Wolseley returns to profit

Published:  04 October, 2011

LEAMINGTON SPA: Resurgent plumbers' merchant Wolseley saw a 38% improvement in annual trading profit at £622m, ahead of the £610m predicted by broker Panmure Gordon.

Profit before tax in the year to 31 July was £391m, versus a loss of £328m the year before, on revenue that grew 3%, or 5% on a like-for-like basis, to £13.56bn.

Ian Meakins, chief executive, said: "We have delivered another decent set of results despite challenging economic conditions, with better customer service driving sales and strong trading profit growth.

"Our ongoing focus on market share gains, protecting gross margins and tightly controlling cost led to a £172m improvement in trading profit and trading margins 120 basis points ahead. Our disposal programme is now substantially complete, enabling us to focus on our great businesses in attractive markets."

Revenue growth trends in August and September were similar to the fourth quarter last year but Meakins cautioned that the outlook was weakening and the final quarter showed a like-for-like decline of 2% on a year earlier.

Meakins said the business is in good shape. "We have strong market positions in large attractive markets with an effective business model and significant opportunities for growth.

The company has reduced its debt to £705m from borrowings of nearly £3bn seen in the aftermath of the 2008 credit crunch. "The business is highly cash generative and borrowings are at a 10 year low. We expect to increase investment in the business where we can generate good returns. Operationally, we will remain focused on improving the service to our customers and developing our strategy to gain market share and protect margins. In the current environment, we will remain cautious on the cost base," he said.

Bathstore posted a 15% slump in annual sales and Wolseley took a £29m write-down to reflect Bathstore's reduced value on its books.

The company said the chain, which it has tried to sell, faced "particularly challenging" trading conditions but remained profitable. Bathstore is the company's only consumer-facing brand in the UK.

Public sector activity, which represents around 25% of UK revenue, stalled in the second half but the more resilient repair and maintenance sector, which represents about 65% of revenues, held up "reasonably well".

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