The share price of plumbing giant Wolseley flopped over three per cent this morning after it announced a raft of UK job cuts and branch closures despite revealing record trading profits.
800 jobs are to go and 80 branches are to be closed as part of a £100m restructuring of UK operations.
Annual revenues jumped by 8.5 per cent to £14.4bn with trading profit up by seven per cent to £917m.
Earnings per share were 247.7p, up from 230.2p in the previous year and a final dividend of 66.72p took total returns to shareholders for the year to 100p – an increase of 10.2 per cent on what they received last year.
Operating cash flow increased from £684m to £787m.
Net debt increased from £805m to £936m.
Why it's interesting
Founded in 1887 and listed in London, Wolseley may appear to be a quintessentially British outfit but nearly two-thirds of its revenues are generated in the US. Branded as Ferguson, operations across the pond are much more lucrative to the bottom line as they account for 81 per cent of trading profit.
UK operations generated nearly £2bn of revenue which translated into £74m of profit, down 18 per cent on the previous year.
The group has already taken a £10m restructuring hit in the year and closed 21 UK branches and it now appears that the plan is to ramp up this process in the next year with the wider closures.
Nordic operations, which generated similar revenues as the UK (£1.9bn), performed similarly in profit terms – down from £72m to £60m. The company announced that a review of the Nordic operating strategy is underway.
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What Wolseley said
Chief exec John Martin said:
Our review of UK operational strategy has identified opportunities to transform our customer propositions whilst simplifying our branch network and supporting logistics facilities to greatly improve service levels, drive availability and choice for customers and generate better returns for shareholders.
Regrettably this will result in job losses which we will handle sensitively and minimise through redeployment and attrition as far as possible.
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.