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Wolseley - Cooling sales overshadow gains

Nicholas Hyett | 1 June 2016 | A A A
Wolseley - Cooling sales overshadow gains

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Ferguson plc Ordinary 10 53/66p

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Wolseley shares opened down 5.5%, as a decent third quarter performance was overshadowed by slowing like-for-like (LFL) growth. Wolseley report 5.9% growth in revenues at constant exchange rates, with trading profits up 12.2%. However, LFL revenues grew 2.8%, including a 1.4% impact from deflationary headwinds, compared to 7.5% a year previously.

Net debt rose slightly to £1,131m (2015: 1,127m) following the completion of a £252m share buyback.

The US business, Ferguson, accounted for 66% of group revenues and 89% of group trading profit. The division saw 5% LFL growth, including 2.3% price deflation, and trading profits increasing 17.4%. Gross margins were ahead of last year with operating costs up 6.6%. Lower commodity prices continued to impact industrial demand (13% of Ferguson revenues).

UK trading profits were in line with last year. LFL revenues were 0.4% lower than a year previously, although this represents an improvement on performance in the previous two quarters with acquisitions contributing 2.8% to headline revenues growth.

In the rest of Europe the Nordic region saw revenues fall 0.9% and trading profits fall 42% as adverse weather conditions and a reduction in tax incentives impacted spring sales. Gross margin was also weaker. Central Europe saw higher margins and lower costs offset a 0.2% decline in LFL revenue to deliver a 32% boost in trading profit at constant exchange rates.

Restructuring costs in the UK business generated £2m in additional costs, bringing the total for the first three quarters to £5m. The group has increased its expectations for full year restructuring costs in the UK and Europe to £20m.

Outlook:

The group continues to see subdued demand in several key markets, including the US. LFL revenue growth in the weeks since the end of the first quarter has continued to slow and is currently running at 1%. The group expects trading profits for the full year, before restructuring costs, to be in line with analyst expectations at current exchange rates.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.


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