Ferguson PLC

Wokingham, United Kingdom-based Ferguson PLC (LON: FERG) is a specialist distributor of plumbing and heating products which has operations in the USA, UK, Canada and Central Europe, with over 1 million customers served by 35,000 associates in 2,259 locations.

Trading Update (as on 3^rd December 2019)

(Source: Trading Update, Company Website)

The company announced the trading update for the three months to 31 October 2019. In the first quarter of 2020, the company’s reported revenue increased by 5.4% to $5,208 million as compared with the corresponding period of the last year, driven by the growth in the United States. The revenue also increased by 2.5% on an organic basis and 5.4% at constant exchange rates. While gross margins for the current quarter were marginally lower at 29.7%, and operating costs were well-positioned, due to good overall trading performance. For the three months to 31 October 2019, the underlying trading profit surged by 4.8% or $20 million to $433 million against the same period of the last year. The impact of IFRS16 added an additional $18 million to trading profit. In Q1 FY20, the trading days remained the same as compared to Q1 FY19. On 31^st October 2019, the company had completed $400 million of the $500 million share buyback.

Share Price Performance
 
Daily Chart as at December-04-19, before the market closed (Source: Thomson Reuters)

On 4th December 2019, Ferguson PLC shares were trading at GBX 6,634 at the time of writing before the market close (at 11:48 AM GMT), up by 2.47% against the previous day closing price. Stock's 52 weeks High and Low are GBX 7,028/GBX 4,594. The company's stock beta stood at 0.82, reflecting the lower volatility as compared to the benchmark index.

The shares of the company have delivered a negative return of 5.31 per cent in the last week.

Conclusion
The company expect to make additional decent progress in the year ahead, while the United States market is broadly flat. Presently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level. The arrival of new competitors with new technologies has started to grab market share. Lower-cost transactional business models have disrupted the wholesale and distribution businesses. As the US market growth moderated in the second half and the withdrawal of the UK from the European Union continues to create a level of uncertainty affecting the UK economy, the group is exposed to short-term macroeconomic volatility, which can impact the company’s performance.

Based on the above rationale, we have given a "Watch" recommendation at the current price of GBX 6,634 (as on 4^th December 2019, before the market close), while we look for any upcoming catalysts.

QUIZ PLC

United Kingdom-based QUIZ PLC (LON: QUIZ) is an international women's wear brand company. The group is focused on providing dressy casual wear, and occasion wear mainly for 16-35-year olds and offers footwear, clothing, and accessories. The company’s products comprise of playsuits, tops, shirts, skirts, and denim. The company has 73 stores and 174 concessions in the United Kingdom.

The company will announce the Christmas trading update in early January 2020.
Financial Highlights (for the six months ended 30 September 2019, £ million)

(Source: Interim Results, Company Fillings, LSE)

In the first half of 2020, the company’s revenue decreased by 5% to £63.3 millionas compared with the corresponding period of the last year data, due to a decrease in the UK stores and concessions revenue and flat Online revenue. While underlying online revenue surged by 7% to £20 million in H1 FY20against the £18.7 million in H1 FY19. The gross margin for the first half of 2020 increased to 61.7% against the same period of the last year. EBITDA rose by 4% to £5.8 million in H1 FY20from £5.6 million in H1 FY19, while underlying EBITDA decreased by 54% to £2.7 million in H1 FY20. For the six months ended 30 September 2019, the basic loss per share was 4.44 pence, and underlying basic earnings per share stood at 0.36 pence against the same period of the last year data. On 30^th September 2019, the net cash was £7.2 million, which reflects the operating cash flows of £4.9 million in the current period. In H1 FY20, the capital expenditure was stated at £2.5 million.

The company own website sales increased by 12% with the group website traffic surged by 11% year on year.During the existing period, the company has opened two stores and nine concessions, but seven concessions were closed.

Share Price Performance

Daily Chart as at December-04-19, before the market closed (Source: Thomson Reuters)

On 4th December 2019, QUIZ PLC shares were trading at GBX 14.85 at the time of writing before the market close (at 10:55 AM GMT), down by 11.21% against the previous day closing price. Stock's 52 weeks High and Low are GBX 42.63/GBX 12.69.

The shares of the company have delivered a negative return of 10.03 per cent in the last month. On Year to Date basis, the company’s stock has given investors 54.47 per cent of a negative return.

Conclusion
For the first half of 2020, the company’s performance of the stores and concessions remained bleak.The crucial Christmas trading period has commenced. On 29^th November 2019, the company’s sales performance was decent, due to the Black Friday week.

The market will remain challenging as customers make a fundamental shift towards the online marketplace. In the short-term, the company expects to face challenges from macroeconomic and geopolitical uncertainties, not least from the continuing global trade tensions, which has impacted the global growth.

Both the top-line and the bottom-line performance have declined for the period. The company’s trailing 12 months P/E multiple is significantly higher as compared to the industry multiple, reflecting overstretched valuations.
Based on the risks associated with the company’s operations, we have given an "AVOID" recommendation at the closing price of GBX 16.73 (as on 3rd December 2019).

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