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For sale? – one less-than careful owner

We should never despair, our Situation before has been unpromising and has changed for the better, so I trust, it will again.

Ouch. As if things weren’t bad enough as it is at Build Center, what with the recession and everything, now the merchant has two years to prove itself or get hived off.

Yesterday’s announcement that the chain is one of 19 Wolseley businesses that may or may not be for the chop within the next two years has been anticipated for sometime (see blog: What next for Wolseley). Build Center as an individual brand has some 160 branches and 1,500 employees , compared with Plumb Center’s 400-plus branches. But that doesn’t make it any easier for those at the coal face to have to hear.

Chief executive Ian Meakins was brought in to sort out the basket case that Wolseley has become and has been doing the things that you expect someone in his position to do. Namely to clear out some of the old guard and replace them with trusted former colleagues (incoming chief finance officer John Martin worked with Meakins at Travelex for example) and make some tough decisions about what to do next.

So far, some of the initiatives seem to be working. The half-year loss was well down on what it was this time last year with trading profit in the UK businesses up. That’s largely thanks to the swingeing cuts in overheads and headcount, with the latter down again by around 750 jobs in the last six months. It’s probably also helped getting rid of the under-performing Irish businesses.

Meakins said yesterday that he doesn’t expect to have to cut costs that much again, although, tellingly, he didn’t rule it out should the economy not pick up enough.

In the meantime, Meakins has done that management consultant thing of taking a long hard look at what’s in the portfolio and dividing it up into categories with ‘management-speak’ titles. Growth Engines, Synergy Drivers and Performance Builders. I’m not sure exactly which of Wolseley’s brands fall into which category, but I think it’s fairly obvious that the Growth Engines are the strongest businesses in terms of business growth, while the Synergy Drivers are clearly those ones which can best grow in conjunction with other sectors or areas. Performance Builders, alas, translates as ‘if we can’t build a decent performance out of this lot then we’ll get shot of them’.

It’s far too early to speculate what might happen or who might want to take Build Center on board as a sell-off isn’t guaranteed. But Meakins isn’t one to hang about when he’s made his mind up. “We won’t dally if we see a business that can’t perform for us in the long term”, he said yesterday.

A question: do businesses perform better when their backs are against the wall like this or does it make for a demoralized workforce, anxious to jump ship at the first opportunity? I’m not sure situations like this make for happy campers. But then, two years is a long time.

It was only 30 months ago that that the BBC’s Robert Peston blew the gaff on Northern Rock’s perilous finances in September 2007 and it took a year for Lehmann Brothers to go belly-up. It seems like an age ago, but it was only 18 months.

Watch this space.

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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