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29 September, 2015
Wolseley (WOS) has taken the UK Index wooden spoon from Glencore this morning, with investors sending the shares back to May lows in response to FY results a touch below City expectations even if they confirm long-term turnaround under CEO Meakins.Nonetheless, investors are demonstrating cold-bloodedness, concerned at ‘markets remaining challenging’ outside the US and European performance mixed. Most worryingly of all, however, is an outlook stating that the ‘heating market in the UK is expected to remain very competitive with little growth’. An illusionary EPS-enhancing 12-month £300m share buyback rather than a special dividend isn’t helping the cause, even if the ordinary divided is being upped by 10%, in line with a progressive policy. In an environment where equity markets are tough and interest rates exceptionally low, income is more important than ever and a ‘pledge to return any excess cash after meeting investment needs’ is clearly seeing C-suite performance metrics (EPS, acquisition) being favoured. Having undone most of 2015’s share price progress, shareholders are clearly re-evaluating their holdings as the shares ‘sink’ back to ‘tap’ fresh 9-month lows.
Mike van Dulken, Head of Research
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