Shares in Wolseley plc fell yesterday after the company posted its financial results for the year ended 31 July, 2015.
Although the company revealed an 11.4% rise in trading profits for the year, pre-tax profits fell from £676m in 2014 to £508m in 2015, partly due to a number of impairment and exceptional charges totalling £242m. The company's reported net debt also increased from £711m in 2014 to £805m in 2015.
Wolseley described its results as good overall, with good market conditions in the USA but challenging markets in Europe and Canada. Demand in the Repairs, Maintenance and Improvement (RMI) markets grew modestly in most countries except the UK, according to the business, although industrial markets in North America weakened due to lower oil prices and the strengthening US dollar. There was also modest price deflation in the USA, UK and Central Europe.
Wolseley plc has gained market share in all its major businesses, with improved gross margins thanks to focusing on a better mix of higher value-added products and services, and improving its purchasing terms.
The company highlighted that e-commerce now accounts for 13% of Wolseley Group revenue at £1.7bn, and said it had enjoyed decent revenue growth in the UK, despite it being "a challenging market".
In the UK, like-for-like revenue growth was 3.6% this year, including price deflation of 0.8%. Acquisitions including BathEmpire.com and MPS contributed 4.1% of additional revenue growth. A net 10 branches were closed during the year and, while the newbuild residential market was strong, this only accounts for 8% of UK revenues.
The RMI market, which represents 52% of UK revenues, remained weak and were flat in the second half. Wolseley UK saw modest revenue growth in the plumbing and heating sector, as well as in the Pipe and Climate Center brands, while utilities business Burden continued to grow strongly.
Wolseley said the UK heating market has weakened, with low volumes from pricing pressures and government sponsored programmes such as the Green Deal continuing to impact margins. The company has concentrated on broadening its product ranges this year, with the plumbing categories growing by 8%.
Operating expenses in the UK region were 8% higher than last year, including 5% from acquisitions and £2m of one-off restructuring charges.
Chief executive Ian Meakins said: "We continue to face some challenging markets and remain focused on improving growth rates and protecting gross margins while keeping the cost base tight. Wolseley continues to be highly cash generative and we have adequate resources to fund our capital investment programme, bolt-on acquisitions and growth in ordinary dividends. We are also announcing a £300m share buyback which reflects the Group's strong financial position and management's confidence in the business."
Looking forward, Mr Meakins said industrial markets in North America, which accounts for about 15% of the region's revenue, would remain challenging, although the Group expects a steady recovery in the Nordic markets. He also predicted the heating market in the UK would remain "very competitive with little growth".
Mr Meakins concluded: "Overall, we expect to make continued progress in 2016."