Weak Europe holds Wolseley profits back

Plumbers merchant group Wolseley posted a 20% fall in pre-tax profits today (March 26).

In the six months to the end of January 2013, group revenue was £6.2bn, 2.2% ahead on a like-for-like basis.

Gross margin was 27.8%, and pre-tax profits were £199m, dragged down by both the weak housebuilding market in Europe and extreme pressure on pricing pressure in the UK.

CEO Ian Meakins said: “We continue to see strong growth in the USA, a broadly flat performance in Canada and the UK and very weak conditions in Europe.”

Revenue in the ongoing UK businesses was flat in a declining market, the company said. Trading profit for the ongoing businesses was £45m, £1m ahead of the same period last year.

Plumb Center and Parts Center increased market share, albeit with lower gross margins. Weakness in the industrial market sector held back Pipe and Climate Center, although these businesses managed to improve gross margins.

The trading margin for the ongoing UK businesses was 5.3%, up marginally from the same period a year ago.

The group announced details of its plans to restructure its French building materials business Reseau Pro, including a proposed closure of 24 loss-making branches and a proposed disposal of 88 others.

Wolseley increased its interim dividend to 22 pence, up 10% from 20 pence last year.

Meakins said: “Like-for-like growth in the third quarter to date has been consistent with the second quarter overall. We continue to see strong growth in the USA, a broadly flat performance in Canada and the UK and very weak conditions in Europe.

“We will invest in growth opportunities where they are available and maintain tight control of the cost base in Europe.”