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Wolseley battered but not beaten by slump

Heating and plumbing products distributor the Wolseley Group is reviewing every part of its business after being hit by the US housing market slump and seeing operating profits more than halve.

But despite these setbacks, Chip Hornsby, Group chief executive insisted the company was performing well in the
UK.

Its interim results for the six months to
January 31 2008 showed group revenue had grown by two per cent to £8 billion, compared with the same period last year. However, operating profit had fallen by 57.7 per cent to £146 million from £345 million.

Mr Hornsby said the company was facing “very challenging conditions, particularly in the
US”, but insisted several parts of the businesses – including Wolseley UK – had managed “extremely positive performances”.

 

Despite these reassurances, a company spokesman said job cuts and branch closures could not be ruled in or out within the UK the moment: “We are evaluating each of our markets closely in line with market conditions including the UK,” he said.

 

“At this stage we cannot give any specific indications on potential cost reduction actions in any particular location. When we have more information we will communicate our proposals to employees, as appropriate, but it would not be appropriate to speculate today where job cuts or branch closures might happen.”


Mr Hornsby predicted Wolseley would survive the downturn and added: “Quite honestly, I think we’re going to lose a lot of players in the market, particularly in the
US markets. And I think there is going to be plenty of opportunity to capture like-for-like sales and organic growth for our existing branch operations.” 

Mr Hornsby believes the
US market is at its worst point since the end of World War Two and unfortunately analysts believe Wolseley is unlikely to recover until the US economy turns around.

 

Keith Bowman, analyst at Hargreaves Lansdown, said: “The difficulties for them have come from the United States operations and that is no surprise as house building and construction have been under pressure for the last 18 months.

“For the time being the consensus still is that Wolesley is a good company and the management are still broadly liked by the wider analyst community, but there will be no light at the end of the tunnel until the
US economy stabilises and there is no sign of that yet.”

Mr Hornsby said: “We’re looking at every component of our business, from top to bottom, even those that are performing extremely well. We’ve begun to close some operations that haven’t been profitable. We’re looking at virtually every component of our business, every aspect of expense.”