Shares in Plumbing and Building merchant Wolseley (WOS) are top of the UK 100 this morning after consensus-beating H1 results, a 10% dividend hike and strategic Nordic exit to focus on the key US market. Like-for like/organic group sales +3.2% is solid, helped by a Q2 acceleration in both the US and UK. Group revenues +6.7% at constant FX compares to trading profits up only 5%, suggesting persistent commodity price deflation, although the drag is waning with US revenues up 9.9% nonetheless and management saying this is now negligible. A Brexit-weakened GBP boosted revenues by £1.1bn.

The importance of the US (84% of group trading profit; unchanged vs H2) is reflected in the group’s decision to rename itself after its US brand Ferguson (well-known Wolseley brand stays in UK & Canada) and adopt the US$ as its reporting currency from August. Furthermore, E-commerce sales now making up 17% of group sales (14% at end H2) echoes strong performance from Kingfisher’s Screwfix last week, implying the group is already extremely well positioned to capitalise on the channel’s future growth.

The UK transformation programme continues as do bolt-on acquisitions (8 in H2 added 2.5% to revenue growth; 2 more since), and whilst recovery potential was identified in Nordic operations, synergies are few and exit deemed the best decision to allow a concentration of efforts on the US, UK and Canada/Europe.

In terms of outlook, management expects further progress in H2. This is supported by it divulging like-for-like sales of +4.5% since end-Jan (US +5.5%). Investors hope a strong start to H2, and yesterday’s bounce off the 100-day MA and 9-month post-Brexit rising support, will remain their friend with the shares trading fresh record highs again. They are also perhaps hoping for a revival of the Trump-trade US optimism that has helped since the US election.

Mike van Dulken, Head of Research, 28 Mar 2017