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"Wolseley continues to be highly cash generative and we have adequate resources to fund future investment in the business alongside growth in ordinary dividends," said Ian Meakins, the group's Chief Executive. Revenue from continuing businesses in the year rose 5.4%, or 3.8% on a like-for-like (LFL) basis, to £12,716m from £12,061m the year before. Trading profit from ongoing businesses jumped 10.4% to £658m from £596m the year before, but goodwill impairment of £353m relating to acquisitions made in its debt-fuelled acquisition spree in 2003 to 2007 put a dent in reported profit before tax, which fell to £198m from £391m last year. The trading margin for the ongoing business was 5.2%, 0.3 percentage points higher than the previous year. The gross margin in the ongoing business was slightly lower at 27.5% (2011: 27.7%) as a result of very competitive market conditions, price deflation in some product categories and the supplier settlement noted in the first half. Headline earnings per share rose 17.8% to 168.4p from 142.9p the previous year.
The transformation of Wolseley from a company in danger of collapsing under the weight of its own debt to one on a sustainable growth path looks complete after the company announced its intention to pay a special dividend. The plumbers' merchant has paid a full year dividend of 60p, which is already a third higher than the 45p it paid last year, but on top of that it will pay a one-off special dividend. The financial year to the end of July saw the group wipe out its £523m debt to end cash positive with net cash of £45m, paving the way for the special divi, which, along with a share consolidation, will cost the company £350m. Broker Jefferies Hoare Govett says the proposed shareholder return of £350m is within the expected range of £250m-£500m. Cash on tap
Negative Points: Accompanying management comments remained cautious in tone, noting that "Demand across our markets remains mixed and the economic outlook continues to be uncertain." Like-for-like sales in both the UK (-0.8%) and France (-1.4%) declined. For the UK business management noted that "There is no evidence yet of improving market conditions and therefore growth will only come from market share gains in the short term." At its French business, the board highlighted that "government incentives put in place in the last two years are ending and demand is expected to continue to decline in the current year." Competition across the group’s markets remains intense. Group's pension obligations as of 31 July 2012 were £358 million (31 July 2011: £360 million). All of the Group's companies are now reviewing their pension arrangements and this may lead to further cash contributions in the year ahead in the range of £100 million to £150 million.
Full year results: Wolseley proposes a special dividend. The figures proved to be broadly in line with analyst expectations. Aided by some stabilization in the US housing market, progress at the group's biggest division – the US currently generates 48% of group sales – helped lead the way. Like-for-like sales in the US grew by 8.4% over the year, more than offsetting falls in both the UK (-0.8%) and France (-1.4%). The sale or proposed sale of businesses provided for some write-down of business values - a factor which impacted pre-tax profit – although funds raised from the sales have allowed for a proposed £350 million special dividend. Accompanying management comments noted that "Demand across our markets remains mixed and the economic outlook continues to be uncertain. Revenue growth rates in the new financial year have been similar to the fourth quarter of last year." In all, with both a strong share performance over the last year (the share price has outperformed the FTSE-100 index by over 50% as of 02Oct2012) and concerns for the economic outlook counterbalancing hopes for further recovery in the US housing marke
Company overview Wolseley plc is a major international specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials in North America, the UK and Continental Europe. The group has around 41,000 employees and is a constituent of the FTSE 100 index.
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Engineering support firm Babcock's second quarter interim management statement should reveal further progress on the expanding bid pipeline, broker Panmure Gordon products. "We expect the core areas of its business in Marine and Defence to remain solid. One area of concern could be South Africa, albeit we note its exposure here is on domestic consumption rather than international resources," the broker cautions. On the economic front, the Nationwide Houser Price Index for September is expected to show no change from August, and is tipped to be down 0.6% year-on-year.
If market rumours are to be believed, plumbers' merchant Wolseley could announce a special dividend with its full-year results on Tuesday. If it does so, that would represent a remarkable turnaround for a company which not so long ago looked set to collapse under the weight of its own debt. "The group is the world's largest specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials in North America, the UK and Continental Europe. Although these markets are very competitive, Wolseley has made good progress in the year to July 2012 driven largely by the revenue uplift in North America," notes Charles Stanley's Tony Shepard. It is these North American revenues which are supposed to be underpinning the payment of a special divi, if, indeed, Wolseley decides to pay one. Shepard is predicting an increase in the full-year pay-out from 45p last year to 60p this, on the back of earnings per share up from 143p to 164p. Charles Stanley has pencilled in a figure of £618m for pre-tax profit. "It is pleasing that Wolseley delivered strong LFL [like-for-like] revenue trends in the USA but the Eurozone crisis is beginning to [have an] impact [on] the European performance. In particular, the Nordic region which includes Denmark, Sweden, Finland and Norway is facing more challenging trading conditions. Also, there may be some negative currency translation effects," Shepard reckons.
