Plumbing firm is feeling squeeze
Sep 25 2007 by Iain Laing, The Journal
HEATING and plumbing company Wolseley has warned that it is starting to feel the knock-on effect from the squeeze in global credit markets.
The uncertainty caused by the liquidity crisis has added to the company’s ongoing problems with the US housing market, which caused Wolseley to post a 7% fall in underlying profits to £758m in the year to July 31.
Chief executive Chip Hornsby described the results performance as “very creditable”, with the US downturn offset by healthier trading in Europe.
However, the company added that recent events involving the sub-prime mortgage market in the US and concerns over liquidity in financial markets had created uncertainty which was being reflected in less favourable sales trends for a number of group businesses.
Wolseley said there were no signs of an upturn in the US housing market, while the repairs, maintenance and improvement market had also begun to soften.
The company – best known for its Plumb Center and Build Center businesses – said it had been “fast and decisive” in its response to the US downturn, including through cost savings. It reduced staff numbers by around 3,500 in the last financial year, representing 20% of the total workforce.
In Europe, Wolseley said the underlying fundamentals of the construction markets remained sound, with Wolseley’s operations expected to show further progress. Revenues growth increased 46.8% to £7.56bn in the last financial year, of which 8.8% came from organic growth.
Acquisitions included DT Group in the Nordic region, which it bought for £1.3bn in 2006.
Wolseley UK and Ireland recorded a 17.9% increase in revenues to £3.17bn, helped by Government spending on schools, hospitals and social housing repairs and maintenance work.
In Ireland, the market saw continued rapid decline in housing starts, with some of the shortfall taken up by strong maintenance activity.
Trading profit increased by 5%, but margins were lower as a result of £13m of one-off restructuring costs relating to 40 branch closures and rationalisation of head offices.
Wolseley had 1,917 branches in the UK and Ireland at the end of the financial year, an increase on the 1,858 seen a year earlier.
Across the group, Mr Hornsby said current market conditions would not prevent the company from pursuing its strategy of achieving both organic growth and acquisitions.
He added: “We will not be deflected from the rigorous execution of our long-term strategy to create competitive advantage and a truly world-class company.”
