Financial results revealed by Ferguson plc show a strong trading result in the first half of fiscal 2020, the distributor noted.
Ferguson noted markets in the U.S. remained flat and the distributor’s businesses continued to take market share.
Revenues for the first half of $10,966 million were 1.1% ahead of last year ($10,847 million). Profit before tax was $640 million, down from $679 million a year prior due to exceptional charges ($19 million) and the impairment of an associate ($22 million) in the current year partially offset by adoption of IFRS 16 in the period, which increased profit before tax by $8 million. Profit for the period decreased to $467 million down from $586 million in 2019 due to the factors noted above plus an increase in the tax charge, primarily as a result of Swiss tax reform and a nonrecurring gain from discontinued operations in the prior period ($46 million).
Ongoing revenue of $9,893 million ($9,489 million in 2019) was 4.3% ahead at constant exchange rates and 2% ahead on an organic basis. Inflation in the first half was about 1%. Ongoing gross margins of 30.2% (same in 2019) were in line with 2019 totals. The cost base was well-controlled, Ferguson noted, with operating expenses in the ongoing business 3.9% higher, which included 2.1% from acquisitions.
Underlying trading profit was $747 million (2019: $714 million), 4.6% ahead of last year, outpacing revenue growth. Foreign exchange movements had an immaterial impact on revenue and trading profit.
Ferguson plc noted its strategy is unchanged. “We continue to focus on driving all our resources and knowledge to serve our customers and make their projects better because they worked with Ferguson,” the company stated. “To achieve this, we will attract, retain and develop the very best associates in the industry who act as trusted advisors to our customers. We will give customers an unrivalled choice of products sourcing the leading brands in all our categories, including the highest quality own brands. We will drive scale in our business ensuring customers have access to products and advice where and when they need it, offering them an omni-channel experience. We will use technology to make our business more productive and equip our associates with the tools to make them more effective, while we constantly look to innovate and disrupt ourselves.”
Kevin Murphy, group chief executive, said; “Our focus has remained on serving our customers and making their projects more successful because they worked with Ferguson. Given the markets we serve remained flat, we were pleased with our progress in the first half and we continued to generate above- market revenue growth in the major U.S. business units. This, alongside continued operational delivery, including tight cost control, ensured we delivered robust trading profit growth and good cash generation.”
Murphy also commented on the coronavirus outbreak. “In response to the outbreak of the coronavirus (COVID-19), in recent weeks the company is taking steps to mitigate any potential impacts. We are following the guidance of governmental health agencies, including the World Health Organization and the Center for Disease Control. Our immediate priority is safeguarding the health and wellbeing of our associates, supporting our business and customers and helping the communities in which we operate.
“Given the strength of our first half results, we had intended to confirm our full-year trading profit outlook for 2020. However, due to the dynamic situation unfolding with COVID-19 it is too early to understand its impact on current trading. Recent government actions to contain the spread of COVID-19 and societal reactions, alongside any potential actions we will take to mitigate them are not reflected in existing market forecasts, and it is too early to quantify them. Ferguson remains well-positioned for long-term success operating in attractive and fragmented markets with a robust business model and backed by a strong balance sheet and liquidity position.”
Ferguson noted ongoing revenue is 4.3% ahead of last year with continued market share gains in the U.S. U.S. revenue growth was 5% and underlying trading profit growth was 5.7%. Ferguson noted it had good gross margin and cost control that ensured trading profit growth outpaced revenue growth.
Ferguson added it invested $141 million in acquisitions in the first half, including S.W. Anderson, and since the end of the period, Columbia Pipe and Supply.
The Ferguson board expects to make a further announcement on listing assessment later in the spring. It added the UK demerger is on track for completion this calendar year.