9th Oct 2018 17:03
LONDON (Alliance News) - Moody's Investor Service said Tuesday it has assigned a Baa2 issuer rating to plumbing & heating materials distributor Ferguson PLC, with a stable outlook.
This is the first time Moody's has assigned ratings to the FTSE 100-listed company.
The investor service said the "strongly positioned" ratings reflect Ferguson's "solid" business profile.
The building materials distributor's "leadership" position in the "fragmented" US industry, said Moody's, signifies Ferguson's strength.
Also, its track record of market share gains and extensive distribution network and omni-channel presence supports Moody's ratings decision.
Finally, Ferguson's "overall conservative and well-articulated financial policy" leads to "solid" credit metrics.
Moody's did temper expectations, however, due to the "inherent cyclicality" of the industry, although Ferguson's exposure to repair, mechanic and maintenance & improvement provides "some degree" of resilience compared to new construction.
Moody's also warned of the risk of heightened competition as other large distributors invest in their own supply chains, possibly eating into Ferguson's business.
This, in turn, could lower the FTSE 100-listed company's earnings and due to its progressive dividend policy, payouts will initially be maintained, which could offset any potential "strengths".
Moody's expects market conditions in the US to remains "favourable" overall in the next 12 to 18 months.
This growth will be supported by market share gains "at the expense of smaller distributors", according to Moody's.
Shares in Ferguson closed down 1.1% Tuesday at 5,773.00 pence each.
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