FTSE 100 plumbing and heating equipment supplier Ferguson is to reverse its decision of a decade ago and is moving its corporate headquarters back to the UK from Switzerland because of changes in the Swiss tax regime set to take effect from 2020
The company, which was previously known as Wolseley, was one of a number of UK multinationals which switched their corporate base in 2010, citing concerns over UK corporation tax. At the same time advertising group WPP and Shire Pharmaceuticals relocated to Ireland, while chemicals group Ineos and publisher Informa also chose Switzerland.
At the time Ferguson cited its growing concerns with Britain's controlled foreign companies (CFC) tax regime.
Now it has announced plans to relocate back to the UK.
In its report for the half year ended 31 January, Ferguson said: ‘Ferguson is proposing to put in place a new corporate structure to change the group’s headquarters and the tax residence of its holding company from Switzerland to the UK.
‘This will simplify the group’s corporate structure following recently announced Swiss tax reform which will reduce the benefits of continuing to be tax resident there.’
On 28 September 2018, the Swiss Parliament approved the final draft of the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF). The tax reform foresees the replacement of certain preferential tax regimes with a new set of internationally accepted measures. The legislative changes will go along with the intention of a broad reduction of the cantonal corporate tax rates.
Ferguson’s move is subject to approval at a shareholders general meeting on 29 April, with an effective date of 10 May 2019. If approved, the company expects to maintain its previously announced guidance for an effective tax rate of 25%-26% for the year ended 31 July 2020.
According to the half yearly report, Ferguson incurred a tax charge of $139m/£105m (2018: $158m) on profit before tax of $679m (2018: $598m). This includes an ongoing tax charge of $161m (2018: $167m) which equates to an ongoing effective tax rate of 22.7% (2018: 25.2%) on the ongoing trading profit less net finance costs of $709m (2018: $664m). The tax rate reduced during the first half as a result of the reduction in the US federal corporate income tax rate on 1 January last year.
Ferguson started in Britain in 1887 as a manufacturer of sheep shearing machines, before moving into early automobiles. It is now the world’s largest specialist trade distributor of plumbing and heating products. It changed its name from Wolseley to match its US brand in 2017 but decided to keep its market listing in London.
The company currently derives four fifths of its annual revenue from the US and 90% of its profits. According to the half yearly report, the US business grew by 9.7% on an organic basis with acquisitions generating 3.2% of additional revenue growth. In contrast, like-for-like revenue growth in the UK was 0.3%, and the repairs, maintenance and improvement markets were flat. Trading profit of $30m was $8m lower than last year.
Report by Pat Sweet