Morning:
6°c
Wolseley, the world's biggest building supplier, today sent shock waves through the industry when it reported a massive slump in profits and warned that the economy will not recover until 2010 at the earliest.
The firm, which owns the Build Center and Plumb Center brands, reported an 88% fall in profits to £72 million for the nine months to the end of April.
“Recent trading has proved extremely challenging and we continue to anticipate this will be the case until at least early 2010,” said chief executive Chip Hornsby. “We really don't see anything positive at all in the balance of this calendar year.”
It sent shares in Wolseley crashing 13%, or 158p to 1070p, dramatically halting the rally since the stock sank to 585p in March.
Keith Bowman of Hargreaves Lansdown stockbrokers said: “Despite considerable investor speculation regarding the green shoots of recovery, Wolseley has to date detected few. A downbeat trading update will again test investor resolve.”
The grim update underlined the crisis facing suppliers to the construction industry and housebuilding sector as property values plummet and building plans are postponed or cancelled.
Andy Brown of Panmure Gordon immediately slapped a sell rating on Wolseley and cut its price target for the shares from 1250p to 1100p.
Paul Checketts, an analyst at Oriel Securities, said “the haemorrhaging of profit needs to be reversed and quickly”. Wolseley recently tapped shareholders for £1 billion of extra funds to repair its balance sheet.
It today said debts are down from £2.88 billion a year ago to £1.53 billion.
Wolseley has cut nearly 14,000 jobs worldwide this financial year including 2800 in the UK.
Some 13,000 of its 63,000 staff around the world work in the UK.
Hornsby said business in the UK and Ireland has “generally shown greater levels of decline than markets elsewhere in continental Europe”.
He said the recession and rising unemployment in the UK was hitting the home improvement market.
Revenues for the UK and Ireland fell 15% in the nine months and profits were down 75%.
“People aren't going out and spending money on their homes because they are concerned about their jobs,” he said.
