Wolseley turns up dial in third quarter thanks to US strength

Wolseley turned up the dial on sales in the third quarter, as the heating and plumbing group enjoyed good growth from its main US markets which offset a weak Britain.

The FTSE 100 group, which at the end of July will change its corporate name to Ferguson Plc to reflect the importance of its main US brand, saw sales rise 16.7% to £4.27bn in the three months to the end of April, up 4.6% at constant exchange rates and 6.6% on a like-for-like basis.

US sales rose 24% or 8.5% on a LFL basis, the UK was almost flat with LFL sales down 0.4% including inflation of 3% as the "repairs, maintenance and improvement markets remained weak", while the Nordics returned to growth with LFL sales up 4.3% but gross margins weaker.

Revenue was boosted by £423m from exchange rate movements.

Forex changes also gave a £29m boost to profits, more than offsetting a £17m hit from two fewer trading days this year compared to last year, leading to a trading profit of £254m for the quarter.

The US division made up £227m of this profit, £6m ahead of the same quarter last year, meaning this business now accounts for 88% of trading profit and all the revenue growth.

In the third quarter a £30m exceptional charge was incurred as a result of restructuring in the UK and Nordic regions.

"Revenue growth in the quarter was good with US residential and commercial markets growing well and industrial markets improving," said chief executive John Martin.

He added: "Since the end of the period revenue growth has been broadly in line with the third quarter, gross margins and cost control have been good.

"The group expects trading profit for the full year to be in line with current analyst consensus expectations."

Wolseley shares dipped more than 4% in early trading on Tuesday to 4,675p.

The diverging performance of the US and UK economies was clear to see in this trading update from Wolseley, said analyst Neil Wilson at ETX Capital, with the US continues to expand at a decent clip but clear signs of a significant slowdown in the UK.

He noted that group profits for the nine months to the end of April are 2% ahead of last year but nearly 8% lower in the UK business, while the US arm is nearly 5% ahead, with LFL revenues for the period ahead 9.4% in the US, down 0.5% in the UK.

While investors don’t seem overly impressed, Wilson felt that once the Ferguson name is adopted at the end of the July and the group starts reporting in dollars, "the shares could get a bump if Wolseley does decide to list in the US, where it could trade at higher multiples".