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Ferguson PLC ADR FERGY

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Morningstar’s Analysis

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Ferguson Sells U.K. Segment for $420 Million in Cash; Shifts Focus to North American Market

Analyst Note

| Brian Bernard, CFA, CPA |

On Jan. 4, Ferguson announced the sale of its Wolseley U.K. business to Clayton, Dubilier & Rice for approximately $420 million in cash. Management expects the sale to close in January 2021. While we think the sale is a prudent move by the management team, the sale price is modestly below our estimate of the U.K. business's intrinsic value. As such, we’ve decreased our fair value estimate for local shares to GBX 7,300 from GBX 7,500 and ADRs decreased to $10 from $10.10. That said, our U.K. intrinsic value estimate assumes the business stabilizes and returns to previous profitability levels, which could prove optimistic. The fair value of local shares was also unfavorably affected by foreign currency translation.

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Company Profile

Business Description

Ferguson distributes plumbing and HVAC products primarily to repair, maintenance, and improvement (60% of U.S. revenue), new construction (32% of revenue), and civil infrastructure (8% of sales) markets. It serves over 1 million customers and sources products from over 45,000 suppliers. Ferguson engages customers through more than 2,200 branches globally (approximately 1,500 in the U.S.), over the phone, online, and in residential showrooms. In 2020, Ferguson derived over 86% of its $21 billion of sales within the U.S. According to Modern Distribution Management, Ferguson is the largest industrial and construction distributor in North America. The firm expects to spin off its U.K. business in 2020 after which the firm will be solely focused on the North American market.

Contact
1020 Eskdale Road, Winnersh Triangle
Wokingham, Berkshire, RG41 5TS, Jersey
T +44 1189273800
Sector Industrials
Industry Industrial Distribution
Most Recent Earnings
Fiscal Year End Jul 31, 2021
Stock Type
Employees 34,453