2nd June 2015
Plumbing giant Wolseley has posted a third quarter trading profit of £195m and its full-year results are anticipated to be in line with expectations. Graham Spooner, investment research analyst at The Share Centre, explains why it is a ‘buy’ for investors…
Investors will be pleased this morning as international plumbing and heating group Wolseley reported a solid third quarter trading update, with a 7.7% rise in like for like revenue growth. These results received a boost from favourable foreign exchange movements, with a trading profit of £195m for the quarter, which was 20.3% ahead of last year. Furthermore, the group reiterated that full year profit is expected to be in line with analyst expectations.
Although investors tend to concentrate on the all-important US operations, where around three-quarters of the company’s profits come from, this quarter’s standout region was the UK, with a 7.6% increase in revenue growth. Investors should acknowledge that despite US growth slowing slightly from the previous quarter, the company reported growth of 8.3% from the same period last year.
Despite its struggles in Europe excluding the UK, the improvement in the US year on year has helped underpin the share price, which is close to a seven year high. As a result, we recommend Wolseley as a ‘buy’ for medium risk investors seeking growth. The company’s focus remains on improving customer service, maintaining market share and margins, cash generation and cutting costs, which we are supportive of.