TIDMFERG
RNS Number : 3685G
Ferguson PLC
17 March 2020
Ferguson plc
17 March 2020
Results for the half year ended 31 January 2020
STRONG OPERATIONAL DELIVERY IN THE FIRST HALF
$m H1 2020 H1 2019 Change
=========================== ========= ========= ========
Statutory financial results
================================================== ========= ========= ========
Revenue 10,966 10,847 +1.1%
Profit before tax 640 679 (5.7%)
Basic earnings per share 206.7c 254.5c
Interim dividend
per share 67.5c 63.1c +7.0%
========================= ======================= ========= ========= ========
Alternative performance measures(1)
================================================== ========= ========= ========
Ongoing revenue 9,893 9,489 +4.3%
Ongoing gross margin 30.2% 30.2%
Ongoing trading profit 782 714 +9.5%
Less impact of IFRS16 (35) -
--------- ---------
Underlying trading profit 747 714 +4.6%
Headline earnings per share 245.7c 241.9c +1.6%
Net debt : Adjusted
EBITDA 1.1x 1.1x
Trading days 127 127 -
-------------------------------------------------- --------- --------- --------
Highlights
- Ongoing revenue 4.3% ahead of last year with continued market share gains in the US.
- US revenue growth of 5.0% and underlying trading profit growth of 5.7%.
- Good gross margin and cost control ensured trading profit
growth outpaced revenue growth.
- Good operating cash generation and the Group has a strong
balance sheet and liquidity position.
- Interim dividend of 67.5c up 7.0%.
- Invested $141 million in acquisitions in the first half,
including S.W. Anderson and since the end of the period Columbia
Pipe and Supply.
- The Board expects to make a further announcement on listing
assessment later in the spring of 2020.
- UK demerger on track for completion this calendar year.
1) The Group uses Alternative Performance Measures ("APMs"),
which are not defined or specified under IFRS, to provide
additional helpful information. These measures are not considered
to be a substitute for IFRS measures and are consistent with how
business performance is planned, reported and assessed internally
by management and the Board. For further information on APMs,
including a description of our policy, purpose, definitions and
reconciliations to equivalent IFRS statutory measures see note 2 on
pages 18 to 22.
Kevin Murphy, Group Chief Executive, commented:
"Our focus has remained on serving our customers and making
their projects more successful because they worked with Ferguson.
Given the markets we serve remained flat we were pleased with our
progress in the first half and we continued to generate above
market revenue growth in the major US business units. This,
alongside continued operational delivery including tight cost
control, ensured we delivered robust trading profit growth and good
cash generation.
"In response to the outbreak of the Coronavirus (COVID-19) in
recent weeks the Company is taking steps to mitigate any potential
impacts. We are following the guidance of governmental health
agencies including the World Health Organization and the Center for
Disease Control. Our immediate priority is safeguarding the health
and wellbeing of our associates, supporting our business and
customers and helping the communities in which we operate.
"Given the strength of our first half results, we had intended
to confirm our full-year trading profit outlook for 2020. However,
due to the dynamic situation unfolding with COVID-19 it is too
early to understand its impact on current trading. Recent
government actions to contain the spread of COVID-19 and societal
reactions, alongside any potential actions we will take to mitigate
them are not reflected in existing market forecasts and it is too
early to quantify them. Ferguson remains well positioned for
long-term success operating in attractive and fragmented markets
with a robust business model and backed by a strong balance sheet
and liquidity position."
For further information please contact
Ferguson plc
Mike Powell, Group Chief Financial Officer Tel: +44 (0) 118 9273800
Mark Fearon, Director of Corporate Communications
and IR Mobile: +44 (0) 7711 875070
Media Enquiries
Mike Ward, Head of Corporate Communications Mobile: +44 (0) 7894 417060
Nina Coad, David Litterick (Brunswick) Tel: +44 (0) 20 7404 5959
In light of current restrictions on travel as a result of
Coronavirus (COVID-19) Ferguson has decided to change its usual
Half Year Results presentation to a conference call. The call
hosted by Kevin Murphy, Chief Executive and Mike Powell, Chief
Financial Officer will commence at 11:00 UK time (07:00 US EST)
today. The call will be recorded and available on our website after
the event www.fergusonplc.com.
Dial in number United Kingdom +44 (0)20 3936 2999
United States +1 646 664 1960
Ask for the Ferguson call quoting 007088.
To register for the webcast please click here .
Financial results
Ferguson plc delivered a strong trading result in the first
half. Markets in the US remained flat and the businesses continued
to take market share.
Statutory results
Revenue of $10,966 million (2019: $10,847 million) was 1.1%
ahead of last year. Statutory profit before tax was $640 million
(2019: $679 million), lower due to exceptional charges ($19
million) and the impairment of an associate ($22 million) in the
current year partially offset by t he adoption of IFRS 16 in the
period which increased profit before tax by $8 million. Profit for
the period decreased to $467 million (2019: $586 million) due to
the factors noted above plus an increase in the tax charge
primarily as a result of Swiss tax reform and a non-recurring gain
from discontinued operations in the prior period ($46 million).
Alternative performance measures
Ongoing revenue of $9,893 million (2019: $9,489 million) was
4.3% ahead at constant exchange rates and 2.0% ahead on an organic
basis. Inflation in the first half was approximately 1 % . Ongoing
gross margins of 30.2% (2019: 30.2%) were in line with last year.
The cost base was well controlled with operating expenses in the
ongoing business 3.9% higher which included 2.1% from
acquisitions.
Underlying trading profit was $747 million (2019: $714 million),
4.6% ahead of last year outpacing revenue growth. Foreign exchange
movements had an immaterial impact on revenue and trading
profit.
Update on Group strategy
Our strategy is unchanged. We continue to focus on driving all
our resources and knowledge to serve our customers and make their
projects better because they worked with Ferguson. To achieve this
we will attract, retain and develop the very best associates in the
industry who act as trusted advisors to our customers. We will give
customers an unrivalled choice of products sourcing the leading
brands in all our categories, including the highest quality own
brands. We will drive scale in our business ensuring customers have
access to products and advice where and when they need it, offering
them an omni-channel experience. We will use technology to make our
business more productive and equip our associates with the tools to
make them more effective, while we constantly look to innovate and
disrupt ourselves.
Operating and financial review
Further details of the financial performance and market
conditions in the Group's businesses are set out below.
First half regional analysis
US$ millions Revenue Revenue Change Trading Less Underlying Trading Underlying
H1 2020 H1 2019 profit impact Trading profit Change
H1 2020 of IFRS16 profit H1 2019
H1 2020 H1 2020
===================== ======== ======== ====== ======== ========== ========== ======== ==========
US 9,318 8,874 +5.0% 774 (34) 740 700 +5.7%
Canada 575 615 (6.5%) 30 (1) 29 39 (25.6%)
Central costs - - (22) - (22) (25)
===================== ======== ======== ====== ======== ========== ========== ======== ==========
Ongoing Group 9,893 9,489 +4.3% 782 (35) 747 714 +4.6%
===================== ======== ======== ====== ======== ========== ========== ======== ==========
UK (non-ongoing) (1) 1,073 1,126 (4.7%) 30 - 30 32 (6.3%)
===================== ======== ======== ====== ======== ========== ========== ======== ==========
1) H1 2019 UK (non-ongoing) numbers are presented excluding
soak.com
Quarterly organic revenue growth
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 H1 2020
--------------- -------- -------- -------- -------- -------- -------- --------
USA +9.6% +9.7% +3.3% +3.0% +3.1% +2.1% +2.6%
Canada +3.3% +0.5% (2.9%) (5.2%) (6.4%) (6.7%) (6.6%)
--------------- -------- -------- -------- -------- -------- -------- --------
Ongoing Group +9.2% +9.1% +3.0% +2.5% +2.5% +1.6% +2.0%
--------------- -------- -------- -------- -------- -------- -------- --------
USA
The US business grew revenue by 5.0% which included acquisition
growth of 2.4%. Price inflation was about 1%. US market growth was
broadly flat with all of our business units except Industrial
generating organic revenue growth in the first half. Blended
Branches achieved 3.7% revenue growth overall. The East grew
significantly boosted by acquisitions, with moderate growth in the
Central and West. Waterworks revenue growth of 12.8% was
principally driven by strong growth in the single-family
residential sector. HVAC revenue growth was good and eBusiness
revenues were up. Industrial revenues were lower in line with
slightly weaker markets.
The organic revenue growth by end market was as follows:
% of US Market Organic
revenue growth revenue
growth
======================== ========= ======== =========
Residential 50% +1% +3%
Commercial 35% +1% +3%
Civil / Infrastructure 7% +3% +10%
Industrial 8% (6%) (7%)
========================= ========= ======== =========
Flat +2.6%
======================== ========= ======== =========
Gross margins remained strong and operating expens es were well
controlled and included labor cost inflation of approximately 2%.
As a result, underlying trading profit of $740 million (2019: $700
million) was 5.7% ahead of last year and outpaced total revenue
growth. The underlying trading margin was 7.9% (2019: 7.9%).
Two bolt-on acquisitions were completed in the first half with
total annualised revenues of approximately $98 million. As
previously announced these included S.W. Anderson and Process
Instruments & Controls. After the half year end we acquired
Columbia Pipe & Supply which specializes in PVF, commercial
mechanical, commercial plumbing, industrial, valve automation,
engineered products and hydronics. The business operates from 16
locations in five states in the Midwest region and generated
revenue of $220 million in the year ended 31 December 2019.
