The division's sales were up 6.2% despite the adverse impact of currency translation.

Wolseley attributed Ferguson's “outstanding” performance in the first half primarily to its focus on specific market sectors, which resulted in increased market share through organic growth, and to its driving further efficiencies from its distribution center network.

Local currency sales in the U.S. plumbing operations rose by 11.4%, of which nearly 10% was organic growth, against a market that increased by around 2% to 3%. Local currency trading profit increased by 19.6% reflecting an increase in gross margin as a result of continuing benefits from the distribution center network, a focus on organic growth and strong cost control.

Volumes through the distribution center network increased 33% in the first half compared to the same period last year. The network was further boosted with the opening of the Richland, Wash., distribution center in November. The division's 6.1% trading margin was ahead of the prior year's first half margin of 5.8% and consistent with achieving a 6% trading margin in 2004, a year ahead of the original schedule.

During the first half, the final phases of the integration of Familian Northwest were completed and the business realized the benefits of having one plumbing and heating organization in the United States, including the elimination of duplicated costs. Now Ferguson management can focus on the achievement of organic growth in a steadily improving market, Wolseley said.

The industrial and commercial markets remained the weakest of the sectors in which Ferguson operates, but housing-related activity held up well. There was more emphasis on entry-level housing vs. high-end housing. More than 6 million homes were sold in the United States in 2003, which presents opportunities in the repair and remodeling sector. That should lead to further organic growth.

Ferguson has purchased additional stock of commodities such as copper and steel in response to tightening supply, in order to be able to respond to customer demand and benefit from price rises, Wolseley said.

The number of branches operating in the division increased from 961 as of July 31, 2003 to 991 locations as of Jan. 31, 2004.

Wolseley said that U.S. markets are likely to remain mixed, but the residential housing and repair/maintenance/improvement markets are expected to hold up well. There are signs that the industrial and commercial market will pick up in the second half of calendar 2004.