Earlier this year building supply company Wolseley rebranded as Ferguson (FERG) to realign the business with its so-called dominant US division. In the first set of results since the change, revenues and trading profit in the States grew 10.4 per cent and 8.2 per cent, respectively – well ahead of the UK, Canada and Europe. This performance was driven by residential and commercial markets. Industrial markets – which account for 7.5 per cent of US revenue – were weak in the first half before recovering.
Elsewhere, conditions were mixed but positive overall. The UK business saw like-for-like sales growth of 1 per cent, including 2.2 per cent price inflation. Residential construction grew, but the higher-contributing repairs, maintenance and improvement markets were flat. The Nordic business was reclassified as a discontinued operation, leading to substantial restatements of last year’s results, while 2017 numbers benefited from one extra trading day, increasing revenue by roughly 0.4 per cent and gross profit by £9m.
An increase in higher-value work led to a 40 basis point improvement in the gross margin, although investments in technology, marketing and fleet combined with climbing headcount and wage inflation pushed operating expenses up in the period.
Net debt fell sharply, reaching £534m from £936m a year ago, and management is now capitalising on its strong cash flow position with a £500m share buyback programme. Last year shareholders authorised the company to buy just north of 25.2m shares before the end of its next annual general meeting this November. It will seek authorisation for buybacks again at that meeting.
Underlying sales growth is reportedly up 6 per cent in the first two months of the new financial year, leading analysts at Peel Hunt to expect modest forecast upgrades. They currently expect pre-tax profits of £1.16bn and EPS of 331p for the year ending July 2018, rising to £1.28bn and 366p in FY2019.
| FERGUSON (FERG) | ||||
| ORD PRICE: | 5,180p | MARKET VALUE: | £13.1bn | |
| TOUCH: | 5,180-5,185p | 12-MONTH HIGH: | 5,285p | LOW: 4,139p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 1357p* | NET DEBT: | 16% | |
| Year to 31 Jul | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 13.2 | 0.46 | 103 | 63.9 |
| 2014 | 12.3 | 0.68 | 182 | 82.5 |
| 2015 | 13.3 | 0.51 | 124 | 90.8 |
| 2016 (restated) | 12.5 | 0.68 | 183 | 100 |
| 2017 | 15.2 | 1.18 | 353 | 110 |
| % change | +21 | +75 | +93 | +10 |
| Ex-div: | 26 Oct | |||
| Payment: | 1 Dec | |||
| *Includes intangible assets of £1.07bn, or 422p a share | ||||