Canada
In Canada, revenue was 6.5% lower with our markets remaining
challenging throughout the period including inflation of
approximately 2%. Gross margins were slightly lower than last year
but operating expenses were well controlled. Underlying trading
profit of $29 million was $10 million behind last year and the
underlying trading margin was 5.0% (2019: 6.3%) with the decline
driven by lower revenues.
Central costs
Central costs in the first half were $22 million, $3 million
lower than last year.
UK (non-ongoing operations)
Revenue declined 4.7% in the UK, primarily as a result of a
deliberate move away from low margin sales, partially offset by
2.1% of growth from acquisitions. Inflation was about 1%. Repairs,
maintenance and improvement markets were subdued. Gross margins
were ahead due to improved product mix. Underlying t rading profit
of $30 million was $2 million lower than last year, however
performance in the second quarter improved with trading profit of
$15 million, up $2 million year-over-year. The trading margin was
2.8% (2019: 2.8%). We continue to actively manage the cost base in
the UK and exceptional costs of $9 million were incurred,
principally relating to the closure of a distribution centre in
Worcester.
E xceptional items
A total exceptional charge of $19 million (2019: exceptional
gain of $3 million) included $8 million of demerger costs relating
to the UK business; $9 million principally related to the closure
of a UK distribution centre; and $2 million of costs relating to
the Group's listing consultation.
Finance costs
Net finance costs before exceptional items were $70 million
(2019: $35 million), with $27 million of the increase due to the
adoption of IFRS16.
Tax
The Group incurred a tax charge of $173 million (2019: $139
million) on profit before tax of $640 million (2019: $679 million).
This includes an ongoing tax charge of $181 million (2019: $155
million) which equates to an ongoing effective tax rate of 25.4%
(2019: 22.8%) on the ongoing trading profit less net finance costs
of $712 million (2019: $679 million). The tax rate increased, as
previously guided, during the first half as a result of Swiss tax
reform. The ongoing effective tax rate is in line with technical
guidance for the full year.
Earnings per share
Total basic earnings per share were 206.7 cents (2019: 254.5
cents). Headline earnings per share increased by 1.6% to 245.7
cents (2019: 241.9 cents) mainly due to the increase in trading
profit and the lower share count as a result of last year's share
buy back programme, partially offset by a higher effective tax
rate.
Cash flow
The Group continued to generate good cash flows with cash
generated from operations of $465 million (1) (2019: $287 million),
after a seasonal working capital outflow of $381 million (2019:
$503 million). Net interest (1) and tax amounted to $215 million
(2019: $166 million) and acquisitions amounted to $141 million
(2019: $589 million). Capital investment was $164 million (2019:
$244 million). Ordinary dividends paid amounted to $327 million
(2019: $300 million) and we completed $350 million (2019: $nil) of
share buy backs.
1) Cash generated from operations is presented excluding IFRS16.
IFRS 16 has no impact on net Cash Flow, but does increase cash
generated from operations by $171 million, offset by increased
interest of $27 million and capital lease payments of $144
million.
Net debt and pensions
The Group's net debt, which excludes leases, at 31 January 2020
was $1,944 million (31 January 2019: $1,885 million (1) ) and the
ratio of net debt to the last twelve months adjusted EBITDA was
1.1x (31 January 2019: 1.1x). The Group has a strong liquidity
position and aims to operate with a net debt to adjusted EBITDA
ratio of between 1x and 2x.
The IFRS16 lease liability recognised on the balance sheet as at
31 January 2020 was $1,445 million.
On 10 March 2020 the Group entered into a new $1.1 billion
revolving credit facility, provided by a syndicate of eleven banks,
with an initial maturity of five years and the option for the Group
to apply for two further one year maturity extensions. This
facility will replace the existing GBP800 million revolving credit
facility which has now been cancelled.
At 31 January 2020 the Group's net pension position was an asset
of $113 million (2019: net asset of $154 million) with the decline
due to lower discount rates on the liability.
1) 2019 net debt includes $5 million of finance leases which
have not been adjusted
Shareholder returns
In November 2019 the Group paid a final dividend of 145.1 cents
per share (2019: 131.9 cents per share) amounting to $327 million.
This included an upwards rebasing of 10% reflecting the Group's
excellent track record of cash generation and the ongoing strength
of the balance sheet. An interim dividend of 67.5 cents per share
(2019: 63.1 cents per share) representing an increase of 7% will be
paid on 30 April 2020 to shareholders on the register on 27 March
2020. In the six months to 31 January 2020, the Company bought back
$350 million of shares. On 4 February we announced a further $500
million share buy back program and in the period to 13 March 2020
we bought back $96 million of shares.
Board changes
On 19 November 2019 Kevin Murphy succeeded John Martin as Group
Chief Executive. Kevin, a US national based in Virginia, was
appointed CEO of Ferguson Enterprises in the USA and joined the
Board in August 2017. Under his leadership Ferguson has continued
to gain market share and generate profitable growth. He has a
wealth of operational experience gained in the plumbing and heating
industry in the US. He has a strong track record of delivery having
previously served as Chief Operating Officer of Ferguson
Enterprises for 10 years after joining the business through an
acquisition of his family's Waterworks business Midwest Pipe and
Supply in 1999.
Following the Annual General Meeting (AGM) in November 2019,
Geoff Drabble succeeded Gareth Davis as Chairman. Geoff joins
Ferguson following a 12 year period as Chief Executive of Ashtead
Group plc, the FTSE 100 industrial equipment rental company. He was
previously an executive director of The Laird Group plc and held a
number of senior management positions at Black & Decker. His
record of value creation is outstanding and he brings a wealth of
experience in the distribution, technology and manufacturing
sectors, particularly in the USA.
Darren Shapland stood down as a Non Executive Director at the
AGM in November 2019 and Gareth Davis stood down as a Non Executive
Director in January 2020.
UK demerger
The demerger process for Wolseley UK is on track and we expect
to complete the transaction within the current calendar year.
The Board is delighted that Gareth Davis has agreed to be
Chairman of the demerged Group once completed. Gareth currently
serves as Chairman of DS Smith plc, as Deputy Chairman of M&C
Saatchi plc and as a Non Executive Director for Gresham House plc.
He was previously Chairman of Ferguson plc for nearly 9 years,
Chairman of William Hill plc and Group Chief Executive of Imperial
Tobacco Group plc. Gareth is in the process of forming a Board for
the new company which will be called 'Wolseley Group plc'.
In January 2020 Simon Oakland was appointed as the Chief
Executive Officer of Wolseley UK after a short period as the
interim. Simon brings extensive experience in strategy, finance and
operations to the role and was formerly CEO of Ferguson's Canadian
business and Head of Corporate Development. He joined Ferguson as
Managing Director of the French business before moving on to the
role of Group Head of Corporate Development where he was
responsible for M&A activity and corporate strategy. Prior to
joining Ferguson in 2012, Simon gained valuable strategic and Board
experience across a variety of sectors spanning Europe, North
America and the Far East as part of a successful career in private
equity, most recently as a Partner at Alchemy Partners.
Outlook
Given the strength of our first half results, we had intended to
confirm our full-year trading profit outlook for 2020. However, due
to the dynamic situation unfolding with COVID-19 it is too early to
understand its impact on current trading. Recent government actions
to contain the spread of COVID-19 and societal reactions, alongside
any potential actions we will take to mitigate them are not
reflected in existing market forecasts and it is too early to
quantify them. Ferguson remains well positioned for long-term
success operating in attractive and fragmented markets with a
robust business model and backed by a strong balance sheet and
liquidity position.
Principal risks and uncertainties
The principal risks and uncertainties which affect the Group
are:
New competitors Wholesale and distribution businesses in other industry
and technology sectors have been disrupted by the arrival of new
competitors with lower-cost transactional business
models or new technologies to aggregate demand away
from incumbents. The Board is attuned to both the
risks and opportunities presented by these changes
and is actively engaged as the Group takes action
to respond.
Market conditions This risk relates to the Group's exposure to short-term
macroeconomic conditions and market cycles in our
sector (i.e. periodic market downturns). Some of
the factors driving market growth are beyond the
Group's control and are difficult to forecast.
The Company is closely monitoring the outbreak of
the COVID-19 coronavirus and taking prudent steps
to mitigate any potential impacts to the health
and safety of our associates or to the successful
operation of our business. We are following the
guidance of the World Health Organization and other
governmental health agencies, including with respect
to travel restrictions. The Company remains prepared
to implement appropriate mitigation strategies to
minimize any potential business disruption.
Pressure on The Group's ability to maintain attractive profit
margins margins can be affected by a range of factors. These
include levels of demand and competition in our
markets, the arrival of new competitors with new
business models, the flexibility of the Group's
cost base, changes in the cost and availability
of commodities or goods purchased, the imposition
of new or increased governmental tariffs on international
sources of supply, customer or supplier consolidation
or manufacturers shipping directly to customers.
There is a risk that the Group may not identify
or respond effectively to changes in these factors.
If it fails to do so, the amount of profit generated
by the Group could be significantly reduced.
Information The Group has a clearly defined global technology
and technology strategy and roadmap. Technology systems and data
are fundamental to the future growth and success
of the Group. Information Technology (IT) risks
are categorised as strategic and operational. Strategic
risks are threats that could prevent execution of
the IT strategic plan such as inadequate leadership,
poor allocation/management of resources and/or poor
execution of the organisational change of management
necessary to adopt and apply new business processes.
Operational risks include business disruption resulting
from system failures, fraud or criminal activity.
This includes security threats and/or failures in
the ability of the organisation to operate, recover
and restore operations after such disruptions. While
cyber security incidents encountered by Group businesses
to date have resulted in minimal impact, this risk
continues to persist and evolve.
