Annual Report & Accounts 2010

Notes to the Accounts

1 Segmental information

The Chief Operating Decision Maker ('CODM'), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board. IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Board to allocate resources and assess their performance. The business is organised around differences in products and services. Where areas of the business have common characteristics, segments have been aggregated appropriately.

The Group's reportable segments and their activities are listed below:

The Domestic Division supplies a comprehensive range of sanitaryware, heating and plumbing products to a variety of customers, both public and private sector, from large national contractors to sole trading plumbers and heating engineers through its extensive branch network.

The Industrial Division is the market leader in the UK supply and distribution of pipeline, process, heating and mechanical services equipment. Its customers range from large national contractors to local independents.

The Specialist Division supplies a range of power tools, hand tools, maintenance and health and safety products to three principal market sectors, the manufacturing industry, wholesale and trade customers. The Division uses its key capabilities, industry leading catalogues, web and vendor managed inventory solutions, in order to maximise service to its customers.

	2010					2009
	Industrial Division £m	Domestic Division £m	Specialist Division £m	Total £m		Industrial Division £m	Domestic Division £m	Specialist Division £m	Restated Total £m
Gross revenue	332.9	931.5	113.1	1,377.5		352.1	873.3	122.2	1,347.6
Inter-segment sales	(0.5)	(15.1)	(9.5)	(25.1)		(0.5)	(2.2)	(4.3)	(7.0)
Revenues from external customers	332.4	916.4	103.6	1,352.4		351.6	871.1	117.9	1,340.6
Adjusted segment result	25.1	32.6	2.0	59.7		30.0	36.8	4.7	71.5
Amortisation of acquired intangibles	(0.4)	(0.5)	(1.4)	(2.3)		(0.3)	(0.4)	(1.5)	(2.2)
Exceptional redundancy costs and restructuring costs	(1.2)	(0.8)	(1.0)	(3.0)		(0.3)	(0.6)	(0.1)	(1.0)
Segment Result	23.5	31.3	(0.4)	54.4		29.4	35.8	3.1	68.3
Unallocated charges (including redundancy costs)				(4.8)					(3.9)
Operating profit				49.6					64.4
Net finance costs				(5.4)					(6.6)
Profit before taxation				44.2					57.8
Income tax expense				(12.8)					(16.8)
Profit for the year				31.4					41.0
Segment assets	126.7	321.2	40.7	488.6		119.9	282.2	44.0	446.1
Acquired intangibles	3.1	4.7	20.9	28.7		0.9	4.2	22.3	27.4
Goodwill	14.2	56.4	17.4	88.0		10.9	51.6	17.4	79.9
	144.0	382.3	79.0	605.3		131.7	338.0	83.7	553.4
Unallocated assets
Fixed asset investment				0.3					–
Deferred tax assets				7.9					9.8
Cash and cash equivalents				10.3					10.8
Derivative financial instruments				17.1					25.5
Intangibles – software				21.9					18.2
Properties				6.8					6.8
Group property, plant and equipment				1.4					0.4
Total assets				671.0					624.9
Segment liabilities	(71.7)	(169.6)	(18.5)	(259.8)		(64.5)	(140.4)	(19.7)	(224.6)
Unallocated liabilities
Retirement benefit liabilities				(26.2)					(30.9)
Onerous lease and property dilapidation provisions				(3.2)					(3.1)
Financial liabilities				(110.3)					(118.0)
Tax liabilities				(15.6)					(16.7)
Total liabilities				(415.1)					(393.3)
Other segment items
Capital expenditure – Property, plant and equipment
Segment	0.8	3.3	1.2	5.3		1.0	6.1	0.8	7.9
Group				0.1					0.1
Capital expenditure – Intangibles
Group				4.6					7.4
				10.0					15.4
Depreciation
Segment	1.1	3.8	0.6	5.5		1.1	3.5	0.7	5.3
Group				0.5					0.5
				6.0					5.8
Amortisation of intangible assets
Segment	0.4	0.5	1.4	2.3		0.3	0.4	1.5	2.2
Group				0.9					0.3
				3.2					2.5

All inter-segment sales/transfers are transacted on an arm's length basis. The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the profit earned by each segment without allocation of corporate and head office costs, investment revenue and finance costs and income tax expense as reported to the Board.

The Board monitor the tangible and intangibles assets and working capital of each segment. Segment assets include property, plant and equipment, goodwill, inventories and trade receivables and exclude deferred taxation. Segment liabilities comprise operating liabilities and exclude taxation, borrowings and retirement benefit liabilities.

Geographical information

The Group operates in one principal geographical area, the UK. The Industrial and Specialist Divisions sell products to overseas countries but these operations of the Group are not monitored by the Board for allocating resources or performance purposes as a separate function.

Information on the split of revenue to overseas countries is shown below, no information on the allocation of assets is available.

	2010 £m	2009 £m
UK	1,338.7	1,322.9
Republic of Ireland	11.2	15.1
Other	2.5	2.6
	1,352.4	1,340.6

Sales to any individual country outside of UK and the Republic of Ireland are not material and therefore are not disclosed separately.

Information about major customers

The Group does not rely on any individual customer. Included in revenues arising from the Domestic Division are revenues of approximately £57.8m (2009: £50.5m) which arose from sales to the Group's largest customer.

Information on products and services

Each Division supplies a distinct set of products and services. The Group's revenues from its major products and services and allocation of its assets are shown by individual segments above.