Investment Column: Wolseley must build on Irish foundation

Wolseley

Our view: Hold

Share price: 1,426p (12p)

Yesterday was a big day for Wolseley, the building supplies company that includes the Plumb Centre chain in the UK. It is selling off its loss-making Irish business to private-investor backed WIBHM.

Wolseley Ireland Holdings Limited – which includes all branches of the Merchants, Brooks, Tubs and Tiles and Encon Ireland chains – will bring in €6.5m (£5.8m) in cash, plus €26.5m through a loan note with a coupon of 10 per cent to be paid back within one year. Wolseley has also agreed to fund the €5.5m pension deficit, to be repaid through a separate loan note, with a 3 per cent coupon, at a rate of €1.5m per annum from the end of the second year.

Ian Meakins, the Wolseley chief executive, is unsurprisingly upbeat. "I am confident that the transaction we have concluded with WIBHM represents a good outcome for Wolseley's shareholders," he said. "It will also enable us to bring an even greater degree of focus on driving performance improvement in our core UK businesses."

Analysts are less impressed. The recession has hit Wolseley hard, forcing a reorganisation of its shares and a whopping £1bn rights issue, last March, to take on its eye-watering £2.5bn debts. The newly weighted shares have traded within a fairly flat range since, with an estimated valuation to Ebitda ratio of 15.5 times based on calendar 2010 forecasts from Panmure Gordon. But the Irish sales could be just the beginning of a major restructuring.

Andy Brown, at Panmure, said: "The disposal of its Irish operations is in-line with its strategic focus. While the proceeds are not huge, it will remove a loss-making operation. While this should help sentiment, we continue to see better opportunities elsewhere in the sector."

We agree. Hold.



Collins Stewart

Our view: Buy

Share price: 70.5p (unchanged)

Investors in stockbroker Collins Stewart have endured a rough ride of late. The stock has shown some volatility, beginning 2009 close to the 60p per share mark, then rising to around 95p in early May before fluctuating widely through the months that followed. It slipped as low as 68.5p in December, and closed at 70.5p last night.

The wider market, on the other hand, has surprised with its resilience since March last year.

Part of the weakness in the Collins price is explained by the performance of the US business, which proved a drag on the half-yearly results last summer. The November interim management statement also evidenced a split between the US and other divisions – Collins said that while total revenues in the four months to the end of October were up 4 per cent on the year before, "overall revenues for businesses outside the US were significantly ahead of the same period in 2008".

In line with the equity market rally, the November update also spoke of a continuation of the momentum seen in the second quarter, however. This is a key point, we think, as brokers such as Collins Stewart are the obvious beneficiaries of the strength in the wider market. Given the risks to the rally – traders have been mumbling about the possibility of a correction for some months now – we would we be cautious about buying a stock like Collins this late in the day.

That said, the underperformance outlined above makes us pause for thought. Indeed, the fact that Collins trades on an undemanding multiple of 12.8 times Arden's forecast earnings for 2010 suggests that concerns about the US business or otherwise have been overdone. We say buy.



Jacques Vert

Our view: Buy

Share price: 12.25p (+3.75p)

Jacques Vert, the Aim-listed 25-store womenswear chain and concession business, added to the festive retail feelgood factor yesterday with a 2.1 per cent rise in sales for the 10 weeks since its half year, plus doubled pre-tax profits to £2.9m for the 26 weeks to 24 October. The retailer has helped itself by improving its ranges and extending to size 24 its Windsmoor daywear and formalwear offer. Another fillip was that Jacques Vert, which generated cash of £9.7m over the half year, said progress on gross margin continues to be "encouraging" and ahead of last year over the most recent 10 weeks.

Some 80 per cent of Jacques Vert's shares are held by seven investors. This is partly why its shares are cheap and trade on a forward 2010 price to earnings ratio of just five, compared to an average of 13 for the retail sector. Given its improved performance, we think Jacques Vert represents a bargain, despite liquidity issues and management's caution about the second half. Buy.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral