British plumber Wolseley relocates to Switzerland to cut tax
Wolseley, the world's biggest distributor of plumbing and heating products, said on Monday that it planned to create a holding company in Switzerland to slash its tax bill.
The company said that it suffered a net loss of 340 million pounds in the 12 months to July 31.
The loss after tax compared with a much larger shortfall of 1.17 billion pounds in 2008/2009.
The holding group, to be called New Wolseley, would be listed in Britain, have tax residence in Switzerland and be incorporated in Jersey.
The change must be approved by shareholders, and Wolseley hopes the new group will be formed by late November.
Also on Monday, Wolseley named a new chairman and said it had significantly reduced its annual losses.
The company, which generates 81 percent of its sales abroad, said that the new company would help the group achieve a "competitive" business tax rate.
In a conference call with reporters, Wolseley chief financial officer John Martin said the change would reduce the firm's corporate tax rate from 34 percent to 28 percent.
Based on earnings in the last financial year, this would save the company about 23 million pounds (27 million euros, 36 million dollars) annually.
Martin said Wolseley wanted to move away from "unhelpful" British legislation -- known as Controlled Foreign Companies (CFC) rules -- which forces the company to pay tax on its overseas earnings.
Martin said Wolseley believed it was being "taxed twice" under the CFC rules.
Discussions were held with government officials before the decision was made, Martin added, but stressed it would not affect tax paid on Wolseley's British business, which employs nearly 10,000 people.
Although Wolseley is not the first company to make such a switch, the decision will be seen as a blow to Britain's new coalition government, which has been warned that banks could also relocate abroad if hit with higher taxes.
Wolseley also said that its chairman of eight years, John Whybrow, would step down in January to be replaced by Gareth Davis, the former chief executive of Imperial Tobacco.
"Wolseley is an excellent business and while it has been through very difficult market conditions recently, it is now emerging strongly with a clear strategy and direction," Davis said in a statement.
"I am very much looking forward to working with my other Board colleagues to deliver value for our shareholders."
In the results statement, the company said that sales had fallen by nearly nine percent to 13.2 billion pounds in the reporting period. Wolseley said that it planned to resume dividend payments after delivering results ahead of expectations.
Kevin Lapwood, an analyst at Seymour Pierce Research, said there was currently "little ground for optimism" at Wolseley.
"The outlook in the US is still uncertain at best. This accounts for 39 percent of group revenue and continues to be adversely affected by weak commercial and industrial markets and an anaemic performance in new housing.
"The UK is also weak and could be further affected by public spending cuts," he added.
© 2010 AFP