Wolseley saw a sharp increase in its shares today after announcing better than expected year end profits yesterday.

The firm, the world’s largest plumbing and heating distributor, returned a pre-tax profit of £391 million, a huge improvement on the £328 million loss last year and the first time Wolseley has turned a profit in three years.

The share price was down initially after cautious comments from chief executive Ian Meakins, but has rallied today, currently trading up 8.18 per cent (124p) at 1,640p at 16.20pm.

‘We have delivered another decent set of results despite challenging economic conditions, with better customer service driving sales and strong trading profit growth,’ said Meakins.

‘However, recent economic forecasts have weakened and over time this is likely to have an impact on our markets.’

Wolseley reported a 3 per cent rise in revenue, to £13,558 million, and a 38 per cent increase in trading profit, from £450 million last year to £622 million in 2011.

Meakins attributed the trading profit improvement to a focus on market share gains, protecting gross margins and tightly controlling cost.

The firm was badly hit by the financial crisis, partly due to its exposure to the US housing market, and had to close sites and lay off thousands of employees.

However, the improved performance means it is now planning a £160 million capital investment, including opening 90 new branches.