Group report 17% drop in profits as US housing starts drop a quarter in six months

Building materials supplier Wolseley has reported a drop in profits of over 17% after being hit by the slowdown in the US residential market.

The firm posted pre-tax profits of £285m for the six months to January 31, compared with £346m in the corresponding period last year. Turnover rose 16.9% to £7870m across the same period.

Chip Hornsby
Hornsby: Wolseley "have taken swift and decisive action to reduce our cost base."

The firm has suffered in the US housing market, particularly in relation to new housing.

Housing starts have fallen from an average annual rate of 2.1 million for the six months to 31 January 2006 to an average of 1.6 million this half.

Across the group, Wolseley was also hit by one-off rationalization costs of £11m.

Wolseley UK’s trading profit increased by 3.2% in the first half compared to the equivalent period in the prior year. One-off costs were approximately £5m, with further rationalisation costs of approximately £6 million are anticipated in the second half.

Chip Hornsby, Wolseley group chief executive said: “The decline in US housing starts has clearly had an impact on our results for the first half, but we have taken swift and decisive action to reduce our cost base and to position the Group to benefit from improving markets. We will continue to pursue our double-digit growth targets through a combination of organic and acquisitive growth with a renewed focus on margin, cash flow and working capital improvement.”