Ferguson’s (FERG) outgoing chief executive John Martin expects the world’s largest trade distributor of plumbing and heating products to “continue to outperform” the markets in which they operate. The company, which last month announced its intention to intends to demerge its UK arm in order to become an exclusively North American business, achieved profit growth over its 2019 financial year in spite of a flat US market.
Mr Martin will be replaced in November by Ferguson’s head of US activities, Kevin Murphy. The company, which is weighing up moving its listing to the US, generated 84 per cent of 2019 revenues here. The chief executive noted organic growth of 6.2 per cent in its biggest geography, adding that Ferguson’s markets had weakened over the second half. But he observed that “we are the leader... in most of our markets” in the States. Its strongholds include waterworks and commercial markets, where it has shares of 23 per cent and 20 per cent respectively.
The group has used acquisitions to cement its hold on market share. The group spent $657m (£537m) on 15 acquisitions over its financial year, although strong cash generation enabled Ferguson to keep its net debt down to a multiple of 0.7 against adjusted cash profits. “There are still bags of opportunities to do bolt-on acquisitions of what are usually small, private companies in any specific geography,” the chief executive said – these deals typically carry low levels of risk. Ferguson also has a small venture unit that invests in emerging technologies, which helps the group understand trends in innovation.
There was no update forthcoming on Ferguson’s imminent de-merger, or its review of its listing.
Peel Hunt forecasts full-year 2020 pre-tax profits and earnings per share of $1.62bn and 527¢, respectively, rising to $1.78bn and 577¢ in 2021.
| FERGUSON (FERG) | ||||
| ORD PRICE: | 6,224p | MARKET VALUE: | £ 17.5bn | |
| TOUCH: | 6,218-6,228p | 12-MONTH HIGH: | 6,601p | LOW: 4,594p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 1,908¢* | NET DEBT: | 27% | |
| Year to 31 Jul | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 13.3 | 0.51 | 124 | 90.8 |
| 2016 (restated) | 12.5 | 0.68 | 183 | 100 |
| ($bn) | ($bn) | (¢) | (¢) | |
| 2017 (restated) | 19.3 | 1.42 | 419 | 156 |
| 2018 | 20.75 | 1.19 | 342 | 189** |
| 2019 | 22.01 | 1.32 | 461 | 208 |
| % change | +6 | +11 | +35 | +10 |
| Ex-div: | 24 Oct | |||
| Payment: | 28 Nov | |||
| £1=$1.23 *Includes intangible assets of $2.08bn, or 912¢ a share **Not including 400¢ special dividend | ||||
