- By Region
Wolseley said it was considering the sale of its struggling French division, as the building materials supplier accelerates its programme to dispose of underperforming businesses.
The FTSE 100 plumbers’ merchant on Tuesday said it was “exploring strategic options” for its French operations, which generated revenue of £1.3bn in the year to end of July 2011.
The decision came as Wolseley warned that it would write-off most of the French division’s £136m of goodwill, and would also review the value of its £393m of goodwill at its Danish business – a move that could put the group in danger of swinging to an annual loss.
“We expect [the Danish goodwill writedown] to be material. It is unlikely to be all of the £393m, but it is likely to be a material piece of that,” said John Martin, Wolseley chief financial officer.
“In France, we need to see whether the £136m is recoverable, and if it is not, then it will be written off.”
Wolseley’s French operations consist of two businesses – building materials group Reseau Pro and wood importer Panofrance.
Wolseley did not estimate a sale price for the French business, which operates from about 300 branches and employs 5,400 staff.
Options for Wolseley’s French business instead of a disposal include a joint venture or a reorganisation, but analysts suggested that a sale was the most likely outcome.
“The implication of today’s announcement is that it is now prepared to exit France entirely,” said Flor O’Donoghue, analyst at Davy Research.
“France has become increasingly peripheral to the group. Exiting a country that has caused years of pain makes sense.”
Wolseley – a dominant force in the US, Swedish and Danish markets – has been hurt by the economic crisis in continental Europe, and has already sold off assets in France and the UK.
A year ago, Saint-Gobain, the French building materials group, paid a total of £310m for Build Center, Wolseley’s UK trade business, and Brossette, the British group’s French plumbing and heating distribution business.
Two months ago, Wolseley, which operates the Plumb Center and Ferguson chains in the UK and the US, disposed of high street bathroom retailer Bathstore, selling it for £15m to Endless, the Leeds-based turnround group.
The sale of its remaining French assets would be the most significant of its recent offloads – in the six months to January 31, Wolseley earned about 14 per cent of its total first-half revenues in the country.
However, with operating margins of 2.7 per cent compared with the group average of 5 per cent, the division is less profitable than most of its other businesses.
Two month ago, Wolseley warned that like-for-like revenues in the country had fallen 6.1 per cent as the local construction sector weakened and government stimulus for the sector came to an end.
Wolseley shares fell 3.5 per cent to £22.48 in early London trading.