Where will this lead to?

Got in at 650p toearly. US HOUSING is the key. First in first out.

I have been keeping an eye on sp but not yet ready to commit. May be more bearish news to come out of US re housing/construction. Board very clever to take the opportunity to have a rights issue near to the top of the market to help pay for the heavy acquisition programme over last couple of years or so. A quality outfit but, they may go lower yet. sp 587p

I agree, the sp will get lower by the end of 2008...
the climb from 450p to 1450p took 3 years but the decline from 1300p to 600p took ONLY 9 months!

Wolseley was the FTSE 100s heaviest faller this morning after Goldman Sachs and ABN Amro advised investors to sell shares in the building supplies group.

Goldman Sachs downgraded it to sell from neutral, cutting its target price to 565p from 775p, saying it expected Wolseleys earnings to decline as US and European construction markets weaken.

ABN Amro also cut Wolseley to sell, from a previous rating of hold, and lowered its price target to 530p from 630p. The broker said it expects Wolseley to report a deterioration in trading when it issues interim results on Monday.

Citing weaker lumber prices, expected weaker UK new housing demand, slower growth in Scandinavia and higher Swedish interest rates, ABN Amro cut its earnings per share forecast for the group by 11.8% for 2008 and 21.9% for 2009.

Goldman Sachs said it expects US housing starts to fall below 1m. It cut its earnings per share estimates for Wolseley by 6% for 2008 and 31% for 2009.

Wolseley turned lower Monday as it reported weaker full year profits, prompting broker Landsbanki to start coverage of the plumbing supplies group with a hold rating and 500p price target.

Profit before tax and amortisation and impairment of acquired intangibles for the half year fell 29% to 233m on revenue up 2% to 8.03bn, pretty much as expected.

The firm said the results reflected increasingly difficult trading conditions across many businesses and the continuing action to significantly reduce the group's cost base and maximise cash flow.

Things arent expected to get any easier, with the company predicting conditions will become even more challenging over the next few months.

The broker is forecasting earnings per share of 80.6p and pre-tax profit of 550m, assuming the dollar doesnt tumble significantly by the end of July

In the short-term, we remain very focused on maximising cash flow, reducing costs and growing market share, said chief executive Chip Hornsby.

We are confident in the long term fundamentals of our markets and will emerge from this current downturn as a stronger organization with an excellent platform for future growth.

The group said it is fully in compliance with its borrowing covenants at the end of January and is confident that this will remain the case.

Closed at 483p. I feel WOS will fall to 350p soon.

or perhaps go to 550p sooner

Going down best short around.

tipton11 - 18 Mar 2008 16:04 - 10 of 13
or perhaps go to 550p sooner

MoneyAM
Plumbing and building materials distributor Wolseley announced trading profits down 23% in the nine months to April 30th and said it expected challenging trading conditions to continue in many of its markets, as it had anticipated.

While not giving any figures, Wolseley said group trading profit in the period fell 23% against the same period last year and pretax profit before amortisation and impairment of intangibles was 30% lower, against a 2% rise in revenue.

The group said trading in the three months to April 30th was broadly in line with expected market conditions that it flagged in its half-year results.

The US housing and repairs, maintenance and improvement (RMI) markets continued to soften, but US commercial and industrial markets held up well.

In Europe, there has been a more pronounced slowdown in the United Kingdom over recent weeks and many other European markets continue to soften.

The company said it took restructuring decisions that would result in one-off costs of about 50m in Q4 and annual savings going forward of about 70m.

'Challenging conditions in many markets are expected to continue, although the US commercial and industrial market, which accounts for the majority of Ferguson's business, is likely to remain stable into the next financial year,' Wolseley said in a trading statement.

'The group's rigorous focus on cost reduction and cash maximisation will continue.'

Wolseley said its Ferguson business in North America continued to gain market share and achieved local currency revenue growth of 1% due to acquisitions in the nine months to April 30th, although organic revenue declined by 3% and trading profit fell 1% than at the same time last year.

Stock Building Supply continued to be affected by the US housing slowdown and saw revenue fall 25% with additional pressure on gross margins.

The trading loss for the nine-month period was $158m.

Wolseley Canada achieved 2% constant currency revenue growth, although trading profit was 15% lower, due to the previously announced one-off branch closure costs.

In Europe, revenue in Wolseley UK, which includes Ireland, increased 3% in the nine months ended April 30th, and trading profit was 6% lower.

Underlying profit in the UK, excluding Ireland, was slightly higher. However, Wolseley UK experienced a more challenging April as the market slowed significantly. In France, the business environment has slowed further. Wolseley France increased local currency revenue 3% in the nine month period and trading profit was 18% lower.

The planned cost reduction measures include the closure of 75 branches and headcount reductions of 200 at Ferguson and the closure or consolidation of 15 locations in Canada, with an associated headcount reduction of around 50 people. Further cost reduction and business improvement actions will be taken in North America and Europe before July 31st, the group said.

Some analysts have said they believe a rights issue or disposal programme may be necessary to reduce Wolseley's net debt, which stood at 2.9bn at the end of January.

Wolseley said it had curtailed capital expenditure plans and now expects total capital spending for the year to July 31st to be 320m to 330m. At April 30th, net debt was about 2,875m, 19m lower than at January 31st, after an adverse exchange impact of 83m. Gearing reduced from 84% at January 31st to 81% at April 30th.

The company said it continues to adopt a cautious approach to acquisitions and had not completed further acquisitions since its half-year results announcement



Guscavalier comment:
3rd paragraph from the end could well prove a continued drag on sp. Rights issue probably more likely than selling businesses in current climate. sp 529p. N.B. re UK, business slowed significantly in April.

410p now...looking nearer to 350p which is my target.

Wolseley's financial structure is currently in jeopardy due to its exposure in the US and its banking covenants would be breached. Highly in debt.
SELL down to 270p. Now 388p.

350p and more further downtrend to go to 270p.

315p...great stuff.

used to so classy. but i had bad experience there early last year so sold the shares.... all of them!