Pick-up in North America helps Wolseley

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A nascent recovery in the US construction market has helped Wolseley offset shrinking sales in France and Scandinavia.

The FTSE 100 plumbers’ merchant on Tuesday reported a 2.1 per cent increase in like-for-like sales in the first quarter, buoyed by a pick-up in North American commercial and industrial construction markets.

Wolseley, which operates the Plumb Center chain in the UK and Ferguson in the US, said that growth in North America had compensated for a slide in continental European sales.

First-quarter like-for-like revenues at Wolseley’s Nordics division fell 4.8 per cent year on year to £532m, while French sales dwindled 8.2 per cent to £250m.

Wolseley’s UK division revenues were flat year-on-year at £428m, while trading profit edged up £1m to £24m.

The continental European weakness is a familiar pattern for the plumbers’ merchant, whose sales are heavily reliant on the strength of the residential and commercial construction markets.

In response to the economic downturn, the building supplies group has sold off a number of businesses to reduce its debt – which has been cut from £523m a year ago to £87m at the end of October – and concentrate on its core North American market.

Two months ago, Wolseley’s long-suffering shareholders – who saw the group pummelled by the 2008 housing market collapse and stagger under a then-£3bn debt burden – were rewarded for enduring a long dividend-free run with a £350m bonus.

“With net debt at £87m, even when the £350m special dividend is paid on December 31, there will be plenty of scope for more returns to shareholders,” said Kevin Lapwood, analyst at Seymour Pierce on Tuesday.

Over the past two years, Wolseley has sold off Brossette, the French plumbing and heating distribution chain, Build Center, the UK builders’ trade business, and British high street bathroom retailer Bathstore.

In July, Wolseley said it was considering the sale of its remaining French operations – building materials group Réseau Pro and wood importer Panofrance – but has yet to find a buyer or a joint venture partner.

“Wolseley has continued to generate good growth in the US and Canada, though revenue has declined in continental Europe as a result of continuing tough market conditions, particularly in the Nordics and France,” said Ian Meakins, chief executive.

“We are working hard to protect gross margins and to drive further operating efficiencies.”

During the three months to October 31, Wolseley reported revenues down 9 per cent year on year to £3.3bn because of disposals, although declines in commodity prices helped keep margins steady at 27.2 per cent.

Trading profit for the period rose 7.6 per cent to £198m, buoyed by a 23 per cent increase from the US that offset an 11 per cent decline from Europe.

Wolseley shares were relatively unchanged at £28.62 in mid-afternoon trading.

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