Health and safety The nature of Ferguson's operations can expose its
associates, contractors, customers, suppliers and
other individuals to health and safety risks. Health
and safety incidents can lead to loss of life or
severe injuries.
Regulations The Group's operations are affected by various statutes,
regulations and standards in the countries and markets
in which it operates. The amount of such regulation
and the penalties can vary. While the Group is not
engaged in a highly regulated industry, it is subject
to the laws governing businesses generally, including
laws relating to competition, product safety, data
protection, labour and employment practices, accounting
and tax standards, international trade, fraud, bribery
and corruption, land usage, the environment, health
and safety, transportation and other matters. Violations
of certain laws and regulations may result in significant
fines and penalties and damage to the Group's reputation.
Talent management As the Group develops new business models and new
and retention ways of working, it needs to develop suitable skill-sets
within the organisation. Furthermore, as the Group
continues to execute a number of strategic change
programmes, it is important that existing skill-sets
and talent are retained. Failure to do so could
delay the execution of strategic change programmes,
result in a loss of "corporate memory" and reduce
the Group's supply of future leaders.
The Group faces many other risks which, although important and
subject to regular review, have been assessed as less significant
and are not listed here. These include, for example, natural
catastrophe and business interruption risks and certain financial
risks.
Statement of Directors' responsibilities
The Directors confirm, to the best of their knowledge, that
these condensed interim financial statements have been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Report and Accounts.
A list of current Directors is maintained on the Ferguson plc website : www.fergusonplc.com .
By order of the Board,
Kevin Murphy Mike Powell
Group Chief Executive Group Chief Financial Officer
Notes to statement
1. About Ferguson
Ferguson plc is a value added distributor of plumbing and
heating products to professional contractors principally operating
in North America and the UK. Ongoing revenue for the year ended 31
July 2019 was $21.8 billion and ongoing trading profit was $1.6
billion. Ferguson plc is listed on the London Stock Exchange (LSE:
FERG) and is in the FTSE 100 index of listed companies. For more
information, please visit www.fergusonplc.com or follow us on
Twitter https://twitter.com/Ferguson_plc .
2. Timetable for the interim dividend
The timetable for payment of the interim dividend is as
follows:
Ex dividend date: 26 March 2020
Record date: 27 March 2020
Payment date: 30 April 2020
The dividend is declared in US dollars but will be paid in
sterling, shareholders can elect to receive the dividend in US
dollars. A dividend reinvestment plan is in operation. Those
shareholders who have not elected to receive dividends in US
dollars or elected to participate in the dividend reinvestment
plan, and who would like to make an election with respect to the
2020 interim dividend, may do so by contacting Equiniti on 0371 384
2934 (or if outside the UK +44 (0) 121 415 7011). The last day for
election for the proposed interim dividend is 7 April 2020 and any
requests should be made in good time ahead of that date.
3. Legal disclaimer
Certain information included in this announcement is
forward-looking and involves known and unknown risks, assumptions
and uncertainties that could cause actual results or outcomes to
differ from those expressed or implied in any forward-looking
statement. There forward-looking statements are based on the
Company's current belief and expectations about future events and
cover all matters which are not historical facts and include,
without limitation, projections relating to results of operations
and financial conditions and the Company's plans and objectives for
future operations, including, without limitation, discussions of
expected future revenues, financing plans, prospects, growth,
strategies, expected expenditures and divestments, risks associated
with changes in economic conditions, the strength of the plumbing
and heating market in North America and Europe, fluctuations in
product prices and changes in exchange and interest rates.
Forward-looking statements are sometimes identified by the use of
forward-looking terminology, including terms such as "believes",
"estimates", "continues", "anticipates", "expects", "forecasts",
"intends", "plans", "projects", "goal", "target", "aim", "may",
"will", "would", "could" or "should" or, in each case, their
negative or other variations thereon or comparable terminology.
Forward-looking statements are not guarantees of future performance
and actual events or results may differ materially from any
estimates or forecasts indicated, expressed or implied in such
forward looking statements. All forward-looking statements in this
announcement are based upon information known to the Company on the
date of this announcement. Accordingly, no assurance can be given
that any particular expectation will be met and readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as at the date of this announcement.
Additionally, forward-looking statements regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Other than in accordance
with applicable law, (including under the UK Listing Rules, the
Prospectus Rules, the Disclosure Guidance and the Transparency
Rules of the Financial Conduct Authority), the Company undertakes
no obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, change in events
or otherwise. Nothing in this announcement shall exclude any
liability under applicable laws that cannot be excluded in
accordance with such laws.
-ends-
Condensed consolidated income statement (unaudited)
Half year to 31 January 2020
2020 2019
------------------------ ----- ---------------------------------------------------- ----------------------------------------------------
Exceptional items Exceptional items
Before exceptional items (note 4) Total Before exceptional items (note 4) Total
Half year to 31 January Notes $m $m $m $m $m $m
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Continuing operations
Revenue 3 10,966 - 10,966 10,847 - 10,847
Cost of sales (7,722) (2) (7,724) (7,653) (1) (7,654)
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Gross profit 3,244 (2) 3,242 3,194 (1) 3,193
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Operating costs:
amortisation of acquired
intangible assets 9 (60) - (60) (44) - (44)
other (2,432) (17) (2,449) (2,441) 1 (2,440)
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Operating costs (2,492) (17) (2,509) (2,485) 1 (2,484)
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Operating profit 3 752 (19) 733 709 - 709
Net finance costs 5 (70) - (70) (35) - (35)
Share of (loss)/profit
after tax of associates (1) - (1) 2 - 2
Impairment of interests
in associates (22) - (22) - - -
Gain on disposal of
interests in associates - - - - 3 3
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Profit before tax 659 (19) 640 676 3 679
Tax 6 (175) 2 (173) (143) 4 (139)
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Profit from continuing
operations 484 (17) 467 533 7 540
Profit from discontinued
operations (1) 1 - 1 45 46
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Profit for the period 483 (16) 467 534 52 586
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Earnings per share 8
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Continuing operations and discontinued operations
Basic earnings per share 206.7c 254.5c
Diluted earnings per
share 205.5c 252.8c
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Continuing operations
only
Basic earnings per share 206.7c 234.5c
Diluted earnings per
share 205.5c 233.0c
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Alternative performance
measures
Underlying trading
profit from ongoing
operations 2 747 714
Underlying trading
profit from non-ongoing
operations 2 30 39
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Underlying trading
profit from continuing
operations 2, 3 777 753
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Adjusted EBITDA from
continuing operations 2 872 842
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
Headline earnings per
share 2, 8 245.7c 241.9c
------------------------ ----- ------------------------ ----------------- ------- ------------------------ ----------------- -------
The Group adopted IFRS 16 "Leases" on 1 August 2019 applying the
modified retrospective transition method. As a result, comparatives
have not been restated and are shown on an IAS 17 "Leases" basis.
See note 1 for further details.
Condensed consolidated statement of comprehensive income
(unaudited)
Half year to 31 January 2020
2020 2019
Half year to 31 January $m $m
---------------------------------------------------------------------------------------------- ------ ----
Profit for the period 467 586
---------------------------------------------------------------------------------------------- ------ ----
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange gain/(loss) on translation of international operations(1) 74 (9)
Exchange (loss)/gain on translation of borrowings and derivatives designated as hedges of
international operations(1) (32) 4
Cumulative currency translation differences on disposal of interests in associates(1) - 7
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on retirement benefit plans(2) (52) (32)
Income tax credit/(charge) on retirement benefit plans(2) 9 (1)
---------------------------------------------------------------------------------------------- ------ ----
Other comprehensive expense for the period (1) (31)
---------------------------------------------------------------------------------------------- ------ ----
Total comprehensive income for the period 466 555
---------------------------------------------------------------------------------------------- ------ ----
