Wolseley share price rises on Q3 update

on Jun 3, 2014
Updated: Apr 9, 2020

iNVEZZ.com, Tuesday, June 3: British heating and plumbing products supplier Wolseley (LON:WOS) today released its Interim Management Statement for the third quarter to April 30, 2014.

According to the statement, foreign currency movements have weighed on the group’s quarterly performance but strong growth in the US and Nordic regions drove an acceleration in like-for-like (LFL) sales.
Wolseley, which operates the Plumb Center and Ferguson chains in the US and Britain, said that adjusted profit for the third quarter was £155 million, up 0.6 percent from a year earlier, but 9.1 percent ahead at constant exchange rates. Sales fell 0.8 percent to £3.05 billion on a reported basis. However, LFL sales were 5.1 percent higher, as nine percent growth in the US and 7.5 percent growth in the Nordic region helped to offset declines in Canada, France, Central Europe and the UK.

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In the UK in particular, LFL sales growth turned negative to 3.5 percent, from a two percent increase in the second quarter, as Wolseley continued to focus on protecting gross margins, it said.
“The group grew its gross margin and controlled operating expenses to generate good conversion into trading profit, though reported results were affected by significant unfavourable foreign exchange rate movements,” Wolseley CEO Ian Meakins remarked, adding that the company “continued to make good progress in the third quarter with strong growth in the USA and the Nordics offsetting more challenging conditions elsewhere.”

Looking ahead, Wolseley said LFL growth in May was broadly in line with the year-to-date. “The USA has continued to grow well, whilst market conditions remain more challenging in Continental Europe. We expect the group’s LFL revenue growth rate for the next six months to be about four percent,” the company’s statement revealed.
Wolseley was hit hard by the financial crisis and resulting economic crisis as its markets in North America and Europe came under severe pressure. It has been recovering over the last couple of years, particularly in the US thanks to the strong recovery in the housing market and the general economy there. The recovery in Europe has been much slower.

In an effort to boost returns, the heating and plumbing products distributor has been selling off less profitable businesses. Late last month, Wolseley announced that it had agreed to sell its Austrian plumbing and heating business ÖAG — a disposal, described by Meakins as a move “in line with our resource allocation strategy of focusing on our core operations where we can build significant scale and generate attractive returns” (Wolseley share price rises on Austrian subsidiary disposal talks)

**Wolseley share price gains on update**
Investors have reacted positively to Wolseley’s quarterly update. The company’s share price opened today’s session more than two percent higher and as of 08:03 BST, it was trading at 3,370.00p — 1.81 percent up on the day.
Of the 23 analysts projecting 12 month price targets for Wolseley for The Financial Times, the median target is 3,625.00p, with a high estimate of 4,061.00p and a low estimate of 2,760.00p.
**As of 08:03 BST, buy Wolseley shares at 3,371.00p.**
**As of 08:03 BST, sell Wolseley shares at 3,366.00p.**


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