About Wolseley:
Wolseley is a globally active distributor of plumbing and heating products. Founded in 1887, what started off small has grown into a major business. Today, Wolseley supplies tradesmen, wholesalers and large construction sites with both third party and their own plumbing and heating products. The Company invests heavily in close customer relationships and in high product availability. Supplying some 1.1 million customers worldwide with specialist products requires efficiency. The right product needs to be available at the right time in the right place. This requires a reliable distribution network, but also efficient procurement and production processes. Wolseley generates most of its turnover in the USA, employs around 39,000 people across 2,800 branches.

Treasury Profile

ADaily Cash Management

BCash Pooling

CPayment Processing

DPayment on Behalf of

ECollection on Behalf of

FSWIFT

GeBAM

HLiquidity Planning

IContract Management for Interest, Currencies

JManagement of Commodities

KTrade Finance Contracts

LCapital Markets

MRegulatory Requirements

NGeneral Risk Management

OTreasury Accounting

PStandard / Individualized Reporting

QNetting & Reconciliation

RInsurance

SMergers & Acquisitions

TInvestor Relations

 

No two treasury departments are alike – and this is particularly obvious with Wolseley. Despite the “lion’s share” of their revenue being generated in the US, they are listed on the London Stock Exchange with an established Group Treasury in London, and the Wolseley Group itself is headquartered in Switzerland. This “triangle” not only influences Wolseley’s core business but also the day-to-day operations in the finance department.

With a delivery and service volume of GBP 14 billion, daily cash and liquidity management are obviously of prime importance for Wolseley’s treasury department. Short-term cash must be made available at short notice in order to quickly meet global demands. At the same time, the business is characterized by sharp fluctuations in working capital and the resulting impact on cash balances. The ebb and flow of liquid funds characterizes Wolseley’s cash situation, requiring a corridor system (with a corridor of up to GBP 400 million). In particular during times of “low tide,” it is up to the treasury department to make sure the group has sufficient liquidity and funds. With a volume of approx. GBP 1.5 to 2 billion, Wolseley’s financial investment strategy plays a key role in this context.

Two “revolvers” to complement financing

Group liquidity comprises both cash funds and two revolving credit facilities (RCFs or revolvers) of GBP 800 million and USD 600 million. These committed lines of credit are regularly extended before maturity. Moreover, Wolseley issues private placements, i.e. non-public securities sold exclusively to select investors. These amount to USD 1.25 billion with an average term of five years. Both these select securities and USD 600 million of the revolving credit facilities are USD-denominated and make up a substantial part of the overall debt finance. They also reflect Wolseley’s geographical focus: around 70% of the group’s turnover is achieved in North America. With revenue of GBP 10 billion, the North American business alone amounts to more than the total turnover of many other global players.

Wolseley’s group companies have a high degree of autonomy, making liquidity forecasts all the more important for the treasury team. They have a bottom-up approach to treasury planning which includes consolidating the business plans of their subsidiaries every six months, creating one overall plan. Once the cash position has been established, the treasury team defines the general FX strategy and hedges accordingly. In between the six-monthly planning intervals, there are weekly updates on the transaction currency forecast for the next four weeks. This allows treasury to confirm the FX positions and to apply any necessary adjustments. The treasury department not only hedges currency risks in connection with the core business, they also hedge dividends and any agreed acquisitions.

Wolseley’s business structure is relatively localized, translating to limited FX risks. To a large extent, products destined for the US market are also produced in the US or in other countries using USD as currency. The same applies to the euro zone and other regions where Wolseley is active: local production for local products and services, although this model is beginning to change as product sourcing from the Far East gains traction.

Phil Scott, Group Treasurer at Wolseley, considers this structural framework the main influencing factor for the treasury team:

"Decentralization plays a major role in Wolseley’s corporate culture. For example, the majority of our services are branded locally and not sold under the brand name ‘Wolseley.’ This structure also influences the treasury function. Our biggest challenge is to act as a central treasury in a decentralized group."

Investing in a US or a British company? – Both!

Since most procurement and revenue is concentrated in the US, Wolseley primarily deals with USD exposures. For potential investors, the situation is comparable to investing in a US company. At the same time, the company is listed on the London Stock Exchange, meaning people officially invest in a British company. This represents a big advantage for some investors – they can benefit from booming business in the US whilst still keeping their investments in the UK.Treasury at Wolseley also includes other important topics next to liquidity planning.

"The treasury function supports the core business operations, and the setup needs to reflect this,” explains Phil Scott. “We really need to understand the core business and consider how we can provide support. Based on this, we can define our role."

Wolseley’s treasury team considers itself a collaborative service provider within the group and aims to implement processes and systems that not only provide added value to the central treasury function but also – and even more importantly – to subsidiaries around the world. In addition to North America, this mainly concerns the Nordic countries, Switzerland, the Netherlands, and of course the UK – the place that many people associate as Wolseley’s “home.”