1. Impacting the translation reserve.
2. Impacting retained earnings.
Condensed consolidated statement of changes in equity
(unaudited)
Reserves
----------------- ----- -------- ---------- -------------------------------------------- --------------- -------
Share Share Translation Treasury Own Retained Non-controlling Total
capital premium reserve shares shares earnings interest equity
Notes $m $m $m $m $m $m $m $m
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Profit for the
period - - - - - 467 - 467
Other
comprehensive
income/(expense) - - 42 - - (43) - (1)
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Total
comprehensive
income - - 42 - - 424 - 466
Purchase of own
shares by
Employee Benefit
Trusts - - - - (26) - - (26)
Issue of own
shares by
Employee Benefit
Trusts - - - - 39 (39) - -
Credit to equity
for share-based
payments - - - - - 21 - 21
Tax relating to
share-based
payments - - - - - (3) - (3)
Purchase of
Treasury shares - - - (191) - - - (191)
Disposal of
Treasury shares - - - 13 - (11) - 2
Dividends paid 7 - - - - - (327) - (327)
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Net change to
equity - - 42 (178) 13 65 - (58)
At 31 July 2019 30 9 (598) (305) (102) 5,316 - 4,350
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Adjustment on
adoption of IFRS
16 1 - - - - - (187) - (187)
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
At 1 August 2019 30 9 (598) (305) (102) 5,129 - 4,163
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
At 31 January
2020 30 9 (556) (483) (89) 5,194 - 4,105
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Reserves
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Share Share Translation Treasury Own Retained Non-controlling Total
capital premium reserve shares shares earnings interest equity
Notes $m $m $m $m $m $m $m $m
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Profit for the
period - - - - - 586 - 586
Other
comprehensive
income/(expense) - - 2 - - (33) - (31)
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Total
comprehensive
income - - 2 - - 553 - 555
Purchase of own
shares by
Employee Benefit
Trusts - - - - (38) - - (38)
Issue of own
shares by
Employee Benefit
Trusts - - - - 25 (25) - -
Credit to equity
for share-based
payments - - - - - 21 - 21
Tax relating to
share-based
payments - - - - - (3) - (3)
Disposal of
Treasury shares - - - 9 - (8) - 1
Dividends paid 7 - - - - - (303) - (303)
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Net change to
equity - - 2 9 (13) 235 - 233
At 1 August 2018 45 67 (556) (1,380) (90) 5,972 (1) 4,057
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
At 31 January
2019 45 67 (554) (1,371) (103) 6,207 (1) 4,290
----------------- ----- -------- ---------- ----------- ---------- ------- ---------- --------------- -------
Condensed consolidated balance sheet (unaudited)
Half year to 31 January 2020
As at As at
31 July As at 31 January
2019 31 January 2020 2019
$m Notes $m $m
--------- -------------------------------------------------- ----- ----------------- ------------
Assets
Non-current assets
1,656 Intangible assets: goodwill 9 1,691 1,632
423 Intangible assets: other 9 451 440
- Right of use assets 10 1,197 -
1,349 Property, plant and equipment 9 1,417 1,316
29 Interests in associates 5 41
42 Financial assets 51 38
178 Retirement benefit assets 137 171
164 Deferred tax assets 509 124
340 Trade and other receivables 363 332
10 Derivative financial assets - 7
--------- -------------------------------------------------- ----- ----------------- ------------
4,191 5,821 4,101
--------- -------------------------------------------------- ----- ----------------- ------------
Current assets
2,821 Inventories 2,970 2,915
3,213 Trade and other receivables 2,968 2,970
6 Current tax receivable 16 12
9 Financial assets 9 -
12 Derivative financial assets 22 3
1,133 Cash and cash equivalents 12 775 699
--------- -------------------------------------------------- ----- ----------------- ------------
7,194 6,760 6,599
--------- -------------------------------------------------- ----- ----------------- ------------
1 Assets held for sale 2 51
--------- -------------------------------------------------- ----- ----------------- ------------
11,386 Total assets 12,583 10,751
--------- -------------------------------------------------- ----- ----------------- ------------
Liabilities
Current liabilities
3,797 Trade and other payables 3,120 3,034
251 Current tax payable 240 189
52 Borrowings 15 722 302
- Lease liabilities 10 265 -
2 Obligations under finance leases - 2
79 Provisions 82 89
- Retirement benefit obligations 6 6
--------- -------------------------------------------------- ----- ----------------- ------------
4,181 4,435 3,622
--------- -------------------------------------------------- ----- ----------------- ------------
Non-current liabilities
292 Trade and other payables 276 295
- Derivative financial liabilities - 7
2,292 Borrowings 15 2,019 2,280
- Lease liabilities 10 1,180 -
4 Obligations under finance leases - 3
56 Deferred tax liabilities 369 75
186 Provisions 181 168
25 Retirement benefit obligations 18 11
--------- -------------------------------------------------- ----- ----------------- ------------
2,855 4,043 2,839
--------- -------------------------------------------------- ----- ----------------- ------------
7,036 Total liabilities 8,478 6,461
--------- -------------------------------------------------- ----- ----------------- ------------
4,350 Net assets 4,105 4,290
--------- -------------------------------------------------- ----- ----------------- ------------
Equity
30 Share capital 30 45
9 Share premium 9 67
4,311 Reserves 4,066 4,179
--------- -------------------------------------------------- ----- ----------------- ------------
4,350 Equity attributable to shareholders of the Company 4,105 4,291
--------- -------------------------------------------------- ----- ----------------- ------------
- Non-controlling interest - (1)
--------- -------------------------------------------------- ----- ----------------- ------------
4,350 Total equity 4,105 4,290
--------- -------------------------------------------------- ----- ----------------- ------------
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Condensed consolidated cash flow statement (unaudited)
Half year to 31 January 2020
2020 2019
Half year to 31 January Notes $m $m
----------------------------------------------------------------------------- ----- ------- -------
Cash flows from operating activities
Cash generated from operations 11 636 287
Net interest paid (72) (38)
Tax paid (170) (128)
----------------------------------------------------------------------------- ----- ------- -------
Net cash generated from operating activities 394 121
----------------------------------------------------------------------------- ----- ------- -------
Cash flows from investing activities
Acquisitions of businesses (net of cash acquired) 13 (141) ( 589 )
Disposals of businesses (net of cash disposed of) - 199
Purchases of property, plant and equipment ( 145 ) (230)
Proceeds from sale of property, plant and equipment and assets held for sale 8 38
Purchases of intangible assets (19) (14)
Acquisition of associates and other investments (3) (9)
Disposal of interests in associates - 18
----------------------------------------------------------------------------- ----- ------- -------
Net cash used in investing activities (300) ( 587 )
----------------------------------------------------------------------------- ----- ------- -------
Cash flows from financing activities
Purchase of own shares by Employee Benefit Trusts (26) (38)
Purchase of Treasury shares1 (350) -
Proceeds from the sale of Treasury shares 2 1
Proceeds from borrowings and derivatives 154 754
Repayments of borrowings - (2)
Lease liability capital payments ( 144 ) -
Finance lease capital payments - (1)
Dividends paid to shareholders (327) (300)
----------------------------------------------------------------------------- ----- ------- -------
Net cash (used in)/generated from financing activities (691) 414
----------------------------------------------------------------------------- ----- ------- -------
Net cash used (597) (52)
Effects of exchange rate changes (1) (3)
----------------------------------------------------------------------------- ----- ------- -------
Net decrease in cash, cash equivalents and bank overdrafts (598) (55)
Cash, cash equivalents and bank overdrafts at the beginning of the period 1,086 458
----------------------------------------------------------------------------- ----- ------- -------
Cash, cash equivalents and bank overdrafts at the end of the period 12 488 403
----------------------------------------------------------------------------- ----- ------- -------
1. Purchase of Treasury shares includes a cash outflow of $159
million which was irrevocably committed to at 31 July 2019 relating
to the share buy back programme
announced on 10 June 2019.
Notes to the condensed consolidated interim financial statements
(unaudited)
Half year to 31 January 2020
1. Basis of preparation
The Company is incorporated in Jersey under the Companies
(Jersey) Law 1991 and is headquartered in the UK.
The condensed consolidated interim financial statements for the
six months ended 31 January 2020 were approved by the Board of
Directors on 16 March 2020. The condensed consolidated interim
financial statements have been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
The accounting policies applied by the Group in these condensed
consolidated interim financial statements are the same as those set
out in the Group's Annual Report and Accounts for the year ended 31
July 2019, except for the adoption of IFRS 16 "Leases" on 1 August
2019.
The condensed consolidated interim financial statements are
unaudited. The financial information for the year ended 31 July
2019 does not constitute the Group's statutory financial
statements. The Group's statutory financial statements for that
year have been filed with the Jersey Registrar of Companies and
received an unqualified auditor's report.
Going concern
The condensed consolidated interim financial statements have
been prepared on a going concern basis. Given the current dynamic
situation unfolding with Covid-19, the Group has assessed the
impact of a number of alternate scenarios including a severe short
term revenue reduction and taking into account reasonable
mitigating actions. The Directors of the Company are confident, on
the basis of current financial projections and facilities available
and after considering these downside scenarios and sensitivities,
that the Group has sufficient resources for its operational needs
and will remain in compliance with the financial covenants in its
bank facilities for at least the next 12 months.
Accounting developments and changes
On 1 August 2019, the Group adopted IFRS 16 "Leases". The
standard makes changes to the treatment of leases in the financial
statements, requiring the use of a single model to recognise a
lease liability and a right of use asset for all leases, including
those classified as operating leases under IAS 17 "Leases", unless
the underlying asset has a low value or the lease term is 12 months
or less. Rental charges in the income statement previously recorded
under IAS 17 are replaced with depreciation and interest charges
under IFRS 16 and right of use assets will be subject to impairment
reviews in accordance with IAS 36 "Impairment of Assets" replacing
the previous requirement to recognise a provision for onerous lease
contracts.
The Group has applied the modified retrospective transition
method and has not restated comparatives for the six months ended
31 January 2019 or the year ended 31 July 2019. For the majority of
leases, the right of use asset on transition has been measured as
if IFRS 16 had been applied since the commencement of the lease,
discounted using the Group's incremental borrowing rate as at 1
August 2019, with the difference between the right of use asset and
the lease liability taken to retained earnings. For the remaining
leases which relate to the Group's US fleet, where sufficient
historic information has not been available, the right of use asset
has been measured as equal to the lease liability on
transition.
The Group has elected to apply the following practical
expedients on transition:
-- To not reassess whether contracts are, or contain, a lease at
the date of initial application;
-- Application of a single discount rate to a portfolio of
leases with reasonably similar characteristics;
-- Reliance on previous assessment of whether leases are onerous
in accordance with IAS 37 "Provisions, Contingent Liabilities and
Contingent Assets" immediately before the date of initial
application as an alternative to performing an impairment
review;
-- Election to not apply the measurement requirements of the
standard to leases where the term ends within 12 months of the date
of initial application;
-- Exclusion of initial direct costs from the measurement of the
right of use asset at the date of initial application; and
-- Use of hindsight, such as in determining the lease term.
The impact of the adoption of IFRS 16 on the income statement in
the six months ended 31 January 2020 was to decrease rental costs
by $166 million, increase depreciation by $131 million and increase
finance costs by $27 million. The impact on the cash flow statement
was to increase cash generated from operations by $171 million,
increase interest paid by $27 million and increase lease liability
capital payments by $144 million. There was no impact on the net
decrease in cash, cash equivalents and bank overdrafts.
