10th Nov 2015 11:19
LONDON (Alliance News) - Shares in building materials company Wolseley PLC took a bruising on Tuesday morning as investors brushed off a rise in group revenue and trading profit to focus on the slowdown in the repair, maintenance and improvement market in the UK, which hammered profit for the group in the country in the first quarter.
Wolseley shares were down 5.1% to 3,613.00 pence mid-morning Tuesday, one of the worst performers in the FTSE 100.
Revenue for the three months to the end of October rose to GBP3.56 billion, up from GBP3.38 billion a year earlier, while like-for-like revenue grew 3.2%.
The growth in revenue was driven by the US, where construction markets remained very strong. Revenue for Wolseley's US plumbing and heating business, Ferguson, benefited from strong heating, ventilation and air conditioning sales, though industrial sales were hit by a weak oil and gas sector.
The oil and gas sector also took a bite out its Canadian business, which also saw trading profit sag due to the weak Canadian dollar.
Revenue from the UK and Nordic businesses was broadly flat in the quarter, but like-for-like revenue in the UK fell, hit by the softness in the repair, maintenance and improvement market which has already caused problems for industry peers such as Travis Perkins PLC and SIG PLC. Revenue growth in the UK, therefore, was driven entirely by acquisitions.
Trading profit for the quarter rose to GBP250.0 million from GBP236.0 million, as Wolseley's gross margin improved to 28%, but the group took a heavy hit from the tough conditions in the UK market, where its trading profit fell 21% thanks to the soft market conditions.
Central Europe also continued to prove tough for Wolseley, with market conditions in Switzerland still weak. Still, its gross margin was broadly in line and costs was brought down, so trading profit edged higher.
"We will remain vigilant on costs and continue to drive performance improvements, strong cash conversion and better customer service," said Chief Executive Ian Meakins.
Davy Research said the pace of moderation in the US was greater than anticipated and hhas hurt the investment case for Wolseley. In addition, current conditions in the US would indicate a somewhat mixed outlook for the near-term, the broker added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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