Wolseley Plc, the world’s largest supplier of heating and plumbing products, said it will create a holding company in Jersey and move its tax residence to Switzerland after reporting a second straight annual loss.
A holding company, New Wolseley, will be created and registered on the island in the English Channel and will pay tax in Switzerland, the company said in a statement today. Wolseley reported a net loss of 340 million pounds ($538 million) for the year to July 31, compared with a loss of 1.17 billion pounds.
Wolseley follows U.K. companies Shire Plc and Ineos Group Holdings Plc in relocating to pay less tax. The building- materials supplier is selling units and cut more than 14,000 jobs last year after a slump in homebuilding and construction in the U.S. and Europe erased profit. The holding company structure should lower the tax rate to about 28 percent from 34 percent.
“Clearly if there hadn’t been the difference in the tax rate we wouldn’t have made this proposal,” Chief Executive Officer Ian Meakins said on a call with journalists today.
New Wolseley will have the same board and management team, headed by Meakins and soon-to-be chairman Gareth Davis.
Chief Financial Officer John Martin said the proposal has been under consideration for a couple of years. Making the move a year ago would have saved Wolseley 23 million pounds in the financial year ended July 31. The new tax rate is more in line with what their competitors who trade solely in the U.K. pay, Martin said.
Against a backdrop of political pressure to clamp down on tax avoidance by both companies and individuals, Wolseley met with government officials to discuss the move, Meakins said.
Prime Minister David Cameron’s coalition of Conservatives and Liberal Democrats is proposing 113 billion pounds of spending cuts and tax rises to cut a record deficit of 11 percent of economic output. Chancellor of the Exchequer George Osborne will set out his budget in a spending review on Oct. 20.
For Wolseley, the day-to-day running of operations won’t change and management will continue reviewing businesses that have already been earmarked for possible sale, Meakins said.
“We have disposed of some in the last year, we are looking to dispose of some others,” Meakins said. Build Center and the Brossette plumbing and heating business are improving, yet they remain in the category of units under review.
Travis Perkins Plc which acquired the Wickes home-improvement chain for 950 million pounds in 2005 and has agreed to add BSS for 553 million pounds, is interested in bidding for Wolseley divisions including Build Center and Encon Insulation chains, Chief Executive Officer Geoff Cooper said in an interview in August.
Deutsche Bank AG and Merrill Lynch International are acting as joint sponsors and brokers to New Wolseley’s listing.