The impact of the adoption of IFRS 16 on the opening balance
sheet at 1 August 2019 was as follows:
$m
--------------------------------- -------
Right of use assets 1,220
Property, plant and equipment (6)
Net deferred tax assets 69
Lease liabilities (1,481)
Obligations under finance leases 6
Other 5
--------------------------------- -------
Net retained earnings adjustment (187)
--------------------------------- -------
A reconciliation of the operating lease commitments previously
reported under IAS 17 in the Group's Annual Report and Accounts for
the year ended 31 July 2019 to the lease liability at 1 August 2019
under IFRS 16 is as follows:
$m
------------------------------------------------------------------------- -----
Operating lease commitments at 31 July 2019 1,126
Leases of low value assets (20)
Long-term leases that expire before 31 July 2020 (12)
Reasonably certain extension or termination options 564
Effect from discounting(1) (183)
Lease liabilities due to initial application of IFRS 16 at 1 August 2019 1,475
Lease liabilities from finance leases under IAS 17 at 31 July 2019 6
------------------------------------------------------------------------- -----
Total lease liabilities at 1 August 2019 1,481
------------------------------------------------------------------------- -----
1. The weighted average incremental borrowing rate applied by
the Group upon transition was 3.5 per cent.
Leases accounting policy applied from 1 August 2019
The Group enters into leases in the normal course of its
business, these principally relate to property for the Group's
branches, distribution centres and offices which have varying terms
including extension and termination options and periodic rent
reviews.
The Group recognises a right of use asset and a lease liability
at the lease commencement date. Non-lease components of a contract
are not separated from lease components and instead are accounted
for as a single lease component.
Lease liabilities are initially measured at the present value of
lease payments using the interest rate implicit in the lease, or if
this is not readily available, at the Group's incremental borrowing
rate. Lease payments comprise fixed payments, variable payments
that depend on an index or rate, payments expected under residual
value guarantees, and payments under purchase and termination
options which are reasonably certain to be exercised. Lease terms
are determined as the non-cancellable period of a lease adjusted
for options to extend or terminate a lease that are reasonably
certain to be exercised, management judgement is required in making
this determination.
Lease liabilities are subsequently measured at amortised cost
using the effective interest method. Lease liabilities are
remeasured when there is a change in future lease payments as a
result of a rent review or a change in an index or rate, or if
there is a change in the assessment of whether it is reasonably
certain that extension or termination options will be
exercised.
Right of use assets are carried at cost less accumulated
depreciation and impairment losses and any subsequent remeasurement
of the lease liability. Initial cost comprises the lease liability
adjusted for lease payments at or before the commencement date,
lease incentives received, initial direct costs and an estimate of
restoration costs. Right of use assets are depreciated on a
straight-line basis to the earlier of the end of the useful life of
the asset or the end of the lease term and tested for impairment if
an indicator exists.
Leases that have a term of 12 months or less and leases for
which the underlying asset is of low value are recognised as an
expense on a straight-line basis over the lease term.
Critical accounting judgements - Leases
Property leases entered into by the Group typically include
extension and termination options to provide operational
flexibility to the Group. Management exercises significant
judgement in determining whether these options are reasonably
certain to be exercised when determining the lease term. In making
these judgements management considers the remaining lease term,
future business plans and other relevant economic factors.
2. Alternative performance measures
The Group uses alternative performance measures ("APMs"), which
are not defined or specified under IFRS. These APMs, which are not
considered to be a substitute for IFRS measures, provide additional
helpful information. APMs are consistent with how business
performance is planned, reported and assessed internally by
management and the Board and provide comparable information across
the Group.
Ongoing and non-ongoing
The Group reports some financial measures net of businesses that
have been or may be disposed of, closed or classified as held for
sale and uses the following terminology:
Non-ongoing operations are businesses which do not meet the
criteria to be classified as discontinued operations under IFRS 5
"Non-current Assets Held for Sale and Discontinued Operations",
which may be disposed of, closed or classified as held for sale. In
2020, the Group's UK business has been classified as non-ongoing.
All comparatives have been restated for consistency and
comparability.
Ongoing operations are continuing operations excluding
non-ongoing operations.
Organic revenue growth
Management uses organic revenue growth as it provides a
consistent measure of the percentage increase/decrease in revenue
year-on-year, excluding the effect of currency exchange rate
fluctuations, trading days, acquisitions and disposals.
A reconciliation of revenue using the above APMs to statutory
revenue is provided below:
Ongoing Non-ongoing Continuing
----- -------- ----------- ----------
Revenue $m % growth $m $m
------------------------------------- ----- -------- ----------- ----------
Reported 2019 restated 9,489 1,358 10,847
Impact of exchange rate movements (1) (20) (21)
------------------------------------- ----- -------- ----------- ----------
Reported 2019 to 2020 exchange rates 9,488 1,338 10,826
Organic growth 194 2.0 ( 58 ) 136
Acquisitions 211 2.3 23 234
Disposals - - (230) (230)
------------------------------------- ----- -------- ----------- ----------
Reported 2020 9,893 4.3 1,073 10,966
------------------------------------- ----- -------- ----------- ----------
Exceptional items
Exceptional items are those which are considered significant by
virtue of their nature, size or incidence. These items are
presented as exceptional within their relevant income statement
category to assist in the understanding of the trading and
financial results of the Group as these types of cost/credit do not
form part of the trading business.
Examples of items that are considered by the Directors for
designation as exceptional items include, but are not limited
to:
-- restructuring costs within a segment which are both material
and incurred as part of a significant change in strategy or due to
the closure of a large part of a business and are not expected to
be repeated on a regular basis;
-- significant costs incurred as part of the integration of an
acquired business and which are considered to be material;
-- gains or losses on disposals of businesses are considered to
be exceptional in nature as they do not reflect the performance of
the trading business;
-- material costs or credits arising as a result of regulatory and litigation matters;
-- gains or losses arising on significant changes to, or
closures of, defined benefit pension plans are considered to be
exceptional in nature as they do not reflect the performance of the
trading business; and
-- other items which are material and considered to be
non-recurring in nature and/or are not as a result of the trading
activities of the business.
If provisions have been made for exceptional items in previous
years, any reversal of these provisions is treated as
exceptional.
Exceptional items for the current and prior period are disclosed
in note 4.
Ongoing gross margin
The ratio of ongoing gross profit, excluding exceptional items,
to ongoing revenue. Ongoing gross margin is used by management for
assessing business unit performance and it is a key performance
indicator for the Group. A reconciliation of ongoing gross margin
is provided below:
Restated
2020 2019
------------ ------- --------------- --------------- ------- ---------------
Gross profit Revenue Ongoing Revenue Ongoing
$m $m gross margin % Gross profit $m $m gross margin %
--------------------------------- ------------ ------- --------------- --------------- ------- ---------------
Continuing 3,242 10,966 3,193 10,847
Non-ongoing (257) (1,073) (324) (1,358)
Exceptional items 2 - 1 -
--------------------------------- ------------ ------- --------------- --------------- ------- ---------------
Ongoing excluding exceptional
items 2,987 9,893 30.2 2,870 9,489 30.2
--------------------------------- ------------ ------- --------------- --------------- ------- ---------------
Trading profit/underlying trading profit and ongoing trading
margin/underlying ongoing trading margin
Trading profit is defined as operating profit before exceptional
items and amortisation of acquired intangible assets. Trading
profit is used as a performance measure because it excludes costs
and other items that do not form part of the trading business.
Underlying trading profit is defined as trading profit excluding
the impact of IFRS 16.
Ongoing trading margin is the ratio of ongoing trading profit to
ongoing revenue and is used to assess profitability and is a key
performance indicator for the Group. Underlying ongoing trading
margin is the ratio of underlying ongoing trading profit to ongoing
revenue.
Underlying trading profit and underlying ongoing trading margin
are presented to allow better comparison between the six months
ended 31 January 2020 prepared under IFRS 16 and the six months
ended 31 January 2019 prepared under IAS 17. The expectation is
that these APMs will only be presented in the year ending 31 July
2020.
A reconciliation of underlying trading profit and trading profit
to statutory operating profit is provided below:
Restated
2020 2019
------- ----------- ---------- ------- ----------- ----------
Ongoing Non-ongoing Continuing Ongoing Non-ongoing Continuing
$m $m $m $m $m $m
---------------------------------------- ------- ----------- ---------- ------- ----------- ----------
Trading profit 2019 restated 714 39 753
Growth 33 (9 ) 24
---------------------------------------- ------- ----------- ---------- ------- ----------- ----------
Underlying trading profit 747 30 777 714 39 753
Impact of IFRS 16 35 - 35 - - -
---------------------------------------- ------- ----------- ---------- ------- ----------- ----------
Trading profit 782 30 812 714 39 753
Amortisation of acquired intangible
assets (51) (9) (60) (43) (1) (44)
Exceptional items (10) (9) (19) (8) 8 -
---------------------------------------- ------- ----------- ---------- ------- ----------- ----------
Operating profit 721 12 733 663 46 709
---------------------------------------- ------- ----------- ---------- ------- ----------- ----------
Revenue, trading profit/underlying trading profit and trading
margin/underlying trading margin by reportable segment and the
calculation of ongoing trading margin and underlying ongoing
trading margin are shown below. For information on our reportable
segments see note 3.
