Ferguson reported better-than-expected FY20/21 results, with revenue coming in >14% higher, driven by robust residential demand and the recovery in commercial and industrial end-markets. Superior operational performance supported profitability with underlying trading profit outpacing revenue growth. FY20/21 dividend was raised by c.15%, while a $1.0bn share buy-back programme was announced. Ferguson sees healthy sales momentum in the near term, but flagged a tough comparable in H2 with inflation
Companies: Ferguson Plc
Ferguson’s Q3 FY20/21 results came in ahead of market expectations. Organic sales growth of c.21% was a result of the strong US residential market, with trading profit further benefiting from a combination of factors, including a favourable channel sales mix and operational improvements. Management raised its FY20/21 outlook on the back of a strong Q3 and early-May momentum. While we will raise our estimates, the recommendation should remain unchanged given the company’s expensive valuation and
Ferguson reported H1 FY20/21 results which were largely in line with market expectations. Organic revenue growth of >3% was aided by robust residential markets, while trading profit also improved, benefiting from cost control measures such as store closures and headcount reduction. Management remains cautious about H2 citing uncertainties, but still expects a market outperformance. The interim dividend was raised to $0.729 per share, and the company also announced the resuption of the share buy-
Ferguson has announced the disposal of the UK business for $420m. While we were expecting a higher price tag (c.$600m), the deal is unlikely to be a needle-mover due to the insignificant size of this segment (accounts for c.2% of the group’s valuation). However, this sale is a step in the right direction from a strategic perspective.
Ferguson kicks off FY20/21 strongly with a 3.1% increase in the top line and c.4x growth in operating profit, benefiting from the cost-cutting actions related to labour and branches – most of these are recurring in our view. For the full year, management remains cautious amidst the COVID-19 pandemic but has reiterated its guidance of outperforming the US Plumbing & Heating market, which is likely to remain flat. Bolt-on M&As, which resumed from this quarter, are also likely to continue in FY20/2
Ferguson closed its FY19/20 books (ending in July 2020) on a good note, as its trading/operating profit outpaced the resilient top-line, on the back of a healthy US performance and several temporary and permanent cost-cutting measures across the group. Moreover, management has announced it is to pay the full-year dividend (including the previously suspended interim instalment) and resume M&As. Also, while the de-merging process of the UK business carries on, the board is also now exploring other
Ferguson has shown good resilience in the COVID-19 pandemic – after losing c.10% of its sales in April, it ceded just c.1% of revenue in the following three months. This was mainly attributable to its strong digital capabilities and gradual re-opening of stores amidst relaxed lockdown restrictions. However, we maintain a cautious view on its FY20/21 performance, as the full impact of recent softness in the US housing / construction activity should be seen in Ferguson’s top-line with a 3-6 months
Ferguson performed a tad better-than-expected in Q3 FY19/20, amidst relatively softer lockdown measures in some pockets of the US. However, as the recession looks inevitable, we remain cautious about P&H demand in the near term, across Ferguson’s three key end-markets: residential, commercial and industrial. The possibility of the UK business demerger happening in 2020 is also low in our opinion, as the equity market remains unfavourable.
As the COVID-19 pandemic is currently hitting Ferguson’s operations hard, management has initiated numerous cost-cutting and cash-preserving actions. These measures, clubbed together with adequate liquidity on its books, will help the group to sail through the crisis, but a weak trading performance in H2 FY19/20 (February to July 2020) is inevitable.
In Q2, Ferguson saw a sequential moderation in organic revenue growth, in both the US and Canada. Despite this, management protected the profitability, on the back of cost-cutting actions. However, amidst the COVID-19 outbreak, it does not expect to meet the full-year guidance (moderate top-line growth and slight improvement in profitability).
Ferguson performed satisfactorily in Q1 FY19/20, with moderate top-line growth and a flat trading margin. The full-year outlook has also been reiterated by management. In terms of business restructuring, while the demerger of the UK business remains on-track to be completed in 2020, the board is unlikely to conclude on Ferguson group’s new listing structure this year – the outcome will be a key share price trigger, in our view.
