Despite a reported £1.17bn loss, building supplies giant is confident of its ability to survive the economic downturn
By Kevin Doyle
The ongoing and unyielding global recession has been especially brutal to the international construction industry. Building materials group Wolseley has been hit especially hard.
Wolseley is reporting a £1.17bn loss and pretax profits at the FTSE 100 company, which trades as Build Center and Plumb Center in the UK, were down by half for the year to July. The firm has reduced its workforce by nearly 40 percent in the last two years, eliminating 30,000 of 80,000 jobs, and also booked a £346m restructuring charge. The company has been scaling back international operations and selling non-core businesses in a bid to ride out the recession.
Chief executive Ian Meakins is happy with the company's "geographic business" and had no plans for further large disposals. The company, which raised £1bn in a rights issue earlier this year, was not under any pressure to sell any more businesses, he said. It has more than halved its debts to just under £1bn but will not pay a dividend this year.
It recently decided to sell its Belgian, Slovakian and Czech businesses as a result of a strategic review. It has also sold a majority stake in its US builder products business, Stock Building Supply, to private equity firm Gores.
Meakins agreed it was "awful timing" to sell the businesses and said his focus now was to improve performance at the remaining operations. He said the company had over reached itself under his predecessor, Chip Hornsby, who spent 31 years there. During Hornsby's three-year tenure as chief executive, the company went on an aggressive buying spree snapping up smaller rivals but its shares lost 75 percent of their value.
Meakins added he was confident that the £1bn raised from shareholders in April would see the company through the downturn and that Wolseley would not need to go back to them for more funding. "We based our capital raising to see us through out worst-case scenario," he said. "Assuming the markets do not get dramatically worse it would be fine. But we would say never say never."
Shares were up by almost eight percent at lunchtime as the profits had beaten market expectations. The company also forecast the rate of sales decline would slow next year, with signs of recovery from the residential market expected to offset further decline in demand from commercial and industrial customers.
Meakins said it was difficult to predict where markets were heading. But he insisted that the company was prepared for any further drop in global economic growth forecast by some economists for later this year. "Is there a possibility of a double-dip recession? There must be. But it's slim. But no one is being complacent that we are out of the woods yet."
The company also said cost cutting measures would save the business £233m next year. Tony Shepard, analyst at Charles Stanley, said much of the restructuring of the business had been done before Meakins took up his post. "He will take a fresh eye to everything," he said. "There will be a bit more to do. But most of the hard work has already been done."
Source:www.gaurdian.co.uk