1st Jun 2016 09:09
LONDON (Alliance News) - Shares in Wolseley PLC fell Wednesday after the company said recent revenue growth trends have been weaker, due to deflationary headwinds and mixed market conditions, although it noted there was "decent revenue growth" in the third quarter of its financial year.
Shares in Wolseley were down 5.8% at 3,817.36 pence on Wednesday morning, the biggest faller in the FTSE 100.
In the weeks since the third quarter ended April 30, Wolseley said like-for-like revenue growth has been 1.0%, compared to 2.8% in the quarter. Additionally the company pointed to further restructuring in the UK and Europe, with total restructuring costs for the full year expected to be about GBP20.0 million.
The company noted that demand in several of its markets remains subdued, and it continues "to experience the adverse impact of commodity deflation, particularly in the US".
"We expect trading profits for the full year, before restructuring costs, to be in line with analyst expectations at current exchange rates," Wolseley said in a statement.
This came as the building products company posted revenue of GBP3.66 billion for the third quarter, an 11% increase from the GBP3.30 billion reported for the same period a year earlier, which drove trading profit up to GBP230.0 million from GBP195.0 million. Trading profit excludes exceptional items and amortisation of acquired intangibles.
Wolseley noted that there was one more trading day in the third quarter than a year earlier, which represented GBP6.0 million of trading profit, and said there will be one fewer trading day in the fourth quarter.
The increase in revenue was boosted by exchange rate movements, which contributed GBP153.0 million, as well as a strong performance in the US division, where revenue came in 8.2% higher than a year earlier at GBP2.41 billion from GBP2.12 billion, and grew 5.0% from the second quarter on a like-for-like basis.
Wolseley said the like-for-like increase included price deflation of 2.3% and, whilst most of its US businesses saw good like-for-like growth, the US industrial market, which represents 13% of Wolesley's US revenue, continued to be impacted by weak demand.
Trading profit grew to GBP204.0 million, a GBP40.0 million increase from a year earlier.
In the UK, like-for-like revenue was 0.4% lower than the same period the previous year, as repair, maintenance and improvement markets remained weak. However, Wolseley said it is making good progress with the review of the UK operating model, and it expects the review to be completed in August.
Wolseley's Nordic operations were hit by bad weather conditions as well as the reduction of tax incentives, and the division was the worst performer, seeing like-for-like revenue decline 2.6% from the second quarter.
In Canada, a stronger performance from the east of the country offset the damage done by weakness in the oil price in the west, and like-for-like revenue rose by 0.1% from the second quarter.
"Wolseley generated decent revenue growth in the third quarter in mixed market conditions and against continued deflationary headwinds. The commercial and residential markets in the US held up well and we achieved good volume growth, though this continued to be partly offset by weaker Industrial markets and the ongoing impact of commodity price deflation which reduced the US growth rate by 2.3%," said Chief Executive Ian Meakins.
"The UK heating market continued to be challenging and we continue to take actions to protect profitability. In the Nordics, after an encouraging first half, construction markets were more challenging in the third quarter. Recent revenue growth trends have been weaker and we have continued to manage costs and productivity very carefully while driving better customer service and strong cash conversion," Meakins added.
By Hannah Boland; [email protected]; @Hannaheboland
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
WOS.L