Plumbing and heating supplies company Ferguson (FERG) knocked out 7.9% growth in revenues for the full year to 31 July 2019 against a softer US market, pushing its shares up 3.8% to £61.74.
Revenues were 4.4% ahead on a like-for-like basis, beating underlying inflation of 3%, while the gross profit margin was slightly ahead of the previous year at 29.4%. At constant exchange rates operating profits were 7.5% higher at $1.6bn.
Chief executive John Martin said ‘The Board expects to make further good progress in the year ahead. Whilst US market growth is currently broadly flat, consistent with the second half of 2019, we expect to continue to outperform. Our order books support continued modest growth in the months ahead and our business is performing well.’
US OUTPERFORMANCE
The company grew its US revenues by 10.1% in constant currencies of which 6.2% was organic compared with market growth of 3%. Growth moderated in the second half against a backdrop of declining new residential-housing starts.
Management took actions to control costs by reducing headcount significantly in the final months of the financial year. Labour represents around 60% of total operating costs.
The firm saw like-for-like growth of 0.6% in the UK against a flat repairs and maintenance market. Operating profit at the soon to be de-merged UK unit was 1.1% ahead at $69m in constant currencies.
Organic revenue growth in Canada was 1.1% lower against a weaker underlying market impacted by government measures to restrict mortgage credit. Operating profit was slightly down at $67m. ($70m)
The company continued its acquisition drive with 15 deals completed in the period, which brought in annual revenues of $715m. Meanwhile the group divested its Dutch plumbing business on 30 January for $111m and exited a non-core UK business in March 2019.
Tight cost control and organic growth resulted in strong cash generation of $1.6bn, up 21.6%, which allowed the company to reinvest in the business, make acquisitions and buy-back £150m worth of shares. In addition the dividend was hiked by 15%.
The company remains comfortably within its target of one-to-two-times net debt to earnings before interest, tax, depreciation and amortisation (EBITDA), being 0.7 times at the year end.
In September the company announced that John Martin will be succeeded by Kevin Murphy as chief executive. Mr. Murphy is based in Virginia and has been running the US business having previously been chief operating officer of Ferguson Enterprises for 10 years.
