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Wolseley lowers half-year sales forecast

Wolseley sign

Shares in Wolseley, the world’s biggest supplier of plumbing and heating equipment, have dropped by more than 13pc after the firm said it expected weaker revenues for the rest of the year.

The FTSE 100 company posted an 11.4pc rise in trading profit to £857m in the year to July, but said parts of its US business had slowed.

Accordingly, the company lowered its sales forecasts for the first-half and pencilled in like-for-like sales growth of 4p, down from the 6pc estimate given in June.

Like-for-like sales jumped 7.1pc on stronger international business, and the group’s underlying trading margin hit a “record” 6.4pc.

However, pre-tax profit fell to £508m from £676m thanks to a £242m exceptional charge, largely related to impairment costs at the struggling Nordics business and some problems in America.

Chief executive Ian Meakins said the industrial markets in North America, which generate 15pc of regional revenues, were “challenging” in the fourth quarter and are expected to remain tough for the rest of this year.

Wolseley’s US operations account for around 75pc of group profits.

He said the sector had suffered from the recent oil rout, which has caused oil prices to halve in the past year. Wolseley distributes pumps and valves to companies involved in chemicals and gas.

“Oil and gas activity has slowed down a lot. Although only 6pc of our sales go directly into oil and gas, it’s had a drag effect on all areas of our industrial businesses in North America,” said Mr Meakins.

He added the heating market in the UK is expected to remain “very competitive with little growth”. Mr Meakins said the strong competition contributed to a 6pc dip in UK profits to £90m.

Online sales, which are becoming an increasingly important part of Wolseley’s business, performed well in the year and accounted for 13pc of group revenue.

Wolseley’s shares had surged by more than 31pc in the past year before its trading update spooked investors.

However, analysts at Berenberg said investors had over-reacted, as the US order book is still in good shape and should contribute to growth in the next six months.

Source : Elizabeth Anderson - The Telegraph

29 September 2015

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