Wolseley profits up 30%

Published:  01 June, 2011

LEAMINGTON SPA: Wolseley reported its third-quarter operating profit up 30% on the back of a healthy repair and maintenance sector and strong revenue growth in the US.

However, revenue in the UK declined by 4% in the quarter, though like-for-like revenue was 1% ahead of last year, the difference mainly arising from the disposal of Brandon Hire in September 2010.

Trading profit for the quarter was £28m – £3m below last year –  due to adverse bad debt charges which were £4m higher than last year.

Revenue in 'plumb' and 'parts' was affected by the loss of a large national supply contract at the end of March 2011, although gross margins improved, the company said.

In addition, the comparative figures included the benefits of the Government's boiler scrappage scheme that ended in March 2010. Drain, Pipe and Climate Centers all performed well in the period.

Build Center "continued to make progress improving its trading performance" with a lower cost base and a focus on higher margins. Bathstore continued to face "challenging market conditions", with revenue significantly lower than last year.

Wolseley said underlying operating profit soared to £131m in the third quarter ended April 30, from £101m in the same period last year, ahead of market expectations.

"New residential construction, which accounts for 20 percent of group revenue, remained subdued in most regions, while demand in repair, maintenance and improvement (RMI) segments held up well in most markets," chief executive Ian Meakins said in a statement on Wednesday.

Wolseley made no comment on the rumours that it is in talks to sell units Build Centre, Electric Centre and Encon as part of its restructuring to sell off non-core assets.

In March, Wolseley said five of its businesses, including its French plumbing and heating company Brossette, were for sale, with decisions on the future of six others still to be made.

Like-for-like revenue growth was strongest in the US, up 10% in the quarter, as well as France and the Nordics, but was offset by weaker sales in the UK and Canada.

Wolseley said it remained confident of meeting its expectations for the year, and as part of its drive to lower costs, net debt was lowered furthered to £824m, from £1.34bn a year ago.

Shares in the company closed at 2088p on Tuesday, valuing the company at £5.7bn.

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