Shares in plumbing and heating supplier Ferguson (FERG) jumped almost 7% to £79.30 as it reinstated its dividend following better than expected trading.
The FTSE 100 company was hit by the coronavirus pandemic but hailed its ‘resilient’ performance as pre-tax profit for the year to 31 July fell 4.8% to $1.3 billion with revenue slipping 0.9% to $22 billion.
Ferguson said it grew trading profit ahead of revenue in the second half despite lockdowns, and since the start of its new financial year has record low single digit revenue growth in its US market.
Taking into account its prospects and financial position, the company said it restored its dividend to the same level as 2018/19 of $2.08 per share.
‘BUSINESS IN GOOD SHAPE’
Chief executive Kevin Murphy said, ‘We continue to execute our strategy of developing the business through organic growth and given recent better than expected trading we are now proposing to reinstate ordinary dividends.’
He added that while the firm remains cautious on the outlook for the year as a whole, the business is in ‘good shape’ and ‘well prepared to address any further market related disruption.’
It comes after the company shelved its interim dividend and suspended a planned $500 million share buyback in the spring as Covid-related restrictions and safety measures reduced demand during April and May.
REINSTATING DIVIDEND ‘SIGNALS CONFIDENCE’
Mamta Valechha, equity research analyst at Quilter Cheviot, said the reinstatement of the dividend ‘signals confidence’ and called Ferguson’s current trading ‘encouraging’.
She said, ‘It does not feel excessive to say many have re-discovered the value of their homes and as a result home improvement is construction’s structural winner from COVID-19.
‘The key takeaways today is the reinstatement of dividends, which signals confidence, and current trading is encouraging with low-single digit revenue growth in the US in a flat market, and Canada and UK back to organic growth in August.’
Valechha added that Ferguson’s additional US listing, which is on track for the first half of next year, could be the ‘key catalyst’ to unlock Ferguson’s valuation discount to its US peers.