October 2, 2018 / 6:33 AM / in 18 days

Ferguson shares fall as revenue growth slows in September

(Reuters) - Ferguson Plc (FERG.L) shares fell on Tuesday after the world’s largest distributor of plumbing and heating products said revenue growth slowed in September, and warned of challenging market conditions in Britain.

Ferguson, which changed its name from Wolseley last year to match its U.S. brand, said organic revenue growth in the first eight weeks of the new year was roughly the same as last year, adding that the growth rate had dipped in September from the previous month.

Ferguson shares were down 5.1 percent at 6,192 pence at 1044 GMT, the second biggest losers on the UK bluechip index .FTSE, rattled by the slowdown in revenue growth in September and caution over its British business, which contributes 5 percent of its profit, traders said.

“It is too early to attribute it to anything in particular. There is no one part of our business - geography or unit - that is suffering,” Chief Executive Officer John Martin said on a post-earnings call when asked for a reason for the dip in organic revenue growth.

“I would say in the context of the usual monthly trading variations, this absolutely falls within the normal range of performance in our business.”

Ferguson has been betting on growth at its U.S. business to drive results, against the backdrop of tough market conditions in Britain and has exited its Nordics business this year.

The company, which is transforming its British business to increase profits and improve customer service to cope with the downturn, said organic revenue in there fell 5.3 percent due to branch closures and the exit of the low margin wholesale business.

“We still have a lot of work to do in the UK in order to bring it back to profitable growth,” Martin said.

The FTSE 100 company reported overall ongoing organic revenue growth of 7.5 percent, above analyst estimates of 7 percent as it benefited from strong demand in U.S. markets, mainly industrial customers.

Goodbody Stockbrokers analyst Robert Eason said the expectations for Ferguson were set pretty high ahead of the results, with shares up 26 percent in the last 12 months.

The company has spent more than $650 million on acquisitions in the last 14 months and said it would likely close another $300-$400 million in deals before the half-year.

Most of these acquisitions are in the United States, with some in Canada, Martin said.

Ongoing trading profit rose 15.3 percent to $1.51 billion for the year ended July 31, while revenue rose 7.6 percent to $20.75 billion. Analysts had expected profit of $1.50 billion on revenue of $20.66 billion, according to a company-compiled consensus.

Ferguson also proposed a 2018 dividend of 189.3 cents per share, 21 percent ahead of last year.

Reporting by Shariq Khan in Bengaluru and Arathy S Nair in Bengaluru; Editing by Bernard Orr and Louise Heavens

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