PLC, a U.K.-based plumbing- and heating-supply company, is expanding its U.S.-based finance team and revamping its financial reporting ahead of the planned transfer of its primary listing to the New York Stock Exchange.
Ferguson shareholders last week voted in favor of shifting the company’s primary listing to the NYSE from the
London Stock Exchange.
The move, set to take place on May 12, follows a yearslong effort by the company to shed businesses outside of North America. Following its sale last year of Wolseley, its U.K.-based business and former namesake, the company is generating all of its revenue in the U.S. and Canada.
“It made sense for us to align our listing structure with where our business operates,” said Chief Financial Officer
who has served as group CFO since November 2020. He is based in the company’s U.S. headquarters in Newport News, Va.
As part of the transfer, Ferguson built out its U.S.-based finance team, adding staff with expertise in accounting rules and internal controls required for U.S.-listed companies. The company, which has about 80 people on its finance team, added approximately 25 finance positions in the U.S. and plans to maintain a small team in the U.K. It employs about 31,000 people in total.
Ferguson doesn’t currently have plans to move its corporate headquarters, which would involve changing its tax structure, Mr. Brundage said. The company incurred one-time costs of roughly $30 million to implement the changes required for the listing change.
Ferguson, a wholesale distributor of plumbing and ventilation equipment, has benefitted from the recent housing and remodeling boom—and has been quick to raise prices as inflation crept up over the past year, analysts said. Net income during the six months ended Jan. 31 was $996 million, more than double the year-earlier figure. Net sales were $13.3 billion, up 29% from a year earlier, with about 95% of those coming from the U.S.
Ferguson’s shares began trading on the NYSE in March 2021 after shareholders approved the addition of a New York listing in July 2020. Once the company shifts its primary listing to the NYSE, it will continue trading on the LSE but will drop out of the FTSE 100 index of large U.K. companies, according to Mr. Brundage.
“It’s hugely important in terms of their shareholder base,” said
chief executive of Thompson Research Group, a research and advisory firm that focuses on construction and industrial companies. Some U.S. funds have mandates that require them to buy U.S.-listed stocks, she said.
About 33% of Ferguson’s shareholders are in the U.S., while around 26% are in the U.K. The rest are based elsewhere around the world, mostly in Europe, according to the company.
“We really needed to bring our shareholder base along with us on this journey,” Mr. Brundage said.
Trian Fund Management LP, a New York-based activist investor, encouraged Ferguson to transfer its primary listing to the U.S., viewing the move as beneficial to the company’s valuation over time, according to
a partner and senior analyst at Trian. The firm owns approximately 11.4 million Ferguson shares, or 5.2% of the company.
To prepare for the listing change, Ferguson revamped its financial reporting and governance structure, Mr. Brundage said. At the beginning of its current fiscal year, the company in August began reporting under U.S. generally accepted accounting principles. It also provided shareholders four years of financial statements, as well as two years of balance sheets and cash flows, that merged its reporting under International Financial Reporting Standards with U.S. GAAP. The company also hosted a Q&A session with investors to walk them through the accounting change.
Ferguson is implementing internal controls required under the Sarbanes-Oxley Act, which requires more sign-offs and documentation than internal-control requirements in the U.K., Mr. Brundage said.
The company, which wants to maintain its U.K. shareholder base, aims to attract new U.S. investors in the months ahead and gain more recognition from American sell-side analysts. Over time, it aims to be included in the S&P 500 and other stock indexes, Mr. Brundage said.
“There’s generally more capital trading on U.S. indices than there is in the U.K., so over the long term, that should be a positive catalyst for our shareholders,” he said.
Shares of the company—which has a market capitalization of about £24 billion, or around $32 billion—traded on Thursday at £109.55 each, according to
a data provider.
Write to Kristin Broughton at [email protected]
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