Ferguson ended FY18/19 on a strong note – though the top-line performance was mediocre, margin resilience impressed the investors. In the softening US housing / construction market, management should be able to keep expenses in check, in turn aiding the bottom-line. Moreover, the Board has commenced a review of various options to get Ferguson listed in the US. Further clarity / development in this direction should support the share price, in our view.
Due to a change in Analyst role, Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
Companies: BDEV BWY BKG VTY COST CRST BBY FERG GLE KLR KIE MSLH MER MTO NXR PSN RDW RNWH SFR SHI MGNS TW/ CTO TEF TPK GFRD
Ferguson’s Q3 organic revenue growth was softer than market expectations. While management has reassured it can achieve its FY18/19 operating profit target (thanks to margin improvement), it seems investors are struggling to digest that Ferguson is moving back to a low-growth environment, amidst the expected subdued US residential and commercial construction activity. We will maintain our cautious view on the stock.
While Ferguson sustained the strong top-line growth momentum in H1, management expects a moderation in H2, due to challenging market conditions, especially in the US – the key reason behind yesterday’s downfall in the share price, in our view. Even Canada and the UK are expected to remain soft in the near term. We will revise our estimates downwards. Our stock recommendation might change to ‘Reduce’.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Ferguson Plc.
We currently have 170 research reports from 9
The forthcoming UN Climate Change Conference (known as COP26) should result in an acceleration of governments’ actions to reduce CO2 emissions. This will result in an acceleration of customer end-user adoption rates which would be positive for AFC Energy which is developing zero-emission solutions for the EV-charging, construction, data centre and marine markets.
Companies: AFC Energy plc
ITM yesterday announced a capital raise of £250m to expand its capacities significantly. This comes sooner than we expected and seems like an opportunistic move to capture the market. The company will use the proceeds to expand its capacities to 2.5GW from 1GW by 2023 and to 5GW by 2024. The remainder of the proceeds will be used to reduce H2 production costs and to build an unparalleled support service. Overall, we are positively surprised.
Companies: ITM Power PLC
Another record quarter – Guidance lifted again
Capital Limited LSE: CAPD) this morning announced its Q3 2021 trading update. Quarterly revenue of US$$61.6 million exceeds our expectations and represents another record quarterly result for the company beating Q2, itself a previous record, by 12.6%. As a result, full year guidance has been lifted to $220 – 225 million (up from $200 – 210 million guided in July and $185 – 195 million with the FY20 results).
Companies: Capital Limited
Seeing Machines, the advanced computer vision technology company that designs AI-powered operator monitoring systems to improve transport safety, has announced that it has established a European sales team, headquartered in Amsterdam, to lead the next phase of its business development and focus on growing demand in Europe for its Aftermarket driver safety technology, Guardian.
Gerard van den Houten has been appointed to head up the European team and comes to Seeing Machines with a strong sales
Companies: Seeing Machines Limited
Avingtrans has invested £2.5m in cash in Adaptix Ltd to acquire a 5.9% holding by participating in Adaptix’s latest £12.9m funding round. Adaptix is looking to transform radiology by bringing to market its low cost, low dose portable imaging technology based around its proprietary Flat Panel X-ray Source (FPS). Avingtrans intends to collaborate with Adaptix to develop a disruptive business offering that envisages bringing together its low cost 3D MRI, through Magnetica, with Adaptix’s 3D X-ray a
Companies: Avingtrans plc
No Joiners Today.
Cambria Autos has left the AIM following a takeover.
What’s cooking in the IPO kitchen?
Light Science Tech Holdings, the controlled environment agriculture technology and contract electronics manufacturing Group to join AIM. Raising £5m. Expected mkt cap £17.4m. Due 15 Oct.
