Wolseley Revenue 2.2% Ahead For The Year

Wolseley's revenues are 2.2% ahead of predictions, a figure that CEO Ian Meakins attributes to increased operational efficiency and strong performance in the U.S., combined with tough market conditions in the UK and Europe. The release does mention that the company may simplify and refocus its Building Materials segment in France, Reseau Pro, including a possible sale or closure.

Results for the half year to 31 January 2013

£mH1 2013H1 2012H1 2012 ongoing (1)Change ongoing (1)Like-for-like change (3)
  1. Ongoing businesses excludes businesses that have been sold or are held for sale.
  2. Before exceptional items and the amortisation of acquired intangibles and with respect to headline earnings per share before non-recurring tax credits.
  3. The increase or decrease in revenue excluding the effect of currency exchange, acquisitions and disposals, trading days and branch openings and closures.
Gross profit1,7421,8761,713+1.7% 
Trading profit (2)324310301+7.6% 
Exceptional items(87)(29)   
Profit before tax199250   
Headline EPS (2)80.7p77.7p +3.9% 
Dividend per share22p20p +10.0% 
Net debt871470   

Financial highlights

Revenue in the ongoing businesses of £6,276 million translates to 2.2% ahead on a like-for-like basis for the company. Gross margin for the ongoing businesses increased to 27.8%, while trading profit of the ongoing businesses is 7.6% ahead of last year. Trading margin for the ongoing businesses is 5.2%, 0.4% higher than last year. The company has net debt of £871 million after £462 million of dividends, £125 million of one-off pension contributions and purchase of £110 million own shares by Employee Benefit Trusts. This half-year, the interim dividend increased by 10% to 22 pence per share.

Operating and corporate highlights

The company continued to experience market share gain and growth in USA, broadly flat in Canada and UK and weakness in Europe. European headcount has been reduced by 990 (7.2%) since 31 July 2012. There has been a continued focus on productivity improvements across the group. In France, detailed plans to simplify and refocus Reseau Pro, its Building Materials business, including proposed disposal or closure of up to 40% of its network, to create a strong regional player in the north. Four bolt-on acquisitions were completed in the period for £120 million with aggregate annual revenue of £245 million.

Ian Meakins, Chief Executive, commented:

“The highlight of these results is the strong performance across our US businesses with market share gains and productivity improvements. Canada and the UK have performed well in continued tough market conditions. We faced substantial headwinds in Europe, and are taking appropriate actions to protect profitability. The underlying gross margin increased and our ongoing focus on operational efficiency has delivered further improvements in the trading margin of the ongoing businesses, now up to 5.2 per cent. Our strong balance sheet has enabled us to continue to reinvest in our businesses at the same time as paying dividends of £462 million. We have completed a number of bolt-on acquisitions in the USA and the UK and they are being integrated successfully.”

“We are in advanced negotiations relating to the proposed disposal of 88 Building Materials branches in the south of France, the potential closure of 24 loss making branches and detailed actions to simplify and refocus the remaining Building Materials business in France. We believe these proposals can create a strong regional player in northern France with a better proposition for our customers, a lower cost to serve and an efficient organisational structure.”

Commenting on the outlook, Ian Meakins said:

“Like-for-like growth in the third quarter to date has been consistent with the second quarter overall.  We continue to see strong growth in the USA, a broadly flat performance in Canada and the UK and very weak conditions in Europe.  We will invest in growth opportunities where they are available and maintain tight control of the cost base in Europe, whilst implementing the strategic proposals we have outlined in France.”