Building materials group reports 20% profit fall and unveils plans to cut French business
Any company with exposure to the construction industry in Europe's struggling economies is bound to be having a tough time, and* Wolseley* is proving the point.
The building materials group has reported a 20% fall in half year profits to £199m, with strong growth in the US outweighed by problems in Europe and the UK. These conditions have persisted into the third quarter
It has already cut 990 jobs across Europe since August and has announced a restructuring of its French business Reseau Pro which involves the closure of 24 loss making branches and the disposal of 88 others. Chief executive Ian Meakins said:
We faced sustantial headwinds in Europe, and are taking appropriate actions to protect profitability.
Like for like growth in the third quarter to date has been consistent with the second quarter overall. We continue to see strong growth in the US, a broadly flat performance in Canada and the UK and very weak conditions in Europe.
The news has made Wolseley the biggest faller in a FTSE 100 trying to edge higher. It has fallen 71p to £31.40, down more than 2%. Analyst Andy Brown issued a sell note, saying:
First half results are broadly in-line with trading profit up 7% and dividend per share up 10%. Its US operations continue to deliver strong results and the outlook remains positive. Conditions are mixed in Europe with UK flat and the mainland described as "very weak". A solution to its French issues is now in place. After a strong performance we continue to advocate taking profit.
Overall the *FTSE 100* has added 5.06 points to 6383.44, as worries about the situation in Cyprus continued to weigh on sentiment amid concerns the hit to banking deposits could be a template for other bailouts. Chris Beauchamp, market analyst at IG said:
Calm has finally descended after the turmoil of the Cyprus bailout, but the damage to investor confidence has been done. Eurozone bureaucrats scrambled to backtrack on comments made by Jeroen Dijsselbloem, and it now appears that the Cyprus bailout is a one-off, not to be repeated event. This is unlikely to reassure nervy depositors, who will be keenly watching for any suggestion that they might have to pay up in any future bailout. The greatest worry is that the eurozone has stuck itself with yet another long-running sore, with additional agreements likely further down the road as the Cypriot economy continues to struggle. Anyone who thinks that the situation is now completely resolved is likely to be sorely disappointed.
Fortunately we have plenty of US data today to keep us occupied. In recent months, the presence of strong figures from the world's largest economy has allowed investors to shrug off any eurozone weakness. After a week of concentrating on the squabbles of the Old World, it will be a relief to focus on the continuing improvement in the US. Ahead of the open, we expect the Dow to start around 40 points higher at 14,487.
Elsewhere *Kingfisher* has climbed 3.8p to 287.1p as its profits, despite falling 11.4% to £715m, were in line with analysts expectations.
*Morrison*s is up 7.8p to 274.5p after Citigroup raised its recommendation on the supermarket group from neutral to buy. Citi said:
Morrisons has the strongest eocnomic model of the three listed UK operators with higher combination of asset turn and margin. Over the long-term we think Morrisons is well positioned to extend [this model] to southern England where it remains under-represented.
Morrisons has been under the cosh on concerns it was being left behind in the fast growing online and convenience store sectors. Reported by guardian.co.uk 55 minutes ago.
Any company with exposure to the construction industry in Europe's struggling economies is bound to be having a tough time, and* Wolseley* is proving the point.
The building materials group has reported a 20% fall in half year profits to £199m, with strong growth in the US outweighed by problems in Europe and the UK. These conditions have persisted into the third quarter
It has already cut 990 jobs across Europe since August and has announced a restructuring of its French business Reseau Pro which involves the closure of 24 loss making branches and the disposal of 88 others. Chief executive Ian Meakins said:
We faced sustantial headwinds in Europe, and are taking appropriate actions to protect profitability.
Like for like growth in the third quarter to date has been consistent with the second quarter overall. We continue to see strong growth in the US, a broadly flat performance in Canada and the UK and very weak conditions in Europe.
The news has made Wolseley the biggest faller in a FTSE 100 trying to edge higher. It has fallen 71p to £31.40, down more than 2%. Analyst Andy Brown issued a sell note, saying:
First half results are broadly in-line with trading profit up 7% and dividend per share up 10%. Its US operations continue to deliver strong results and the outlook remains positive. Conditions are mixed in Europe with UK flat and the mainland described as "very weak". A solution to its French issues is now in place. After a strong performance we continue to advocate taking profit.
Overall the *FTSE 100* has added 5.06 points to 6383.44, as worries about the situation in Cyprus continued to weigh on sentiment amid concerns the hit to banking deposits could be a template for other bailouts. Chris Beauchamp, market analyst at IG said:
Calm has finally descended after the turmoil of the Cyprus bailout, but the damage to investor confidence has been done. Eurozone bureaucrats scrambled to backtrack on comments made by Jeroen Dijsselbloem, and it now appears that the Cyprus bailout is a one-off, not to be repeated event. This is unlikely to reassure nervy depositors, who will be keenly watching for any suggestion that they might have to pay up in any future bailout. The greatest worry is that the eurozone has stuck itself with yet another long-running sore, with additional agreements likely further down the road as the Cypriot economy continues to struggle. Anyone who thinks that the situation is now completely resolved is likely to be sorely disappointed.
Fortunately we have plenty of US data today to keep us occupied. In recent months, the presence of strong figures from the world's largest economy has allowed investors to shrug off any eurozone weakness. After a week of concentrating on the squabbles of the Old World, it will be a relief to focus on the continuing improvement in the US. Ahead of the open, we expect the Dow to start around 40 points higher at 14,487.
Elsewhere *Kingfisher* has climbed 3.8p to 287.1p as its profits, despite falling 11.4% to £715m, were in line with analysts expectations.
*Morrison*s is up 7.8p to 274.5p after Citigroup raised its recommendation on the supermarket group from neutral to buy. Citi said:
Morrisons has the strongest eocnomic model of the three listed UK operators with higher combination of asset turn and margin. Over the long-term we think Morrisons is well positioned to extend [this model] to southern England where it remains under-represented.
Morrisons has been under the cosh on concerns it was being left behind in the fast growing online and convenience store sectors. Reported by guardian.co.uk 55 minutes ago.