Plumbers merchant Wolseley (WOS), while initially a victim of the bombed out US housing market between 2008 and 2010 has seen its shares rise quite sharply, in fact by over a quarter since the June low near £21. Indeed, the rise was so sharp that brokers UBS and Panmure Gordon downgraded the stock during September, saying that the share price had run ahead of events. Nevertheless, the recent profit taking could well present a buying opportunity provided the latest update from the group doesn’t deliver any adverse surprises.
After a strong run in the share price, passing their target price on the way, analysts at Panmure Gordon believe it is time to lock in some profits on Wolseley. Hence, they cut their recommendation from Buy to Hold, while maintaining their 2500p target price.
Their forecasts for a fiscal year 2012 earnings per shares (EPS) of 162p, versus a consensus estimate of 160p, and a fiscal year 2013 EPS of 184p (Consensus: 183p) imply a calendar 2012E price-to-earnings multiple of 16x falling to 14x. That compares with its near UK peers on circa 11x, although Home Depot appears to be on 18x. Nevertheless, the broker admits that the company's shares offer a sound long-term investment case. Panmure thus adds that: "We have been impressed with the action taken by management in recent years, with many of its problem businesses sorted out. The 63%/37% North America/Europe split is still an attractive "mix," until signs of a stronger European recovery emerge." Despite which...recommendation trimmed Lastly, these analysts write that: "The next news update from the group will be the fiscal year results release on October 2. July traditionally is a key trading month for the group. With the share price having sailed through our target price we believe it is right to now lock in some profits so we cut our recommendation to Hold (from Buy)."
After a strong run in the share price, passing their target price on the way, analysts at Panmure Gordon believe it is time to lock in some profits on Wolseley. Hence, they cut their recommendation from Buy to Hold, while maintaining their 2500p target price. Of interest, they indicate that,"having healthy exposure to US construction markets has been a catalyst for share price out-performance. We would flag Ashtead and Keller while noting that Home Depot in the US has also done very well. Wolseley's share price started the year at 2000p and recently hit 2800p equivalent to 26% relative (to all share index) outperformance year to date."
UBS has cut its recommendation for plumbing and heating products group Wolseley from 'buy' to 'neutral', saying that it is pausing for breath following a strong performance in 2012 so far. "Following a strong run (+26% absolute year-to-date) and a significant re-rating we downgrade Wolseley to 'neutral' from 'buy'. We believe the fundamentals remain positive with a solid market share take story in the US (in addition to cyclical recovery, helped by an improving US housing market) and a very strong balance sheet allowing for cash returns, but we believe this is now priced in," UBS said on Wednesday morning.
Wolseley: JPMorgan Cazenove ups target from 2,830p to 2,870p, overweight rating kept.
Wolseley's strategy is to focus on businesses where it can establish leading positions in attractive markets and consistently generate good returns for shareholders. In this context, we have decided to explore strategic options for the future of our businesses in France. In the year ended 31 July 2011 the businesses generated revenue of £1.3 billion and employed net assets of approximately £500 million, including £136 million of goodwill. In light of this review the appropriate carrying value of these assets will be assessed at year-end and this is likely to give rise to a non-cash impairment charge. This announcement is being made in order to enable us to commence consultation with our employees in France. In our Q3 IMS we reported difficult market conditions in Continental Europe and these conditions have continued. We continue to take appropriate actions to reduce our cost base and, in line with previous guidance, we have incurred one-off restructuring costs of approximately £20 million since 1 August 2011. As previously stated, it is likely that these costs will be charged to trading profit. In Denmark, where we have strong market positions, trading conditions have remained challenging and we will review the carrying value of goodwill and intangible assets of £393 million associated with this business. This is also likely to give rise to a non-cash impairment charge.
http://www.investegate.co.uk/Article.aspx?id=201207170700037809H
FLASH: Panmure Gordon upgrades Wolseley from sell to buy, target price raised from 1500p to 2500p
UBS has lowered its price target for plumbers' merchant Wolseley from 2,650p to 2,500p following Tuesday's third-quarter statement, which showed deteriorating conditions in Europe. The broker has maintained its buy rating on the stock. "We still believe that fundamentals are positive for Wolseley, in particular: (1) the significant growth potential from both market share take and cyclical recovery in the US; and (2) a strong balance sheet expected to be net cash by end of CY12 giving flexibility to invest and/or return cash to shareholders."
