Wolseley is axing 6000 jobs and divi as profits crash

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Chip Hornsby, Wolseley's veteran chief executive said he has seen nothing like the current housing and construction slump and admitted he has no idea where it is going or when it will end.

"In my three decades in the business I have not experienced this before," he said. "It is certainly as complex as 1992 [the last major slump] but it is definitely of a different magnitude.

"You can normally call these cycles over 12 months or 18 months. In the US, we have now been in a negative market for nearly two-and-a-half years."

While Wolseley has been hammered in the US, its biggest market, in the UK where it is best known for its Bathstore and Plumb Center businesses, the slide in recent weeks has been rapid.

"We have seen a significant deterioration in May and June," Hornsby said. "Things have accelerated quickly and we are not expecting any relief in the short term."

In a trading update ahead of its 31 July year-end, Wolseley said it expects underlying pre-tax profits to fall by 35%, or £265 million, from last year's £758 million and said no final dividend will be added to the 11.25p paid at the half-year. Last year's payouts to shareholders totalled 32.4p.

Axeing the final will save £150 million on top of the £136 million the company expects to save from the jobs cull. However, the immediate cost of the lay-offs will take another £57 million off profits.

In the UK and Ireland - where further job cuts are likely - trading profits have dived 17% over the past 11 months, though year-on-year comparisons have worsened recently.

"The results reflect tougher trading conditions in Ireland combined with an increasingly difficult UK housing market," Wolseley said. "New housing in the US has slowed significantly in recent weeks in response to the lower availability and increased cost of mortgage financing and deteriorating consumer confidence is also affecting the RMI [home improvement] market."

Asked whether Wolseley, £2.7 billion in debt, could go bust, Hornsby said: "We are taking all the corrective action we know how and continuing to evaluate the business to make sure we remain compliant with our banking covenants."