Plumbing and heating supplier Ferguson’s share price dives after profit warning

Shares in FTSE 100 plumbing and heating products supplier Ferguson fell nine per cent this morning after it issued a profit warning for 2019.

The figures

The company's results today revealed a rise in profits before tax of $676m (£513m) before exceptional items for the half year to 31 January, up from $644m for the same period a year earlier.

Ferguson’s revenue grew to $10.8bn, compared to $10bn a year earlier. Its net cash fell to $121m, down from $261m in the second half of 2017.

The FTSE company’s basic earnings per share was up to $2.55 in the half year to 31 January, from $1.83 year-on-year.

In December the group's final dividend rose to $1.32 per share, from the December 2017 amount of $0.73 per share.

Why it’s interesting

Despite a rise in profits, Ferguson slid to the bottom of the FTSE 100 leaderboard as its shares dropped nine per cent after it said: “We expect trading profit for the full year to be towards the lower end of the range of analysts’ expectations.”

Ferguson has revised its “estimates of group organic revenue growth to between three and five per cent”. In the six months to 31 January 2019 it was 6.8 per cent.

The firm said lower-cost competitors, weak macroeconomic conditions, pressure on margins due to rising costs, and the chance of higher tariffs were all risks and uncertainties for the future in its operations in the UK, the US and Canada.

Russ Mould, AJ Bell investment director, said: "The company’s warning of a slowdown in second-half sales growth… raises questions about the economic health of its largest target market, the USA.”

“For the first half, it looks like the villain of the piece was the UK, where sales fell again on an underlying basis in the second quarter."

“However, what has really spooked investors is management’s forecast of sales growth for the year of 3 per cent to 5 per cent," he said.

What Ferguson said

Chief executive John Martin said: “Ferguson performed well in the first half with continued strong organic growth in the US of 9.7 per cent. Growth in the US was widespread across all geographic regions, major business units and end-markets.”

“We will continue to execute our strategy of delivering excellent customer service to maximise profitable growth opportunities whilst remaining vigilant on costs. Our capital allocation policy is unchanged and we will continue to maintain a strong balance sheet.”