Ferguson has released an update on how COVID-19 has impacted trading for the period of March 17 to March 31 2020.

Current trading

Group trading to 31 March 2020 was not materially impacted by COVID-19, though revenue growth weakened towards the end of the period, the company says. A detailed view of financial performance for this time period is below.

 ^{*One additional trading day in current year added 2.5% to both US revenue growth ongoing operations respectively.}

Ferguson notes that in the ten days before April 15, the impact of COVID-19 has significantly increased, mainly due to government actions and societal reactions. The overall trading situation on the ground is differs across the U.S. For example, revenue in New York has declined due to large outbreaks in the state. While revenue trends hold stronger in regions across the country that are less affected by the virus.

Ferguson explains that the majority of their branches in the U.S. remain open, but the company is preparing for lower activity levels given the likelihood of more regions experiencing continued spread of the virus resulting in disruption. “In light of recent CISA2 guidelines we have been working with the relevant authorities across each state and local jurisdiction to ensure we can continue to support our customers,” the company says.

Most markets in Canada are in lockdown and the U.K. market is extremely challenging due to widespread lockdown already in place, but Ferguson branches in both areas remain open where essential business are allowed to operate.

“As indicated at the time of the Half Year results given the unprecedented uncertainty around the impact of COVID-19 it is not possible to assess with certainty the impact it will have on the Group’s financial performance for the year. The Company is therefore not providing guidance for the year to 31 July 2020,” the company notes.

Cost reduction actions

Ferguson explains that in response to the evolving COVID-19 situation, it has worked quickly to protect liquidity and cash flow to ensure it is well positioned to benefit when recovery takes place. “Ferguson benefits from an agile business model and, as we prepare for short-term revenue pressure our approach has been to protect our skilled workforce which is critical to the long-term success of our business. We have already taken a number of prudent cost saving measures to protect short-term profitability and cash generation of the business. This has included a hiring freeze, a reduction in associate hours, overtime and the use of temporary staff, and temporary lay-offs being implemented in the worst hit regions. We have taken decisive action in the worst hit regions whilst ensuring the business is appropriately sized for the post COVID-19 operating environment.”

U.K. demerger

When commenting on the planned U.K. demerger, Ferguson explains that the demerger of Wolseley U.K. remains on track to be completed this year, assuming market conditions normalize by the latter part of the year.

Financial position

The Company’s net debt excluding leases at 31 March 2020 was $1,929 million and the ratio of net debt to the last 12 months adjusted EBITDA was approximately 1.0 times. As at 31 March 2020 the Group had c.$2.5 billion of available liquidity comprising readily available cash of approximately $0.7 billion and $1.8 billion of undrawn facilities. Since 31 March the Company has been approved and has issued commercial paper under the Bank of England’s Covid Corporate Financing Facility (CCFF).

Ferguson has also introduced the following measures to protect cash position:

• The company has suspended the $500 million share buyback announced on 4 February 2020. At 31 March 2020 the Group had completed about $100 million of the program.
• The Company has paused current M&A activity due to current market uncertainty. In the current financial year to date we have invested c. $340 million in 6 businesses which are in the process of being rapidly integrated. Selective bolt-on and capability M&A remains an important part of the Company’s strategy.
• After careful consideration the Board has decided to withdraw the interim dividend due for payment on 30 April 2020. While the balance sheet remains strong, the Board believes this is currently in the Company`s immediate best interests, balancing all our stakeholders’ interests against a background of significant uncertainty as to the impact and duration of the current COVID-19 disruption. We recognize the importance of the dividend to our shareholders and the Board will review this decision later in the financial year as trading conditions become clearer.
• Following a careful review of existing capital expenditure plans we now expect it to be in the region of $280-300 million for 2019/20. Given our strong liquidity position the Board’s intention remains to scale future capital investment to ensure we continue to invest in and develop the business and execute our strategy for the long-term.