More on Wolseley
Wolseley
Plumbing, heating and building products supplier Wolseley is set to report strong earnings for the first half of 2005, a continuation of the strong growth seen last year, although there is a decrease in the rate of growth. Its latest trading statement reported that group sales increased by nearly 10% and trading profits by more than 25%, despite adverse currency movements. (Sales grew 23.2% last year and pre-amortisation profits by 31.2%.)
The company reported a high rate of organic growth in North America and the UK, although acquisitions have undoubtedly contributed to the good performance, just as they did last year. (Wolseley spent £183m on acquisitions to December). The group has experienced better prices in the USA and marginshave improved.
In Europe, Wolseley’s largest market, strong demand for repairs and maintenance along with higher levels of commercial and government spending has seen sales rise 10% in sterling terms. In the UK the company claims to have recorded organic growth of 8% and double digit growth in sales and trading profits.
The overall driver of growth seems to have been in repairs and maintenance. New construction has been flat in all markets, only to be expected as the hosuing market starts to cool. The company expects the rest of the year to be relatively strong but the rate of growth will inevitably slow. Further acquisitions seem to be on the cards, which will drive growth as the markets slow, but at the expense of gearing (currently 55%, up from 49.5% in July 2004). The stock trades at 1047p, on a prospective PE of 13.2× which is at the upper end of the sector range, the yield is 2.5%
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