Wolseley share price tumbles after release of half-year report

Wolseley’s (LON:WOS) share price tumbled around three percent at the opening bell this morning, after the British plumbing supplies group published its results for the six months ended January 31. The company, which operates the Plumb Center and Ferguson chains in Britain and the US, revealed that its pretax profit fell by two-thirds in the first half of the financial year, as it booked a large impairment due to challenging market conditions in the Nordic region. However, its closely-watched trading profit rose on the back of a strong performance in the US.

Wolseley’s reported pretax profit came in at £103 million – 67 percent down year-on-year — as the group booked a £245 million impairment on the DT Group business in the Nordics that it bought back in 2006. Excluding that, its closely-watched trading profit from ongoing businesses jumped 11 percent to £390 million, as revenue increased 8.9 percent to £6.44 billion and its trading margin rose 20 basis points to 6.1 percent, with a strong performance in North America offsetting entrenched weakness across much of Europe.
Like-for-like revenue in the US, where Wolseley makes 76 percent of its profit, rose 11.7 percent to £3.92 billion, fueled by several bolt-on acquisitions and good growth across residential, commercial and industrial construction markets. While the UK saw a 1.9 percent like-for-like increase after a spike in housebuilding volumes in the period, the eurozone remained subdued in the face of weak economic conditions. Central Europe saw a like-for-like revenue decline of 1.5 percent, with Switzerland particularly highlighted for reduced activity and currency volatility.
Wolseley revealed another hit from the strength of sterling. Its revenue would have risen 10.3 percent if exchange rates had remained constant, while trading profit from ongoing businesses would have risen 12 percent. Still, Wolseley raised its interim dividend by 10 percent to 30.25p.
Looking ahead, Wolseley said it expected its like-for-like revenue growth rate to moderate to about six percent in the second half of the financial year, compared to 7.8 percent growth in the first half, although constant-currency trading profits for the full year should be in line with analysts’ expectations.
As of 09:06 GMT, Tuesday, 24 March, Wolseley plc share price is 4,098.50p.