US growth helps Wolseley offset weak UK demand

BUILDING supplies group Wolseley has seen interim pre-tax profit climb 28% with revenue up 5% on a like-for-like basis, despite a decline in its UK sector during the first half.

The Warwickshire group said revenue in the ongoing UK business declined 3% on a like-for-like basis. Demand was also weak in other European territories but showed an improvement in the United States and Canada.

Half-year revenue came in at £6.8bn (2011: £6.6bn), with pre-tax profits standing at £250m (2011: £195m).

The underlying gross margin in the ongoing business remained unchanged.  Trading profit of £310m included £8m (2011: £4m) for businesses sold or held for sale and is net of £16m (US: £11m, UK: £3m, France: £2m) of non-recurring items (2011: £3m).  Adjusting for these items, underlying trading profit was £318m (2011: £274m), up 16% on last year.  

Earnings per share rose 30% to 78p, with the interim dividend increased by 33% to 20p per share.

Wolseley said the UK business, which includes brands such as Plumb Center, Climate Center and Pipe Center, had made considerable progress in replacing volumes lost when a contract ended last year. Headcount was also reduced by 179.

It added that while demand in the heating market was subdued, other product categories had performed well.  Price inflation in the ongoing businesses was approximately 3%.
Trading profit for the ongoing business was £44m, down £4m on last year although this included £3m of non-recurring restructuring charges.

Plumb and Parts Center were said to have achieved a good performance in lacklustre markets and increased gross margins despite strong competition.  Pipe and Climate Center and Drain Center both continued to perform well, generating good growth and continuing to take market share.

The underlying trading margin for the ongoing UK business was 5.5% (2011: 5.6%).

Ian Meakins, Wolseley chief executive, said: “Wolseley has delivered another decent performance, despite challenging economic conditions in Europe, with like-for-like revenue growth of 5%.

“The underlying gross margin was maintained and our ongoing focus on operational efficiency has delivered further improvements in the trading margin of the ongoing business to 5%.”

He said good cash flow had enabled the business to continue to reduce net debt and to invest for future growth.  It completed a number of value-enhancing acquisitions in the US and Nordics region with integration continuing.

“Like-for-like growth trends for the group since the end of the period have been slightly lower than the first half overall with the US a little better and Europe a little weaker. We will continue to pursue operating efficiencies and remain focused on improving customer service, gaining market share and protecting our gross margins.

“We will continue to invest selectively in the business where we can exploit growth opportunities and generate good returns,” he added.