27th Sep 2016 11:41
LONDON (Alliance News) - Plumping and heating supplier Wolseley PLC on Tuesday tabled plans to slash 800 jobs and close 80 branches in the UK, citing subdued demand and competitive trading conditions in the region.
Wolseley was trading down 4.0% at 4,128.00 pence on Tuesday afternoon, the worst performer in the FTSE 100.
The plans to overhaul the UK operations came as Wolseley said its UK like-for-like revenue declined 1.6% over its financial year ended July 31, with acquisitions in the region contributing 2.7% of additional revenue.
The company said it has seen declines in quarterly like-for-like revenue every quarter over its financial year, due to the weak repair, maintenance and improvement market, from which it generates the majority of its trading profit. The UK division generates around 8.0% of total group trading profit.
Wolseley outlined the cuts as part of a series of restructuring actions, in which it also said it would invest funds in improving its technology and refurbishing sites.
Wolseley already closed 21 branches in the year ended July 31, resulting in around GBP10.0 million of restructuring charges during the year. However, the additional closures and job cuts are expected to result in further restructuring charges of around GBP100.0 million.
Elsewhere, the company's Nordic division, in which it generates 5.0% of trading profit, saw like-for-like revenue growth of 0.6%. However, Wolseley said market conditions in Denmark weakened in the second half of the year and said demand remained poor in Finland.
Gross margins were hit by a higher mix of revenue from direct business from large contractors, which meant trading profit from the region fell to GBP60.0 million from GBP72.0 million.
Wolseley said it was initiating a review into the operating strategy of this division.
Despite the poor UK and Nordic trading performances, Wolseley said the majority of its trading profit is generated from the US, where it reported a strong performance.
US revenue grew 4.1% on a like-for-like basis, thanks to growth within both Wolseley's residential end-market and commercial end-market, the pair being the largest of Wolseley's end-markets in the region.
Wolseley said this drove its group revenue for the year ended July 31 up 9.0% to GBP14.43 billion from GBP13.30 billion a year earlier.
Wolseley said commodity price deflation reduced its overall revenue growth rate by 1.5% over the year, but said changes in foreign exchange rates increased revenue by GBP552.0 million.
Total group trading profit, excluding exceptional items, rose to GBP917.0 million, from GBP508.0 million a year earlier. Wolseley reported pretax profit of GBP727.0 million for the year ended June 30, ahead of the GBP508.0 million reported a year earlier.
The company declared a full-year dividend of 100.00 pence per share, up from 90.75p per share a year earlier.
"Like-for-like revenue growth in the new financial year has been 1.5% for the group and 4.5% in the US. Demand across our markets remains mixed, with some uncertainty in the economic outlook. We will remain vigilant in controlling our costs to protect profitability while investing in attractive opportunities for profitable growth. We are confident that Wolseley will make further progress in the year ahead," said Chief Executive John Martin.
By Hannah Boland; [email protected]; @Hannaheboland
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