Revenue in the US, which account for 43 per cent of the group total, rose by 9 per cent, including price inflation of around 4 per cent. The better tone was helped by a modest recovery in new construction and a resilient repair, maintenance and improvement sector. So while operating expenses here were up 7 per cent, with the benefit of higher margins trading profits raced ahead 18 per cent to £173m.
Trading in the UK was much tougher, with sales falling 3 per cent on a like-for-like basis, although a more favourable sales mix meant that, even after restructuring charges of £3m, trading profits only fell 8 per cent to £44m.
Numis Securities is forecasting full-year pre-tax profits of £629m and EPS of 163p (2011: £555m and 143p).
|ORD PRICE:||2,473p||MARKET VALUE:||£7.0bn|
|TOUCH:||2,473-2,476p||12-MONTH HIGH:||2,593p||LOW: 1,385p|
|DIVIDEND YIELD:||2.0%||PE RATIO:||21|
|NET ASSET VALUE:||1,186p*||NET DEBT:||16%|
|Half-year to 31 Jan||Turnover (£bn)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 4 Apr
Payment: 1 May
*Includes intangible assets of £1.58bn, or 554p a share
Wolseley’s ability to grow will remain constrained by weakness in European markets, although the US holds more promise. The dividend is up significantly, and net debt will fall further with the disposal of the French operation Brossette. But trading on 15 times forecast earnings, the shares look up with events. Hold.
Last IC view: Fairly priced, 1,488p, 4 October 2011.