British plumber Wolseley returns to profit

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Wolseley, the world's biggest distributor of plumbing and heating products, said Tuesday that it had returned to profit during the group's first-half after plugging two years of sizeable losses.

Wolseley posted net profit of £133 million (151 million euros, $213 million) for the six months to January 31, compared with a loss after tax of £220 million in the first-half of 2009-10, as the group slashed its costs.

It was also helped by improved sales, which rose 5.0 percent to £6.63 billion.

"We continue to maintain our emphasis on protecting market share and gross margins while keeping a tight control on the cost base," chief executive Ian Meakins said in Wolseley's earnings statement.

"The group expects to continue to grow in the second half of the year."

Wolseley also announced it would resume payment of shareholder dividends for the first time since 2008 after turning around its fortunes in recent months.

Wolseley's share price jumped 3.5 percent to 2,163 pence in early London trade following the group's return to profit and announcement that it would pay shareholders a half-year dividend of 15 pence a share.

London's benchmark FTSE 100 rose only slightly.

Wolseley's shares "have already attempted to price in today's announced recovery, outperforming the FTSE 100 index by a substantial 25 percent over the last year alone," noted analyst Keith Bowman at Hargreaves Lansdown Stockbrokers.

Wolseley was hit hard by the 2008 credit crisis and resulting economic downturn, causing it to axe thousands of jobs and shut sites. Wolseley suffered a net loss of £1.17 billion in 2008-09 and of £340 million in 2009-10.

The impact was heightened by Wolseley's exposure to a troubled housing market in the United States -- a country that accounts for about 40 percent of the group's sales.

"Construction markets have now broadly stabilized in most of our geographies, particularly the new residential and RMI (repairs, maintenance and improvement) segments in the US," Meakins added on Tuesday.

However Wolseley said it would be impacted in Britain by the coalition's huge spending cuts and a recent hike to the country's sales tax.

"The impact of recent VAT increases and government spending cuts leaves the outlook in the UK more uncertain," said Meakins.

Wolseley last year created a holding company in Switzerland to slash its overall tax bill. The company is unhappy about British legislation -- known as Controlled Foreign Companies (CFC) rules -- that forces the company to pay tax on its overseas earnings.

© 2011 AFP

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