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Consumer confidence and lack of credit delays recovery for Wolseley

Building materials supplier Wolseley this week said its UK business had improved in 2010 but that public spending cuts and fragile consumer confidence meant the recovery would be “weak”.

The company’s UK business, which accounts for 19 per cent of group revenues, posted revenue of £2.47 billion in the 12 months to 31 July.

This was down 9 per cent on the previous 12 months, due to the impact of disposals and branch closures. But like-for-like revenue grew 5 per cent in the second half of the year.

The company said: “We expect the overall recovery to remain weak as activity levels are held back by fragile consumer confidence and low availability of credit.

“In addition, public sector activity, which represents around 25 per cent of our UK revenue, may come under pressure later in the year, following the government’s spending review in October.”

The company said that the repair, maintenance and improvement market, which accounts for about 65 per cent of its UK revenues, had continued to improve. Commercial and industrial markets remained “relatively weak”.

Wolseley also said there had been a “significant decline” in gross margins in the UK owing to increased competition. However, it said this trend had largely been offset by reductions in the company’s cost base following restructuring in the previous year.

Chief executive Ian Meakins said: “Demand across our markets remains mixed and the economic outlook continues to be unclear.

“Revenue growth in the early part of the current financial year is similar to that seen in Q4 last year.”

Andrew Brown, an analyst at Panmure Gordon, said that the improvement in Wolseley’s UK trading reflected a more stable residential property market and a slight pick-up in new builds.

 

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