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Ferguson in $400m share buyback as H1 profits rise

Tue 16 March 2021 07:26 | A A A

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(Sharecast News) - Multinational plumbing and heating products distributor Ferguson reported a rise in half-year profits boosted by US demand and announced a $400m share buyback but also warned of second-half supply chain pressures.

The US-focused company, formerly known as Wolseley, said pre-tax profits for the six months to January 31 rose 17.7% to $739m on revenues of $10.3bn, up 4.2%.

A dividend of 72.9cents a share was declared. Shareholders will also receive $400m as part of a 180 cent-a-share special payout from the sale of Wolseley UK.

Chief executive Kevin Murphy said Ferguson had continued to trade well since the start of the third quarter "generating high single digit organic revenue growth", but warned of supply chain pressures and increased transportation costs,

"While the outlook for the second half remains very uncertain, we expect to generate above market revenue growth in good residential markets aided by increasing inflation."

However, we expect this to be partially offset by increasing supply chain pressures, transportation costs and the reversal of temporary cost reduction actions taken during the initial stages of the lockdown starting in April of last year."

Fellow US suppliers Home Depot and Lowe's have also benefited from Americans buying building materials all during Covid-19 lockdowns.

"It will now be interesting to see if Ferguson's shareholders feel any benefit from the US listing - a move that is financial in nature, rather than one that relates to the underlying business and its competitive position," said AJ Bell investment director Russ Mould.

"Ferguson trades at a valuation discount to US peers Home Depot and Lowe's and management is clearly hoping for an upward re-rating over time through greater visibility among US investors.

"In the end, however, improved financial performance, consistency of returns, strong cash flow and the manner in which management conducts itself are all likely to have a far greater say in the rating attributed to the stock, rather than where that stock changes hands."

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