The Week Ahead: Wolseley cost-cutting expected as debt mounts
Debt and covenants are likely to be the key talking points when Wolseley posts a trading update for the five months to the end of December.
The construction materials group’s £2bn-plus debt pile has evoked concern among analysts ever since the housing market began to sour here and credit markets dried up. Last week, the issue resurfaced after reports that the company was in talks with investors and private equity firms to raise between £300m and £500m to try to ease the burden on its balance sheet.
The stock retreated in response, with traders speculating about the proportion of funds the group may raise via issuing new equity to shareholders. The timing was also questioned, with some anticipating an announcement with today’s update.
UBS, however, reckons it is too early. The broker, which forecasts £128m in first-half pre-tax profits with 14.1p in earnings per share, said that while the group is likely to raise equity to reduce its debt in due course, it is unlikely to move on the issue at this stage.
Instead, analysts highlight the prospect of further cost-cutting, possibly in the form of a reduction in stock held at the company’s branches.
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