again our intent is to double every five to seven years.

Some of these slides you've seen before but they're worth restating. The market opportunity is huge. GBP700b annual spend in North America and in Europe. In North America GBP460b. Our share is very small, even in the area of plumbing and heating. In Europe very similar again. Even in our core businesses less than double digit growth. Tremendous opportunities for us to continue to expand our presence on both continents.

So let's take just a minute to confirm our financial objectives. Double digit growth with a compounded growth rate of around 10-15%. Our acquisition target is about 5% of sales. A higher focus on like for like sales. Continue to invest in CapEx and yes, expect us to drive to the 7% margin range within four years. With a higher focus on cash flow and still a return on capital employed of at least 4% above our weighted average cost to capital.

Over the next six months expect additional restructuring. As the market changes there are moves we need to make. Certainly a closer integration of our operations in North America. And finalize our European supply chain strategy for the future. We also expect to see some additional benefits from some of our investments, particularly in the area of Leamington Spa.

Also further emphasis on business change program. To date we've finalized the financials and continued the process. By the end of the year we hope to have human resource management complete and we continue to expand our supply chain initiatives on both continents. Ferguson is the perfect example where to date we've installed High Jump, the supply chain solution that we have, in 65 locations. And we will continue to invest.

All this is designed to improve our overall performance. We have an executive team that can drive this. Our initiatives again are earn, turn and grow. These initiatives will allow us to outdistance the competition as the industry leader. More specifically, create greater value for our shareholders going forward. Yes, it's been a tough six months in the U.S. but we reacted quickly. We're especially encouraged with the progress that we made in the last six months in Europe. We're capable of not only managing through these cycles but evolving even stronger in the future. Still a fragmented market and this industry will continue to consolidate. That provides Wolseley with tremendous opportunities going forward. We're raising the bar. We expect to hit it and we're committed to becoming the name the world builds on.

Thank you for your time and we'll now move to questions.

Ladies and gentlemen, thank you for your attention. We'll be glad to take your questions but please wait for the microphone to state your name and which firm you represent. I'd also ask you to please -- there's a lot of you in here that will have questions, we have a limited amount of time, please limit your questions as much as you can to the area too. I know how guys like to consolidate this but we'll see how creative the Group is as we get into it.

So first question. Yes sir.

Good morning. Nicolas Godet from Exane BNP Paribas. Just to give a breakdown of the target of 7% margin between Europe and North America for example. Because in my mind for example in Europe you're already very good compared to peers and your target of 7% if this was the target for Europe would be much higher than the target of peers in Europe for example. So could you comment a little bit on your target and could you give us a little bit more flavor on what is the impact of for example labor cost improvement that you can have in Europe? Do you plan to reduce headcount and have more sales? Could you detail it a bit?

Quite honestly we haven't broken it down by operating company or individual location or by continent for that matter. The key thing is, and these are newly appointed positions that have occurred in the last 45 days, we're beginning to draw attentions specifically one in the area of added value or gross margin. We've selected own brand as certainly an addition to that. Further leverage our purchasing power will have a positive impact as well. On the expense side of it, certainly labor is a key component, it's an area that we want to draw a high degree of attention to. Exactly -- will Europe and North America look exactly the same? No. Some of the countries may even vary along those lines. But it comes down to not going in and making huge reductions beyond what we've already been required to today, particularly in the U.S. It's about increasing our overall efficiency and productivity as time goes forth.

Okay, thank you. Can I have another two questions regarding H2? Maybe just a guidance, you said at DT there will be a seasonality but should we target a margin of let's say 6.3% for the full year that we will take correct reserves in [inaudible] DT?

Without being specific about the number I think you can tell from the announcement the run rate of their margin when we acquired it. We obviously feel keen to add value by improving that margin but [inaudible] stick to one decimal point margin.

Okay and my very last one on the U.K. You mentioned at the trading update that part of the problems in the U.K. were pricing pressure. In H2 margins should increase because you don't have a lot of restructuring one-off investment costs. But you still have that pricing pressure. So, is there any risk that margins in the U.K. be under pressure because of that pricing? What is the pricing [inaudible]?

Rob wants to take that one.

