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## Europe Distribution 

## Results 

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EBITDA and operating profit exclude profit on disposals 

Adverse weather conditions in the early months of 2012 combined with weaker market demand in the Netherlands and Switzerland resulted in a sharp decline in first-half profits. However, despite continuing market weakness, a disciplined approach to pricing combined with strong cost and procurement management delivered a robust second-half trading performance with both EBITDA and operating profit margins in line with the period from July to December 2011. As a result, the full-year EBITDA decline was limited to 14% (down 26% in the first-half) while full-year operating profit fell 19% compared with a first-half decline of 35%. 

In 2012 Europe Distribution continued to expand its Sanitary, Heating and Plumbing business and added two Belgian specialist merchants with a total of 16 branches, strengthening our market presence in what is a key market for the segment. In the Netherlands we acquired a specialist merchant of finishing products, adding 6 branches to the Dutch Professional Builders Merchants business. 

## Professional Builders Merchants (50% of EBITDA) 

With 426 locations in six countries, Professional Builders Merchants has strong market positions in all of its regions. Overall operating profit for this business was lower than in 2011. 

Markets in the Benelux were weak in 2012 and this resulted in lower sales and operating profit. Sales levels in France were slightly lower compared with 2011 but operating profit was maintained due to the strong focus on costs, purchasing and pricing. Our operations in Switzerland saw a decline in sales impacted by the severe winter weather and the strength of the Swiss Franc which affected competitiveness; however, strict cost control measures alleviated the impact on operating profit. Austria again showed a strong performance and for the fourth year in a row reported an increase in operating profit. In Germany like-for-like sales decreased during 2012 due to poor early weather and a weak garden season; as a result, profits fell short of 2011 levels. 

## DIY (30% of EBITDA) 

Our DIY platform in Europe operates a network of 238 stores under four different brands; Gamma and Karwei in the Benelux, Bauking in Germany and MaxMat in Portugal. Overall operating profit for DIY was behind 2011. 

In the Netherlands, continued weakness in consumer confidence put pressure on sales levels; however, the adverse impact on operating profit was lessened due to specific purchasing initiatives and good cost control. In Belgium our network of 19 stores reported an increase in operating profit as a result of continued progress realised on operational effectiveness. With consumer 

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confidence also under pressure in Germany during the latter part of the year, operating profit for our 48-store DIY network in Germany declined. Despite a very difficult economic environment in Portugal, operating profit was in line with 2011. 

## Sanitary, Heating and Plumbing (‘SHAP’) (20% of EBITDA) 

Our SHAP business services the specialist needs of plumbers, heating specialists and installers, and of gas and water technicians. With a total of 119 branches in three countries and annualised turnover of almost €600 million, this business is developing in line with our strategy to build a European platform in this growing RMI-focussed channel. With the benefit of acquisitions during the year, operating profit was well ahead of 2011. Our businesses in Germany and Switzerland performed well in 2012 delivering improvements in sales and operating profit compared with 2011. The business in Belgium performed strongly and once more exceeded expectations. 

## Outlook 

After a difficult 2012 we believe that market conditions will remain weak in 2013, albeit at different levels in the various markets we operate in. Our expectations for the German, Austrian, Swiss and Belgian markets are more favourable than our outlook for the markets in the Netherlands and France. We therefore expect 2013 to be challenging, due mainly to the difficult outlook for the Dutch economy, and we remain focussed on delivering further savings from our operational excellence programmes. 

Restructuring costs amounted to €3 million (2011: €4 million) 

## Analysis of change 

No impairment charges were incurred (2011: €2 million) 