Control by visibility

Wolseley started making use of system support in the “traditional” treasury disciplines years ago. Next to a traditional treasury system, they also established cash pools, for example with Bank Mendes Gans (a wholly owned subsidiary of ING Bank in the Netherlands). The 360T platform is used for FX trading with banks. SEPA has brought a number of adjustments to the payments process, and EMIR requirements were also accommodated. Despite this, Wolseley was struggling to find a satisfactory solution for the most important issue: simplifying and centralizing the data required for reporting to management and the implementation of operating treasury tasks from group companies in a timely and automated manner.

"Our guiding principle is ‘control by visibility’ – and this is exactly what BELLIN enables us to do,” explains Phil Scott. “It is more difficult to implement centralization efforts in such a decentralized company (not least from a corporate culture point of view). But if I have group-wide visibility of cash balances or can make sure that FX deal requests are all done in one system, then central management is in a position to provide sufficient security and to offer group-wide risk management without the local group companies losing their sense of autonomy."

It took time and effort to overcome initial resistance and to gain the support and trust of the group companies. They needed to keep reiterating that changes will not lead to more pressure or a higher workload – but that they’re intended to do the very opposite and will also achieve that. Wolseley’s treasury also needed to create awareness for the fact that the focus is on the best possible collaboration and not on simply controlling activities.

Step by step, central treasury replaced existing system components with a web-based platform to achieve this aim. This ensured a straightforward, group-wide rollout with all companies having access to the platform to capture their local business operations.

“There were two main driving factors for these changes to the system landscape: for one, we wanted to become more independent of internal IT support, needed in connection with the various platforms previously used, by introducing one central, standardized cloud-based system. Moreover, we wanted to provide a system that can be used by everyone and that benefits everyone,” points out Royston Da Costa, Assistant Group Treasurer, at Wolseley.

The first milestone: integrating Accounting

Few systems were standardized in the past. With the exception of Microsoft products, the treasury platform is one of the only group-wide system tools in this decentralized organization. When the system was implemented, the accounting department was integrated – a critical milestone and a sort of test that needed to be passed. This was proof that the necessary automation required in accounting was possible and provided the promised benefits – and therefore a green light for the rest of the rollout was given. Fully automated creation and forwarding of booking information from treasury to accounting paved the way for a group-wide, holistic standardization of treasury processes.

“When we started, we were initially uncertain as to how exactly we were going to achieve the required visibility and control within the group,” Phil Scott and Royston Da Costa agree. Now they’ve taken the first step and have a clear roadmap, the direction is clear: this is a step-by-step journey that has enabled a degree of visibility in connection with data and processes no one would have expected to be achievable in such a short period of time.

Small steps – big results

What advice would Wolseley’s treasurers give other treasurers? Take the small steps first, and you will realize that they have actually taken you much further than you expected! More often than not, it is not complex strategies that help advance treasury but the “simple” consolidation of key information. This is just as true for Wolseley as it is for any other business. However, there are a few important prerequisites that Phil Scott and Royston Da Costa would like to stress: management needs to back the project; you need the right technology; and you should concentrate on those things that are actually feasible under the specific conditions. Once you’ve created this framework, you have all the information and all the time you need to actually manage group-wide risks in a qualified and precise fashion. With this goal in mind, the treasury department prepares new projects – such as group-wide intercompany netting – carefully. Accounting will once again benefit from these changes and the degree of automation, in turn boosting the treasury function.

At Wolseley, treasury routine is something virtually unheard of in light of the many and diverse daily responsibilities in such a complex and large group. Not one day is like the other, and systems and processes need to be set up in a most flexible manner to enable the treasury department to react quickly to external requirements. This is the only way group-wide collaboration can ultimately provide added value to the whole group – reflecting the aim of Wolseley’s treasury team. Phil Scott can only encourage others to champion flexibility:

"Don’t ever think that when the seas are calm they’re going to stay calm. Make provisions when times are good, optimize your financing, put in place risk management and ensure processes and rules are well defined. Don’t rest on your laurels but keep moving forward!"

 

System support is ideal when it comes to saving money, becoming more efficient and improving visibility, compliance and control. BELLIN has allowed us to achieve all of that, and we will continue to profit in the future.

Royston Da Costa | Assistant Group Treasurer, Wolseley

 

We’ve come across a number of solutions that simply weren’t what we were looking for. They were either too small or not up-to-date, giving you the feeling you needed to program them yourself to get an adequate result. Or they were so large that they really only met the requirements of large multinationals with treasury departments of 70+ people. What we need is expert know-how, topical and functional features, combined with software and services that are flexible and responsive in meeting our needs.

Phil Scott | Group Treasurer, Wolseley