Yes. You're always going to have pricing pressure in every one of our markets and every MD I talk to says his market's the most competitive. So, I think in the good businesses in the last two months, we've seen the Plumb brand in the U.K. the highest gross margin it's achieved in the last nine to 10 months. So while there is competition in the marketplace, we feel like with some of our core brands we've really begun to turn the corner and with the focus on gross margin management in those brands we've been able to mitigate any impact. But there always is going to be margin pressure from competition so.

[What] you shall see for those of you who'll come next month, this is an initiative that we decided with the Group at Board level. Adrian kicked it off, Nigel is continuing to execute it and we've made significant investments to be able to perpetuate this growth in the U.K. for the future.

Next question? Yes, sir.

Morning, it's Paul Roger from ABN. A couple of questions if I can. Firstly on the cost of acquisitions in the pipeline. Are you at all concerned that the multiple you're paying seems to be going up? And does that reflect private equity interest or a lower pipeline? That's the first question.

And then secondly, you've obviously taken a lot of costs out of the business. Are you concerned at all that that affects your long-term growth potential in the U.S. and has the Company responded to this matter?

Well, first, on the acquisition piece, I would envision that acquisitions in the United States will likely be at lesser levels than we've seen in the last three to four years and I think that's probably an understatement. So I don't -- and private equity very rarely gets involved in the areas that we're involved -- that we're involved in, the bolt-ons, because it's just not big enough for them to get all that excited about. So we don't see that occurring on a routine basis by any means.

And we're going to continue to invest in people, in structure and that type of thing, as is necessary. This is -- we've certainly been through a challenging time -- cycle and how long this is going to last it's hard to interpret. But as you can see, we're investing for the future to be able to continue to gain shares and if we evolve out of this, we're stronger than when we went into it.

Okay.

Mark.

Hello. Mark Stockdale, UBS. I've got a few. Firstly, Chip, you mentioned on further cost and you said closer integration in North America, does that mean you roll Canada into Ferguson? Do you actually look at the actual structure of Ferguson, Stock and [Canada]? There's, obviously, some costs there that you could attack, if it's right for the business.

Frank, do you want to take that?

Yes, sure. As it relates to Canada and Ferguson, they're in the same businesses. One of the things we've already started is to align Canada up with a similar business group focus like we had in the U.S. We've added DCs, there's alignment now in strategies by product, by customer type. So yes, I think you'll see further and further integration, if you will, on the cost side as well as the customer side. We are finding that there are a number of continental customers, particularly on the industrial -- in the industrial sector, that allows us to go in as one and really offer a unique footprint in terms of product services and geographies.

Stock. We're doing much more with Stock in terms of -- actually with all three companies in integrating the departments. Be it HR, marketing, finance, we will have one group representing all three companies at the North American level so you'll see further integration there. A lot of the cuts that were made in the first half were made at the headquarters levels, particularly, in Newport News and Raleigh. We don't feel like we'll be replacing a lot of those or re-backfilling those positions as we get out of this housing slump. So, yes, you'll see more and more of the integration both on the cost side as well as the customer side.

Thank you. The second one was on the margin target. Is that all internal action, i.e. that 7% excludes your view, whatever it may be, of the market? So that -- is that, just to be specific, that's all your efforts or are you assuming a certain market growth?

Let's get the 7% first and then we'll talk later.

No but I was -- not pushing that. Is that all you internally, i.e. you're not saying the markets going to grow at 3 and price will be 2. Is that -- I just want to get the sense of how you get to it.

The markets going to do whatever the market does. We just need to go in and determine exactly what impact we can have and where we want to take the organization and I think the 7% target is the next step for us in the progression and we'll determine, once we get there, what's next.

Just two quick ones for Steve. It is quick. Tax, you say.

That's five questions, I think.

Tax continues for this year. Does it continue for '08 and '09 or is this just a one, two year effect?

I think it should continue for '08 and '09, Mark. It's definitely not out any further than that because, obviously, tax jurisdictions around the world increase when you take action in certain areas but I think for the next year or two that that tax rate is secure. Just watch though the charge relating to stock options. I think I explained before to this audience that the charge depends on the share price on the final day of the year, so until we get to the final day of the year you don't know what the deduction's going to be, so that's quite a variable element. But, obviously, DT Group and expansion in Europe has created a favorable mix effect on the Group's tax charge.

