Wolseley on the up despite £766m loss
BUILDING supplies giant Wolseley yesterday warned that its markets were likely to remain tough as it tumbled £766 million into the red for the year to July.
But the shares surged 146p to 1455p because the group’s underlying performance was better than expected.
Chief executive Ian Meakins said the group’s US operations would continue to struggle in the next year as the market continued to decline sharply, offsetting signs of “stabilisation” in the British housebuilding sector.
He refused to rule out further job cuts on top of the 9,848 the company has already made in moves to save £431 million a year but said any further losses would not be on the same scale.
Wolseley made the pre-tax loss, down from a £399 million profit last time, on the back of more than £1 billion in one-off restructuring costs and writedowns.
Underlying profit fell by 52 per cent to £447 million as sales tumbled 16.3 per cent to £14.4 billion. The company made a further £441 million loss on the sale of its US business Stock.
“We expect the year 2009 to 2010 to be equally as tough as last year,” Meakins said yesterday.
“But in the longer term, when the markets pick up again there will be a substantial bounce-back in most of our businesses.”
He said that while housebuilders were stabilising, there were still major issues in the group’s commercial and industrial operations, although the overall rate of sales decline would continue.
The company has trimmed back operations to focus on four key markets in the UK, the US, France and Scandinavia.
It is putting businesses in three regions, Belgium, Slovakia and the Czech Republic.
Wolseley has paid down debt from nearly £2.5 billion to £959 million, a level with which it is comfortable, and has more than £1 billion of financial headroom, following a £1 billion rights issue earlier this year.
Meakins, who replaced ousted Chip Hornsby in July, said the company would consider acquisitions but these were likely to be bolt-on deals rather than a takeover of a major rival.