Wolseley trading: 'market conditions are likely to worsen'

Wolseley warns that its pre-tax profit dropped by a third in the five months to the end of December 2007.

Also, Wolseley’s trading statement this morning warns that “market conditions are likely to worsen”.

Wolseley is the world’s largest specialist trade distributor of plumbing and heating products to contractors. It also supplies building materials.

The summary of Wolseley’s activities in the past five months reports:

• turnover 2% higher
• trading profit down 25%
• pre-tax profit running almost 33% lower
• 10 bolt-on acquisitions completed at a cost of £170m 

Wolseley’s world divides between North America, where everything looks grim, and Europe where life has been less daunting, even promising in some parts.

Chip Hornsby, chief executive, said: “We have acted rapidly in response to the challenging market conditions to take cost out of the group.

“Results continue to be affected by the worsening US housing market, low consumer confidence arising from global credit restrictions and the weakness of the US dollar.”

Net debt during the five-month period rose by 15% to give a gearing [i.e. ratio of debt to equity] of 82%, up from a figure of 72% in July 2007. The change was the result of the on-going spend on bolt-on acquisitions.

North America was a muddle with Wolseley’s turnover down by 10% and trading profit falling by 40%.

Wolseley’s European operations were able to cover for part of that, with turnover up 17%. Trading profit inched higher by 1%.

However when the effect of Wolseley’s acquisition of DT Group is stripped out, turnover would show as being only 4% higher while the adjusted trading profit shows a 20% fall due to “a disappointing performance in France and some initial disruption, now diminishing, caused by the ITY systems implemented in Austria and Italy.”

Turnover in Wolseley’s UK and Irish businesses was 3% higher. Hornsby said that a positive performance in the UK was partly offset by tougher trading conditions in Ireland where housing starts were 50% lower and the RMI market is weaker.”

Wolseley sees “increasing signs” that the UK housing market is slowing.