Wolseley’s Share Price Plunges Despite Upbeat Trading Update

on Jun 4, 2013

Wolseley’s share price (LON:WOS) declined by more than 2.8 percent to ₤32.62 in early trading in London today, June 4 despite the release of an upbeat trading update for the company’s fiscal third quarter.

The distributor of heating and plumbing equipment has reported revenue of ₤3.23 billion for the three months ended April 30, up six percent from last year and up 2.4 percent on a like-for-like basis. Gross margin was 27.9 percent, in line with last year, while trading profit came in at ₤150 million, up 7.9 percent year-on-year.
“Wolseley continued to make decent progress in the third quarter, with good growth in the USA and the UK offsetting challenging conditions elsewhere in Europe. We held our gross margin overall and controlled costs to generate 7.9% trading profit growth in the ongoing business,” chief executive Ian Meakins commented in the trading update. “We will continue to pursue operating efficiencies and remain focused on customer service, gaining market share and protecting our gross margins.”

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Like-for-like revenue growth of 8.3 percent in the U.S. and 5.2 percent in the UK has managed to offset a continued slide in the Nordic countries, France and Central Europe.
Wolseley said that its UK growth in the three months to end-April was mainly driven by its Plumb and Parts Center brands, while Pipe and Climate Center struggled amid weaker industrial markets. Trading profit dropped by ₤2 billion due to costs related to the integration of 22 recently-acquired Burdens drainage supplies depots. Wolseley announced in the trading update that it planned to cut 200 jobs from its Burdens business this year, about a third of its workforce.

French like-for-like sales declined by 9.2 percent while in Central Europe they plunged by 4.6 percent. Business in the Nordic countries saw a decline of 7.3 percent in like-for-like revenue.
Wolseley also said in the trading update that as of April 30 net debt was at ₤694 million, down by ₤177 million compared to the previous quarter. The UK-based group has managed to get back on its feet since its ₤1 billion rescue rights issue in 2009.

**Analysts on Wolseley**
!m[Wolseley (LON:WOS) ](/uploads/story/2728/thumbs/pic1_inline.png)
Analysts at J.P. Morgan Cazenove reaffirmed their “overweight” rating on Wolseley’s stock last week. Last month, Davy Research reiterated its “neutral” rating, while Deutsche Bank gave the shares a “buy”. Morgan Stanley has kept its “underweight” rating on the stock.
Two analysts have rated Wolseley with a “sell” rating, three have assigned it a “hold” rating and six have given it a “buy” rating. As of the morning today the company had a consensus rating of “hold”.
**Wolseley’s share price was ₤32.56 as of 04.06.2013, 09.50 BST.**


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