UK-based global plumbing and building materials distributor reported revenues were up 3% for the first five months ended Dec. 31, 2008. The distributor’s half-year results will be announced March 23.
Profit fell 45%.
We continue to act decisively and rapidly in response to the unprecedented market conditions we face, said Chip Hornsby, CEO. Our attention and efforts remain resolutely focused on achieving compliance with our banking covenants, without losing sight that to generate shareholder value we must seek to ensure the business is well positioned to benefit when the markets in which we operate begin to recover. In the meantime, and against this background of declining macro economic activity we continue to implement the actions required to reduce cost and maximize cash."
The profit drop was attributed to lower profitability in Stock Building Supply (the U.S. building materials group), DT Group and Wolseley UK.
To manage costs, as previously announced, the distributor cut headcount by 7,500 in the five months to Dec. 31, 2008. Wolseley did not announce further cuts.
Net debt has increased by 22%, Wolseley announced announced, mostly due to the adverse effect of the exchange of the British pound to the euro. The distributor says it has “no need” for additional banking facilities until after the year ended July 31, 2011, and that it projects compliance with banking covenants as of Jan. 31, 2009.
North America Results
In North America, revenue in the five months ended 31 December 2008 in sterling, was up 6% compared with the prior-year period. Profit was down by around 16% reflecting the loss reported by Stock in the period. In constant currency, revenue and trading profit would have been around 11% and 30% lower than the corresponding period in the prior year.
U.S. results have continued to be affected by the ongoing decline in U.S. housing starts and falling consumer confidence.
Ferguson revenue in U.S. dollars for the five months ended Dec. 31, 2008, was down 10% and profit excluding property profits was down 13%. Ferguson benefited from the stability of the commercial and industrial market, although during December there were signs of certain segments of the market weakening due to continued scarcity of finance for projects, according to Wolseley.
Stock reported revenue decline of 23% and a loss of $110 million, compared with the prior-year period loss of about $50 million. The continued decline is the result of the slowdown in the new residential market as well as the continued decline in lumber prices.
Restructuring actions for Stock have been completed, with the exception of two locations that will close in the next few weeks.
Despite slowing markets, the Canadian business has achieved an increase in organic sales growth of around 4% in the five months to 31 December 2008. Local currency trading profit was slightly down due to a lower gross margin.
Revenue in sterling for Europe was flat in the five months, and profit was down by around 60% mainly as a result of the lower level of activity in all regions. In constant currency, revenue and profit would have been around 10% and 65% lower than the corresponding period in the prior year.
Revenue for the UK and Ireland decreased by about 12% with trading profit down by around 80%.As anticipated there has been a further deterioration in the UK market activity in recent weeks.
In France, revenue in euros for the five months was around 4% lower with profit down by over 60%.
DT Group reported revenue, in local currency down around 13% with profit down around 40%. The markets for building materials continued to deteriorate in all four Nordic countries during November and December.
Revenue in Central and Eastern Europe, in local currency was flat with profit down around 85%, which was attributed to competitive pressure on margins” and an additional impairment in respect of a deferral, announced in September, of an IT project.
Wolseley expects economic conditions to deteriorate in the short term, and until conditions stabilize Wolseley says it is unlikely to see any upturn in its markets. Until consumer confidence returns and availability of finance for customer projects improves, the group expects performance in North America to decline. 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 by macro economic conditions.