Wolseley's net debt hits £3bn - a rise of £560m

Wolseley’s net debt now stands at £3bn, a 22% increase in just five months, with £580m of the rise being the result of the decline in the value of the sterling exchange rate.

In a statement on the Stock Exchange, providing a trading update for the five months since the end of July 2008, Wolseley said:

• further deterioration in general trading in November and December
• emphasis is still on actions to enhance cash generation and reduce costs
• the benefits of this approach are coming through as planned.

 Operating highlights are:

• turnover up about 3% (but this represents a fall of 10% in constant currency terms)
• trading profit down 45%
• profit before tax, exceptional items and amortisation and impairment of acquired intangibles down 75% in constant currency.

Actions to date initiated in the final five months of 2008 have resulted in:

• headcount reductions of 7,500
• restructuring charges of £210m
• annualised cost savings of £240m.

Looking ahead, Wolseley said: “The group expects economic conditions to deteriorate in the short term, and until conditions stabilise Wolseley is unlikely to see any upturn in its markets.

“The group also expects conditions in the UK to continue to deteriorate with performance in continental Europe also likely to remain under pressure as consumer sentiment is further negatively affected.

“The next few months will be critical in providing further evidence to assess how the downturn may evolve.

Chip Hornsby, chief executive, said that Wolseley remains “focussed on achieving compliance with our banking covenants”.

In the UK and Ireland, turnover was 12% down with trading profit down by around 80%.

On top of that “there has been a further deterioration in the UK market activity in recent weeks”.

Restructuring actions already announced should save £80m in the UK…. though with the loss of 2,000 jobs.