Heating and plumbing products distributor Wolseley Group is reviewing every part of its business after being hit by the US housing market slump and seeing operating profits more than halved.
But, despite these setbacks Chief Executive Chip Hornsby 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 £8billion compared with the same period last year, but operating profits 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”.
A company spokesman said job cuts and branch closures could not be ruled in or out at the moment:
'We are evaluating each of our markets closely in line with market conditions including the UK. 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.
In the UK – separated out from Ireland - Mr Hornsby insisted the “underlying business has definitely improved” including a “massive contract with British Gas (to supply domestic heating products) where they were able to go in and expand the contract much further than they have ever done in the past.”
Wolseley said the UK residential market and RMI sector are weakening although Government expenditure on social housing, health and education remains strong.
Against this background, Wolseley UK, which manages 1,927 branches across the UK and Ireland, recorded a 3.1 per cent increase in revenue to £1.6b, but the the trading profit fell by 8.2 per cent to £85 million. This was largely due to a lower performance in Ireland.
Particularly good trading margin performances were reported in Plumb Center and Bathstore
“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.”