More on Wolseley
Wolseley Trading Statement
Plumbing and heating products distributor, Wolseley looks likely to have another good year (in the financial year to July 2005), although growth rates in the second half are expected to be a little slower.This combined with good pricing has improved operating margins (***link this) of the company. Wolseley’s overall organic growth is a fairly modest 3%.
Wolseley’s key revenue driver is the growing sales in North America and reasonable sales growth in the U.K. Both revenue and net profit are likely to show double digit growth. Unsurprisingly, most of the improvement are expected to come from the repair, maintenance and improvements markets (as opposed to fresh construction) in both North America and Europe.
Wolseley has continued to make acquisitions, and since the beginning of the financial year 2005, the company has acquired 26 distribution businesses for £430 million. These new acquisitions are expected to add around £770 (around 7%) million in revenue in 2005.
We believe the Wolseley’s gearing is low enough to continue acquisitive growth, which continue to be the key business growth driver at least in the short-medium term.
Wolseley shares trade at 1073p, on a prospective PE of 14×. This reflects opportunities for acquisitive growth as well as strong recent performance. Given that the ultimate drivers are closely linked to house builders which are far cheaper it does look a little expensive compared to them although growing spend on repairs and maintenance (which is also driving the growth of, for example, DIY retailers) does give it better growth prospects. The stock also offers an average yield of is 2.5%.
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