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Strong US markets boost Ferguson profit
Plumbing and heating products distributor Ferguson, formerly Wolseley, posted a 17.1% jump in third-quarter trading profit on Tuesday thanks to strong US residential markets.
In the three months to 30 April, trading profit rose to $356m on revenue of $5.08bn, up 10.2% on the same period a year ago. Meanwhile, gross margins continued to improve, up 40 basis points to 29.3%.
Revenue in the US business was up 11.5% at constant exchange rates to $4.1bn, while trading profit rose 20.8% to $334m. Ferguson said US market growth continued to be good with residential demand supporting broadly-based growth across all regions. Commercial markets, whilst lower growth than residential, also remained good and industrial markets continued to recover strongly.
Canada and Central Europe saw revenues rise 8.9% to $342m and trading profit increase 11.6% to $11m. In the UK, however, revenue declined 10.9% in the quarter to $629 and trading profit was 29.3% lower at $23m.
Chief executive John Martin said: "The US continued to grow strongly with organic revenue growth of 10.6% in the quarter. Growth was broadly based across all US regions, supported by good market conditions. We also continued to manage gross margins effectively, making further progress. We generated good growth in Canada and in the UK we continued to focus on executing the restructuring plan.
"The fourth quarter has started well with organic revenue growth in line with the third quarter. Given the third quarter outturn, the group is well positioned for a successful outcome for the year."
RBC Capital Markets said: "We continue to believe that Ferguson's end markets remain robust, and we like the strength of its market position and believe that the scale advantages (around procurement and supply chain and the customer proposition) should allow the business to continue to take further market share.
"Management is allocating capital to the higher-growth areas, where it has a competitive advantage, and the focus on cashflow and returns, along with a strong balance sheet, means that investors should continue to get an attractive mix of growth and shareholder returns. The stock trades at a slight discount to the sector average, although at a circa 5% premium to other cyclicals and we see the stock fairly valued here. We remain at sector perform."
At 1310 BST, the shares were up 2.5% to 6,037p.