Investors in Wolseley were spooked by deteriorating construction markets in Europe today, despite an otherwise healthy set of third-quarter figures.
Shares slumped 3 per cent after chief executive Ian Meakins admitted to “challenging conditions” in the continent, which included homeowners deciding against replacing toilets and taps in the Nordic, French and Central European regions.
However, the FTSE 100 stalwart’s most important market, the US, saw revenue reach nearly £1.7 billion in the three months to April, up 12.2 per cent on the same quarter last year. Coupled with an 11.2 per cent improvement in the Warwickshire-based group’s domestic market, which includes the 480-branch Plumb Center chain, this more than offset the problems in Europe. Group turnover marginally increased to £3.23 billion, while trading profit rose 6.4 per cent to £150 million.
This is the latest boost to a business that suffered badly in the depths of the crisis, triggering a restructuring that started in 2009 after losing nearly £1.2 billion in 12 months. Wolseley, the world’s biggest supplier of plumbing goods, from baths to kitchen sinks, sold a number of struggling businesses, such as Build Center and French plumbing and heating subsidiary Brossette. Over the past year its shares have made a spectacular advance, soaring from around 2200p to more than 3400p last month.
Meakins suggested that any future investment would be focused on North America and the UK, “executing our growth initiatives in the more robust markets.”
That said, Wolseley plans 200 job cuts at Burdens, the drainage supply business it spent £30 million on last autumn. Those redundancies account for a third of Burdens’ workforce. In today’s statement, Wolseley insisted it had made “excellent progress” in integrating Burdens.
Andy Brown, analyst at Panmure Gordon, said: “While investors will focus on [improvements in] US housing we believe that there is already a lot of good news in the share price; take profit, sell.”
Oriel Securities said that the £150 million trading profit was at the lower end of what it had hoped for.