Impact
of Underlying Underlying
Trading IFRS trading Trading Trading trading Trading
Revenue profit/(loss) 16 profit/(loss) profit/(loss) margin margin margin
------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
Restated Restated
2020 Restated 2019 2020 2020 2020 2019 2020 2020 2019
$m $m $m $m $m $ m % % %
------------ ------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
USA 9,318 8,874 774 ( 34 ) 740 700 8.3 7.9 7.9
Canada and
Central
Europe 575 615 30 (1) 29 39 5.2 5.0 6.3
Central
costs - - ( 22) - (22) ( 25 ) - - -
------------ ------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
Total
ongoing
operations 9,893 9,489 782 ( 35 ) 747 714 7.9 7.6 7.5
------------ ------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
Canada and
Central
Europe - 181 - - - 9
UK 1,073 1,177 30 - 30 30 2.8 2.8 2.5
------------ ------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
Total
non-ongoing
operations 1,073 1,358 30 - 30 39
------------ ------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
Continuing
operations 10,966 10,847 812 ( 35 ) 777 753
------------ ------ ------------- ------------- ------ ------------- ------------- ------- ---------- --------
Adjusted EBITDA
Adjusted EBITDA is operating profit before charges/credits
relating to depreciation, amortisation, impairment, exceptional
items and the impact of IFRS 16. Adjusted EBITDA is used in the net
debt to adjusted EBITDA ratio to assess the appropriateness of the
Group's financial gearing and excludes IFRS 16 in line with the
requirements of the Group's debt covenants. A reconciliation of
statutory profit for the period to adjusted EBITDA is provided
below:
2020 20 1 9
---------------------------------------------- ---------- ------------ ----- ------------- ------------ ------
Continuing Discontinued Group Discontinued Group
$m $m $m Continuing $m $m $m
---------------------------------------------- ---------- ------------ ----- ------------- ------------ ------
Profit for the period 467 - 467 540 46 586
Exceptional items (net of tax) 17 (1) 16 (7) (45) (52)
Tax 175 6 181 143 1 144
Share of loss/(profit) after tax of associates 1 - 1 (2) - (2)
Impairment of interests in associates 22 - 22 - - -
Net finance costs 70 (1) 69 35 - 35
Amortisation of acquired intangible assets 60 - 60 44 - 44
---------------------------------------------- ---------- ------------ ----- ------------- ------------ ------
Trading profit 812 4 816 753 2 755
Impact of IFRS 16 (35) - (35) - - -
---------------------------------------------- ---------- ------------ ----- ------------- ------------ ------
Underlying trading profit 777 4 781 753 2 755
Depreciation and impairment of property, plant
and equipment 78 - 78 73 - 73
Amortisation of non-acquired intangible assets 17 - 17 16 - 16
---------------------------------------------- ---------- ------------ ----- ------------- ------------ ------
Adjusted EBITDA 872 4 876 842 2 844
---------------------------------------------- ---------- ------------ ----- ------------- ------------ ------
Ongoing effective tax rate
The ongoing effective tax rate is the ratio of the ongoing tax
charge to ongoing profit before tax and is used as a measure of the
tax rate of the ongoing business.
Restated
2020 2019
Half year to 31 January $m $m
--------------------------------------------------------------------------------- ----- --------
Tax charge in relation to continuing operations (173) (139)
Deduct: tax credit on the amortisation of acquired intangible assets (15) (11)
Deduct: tax credit on exceptional items (2) (4)
Add back: tax charge on profits from non-ongoing operations 5 8
Add back/(deduct): non-recurring tax charges 4 (9)
--------------------------------------------------------------------------------- ----- --------
Ongoing tax charge (181) (155)
--------------------------------------------------------------------------------- ----- --------
Profit before tax and exceptional items from continuing operations 659 676
Add back: amortisation of acquired intangible assets 60 44
Add back/(deduct): share of loss/(profit) after tax and impairment of associates 23 (2)
Deduct: other profits before tax from non-ongoing operations (30) (39)
--------------------------------------------------------------------------------- ----- --------
Ongoing profit before tax 712 679
--------------------------------------------------------------------------------- ----- --------
Ongoing effective tax rate 25.4% 22.8%
--------------------------------------------------------------------------------- ----- --------
Ongoing profit before tax means profit before tax, exceptional
items, amortisation of acquired intangible assets, impairments of
interests in associates and share of loss/profit after tax of
associates for ongoing operations. Ongoing tax is the tax expense
arising on ongoing profit before tax.
Headline profit after tax and headline earnings per share
Headline profit after tax is calculated as the profit from
continuing operations after tax, before charges for amortisation of
acquired intangible assets and impairments of interests in
associates net of tax, exceptional items net of tax and
non-recurring tax relating to changes in tax rates and other
adjustments. The Group excludes amortisation and impairment of
acquired intangible assets to improve the comparability between
acquired and organically grown operations, as the latter cannot
recognise internally generated intangible assets.
Headline earnings per share is the ratio of headline profit
after tax to the weighted average number of ordinary shares in
issue during the period, excluding those held by the Employee
Benefit Trusts and those held by the Company as Treasury shares.
Headline earnings per share is used for the purpose of setting
remuneration targets for executive directors and other senior
executives. See reconciliation in
note 8.
Net debt
Net debt comprises cash and cash equivalents, bank overdrafts,
bank and other loans, derivative financial instruments and
obligations under finance leases under IAS 17. Net debt is a good
indicator of the strength of the Group's balance sheet position and
is used by the Group's debt providers. See reconciliation in note
12.
3. Segmental analysis
The Group's reportable segments have been determined on the same
basis as, and are consistent with, those disclosed in the Annual
Report and Accounts for the financial year ended 31 July 2019.
The Group's business is not highly seasonal and the Group's
customer base is highly diversified, with no individually
significant customer.
The changes in revenue and underlying trading profit for
continuing operations between the period ended 31 January 2019 and
31 January 2020 include changes in exchange rates, disposals,
acquisitions and organic change.
An analysis of the change in revenue by reportable segment for
continuing operations is as follows:
Organic
2019 Exchange Disposals Acquisitions change 2020
$m $m $m $m $m $m
-------------------------- ------ ---------- --------- ------------ -------- ------
USA 8,874 - - 210 234 9,318
UK 1,177 (20) (49) 23 (58) 1,073
Canada and Central Europe 796 (1) (181) 1 (40) 575
------------------------------ ------ ---------- --------- ------------ -------- ------
Group 10,847 (21) (230) 234 136 10,966
------------------------------ ------ ---------- --------- ------------ -------- ------
An analysis of the change in underlying trading profit/(loss) by
reportable segment for continuing operations is as follows:
Organic
2019 Exchange Disposals Acquisitions change 2020
$m $m $m $m $m $m
-------------------------- ---- ---------- --------- ------------ -------- ----
USA 700 - - 8 32 740
UK 30 (1) 2 4 (5) 30
Canada and Central Europe 48 (1) (9) 1 (10) 29
Central costs (25) 1 - - 2 (22)
------------------------------ ---- ---------- --------- ------------ -------- ----
Group 753 (1) (7) 13 19 777
------------------------------ ---- ---------- --------- ------------ -------- ----
The reconciliation between underlying trading profit/(loss),
trading profit/(loss) and operating profit/(loss) by reportable
segment for continuing operations is as follows:
2020 2019
-------------------------------- ----------------- ------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------
Trading Trading
Underlying trading profit/(loss) Impact of IFRS 16 profit/(loss) Exceptional items Amortisation of acquired intangible assets Operating profit/(loss) profit/(loss) Exceptional items Amortisation of acquired intangible assets Operating profit/(loss)
Half year to 31 January $m $m $m $m $m $m $m $m $m $m
------------------------ -------------------------------- ----------------- --------------- ----------------- ------------------------------------------ ----------------------- --------------- ----------------- ------------------------------------------ -----------------------
USA 740 34 774 - (50) 724 700 - (43) 657
UK 30 - 30 (9) (9) 12 30 (35) - (5)
Canada and Central
Europe 29 1 30 - (1) 29 48 38 (1) 85
Central costs (22) - (22) (10) - (32) (25) (3) - (28)
------------------------ -------------------------------- ----------------- --------------- ----------------- ------------------------------------------ ----------------------- --------------- ----------------- ------------------------------------------ -----------------------
Group 777 35 812 (19) (60) 733 753 - (44) 709
Net finance costs (70) (35)
Share of (loss)/profit
after tax of associates (1) 2
Impairment of interests
in associates (22) -
Gain on disposal of
interests in associates - 3
------------------------ -------------------------------- ----------------- --------------- ----------------- ------------------------------------------ ----------------------- --------------- ----------------- ------------------------------------------ -----------------------
Profit before tax 640 679
------------------------ -------------------------------- ----------------- --------------- ----------------- ------------------------------------------ ----------------------- --------------- ----------------- ------------------------------------------ -----------------------
Other information on assets and liabilities by segment is set
out in the table below:
31 January 2020 31 January 2019
----------------------------------------------------------------- ----------------------------------------------------------------
Segment Segment
assets Segment liabilities Segment net assets/ (liabilities) assets Segment liabilities Segment net assets/ (liabilities)
Segment assets and liabilities(1) $m $m $m $m $m $m
---------------------------------- --------- ------------------- --------------------------------- -------- ------------------- ---------------------------------
USA 9,257 (3,985) 5,272 7,928 (2,570) 5,358
UK 1,332 (738) 594 1,327 (670) 657
Canada and Central Europe 594 (252) 342 534 (178) 356
Central costs 76 (126) (50) 94 (144) (50)
Discontinued 2 (27) (25) 23 (41) (18)
---------------------------------- --------- ------------------- --------------------------------- -------- ------------------- ---------------------------------
Total 11,261 (5,128) 6,133 9,906 (3,603) 6,303
Tax assets and liabilities 525 (609) (84) 136 (264) (128)
Net cash/(debt) 797 (2,741) (1,944) 709 (2,594) (1,885)
---------------------------------- --------- ------------------- --------------------------------- -------- ------------------- ---------------------------------
Group assets/(liabilities) 12,583 (8,478) 4,105 10,751 (6,461) 4,290
---------------------------------- --------- ------------------- --------------------------------- -------- ------------------- ---------------------------------
1. As at 31 January 2020, segment assets includes right of use
assets and segment liabilities includes lease liabilities.
