Management is doing all the right things, and our head of markets reports plenty of optimism here.
Given the level of challenges, some of which are of its own making, Ferguson (LSE:FERG) is generally making solid progress.
The US business in particular, which accounts for 84% of group revenues, saw full-year sales increase by 10%, sweeping aside any previous concerns for the moment on wage inflation, lessening demand in this core market or, indeed, the possibility of a slowdown in the broader US economy.
Meanwhile, the company's strong cash generation has not only enabled the $500 million share buyback as previously announced, but also a 10% hike to the dividend, both of which are supportive to the share price as well as underlining confidence in prospects.
Brisk trading and the ongoing containment of costs has resulted in a 7.4% increase in trading profit, at the top end of expectations, a rise of 11.5% in pre-tax profit and the protection of a healthy gross margin across the piece.
Source: TradingView Past performance is not a guide to future performance
Operationally there are some blots on the landscape, with revenues in the UK (which account for 10% of the group total) dropping 6%, due in part to currency headwinds, basic earnings per share down nearly 7% and net debt having increased in the period by 11%. The latter figure is understandable given a further 15 acquisitions totalling $660 million, with further bolt-ons to come should the opportunities arise.
While this heightened level of execution risk may be something in which Ferguson is well versed, the planned demerger of Wolseley UK will add further distractions and cost in what could be a challenging economic time in the company's core US market over the next year.
Indeed, the separation of the US and UK businesses will put the former strongly in the spotlight, given the wider economic questions resulting from the trade spat with China and some increasingly mixed economic numbers from the world's largest economy.
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The dichotomy between strong actual performance and a more difficult period to come has been reflected in a mixed share price performance. In the last six months, the shares have added 22%, whereas over the last year, the price remains down 9%, as compared to a 1.2% decline for the wider FTSE 100 index.
Ferguson has, for the most part, delivered in terms of these numbers, and the demerger makes sound strategic sense in recognising the US business as a separate entity, as well as creating some additional value for shareholders. This in turn has garnered wide support for the company's objectives, with the market consensus of the shares as a 'buy' reflecting general optimism.
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