Wolseley reinstates dividend in fragile market

Building supplies retailer Wolseley has grown trading profits by 64 per cent in the six months to the end of January as smaller builders continued to pull in renovation, maintenance and improvement work on houses.

Trading profit rose to £275m in the half year, up from £167m in the same half in 2010, while pre-tax profit rose to £195m, up from a £261m loss in 2010.

The group, which supplies professional builders, has cut net debt to £933m from nearly £1.5bn in the half year in 2010.

Earnings per share have also soared to 47p from a 79p loss per share in 2010 and the company has reinstated its interim dividend, paying 15p per share.

Chief executive Ian Meakins said the company had acted defensively to protect margins and cut costs in a “fragile” environment.

“The overall macro-economic environment in several regions continues to be fragile and pricing competition remains intense. The impact of recent VAT increases and government spending cuts leaves the outlook in the UK more uncertain,” he said.

Revenue rose five per cent on a like-for-like basis in the six months to £6.63bn from £6.33bn in the 2010 half.

Wolseley also made structural changes, adding three small bolt-on acquisitions in the period and selling its Italian business in February this year.

“The group expects to continue to grow in the second half of the year, though the comparatives will now be much more demanding,” Meakins added.

Keith Bowman at Hargreaves Lansdown said Wolseley's shares have outperformed the FTSE 100 by 25 per cent over the past year so the group's recovery was already well priced in.

"Management have again peppered outlook comments with caution," he said. "The shares remain a geared play on economic recovery, particularly in the US."