Wolseley profits down 75% in third quarter

Builders and plumbers merchant group Wolseley’s interim management statement, published this morning, shows trading profit for the UK and Ireland down by 755, on sales that fell 15%.
According to the statement, all of the Group’s European operations have witnessed declining economic activity in the period, with those in the Nordic region and the UK and Ireland generally

showing greater levels of decline than markets elsewhere in continental Europe.

For the nine months ended 30 April 2009, Group revenue of £12,100 million was up 0.2% but was down 15% on a constant currency basis. Trading profit of £189 million was 58% lower or down 65% in constant currency, and profit before tax, exceptional items and the amortisation and impairment of acquired intangibles of £72 million was down 80%, or 88% in constant currency.

In Europe, revenue in the UK and Ireland continued to deteriorate principally as a result of further weakness in the RMI and a recent deterioration of the commercial and industrial markets. The Irish construction market, in particular, remained severely depressed with activity over 70% lower than the equivalent period in

the prior year. Revenue for the UK and Ireland decreased by 15% in the nine months ended 30 April 2009 and trading profit was 75% lower than the equivalent period in the prior year.

During the period, the Group entered into an agreement to sell the loss-making US arm, Stock Building Supply to a joint venture company with the Gores Group.

The Group expects market conditions to continue to deteriorate in the short term and anticipates that trading conditions will remain challenging until at least early 2010. In particular, the commercial and industrial market in the US is expected to soften over the remainder of the calendar year. The Group will continue to drive further cost reductions and take measures to maximise cash flow, as appropriate.

The recent capital restructuring, which raised approximately £1 billion net of expenses via a rights issue, combined with the Group’s new debt facilities, means the group should be able to meet “the current challenges in the markets and to capitalise on a future market recovery.”

Chip Hornsby, Group Chief Executive of Wolseley, said: “Recent trading has proved extremely challenging and we continue to anticipate this will be the case until at least early 2010. In the circumstances our drive for tighter cost control and strong cash generation remains a key area of focus for the Group. These actions, coupled with the Group’s recently strengthened financial position through the capital raising and exit of Stock, leaves Wolseley well placed both to meet the current challenges and to capitalise on a future market recovery.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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