Wolseley rights issue confirmed as operating profits plummet

Builders and plumbers merchant group Wolseley plc are to raise £1bn via a long-rumoured rights issue.
The group made the announcement this morning along with their interim results, which showed operating profits down 62% to an operating loss of £888,000.

The company intend to further restructure the Wolseley UK business and has curtailed any further expansion. They are also likely to also either dispose of the loss-making U.S.-based Stock Building Supply or find a joint venture partner and have set a deadline of August.

Revenue for group for the six months to January 31 was £8,2bn, up 3.2% on same period last year (2008: £8.0bn), though taking out exchange rate fluctuations meant that represented a 12.1% fall.

Trading profit5 , at £182m, were 42.7% down on same period last year and pre-tax profits, before exceptional items and amortisation and ‘impairment of acquired intangibles’ were down to £97 million, a fall of 61.4% on the same period last year.

That leaves an operating loss before tax of £880m after exceptional items of £262 million and impairment and amortisation of acquired intangibles of £800m.

The rights issue will see Wolseley will raise £270m by placing shares at 120 pence with new investors, and £781m via a rights offering with existing shareholders priced at 40 pence a share.

Chief Executive Officer Chip Hornsby said in the statement that Wolseley’s balance sheet will be “substantially strengthened” by today’s actions. “Our markets have been hit hard in recent months and in response we have continued to take prompt and decisive action to reduce both costs and debt.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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