£10bn turnover not enough for ambitious Wolseley boss

Wolseley chief executive Charles Banks may not be the highest profile figure in the industry, but he is one of the most influential. He heads the biggest company in the quoted sector, which last year achieved sales that broke the £10bn barrier. And, as a FTSE-100 company, the material supplier’s share performance has a greater impact on the performance of the sector overall than its fellow listed companies.

It’s a powerful position that suits the affable but authoritative Banks, an American who now lives and works in the UK. His background must have stood him in good stead – after graduating from Brown University in Providence, Rhode Island, on the east coast, Banks spent two years in the US Navy where he rose to lieutenant. His ambition led him to rise quickly up the ladder at Wolseley, where he joined the board in 1992 and took the top job in 2001.

Banks has continued to bring success to the company, which last week delivered an upbeat message at its annual general meeting. Although most of the markets in which Wolseley operates in Continental Europe are expected to remain flat in the next financial year, the UK, US and Canadian businesses are performing well.

Wolseley has a market capitalisation, or total share value, of £5.52bn, compared with Hanson’s £3.14bn, the only other FTSE 100 company in the sector. Wolseley’s sales exceeded £10bn in the past financial year, £2.1bn, or 21% of which, was achieved in the UK. The UK has been the best performing part of Wolseley’s European business for the past five years in terms of growth and profit.

But even this success is not enough for the ever-ambitious Banks, who says that his aim is to improve sales and profit 10% every year. The road to expansion will be built on acquisitions and organic growth.

“Acquisitions are a key part of our success and we’ll continue that,” says Banks. “We need to, in order to meet our growth targets.” So far, he’s put his money where his mouth is – Wolseley has snapped up 53 businesses, spending £750m in the process, in the past three years.

The principal element of his UK business is repair, maintenance and improvement work (RMI). “Our customer base is the white van man in the UK, all the way through to people who build offices, shopping centres and hospitals,” says Banks.

Despite a slowdown in the UK contracting and housing market, Banks is confident that Wolseley’s diverse operations mean it will not be affected. He says the housing market in the UK is suited to Wolseley’s interest in RMI work. “The RMI business is very big in the UK. People improve their properties because the planning system stops people building on greenfield,” says Banks.

Housing is 30% of Wolseley's business, so if that goes down and commercial goes up, it's okay

Charles Banks, Wolseley chief executive

Not easily fazed, Banks is taking the steady decline in house prices in his stride: “Housing is 30% of Wolseley’s business, so if that goes down and commercial goes up, it’s okay.”

Banks, who is based at the Reading office in Berkshire, spends two-thirds of his time in the UK. He says the UK market has been a pivotal part of the growth of the business but it is difficult to make a straight comparison with the US market in terms of productivity. In the US, 1.7 million homes are built every year, in a country that has a population five times bigger than the UK. “Because the business is different in the UK, where there is a focus on RMI and not new-build, the average sale is smaller,” says Banks. “In the US there is a lot more focus on new work, so it is very difficult to measure productivity.”

He adds that he would never try to manage the different geographic divisions as one entity.

“If I tried to manage Wolseley as if they were all the same it would be a mess. So it’s a matter of how they manage their own business and productivity.”

In terms of the future, Banks says social housing is “definitely a place where we want to go.” He adds: “John Prescott’s aims are a huge part of this, even if it takes 10 years. It is not just housing, but infrastructure, water and the environment.”

Banks believes size matters if you are going to adapt to change: “You need to be a very small talented niche player or you’d better be a good big one.” He says that customers are more demanding today and more global.

One of the challenges that Wolseley is facing – along with the rest of the industry – is a rise in energy and materials prices. “The increases will go through to the end user. Everyone fights like hell against it, but you’ll have to pay the price.”