Wolseley axes 800 UK jobs as sales drain away

Heating and plumbing giant Wolseley axed 800 jobs on Tuesday in a major overhaul of its struggling UK business as the blue-chip’s latest results flopped in the City.

The cuts represent nearly 15% of the blue-chip’s 6000-strong UK workforce while the company — known for brands like Plumb Center — is also shutting 80 of its 737 branches as well as a distribution centre.

The shares slumped to the bottom of the FTSE 100 — down 153p or 4% to 4147p — as analysts focused on sales falls in the UK and Nordic markets like Denmark and Sweden. That dragged down Wolseley’s healthier US arm, which generates 80% of group profits.

Chief executive John Martin said the UK cuts were unrelated to the Brexit decision, adding that the move was a push to drive more profits out of a market weakened by the absence of spurs like Government subsidy schemes for new boilers. “There isn’t a lot of natural growth in the market,” he added.

The gloomy assessment of the sector knocked shares in rivals like Travis Perkins — down 2% — and Marshalls, whose shares slid 3%.

Wolseley, which added that “the competitive landscape has been very challenging for some time”, will take a £100 million hit on the cuts programme, which is expected to take up to three years to complete and generate savings of as much as £30 million a year.

In the latest quarter, UK same-store sales sank 2.1%, while Wolseley’s Nordic business — where sales fared even worse — has also been placed under review.

Despite a much stronger sales advance of 3.1% in the US, where the company owns the Ferguson plumbing distributor, European woes dragged back overall sales growth to 1.5% in the three months to July 31.

Liberum’s Charlie Campbell said sales were “slower than we would have expected, with the disappointment more outside the US”.

Wolseley posted a 7% rise in trading profits to £917 million for the year to July, also shy of City forecasts despite a 10% rise in the dividend.

The profit performance would have been even worse if not for a £46 million boost from the weaker pound, inflating the sterling value of the company’s mainly US-generated profits. Overall revenues rose 9% to £14.4 billion.

The blue-chip is eyeing the US for growth with £300 million in bolt-on acquisitions approved since the end of July, Martin added.

Peel Hunt’s Clyde Lewis said: “While Ferguson continues to deliver strong growth the rest of the group looks set to weigh.”