Wolseley confident in reslilience amid mixed markets

Plumbing and heating products group Wolseley stressed the resilience of its first-half performance, lifting the dividend 10% as it rode out mixed market conditions and sustained deflationary headwinds in the USA, UK and Europe.

Market conditions remain mixed but after a low point in November, like-for-like revenue growth over the subsequent three month period to 29 February 2016 improved to 3.2% for the group and 5.7% in the USA.

While the residential and commercial building markets that account for 70% of US revenue have held up well, industrial markets have been tough due to lower oil prices and the impact of the strong dollar on US domestic manufacturing.

In the UK, the repairs, maintenance and improvement (RMI) and social housing markets were also challenging, which has seen management step up cost-control initiatives, with £15m of restructuring spend committed for the second half.

UK profits were the worst performing in the period, falling 21%, ahead of Canada, which was down 17%.

In the six months to 31 January revenue from the ongoing businesses reached £6.8bn, which was 5.9% ahead of the same period a year ago and 2.7% ahead on a like-for-like basis.

Gross margins were widened to 28.3% from 27.9% a year ago, with trading profits up 5.1% to £410m.

An interim dividend of 33.28p per share was declared, an increase of 10.0%, after earnings per share rose 6.4% to 110.2p thanks to the growth in trading profit and the reduction in share count as a result of the buyback.

Chief executive Ian Meakins, who will retire on 31 August and be replaced by current chief cinancial officer John Martin, was confident the full year result would be in line with expectations.

"Our strong cash flow has allowed us to continue to invest in our business for future growth, as well as to return surplus cash to our shareholders," he said.

"Market conditions remain mixed across the group and we will therefore continue to invest in profitable growth where conditions are favourable and take actions to reduce our cost base and protect our profitability in weaker markets."