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UPDATE 2-Plumbing supplier Ferguson rewards shareholders after profit jump

· 03/16/2021 03:50
UPDATE 2-Plumbing supplier Ferguson rewards shareholders after profit jump

Raises interim dividend, announces share buyback

Says second-half outlook remains very uncertain

Organic revenue growth in high single digits in current quarter

Adds analyst comment, share move

By Vishwadha Chander and Pushkala Aripaka

- Ferguson FERG.L announced a special dividend and share buyback of about $400 million each on Tuesday after cost cuts and strong U.S. home improvement demand helped the plumbing and heating parts distributor increase first-half profit.

Tuesday's results chimed with those of U.S. rivals Home Depot HD.N and Lowe's Companies LOW.N, both of which also benefited from stuck-at-home Americans snapping up building materials through COVID-19 lockdowns in Ferguson's biggest market by sales.

London-listed Ferguson, shares of which also began trading in the United States this month, said half-year profit rose 12.2% as residential sales recovered on the back of a pick-up in the housing market.

However, analysts have said that pandemic-led demand could fade for home-improvement chains as COVID-19 vaccine programmes are rolled out. nL4N2KT2F3 nL4N2KU3EL

Ferguson warned that the outlook for the second half of the financial year remains "very uncertain" and it expects rising supply chain pressures, transportation and other costs to partially offset revenue growth.

The United States-based company's London-listed shares were up slightly at 90.44 pounds at 1115 GMT.

"We are well positioned to manage through this environment," Chief Executive Kevin Murphy said, adding that the company has generated high single-digit organic revenue growth since the beginning of its third quarter.

The company's special shareholder payout reflects the sale of its UK-focused business for about $420 million this year while it also raised its interim dividend by 5% to 72.9 cents per share.

The sale of its British arm, Wolseley UK, was aimed at allowing the group to focus solely on its main U.S. business. The company also operates in Canada. nL4N2JF1SZ

Ferguson's underlying trading profit rose to $837 million for the six months to Jan. 31, up from $746 million a year ago, on sales of $10.31 billion.

Liberum analysts said the revenue would be a "little disappointing" for the market, given the strength of the U.S. housing market.

(Reporting by Vishwadha Chander and Pushkala Aripaka in Bengaluru
Editing by Rashmi Aich and David Goodman)

((Vishwadha.Chander@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 6749 6132;))