Wolseley shares plummet on profit warning

Shares in builders and plumbers merchant chain Wolseley fell 30% on Monday morning to 176p after their latest market update showed profits down 66% year on year.

The shares closed yesterday at 180p. Some analysts now believe that Wolseley cannot avoid refinancing.

Giving the pre-close trading statement for the last five months of 2008, Wolseley warned that because of further deterioration in the general trading environment in recent weeks, as well as currency movements, profit before tax will be two thirds lower.

Wolseley’s net debt rose by 22% to £3 billion, thanks mainly to the impact of the fall of sterling against both the dollar and the euro.

Group revenue for the five months ended 31 December 2008 was up around 3% compared to the corresponding period in 2007. Trading profit was down by around 45% primarily due to lower profitability in Stock Building Supply, DT Group and Wolseley UK. In constant currency, revenue would have been around 10%

Revenue for the UK and Ireland fell by about 12% with trading profit down by around 80%.

The group has already reduced the headcount by 7,500, with 2,000 of the job losses in the UK.

Rival builders merchant Travis Perkins have already warned that sales volumes will drop by 25% from peak levels by April – an estimated fall of £800m.

The company said that the first four months of this year will be “very difficult” as the collapsed housing market shows no signs of recovering.

Travis Perkins’ results for 2008 are due out on 19 February.