Wolseley investors land £300m windfall as annual profits leap

Building materials giant Wolseley said it will pay another special dividend, on top of a bigger standard payout, following better trading in Britain and another year of strong gains in the United States.

But the group said it will continue to slash costs after axing more than 900 jobs during the year, as it struggles in France, central Europe and the Nordic region.

Like-for-like sales increased by 2.9 per cent during the year to the end of July, with trading profits surging 10.7 per cent to £725m.

Wolseley said it is seeing “early signs of recovery” in the UK, where it also has brands including Drain Center and Parts Center.

It grew underlying revenues by 2.5 per cent in the UK during the year, helped by improving housebuilding and home repairs as the housing market recovers, while trading profits edged up £2m to £95m.

Its core pipe, plumbing, climate and parts businesses grew UK market share, but were held back by weaker industrial markets.

The group increased its UK workforce by a net 52 during the year to 5,952, after buying Burdens drainage supplies depots. But new joiners from the acquisition were largely balanced out by about 502 UK departures, including redundancies from a shake-up of its drains business.

Profit margins in the UK were weakened to 5.4 per cent from 5.6 per cent by the Burdens deal.

Wolseley’s sales growth of 8.2 per cent in the US contrasted with a 9.1 per cent plunge in underlying sales in France and a 5.7 per cent fall in Nordic countries.

The group, which is headquartered in Switzerland and registered in Jersey, has around 39,300 staff and earns 81 per cent of its profits from the US and the UK.

Chief executive Ian Meakins said: “Our markets in the US continue to grow steadily and the UK market growth is encouraging. However, economic conditions in continental Europe are very challenging and we expect them to remain so for the foreseeable future.

“We will continue to take all appropriate actions to reduce our cost base and protect our profitability.”

Wolseley’s £300m special divi – worth 110p per share – is in addition to a total divi up 10 per cent to 66p per share.

The group announced another £350m special dividend with last year’s annual results.

It is the latest windfall from a big blue-chip company. It follows British Gas owner Centrica’s decision to return £500m to shareholders, and Vodafone’s £54bn cash and shares payout from the sale of its US arm.

On a pre-tax level, including exceptional items such as cost cuts and goodwill impairments, profits swelled to £473m from £198m a year earlier.

Ongoing group revenues rose 4.1 per cent to £12.9bn.

“The UK market has clearly come back a little bit, housing transactions are up five per cent and housing starts have definitely recovered in the last part of last year,” Mr Meakins said, adding that it was too soon to say what the impact would be from the Government’s Help to Buy mortgage scheme.

“There is general improvement in consumer confidence, there is a little bit of recovery and some of the eco expenditure has had an effect which has probably delivered about an extra two or three per cent growth,” he added.

Analysts at Panmure Gordon said Wolseley appears to be “delivering on all fronts”.

They added: “Operationally, the business is performing at the top end of expectations, cash generation remains strong and further special dividends are being delivered to ensure shareholder value is maximised.”

Wolseley employs around 360 staff at its site in Ripon, North Yorkshire.

Wolseley can trace its roots back to 19th century Australia. The firm’s founder, Frederick York Wolseley, was born in Dublin in 1837, and emigrated with his family to Australia when he was 17.

In 1887, he founded the Wolseley Sheep Shearing Machine Company in Sydney, Australia.

Mr Wolseley returned to Britain, and in 1889, he set up a company that bought the rights and patents of the Australian company for £75,000. Wolseley has grown organically and by acquisition to become the world’s largest specialist distributor of plumbing and heating products.

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