Wolseley Q3 Revenue Down By Over A Quarter Amid Lockdown

Ferguson has reported on Q3 trading, advising that it is in a strong financial position and is well-positioned to support its associates and customers through the COVID-19 pandemic.

At the time of the half year results on 17 March 2020 we were trading in line with expectations. As outlined in our trading update on 15 April 2020 since the middle of March we rapidly changed our operating procedures to protect the safety and wellbeing of our associates and our customers. This is against a background of the unprecedented action taken by governments to contain the COVID-19 virus and the societal impact which has resulted in adverse trading conditions within the Group's end markets. The Group is today outlining quarterly results for the 3 months to 30 April 2020.

Summary of revenue trends

Group results

The Group generated revenue in the ongoing businesses of $4,750 million in the third quarter, 0.9% ahead of last year or 1.7% behind on an organic basis. Gross margins were 40 basis points lower at 29.8% in the quarter with underlying trading profit of $334 million, $5 million behind last year. The impact of IFRS16 contributed a further $17 million to trading profit. There was one additional trading day in Q3 2020 compared to Q3 2019.

USA

Our US business grew well in February and March but revenue was lower in April due to the impact from COVID-19 related restrictions and safety measures. Total growth of 1.9% comprised of a 1.0% organic decline offset by 1.3% of growth from acquisitions and a further 1.6% from the additional trading day. Price inflation during the quarter was broadly flat.

Gross margins were slightly lower due to the mix of business with no discernible pricing changes in the marketplace. Underlying trading profit of $343 million was 0.9% behind last year.

Before pausing M&A activity, we completed three acquisitions in the quarter including Columbia Pipe & Supply, which specializes in PVF, commercial mechanical, commercial plumbing, industrial, valve automation, engineered products and hydronics; Rencor Controls, an automated valve distributor in the North East; and MFP Design, a custom designer of fire sprinkler systems. These three businesses generated a combined $229 million of annualized revenue on a pre COVID-19 basis.

Canada

Revenue in Canada was 16.4% lower with markets remaining challenging in February and March prior to lockdowns in the balance of the quarter. Gross margins were slightly lower, contributing towards an underlying trading loss of $1 million, $5 million below last year.

Non-ongoing operations (Wolseley UK)

In the UK, revenue declined 26.5% in the quarter as the national lockdown severely impacted demand. An underlying trading loss of $12 million was $32 million lower than last year. We continue to actively manage the cost base given the challenging market environment.

The Board’s strategic intent to demerge the UK business is unchanged and we continue to progress the demerger process, although timing will depend upon the stabilization of market conditions.

Outlook

Due to the dynamic situation unfolding with COVID-19 the Company has withdrawn formal guidance. We continue to operate as an essential business with the majority of our branches open and serving customers as much as possible. Ferguson remains well positioned for long-term success operating in attractive and fragmented markets with a robust business model and backed by a strong balance sheet and liquidity position.

Commenting on the results Kevin Murphy, Group Chief Executive, said:

“Our strong revenue momentum in February and March was adversely impacted in April as federal, state and local COVID-19 restrictions and safety measures brought about a reduction in demand. We have rapidly implemented responsible working practices to protect the health and wellbeing of our associates and with few exceptions our traditional branch network remains open. During these challenging times we remain immensely thankful and very proud of the dedication of our 35,000 associates as they continue to support our customers in serving our critical industries.

“We have taken steps to manage our cost base and protect cash flow given the uncertain outlook both in the short-term during the crisis phase but also to ensure the business is appropriately sized for the post COVID-19 environment. We are confident these actions coupled with the strength of our balance sheet will serve us well in the coming months and years. As a value-added distributor Ferguson remains well positioned to support our customers, vendors and communities during this challenging time while continuing to build our capabilities for the long-term.”

Source : Ferguson

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