4. Exceptional items
Exceptional items included in profit before tax from continuing
operations are analysed by purpose as follows:
2020 2019
Half year to 31 January $m $m
-------------------------------------------- ----- ----
(Loss)/gain on disposal of businesses (1) 38
Business restructuring (8) (31)
Other exceptional items (10) (7)
-------------------------------------------- ----- ----
Total included in operating profit (19) -
Gain on disposal of interests in associates - 3
-------------------------------------------- ----- ----
Total included in profit before tax (19) 3
-------------------------------------------- ----- ----
For the half year to 31 January 2020, business restructuring
comprises costs incurred in the UK and includes $2 million charged
to cost of sales for inventory write downs.
Other exceptional items predominantly relate to the demerger of
the UK business.
5. Net finance costs
2020 2019
Half year to 31 January $m $m
------------------------------------------------ ---- ----
Interest income 5 5
Interest expense
Lease liability expense (27) -
Other (50) (43)
------------------------------------------------ ---- ----
(77) (43)
Net interest income on retirement benefit asset 2 3
------------------------------------------------ ---- ----
Total net finance costs (70) (35)
------------------------------------------------ ---- ----
6. Tax
The tax charge on continuing operations for the half year has
been calculated by applying the expected full year rate to the half
year results with specific adjustments for items that distort the
rate (amortisation and impairment of acquired intangible assets,
share of loss/profit and impairment of interests in associates,
exceptional items and non-recurring tax items). The tax charge for
the period comprises:
2020 2019
Half year to 31 January $m $m
----------------------------------------------------------------------- ----- -----
Current tax charge (145) (134)
Deferred tax charge: origination and reversal of temporary differences (28) (5)
----------------------------------------------------------------------- ----- -----
Total tax charge (173) (139)
----------------------------------------------------------------------- ----- -----
The total tax charge includes an ongoing tax charge of $181
million (restated 2019: $155 million). This equates to an ongoing
effective tax rate of 25.4 per cent (restated 2019: 22.8 per cent)
on the ongoing profit of $712 million (restated 2019: $679
million). See note 2 for reconciliation.
7. Dividends
2020 2019
Half year to 31 January $m $m
---------------------------------------------------------------------- ---- ----
Amounts recognised as distributions to equity shareholders:
Final dividend for the year ended 31 July 2018: 131.9 cents per share - 303
Final dividend for the year ended 31 July 2019: 145.1 cents per share 327 -
---------------------------------------------------------------------- ---- ----
Dividends paid 327 303
---------------------------------------------------------------------- ---- ----
Since 31 January 2020, the Directors proposed an interim
dividend of 67.5 cents per share (2019: interim dividend 63.1 cents
per share). This is not included as a liability in the balance
sheet at 31 January 2020.
Dividends were declared in US dollars and paid in both pounds
sterling and US dollars. For those shareholders paid in pounds
sterling, the exchange rate used to translate the declared value
was set in advance of the payment date. As a result of foreign
exchange rate movements between these dates, the total amount paid
(shown in the Group cash flow statement) may be different to that
stated above.
8. Earnings per share
2020 2019
-------- ---------- ---------- --------- ---------- ----------
Basic Diluted Basic Diluted
earnings earnings earnings earnings
Earnings per share per share Earnings per share per share
Half year to 31 January $m cents cents $m cents cents
----------------------------------------------- -------- ---------- ---------- --------- ---------- ----------
Profit for the period 467 206.7 205.5 586 254.5 252.8
Profit from discontinued operations - - - (46) (20.0) (19.8)
----------------------------------------------- -------- ---------- ---------- --------- ---------- ----------
Profit from continuing operations 467 206.7 205.5 540 234.5 233.0
Non-recurring tax charge/(credit) relating to
changes in tax rates and other adjustments
(note
2) 4 1.8 (9) (3.9)
Amortisation of acquired intangible assets and
impairment of interests in associates 82 36.3 44 19.1
Tax on amortisation of acquired intangible
assets and impairment of interests in
associates
(note 2) (15) (6.6) (11) (4.8)
Exceptional items (net of tax) 17 7.5 (7) (3.0)
----------------------------------------------- -------- ---------- ---------- --------- ---------- ----------
Headline profit from continuing operations 555 245.7 557 241.9
----------------------------------------------- -------- ---------- ---------- --------- ---------- ----------
The weighted average number of ordinary shares in issue during
the period, excluding those held by Employee Benefit Trusts and
those held by the Company as Treasury shares, was 225.9 million
(2019: 230.3 million). The impact of all potentially dilutive share
options on earnings per share would be to increase the weighted
average number of shares in issue to 227.3 million (2019: 231.8
million).
9. Intangible assets and property, plant and equipment
Other intangible assets
-------- -----------------------------------
Other
acquired Property, Total tangible
Goodwill intangible assets Software Total plant and equipment and intangible assets
$m $m $m $m $m $m
------------------------- -------- ------------------ -------- ----- -------------------- ----------------------
Net book value at 31 July
2019 1,656 356 67 423 1,349 3,428
Adjustment on adoption of
IFRS 16 - - - - (6) (6)
------------------------- -------- ------------------ -------- ----- -------------------- ----------------------
Net book value at 1
August 2019 1,656 356 67 423 1,343 3,422
Acquisition of businesses 46 66 - 66 2 114
Adjustment to fair value
on prior year
acquisitions (14 ) 16 - 16 - 2
Additions - - 19 19 146 165
Disposals - - - - (4) (4)
Amortisation and
depreciation - (60) (17) (77) (77) (154)
Impairment - - - - (1) (1)
Reclassified to held for
sale - - - - (5) (5)
Exchange rate adjustment 3 2 2 4 13 20
------------------------- -------- ------------------ -------- ----- -------------------- ----------------------
Net book value at 31
January 2020 1,691 380 71 451 1,417 3,559
------------------------- -------- ------------------ -------- ----- -------------------- ----------------------
10. Leases
Movements in right of use assets for the period ended 31 January
2020 were as follows:
Land and buildings Plant and machinery Total right of use assets
$m $m $m
-------------------------------------------------- ------------------ ------------------- -------------------------
Net book value at 31 July 2019 - - -
Adjustment on adoption of IFRS 16 940 280 1,220
-------------------------------------------------- ------------------ ------------------- -------------------------
Net book value at 1 August 2019 940 280 1,220
Acquisition of businesses 17 - 17
Additions 29 32 61
Disposals (1) (1) (2)
Adjustment as a result of remeasurement of lease
liability 21 - 21
Depreciation (94) (37) (131)
Exchange rate adjustments 9 2 11
-------------------------------------------------- ------------------ ------------------- -------------------------
Net book value at 31 January 2020 921 276 1,197
-------------------------------------------------- ------------------ ------------------- -------------------------
The maturity of lease liabilities at 31 January 2020 was as
follows:
2020
$m
---------------------------------- ------
Due in less than one year 310
Due in one to two years 326
Due in two to three years 300
Due in three to four years 244
Due in four to five years 175
Due in over five years 276
---------------------------------- ------
Total undiscounted lease payments 1,631
Effect of discounting (186)
---------------------------------- ------
Total lease liabilities 1,445
---------------------------------- ------
Current lease liabilities 265
Non-current lease liabilities 1,180
---------------------------------- ------
Total lease liabilities 1,445
---------------------------------- ------
Amounts charged/(credited) to the Group income statement during
the period were as follows:
2020
$m
--------------------------------------------------- ------
Depreciation of right of use assets 131
Short-term lease expense 8
Low-value lease expense 8
Sublease income (1)
--------------------------------------------------- ------
Charged to operating costs 146
Charged to finance costs 27
--------------------------------------------------- ------
Total amount charged to the Group income statement 173
--------------------------------------------------- ------
11. Reconciliation of profit to cash generated from
operations
Profit for the period is reconciled to cash generated from
operations as follows:
2020 2019
Half year to 31 January $m $m
------------------------------------------------------------------------------------- ----- ------
Profit for the period 467 586
Net finance costs 70 33
Share of loss/(profit) after tax of associates 1 (2)
Gain on disposal of interests in associates - (3)
Impairment of interests in associates 22 -
Tax charge 179 134
Profit on disposal and closure of businesses and revaluation of assets held for sale - ( 67 )
Amortisation of acquired intangible assets 60 44
Amortisation of non-acquired intangible assets 17 16
Depreciation and impairment of property, plant and equipment 78 73
Depreciation of right of use assets 131 -
Profit on disposal of property, plant and equipment and assets held for sale - (7)
Increase in inventories (106) (250)
Decrease in trade and other receivables 281 179
Decrease in trade and other payables (556) (432)
Decrease in provisions and other liabilities (29) (38)
Share-based payments 21 21
------------------------------------------------------------------------------------- ----- ------
Cash generated from operations 636 287
------------------------------------------------------------------------------------- ----- ------
12. Reconciliation of opening to closing net debt including
lease liabilities
Derivative(1) Obligations(1) under
Total financial finance
cash, cash equivalents and bank over
Cash and cash equivalents Bank overdrafts drafts instruments Loans(1) leases Net debt Lease(1) liabilities Net debt including lease liabilities
$m $m $m $m $m $m $m $m $m
-------------- ------------------------- --------------- -------------------------------------- ------------- -------- -------------------- -------- -------------------- ------------------------------------
At 31 July
2019 1,133 (47) 1,086 22 (2,297) (6) (1,195) - (1,195)
Adjustment on
adoption of
IFRS 16 - - - - - 6 6 (1,481) (1,475)
At 1 August
2019 1,133 (47) 1,086 22 (2,297) - (1,189) (1,481) (2,670)
-------------- ------------------------- --------------- -------------------------------------- ------------- -------- -------------------- -------- -------------------- ------------------------------------
Cash movements
Proceeds
from
borrowings
and
derivatives - (4) (150) - (154) - (154)
Lease
liability
capital
payments - - - - - 144 144
Interest
paid on
lease
liabilities - - - - - 27 27
Changes in
net debt
including
lease
liabilities
due to
acquisition
of
businesses 5 - - - 5 (17) (12)
Other cash
flows (602) - - - (602) - (602)
Non-cash
movements
Lease
liability
additions - - - - - (61) (61)
Discount
unwinding
on lease
liabilities - - - - - (27) (27)
Fair value
and other
adjustments - 10 (7) - 3 (20) (17)
Exchange
movements (1) (6) - - (7) (10) (17)
-------------- ------------------------- --------------- -------------------------------------- ------------- -------- -------------------- -------- -------------------- ------------------------------------
At 31 January
2020 775 ( 287 ) 488 22 (2,454) - (1,944) (1,445) (3,389)
-------------- ------------------------- --------------- -------------------------------------- ------------- -------- -------------------- -------- -------------------- ------------------------------------