Harmony Energy Income Trust to join the Specialist Fund Segment of the Main Market raising up to £230m. The Company's investment objective is to provide investors with an attractive and susta
Companies: VRS ORPH SNG MRL EBQ AVG
Several stars have aligned for Brickability to flag an excellent half year's trading (to end Sep-21) in its latest update. Post-COVID recovery in housing markets, the natural seasonality of the business, favourable timing of acquisitions (notably Taylor Maxwell), output price inflation (especially in timber) and business mix all combining to drive revenue to three times the reported H1/20 level and EBITDA twofold ahead. This sets a strong foundation to ratify existing FY21 (March) forecasts with
Companies: Brickability Group PLC
Avon Protection has indicated that management guidance for FY21 revenue and EBITDA margin has been achieved before an additional one-off, non-cash inventory write-down of around $4m in ballistics. Cash generation was better than anticipated after record levels of investment and order intake remained strong despite previously indicated pandemic delays. The healthy opening backlog underpins strong growth in FY22 as ballistics revenues ramp up, Team Wendy makes a full year contribution and EBITDA m
Companies: Avon Protection PLC
Light Science Tech Holdings (LST.L), the controlled environment agriculture technology and contract electronics manufacturing Group has joined AIM. Raising £5.2m. Market Capitalisation approximately £17.4m.
No Leavers Today.
What’s cooking in the IPO kitchen?
Gymshark has started to put together plans for a stock market listing according to City A.M. The company hit a £1bn valuation just over a year ago and boasts customers in more than 130 countries. Gymshark was founded by teen
Companies: NWT LTG ITM POW
Brent crude topped $85 a barrel in London for the first time since 2018, the latest milestone in a global energy crisis that has seen prices soar.
West Texas Intermediate for November settlement rose 97 cents to settle at $82.28 a barrel in New York.
Brent for December delivery added 86 cents to settle at $84.86 a barrel.
The global benchmark rose above the key level in intraday trading but did not settle above it on Friday. US crude futures posted an eighth straight weekly
Companies: FO 88E DEC EME GTC TRIN UOG WEN
TMT Acquisition (TMTA.L) has joined the Main Market (Standard) pursue opportunities to acquire businesses in the technology, media and telecom sector. Raised £5m, mkt cap £5.5m.
NMCN Plc has left the Main Market (Premium) following the appointment of administrators.
What’s cooking in the IPO kitchen?
Harmony Energy Income Trust to join the Specialist Fund Segment of the Main Market raising up to £230m. The Company's investment objective is to provide investors with an attractive
Companies: SEE FST ORCP DNL FDBK 8091 IGP
Companies: DeepMatter Group Plc
Imperial Helium (IHC CN)C: Smaller resources but good well test results could suggest a commercial development – At the IHC-Steveville-2 well, a 12 metre zone was tested at a rate of ~2 mmcf/d. This zone is an interval equivalent to the blow-out zone in the offsetting 13-22 well. While the headline flow rate might appear low, it is in reality a good result that suggests that the well can be brought into production at 5-6 mmcf/d at leas
Companies: AKRBP AKERBP CASP GENL GTE HUR IHC KOS LUPE PEN PEN TAL RBD EGY DNO DNO JKX
Directa Plus, the leading producer and supplier of graphene nanoplatelets based products for use in consumer and industrial markets, has announced that it has qualified for an additional €0.5m loan under the Italian Government's Covid-19 Recovery Plan. The funds are additional to the €0.7m loan announced on 2 August 2021. The €0.5m loan has a term of six years, a variable interest rate of 1.5% + EURIBOR 3M and is 80% guaranteed by the Italian government.
Companies: Directa Plus Plc
AFC Energy hosted its maiden Capital Markets Event yesterday, giving an excellent summary of its progress in the last year and its prospects. The company is making good progress in commercialising its EV charging product alongside ABB and should be ready for market in 2022. We believe the long-term prospects for the company remain exciting.