Wolseley Earnings Rise 9 Percent as U.S. Sales Gain

Wolseley Plc (WOS), the world’s biggest distributor of plumbing and heating products, reported full-year earnings that beat analysts’ estimates after the company disposed of less-profitable units and U.S. sales rose.

So-called trading profit in the 12 months through July climbed to 725 million pounds ($1.2 billion) from 665 million pounds a year earlier, the Zug, Switzerland-based company said today. Analysts had predicted earnings of 704 million pounds, according to the average of 20 estimates compiled by the company. Wolseley also proposed a special dividend payout of 300 million pounds.

“Wolseley remains a very good story,” said Mark Howson, an analyst at Oriel Securities, who has a hold rating on the stock. “Margins in the U.S. are already through the prior peak and should continue through the 8 percent mark. Any payment of things like special dividends today is all very welcome.”

Wolseley, which employs about 40,000 people, has scaled back unprofitable French businesses to shift focus to the recovering U.S. construction market, which now accounts for more than half of revenue and earnings. Total full-year revenue declined 2 percent to 13.2 billion pounds, while U.S.sales gained 10 percent, the company said today.

The stock gained as much 3.1 percent to 3,295 pence in London trading and was up 2.3 percent as of 9:56 a.m., valuing the company at 9 billion pounds. Before today, the stock had gained 10 percent this year, in line with the gain of the FTSE 100 benchmark index.

U.S. Growth

The wholesale distributor defines trading profit as earnings before exceptional items, amortization and impairment of acquired intangibles and non-recurring tax credits.

Full-year net income rose to 305 million pounds from 57 million pounds. Net debt as of July 31 was 411 million pounds compared with 45 million pounds in net cash a year earlier. The company has credit facilities of 2.1 billion pounds committed for more than a year, according to the statement.

Wolseley plans a full-year dividend of 66 pence a share, matching the average analyst estimate compiled by Bloomberg. The year-earlier payout was 60 pence, while shareholders also received a special dividend of 124 pence.

The company said it has “adequate resources” to fund future investments and acquisitions alongside growth in ordinary dividends.

U.S. Deals

“We’re looking for acquisitions in areas where we’ve got really good businesses doing well and where we can get appropriate synergies,” Chief Financial Officer John Martin said on a conference call today. “Clearly the U.S. is high up there, as are the U.K. and the Nordics.”

The company’s continental European businesses continued to lose sales, with revenue declining by 10.8 percent from a year earlier in France and 4.8 percent in Central Europe. U.K. revenue grew 6.1 percent due to a recovery in the country’s housing market.

“The highlight of these results was another strong performance across our U.S. business where we achieved good revenue growth,” Chief Executive Officer Ian Meakins said. “We continued to face substantial headwinds in Europe and took decisive action to protect profitability with significant headcount reductions in the year.”

To contact the reporter on this story: Natasha Doff in London at ndoff@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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