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Wolseley unveils £1 billion fundraising effort

The latest restructuring move by building supplies firm Wolseley involves a placing and rights issue to raise £1 billion to cut its net debt.
Wolseley's revenues rose 3.2% to £8.3bn in the six months to January 2009, but trading profits dropped by 43% to £182m, leaving an operating loss before tax of £880m, according to financial results published on March 6.

The firm is placing £270m of new shares with existing investors at 120p each, or a 27% discount on March 5th's closing price.

A further £781m will be raised through issuing 11 new shares for every five they own and Wolseley has also renegotiated a £890m (€1bn) two year debt facility from August 1, 2011.

The company intends its future focus to be on Wolseley's core businesses of North American Plumbing and Heating, UK and Ireland, Nordic and French businesses, because this is 'where it has built sufficient scale and can deliver appropriate financial return'.

Wolseley's businesses in UK and Ireland accounts for 17% of the group's revenue. Its Heavyside building materials brands, mainly Build Center and Brooks, continue to be affected by the rapid deterioration in new residential construction in the UK and Ireland.

The Lightside plumbing and heating brands reported deterioration in the first half while continuing to perform at or above the market. Plumb and Parts Center 'showed some resilience, with more than two thirds of revenues relating to the residential RMI market and the heating segment which remained relatively robust'. The firm said the Commercial and Industrial business 'continues to be more positive with government expenditure on social housing, health and education remaining positive'.

Trading profit declined by 76% compared to the prior year, from £85 million to £20 million, due to lower trading volumes and price competition. As a result, the UK and Ireland trading margin fell from 5.3% to 1.4% with the Irish business moving into loss.

Wolseley's previously announced restructuring actions will deliver annualised benefits of £95 million and headcount reductions of 2,485 in the UK. During the first six months, 161 net locations were closed in the UK and Ireland taking the total number of branches for Wolseley UK to 1,766 (July 31, 2008: 1,927).

Globally, Wolseley has already cut 17,000 jobs and closed 713 branches since August 2007 . Existing cost-saving plans are expected to deliver £572m per year.

The Board said it believes that the downturn in the UK, Irish and Nordic economies is likely to be more severe than that experienced in the remainder of continental Europe and if markets deteriorate further than it expects, it will take further action.

Chip Hornsby, Wolseley group chief executive said: 'Our markets have been hit hard in recent months and in response we have continued to take prompt and decisive action to reduce both costs and debt'.

He added: 'Following the completion of the comprehensive financial restructuring announced today, theCompany's balance sheet will be substantially strengthened. In addition, the clear focus on those core markets where Wolseley has built leading positions will enable the Group to maintain investment in our key most profitable markets and remain strongly positioned to capitalise on future market recovery.'
6 March 2009

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