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Wolseley PLC WOS
Q3 2013 Earnings Call Transcript

Transcript Call Date 06/04/2013

Operator: Good day, and welcome to the Wolseley PLC Third Quarter Interim Management Statement Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Martin, Chief Financial Officer. Please go ahead.

John Martin - CFO: Marina, thank you very much, and good morning, everybody. Welcome to our third quarter results conference call. I'll just make a few introductory remarks this morning about trading and then Mark and I will be happy to take any questions that you've got.

So you all have seen this like-for-like revenue growth for the ongoing business was 2.4% in the quarter, in line with the rate we saw in the first half. Growth came substantially from the U.S. but it's also great to see some signs of life in the U.K. towards the end of the quarter. That growth was partly offset by challenging conditions in the rest of Europe and I’ll come back to the regional trends in just a minute.

The gross margin for the Group was held at 27.9%. That's in line with last year. And as you know, this is a major focus for us, particularly in the current market environment. We’re also staying very close to the cost base and operating costs and headcount continue to be very tightly controlled.

Given the uncertain economic outlook in Europe, we will continue that in the fourth quarter and also into next year.

Trading profit of GBP150 million was 7.9% ahead of last year, giving a trading margin of 4.7% in that third quarter. That's 20 basis points ahead of last year.

Our balance sheet remains strong. Net debt at the end of the quarter was GBP694 million and that's before the interim dividend of GBP60 million, which was paid out on the June 1. That's GBP170 million better than at the half year.

Let me just cover a couple of other things as well. We had one fewer trading day in the quarter and that cost us about GBP6 million of trading profits. In the final quarter, the number of days is the same as it was last year.

FX in the quarter, though, was favorable, principally due to the U.S. dollar rate and that was worth GBP90 million of revenue and GBP5 million of trading profit, so the days and FX essentially compensating for each other.

Just moving on to operations, the U.S. grew at 8.3% and the growth continued to be pretty broadly based coast-to-coast really in the U.S. The growth rate improved slightly in Blended Branches and in HVAC, but Waterworks, B2C and Fire and Fabrication all continued to grow strongly. In Industrial, PVF performed well. The only weak spot in Industrial was the HDPE business.

Overall in the U.S., despite pricing pressure, gross margins were defended and we improved our gross margins across most of those businesses. We stayed cautious on new hires and operating costs are well under control. Trading profit was GBP20 million ahead of last year and we continued to make some pretty valuable gains in market share.

In Canada, revenue was pretty flat. New residential construction volumes were weaker. Though, that was offset by continued decent demand in Industrial as infrastructure investments has carried on. So our Industrial business continue to grow. There was not a lot of growth anywhere else. Gross margin is slightly ahead of last year and the business held operating costs flat, so we edged trading profits up to GBP7 million.

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