Market responds with a drop in price as company expects reduced growth due to poor market conditions
Ferguson to shift headquarters to UK as it warns of lower growth
- Solid US and Canadian trading performance and progress on UK iniatives provide some scope of optimism for investors. Our recommendation is now under review.
- Ferguson tightening the screws as it warns on lower growth rates due to poor market conditions.
- Headquarters to move back to the UK following unfavourable Swiss corporate tax reforms which may help rekindle struggling UK market.
Today’s results have shown a 6.5% rise in organic growth and a 27.9% increase in profits compared to the previous year, but warned the market it now expected growth to fall in the second half due to poor market conditions. The company is still seeing good growth in its main US market where organic revenue growth reached 9.7%. However, Ferguson said that it now expected full-year organic growth to be in the 3-5% range with the consequent knock-on effect that trading profit will be at the lower end of the range of expectations.
The response from the market today was swift with a 9% drop in the shares in early trading. While the news today is concerning, it is hardly unexpected. Growth in the US remains robust and it was good to see the dividend lifted by 10%, the company is clearly experiencing a slowdown in some of its other markets. Management also announced the company’s headquarters is to move to the UK in order to avoid unfavourable tax reforms introduced in Switzerland.
However the strong balance sheet, solid trading conditions in Canada and good progress on strategic initiatives in the UK are all positives for investors in the plumbing products and building materials company. Our view on this stock is now under review.
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