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Heating specialist Wolseley gets US boost

Strong trading in the US Ferguson business more than offset weakness in the UK and Nordic operations
September 27, 2016

Plumbing and heating specialist Wolseley (WOS) delivered record trading profit (before exceptionals and impairments) of £917m in the year to July, from £805m in the previous 12 months. In this, it was boosted by strong trading in the US, partly offset by weakness in its UK and Nordic operations.

IC TIP: Hold at 4156p

Ferguson, the core US business that generates over 80 per cent of group profit, performed well despite falling commodity prices. Revenue grew by 6.2 per cent at constant exchange rates, and by 4.1 per cent on a like-for-like basis. The residential and commercial divisions were largely responsible for this growth, although conditions in its smaller industrial division remained tough, with revenue down by 10 per cent. A total of 13 acquisitions were completed during the year, adding £183m of revenue on an annualised basis, and two more purchases secured since the year-end will add another £92m of revenue.

The UK accounts for just 8 per cent of trading profit, and a weak repair, maintenance and improvement market saw like-for-like revenue down by 1.6 per cent. Restructuring charges associated with 21 branch closures meant that trading profit slid 18 per cent to £74m. A restructuring will involve closing a further 80 closures, incuring a further £100m in charges and a loss of 800 jobs.

Broker Peel Hunt forecasts adjusted pre-tax profit for the year to July 2017 of £1.08bn (from £876m and EPS of 307.4p in FY2016).

WOLSELEY (WOS)
ORD PRICE:4,156pMARKET VALUE:£10.5bn
TOUCH:4,155-4,156p12-MONTH HIGH:4,458pLOW: 3,214p
DIVIDEND YIELD:2.4%PE RATIO:21
NET ASSET VALUE:1,150p**NET DEBT:32%

Year to 31 JulTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201213.41982158.1
201313.246010363.9*
201412.367618282.5
201513.350812490.75
201614.4727196100
% change+8+43+58+10

Ex-div: 27 Oct

Payment: 1 Dec

*Excludes 110p a share special dividend **Includes intangible assets of £1.1bn, or 437p a share