Mr Adrian Barden thinks the €183 million paid for Brooks will give the group the potential to open new branches, add to brands and grow operating margins, writes Una McCaffrey
Mr Adrian Barden of Wolseley is feeling a little bewildered at the moment. Even though he has worked in the builders' merchanting sector for no fewer than 33 years, he has recently encountered a new phenomenon: the media frenzy.
His eyes widen when he talks about the attention that has been lavished on Wolseley in the course of its acquisition of Brooks Group, the Republic's third-biggest merchanting chain.
The deal, when it happened, was concluded in private - it was the run-up to the handshake that grabbed all the headlines. The most striking example of this, Mr Barden recalls, was when a low-profile visit by him to a single Brooks site ended up in a newspaper report a few days later. He jokes of waking up to an "Adrian Barden sneezes" story one of these days.
Now that the €183 million deal is done, however, the excitement will die down a touch, with attention already having moved on to the next deal in town - a possible link-up between Grafton and Heiton.
Mr Barden, who was the driving force behind the Brooks deal from the start, will be happy to move out of the limelight.
He has been in Ireland this week talking to Brooks staff and reassuring all 430 of them that Wolseley will look to expand rather than cull the business. His first question to a group of managers briefed on Tuesday in Dublin was where they thought Brooks should open its next outlet.
For staff who had for years been starved of an expansionary impetus by their Finnish bosses, UPM-Kymmene, the fighting talk must have come as a shock.
"Ireland has always been a target area," is how the straight-talking Mr Barden justifies Wolseley's latest move. He further explains that the firm has a habit of first testing a market through its "core" heating and plumbing business before going back for more with a wider offering. And so it has been in the Republic: five years ago, Wolseley took a presence in the Republic through the Heatmerchants chain of heating and plumbing supply outlets, and now it is coming back with many more bells and whistles.
Mr Barden shies away from discussing the extent of Wolseley's vision for Brooks, but he acknowledges the kind of growth experienced by Heatmerchants over the past half-decade might be a reasonable barometer.
When Wolseley bought Heatmerchants, the business had a turnover of about €48 million from 18 branches. Last year, it recorded sales of €101 million, with the chain now 52 stores long.
"We buy businesses to grow them," he says.
As for the task in hand, Mr Barden says building distribution - as he prefers to call it, believing that merchanting is old-hat and not sufficiently customer-focused - is "not rocket science".
He says the opportunity contained within Brooks is vast, as Wolseley moves along the twin tracks of opening new branches and adding to the brands that the business already offers.
Thus, a Brooks branch near you could soon be selling products from Wolseley's many UK businesses - Parts Center, Pipes Center and Hire Center for example - alongside its more familiar timber.
Wolseley has "segmented" the market, according to Mr Barden. "We can complement the existing business," he says.
As far as physical expansion goes, plans are still being formulated, with geographical chinks in the Brooks armour (such as the north-west) currently under scrutiny.
"I would be very hopeful of two new branches within the next 12 months," he says, hinting at faster expansion thereafter.
Likewise, he says, Wolseley's presence in 13 countries could see parts of the Brooks business being exported. He expresses admiration, for example, for a sophisticated doors business based in the Belfast branch.
In the shorter term, his agenda is also occupied by the small matter of the valuable site occupied by one large Brooks branch at North Wall in Dublin.
Wolseley said a week ago that it would gain at least €53 million from the disposal of Brooks properties, with a deal already agreed. North Wall is the main site being sold, with the Brooks headquarters on Dublin's Naas Road to be retained.
Mr Barden explains that the North Wall property will, in time, be dissected by the Luas as it makes its eventual way down Mayor Street. The site, which would suddenly become much less valuable for a builders merchant, would thus have been on the market even if Brooks had not been sold.
He says Wolseley has a couple of years to consider precisely how it wants to deal with the matter. The sale of the land, which is comprised of three large sites, has been agreed on the long finger with its still-anonymous buyer. The business will thus migrate on a "planned" basis to its new home, possibly being broken up into as many as three outlets in the process.
"We've got time to get other sites open and for customers to get used to other sites before phasing out North Wall," Mr Barden explains.
