3rd June 2014
Traders have cheered today’s latest market update from Wolseley with shares in the plumbing giant up 3% in early trading as the firm boasts of robust performance from its US business.
In its third quarter update, the group which specialises in products for heating and plumbing system installations reported that in the three month period to the end of April, it generated revenue in the ongoing businesses of more than £3bn, 6% ahead of the same period last year, at constant exchange rates and 5.1% ahead on a like-for-like basis.
By 11.15, the shares had moved 3%, of 87p higher, to 3,397p.
But while its US arm posted like-for-like revenue growth of 9%, in the UK where the business is seen as something of a barometer for the construction industry, the numbers were less upbeat as revenue declined by 3.5%.
In Britain residential construction, which represents approximately just 5% of UK revenue continued to grow strongly but growth in residential RMI markets, which represents approximately 60% of UK revenue, remained only modest while industrial business markets was weak.
Commenting on the results, Ian Meakins, chief executive, says: “We continued to make good progress in the third quarter with strong growth in the USA and the Nordics offsetting more challenging conditions elsewhere. Like-for-like revenue growth in the UK was lower as we continued to focus on protecting gross margins.
“The group grew its gross margin and controlled operating expenses to generate good conversion into trading profit, though reported results were affected by significant unfavourable foreign exchange rate movements. Cash generation was good and we are continuing to invest in technology and new business models to deliver better customer service and gain profitable market share.”
While the market consensus has the stock, down 2% over 12 months, positioned in ‘buy’ territory The Share Centre is calling the stock a ‘hold’. Graham Spooner, investment research analyst at group says: “Like many companies recently Wolseley saw currency exchange movements have an adverse effect on figures, impacting growth in profits.
“Continued improvement in the US should help underpin the share price which has been trending sideways over the last 12 months. However, with operations continuing to struggle in Europe, leading to some write downs, we continue to recommend Wolseley as a ‘hold’ for investors.”
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