Wolseley profits take a tumble
PROFITS at Wolseley, the world’s largest specialist trade distributor of plumbing and heating products, have tumbled dramatically as the group continues to be hit by the global downturn and fluctuating exchange rates.
The group, which has its UK headquarters, contact centre and distribution warehouse in Ripon, near Harrogate, said today in a trading update that pre-tax profits for the five months ended December 31 were down 75%.
Group revenue was up around 3% compared to the corresponding period in the prior year but trading profit dropped by around 45% primarily due to lower profitability in Stock Building Supply, DT Group and Wolseley UK.
Net debt has increased by 22% since July to £3bn principally due to £557m adverse effect of currency exchange.
However, excluding the effects of currency translation, the improvement in working capital cash-to-cash days was in line with the 10% target for the full year 2009.
Previously announced restructuring actions, including the loss of 7,500 staff including 2,300 in the UK, had also realised combined cost savings of £237m.
Wolseley added that the risk of further adverse effects on net debt caused by the weakening of sterling against the euro were being mitigated.
But it warned that it expected macro-economic conditions to deteriorate in the short term and that until conditions stabilised it was “unlikely” to seen any upturn in its markets.
The group also expects conditions in the UK to continue to deteriorate with performance in continental Europe likely to remain under pressure as consumer sentiment is further negatively affected by macro-economic conditions.
As a result Wolseley will continue to evaluate all of the options and implement the actions necessary to position the balance sheet appropriately for the medium term.
Chip Hornsby, chief executive of Wolseley, said: “We continue to act decisively and rapidly in response to the unprecedented market conditions we face.
“Our attention and efforts remain resolutely focussed on achieving compliance with our banking covenants, without losing sight that to generate shareholder value we must seek to ensure the business is well positioned to benefit when the markets in which we operate begin to recover.”
He added: “In the meantime, and against this background of declining macro economic activity we continue to implement the actions required to reduce cost and maximise cash.”
