Sept. 26 (Bloomberg) -- Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, named Chip Hornsby, the head of its North American business, to replace retiring chief executive officer Charles Banks after rising U.S. demand fueled earnings growth in the fiscal second half.

Hornsby, 49, will succeed Banks, 64, when he steps down after four years as CEO, Reading, England-based Wolseley said in a statement today. Both men are from the U.S., where the U.K. company gets half of its revenue, and both worked their way up through its Virginia-based Ferguson unit.

Under Banks, Wolseley has improved on record earnings each year, doubling profit and boosting sales by 60 percent. Hornsby, who takes over next year, inherits a business where net income rose 7.4 percent in the six months through July as U.S. economic growth led industrial clients and homeowners to spend more on products from water pipes and bricks to bathrooms and kitchens.

``Banks is definitely a hard act to follow but this guy's been engrained in the Wolseley culture for years and he's done a good job in the U.S., so I'm not concerned at all,'' said Rachael Waring, an analyst at Numis Securities in Liverpool, northwest England, who has an ``add'' rating on the stock. ``There's a long handover period so he'll be fine.''

Since Banks became chief in may 2001, Wolseley's share price has more than doubled. The stock slipped 18 pence today to 1,156 pence, paring this year advance to 18 percent for a market value of 6.81 billion pounds. That compares with a 13 percent gain in the FTSE 100 Index of leading U.K. stocks, in which the company ranks No. 39 by value.

Graduate Trainee

CEO-designate Hornsby, who takes charge on Aug. 1, is currently head of Wolseley's North American business, having joined as a graduate trainee at Ferguson some 27 years ago. Banks has been with Wolseley or its units for 39 years.

``I've always said I was happy to stay on as CEO until we found the right person to lead the business and I'm confident that in Chip we've found him,'' Banks said on a conference call.

Wolseley's second-half net income rose to 257.2 million pounds ($456 million) from 239.4 million pounds as surging U.S. demand helped counter more sluggish business in the U.K., where the company is targeting professional builders as a slowdown in high-street spending hurts home-improvement sales. Revenue advanced 12 percent in the period, to 5.93 billion pounds.

``We've seen strong performances across the board, particularly the U.S.,'' said Numis's Waring. ``We believe the quality of Wolsleley's operation will shine through, despite difficult market conditions in some territories.''

Analyst Estimates

Wolseley had been expected to report second-half net income of 264 million pounds on sales of 5.91 billion pounds, according to a Bloomberg survey. Earnings were equivalent to 43.28 pence a share, compared with 40.55 pence a year earlier.

Net income for the fiscal full year rose 16 percent to a record 461.2 million pounds, or 77.71 pence a share, from 397 million pounds, or 67.36 pence, the company said in a statement. Sales added 7.4 percent to 10.88 billion pounds.

Sales at Newport News, Virginia-based plumbing business Ferguson, which both Banks and Hornsby have previously run, rose 14 percent in the year, while operating profit added 18 percent. Construction spending in the world's largest economy reached a record in February, according to the Commerce Department.

``We feel pretty good about the U.S. economy,'' said Banks. ``Market conditions are expected to remain favorable.''

Katrina, Rita

While Banks said destruction wrought by hurricanes Katrina and Rita has led to ``a need for product,'' there is likely to be no major impact on Wolseley's business. ``We think we will be able to participate but I don't think this will be a boom to the U.S. construction industry,'' he said.

Growth in the U.K. market slowed in the second half, crimped by ``weaker'' consumer confidence, Wolseley said, as the cost of borrowing prompted homeowners to delay home improvements and the pace of new building slowed.

Kingfisher Plc, the world's third-largest home-improvement retailer, said this month it will shut 22 B&Q stores in the U.K., while earnings at Travis Perkins Plc have been eroded after its purchase of the Wickes do-it-yourself chain in February increased its exposure to slowing sales of items such as new kitchens.

Still, Wolseley's 1,570 outlets in the U.K. and Ireland get most business from trade clients, where demand has held up better, while government spending on social housing is also a ``bright spot,'' the company said today. Markets in continental Europe are ``broadly flat,'' it said.

Higher Market Share

``The U.K. is challenging, but Wolseley has gained market share and demonstrated significant outperformance,'' Waring wrote in a note to investors. ``We would expect that to continue.''

Wolseley spent 431 million pounds on 26 acquisitions in its fiscal year. The businesses are expected to boost annual sales by 770 million pounds, it said in the statement.

``I would hope you'll see more of the same,'' said Banks. ``I don't know if we'll spend as much but if there are opportunities we will.''

Wolseley traces its history to 1887, when Irish emigrant Frederick Wolseley founded the Wolseley Sheep Shearing Machine Co. in Sydney. He later moved to Birmingham, England, where he made motor cars, an operation that was later spun off.

The company added central heating and plumbing products before beginning a period of expansion through acquisitions in 1976. It sold shares to the public in 1982 and in the same year established itself in the U.S. by buying Ferguson.

Bloomberg calculated second-half earnings by subtracting first-half figures from full-year ones. The numbers were confirmed by the company.

To contact the reporter on this story: Brian McGee in London at bmcgee3@bloomberg.net

Last Updated: September 26, 2005 12:06 EDT