Profits woe as Wolseley drops 12.5%

HEATING and plumbing merchant Wolseley was the biggest blue-chip loser yesterday after it reported a slump in profits and cut its revenue forecasts.

Investors dumped the stock as chief executive Ian Meakins voiced concern over the strength of its industrial markets in the US and its heating business in Britain.

Its UK brands include Plumb Center and Parts Center.

Wolseley shares, which had risen by nearly 30pc over the 12 months prior to the update, tumbled 12.5pc – or 523p – to 3656p despite the dividend rising by 10pc to 90.75p a share.

Analysts at Berenberg said the sell-off was an ‘over-reaction’. But Keith Bowman, of Hargreaves Lansdown, said the ‘caution in relation to the outlook for North American industrial markets provides a clear focus’ for investors.

Wolseley posted a 25pc fall in annual profits to £508m for the year to the end of July, due in part to a £242m exceptional charge, mostly related to writedowns at its struggling Nordic business.

Revenues rose by 7.1pc last year but the company now expects revenue growth of just 4pc in the first half of this year – down from the 6pc it estimated in June.

The US accounts for three-quar- ters of group profits, while the industrials business – which sells kit to oil and gas companies now suffering from the slump in the price of crude – makes up 15pc of revenues in the region.

‘Industrial markets in North America were challenging in the fourth quarter and we expect this to continue,’ said Meakins.

He also warned that the UK heating market ‘is expected to remain very competitive with little growth’ as Wolseley and rivals such as Travis Perkins battle for market share. UK trade relating to house building was ‘strong’, he said, but repair and maintenance work ‘remained weak’, adding: ‘Overall, we expect to make continued progress in 2016.’