TIDMFERG
RNS Number : 3014J
Ferguson PLC
04 December 2018
4 December 2018
Interim Management Statement for the 3 months to 31 October
2018
Ongoing businesses(1) Q1 2019 Q1 2018 Change Organic
US$ millions change(3)
--------- -------- --------
Revenue 5,554 5,117 +8.5% +6.7%
Trading profit(2) 432 393 +9.9%
Trading
days 65 65 -
Reported net debt
to EBITDA 0.9x 0.5x
----------------------- --------- --------- -------- -------- -----------
First quarter highlights
- Ongoing revenue 8.5% ahead of last year, including 6.7% organic growth.
- Gross margin of the ongoing business was 29.6%, 0.5% ahead of last year.
- Ongoing trading profit of $432 million was 9.9% ahead of last year.
- Invested $284 million in acquisitions in Q1.
John Martin, Group Chief Executive, commented:
"Ferguson continued to perform well in the first quarter with
good organic growth in the US of 9.6 per cent in supportive
markets. Growth in the US was widespread across all geographic
regions and major business units. Canada continued to grow against
tough prior year comparatives and the UK also grew modestly on a
like-for-like basis.
"Since the end of the quarter, the US has continued to grow well
and the current indications are that growth will continue in the
months ahead. As a result, we expect trading profit for the full
year to be in line with analysts' expectations.
"We will continue to execute our strategy of delivering
excellent customer service to maximise profitable growth
opportunities whilst remaining vigilant on costs. Our capital
allocation policy is unchanged and we will continue to maintain a
strong balance sheet."
Group results
The Group generated revenue of $5,554 million in the first
quarter, 9.0% ahead of last year at constant exchange rates and
6.7% ahead on an organic basis. Gross margin continued to improve,
up 50 bps to 29.6%, as a result of recent acquisitions and the exit
of low margin wholesale business in the UK last year. Operating
costs were well controlled and trading profit of $432 million was
10.2% higher than last year at constant exchange rates. Exceptional
costs of $6 million were incurred and related to the previously
announced UK restructuring programme. There is one fewer trading
day this year compared to 2018, which falls in the second
quarter.
1) 'Ongoing businesses' excludes businesses that have been
closed, disposed of or are classified as held for sale.
2) Before exceptional items and amortisation of acquired intangible assets.
3) The increase or decrease in revenue excluding the effect of
currency exchange, acquisitions and disposals and trading days.
Regional analysis
Ongoing businesses Revenue Revenue Change Trading Trading Change
US$ millions Q1 2019 Q1 2018 (at constant profit profit (at constant
exchange Q1 2019 Q1 2018 exchange
rates) rates)
--------------------- -------- -------- ----------------- -------- -------- -------------
US 4,607 4,112 +12.0% 400 363 +10.2%
UK 607 679 (9.5%) 19 21 (7.8%)
Canada 340 326 +8.9% 27 23 +24.8%
Central costs - - (14) (14)
--------------------- -------- -------- ----------------- -------- -------- -------------
Group 5,554 5,117 +9.0% 432 393 +10.2%
===================== ======== ======== ================= ======== ======== =============
Quarterly organic revenue growth
Ongoing businesses Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
--------------------- ------- ------- ------- ------- -------
US +8.3% +9.1% +10.6% +11.4% +9.6%
UK(1) +3.9% (1.7%) +0.7% (0.1%) +1.5%
Canada +7.2% +9.9% +4.7% +6.3% +3.3%
====================== ======= ======= ======= ======= =======
Group +7.5% +7.4% +7.1% +8.1% +6.7%
====================== ======= ======= ======= ======= =======
(1) The UK revenue growth rate is presented on a like-for-like
basis to remove the impact of closed branches and the exit of low
margin business.
USA
Our US business grew revenue 9.6% on an organic basis, which
included price inflation of about 3%, and acquisitions contributed
a further 2.4%. All of our business units generated organic growth
in the quarter, with continued good demand from residential and
commercial customers. Industrial markets also continued to grow
very well. The revenue growth rate in the B2C business was lower,
as we continue to consolidate pay-per-click advertising spend
around fewer trading websites, which resulted in an improvement in
trading profit in the period.
Gross margins were ahead principally as a result of recent
acquisitions. Operating expense growth included labour cost
inflation of about 4% and distribution costs were higher due to
inflationary pressures. Trading profit of $400 million was 10.2%
ahead of last year.
Acquisitions completed during the quarter had total annualised
revenue of $216 million. The most significant of these was Jones
Stephens, a master distributor of own brand plumbing products, as
disclosed with the Full Year results. Since the end of the quarter
we acquired Robertson Supply a residential and commercial
wholesaler with 8 branches in Idaho and Oregon with annualised
revenue of $50 million.
