Wolseley to raise £1bn in rights issue
WOLSELEY has announced that it is to pursue another raft of measures designed to strengthen its balance sheet including raising £1bn through a rights issue.
The specialist trade distributor of plumbing and heating products, which has its UK headquarters, contact centre and distribution warehouse in Ripon, near Harrogate, has seen profits tumble dramatically as the group continues to be hit by the global downturn and fluctuating exchange rates.
Since August, the group has implemented a number of restructuring measures including headcount reductions of around 17,000 and 713 branch closures.
Around 2,500 staff losses were in the UK. Cost saving initiatives have so far realised savings of around £572m.
However, Wolseley today said that given the “severity and breadth” of the global economic crisis the board had decided it is appropriate to recapitalise now.
The £1bn share issue, which is fully underwritten, comprises a £270m firm placing at 120p per share and an 11 for five rights issue to raise £781m.
It is also planning to focus on chosen core businesses including the UK and Ireland, Nordic, France and North America, where it says it had sufficient scale to deliver an appropriate financial return.
Wolseley UK and Ireland will focus on the current portfolio where it has critical mass and market strength across several trading brands.
The directors intend to further restructure the business and refine the portfolio. Until restructuring is completed no further capital will be allocated for the expansion of the business other than maintenance capital expenditure.
It said that the residential market had deteriorated since the summer and that its Heavyside building materials brands Build Center and Brooks continued to be affected.
The Lightside plumbing and heating brands reported deterioration in the first half while continuing to perform at or above the market.
Plumb and Parts Center showed some resilience, with more than two thirds of revenues relating to the residential market in particular, the heating segment, which remained relatively robust.
The commercial and industrial business continues to be more positive with government expenditure on social housing, health and education remaining positive.
Chip Hornsby, Wolseley’s group chief executive, said: “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.
“Following the completion of the comprehensive financial restructuring announced today, the company’s balance sheet will be substantially strengthened.
“In addition, the clear focus on those core markets where Wolseley has built leading positions will enable the group to maintain investment in our key most profitable markets and remain strongly positioned to capitalise on future market recovery.”
Pre-tax profits for the six months ended January 31 were 61.4% down on the same period last year to £97m.
Operating loss before tax of £880m after exceptional items of £262m and impairment and amortisation of acquired intangibles of £800m.
However, the group said it continued to operate within its banking covenants.
Wolseley said that in light of adverse market conditions no interim dividend to be paid.
