Q3 Interim Management Statement for the nine months to 30 April 2015
Third quarter highlights
- Revenue of the ongoing businesses 12.4% ahead of last year at constant exchange rates, including like-for-like growth of 7.5%.
- Trading profit for the ongoing businesses £195 million, 20.3% ahead of last year at constant exchange rates.
- Foreign exchange movements increased trading profit by £11 million.
- Three further bolt-on acquisitions completed with total annualised revenue of £69 million.
- Good cash generation with net debt of £1,127 million (31 Jan 2015: £1,221 million), after payment of the interim ordinary dividend of £78 million.
Commenting on the results, Ian Meakins, Chief Executive, said:
“Like-for-like revenue growth continued to be good and we outperformed the market in all key regions. Gross margins were ahead as we continued to focus on improving the mix of customers, suppliers and products. Operating expenses were well controlled and we generated decent flow through to trading profit. Strong operating results were also boosted by favourable foreign exchange rate movements. Cash conversion was in line with our expectations and we are continuing to invest in developing a more efficient business model to deliver better customer service and gain profitable market share.”
In the USA, like-for-like revenue growth was 8.3% with negligible price inflation. Market conditions remained good and growth was broadly based across all regions. The Blended Branches, Fire and Fabrication and Industrial businesses all generated good like-for-like revenue growth and the B2C business continued to grow strongly. Acquisitions contributed 3.3% of additional revenue growth. Gross margins were ahead of last year and operating costs were 14% higher at constant exchange rates including acquisitions and the continuing planned investment in developing a more efficient business model. Exchange rate movements were favourable in the quarter and increased trading profit by £13 million. Trading profit of £164 million was £43 million ahead of last year.
acquisitions were completed with total annualised revenue of £31 million. These were Redlon & Johnson, a plumbing distributor with 11 branches and Arkansas Supply, a single branch operation.
In Canada, like-for-like revenue declined by 1.9% including 1% price inflation. Acquisitions contributed 2.1% of revenue growth. Blended Branches continued to grow well but the Waterworks and Industrial businesses weakened as a result of the fall in oil prices. Gross margins were better than last year and trading profit of £3 million was in line with last year.
In the UK, like-for-like revenue growth was 7.6% including 1% price deflation. Acquisitions contributed 4.2% of additional revenue growth. The Plumbing & Heating business and Pipe & Climate generated good growth and the Utilities business continued to grow strongly. Gross margins were lower than last year in a challenging plumbing and heating market and operating costs remained well controlled. Trading profit for the period of £26 million was £2 million ahead of last year.
After the end of the quarter we completed the acquisition of MPS, a utilities business, with annualised revenue of £38 million.
In the Nordic region, like-for-like revenue growth was 8.8% and price inflation was less than 1%. Acquisitions contributed 4.0% of additional revenue growth. Market conditions were satisfactory in all Nordic countries except Finland which continued to be very challenging. Gross margins were lower due to the impact of acquisitions and pricing pressure. Operating costs were 7% higher at constant exchange rates including 2% from acquisitions. Exchange rate movements were unfavourable in the quarter and reduced trading profit by £2 million. Trading profit of £11 million was in line last year.
In Central Europe, like-for-like revenue growth was 1.0% including 2% price deflation. Revenue and gross margins were lower in Switzerland, which was affected by currency volatility, and were ahead in the Netherlands. Operating costs were lower and trading profit of £3 million was £1 million ahead of last year.