UK
Like-for-like revenue growth was 1.5% in the quarter which
included about 2.5% of price inflation. This reflected weak repair,
maintenance and improvement markets. Total revenue was down 9.5% on
a constant currency basis due to closed branches and the exit of
low margin business. Underlying gross margins were slightly ahead.
Trading profit of $19 million was $2 million lower than last year
at constant exchange rates mainly as a result of investment in the
B2C platform. The previously announced restructuring actions are on
track for completion this year.
Canada
Organic revenue in Canada grew by 3.3% against tough prior year
comparatives with acquisitions contributing a further 5.6%.
Ontario, Atlantic and Quebec regions grew well though our business
in Western Canada was slightly lower. Gross margins were ahead of
last year and trading profit of $27 million was 24.8% ahead of last
year at constant exchange rates. One small acquisition was
completed in the quarter with total annualised revenue of $11
million.
Non-ongoing operations
The disposal process for Wasco is on track and the business
continued to trade well in the quarter generating revenue of $81
million (2018: $74 million) and trading profit of $3 million (2018:
$2 million).
Financial position
Net debt at 31 October 2018 was $1,599 million after a cash
outflow of $266 million relating to acquisitions, capital
expenditure of $163 million and normal seasonal working capital
outflows. In October we raised $750 million of public bonds at 4.5%
with a ten year maturity. The final dividend of 131.9 cents per
share will be paid to shareholders on 5 December 2018. There have
been no other significant changes to the financial position of the
Group.
Outlook
Since the end of the quarter, the US has continued to grow well
and the current indications are that growth will continue in the
months ahead. As a result, we expect trading profit for the full
year to be in line with analysts' expectations.
For further information please contact Ferguson plc
Mike Powell, Group Chief Financial Officer Tel: +41 (0) 41 723 2230
Mark Fearon, Director of Corporate Communications
and IR Mobile: +44 (0) 7711 875070
Media Enquiries
Mike Ward, Head of Corporate Communications Mobile: +44 (0) 7894 417060
Nina Coad (Brunswick) Tel: +44 (0) 20 7404 5959
Investor conference call
A conference call with Mike Powell, Chief Financial Officer will
commence at 08.00 UK time today. The call will be recorded and
available on our website after the event www.fergusonplc.com.
Dial in number UK: +44 (0)330 336 9105
Switzerland: +41 (0)44 580 7206
Ask for the Ferguson call quoting 5447186.
Ferguson plc is the world's largest specialist trade distributor
of plumbing and heating products to professional contractors
principally operating in North America and the UK. Revenue for the
year ended 31 July 2018 was $20.8 billion and ongoing trading
profit was $1.5 billion. Ferguson plc is listed on the London Stock
Exchange (LSE: FERG) and is in the FTSE 100 index of listed
companies. For more information, please visit www.fergusonplc.com
or follow us on Twitter https://twitter.com/Ferguson_plc.
Financial calendar
H1 Results for period ending 31 26 March 2019
January 2019
Q3 results for the period ending 18 June 2019
30 April 2019
Full Year Results for year ended 1 October 2019
31 July 2019
Legal disclaimer
Certain information included in this announcement is
forward-looking and involves risks, assumptions and uncertainties
that could cause actual results to differ materially from those
expressed or implied by forward-looking statements. Forward-looking
statements cover all matters which are not historical facts and
include, without limitation, projections relating to results of
operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation,
discussions of expected future revenues, financing plans, expected
expenditures and divestments, risks associated with changes in
economic conditions, the strength of the plumbing and heating in
North America and Europe, fluctuations in product prices and
changes in exchange and interest rates. Forward-looking statements
can be identified by the use of forward-looking terminology,
including terms such as "believes", "estimates", "anticipates",
"expects", "forecasts", "intends", "plans", "projects", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in
each case, their negative or other variations or comparable
terminology. Forward-looking statements are not guarantees of
future performance. All forward-looking statements in this
announcement are based upon information known to the Company on the
date of this announcement. Accordingly, no assurance can be given
that any particular expectation will be met and readers are
cautioned not to place undue reliance on forward-looking
statements, which speak only at their respective dates.
Additionally, forward-looking statements regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Other than in accordance
with its legal or regulatory obligations (including under the UK
Listing Rules, the Prospectus Rules, the Disclosure Guidance and
the Transparency Rules of the Financial Conduct Authority), the
Company undertakes no obligation to update publicly or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. Nothing in this announcement shall
exclude any liability under applicable laws that cannot be excluded
in accordance with such laws.
-ends
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END
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