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MARKET COMMENT
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They say "A good flush beats a full house every time". A good flush or a well-furnished bathroom can, it is also said, add to the value of your home. Gone are the days when Britons were content with an outside loo or a simple Twyford's water closet. Today, we want power showers, bidets and, if there's any room left in the bathroom, a Jacuzzi! All of this translates into growth in the plumbing industry. Last year, the UK's builders and plumbers' merchants market was worth some £9b. That's expected to grow to £10b this year, a rise of 11%. Naturally, much of this expansion is as a result of the robust UK housing market. That said, even if the housing market does slow, plumbing is unlikely to disappear down the U-bend of contraction, because homeowners will always want to improve their domestic waterworks! There are a number of quoted companies that could benefit from the strong growth in the plumbing sector. Wolseley (LSE: WOS), with its 500-strong Plumb Centre chain, is the likely destination of choice, not only for DIY enthusiasts but investors too. Wolseley, which is valued at a not-too-expensive eleven times prospective earnings, is a significant player in the US plumbing market as well. Its shares, which stand at 732p, yield 3.2%. BSS (LSE: BTSM) services the domestic sector through its network of 175 PTS Plumbing Trade Supplies outlets. The company has benefited from increased government spending, which has underpinned parts of the construction market. BSS, which specialises in heating installation and supplies, said trading this year is expected to be in line with expectations. That suggests annual pre-tax profits of £24m on revenues that could rise as much as 25% to £620m. Its shares currently stand at 555p, which values the business at a modest ten times prospective earnings.
Another player with a significant presence in the over-the-counter plumbing supplies market is Grafton (LSE: GFTU). Its Plumbase chain has 135 UK branches, making this Dublin-based plumbing merchant another major player. Grafton expects to post a 30% rise in sales this year, with its top line boosted by acquisitions. Earnings per share of €0.43 are pencilled in for 2003, valuing the shares, which stand at €5.2, at twelve times earnings.
Oystertec (LSE: OYS) is a more speculative play on the growing plumbing market. The company, which is chaired by Angus Munro, former head of Matalan (LSE: MTN), is looking at ways to commercialise its new plumbing products. Its innovative Rotarad swing-out radiators for domestic use are already available in Wolseley's Plumb Centres. Sales for this year are expected to come in at £102m, and profits of £3m value the company at eight times prospective earnings. In spite of its fledgling status, Oystertec is expected to pay a dividend of 0.3p this year, rising to 1p in 2004, which implies a prospective yield for its shares, which trade at 15p, at 6.7%. Read more about plumbing on the Building/ DIY Fools board.