Material damage

21 January 2008 By George Hay Follow @gfhay

The UK group only gets about a quarter of its revenue from new US construction. That business has been suffering badly, dragging the share price down. Other markets are now slowing. That s bad news for current profits. And a test for this acquisitive company s business model.

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Wolseley shares fell 12% on the morning of January 21, after the building products retailer reported a 25% fall in fivemonth trading profits.

Updating the market ahead of firsthalf results, Wolseley said that a deteriorating US housing market had caused problems in its building materials division to spread to its plumbing and heating distribution business, Ferguson, where revenues fell 3%. North American operating profits were down 40% in total.

Wolseley's European operations fared better, growing operating profit 1%. However, this was well below the 15% growth recorded in the first quarter, and included a 35% fall in French operating profit. The company forecast that market conditions were likely to worsen.

Wolseley shares had recovered to 671p, down 3.7%, by afternoon trading.

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