And then the other was just can you tell me what the depreciation charge for the Group for the full year because, obviously, you had a lot of CapEx, a lot of moving? Where are you looking for?

I -- you can probably see the trend the depreciation's gone up by GBP30-40m a year and if you work on that possibility you won't be far out.

Thank you.

Next question. Yes, sir. I promise you we'll move back here.

Nick Ward from Deutsche Bank. Just two quickies. First of all, management remuneration, is that at all being changed to reflect the slightly revised targets now that the Group is putting place, particularly around the cash flow side?

And secondly, you've quantified your margin goal but you've given us no sort of quantification of cash flow targets being as a percentage of EBIT or whatever. Is that something you're willing to do or would plan to do in due course?

Definitely where remuneration is concerned, we're going to drive the whole organization in that direction to be able to meet these expectations and targets.

Where cash flow's concerned, I think it's a little early for us. We're really just beginning to drive this and understand what these initiatives can have so we haven't clearly that this is exactly what it's going to be and I think it ties in well with what we're expecting to spend. 5% of sales on acquisitions would be GBP400 this year and it would be GBP450 next year depending on the numbers, CapEx, somewhere in that same neighborhood, and, in order to be able to support that, we think we can drive some cash out of the business. But, to be quite honest with you, because there's certainly opportunities for us to continue to improve and it's just beginning to show some traction along those lines to understand what's available to us.

Yes. Clyde.

Clyde Lewis from Citigroup. Two if I may, Chip. One on the electrical entree that you've made in the last 12 months. Could you say a little bit about how you are finding that market and how attractive you are to it? Obviously, you've flagged it up in one of your pie charts at the back as a sort of area for potential growth. I'm just wondering whether you could say a little bit more about that.

And the second question I had was on the U.S. renovation market. Again, it's been a drive for the Group in terms of trying to build a bigger position in that market having, if you like, not focused it on historically. Can you say how that market has behaved in the last six months and maybe comment a little bit on the very recent trends as well?

Okay. Rob, do you want to take the first one in Electrical?

Yes. I think, as you know, we've got electrical in the U.K., we just announced a small electrical acquisition in Ireland and we've had electrical in the set now for about ten years. In terms of the general market, we are a small player relative to the big brands so, for us, we're in under the radar, if you will. We find that to be very attractive, we like the model and we will continue to develop growth in that approach. As we begin to refine it Ireland and the U.K., we will begin to look at other countries where it makes sense.

The RMI market in North America, Frank.

Sure. Yes. The RMI continues to be a focus in North America, particularly for Stock. We want to diversify the mix with their product offering so we're looking at one of the priorities will be how to -- over the next 12 months, is how can we grow the roofing business more than we currently have. We'll be entering the flooring business, as well as expanding the [cabinetry] business, which we view as a $37b opportunity, which neither Ferguson or Stock really play in that area.

So, as far as Ferguson goes, yes, we will continue to get in the repair and remodel. That's important. The whole XpressNet initiative that was started three years ago is about further penetration in that market so we will continue to invest there as well. Canada, similarly, with diversification on the XpressNet model that will be rolled out in that market, particularly in the eastern provinces in the next six months.

Could you say a little bit about recent trends in terms of how that market is?

The market, historically, has held up well. In the last couple of months I've been reading about how it's slowing down. I think there is -- it seems like there is so much news about sub-prime and other things in the marketplace that maybe consumers are holding back a little bit for fear of price deflation in their homes. So we've seen a little bit of slowdown but it's still a big opportunity. We have such small share we feel like it's a good focus for us.

I'm going to pass it to Tobias right there.

Thanks a lot. Two questions, if I may. Historically, you have given us an indication of where you see the lumber price moving forward and maybe, if you don't want to do this, just give us a little bit of a picture of where you see demand, supply come on, the dynamics of that?

And then just secondly, you've touched upon the RMI market there at the moment but the -- and you talk about Ferguson slowing in the second half, what sort of slowdown should we assume just for our models to get a better feel?

