Wolseley lifts first-quarter revenues despite weak UK and Nordics

Wolseley, a distributor of plumbing and heating products, reported a rise in first quarter revenue, including increased revenue from the US, but said the UK remained weak and the Nordics had deteriorated.

During the quarter ended 31 October, the company generated revenue of £4.36bn, 5.2% ahead of last year at constant exchange rates and 1.8% higher on a like-for-like basis, including a 1.3% commodity price deflation.

Trading profit rose 1.4% to £303m at constant exchange rates, this included an extra day of trading which generated £6m of additional trading profit.

Exchange rate movements increased revenue by £599m and trading profit by £48m.

In the US, the company’s plumbing and heating business, Ferguson, grew 4.2% on a LFL basis, this was partly offset by the ongoing impact of commodity price deflation which reduced US revenue growth by 2.4%.

LFL revenue was down 2.9% in the UK as the repairs, maintenance and improvements markets remained “weak”. But despite this the gross margin increased and the £17m of trading profit was just £2m behind last year.

For the Nordic region LFL revenue fell 2.9% due to deterioration in the construction markets and the gross margin was weaker with trading profits, at contrast exchange rates, behind by £5m. The company said it has launched a review of the region's operating strategy.

LFL revenue in Canada and central Europe was also down 2.7%.

While the US provided some encouragement, chief executive John Martin said: “Our other markets were more challenging as the UK heating market was weak and Nordic construction markets deteriorated. While revenue growth trends have improved slightly we continue to manage costs and productivity very carefully while continuing to drive customer service and strong cash conversion."

Net debt at the end of October widened by 18% in line with expectations to £1.16bn and the final dividend of £167m was paid to shareholders on 1 December.

During the quarter the company made four acquisitions, and one since the end of the quarter, for a combined £216m.

The company said that like-for-like revenue growth in the second quarter has been in line with the first.

It said that markets continue to be mixed across the business with “some uncertainty in the economic outlook”, but it remains confident that company “will make further progress in the year ahead and expect group trading profit to be in line with analyst expectations at current exchange rates”.

Analysts at Shore Capital said: "No further details on cost cutting planned for UK were announced however gross margins are ahead of last year which indicates some progress is already being made.

"As we have previously discussed there is a concerted effort amongst the three major players in the UK plumbing and heating distribution market to reduce capacity and we expect to see an improvement in profitability across the industry within the next 12 months."