Wolseley beats forecasts again with rise of 67%: Analysts raise estimates for next two years but shares fall, reports Tom Stevenson

Full-year results from Wolseley, the world's largest distributor of plumbing and heating products, were as usual well ahead of forecasts.

Analysts upgraded estimates for the next two years, focusing on Wolseley's perceived management strength, strong internal systems and consistent record of high returns on capital and investment.

Driven by a successful strategy of equity-financed acquisitions, the owner of more than 1,100 specialist builders' merchants in the US and Europe yesterday reported pre-tax profits of pounds 202.3m for the year to July, a 67 per cent increase on 1993's pounds 121.1m.

Organic growth was also strong, with a 34 per cent rise in profits from existing businesses and sales 11 per cent higher.

Earnings per share, which have compounded at almost 14 per cent a year for the past 30 years, were 51 per cent higher at 50.8p and the dividend, three times covered by earnings, grew 26 per cent to 16.7p (13.3p).

Despite the sparkling figures, Jeremy Lancaster, chairman and managing director, was characteristically pessimistic about the markets in which Wolseley operates and the shares slipped 8p to 725p.

In line with the rest of the building sector, they have fallen from a high of 975p in March as the market worried about rising interest rates in Britain and the US and a disappointing housing market recovery.

Mr Lancaster said tax increases in April and a general lack of security for homeowners had reduced sales growth in the second half of the year for the British chain of Plumb Centers.

Repair and maintenance, which accounts for two-thirds of European building distribution sales, had been particularly disappointing.

In France, where Wolseley bought Brossette, a chain of 200 merchants, in February 1992, sales increased by 6 per cent despite a flat housing and construction market.

Brossette was the first of a string of acquisitions over the past two years, costing almost pounds 300m and all financed by share placings, which have taken advantage of Wolseley's traditionally high rating.

One of those, Erb Lumber, took Wolseley further into the US timber distribution market, which accounted for 40 per cent of the division's pounds 87m trading profit, up from pounds 47m in 1993.

Operating margins moved ahead from 3.9 per cent to 5.1 per cent as plumbing profits also rose sharply.

SG Warburg is now looking for pre-tax profits to next July of pounds 245m, implying a prospective p/e ratio for 1995 of 11.3, a discount to the sector average of 12.1. A planned one-for-one scrip issue should improve the shares' marketability.

The prospective dividend yield is 3.3 per cent.

(Graphic omitted)

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
Sport
footballBrighton vs Arsenal match report
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us