Reece (REH) | Ferguson PLC: 3Q20 Trading Update
- In a nutshell: Ferguson reported a mixed 3Q20 trading result, with ongoing sales up 1.9% and trading profit essentially flat. In the two months to March, Ferguson’s US operations reported strong revenue momentum, with revenue up 8.2%. However, adverse trading conditions in April, as government restrictions brought about a significant reduction in demand, lead to a sales decline in April of 9.3%. In terms of outlook, Ferguson has withdrawn formal guidance. However, as an essential service, the majority of its branches remain open and overall is generating resilient results in a difficult US market.
- US trading update mixed: Ferguson generated 3Q20 revenue of $4,750m, 0.9% ahead of last year. While, FERG’s US business achieved solid growth in February and March, revenue was lower in April due to the impact from COVID-19-related restrictions. In the US, the revenue decline in April was 9.3%. The major impact on volume continues to be highly correlated to the degree of disruption to local markets. Blended Branches revenue was down 15.3% in April, where infection rates have been highest (New England, New York, Michigan, the Pacific North West and Northern California). Its eBusiness reported revenue growth of 14.6%. Underlying trading profit of $343m was 0.9% behind last year.
- UK remains challenging (non-ongoing): Ferguson’s UK operations, now treated as non-ongoing, remained significantly challenged during the quarter owing to the nationwide lockdown. Revenue declined 26.5% for the quarter, while revenue declined 60.2% during April. In the UK, the company recorded an underlying trading loss of $12m, $32m lower than last year. The company is actively managing its cost base given the challenging market environment.
Outlook: In terms of outlook, given the dynamic situation unfolding with COVID-19, Ferguson has withdrawn formal guidance. However, it continues to operate as an essential business, with the majority of branches open and serving customers.