October 1, 2019 / 7:28 AM / 19 days ago

Ferguson posts annual profit beat, powered by stringent cost cuts

(Reuters) - Plumbing parts distributor Ferguson Plc (FERG.L) on Tuesday posted a better-than-expected 7% rise in full-year profit, as it rigorously cut costs by shedding jobs and closing some underperforming branches.

The company, formerly known as Wolseley, said trading profit rose to $1.60 billion in the year ended July 31 from $1.49 billion a year earlier. Revenue rose 6% to $22.01 billion.

Analysts on average expected ongoing trading profit of $1.57 billion and revenue of $21.87 billion, according to a company-compiled consensus.

Ferguson revealed plans last month to split off its U.K. business and said Chief Executive Officer John Martin was stepping down and being replaced by U.S. operations chief Kevin Murphy, as the company focuses more on its largest market in the United States.

The company said on Tuesday that work on the proposed demerger is “progressing well”.

Ferguson, which draws about 80% of its revenue in the United States, said it was considering the “most appropriate listing structure” for the unit. Analysts expect the company’s North American business to be listed in the U.S., with Wolseley UK remaining in Britain.

Ferguson has been under pressure this year as growth in the United States has slowed. It announced a $500 million share buyback programme in June after reporting third quarter sales that fell short of targets.

“The board expects to make further good progress in the year ahead. Whilst U.S. market growth is currently broadly flat, consistent with the second half of 2019, we expect to continue to outperform,” the company said.

Analysts expect fiscal 2020 trading profit to rise to $1.65 billion and revenue to $22.82 billion.

Reporting by Justin George Varghese in Bengaluru; Editing by Bernard Orr

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