Strong US markets boost half year results for Wolseley

Recovering markets in the United States have helped to boost half year results for Warwickshire-based Wolseley.

In its interim results statement, the group said the six months to January 31, 2017 had benefited from the markets in the US, which account for 75% of total revenue.

“The US residential and commercial markets remained good and industrial markets improved but were still negative,” it said.

However, the picture in the UK was different.

“There was little growth in the UK heating market. Nordic markets overall were weak, though there has been some recovery in the last two months,” it added.

Revenue for the six months reached £8,461m (2016: £6,795m), up 6.7% at constant exchange rates and 3.2% ahead on a like-for-like basis. US commodity price deflation remained a headwind in the first half but eased over the period. Gross margins of 28.6% (2016: 28.3%) were 0.3% ahead of last year as the group said it continued to focus on improving its mix of customers, products and sales of higher margin private label products.

Trading profit was £515m (2016: £412m), 5% ahead of last year at constant exchange rates. The trading margin was 6.1% (2016: 6.1%).

The period saw the group invest £271m in eight acquisitions with annualised revenue of £214m. It also completed two further acquisitions since the period end with annualised revenue of £33m.

Pre-tax profit was £328m (2016: £367m) which was after impairment and exceptional costs of £124m.

Headline earnings per share were 141.0p (2016: 111.3p) an increase of 26.7%, reflecting foreign exchange movements, the growth in trading profit and the reduction in share count as a result of the buyback last year. Basic earnings per share from continuing operations were 83.7p (2016: 103.9p).

John Martin, Chief Executive, said: “The group delivered a good trading performance in the first half driven by (US subsidiary) Ferguson. In the US, residential and commercial markets remained good and industrial markets improved but were still negative. Commodity price deflation reduced US revenue growth by 1.8% in the first half.

“The UK transformation programme has started well and we are making good progress clarifying our customer propositions and simplifying our logistics network. We have concluded our review of the Nordic operating strategy and identified a clear and executable plan to return the business to profitable growth.

“However, there are few synergies with the rest of the group’s plumbing and heating businesses and we have initiated a process to exit our business in the region. We have excellent opportunities to generate attractive returns in our other businesses and we will focus resources there in the future.”

Ferguson now accounts for 84% of group trading profit and as such, Wolseley said it had decided to align the group’s name with its most significant brand in our largest market.

“Whilst the group will be known as Ferguson plc going forward we will continue to use the Wolseley name in the UK and Canada where it has strong local recognition,” added Mr Martin.

The move coincides with the decision by Ferguson CEO Frank Roach to retire from the business.

He will also step down as an executive director of Wolseley July 31, 2017.

The Wolseley board has said his replacement will be Kevin Murphy, current Chief Operating Officer of Ferguson.