Ferguson slips as US revenue growth slows

Ferguson on Monday reported that it had missed third quarter revenues estimates following a slowdown in US growth, though the business still achieved revenue and trading profit growth.

The plumbing products specialist said revenue rose 6.2% year on year to $5.27bn for the three months to April 30, but lower than forecasts of $5.36bn, while trading profits were in line with expectations as an improvement in margins spurred a 2.3% increase to $359m.

Revenue from the US business, Ferguson's largest, increased by 3.3%, compared with 9.7% growth in the second quarter and 10.6% growth in last year's third quarter, with year-on-year order book growth indicating modest US revenue growth over the coming months.

Overall revenue growth has softened from 7.0% in last year's third quarter to 2.7%.

Meanwhile, UK like-for-like revenue growth was 2.8% in the quarter as gross margins dropped but costs remained controlled, while Canadian revenue declined 2.9% as residential markets slowed as a result of rising interest rates and government initiatives to restrict mortgage credit.

Chief executive John Martin said the company expected to generate full year group trading profit in t in line with current analysts' consensus forecasts of $1.59bn .

Martin added that, given Ferguson's strong financial position, and in line with its capital allocation policy, the company is initiating a $500m share buy back programme which is expected to complete within the next 12 months.

Analysts at Canaccord said: "US performance was virtually in line with our forecasts but the growth in the market has clearly slowed abruptly, not helped by a strong comparative but residential markets have clearly slowed. The group is cutting costs and adjusting its cost base for the new market growth backdrop and expects to meet full year expectations. However, the update will not assuage fears about a macro slowdown in the US and if anything consensus is likely to edge lower."

Ferguson's shares were down 4.00% at 5,134.00p at 0843 BST.