Plumbing giant Ferguson, previously known as Wolseley, today rewarded shareholders with bumper payouts after the 130-year-old British firm hailed the success of its US revamp.
Reporting its full-year results, Ferguson hiked its dividend by 10 per cent and revealed plans to return £500m to investors through a share buyback scheme.
The firm was the biggest gainer on the FTSE 100 this morning, with shares rising 3.6 per cent.
The world's largest heating and plumbing distributor, best known in the UK for its Plumb Centre operations, changed its name from Wolseley this year to that of its US subsidiary Ferguson.
Faced with challenging UK market conditions, the firm unveiled the closure of 80 UK branches with the loss of 800 jobs in September 2016 as part of a "transformation process".
“I don’t want to imply that the UK market is unattractive but the blunt reality is, in the US, we have had better underlying economics for quite some time. GDP growth has been better for longer," Ferguson chief executive John Martin told City A.M..
There is net inbound immigration [in the US], which leads to more home building. There is more land available for home building... It is a bigger and faster growth economy.
Sales spiked by 22.5 per cent of the year, though this was a more moderate six per cent on a like-for-like basis. Profits rose from £675m to £1.2bn with net debt almost halving to £534m.
Martin said: “The large majority of our profits are generated in the US and the large majority of our cash is generated in the US. That is a consequence of the scale of our business in the US. We are very proud of that and that’s the reason we returning capital to shareholders today and are paying a huge dividend."
A shake-up of UK operations is set to cost Ferguson, which started as a sheep-shearing company in London, in the region of £200m.
“That’s several of years of profitability," said Martin.
I think that is a sign of our confidence and commitment long-term to the UK market, not the other direction.