Wolseley Plc., the British LBM giant that among other properties owns 49% of Stock Building Supply, reported today that Ferguson, its American plumbing and heating division, recorded a 37.6% drop in trading profit to 317 million pounds ($507.2 million at current exchange rates). Revenue fell 18.7% to 5.82 billion pounds ($9.31 billion).
Wolseley also said that its North American Loan Services unit--a division of Stock that Wolseley retained after selling 51% of Stock to a private equity group--recorded a loss of 24 million pounds ($38.4 million) as it continued to wind down its operations. For the entire company, Wolseley swung to a group loss of 1.17 billion pounds ($1.88 billion) from a profit of 74 million pounds ($118.4 million) in the previous fiscal year. The operating numbers were just as weak, with Wolseley swinging to a loss of 606 million pounds ($969.6 million) from a year-earlier profit of 555 million pounds ($888 million).
Today's reports didn't include numbers on Stock. As of May 5, Wolseley's 49% investment in America's No. 2 LBM operation now comes in the form of a private holding controlled by the Gores Group, a private equity firm based in Los Angeles. Consequently, Stock's current numbers are private, although Stock CEO told ProSales during an interview on Sept. 8 that he expects the company will be EBITDA-positive in the current fiscal year, which ends next June 30. (Story)
Wolseley's move this summer left Ferguson as its main U.S. operation. The Newport News, Va.-based plumbing and heating dealer provides 40% of Wolseley's total revenue and 61% of its trading profit (a British accounting term used to describe operating profit before exceptional items and the amortisation and impairment of acquired intangibles). But while Ferguson recorded a 5.4% trading profit margin last fiscal year, it had its troubles. Wolseley shut 154 Ferguson branches, an 11.1% reduction, leaving it with 1,228 as of July 31, and it slashed its headcount 18% to 3,840.
Wolseley continues to be committed to Ferguson, noting in today's results that it believes Ferguson outperformed its market rivals. The North American Loan Services operation, however, is slated to be phased out over the next three years. As of July 31, Wolseley said, the unit had $272 million in construction lending receivables, 42% below FY2008's level. Loans in the Carolinas, Texas, and Virginia accounted for 90% of receivables, it said.
Roughly 19 million of the 24 million pounds ($38.4 million) trading loss came from a provision charge taken for bad debt. It excludes another 31 million pounds ($49.6 million) in exceptional provisions taken on July 31.