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Wolseley ramps up restructuring efforts after Q3 slowdown

Parts Center and Plumb Center 725 x 500

Shares in Plumb Center owner Wolseley sank by 6 per cent today (1st June 2016) after the firm said it was ramping up restructuring efforts across the UK and Europe as it revealed a sharp slowdown in sales growth.

The FTSE 100-listed firm said like-for-like revenue growth had dropped to 1 per cent in recent weeks, down from 2.8 per cent in its third quarter, with current trading 'subdued'.

As a result, Wolseley said, it had ‘committed to further restructuring’ as part of an overhaul announced in March that will see 14 branches closed and around 300 jobs axed.

The building supplies group said its bill for the restructuring will increase to around £20million this year, up from £15million previously.

In reaction, Wolseley shares topped the FTSE 100 fallers list in late morning trading, shedding 6.7 per cent, or 271p to 3,780.0p.

Wolseley said its additional revamp efforts would not impact further on its branches or jobs, although there remained fears of more cuts to its 6,200-strong UK workforce as it carries out a root-and-branch review of its British business.

The group said it aims to complete the UK review by August.

Wolseley also stuck by its full year profits forecast, with UK trading profits holding firm at £26million in the third quarter, but it cautioned over current trading.

‘Demand in several of the Group's markets remains subdued and we continue to experience the adverse impact of commodity deflation, particularly in the US,’ the firm said in the trading update for the three months to April 30.

The gloomier outlook comments came as Wolseley posted a 0.4 per cent fall in third quarter like-for-like revenues for its UK business, hit by weak repairs, maintenance and improvement markets.

It added the UK heating market ‘continued to be challenging and we continue to take actions to protect profitability’.

See the full results publication here

Ferguson - the US arm, which represents the bulk of Wolseley's earnings – saw its like-for-like revenues grow by 5 per cent in the quarter, but that was down from growth of 8.3 per cent a year earlier, impacted by lower demand in industrial markets.

US trading profits rose to £204million, up 17.4 per cent after currency effects were stripped out.

Analysts at Liberum Capital said Wolseley delivered a ‘decent’ performance in the third quarter, but the slower recent trading was a concern.

They added: ‘The Q3 update from Wolseley confirmed again that Ferguson is the jewel in the group's crown and that the rest of the businesses are running hard to stand still.’

Helal Miah, investment research analyst at The Share Centre, said: ‘Wolseley still expects to deliver full year numbers before restructuring costs that are still in-line with expectations.

‘Therefore, despite the disappointing Q3 trading update, we continue to recommend the group as a “buy” for longer term, medium risk investors. The US market remains a growth opportunity and investors dividends will be supported by a share buyback programme.’

And Mike van Dulken, Head of Research at Accendo Markets, said: ‘The latest Brexit poll suggesting a surge by the Leave campaign adds to an uncertain outlook for growth which may be making matters worse.’

Image: Imran's Photography / Shutterstock.com 

Source : ThisIsMoney
www.thisismoney.co.uk/money/markets/article-3619661/Wolseley-shares-sink-6-Plumb-Center-owner-unveils-plans-ramp-restructuring-sales-growth-slows.html

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03 June 2016

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