Wolseley sells two more low earning firms

BUILDERS merchant Wolseley said it had agreed to sell two of its underperforming businesses to French rival Saint-Gobain for a total £310m yesterday.

The world’s biggest plumbers and building merchant said Saint-Gobain would buy its UK building materials distribution business Build Center for £145m and was in exclusive talks to buy its French plumbing and heating firm Brossette for £165m.

The disposals are the latest in an asset sale that has seen Wolseley offload underperforming parts of its business to raise cash and repay debt. It flagged both firms several months ago as units it wished to divest.

The two businesses each made very little profit despite generating close to £1bn in combined revenues. Wolseley said Build Center generated just £4m trading profit on revenues of £294m in the 11 months to the end of June, while Brossette made a £5m profit on revenues of £590m in the same time.

Wolseley’s chief executive Ian Meakins said they were the last two major businesses it needed to sell to refocus on its core businesses, which include building materials, plumbing and heating in the UK and France.

Analysts welcomed the sale, saying it left Wolseley with just £100m net debt and positioned it well to ramp up its investment for growth in future. Evolution Securities analyst Adrian Kearsey said Wolseley negotiated a good price for the two disposals, though regulatory approvals needed meant they could take months to complete.

Shore Capital analyst Gavin Jago also said the sales put an end to speculation that Travis Perkins had hopes of buying the businesses.

Travis Perkins has been linked to bids for Wolseley’s assets for the past year, in a period of industry consolidation that included Travis Perkins’ £558m purchase of BSS in December.

But Wolseley will still have to manage a restructuring process to cut unrecovered overheads of £1m per month. It also expects to pay £15m restructuring costs.