Wolseley plc (WOS.L), a specialist trade distributor of plumbing and heating products, Thursday reported a 58% decline its trading profit for the nine months ended on April 30. The company's group revenue was up 0.2% for the period. The company expects trading conditions to remain challenging until at least early 2010.
Wolseley's trading profit for nine months was GBP 189 million, a decline of 65% in constant currency. Profit before tax, exceptional items, and the amortization and impairment of acquired intangibles, declined 80%, or 88% in constant currency, to GBP 72 million in the period. The results included GBP 10 million relating to the loss on the disposal of Wolseley's Hungarian business MART.
For the nine-month period, the company's group revenue was GBP 12.10 billion. On a constant currency basis, revenue dropped 15%.
Wolseley said that, as expected at the time of the group's half-year results announcement on March 6, most of the company's markets continued to weaken in March and April against the background of deteriorating economic conditions. In North America, challenging trading conditions in the US residential and non-residential markets continued. The U.S. commercial and industrial sectors also experienced further decline during the third quarter, the company stated.
In North America, Ferguson continued to gain market share, although revenue declined 15% in local currency. Wolseley Canada saw a 2% local currency revenue decline, with trading profit 26% lower as the residential markets began to soften.
In addition, the company's European operations witnessed declining economic activity in the period. Markets in the Nordic region and the UK and Ireland showed greater levels of decline than markets elsewhere in continental Europe, the company stated. Nine-month period revenue for the UK and Ireland decreased 15% and trading profit was down 75% from last year. Wolseley France saw a 10% decline in local currency revenue and trading profit fell 70%. In Central and Eastern Europe, local currency revenue was down 8%.
Wolseley said that it has continued to implement cost reduction actions for increased cash generation from tight working capital control and ongoing restraint on capital expenditure. During the nine-month period, the company's restructuring actions resulted in exceptional costs of GBP 336 million. These actions are expected to deliver cost savings of GBP 316 million for the year ending on July 31. The expected annualized benefit of these actions is GBP 511 million.
Looking ahead, Wolseley said that market conditions are expected to continue to deteriorate in the short term. The company also anticipates trading conditions to remain challenging until at least early 2010.
The commercial and industrial market in the US is expected to soften over the remainder of the calendar year. The company also plans further cost reduction actions in France for the fourth quarter which are expected to result in annualized benefits of GBP 20 million.
WOS.L is trading at 1,050 pence on the LSE, down 178 pence, on a volume of 3.73 million shares.
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