Ferguson PLC is a global leader in plumbing and heating products distribution. The company incorporated in the year 1887. Its operations spread across the USA, UK, Central Europe and Canada regions; headquartered at Switzerland. The company was earlier known as Wolseley plc and in July 2017 name was changed to Ferguson Plc. The Company share trades on the London Stock Exchange (LSE: FERG) and a part of the FTSE 100 index.
Ferguson has complete dominance and the largest distributor of plumbing supplies, PVF, waterworks, fire and fabrication products in the United States. It serves mainly Repairs, Maintenance and Improvement (RMI) markets globally.
- Commercial and residential plumbing (bathroom and kitchen)
- Pipe, valves, and fittings (PVF)
- Heating, ventilation and cooling equipment
- Waterworks, Pumps and tools
- Industrial and mechanical products
- Fireplaces and fire protection products
- Kitchen, bath, lighting, and appliances
- Safety appliances
- Maintenance, repair and operations (MRO) products
Total outstanding market capitalisation is around GBP 12.70 billion; Core strengths: 2,280 global branches; 35,000 associates and 43,000 suppliers manufacturing products.
(Source: Company website)
- Mr Gareth Davis – Chairman
- Mr John Martin – Group Chief Executive
- Mr Mike Powell – Group Chief Financial Officer
- Mr Kevin Murphy – Chief Executive Officer, USA
Key Financial Metrics
(Source: Company fillings)
Key First Quarter 2019 Highlights:
- The company reported sales figure surged 8.5 per cent to USD 5,554 million when compared with the first quarter of 2018 data.
- Gross margin reported was 29.6 per cent, reflecting an increase of 0.5 per cent when compared with last year data of the first quarter of 2018.
- In quarter one of 2019, acquisitions investments amounted to USD 284 million.
- Ongoing trading profits reported for Q1’19 was USD 432 million, a surge of 9.9 per cent from last year same quarter.
- Net debt reported as at 31st Oct’18 after excluding capital expenditure, working capital and acquisition investments outflow was USD 1,599 million.
- The company raised USD 750 million through public bonds in Oct’18 at 4.5 per cent with a 10-year maturity period.
(Source: Company fillings)
Regional Performance Analysis
USA Market Analysis
- In the first quarter of 2019, the highest organic revenue growth was reported for the USA market, 9.6 per cent when compared with other segments. A surge in top-line seen with persistence demand from residential and commercial clients. Growth momentum continued for industrial markets segment as well.
- With recent acquisitions, gross margins surged consistently. During the quarter, completed significant acquisitions had an annualised revenue of USD 216 million. Major acquisitions completed were- “Jones Stephens”, a master distributor of own brand plumbing products; “Robertson Supply” (residential and commercial wholesaler), having 8 branches in Idaho and Oregon.
- Operating expenditure (labour and distribution expense) growth surged with strong inflationary pressures. During the quarter, trading profits reported was USD 400 million, a surge of 10.2 per cent when compared with last year.
Canada Market Analysis
- During the quarter, organic revenue increased by 3.3 per cent. Business operations across Atlantic, Quebec and Ontario regions grew strongly with Western Canada region performance reported lower.
- The consistent surge in gross margins when compared with last year and trading profits generated was USD 27 million, up by 24.8 per cent from last year.
- During the quarter, the completed minor acquisitions had an annualised revenue of USD 11 million.
UK Market Analysis
- During the quarter, the UK market total revenue declined (9.5 per cent) on a constant currency basis due to business with low margin and branches being completely closed.
(Source: Thomson Reuters)
- In FY 2018, reported profitability margins were stable and inching towards the industry median.
- The liquidity position was quite stable and equates with the industry median.
- On leverage front, the debt-equity ratio declined from the last two years and below the industry median. It is a positive sign, suggesting the company has enough cash flows to repay its loan obligations on time. For raising funds, the company is opting for high proportion of equity funding route.
Share Price Performance
(Source: London Stock Exchange)
Share Price Commentary
- On 15th February 2019, Ferguson share closed at GBp 5,473, up by 1.16 per cent against its previous day closing price.
- Stock's 52 weeks High and Low is GBp 6,601.91/GBp 4,688.50. At the closing price, the share was trading 17.10 per cent lower than its 52w High and 16.73 per cent higher than its 52w low.
- In the last three months, Ferguson share price return consistently outperformed the benchmark FTSE 100 index return.
- Stock’s average traded volume for 5 days was 344,014.20; 30 days - 477,472.50 and 90 days -663,085.09.
- On the valuation front, the stock was trading at a trailing twelve months PE multiple of 14.8x as compared to the industry median of 11.3x.
- The company stock beta was 0.82, reflecting less volatility as compared to the benchmark index.