Ferguson, the UK-headquartered plumbing equipment supplier which moved its primary stock market listing to New York last year, has “no regrets” over the switch, its chief executive said as the prospect of losing more companies sends a chill through the City of London.
A year after Ferguson won shareholders’ backing for the move, the competitiveness of London’s stock market is under renewed scrutiny after building materials group CRH and UK chip designer Arm opted to list their shares in New York.
Chief executive Kevin Murphy said transferring Ferguson’s listing had achieved almost all its objectives, including allowing management to pitch the company to a “very large pool of capital in the US” for little extra cost.
“I don’t have any regrets,” he said. Ferguson was known as Wolseley until a 2017 rebranding.
Ferguson began sounding out investors about the move in 2019 after Trian Partners, Nelson Peltz’s US activist fund, took a stake and pushed for the company to focus on its large North American business.
Ferguson, which was a constituent of the FTSE 100, the London market’s blue-chip index, sold its UK business in early 2021. The company added a US listing in 2021 but did not make New York its primary listing until last year.
As it pushed ahead with the plan, Murphy said the group highlighted that all of its revenues and profits would come from North America, where its peers were widely followed by investors and analysts.
Ferguson initially met resistance from shareholders but secured support from 95 per cent of votes cast last March. Its stock, which traded at about $121 when the change took effect last May, closed at $140.03 on Wednesday, giving it a market capitalisation of $29bn.
According to a person familiar with the matter, Ferguson’s decision was one of the reasons that encouraged CRH, which also makes the bulk of its profits in the US, to embark on its move.
Murphy said other London-listed companies had not been calling him for advice. “It wouldn’t be for me to comment on London’s competitiveness,” he added.
Ferguson was not on the S&P 500, Murphy noted, but the group believed it now met the criteria for admission to the most widely tracked index of large-cap US companies. Baird analysts said last November they expected inclusion in the index to drive more interest in Ferguson from both passive and active funds.
The group had accomplished its other goals of maintaining good relationships with long-term UK investors, making the move in a “methodical and consultative” manner and better informing US investors about its scale and growth record, Murphy said.
US investors now own just over 50 per cent of Ferguson’s stock, up from “the low 30 per cent range”, according to Bill Brundage, chief financial officer. The share of UK investors has halved from about 30 per cent, largely driven by the loss of UK-focused passive index funds.
Its shares have narrowly outperformed the S&P 500 but lagged the FTSE 100 over the past 12 months, a period in which the London index has benefited from its weighting towards energy companies and largely escaped the decline in tech group valuations.
Trading volumes in its shares have increased sharply with access to the more liquid US market, according to data from BMLL Technologies. But Murphy said he could not attribute movements in the share price to Ferguson’s listing location, highlighting other factors including market share gains and improvements in operating margins.
The group reported organic sales growth of 23.5 per cent and a 41 per cent jump in adjusted operating profit last year, but second-quarter results, released this week, showed slower organic top-line growth of 2.7 per cent and a 1.1 per cent fall in operating profit.
“Challenging” markets, particularly for new residential construction, prompted it to cut 1,500 jobs in the first half of the financial year and announce another 500 cuts in February.
Ferguson, which relocated its headquarters from Switzerland to the UK for tax reasons in 2019, was not looking to move it again despite having most of its management in Newport News, Virginia, Murphy said.
Changing its tax domicile to the US would require support from three-quarters of its investors, and for now it retains a team of associates and holds most board meetings in Winnersh in Berkshire.
The group has changed direction several times in the past. It traces its history back to the 1889 launch of the Wolseley Sheep Shearing Machine Company, which sold to farmers from the UK to Australia.
A notice in the Financial Times of that year highlighted the “considerable gain to the wool grower” from using its machinery and the directors’ expectations of profit margins exceeding 20 per cent.