Ferguson Plc (LON:FERG) saw continued strength in its North American operations which offset a fall in the UK as it reported a rise in first-quarter trading profit and revenue and said it expected to meet full-year expectations, although its shares still declined.
The FTSE 100-listed plumbing and heating products distributor saw its trading profit rise by 9.9% to US$432mln in the three months to 31 October 2018, up from US$393mln a year earlier, as revenue increased by 8.5% to US$5.5bn from US$5.11bn.
READ: Ferguson hikes the dividend as US industrial growth drives profit uplift
The company said like-for-like revenue growth was 1.5% in the quarter which included about 2.5% of price inflation, reflecting weak repair, maintenance and improvement markets.
It saw its gross margin continued to improve, rising by 50 basis points to 29.6%, as a result of recent acquisitions and the exit of low margin wholesale business in the UK last year.
Ferguson’s chief executive John Martin commented: "Growth in the US was widespread across all geographic regions and major business units. Canada continued to grow against tough prior year comparatives and the UK also grew modestly on a like-for-like basis.”
He added: "Since the end of the quarter, the US has continued to grow well and the current indications are that growth will continue in the months ahead. As a result, we expect a trading profit for the full year to be in line with analysts' expectations."
Sentiment remains fragile
However, in early morning trading, Ferguson shares were 3.7% lower at 5,009p.
Richard Hunter, head of markets at interactive investor, commented: “Ferguson has made a strong start to the year, which should restore some confidence to what has proved to be a difficult few months of trading, even though the initial share price reaction reflects the ongoing fragility of sentiment.”
He added: “The cautious outlook and a stuttering UK performance at the full year results in early October prompted a sharp decline in the shares, which stand 20% lower since.
“Even now, there may be concerns regarding any slowdown in the US housing market, whilst the UK part of its operations, which currently represents 11% of revenues, remains finely balanced.”
Hunter concluded: “The lack of any comments around shareholder returns and a dividend yield of just 2.8%, despite the strength of the balance sheet, are potentially weighing on the shares”.