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Wolseley sees profits slump 35%

Wednesday, 16 July 2008 12:00 AM

Wolseley - the world's largest specialist trade distributor of plumbing and heating products - has seen profits fall 35 per cent in the 11 months to June 30th 2008.

The news comes despite a one per cent increase in revenue.

However, a sharp deterioration in trading conditions in several key markets have seen profits slide, with the company remaining £2.7 billion in debt.

As a result Wolseley - which owns the Plumb and Build Centre - will pay no dividend on shares. However, the company intends to pay shareholders a dividend "as soon as it is prudent to do so".

"The deterioration in some of our key markets continues and it is likely that conditions will get tougher still," said Chip Hornsby, group chief executive of Wolseley.

"In these unprecedented circumstances, driving cost reduction, enhancing cash flow and closely managing the balance sheet, remain key priorities."

Slowing global demand is key to the fall, argues the organisation.

The US housing and repairs, maintenance and improvement market has softened further since interim results were released in May, in Europe there has been a rapid deterioration in market conditions.

This is particularly true of the UK new housing sector; while many other European markets continue to soften.

In response the group has reduced its payroll by 6,000 people since August 1st 2007 - accounting for annualised savings of £136 million - and will continue to make cutbacks in all areas of the business.

The key focus for the company in the medium term will be reduction of debt, in order to remain within banking covenants.

"No new cost-cutting measures were announced, although the tone suggests more will come," said Tom Sykes, an analyst at Deutsche Bank in note to traders released today.

Chris O'Toole

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