Building supplies business Wolseley has pleased investors with a raised dividend and £250m share buyback, after a strong US performance boosted its results.
The company, which has around two-thirds of profits in the US, said it would pay a full year dividend of 82.5p a share, up 25%, and launch its third buyback in three years.
It reported an 8.6% rise in full year trading profit to £761m, better than the £750m expected by the City. Its US business benefited from growth in housebuilding and an increase in market share, which helped offset weak markets in Europe. Peel Hunt analyst Clyde Lewis said:
Full-year results were essentially a reverse image of the Ryder Cup – the US posted stellar results, with its trading margin moving up by 40 basis points to 7.7%. Meanwhile Europe, despite lots of endeavour, saw trading profits slip by 9%. With over 70% of profits now coming from the US (and a further 6% from Canada), the driving force behind the group is increasingly clear, especially when the European outlook is dull at best. We don't think the shares are that expensive, but we see better value elsewhere. Remains a hold.
But in the market Wolseley is currently up 42p at £32.99.
Elsewhere Melrose has risen 10.6p to 248p after the industrial group announced the purchase of US heating component specialist Eclipse for $158m in cash.
AO World has added 6p to 198p after it said its German website would go live on Wednesday, six months ahead of schedule. Mike Stewart at Shore Capital said:
When we initiated coverage earlier this year, we forecast a £4m start-up loss for [Germany] with no revenue contribution, this ultimately caused a drag on the group's earnings; consequently, we will be upgrading our numbers for the territory, and for the group, post the analyst call this morning with the belief that start-up losses will now be narrower than we initially anticipated.
Management today expressed that the core UK business continues to perform well with UK revenue growth and EBITDA on track to meet full year expectations. We suspect that trading may well be a little stronger than the market suspects however and we will be reviewing our numbers for the core UK business also. Whilst we still struggle with the valuation of this business, we believe that the differential between the intrinsic value of the group and the current market price may well have narrowed slightly.
But interdealer broker Icap has dropped 7.6p to 388.1p as it warned first half revenue would be around 10% lower than a year ago after poor trading volumes. Finance director Iain Torrens is leaving the group to join TalkTalk Telecom, up 0.4p at 298.3p.
Liberum analysts said the update was very poor:
[There is a] glimmer of hope in that trading in September was said to have improved but this is unlikely to prevent downgrades from the market. The results are expected to be second half weighted due to £40m of cost savings. Management is doing what it can but markets remain extremely difficult. Re-iterate sell.
