Wolseley cheers with £300m dividend on US recovery

Wolseley, the FTSE 100 supplier of heating and plumbing kit, beat City profit forecasts today and said it would return another £300 million to shareholders on top of its usual dividend.

Chief executive Ian Meakins said the business had been driven by the US, where just over half of Wolseley’s sales take place, and growth for the year to July came in 10% ahead with a further rise in profit margins.

The UK saw improving conditions in the housing market, along with government initiatives to help people improve their home central heating, boosting sales by 6% .

But the situation in France, the Nordic countries and central Europe remained tough, with sales down in all three areas.

Meakins said: “We continued to face substantial headwinds in Europe and took decisive action to protect profitability with significant headcount reductions in the year. Gross margins were ahead and our ongoing focus on operational efficiency has delivered further improvements in the trading margin of the ongoing business, now up to 5.6%.”

Wolseley cut a net 900 jobs during the year almost all of them in continental Europe, which accounted for the vast bulk of its £174 million exceptional charges.

Trading profits rose 11% to £725 million on revenues that were 4.1% higher at £12.8 billion.

The regular dividend rose 10% to 66p a share and a special dividend totalling £300 million will be paid in December.

Wolseley is one of the last major UK companies which has not returned its tax domicile to the UK following George Osborne’s cuts in corporation tax. It moved its tax domicile to Switzerland three years ago. Last year its underlying tax rate rose from 25% to 28.6% but it has no plans to move back. Meakins said: “There is no economic reason for us to change at the moment but we will keep the situation under review.”

He said the new financial year had seen trends continuing as they were in the fourth quarter with the US growing steadily and the UK showing “encouraging” growth. But the European market remains challenging and he expects that to continue for some time.