Heating and plumbing distributor Wolseley continues to be under massive financial pressure with profit before tax down by three quarters and revenue down 10 per cent in constant currency.
A statement covering the five months up to 31 December said trading had continued to deteriorate in the last two months of the year and Wolseley’s management continued to concentrate on ways to cut costs while increasing cash generation.
However, the company insisted that banking convenants will not be broken although it expects global economic conditions to deteriorate in the short term and does not expect any upturn in its markets until conditions stabilise.
Overall Wolseley saw - in constant currencies - revenues down by 10 per cent and profit before tax down 75 per cent.
UK market sees profits hit
In the UK and Ireland revenues were down by about 12 per cent with trading profit down by around 80 per cent.
The statement said: “As anticipated there has been a further deterioration in the UK market activity in recent weeks. The previously announced restructuring actions are well under way and are on track to deliver annualised benefits of £80 million and a headcount reduction of 2,000 in the UK.”
Debt restructuring work also saw Wolseley UK enter into a receivables funding arrangement in December which reduced net debt at 31 December by £72 million. However, the additional cost of servicing this arrangement is expected to be around £4 million a year.
Weakening pound adds to financial pressure
Overall the group’s finances have come under further stress due to currency exchange rates in the last three months and in particular the weakening of the pound.
The statement said this would mean the group’s “covenant headroom” would be lower than previously predicted in its interim management statement.
Chief executive of Wolseley Chip Hornsby, pictured, said: “Our attention and efforts remain resolutely focussed 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 maximise cash.'