Wolseley plc reports full year results for fiscal year ended July 31, 2010.
UK-basedWolseley plcreported that annual sales forFerguson(Newport News, VA) were 11% below last year, though the like-for-like revenue decline was 9%.
During the fourth quarter ended July 31, 2010, the business generated like-for-like revenue growth for the first time in three years as New Residential and RMI markets continued to recover.
Wolseley said that overall the recovery in new construction has been modest, citing factors such as high unemployment, low availability of credit, high levels of unsold housing inventory and the recent expiration of tax incentives that continued to hold back demand.
The less volatile RMI segment has been relatively more resilient, while the Commercial sector, in particular, remained weak throughout the year and continued to be restricted by the lack of availability of finance for construction projects, Wolseley said.
Industrial markets were generally better. With the exception of Fire and Fabrication, which is particularly exposed to the commercial market, Wolseley said all Ferguson businesses continued to gain market share in the period.
Gross margin was slightly lower than the prior year, with pricing pressure largely mitigated by a focus on improvements in the business mix towards showrooms, counter sales and private label products.
Second half profit was ahead of last year. Trading profit benefited from a much lower bad debt expense than last year.
Wolseley said the largest business unit in the USA is the Blended Branches business.
While Commercial revenue was weak, New Residential and RMI markets showed modest improvements in the period. The Industrial Pipe Valves and Fittings (PVF), Waterworks, and Heating, Ventilation and Air Conditioning (HVAC) businesses made good progress in the period. HVAC in particular performed strongly, benefiting from a change in strategy to fewer key vendors, improved product availability to drive service and a lower cost base. The USA trading margin was 4.6% compared with 5.3% in 2009.
In Canada, revenue for the year was 3% behind last year in constant currency, though the business returned to growth in the second half.
Wolseley said the growth trends were broadly similar across the business with some benefit from tax incentives and government stimulus spending. The Canadian economy emerged from the downturn strongly and interest rates have now begun to rise.
Trading profit was ahead of the prior year, attributed to currency translation, improvement in the gross margin and a reduction in the cost base. Blended Branches, Waterworks and HVAC all generated growth during the year and improved market share.
Wolseley reported that the business is expanding its Regional Distribution Centre in Milton, Ontario, to increase capacity and improve customer delivery times and fill rates. The trading margin was higher at 5.4% compared with 4.6% in 2009.
In terms of Wolseley's overall performance, Chief Executive Ian Meakins said, “In the second half of 2010 an improvement in like-for-like revenue growth, continued cost discipline and a consistent focus on protecting gross margins delivered results ahead of expectations. Recognising this improved performance, the Board intends to resume dividends at the half year results.”
He noted that demand across Wolseley's markets remains mixed and the economic outlook continues to be unclear. Sales growth in the early part of the current financial year has been similar to what was seen in the fourth quarter last year, he said.
"We will continue to take actions that will strengthen the business and, whilst overall we remain cautious about the outlook for our markets, we are confident that Wolseley will make good progress in the year ahead,” Meakins stated.