Wolseley improves on full year but warns of continuing European woes

BUILDING, heating and plumbing supplies group, Wolseley, has announced improved full-year results. The Leamington Spa group said market conditions in the US had been good and the UK was improving although Europe continued to struggle.

It said demand in the Repairs, Maintenance and Improvement (RMI) markets remained stable in most countries.  However, residential new construction markets were weak in all regions outside of the US.  However, most of the group’s major businesses continued to gain market share.

The board has proposed a special dividend of £300m accompanied by a share consolidation which the group said reflected its strong financial position and its desire to maintain an efficient and sustainable balance sheet.

Revenue for the full year was up 4.1% at £12,854m (2012: £12,345m), including like-for-like growth of 2.9%.  The gross margin in the ongoing business improved by 0.1% on an underlying basis and 0.3% overall to 27.8% (2012: 27.5%) despite very competitive market conditions.  Operating expenses in the ongoing business were 3.6% higher in constant currency of which 1.4% arose from acquisitions completed during the year.

Trading profit in the ongoing businesses was £725m (2012: £655m), an increase of 10.7% on last year. The trading margin for the ongoing business increased to 5.6% (2012: 5.3%).

Impairments and exceptional charges of £174m (2012: £377m) were incurred which principally related to restructuring in Continental and North Europe.  The normal amortisation charge in relation to the group’s acquired intangible assets was £55m (2012: £60m).

Headline earnings per share stood at 181.8p (2012: 168.4 p), an increase of 8%, reflecting the growth in trading profit and lower finance charges, although partly offset by higher tax charges.  Basic earnings per share from continuing operations were 106.3p (2012: 21.2p).

In the UK, revenue was 2.5% ahead of last year on a like-for-like basis.  New residential construction and RMI markets improved in the second half.
 
Plumb and Parts Center increased market share as did Pipe and Climate Center though growth was held back by weaker industrial markets.  Gross margins were down on last year due to the dilutive impact of the Burdens acquisition in January and a challenging pricing environment.  

Headcount in the ongoing business increased by 52.  Trading profit for the ongoing business of £95m was £2m ahead of last year, principally due to one-off property gains.

Its markets in the US continued to grow steadily, however, it said Continental Europe was very challenging and it expected this would remain the case for the foreseeable future.  

“We will continue to take all appropriate actions to reduce our cost base and protect our profitability.  In the year ahead we plan to increase our investments where there are growth opportunities, and in technology and processes to develop more efficient business models.  This will improve the leverage in our business and generate good growth in the future,” it said.