Ferguson FY profits rise on strong US performance as UK struggles

2nd Oct 2018 07:25

(Sharecast News) - Ongoing full year trading profit at plumbing and heating products group Ferguson rose 14.7% to $1.5bn on the back of a strong US performance, although the company took a $122m impairment charge on its stake in Swiss Associate Meier Tobler Group.Pre-tax profits fell to $1.1bn from $1.42bn as tough trading conditions continued in the UK . The ongoing trading margin was 40 basis points ahead of last year at 7.3%. Foreign exchange rate movements increased revenue by $229 m and trading profit by $7m.Revenue at the company formerly known as Wolseley rose 7.6% to $20bn which included the results of two disposals for part of the year.UK trading profit fell 28.8% to $73m as it continued to restructure the division.Ferguson said the Meier Tobler writedown was a response to warnings by the Swiss company "regarding difficult trading conditions and the temporary suspension of dividends until 2020"."This generated a trigger event for management to reassess the recoverability of the carrying value recognised in the group's consolidated financial statements.""Due to the size of the group's (39.2%) shareholding and the illiquid nature of the shares, it was not appropriate to use the quoted share price for assessing the fair value," Ferguson said.Elsewhere, chief executive John Martin said US operations generated 90% as all businesses grew well and continued to gain market share, with the Industrial unit having a "particularly strong year"."Markets in the USA and Canada have remained good throughout the year despite recent inflationary pressures, though the UK remains tough," he said.The company declared a final dividend of 131.9 cents a share for a total of the total dividend to 189.3 cents a share, up 21%, including an upward rebasing of 10%.Martin said organic revenue growth In the first eight weeks of the new financial year had been been broadly in line with the overall growth rate last year, "though growth in September was slightly lower than August"."The growth in our order books suggests continued growth in the months ahead," he said.Analysts at Cannacord Genuity marked Ferguson shares a 'hold' with a target price of 6,500p, although the broker did muse as to "what extent is this as good as it gets, particularly with US interest rates now going up"."In the near term, the group does look set to continue to enjoy supportive trading conditions and its focus on the strong US market where it has a very strong market position. Consensus probably ticks up a bit at this stage as acquisitions are factored in with some offsetting factors (e.g., sale of Wasco); but if the US market continues to deliver organic growth of +10% for the rest of the year, the risk looks to the upside, but clearly the comparative will get more difficult."