Britain based building and plumbing supplier Wolseley posted underlying year profits at the top end of forecasts on Monday, but its shares fell as it said it was selling new shares to help fund acquisitions.
The world's largest distributor of plumbing and heating products said it was placing 59.5 million shares, or just below 10 percent of outstanding shares, to cut borrowings related to its DT Group transaction and other recent bolt on acquisitions as well as help do more deals.
Wolseley is expected to raise up to 690 million pounds from the offer, as dealers expect the placing to be priced at between 1,080 pence and 1,160 pence a share.
The placing will enable the group to continue to pursue its growth strategy and its programme of bolt on acquisitions, Wolseley said in a statement.
By 08:10 GMT (9:10 a.m. British time) shares in the company, which have lagged the UK support services sector index by 14 percent over the past 12 months, were down 5.8 percent at 1,097 pence, valuing the group at around 6.6 billion pounds.
Wolseley said it made a profit of 817 million pounds before tax and amortisation for the year to end July, up 19 percent on the previous year. This compared with market forecasts which ranged between 766 million and 817 million pounds and averaged 789 million pounds, according to a survey of 16 analysts by Reuters Estimates.
Revenue rose 23 percent to 14.2 billion pounds, exceeding forecasts, which ranged between 12.3 billion and 14 billion, and Wolseley raised its total dividend by 11.4 percent to 29.40 pence a share.
Although the slowing U.S. housing market may bring us challenges next year, we will continue to pursue our double digit growth targets through a combination of organic and acquisitive growth, Chip Hornsby, who succeeded as chief executive in August, said in the statement.
The company expects continued growth in the U.S. industrial and commercial market as well as home repairs maintenance which would more than outweigh a softening in the new residential market.
North America, which accounted for nearly 65 percent of Wolseley's annual turnover, has begun to show a slowdown in new housing starts following a series of interest rate increases in the United States.
While we believe that the uncertainty in the U.S. is likely to continue to impact on sentiment, the group's ability to invest to grow and strong markets ex U.S. housing mean that it is likely to retain double digit growth track record, Bridgewell Securities analyst Howard Seymour said.
The company, which spent 914 million pounds on more than 50 acquisitions in the financial year 2005/06, unveiled several more deals in the current year including an agreement to buy Denmark's DT Group for 1.35 billion pounds.
The bolt on acquisition pipeline remains strong with ample opportunities to support Wolseley's growth while meeting the group's criteria for returns on investment, the company said.
The group said it was seeing strong growth potential to continue, with double digit percentage growth targets, as it has less than 3 percent of the 700 billion pound construction materials market in Europe and North America.
UBS and Hoare Govett are acting as joint book runners and joint brokers for the placing of the new shares, which Wolseley expects to be listed on Thursday. UBS is also acting as financial adviser to Wolseley for the placing.
(Additional reporting by Louise Heavens)