London - Wolseley plc released their first quarter financail results.
Commenting on the results, Ian Meakins, Chief Executive, said:“Wolseley has continued to generate good revenue growth in the USA and the UK, although like-for-like revenue declined in the other countries as a result of continued tough market conditions. We improved our gross margins and controlled our operating expenses resulting in a 9.0 per cent increase in trading profit in the ongoing businesses. Cash generation was strong and we are continuing to invest in technology and new business models to deliver better customer service and gain market share.”
|£m||Q1 2014||Q1 2013||Change||Like-for-like change(3)|
|Trading profit (2)||Ongoing (1)||218||200||+9.0%|
|Net (debt) / cash||(469)||(87)|
During the quarter the Group generated revenue of £3,470 million, 7.4% ahead of last year and 3.5% ahead on a like-for-like basis. The impact of inflation on Group revenue was negligible. The gross margin of 27.6% was 20 basis points ahead of last year. Operating costs were tightly controlled, particularly where markets are still declining. Trading profit of £218 million was 9.0% higher than last year and the first quarter trading margin improved by 10 basis points to 6.3% for the ongoing businesses. The number of trading days was the same as in the first quarter last year.
|Central and other costs||(10)||(12)|
|Sold or held for sale||62||73||(2)||(2)|
Quarterly like-for-like revenue growth
|Q1 2013||Q2 2013||Q3 2013||Q4 2013||Q1 2014|
In the USA, like-for-like revenue growth was 7.6% as the key businesses continued to take market share. Inflation overall was negligible. The Blended Branches, Heating, Ventilation and Air Conditioning (HVAC), Waterworks and B2C businesses all generated good like-for-like revenue growth and improved returns. The Industrial segment remained weak. The acquisitions made last year contributed 1.5% of additional revenue growth in the period. Gross margins were ahead of last year and overall US trading profit of £142 million was £20 million ahead.
Like-for-like revenue in Canada was down 0.6% with inflation less than 1%. Market conditions in Quebec remained weak but this was largely offset by continued growth in the West. Gross margins were ahead of last year but due to unfavourable foreign exchange movements trading profit declined by £1 million to £17 million.
Like-for-like revenue in the UK was 4.3% ahead of last year including 1% price inflation. New residential construction and RMI markets grew but Industrial markets remained weak. The acquisition made last year contributed a further 8.5% to revenue growth. Gross margins excluding the acquisition were broadly in line with the same period last year. Trading profit for the period was £25 million, £1 million ahead of last year, held back by excess bad debt charges of £2 million.
In the Nordic region, like-for-like revenue declined 2.6% including 1% price inflation. Market conditions remained particularly difficult in Finland and continue to be challenging in Denmark. Gross margins were somewhat lower in the period due to pricing pressure. Favourable foreign exchange movements contributed £2 million to trading profit, which was still down £6 million to £28 million. In light of continued poor market conditions further cost reductions are being implemented.
Results in France exclude the branches currently held for sale. Like-for-like revenue declined by 4.8% due to continued weakness in the new residential market and inflation was still negligible. Gross margins were lower than last year and operating costs were reduced significantly. Trading profit improved by £2 million due to the reduction in costs. The sale and closure of branches announced last spring and the transfer of branches in the South are progressing well.
In Central Europe, like-for-like revenue declined by 2.9% with no significant price inflation. Overall gross margins were ahead of last year and costs were well controlled. Trading profit was held flat compared to the same period last year at £14 million.
Net debt at 31 October 2013 was £469 million (31 October 2012: £87 million). The final ordinary dividend of £121 million will be paid on 2 December 2013 and the special dividend of £300 million will be paid on 16 December 2013. There have been no other significant changes in the financial position of the Group since 31 July 2013.
Foreign exchange movements in the first quarter increased revenue by £53 million and trading profit by £2 million. However, if current exchange rates continue, in particular the US dollar :sterling rate which is currently $1.63, trading profit will be lower by £25 million in the remainder of the year compared to the same period last year.
Like-for-like revenue growth rates in November have been broadly in line with the first quarter. So far there are no signs of improvement in market conditions across Continental Europe and we expect trading conditions to remain tough for the foreseeable future. We will continue to actively manage our cost base and still expect to charge approximately £20 million of restructuring costs to trading profit this year as previously announced.