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Friday 18 October 2019

Ferguson profits rise ahead of UK spin-off

The group reported an 11.5% hike in pre-tax profits to 1.3 billion US dollars for the year to July 31.

Wolseley owner Ferguson has seen shares jump higher after it revealed a hike in annual profits (Anna Gowthorpe/PA)
Wolseley owner Ferguson has seen shares jump higher after it revealed a hike in annual profits (Anna Gowthorpe/PA)

By Holly Williams, PA Deputy City Editor

Plumbing giant Ferguson has seen shares jump higher after it revealed a hike in annual profits, as it gears up to spin off the UK business.

The group surged to the top of the FTSE 100 as shares lifted 6% after reporting an 11.5% hike in pre-tax profits to 1.3 billion US dollars (£1.1 billion) for the year to July 31.

It said trading profits rose 7.5% to 1.6 billion US dollars (£1.3 billion) for the year to July 31 – at the top end of City expectations – on sales 6.1% higher at 22 billion US dollars (£17.9 billion), or 7.9% on an underlying basis.

Markets weakened in the second half but our well-executed approach to expanding gross margins and decisive cost control measures ensured strong profit delivery John Martin, Ferguson chief executive

The figures come just a month after Ferguson announced plans to split off its British operations as Wolseley UK following a lengthy strategic review of the group.

It also revealed that chief executive John Martin is set to leave the company on November 19 following nine years on the board.

He will be replaced by Kevin Murphy, currently chief executive of Ferguson Enterprises in the US.

Mr Martin said the demerger was “progressing well”.

He added the results showed Ferguson “performed strongly” over 2018-19.

“Markets weakened in the second half but our well-executed approach to expanding gross margins and decisive cost control measures ensured strong profit delivery,” he added.

Annual results showed the US division – where the company makes more than 90% of its earnings – continued to enjoy impressive gains, with trading profits up 7.3% on revenues 10% higher.

But the UK saw revenues slip 6% lower, though it managed to eke out a 1.1% rise in trading profits.

Ferguson has been overhauling its UK arm, axing branches and quitting unprofitable wholesale business in an attempt to turn around trading.

The group changed its name from Wolseley in 2017 as part of efforts to focus more on the US, where it makes the bulk of its revenue and trades as Ferguson.

But the Wolseley name has been retained in the UK, replacing previous brands such as Plumb Center.

Ferguson’s recent break-up plans were announced only three months after hedge fund Trian – run by veteran activist investor Nelson Peltz – bought a 6% stake in the group.

Trian said it believed Ferguson was “an attractive business that trades at a discount to comparable US peers”.

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