Wolseley is confident as profits rise

City A.M. Reporter
WOLSELEY, the world’s largest plumbers and builders merchant, posted a 39 per cent rise in first-quarter trading profit, helped by top-line growth in all regions.

The FTSE 100 company said underlying operating profit rose to £159m in the three months to end-October, with like-for-like revenue up four per cent to £3.47bn.

“This is a business with fairly low visibility, but I would say we are quietly cautiously
confident that we will continue to generate growth,” chief financial officer John Martin said.

Like-for-like US revenues were up 6 per cent, while revenues in Canada rose 7 per cent. Like-for-like sales were ahead by 5 per cent in the UK.

Wolseley, which trades in Britain, Canada, the United States and 22 other countries, said demand improved in most countries in its first quarter but pricing competition remained tough with no sign of a respite in 2011.

“There remains a lot of spare capacity in the industry... It would not surprise me if that drags on pricing certainly for the rest of this financial year,” said Martin.

Shares in Wolseley, which said in September it was to redomicile in Switzerland to lower
its tax rate to 28 per cent from 34 per cent, closed up 2.73 per cent at 1880p.

Residential new-build markets remain “very depressed”, Martin said, adding a focus on repair and maintenance and its industrial unit were driving growth while commercial markets were showing early signs of stabilising after a deep downturn.

“These markets are still driven partly by sentiment and consumer sentiment remains weak, but it is better than 2008 and 2009.”

As part of a restructuring announced last year, Wolseley is continuing to assess non-core assets.

Martin said three businesses, which represent 10 per cent of group sales, were under review despite contributing to a “material improvement” in trading profit this year.

“Wolseley has been the big winner in 2010 in the building materials sector,” Davy Research analyst Flor O’Donoghue said, noting the E300 Construction and Building Materials Index has fallen five per cent this year while Wolseley is up almost 50 per cent.