Global building supplies group Wolseley has warned of a “rapid” deterioration in the UK market as it reaffirmed its focus on cutting costs.

Wolseley, whose UK headquarters are in Leamington Spa, said it had cut 6,000 jobs since last August as it struggles with deteriorating conditions in its key markets.

None of the recent job cuts have been in the UK – the bulk of positions have gone in the US, which accounts for around half of the group’s annual £16 billion sales.

Trading profit in the UK and Ireland fell 17 per cent in the 11 months to June 30, including restructuring costs of £9 million in Ireland after 150 job were cut and 13 branches closed.

The group, whose brands include Build Center and Plumb Center, said the figures reflect an increasingly difficult UK housing market, hit by the lower availability and increased cost of mortgage financing.

Wolseley Group chief executive Chip Hornsby said: “The news just keeps getting more challenging, with what’s going on with the mortgage markets on both sides of the Atlantic, whether Fanny Mae and Freddy Mac or the mortgage issues we have in the UK.’’

“It’s one of the most challenging periods we’ve seen, particularly considering that the downturn started about two-and-a-half years ago in the US.’’

Mr Hornsby would not quantify any future job cuts, debt or cost saving targets. But he said the £50 million in one-off savings announced in May had comprised the 150 job losses in Ireland and 200 at Ferguson, its US plumbing and heating business, during May and June.

In addition, Mr Hornsby expects a further 50 job losses in Canada and 400 in France, subject to employee consultation, in July. “The deterioration in some of our key markets continues and it is likely that conditions will get tougher still,” said Mr Hornsby in Wolseley’s trading statement.

“In these unprecedented circumstances, driving cost reduction, enhancing cash flow and closely managing the balance sheet, remain key priorities.”

The global group said overall trading profits were 28 per cent lower in the period, with group revenues up one per cent after benefiting from acquisitions.

It added trading conditions in most of its markets had got worse since its May update, when it announced a drop in UK profits of six per cent in the nine months to April 30.

The company said it would not pay a final dividend to shareholders in the light of current market conditions, bringing a cash saving of £150 million.
The group also said it was taking action to ensure it remained within its borrowing covenants.

It said gearing reduced to 77 per cent at 30 June this year, down from 84 per cent on 31 January 2008.

Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said the current turmoil in the housebuilding sector was rippling out to the secondary building market and plumbing merchants such as Wolseley.

He added: “Management has been taking decisive action in order to offset the expected decline in profits, including axing some 6,000 jobs since August 2007.

“Furthermore, like their housebuilding counterparts, a significant focus is being placed on both reducing debt and concentrating on cashflow, including cutting the dividend payment.

“However, with Wolseley having ratcheted up it debt levels to over £2.5 billion via a series of bolt-on acquisitions in years gone by, investor nerves remain frayed.”

Wolseley said it continued to adopt a cautious approach to acquisitions and was pursuing a police of selective disposal of non-core businesses.
The firm sold three of its businesses for a combined total of £18 million between April and July.

Its US Ferguson arm has disposed of two businesses and Wolseley France has sold a metal connector plate and anchor design and manufacturing business.

Wolseley is the latest construction-related group to sound a grim note – Austria’s Wienerberger AG, the world’s largest brickmaker, last week issued a profit warning due to the “collapse’’ of residential construction in Britain.