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Wolseley reports a solid Q1, supported by strong US and UK sales

PLUMBING supplies group Wolseley posted like-for-like revenue growth of 3.5 per cent in its first quarter, after its performance was boosted by strong trading in the US and Britain, which offset weaker European markets.

The company, which operates the Plumb Center and Ferguson chains in Britain and the US, said trading profit for the group was up nine per cent to £218m in the three months to the end of October, as tight cost control helped it to improve gross margins to 27.6 per cent. Revenue came in at £3.5bn.

Wolseley, which employs around 360 staff in Ripon, North Yorkshire, reported strong annual results in October, and returned £300m to shareholders after seeing signs of improved confidence in the US and its home market.

Chief executive Ian Meakins said: “Wolseley has continued to generate good revenue growth in the US and the UK, although like-for-like revenue declined in the other countries as a result of continued tough market conditions.”

In the US, like-for-like revenue growth was 7.6 per cent as the key businesses continued to take market share, Wolseley said in a trading update.

The blended branches, heating, ventilation and air conditioning (HVAC), waterworks and B2C businesses all generated good like-for-like revenue growth and improved returns, although the industrial segment remained weak. Gross margins were ahead of last year and the overall US trading profit of £142m was £20m ahead.

In the Nordic region, like-for-like revenue declined by 2.6 per cent, including one per cent price inflation. Market conditions remained particularly difficult in Finland, and continued to be challenging in Denmark.

Commenting on the outlook, Wolseley said: “Like-for-like revenue growth rates in November have been broadly in line with the first quarter.

“So far, there are no signs of improvement in market conditions across continental Europe and we expect trading conditions to remain tough for the foreseeable future.

“We will continue to actively manage our cost base and still expect to charge approximately £20m of restructuring costs to trading profit this year, as previously announced.”

The company’s net debt on October 31, 2013 was £469m. The final ordinary dividend of £121m will be paid on December 2, and the special dividend of £300m will be paid on December 16, 2013. Wolseley will announce its interim results on March 25, 2014.

Jonathan Jackson, head of equities, at Killik & Co, said: “We remain positive on the company, which provides exposure to a recovery in housing and construction markets, and we would use today’s share price weakness as an opportunity to buy.”

Mike Allen, of Panmure Gordon, added: “Wolseley has delivered a solid set of Q1 (quarter one) results, Within the mix, the momentum in the US remains strong with good evidence of pricing growth in the UK. Europe remains difficult with no clear signs of improvement as yet.

“We would not anticipate any significant change to consensus on the back of this update and maintain a neutral stance on the shares for now.”

Wolseley can trace its roots back to 19th century Australia. The firm’s founder, Frederick York Wolseley, was born in Dublin in 1837, and emigrated with his family to Australia when he was 17.

In 1887, he founded the Wolseley Sheep Shearing Machine Company in Sydney, Australia.

Mr Wolseley returned to Britain, and in 1889, he set up a company that bought the rights and patents of the Australian company for £75,000.

Wolseley has grown organically and by acquisition to become the world’s largest specialist distributor of plumbing and heating products.

Source : Greg Wright - Yorkshire Post

30 November 2013
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