Investors in Wolseley, the FTSE 100 building materials giant, may have read the rhunes when the company received an anonymous calling card just before Valentine's Day from a private equity firm. The suitor was understood to be Cinven and the matchmaker Goldman Sachs. By Valentine's Day however Cinven got cold feet after the matchmaker ripped up its analysis of why it would be good to make an offer of a discreet meeting with Wolseley. Weeks later delivering a half-year report for Wolseley, its chief executive Chip Hornsby became the first industry leader to warn that there may be worse times ahead in the US housing market. Today delivering full-year figures investors can witness the accuracy of Mr Hornsby's predictions and take seriously his latest crystal ball gazing.

Annual pre-tax profits fell for the first time in years, down 17.6 per cent to £634 million at 31 Juy, dragged down by a 74.9 per cent fall in trading profit at Stock, the company's US building materials business. That division is the most exposed to the new homes market. Housing starts this month fell back to an annualised rate of about 1.3 million from March's low of 1.5 million starts. The long-term average for the US is 1.7 million. The country was building about 2.2 million homes at the market's peak in 2005, meaning there could be at least a year of unsold half-built stock still sitting idle. With loan foreclosures on the rise from the sub-prime collapse, it should come as no surprise today that Mr Hornsby said he can 't predict when the housing market will pick up. Stock has already cut 3,500 jobs so if the market deteroriates further it will hope that its new same-day national distribution centres will help keep a lid on costs if revenues fall back further.

But the new worry for Wolseley is another prediction from Mr Woseley. Now he fears for the so-called repair and maintenance market for housing. That is where existing home-owners enter one of Wolseley's 100 stand-alone show-rooms looking to spend $10,000 on doing up a bathroom and hopefully walk-out having spent $50,000. But if home-owners just sit at home the it is very hard for Wolseley's plumbing staff at its Ferguson division to work their sales techniques. Ferguson's revenue rose 14.8 per cent to over $11 billion including 5.5 per cent organic growth. Sales and repairs account for 16 per cent of Ferguson's sales, so if that market takes a hit, Ferguson could be in for harder times ahead.

Against a backdrop of woes in the US, Wolseley is still an efficient business and enjoys the benefits of scale. Business in Europe meanwhile is roaring ahead. As a group Wolseley still managed to increase its cash flow from £800 million last year to £1.3 billion this time round, sufficient to drive a 10.2 per cent rise in the dividend and the company is confident of similar dividend rises for the coming year.

Wolseley shares fell 27p today to 821+p, a three and half year low. When news of Goldman Sachs's interest in Wolseley on behalf of Cinven first emerged, the company's shares were trading at about £14 valuing the group at over £14 billion but analysts at the time thought Cinven would have to find £15 a share, valuing its equity at £10 billion. Wolseley today is valued at about £5.5 billion, still too much for a bid with the credit markets turned off. But rest assured that someone is making plans for a date with Wolseley ready for a return in the leveraged buy-out market. Forget the short-term woes in the US, when a company throws off £1.3 billion a year in cash and its share price has fallen over 40 per cent in six months, a private equity firm may think want to make a date before Valentine's comes round again.

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