Wolseley owner Ferguson resumes dividend despite pandemic-related profit hit
Plumbing giant Ferguson — formerly known as Wolseley — announced a resumption of dividend payments today despite a less-than-watertight set of full-year results after activity was held back during the pandemic.
The results
Revenue slipped 0.9 per cent to $21.8bn for the 12 months to 31 July, down from $22bn in the same period last year. The group said it maintained revenue growth on an ongoing basis and grew trading profit ahead of revenue despite lockdowns in the second half of the year.
Profit before tax fell 4.8 per cent to £1.26bn from $1.3bn in 2019.
Total basic earnings per share sank 11.2 per cent year-on-year to $4.28, down from $4.81.
However, the group said it had “excellent operating cash generation” and maintained a strong balance sheet and liquidity position.
The company said that it would pay a final dividend of $2.08 as it reported “better than expected trading”. The firm last year dished out a final dividend of $1.45, but withdrew its interim dividend and suspended a $500m share buyback in April at the outbreak of the coronavirus crisis.
The group said it remained “cautious on the outlook for the year” ahead, but assured investors it stands in good stead to weather future fallout from the pandemic.
Shares rose 5.4 per cent to 7,818p in early trading.
Why it’s interesting
The US-focused plumbing merchant said it delivered a “strong and resilient” set of results for the full year despite months-long lockdowns during the pandemic.
Ferguson said business impact during the second half of the year was “significant”, forcing it to take immediate action to shore up finances and preserve cash flow.
The group immediately implemented a hiring freeze, slashed overtime and made temporary lay-offs in the wake of the pandemic. It reduced its headcount by 2,100 over the year across the US, Canada and the UK, and made 94 branch closures.
Ferguson said it will continue pursuing the demerger of Wolesley — its beleaguered UK arm — announced earlier this month. The group will offload Wolesley as a new company on the FTSE 250 with a fresh board line-up and estimated value of £600m.
However, Ferguson cautioned that the timing of the demerger remains uncertain amid ongoing market turbulence during the pandemic.
“The board is assessing other separation options in parallel with progress towards the demerger to facilitate the exit of the Wolseley UK business,” the company stated.
Ferguson also announced that Bill Brundage, current chief financial officer of Ferguson Enterprises, is set to succeed Mike Powell as chief executive on 1 November. Powell is set to step down at the end of October.
Richard Hunter, head of markets at interactive investor, commented: “Ferguson has delivered an impressive performance for the year, particularly in light of the effects of the pandemic which have brought such difficulties elsewhere.
“Indeed, the most striking proof that the financial measures taken have been successful, as well as signposting confidence in future prospects, is the full restoration of the dividend.”
What Ferguson said
Kevin Murphy, group chief executive, said:
“We have delivered a strong performance in 2020, which given the global pandemic has highlighted the resilience of our business model. Early in the crisis we moved decisively to protect the health and wellbeing of our associates while continuing to serve our customers supporting critical infrastructure.
“On an ongoing basis we delivered Group revenue growth and grew trading profit ahead of revenue despite lockdowns in the second half.
“It is impossible to predict the future progress of the virus, or its economic impact and we expect the current levels of uncertainty to continue for the foreseeable future. However, the fundamental aspects of our business model remain attractive and since the start of the new financial year Ferguson has generated low single digit revenue growth in the US in flat markets overall.
“While we remain cautious on the outlook for the year as a whole, the business is in good shape and well prepared to address any further market related disruption.”