Well, on the lumber price, obviously, we just react to the market. I guess if there's any bit of good news, our largest supplier last Friday began to cut back significantly on production which is the first flinch we've seen from anybody in the industry as it relates to the last six months. Where it's going to end up is hard to determine, but at least some of the supply looks like it's going to begin to come off the market and, for them, they're going to begin to cut lumber to European specs and ship that over here because the market price is so much higher. But that's really the only indication that we've seen that's gone on in the last couple of weeks and exactly where it goes from here, Tobias, it's anybody's guess. It's, obviously, 250 or 260 or 270 but it isn't 300 or 330 that we've experienced in the past.

On the Ferguson piece, do you want to go and say something?

Yes. We expect to have good organic growth in the second half but, again, it all depends on the housing market, the economy in general and what commodities are going to do.

Yes, sir.

Mark Shepphard from UBS. Steve, you talk about the working capital improvement in the first half, can you give us some guidance for those going forward and how sustainable is that?

We -- not only do we think it's sustainable, we're looking to improve it still further actually and, as both Chip and I said, there's a huge extra focus on this area. We think there are improvements in each of the three key areas really. Inventory management being the biggest opportunity, receivables, we've done a pretty good job on but we still feel we can do a little bit of work there, and, certainly, on the payable side, the terms with preferred suppliers and so on effects rebates more quickly. So those are the sort of things we're doing.

Partly picking up a previous question, we've set internal targets for all the companies and we've certainly set internal targets for next year. We're not ready to publish those yet. I think in the past we've talked about a 1% improvement in the working capital ratio. We'd be disappointed if we didn't do better than that, but it will be a gradual thing. You're not going to get a sudden overnight transition but you can see from the first half performance, that 73% improvement, the effect it has had in the short-term.

And it is a high priority and it's an area we're focusing and, quite honestly, it's one -- if there is a benefit from not growing at such rapid rates, it allows you to go in and fine tune some of these things. When you're growing at 25 and 30% you're barely keeping up with the demand. And what we hope to be able to do is set a new benchmark that even when business does begin to -- the pace pick up at a more significant rate, that we're operating at better levels than we were when we went into it.

Yes, Chris.

This is probably one for Larry actually, I think. In relation to the cost of the common IT platform progress timing, just a bit more flavor on that as it's a major initiative across the Group.

We've spent GBP50m to date and we've been working on this for three or so years so far. As Chip alluded to, initially we've already installed the financials so that's completely done. We hope to have the HR system done before the end of the year or by the end of the year, if possible. We've also been starting a pilot with our Austrian business to look at a basic ERP, to start learning from that. This is a major project that's going to take many years to do it and we're going to do it in phases. It's not going to be one fail swoop. It's just too big an organization and too complex an organization to be able to do that. So you're going to hear more and more details about this as it goes forward but it's going to be a major project and it's going to take us several years to install.

Just a little bit more about the pilot in Austria. What you're actually do there in terms of --

Well, we've been preparing our Austrian business for this. They've been working pretty diligently getting this process and systems up to speed and we're going to implement an out-of-the-box SAP plan in Austria. So that should be coming up over the next few months. We're going to test that, pilot it, learn a lot from it, and then we'll begin to duplicate some things from there.

Just here. John.

John Messenger, Morgan Stanley. Apologies, I've got three. First one, just on Stock. When we look at it's performance against the market, Chip, has there been a deliberate move to actually target sales from the major homebuilders? Just to understand that 25% down in housing versus their 10% on volume. Is it geographic or has there been some clear strategic moves to go out and win share in certain particular segments?

Well their business varies greatly from one market to the other. In the hotter markets where the national home builders have come in, as we've indicated Florida, Arizona, California, a significant portion of their business in Vegas, especially, was national home builders. If you go to Raleigh, they're much more orientated towards custom homebuilders and so, again, it just depends on the market, what the market shape is that the home builders decide the target.

And is it [Boyse Cascade] who you were mentioning as a supplier, which was the one you just?

No. It's out of Canada. [Cairn]. Yes. They're our largest supplier out of British Columbia. Go ahead.