1. Liabilities from financing activities.
13. Acquisitions
The Group acquired the following businesses in the period ended
31 January 2020. All of these businesses are engaged in the
distribution of plumbing and heating products. These transactions
have been accounted for by the purchase method of accounting.
Name Date Country of incorporation Shares/asset deal % acquired
------------------------------------ --------------- ------------------------- ------------------ ----------
Continental Product Engineering Ltd August 2019 UK Shares 100
Process Instruments & Controls, LLC September 2019 USA Assets 100
S W Anderson November 2019 USA Shares 100
------------------------------------ --------------- ------------------------- ------------------ ----------
The assets and liabilities acquired and the consideration for
all acquisitions in the period are as follows:
2020
Provisional fair values acquired
$m
------------------------------------------- ---------------------------------
Intangible assets
- Customer relationships 53
- Trade names and brands 12
- Other 1
Right of use assets 17
Property, plant and equipment 2
Inventories 19
Receivables 29
Cash, cash equivalents and bank overdrafts 5
Payables (14)
Current tax 3
Lease liabilities (17)
Provisions (2)
Deferred tax (18)
--------------------------------------------- ---------------------------------
Total 90
Goodwill arising 46
--------------------------------------------- ---------------------------------
Consideration 136
--------------------------------------------- ---------------------------------
Satisfied by:
Cash 127
Deferred consideration 9
--------------------------------------------- ---------------------------------
Total consideration 1 3 6
--------------------------------------------- ---------------------------------
The fair value adjustments for the period ended 31 January 2020
are provisional figures, being the best estimates currently
available. Amendments may be made to these figures in the 12 months
following the date of acquisition when additional information is
available for some of the judgemental areas.
The goodwill arising on these acquisitions is attributable to
the anticipated profitability of the new markets and product ranges
to which the Group has gained access and to additional
profitability and operating efficiencies in respect of existing
markets.
The acquired businesses contributed $44 million to revenue and
$5 million to trading profit for the period between the date of
acquisition and the balance sheet date. If each acquisition had
been completed on the first day of the financial year, continuing
revenue would have been $11,001 million and continuing trading
profit would have been $815 million. It is not practicable to
disclose the impact of acquisitions on profit before or after tax,
as the Group manages its borrowings as a portfolio and cannot
attribute an effective borrowing rate to an individual
acquisition.
It is also not practicable to disclose the impact of
acquisitions on operating profit as the Group cannot estimate the
amount of intangible assets that would have been acquired at a date
other than the acquisition date.
The net outflow of cash in the period to 31 January 2020 with
respect to the purchase of businesses is as follows:
2020
$m
---------------------------------------------------------------------------- ----
Purchase consideration 127
Deferred and contingent consideration in respect of prior year acquisitions 19
---------------------------------------------------------------------------- ----
Cash consideration 146
Cash, cash equivalents and bank overdrafts acquired (5)
---------------------------------------------------------------------------- ----
Net cash outflow in respect of the purchase of businesses 141
---------------------------------------------------------------------------- ----
14. Related party transactions
In the period ended 31 January 2020, the Group purchased goods
and services on an arm's length basis totalling $9 million from and
owed $nil in respect of these goods and services to a company that
is controlled by another company in respect of which one of the
Group's Non Executive Directors is the chief executive officer.
There are no other material related party transactions requiring
disclosure under IAS 24 "Related Party Disclosures" other than
compensation of key management personnel which will be disclosed in
the Group's Annual Report and Accounts for the year ending 31 July
2020.
15. Borrowings, financial instruments and financial risk
management
31 January 2020 31 January 2019
------------------------------ ---------------------------
Current Total Current Non-current Total
$m Non-current $m $m $m $m $m
---------------------------- ------- -------------- ----- ------- ----------- -----
Bank overdrafts 287 - 287 296 - 296
---------------------------- ------- -------------- ----- ------- ----------- -----
Bank loans 150 - 150 - - -
Senior unsecured loan notes 285 2,019 2,304 6 2,280 2,286
---------------------------- ------- -------------- ----- ------- ----------- -----
Total loans 435 2,019 2,454 6 2,280 2,286
---------------------------- ------- -------------- ----- ------- ----------- -----
Total borrowings 722 2,019 2,741 302 2,280 2,582
---------------------------- ------- -------------- ----- ------- ----------- -----
At 31 January 2020, the Group has total available facilities,
excluding bank overdrafts, of $3,916 million (2019: $3,935
million), of which $2,431 million is drawn and $1,485 million is
undrawn (2019: $2,286 million and $1,649 million respectively). The
Group does not have any debt factoring or supply chain financing
arrangements.
The senior unsecured loan notes have an estimated fair value of
$2,495 million (2019: $2,312 million).
Included in bank overdrafts at 31 January 2020 is an amount of
$219 million (2019: $219 million) which is part of the Group's cash
pooling arrangement where there is an equal and opposite balance
included within cash and cash equivalents. The amounts are subject
to a master netting arrangement.
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date. The
fair value of financial instruments that are not traded in an
active market (such as over-the-counter derivatives) is determined
by using valuation techniques including net present value
calculations. The fair value of interest rate swaps is calculated
as the present value of the estimated future cash flows based on
observable yield curves. The fair value of foreign exchange swaps
has been calculated as the present value of the estimated future
cash flows based on observable future foreign exchange rates.
The Group's other financial instruments are measured on bases
other than fair value. Other receivables include an amount of $73
million (2019: $70 million) which has been discounted at a rate of
1.6 per cent (2019: 2.7 per cent) due to the long-term nature of
the receivable. Other current assets and liabilities are either of
short maturity or bear floating rate interest and so their fair
values approximate to book values.
The Group is exposed to risks arising from the international
nature of its operations and the financial instruments which fund
them, in particular to foreign currency risk, interest rate risk
and liquidity risk. Full details of the Group's policies for
managing these risks are disclosed in the Group's Annual Report and
Accounts for the financial year ended 31 July 2019. Since the date
of that report, there have been no significant changes in:
-- the nature of the financial risks to which the Group is exposed;
-- the nature of the financial instruments which the Group uses; or
-- its contractual cash outflows.
16. Subsequent events
Since 31 January 2020, the Group has acquired Columbia Pipe
& Supply, a business in the US with annual revenue of $220
million.
On 5 February 2020, the Group entered into an irrevocable and
non-discretionary arrangement with its broker Barclays Capital
Securities Limited to purchase shares until 31 March 2020 as part
of the recently announced share buy back programme.
On 10 March 2020, the Group entered into a new $1.1 billion
revolving credit facility, provided by a syndicate of eleven banks,
with an initial maturity of five years and the option for the Group
to apply for two further one year maturity extensions. This
facility will replace the existing GBP800 million revolving credit
facility which has now been cancelled.
17. Exchange rates
Exchange rates (equivalent to $1) 2020 2019
----------------------------------------------------------------- ---- ----
Pounds sterling
Income statement (average rate for the six months to 31 January) 0.79 0.78
Balance sheet (rate at 31 January) 0.76 0.76
Balance sheet (rate at 31 July) 0.82
----------------------------------------------------------------- ---- ----
Canadian dollars
Income statement (average rate for the six months to 31 January) 1.32 1.32
Balance sheet (rate at 31 January) 1.32 1.31
Balance sheet (rate at 31 July) 1.32
----------------------------------------------------------------- ---- ----
Independent review report to Ferguson plc
We have been engaged by Ferguson plc (the "Company") to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 January 2020 which
comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the
condensed consolidated statement of changes in equity, the
condensed consolidated balance sheet, the condensed consolidated
cash flow statement and related notes 1 to 17. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as adopted by
the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
January 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
16 March 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAEDKFSKEEAA
(END) Dow Jones Newswires
March 17, 2020 03:00 ET (07:00 GMT)
Ferguson (LSE:FERG)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Ferguson (LSE:FERG)
Gráfica de Acción Histórica
De May 2023 a May 2024
