A “hangover” from a UK boiler price war squeezed margins at heating and plumbing giant Wolseley, its boss Ian Meakins has said.
The heating market declined around 1% in the six months to January 31 because the first government-backed Energy Companies Obligation programme — aiming to make homes more efficient — ended.
Wolseley said that “very competitive pricing” for boilers had had an impact on gross margins.
Meakins added: “If you go back a year, there was a lot of activity going into the market because of ECO… there were a lot of low-margin boilers going around at that stage. There has been a bit of a hangover from that — both we and boiler manufacturers are pretty competitive at the moment.”
Wolseley’s UK business only accounts for around 10% of group trading profits, which rose 11% to £390 million over the half thanks to record margins in the US, where all its businesses outperformed.
Meakins said the US operation — accounting for more than three-quarters of trading profits — saw its third successive quarter of double-digit sales growth and was well-placed despite the looming prospect of the US Federal Reserve raising interest rates later this year.
First-half revenues were up almost 8% to £6.4 billion but pre-tax profits slumped two-thirds to £103 million.
That was thanks to a £245 million writedown on Scandinavian materials firm DT Group — which it bought in 2006 — because of “continued challenging market conditions in the region and reduced expectations of future profitability”.