Positive Points: Group gross margin of 27.7% held at last year's level. Trading profit of £139 million was 10.3% ahead of last year. Revenue in Canada in the quarter grew by 7.9% on a like-for-like basis. The Industrial business was particularly strong as it continued to benefit from the buoyant oil, gas and mining sectors. Group net debt of £277 million was reported, £314 million better than 30 April 2011. The group continues to be repositioned. Two small bolt-on acquisitions were completed in the quarter in the US and Denmark. Wolseley enjoys geographical diversity, a strategy which should help it balance stronger regions against weaker ones. A significant hike in the half year dividend was reported.
Negative Points: Group like-for-like sales increased by 3.8%, down from the 5% recorded in the first half. Like-for-like revenue in France declined by 6.1% as new construction markets weakened. Management noted that "government stimulus activity is now coming to an end which may have an effect on activity levels going forward." In the Nordic region like-for-like revenue decreased by 1.7%. The seasonal pick up in new residential construction markets in Denmark was weaker than last year. Management highlighted that the company may incur further restructuring charges in the fourth quarter, though these are unlikely to be material in the context of the group's full year results. Operating costs were 3.6% higher than last ye
Financial Highlights: Total revenue grew by 4.7% to £3.07 billion. Like-for-like sales increased by 3.8%, down from 5% in the first half. The gross margin of 27.7% was unchanged. Trading profit of £139 million was 10.3% higher than last year.
Third quarter update: The release saw some slowing in sales reported. Although like-for-like sales increased by 3.8%, this was down from the 5% recorded in the first half. Sales in the group's important US region slowed to 9.4% from 10.0% in Q3 last year, whilst France recorded a major deterioration, reporting a fall in like-for-like sales of 6.1%, down from an increase of 9.1% in the comparative period last year. The group's Nordic region also suffered, reporting a fall in same store sales of 1.7% compared with growth of 5.8% in Q3 last year. More positively, the group's gross profit margin held at 27.7%, with trading profit for the period enjoying a 10.3% improvement compared to that seen during Q3 last year. Management noted that "given the uncertain economic outlook in Europe we will remain vigilant on the cost base while continuing to drive growth initiatives in the more robust markets."
Wolseley plc is a major international specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials in North America, the UK and Continental Europe. Wolseley has around 43,000 employees, is headquartered in Zug, Switzerland and is listed on the London Stock Exchange - a constituent of the FTSE 100 index.
Third quarter trading performance (ongoing businesses) During the quarter the Group generated revenue of £3,069 million, 4.7% ahead of last year and 3.8% ahead on a like-for-like basis. The impact of inflation on Group revenue was approximately 2%. The gross margin of 27.7% was unchanged, despite a continuing tough pricing environment. We have grown market share in key regions and continue to implement initiatives to hold or improve margins. Operating costs were 3.6% higher than last year including increases in employee share scheme expenses of £4 million and £2 million of one-off restructuring charges. Headcount continues to be tightly controlled, particularly where markets are deteriorating. In light of tough markets in Europe, as noted at the half year, the Group may incur further restructuring charges in the fourth quarter though these are unlikely to be material in the context of the Group's full year results. Trading profit of £139 million was £13 million or 10.3% higher than last year. The trading margin improved to 4.5% (2011: 4.3%). The number of trading days in the period was the same as last year.
Commenting on the trading outlook, Ian Meakins, Chief Executive said: "Wolseley has continued to make decent progress in the third quarter, with good growth in the USA and Canada partly offset by Europe. We held our gross margin overall and controlled costs to generate 10 per cent trading profit growth in the ongoing business. We will continue to pursue operating efficiencies and remain focused on customer service, gaining market share and protecting our gross margins. Given the uncertain economic outlook in Europe we will remain vigilant on the cost base while continuing to drive growth initiatives in the more robust markets."