Wolseley plans £1bn rights issue as profits plunge

Building materials giant Wolseley is planning a £1bn rights issue to shore up its balance sheet.

As part of a wider refinancing plan, which the banks have made conditional on tapping investors for more cash, it will get a new €1bn (£890m) debt facility from August 2011.

Net debt stands at about £2.48bn and City analysts have speculated it may breach its banking covenants if it doesn’t take action.

Chip Hornsby, its 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. Following the completion of the comprehensive financial restructuring announced today, the company’s balance sheet will be substantially strengthened.”

In the six months to 31 January 2008, the company made a pre-tax loss of £965m as a result of restructuring costs and goodwill writedowns on acquisitions. The figure compares to a profit of £79m in 2008.

Turnover rose by 3.2% from £8bn to £8.3bn, although the figure was 12% down in constant currency terms.

In its UK and Ireland business, it recorded a 12.5% fall in turnover from £1.6bn to £1.4bn.

The region made an operating loss of £137m compared to a profit of £76m in 2008.

There was a net loss of 161 branches over the period in the UK and Ireland – falling from 1,927 to 1,766.

Worldwide the company has closed 713 branches and made 17,000 redundant since August 2007.