Under the ownership of paper firm UPM-Kymmene, Brooks has grown its sales by about 24 per cent over the past three years. It posted operating profits of €9.4 million on turnover of €195 million last year.
With Wolseley's purchasing power and cost-controlling skills on board, however, both measures can be expected to improve substantially before long.
To put things into context, Wolseley's UK merchanting arm is expected to report sales of about €2 billion for the year just ended.
Brooks currently delivers an operating margin of 4.8 per cent. Under Wolseley's guidance this will, Mr Barden predicts, be raised to at least 8 per cent.
He thus rejects suggestions that the firm has overpaid for its latest buy, describing the €183 million (minus property disposals) price tag as "appropriate".
The increase in margins will be achieved - if various forecasts are to be believed - at a time of unprecedented expansion in construction.
On the housing side alone, Davy Stockbrokers is expecting 80,000 houses to be built this year.
Mr Barden reckons housing output of 50,000 would be enough to create a "very positive" market for Brooks.
At the moment, about 60 per cent of the firm's business focuses on repair and maintenance but as the stock of housing grows, this is expected to increase.
The growing obsession with television programmes featuring renovations and remodelling will, in Mr Barden's view, underline the trend.
Just as the market will grow, however, so will competition, with Mr Barden seeing Ireland at the start of a phase of consolidation.
"You can see that there is momentum building."
He does not necessarily see a link between the main players - Grafton and Heiton - as "complementary", however, describing Grafton's move on its smaller rival as "just strange".
"I can't see an endgame," he says, adding that he has been watching developments on the approach with interest.
This interest will no doubt be at its peak today - the date set by the Takeover Panel for Grafton to either stump up with an offer or walk away.
An offer and subsequent deal would almost certainly generate some "heartache" as the businesses would come together, in Mr Barden's view.
Wolseley has already come up against Grafton as a competitor in the UK and Mr Barden describes the firm as "sensible traders", just as Heiton and Grafton would no doubt claim to welcome Wolseley as a competitor in the Irish market.
For its part, Mr Barden says Wolseley would not be interested in Heiton, with the firm's exposure to the DIY market through Atlantic Homecare simply not appealing.
"Heiton is a different formula," he says.
Looking to the Irish competitive landscape as a whole, Mr Barden sees a large number of smaller merchants being swept up into larger groups over the next few years. He estimates that about half of the British market is in independent hands, whereas this measure rises to about 65 per cent in Ireland.
"It's got a long way to go," he says. "Consolidation will take a number of years and there will no doubt be new entrants."
For the moment, Wolseley and Mr Barden will be digesting the Brooks deal rather than looking for further acquisitions.
The company is currently concentrating on empowering the Brooks management that will transfer in the sale. Decisions on how Brooks is run at ground level will be made by Irish people because they know the market, Mr Barden says.
"The Irish market is different," he adds.
He repeatedly emphasises the local element of the merchanting sector in general, recognising that business comes and goes on the basis of simple factors such as personal relationships and credit terms.
Aside from Brooks, Wolseley as a group has completed 15 purchases so far this year at a total cost of almost €190 million. While Brooks stands out as one of the larger deals in this context, it takes on minuscule proportions when set beside the £8.2 billion in sales collectively notched up by all of Wolseley's subsidiaries last year.
Mr Barden himself oversees no fewer than 12,000 employees, a body of staff with which he claims to be perfectly comfortable.
Is it true to say then that Brooks, with its 430 staff and sales of €195 million, just small fry? "No way," says Mr Barden.
"The UK business was small once," he remarks.
Factfile
Name: Mr Adrian Barden.
Age: 49.
Position: Managing director, Wolseley, UK and Ireland.
Background: From Kent, he began work as a manager apprentice in a builders merchant in the south of England when he was 16 and has spent all of his working life in the sector.
Family: Married, with two sons aged 27 and 25.
Hobbies: Competitive sailing. Has taken part in "Cork Week" at Crosshaven on numerous occasions.
Why he is in the news: He was behind Wolseley's acquisition of Irish merchanting firm Brooks Group for an estimated 183 million.
