Plumbing and heating products distributor Wolseley Plc. (WOS.L,WOSYY.PK,WOSCF.PK) Tuesday reported a decline in first-half profit, reflecting higher charges. Adjusted earnings improved from last year, even as revenues were hurt by weakening demand in Canada and Europe, despite continued market share gain and growth in its major market USA.
Wolseley declared higher dividend, and said its like-for-like growth in the third quarter to date has been consistent with the second quarter overall. The company also noted that new residential markets deteriorated sharply in parts of Europe, most notably France, but improved in the USA.
Chief Executive Ian Meakins said, "The highlight of these results is the strong performance across our US businesses with market share gains and productivity improvements. Canada and the UK have performed well in continued tough market conditions. We faced substantial headwinds in Europe, and are taking appropriate actions to protect profitability."
In its first half of fiscal 2013, Wolseley's pretax profit decreased 20.4 percent to 199 million pounds. Profit per share was 48.2 pence, compared to 62.3 pence in the prior year.
The latest results were hurt by exceptional items of 87 million pounds related to impairment and restructuring charges, higher than prior year's 29 million pounds.
Profit before tax, exceptional items and the amortisation of acquired intangibles, was 313 million pounds, 6 percent higher than last year. Headline profit per share also rose to 79.9 pence from 77 pence prior year.
Revenues, meanwhile, declined to 6.28 billion pounds from 6.84 billion pounds last year. Revenue on an ongoing basis, i.e., excluding businesses that have been sold or are held for sale, edged up 0.1 percent, while revenues increased 2.2 percent on a like-for-like basis.
During the period, Repairs, Maintenance and Improvement or RMI markets were stable in most countries, but declined in France and the Nordics.
Gross margin for the ongoing businesses increased 0.5 percent to 27.8 percent. Ongoing trading profit grew 7.6 percent and trading margin was 5.2 percent, 0.4 percent higher than last year, benefited by its ongoing focus on operational efficiency.
Wolseley said its interim dividend will be increased by 10 percent to 22 pence per share and will be paid on May 1 to shareholders on the register on April 5.
Further, the company said it is in advanced negotiations relating to the proposed disposal of 88 Building Materials branches in the south of France, the potential closure of 24 loss making branches and detailed actions to simplify and refocus the remaining Building Materials business in France.
Looking ahead, 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. We will invest in growth opportunities where they are available and maintain tight control of the cost base in Europe, whilst implementing the strategic proposals we have outlined in France."
The company added that it would incur further exceptional charges in the second half of 70 million pounds to 80 million pounds, in the light of market conditions in Europe.
In London, Wolseley shares are currently trading at 3,131.15 pence, down 79.85 pence or 2.49 percent.
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