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Wolseley To Close 75 Ferguson Locations

May 23, 2008
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The group issues results for first nine months of fiscal year.

Wolseley plc will cut 250 jobs in the United States and Canada, and close 90 branches, as the construction downturn continues to hammer its results.

It is set to close 75 of its Ferguson locations, laying off 200 workers, and shutter or consolidate another 15 branches in Canada, laying off 50 workers.

These decisions will save the company roughly $138 million a year, meaning a $98.2 million charge during the fourth quarter. Wolseley said further closures and layoffs are in the cards and will be announced before July 31.

Wolseley reported its third-quarter results on Tuesday. And though it said the first nine months of the fiscal year (ended April 30) are in-line with the expected market conditions, the U.S. housing and repairs, maintenance and improvement markets have continued to soften.

U.S. commercial and industrial markets have held up well, and Ferguson reported a continuous gain in marketshare, but the group will focus on cost reduction and cash-flow enhancement.

Group revenue was up 2 percent, trading profit was 23 percent lower, and profit before tax and amortization and impairment of acquired intangibles was down 30 percent.

At Ferguson, it posted an achieved revenue growth of 1 percent, due to acquisitions. Organic revenue declined 3 percent and trading profit was 1 percent lower than the equivalent period in the prior year.

Stock Building Supply continued to be affected by the U.S. housing slow-down and saw revenue fall 25 percent with additional pressure on gross margins. The trading loss for the nine-month period was $158 million USD.

Wolseley Canada achieved 2 percent constant currency revenue growth. Revenue in Wolseley UK, which includes Ireland, increased 3 percent. However, Wolseley UK experienced a more challenging April as the market slowed significantly.

Further cost-reduction and business-improvement actions will be taken in North America and Europe before July 31, the end of Wolseley’s fiscal year.  Outlook-challenging conditions in many markets are expected to continue, although the U.S. commercial and industrial market, which accounts for the majority of Ferguson's business, is likely to remain stable into the next financial year. The group's rigorous focus on cost reduction and cash maximization will continue.

Chip Hornsby, group chief executive of Wolseley, said, "Given the continuing tough market conditions, our response has been to take further action to lower the cost base and improve cash flow, while continuing to pursue our longer-term strategic aims. The cost-reduction actions outlined today will enable us to restructure the business further, so that we are better positioned for the challenges ahead."

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