The second one was just on non-residential. You mentioned about it holding up in the statement. Obviously, you still seem very strong in terms of growing 14-15% year-on-year. Are you actually seeing, when you look at what's happened in the last couple of months, is that slowing off? Just the wording, hold up, doesn't sound quite so positive compared to what we've heard before. When do you think that will [inaudible] really?

Frank, do you want to answer it?

Yes. We feel like it's going to stay weak for the rest of --

He's talking about non-residential.

Non-residential.

Oh, non-residential.

Commercial.

You panicked me there, Frank.

Sorry. Sorry. I didn't hear. Yes. Non-residential should hold up. If you look at the hospitality, I know California's getting ready to build eight prisons. There's so much -- within reason.

Hospitality.

Yes. That's hospitality in their minds. But there's a lot of non-residential spend that's still planned for this year. And particularly Ferguson in Canada, we do very well in that market so we feel like it's not a market we're pursuing, it's a market we've always been in so we feel pretty good about that. Now, will it offset what's going on in the residential? We don't know.

And just finally, when we look at Ferguson, the organic sales growth is GBP215m in the half year, you've put GBP6m on the bottom line so a 2.8% margin. Historically, Chip, you've always said, look assume 7% activities, operational gearing in there. [By these numbers] it looks like the cost base grew about 10%. You're still taking on college graduates. And when we look forward -- I suppose what I'm really asking is did the sales growth, that GBP215m, was there a sharp adjustment Q1, Q2, just in terms of the comments you were making about your ability to grow at maybe not quite the same pace into the second half?

Yes. I think that's accurate. I'd have to the math. I don't have the benefit of the numbers in front of me like you have with the calculator or whatever but the intent is, and I think Frank will explain to you, we're definitely going forward with our graduate program there. What we've found is that we've not, by virtue of the retention rate, it's so much higher with the new training program, and I won't get into all the details of that, is so much higher than we ever had. I think we're at 70% after two years.

Yes.

And we've always projected 50%. We're all products of the systems it's just that we've been able to retain that. So, again, the ability to be able to retain those people doesn't require that we had to have as many coming in and, obviously, with a growth rate that's now 10% versus 30% or whatever it is, the needs different as well. But we're not walking away. That is a core and that will -- if you notice, if you do the math, we're taking more out of the labor costs out of Stock than we are out of Ferguson, when you get that, that's where it is. It gives us that flexibility to be able to bring those kids in, in May, June, July, August and September to be able to do that. So some of those are replacements, if you will.

Can I just pick up on that though? When we look at GBP6m, would I be right in thinking you were profitable first half and you actually broke even or lost money at the organic level in the second quarter? Would that be fair?

No. I think what we would had to do, we had to go back and evaluate the impact of acquisitions because we bought in -- if you look at the growth rate, we had higher acquisition growth and we had to go back and evaluate the [recruitment].

Yes. I'm just looking at the pure organic number there. That was all I was just trying to do because I would have thought there's been quite a sharp slowdown in the second quarter and I'm just trying to understand it. When we look at the cost information and then you look at incremental organic sales growth you [inaudible].

The one thing to consider is if you remember last year, we indicated we had about $35m in profit that came from copper tubing in that last quarter that just showed up. And we had no control over it, we just managed it well. We're not anticipating that this time. It just -- it's not realistic to think that's going to that that's going to occur. So that's a one-off that we clearly identified and we don't see anything coming in, in commodities. Anything like that again.

I think the other thing you have to be careful with, John, is the seasonal side of the business because, obviously, August, September, to some extent October, are very strong months. November, December, January, less so. So you'll always get quite a skewing actually if you look at those six months in terms of relative performance. And things like the branch openings do have an effect in the first period so you can expect a better cost to sales ratio in the second half, certainly, and that final quarter is not indicative, necessarily, of the way it's going to be.

Thanks.

Yes. Robert.

Hello. [Robert Donalds], GLG. Just briefly, two issues. One is a point of small of detail, that is there was a property profit recognized in the cash flow of roughly 11m versus 3m a year ago. I wonder if you could just identify regionally which area that came through?

