2nd Jun 2015 09:41
LONDON (Alliance News) - Wolseley PLC Tuesday said it expects to meet analysts' expectations for its trading profit in the current financial year after reporting strong growth in the third quarter of the year, driven by like-for-like sales growth, acquisitions, and an exchange rate boost.
The building products company reported a trading profit from ongoing businesses of GBP195 million for the three months to April 30, up 29.1% from GBP151 million a year earlier, as revenue grew 16.6% to GBP3.30 billion from GBP2.83 billion and the company improved its gross margins. The revenue increase if exchange rates had remained constant over the year would have been 12.4%, while the currency movements buoyed trading profit by GBP11 million.
"Gross margins were ahead as we continued to focus on improving the mix of customers, suppliers and products. Operating expenses were well controlled and we generated decent flow through to trading profit," the company said.
Wolseley said like-for-like revenue growth in the third quarter was 7.5% as it "outperformed the market in all key regions". It is predicting like-for-like growth of about 6% over the next six months.
The company bought three bolt-on companies in the quarter, with combined total annualised revenue of GBP69 million.
It said its closely-watched cash conversion was in line with its expectations. Its net debt stood at GBP1.13 billion on April 30, down from GBP1.22 billion on January 31, after paying its GBP78 million interim dividend.
"We expect the group's like-for-like revenue growth rate for the next 6 months to be about 6%. At current exchange rates, we expect group trading profit for the ongoing businesses for the full year to be in line with the current consensus of analyst expectations," the company said in its outlook statement.
On a regional basis, the company's revenue rose 13.5% in the US in the third quarter, 2.0% in Canada, 12.2% in the Nordics and 2.7% in Central Europe at constant currency rates. Revenue grew 13.3% in the UK. Like-for-like revenue growth was 7.6% in the UK, an acceleration from the growth in both the first and second quarters, and was 5.3% in the Nordics, 11.1% in the US and 4.6% in Central Europe.
It said market conditions remained good in the US and growth was broadly based across all regions. In the UK, growth was driven by the plumbing and heating business, the pipe and climate business and the utilities business. In the Nordics, it said market conditions were satisfactory in all regions bar Finland, which remained "very challenging".
Trading profit in the US, Wolseley's biggest market, rose to GBP164 million from GBP121 million, assisted by currency movements, while it rose to GBP26 million from GBP24 million in the UK, and was flat at GBP11 million in the Nordics.
Wolseley shares were up 1.9% at 4,095.99 pence Tuesday morning, the best-performing stock on a FTSE 100 with only three stocks making gains.
Davy said it may have to raise its full-year estimates for Wolseley after the strong third-quarter report.
"Given that our forecast trading profit for the year to end July of GBP856 million is a little below consensus of GBP864 million, there is room to nudge up our estimate," said Davy analyst Flor O'Donoghue.
By Steve McGrath; [email protected]; @stevemcgrath1
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
WOS.L