Wolseley released its first-half 2010 results today; and this was one of the first times we’ve heard from Ian Meakins, the new Chief Executive at the UK-based distributor of HVAC/plumbing and building products.  (His full presentation can be found at wolseley.com at this link.)

 

Meakins was blunt with his appraisal of the business, which has seen some big highs and dramatic lows in the past five years. He said Wolseley had in the past few years lacked a "strategic approach to capital and resource allocation" as well as performance management, and has focused on a global model "at the expense of winning locally." Meakins also said acquisitions were made in unrelated segments, with little synergy, and were not fully integrated into the rest of the Group. (Meakins replaced Chip Hornsby in mid-2009.)

 

Over the past six months, he said, Wolseley has taken a closer look at its 41 business units and analyzed the attractiveness of the markets, how that unit is positioned strategically, what that unit’s record has been over the past four years, and what synergies it brings to the group. Meakins said that Wolseley then determined a "clear classification" for each unit within the group. Here are the three classifications and descriptions based on Wolseley’s presentation and earnings release: 

Meakins said that resources will go to the "best" businesses, proportionally, and the company would consider bolt-on acquisitions to these businesses. Performance Builders will improve and be re-classified, or Wolseley will exit these businesses. But "we’re not rushing to exit business where we are underperforming," he said.

 

Though Wolseley is among the largest distributors in the segments it serves, its analysis of its business units seems thorough, but we will have to wait and see what impact it will have on Wolseley’s top and bottom lines.

 

Distributors can take ideas from Wolseley’s actions. Wolseley is taking a systematic approach to analyzing its individual business units. This can be done in a smaller distributorship on the branch, customer, end-market or product-line level to determine where the firm is deriving its greatest return on investment.

 

On an ongoing basis, Wolseley will be keeping close tabs on its businesses with regular performance reviews – another systematic approach that can be adopted by any business. It listed several attributes it would be monitoring, including customer service, market share performance (and share of spend with major customers), review of vendors, review of branch manager performance, review of key operating metrics in branch network and core financial metrics.

 

MDM will be reporting further on Meakins’ presentation in the April 10, 2010, issue of MDM. (Subscribe.)

Watch for my interview with Wolseley’s North American leadership team