And the second issue relates to branch openings. Particularly, in the U.K., Chip, and the U.S. heating and plumbing you grew by about 60 and 80 branches respectively. Can you give us a sense of what you expect the second half incremental branch openings to be in those two key areas? And just give us a feel, do those branches come in at 60% of the average size of the existing branch or 50% or is it close to the average? Thank you.

Why don't you answer the second one first because you guys are going to have to get into the math on that?

Yes. On the U.K., on the 60 or so branches that were opened, the vast majority were Bathstore locations. We also had electric center and hire development. In the second half, that run rate will be significantly less as we focus on getting us back to the margin because there's a big investment cost to start those branch openings. That being said, a typical Bathstore location turns a profit within four to five months so we like those, whereas the electric and the Brandon Hires tend to take a little bit longer, but it will not be at the 68. It will probably be about 40-ish for the second half of this year.

Yes. And the 100 in the U.S. and Canada, most of those, well, I would say 25% of those were counters, XpressNet counters or the Canadian version, showrooms, new large branch facilities, satellites. So all shapes and sizes. All types of business. And I would say our run rate in the second half will be probably 65 to 70% of that first half number.

Steve, on the property profits.

Yes. I haven't got the full detail with me. My recollection is that more than half the property profits relate to the U.K. but we had some in the first half year. So I think the year-on-year impact for the U.K. is about 3m in that first half. The majority U.K. and the other spread around U.S. and the rest of Europe.

Other questions. Going once.

Just on acquisitions. I think you've talked before about GBP400m as the number for the year. Is that still very much where you expect to be?

And one for Rob really, in terms of CRH, obviously, announced a deal in Switzerland. Did you have a look at it? Did you have the opportunity to bid and would you have liked to get your hands on it if you'd had more cash?

Well, I don't think we can comment on your second question by any means because we just don't get into acquisitions and what individual acquisitions until we get them done.

To answer your question. Yes, I think GBP400m is what we're targeting. We only have four months left this year. We're pretty much heading down that path. We're beginning to position ourselves. As you know, these things take months to bring into fruition so we're already between Rob and Frank, in combination with Adrian's work, targeting what we're going to do for bolt-ons for next year and the pipeline is always there's plenty. This is such a fragmented industry. There's more opportunities than we can keep up with and we just -- we're in a position now where we can go back and really evaluate those based on knowing how strategic they are but also the performance that they can bring to the organization. And, particularly, like we've had in the recent past, the leadership that they bring in like we've so much success in Europe.

Can I just pick up on that? The actual Tobler in Switzerland, would there have been benefits for yourselves? Did you have a look? Was this on the target listed as potential businesses that would have benefited inside the Swiss --

As you know, we just can't comment on those things because of the situation. We get so much going in with acquisitions at any given time, we have to evaluate each one of them.

Just one question. Paul Steegers from Merrill Lynch. Just on the balance sheet, interest cover is seven times in the first half which is close to your target where you feel comfortable there that you can get it down to five times. Do you -- are you happy, therefore, just to continue to bolt-on acquisitions to get the 5% growth, or do you feel the balance sheet's perhaps constrained? Are there any larger deals that, perhaps, you could envisage that you might want to do over the next 12 months but you feel, perhaps, out of debt, you wouldn't be able to do?

Do you want to start with it Steve and then I'll?

Yes. As Chip has explained, the thing about bolt-on acquisitions equivalent to 5% of the sales growth remains the target. It's always been the acquisitions strategy. But, obviously, we always review other things that come up in our space, almost in answer to the previous question, and then we decide what to do about it. So the immediate part at the moment is a bolt-on acquisition spend around the number of GBP400m. Of course, that will increase next year as the sales base of the business increases. But we will continue to review other things that come up and make a decision but the priority is those bolt-on acquisitions.

So, I guess, another way to ask the question is if something came along and you thought it was really, really exceptional would you not rule out doing another equity issue?

It would just be what I said. I think we'll continue to review everything that comes up in our space and make a decision as to whether to go for it or not.

