READING, England – Wolseley recently announced its first quarter earnings results. According to the company,
- Revenue increased by 2% and like-for-like revenue increased by 4%.
- Gross margin was 27.0%, 0.2% ahead after adjusting for disposals.
- Operating costs were £23 million lower than last year principally due to disposals.
- Strong trading profit growth to £159 million.
"Most markets continued to grow in the first quarter and the Group’s trading performance was slightly ahead of management expectations, said Wolseley CEO Ian Meakins. “Whilst demand has improved in most countries, pricing competition has remained intense. We continue to focus on improving customer service, growing market share, driving efficiencies and generating strong cash flow."
First quarter trading performance
During the quarter the Group generated revenue of £3,471 million. This was 2% ahead of last year, and 4% on a like-for-like basis, consistent with last quarter. The gross margin of 27.0% was 0.2% ahead of last year adjusting for disposals, despite continued pricing pressure. Trading profit of £159 million was £45 million higher than last year as a result of the revenue growth combined with careful control of gross margins and costs. The results for the period also benefitted from the impact of restructuring actions completed in the first quarter last year. The net impact of non-recurring items charged to trading profit in the quarter was not material and there were no significant exceptional items. The trading profit in the first quarter last year has been restated from £104 million to £114 million, the difference arising from items later reclassified as exceptional.
In the United States, revenue was 10% ahead of last year and like-for-like revenue growth was 6%, the difference arising from strengthening of the U.S. dollar. Demand in Residential and RMI markets continued to improve and the business made good progress in the Industrial and Waterworks sectors. Demand in the Commercial sector remained subdued. Trading profit of £80 million was £18 million ahead of last year as a result of the improvement in revenue.
Canada generated revenue 16% ahead of last year, 7% on a like-for-like basis, due to the strengthening of the Canadian dollar. The growth trends continued to reflect positive economic factors although these have moderated recently. The Waterworks and Industrial PVF businesses continued to perform strongly. Trading profit of £16 million was £4 million ahead of last year.
Revenue in the UK declined by 4% in the quarter, though like-for-like revenue was 5% ahead of last year with the difference being due to the disposal of businesses, including Brandon Hire which was completed in September 2010. Trading profit in the quarter of £30 million compared to £23 million in the same period last year, the improvement arising from exiting Ireland and reductions in the cost base.
In the Nordic region revenue increased by 1% and the like-for-like increase was 4% the difference being the result of adverse currency movements. The market in Denmark, the largest revenue generator in the region, continued to decline though Sweden, Finland and Norway all generated like-for-like growth. Trading profit of £35 million was in line although last year’s result included a one-off gain of £2 million relating to the disposal of property.
Revenue in France declined by 8%, although the business generated like-for-like growth of 2%, with the difference arising from currency movements. The Building Materials and Import and Wood Solutions businesses generated like-for-like growth though the revenue trend in plumbing and heating remained negative. France overall broke even in the first quarter compared to a loss of £9 million last year, principally due to improvements in the cost base.
In Central Europe revenue was 10% lower than last year, 3% lower on a like-for-like basis as a result of disciplined margin management and the exit of unprofitable business. Profitability improved in each country and the region generated a trading profit of £12 million, strongly ahead of last year.
Net debt at 31 October 2010 was £681 million (31 October 2009: £1,223 million) and £249 million of factoring facilities were utilized (31 October 2009: £145 million).