EUROPE’S ailing economy dragged down half-year profits at building materials group Wolseley as it warned of more cuts to protect earnings.
The group, which trades under the Plumb Center, Pipe Center and Drain Center brands in the UK, has cut almost 1,000 staff from its European workforce over the past seven months, including 234 in the UK.
The firm is facing weak conditions in France, Denmark, Sweden, Finland and Norway and said housing markets deteriorated “sharply” in the six months to January.
Wolseley’s half-year earnings were affected by £87m of exceptional costs, with £63m of these stemming from France, and £10m from redundancies.
It expects another £70m to £80m of charges in the second half, and is selling or closing more than 110 building materials branches in France.
Underlying group sales increased 2.2 per cent across the group to £6.3bn versus a year earlier.
But exceptional charges dragged pre-tax profits down to £199m from £250m in 2012. Trading profits – booked before exceptionals – grew 7.6 per cent to £324m.
Wolseley posted flat sales in a declining UK market, where it generates 14 per cent of its business.
Like-for-like sales surged 8.3 per cent in its biggest market, the United States.
But Wolseley reported steep underlying sales falls in France and its Nordic markets, where they declined 10.4 per cent and 6.2 per cent respectively.
Chief executive Ian Meakins said: “We faced substantial headwinds in Europe, and are taking appropriate actions to protect profitability.”
He expects trading in the UK to remain flat and “very weak” in Europe, where it will maintain tight control of costs.
It completed four acquisitions during the half for a total £120m, including buying 22 Burdens drainage supplies depots in the UK.
It plans to cut 200 jobs from the Burdens business, almost a third of its workforce.
Wolseley’s net debt grew to £871m from £470m a year ago after paying out £462m in dividends. It plans to increase its half-year dividend by 10 per cent to 22p per share.
Brokerage Panmure Gordon said: “After a strong performance we continue to advocate taking profit.”
Wolseley employs around 360 staff at its site in Ripon, North Yorkshire.
Wolseley can trace its roots back to 19th century Australia. The firm’s founder, Frederick York Wolseley, was born in Dublin in 1837, and emigrated with his family to Australia when he was 17.
In recent years, Wolseley has continued to grow organically and through acquisition.