Building materials giant Wolseley has issued a grim trading update for the five months to 31 December 2008 but said it will not breach banking covenants this month

It said pre-tax profit fell two-thirds over the period and turnover was down 3%.

A statement said: “Against the background of deteriorating trading conditions and volatile financial markets, the group will continue to concentrate its near-term operational actions on enhanced cash generation and cost reduction.”

Net debt increased by 22% since 31 July 2008 to £3bn, principally owing to a £557m hit from currency exchange rate swings.

Building revealed last week that sources close to the group’s lenders were confident covenants would not be breached at the end of its financial year in July.