Builders and plumbers merchant group Wolseley saw pre-tax profits slide 77% thanks to the UK and US housing slowdowns.
Pre-tax profits for the year to 31 July fell to £145m ($266m) from £634m a year ago. Profits before one-off costs, which included restructuring costs and branch closures, fell 30% to £527m.
The firm made 7,100 job cuts across all its divisions during the financial year, and a further 600 jobs have gone since then.
However, despite this the group, which runs Plumb Center and Build Center in the UK – has no plans to raise extra funds or to renegotiate covenants held with banks.
Group chief executive Chip Hornsby said: “We have continued to take action to reduce costs and drive working capital improvements in response to challenging market conditions. While these conditions have impacted many of our businesses significantly during the year, our employees have done a good job at responding to the tough markets and we are seeing the benefits of our actions with market outperformance in many areas.”
He said that financial discipline in terms of cost reduction and cash flow enhancement remains Wolseley’s primary focus to ensure they remain compliant with banking covenants and ensure they are well positioned for any market recovery.
Wolseley expect to save around £176m a year restructuring and other initiatives.
The results for Wolseley UK reflect much tougher trading conditions in Ireland throughout the period as well as the increasingly difficult UK housing market.
Against this background, Wolseley UK and Ireland recorded a 1.0% increase in revenue to £3,203m (2007: £3,171m), due to acquisitions. Organic revenue growth of 1.8% was achieved in the UK, excluding Ireland, with market share increased.
Gross margin increased slightly due to a change in business mix, including an increase in private label sales, and despite increased pricing pressure as markets deteriorated.
Trading profit was 16.6% lower at £176m (2007: £211m) excluding £12m of exceptional restructuring costs, principally relating to 13 branch closures and 150 redundancies, in Ireland. These restructuring plans and other business initiatives should give rise to annualised savings of £17m. The trading margin fell from 6.7% to 5.5%, primarily due to lower profitability in Ireland, whilst the plumbing and heating business improved its margin.
During the year, a new regional distribution centre (DC) was opened in Chorley and the benefits of the national DC in Leamington Spa continue to be realised, with the distribution network and management focus driving significant improvements in working capital, whilst achieving high fill rates to branches and customers.
Ten new locations were added in the UK and Ireland taking the total number of branches to 1,927 (2007: 1,917).