The other thing too is we've put a lot of [activity strong] acquisitions, don't discount our capital expenditure. We're convinced that this distribution network has tremendous potential for us and we've got to continue to invest. We're obviously continuing to do so in the U.S., we've got a long ways to go in Europe. That's where we can truly get to leverage as far as being able to lower the cost at our suppliers. That's where we, with Adrian's initiative, to really go out and drive the own brand and things that come in from low cost country sourcing or whatever it is where we've got a distribution point. So that's a key -- don't discount how critical that is to our success and truly a competitive advantage.

Yes, sir.

Mike Betts, JP Morgan. Taking on your -- coming back to your stock, two points or two questions. Firstly, there must be a lot of acquisition opportunities at the moment given the bloodbath that's going on there. What's your strategy in terms of the size that you would want that to do within the Group and is this an opportunity or do you prefer to just concentrate on what you've got?

And then secondly, maybe for Steve, and maybe I should know this but what happened in the early '90s, last time we had a collapse in the housing market, to that construction loan book? Did you have to take write-offs?

And, related to that, I think you said you have got 69% loan to value, who's providing the rest and where do they sit relative to you if [support a project]?

Why don't you do that one first.

The construction loan lending program has been with us since we bought what was then Carolina Builders and now Stock Building Supply back in '85, I think it was, or thereabouts. So we've been working on this for about 20 years. For what it's worth, the size of the portfolio now relative to the size of the business is much lower. In other words, we haven't expanded the construction loan lending portfolio at the same time -- at the same rate we've expanded the business. And it's spread around in far more markets now than it was five years ago, 10 years ago, 15 years ago so the exposure is much more spread. All of the security is a first charge, that's the first thing to say, not a second, third or any other charge.

And going back to the late '80s, early '90s, remember housing dropped to about 1m starts at that point. And I think we're in about two or three states in Carolina or Stock, we're now in 33-34 states. And, at that time, the -- one of those states, we happened to be in North Carolina, was a bit of a bloodbath. They just stopped building. So, in those days, in the year which that happened, yes, we have some provisions against some construction loans but virtually all of them, the cash was recovered in the following year or 18 months thereabouts.

So, from an accounting point of view, yes, of course you make a provision if the agent starts getting out, but then you collect the cash by enforcing the security, selling the property. In some cases then, and this would apply if we had a similar development, you have to make a decision as to whether to sell there and then or carry on building actually and wait for the market to pick up. And, obviously, you take a selective view -- or we took a selective view then, depending on each individual market.

So the experience back in those dark days of the late '80s, early '90s was very positive in terms of the system working, having a good cushion with our [TV] ratio, having ability to collect the cash although it may have taken a few months through that foreclosure process. But given that we're massively more spread now, from a housing point of view, and it's a much lower proportion of the activity levels of the business, I think the risk is much, much lower now than it was back in the early '90s.

And as you can see, he doesn't focus on it at all. To answer your second question, have we seen -- are they're going to be opportunities in the U.S.? Well, we have opportunities all the time. Will they be better valuations? I would assume so in the future. Quite honestly, with our bolt-on, and if you begin to measure against the publicly traded companies and building materials, obviously, they've been impacted, but the bolt-on acquisitions, the opportunities that we're looking for, quite honestly, it takes a while for it to catch up. These are mom and pop organizations, they've got to go through their financial year-end, they've got to file their taxes next month, and they've got to wait for the bank to come in and say we need to talk about this, you're raising debt. I would envision, by the time we get into the summer, they'll be a lot of opportunities available at probably some pretty exciting levels. But, again, I think it's a little bit premature in the first quarter of this calendar year.

But, just to clarify, the wish would be to further expand the importance of stock within the Group?

Yes. But I think it's like indicated. Part of our intent is to diversify. There is -- there's a lot of opportunities for us to be in building materials. It's not just new residential construction. Roofing is an $11b industry in the U.S. 78% of that is replacement, no matter what housing starts are. And we can go down the list, you've got cabinets etc. etc. So we want to be in the building materials business but the intent is, certainly, before we went into this cycle, during this cycle, and after this cycle will be continue to diversify that group to some of the other businesses there.

Any others? Okay. Well, ladies and gentlemen, thank you for joining us in London and for tuning in on the webcast. We look forward to seeing you again at our September preliminary results. Have a great afternoon.