The turnaround and repositioning strategy of Wolseley UK is designed to deliver ‘a step change in operational efficiency and consistency’.
The restructuring only affects Wolseley’s plumbing & heating operations; the civils, utilities and infrastructure businesses in the UK are unaffected.
The plumbing & heating business is to be restructured into a local network of approximately 450 branches and a national network of around 80 larger branches, open seven days a week
The next step is a period of consultation with employees at affected sites. “Overall, the reorganisation will take two to three years to complete and is expected to deliver annualised cost savings of £25m to £30m,” the company said. “It is too early to provide details of which branches will close, either by region or brand identity.”
However, the Worcester distribution centre is likely to be closed. “The reorganisation of our logistics and supply chain network, which we plan to complete over the next two years, will result in lower overall capacity requirements in our UK supply chain,” the company said. “This will enable us to operate from three regional distribution centres in the UK instead of four which will significantly reduce our operating costs. On this basis, we propose to assess the feasibility of our Worcester DC as the changes in our plan are put in place.”
Patrick Headon, managing director of Wolseley UK, said: “We have put the customer at the heart of this review with the aim of making Wolseley the first choice specialist merchant in our chosen markets. We have a great business in the UK and there are continued opportunities for growth. I’m confident the transformation programme will drive better customer service and employee engagement and improve our financial returns.
“The trends in our profitability have been disappointing and we need to take action to improve our customer proposition and the efficiency of our business. We have an outstanding team made up of hard working and dedicated people across the UK and we are very conscious of the impact this transformation of the business will have on some of them. We are therefore committed to carrying out this programme as sensitively as possible, using voluntary means to achieve the proposed headcount reductions wherever possible. Over time I’m confident our proposals will benefit both our colleagues in the UK and the customers they serve every day.”
Wolseley generated £1,996m revenues from its UK activities in the year to 31st July 2016, up just 0.5% on 2015. Trading profit for the year was £74m, down 17.8% on the previous year.
By contracts Wolseley’s US operations saw revenues grow 6.2% to £9,456m for the year and trading profit by a similar percentage to £775m.
Group chief executive John Martin said: “Ferguson, our core US business which generates over 80% of the group's trading profit, performed well and achieved good growth in residential and commercial markets, partly offset by weakness in industrial markets. Commodity deflation, principally in the US, reduced the group's growth rate by 1.5%. Ferguson continues to be the main priority for organic expansion and bolt-on acquisitions.
“Our review of UK operational strategy has identified opportunities to transform our customer propositions whilst simplifying our branch network and supporting logistics facilities to greatly improve service levels, drive availability and choice for customers and generate better returns for shareholders. Regrettably this will result in job losses which we will handle sensitively and minimise through redeployment and attrition as far as possible.
“Like-for-like revenue growth in the new financial year has been 1.5% for the group and 4.5% in the US. Demand across our markets remains mixed, with some uncertainty in the economic outlook. We will remain vigilant in controlling our costs to protect profitability while investing in attractive opportunities for profitable growth. We are confident that Wolseley will make further progress in the year ahead.”