READING, England -- In the half year ended 31 January 2011 Wolseley’s markets continued to stabilise particularly in the new residential and Repairs, Maintenance and Improvement (RMI) segments. Revenue growth of 5%, an ongoing focus on maintaining gross margins and cost control led to a strong first half performance.
During the first half the Group generated revenue of £6,629 million (2010: £6,331 million). Like-for-like revenue growth was 5% and the rate continued to improve in the first half driven principally by the USA, which generated 41% of Group revenue. The beneficial impact of inflation on Group revenue was around 3%, principally due to rising commodity prices. Despite considerable pressure on selling prices, the gross margin was 20 basis points higher at 27.7% as a result of a continued focus on improving customer and product mix. Trading profit of £275 million was £108 million higher than last year driven by higher revenue and gross profit and a stable cost base. While operating costs in the first half were £16 million lower, the cost base in constant currency in the ongoing business, excluding disposals, rose by 2%. The rate of cost growth is expected to be somewhat higher in the second half of the year. The Group’s trading margin increased from 2.6% to 4.1%.
An exceptional charge of £11 million was incurred in the first half arising primarily from losses on disposal of businesses and the revaluation of assets held for sale (2010: exceptional charge of £255 million). The charge relating to amortisation of acquired intangibles was £38 million (2010: £48 million). Net finance costs of £31 million (2010: £41 million) were substantially lower reflecting the reduced level of net debt and the benefits of effective cash pooling. Profit before tax of £195 million (2010: loss before tax of £261 million) was strongly ahead.
The effective rate of tax on trading profit less net finance costs was 30% (2010: 34%) principally as a result of the redomiciliation to Switzerland. Headline earnings per share were 60.5 pence (2010: 24.5 pence) and basic earnings per share from continuing operations were 47.1 pence (2010: loss per share of 79.5 pence). The growth in profitability has enabled the reinstatement of dividends and an interim dividend of 15p per share has been declared.