TIDMFERG
FY2024 Guidance (unchanged)
Total Company 2024 Guidance
Net sales* Broadly flat
Adjusted operating margin** 9.2% - 9.8%
Interest expense $190 - $210 million
Adjusted effective tax rate** Approximately 25%
Capital expenditures $400 - $450 million
* Net sales guidance assumes mid-single digit market decline with continued
Company market outperformance, contribution from completed acquisitions and
one additional sales day. Overall impact of price inflation estimated to be
broadly neutral for the year.
** The Company does not reconcile forward-looking non-GAAP measures. See
"Non-GAAP Reconciliations and Supplementary information".
Kevin Murphy, Ferguson CEO, commented, "The year has started in
line with our expectations. I would like to thank our associates
for their strong execution in delivering solid results with
continued market outperformance against a challenging backdrop. Our
cash generative model and strong balance sheet allow us to invest
for organic growth, sustainably grow our dividend, consolidate our
fragmented markets through acquisitions and return capital to
shareholders.
"Our FY2024 financial guidance is unchanged and our balanced end
market exposure positions us well to leverage emerging multi-year
structural tailwinds such as non-residential megaprojects. We
remain confident in the strength of our markets over the medium and
longer term and expect to capitalize on attractive growth
opportunities."
Three months ended October 31,
US$ (In millions,
except per share
amounts) 2023 2022 Change
Reported Adjusted(1) Reported Adjusted(1) Reported Adjusted
Net sales 7,708 7,708 7,931 7,931 (2.8) % (2.8) %
Gross margin 30.2 % 30.2 % 30.5 % 30.5 % (30) bps (30) bps
Operating profit 739 773 831 864 (11.1) % (10.5) %
Operating margin 9.6 % 10.0 % 10.5 % 10.9 % (90) bps (90) bps
Earnings per share
- diluted 2.54 2.65 2.84 2.95 (10.6) % (10.2) %
Adjusted EBITDA 819 912 (10.2) %
Net debt(1) : 1.0x 1.0x
Adjusted EBITDA
(1) The Company uses certain non-GAAP measures, which are not defined or
specified under U.S. GAAP. See the section titled "Non-GAAP
Reconciliations and Supplementary Information".
Summary of financial results
First quarter
Net sales of $7.7 billion were 2.8% below last year against a
strong prior year comparable. Organic revenue declined 4.9% with
foreign exchange rates having a 0.1% adverse impact, both of which
were partially offset by acquisition contributions of 2.2%. The
Company's decrease in net sales was principally driven by a decline
in residential, partially offset by growth in non-residential sales
compared to the prior year period. As expected, weakness in certain
commodity categories drove modest overall price deflation of
approximately 2% as we lapped strong inflation comparables.
Gross margin of 30.2% was 30 basis points lower than last year,
impacted by certain commodity categories. Operating expenses were
diligently managed and we remain focused on driving productivity
and efficiencies while investing in core capabilities for future
growth.
Reported operating profit was $739 million (9.6% operating
margin), 11.1% lower than last year. Adjusted operating profit of
$773 million (10.0% adjusted operating margin) was 10.5% lower than
last year.
Reported diluted earnings per share was $2.54 (Q1 2023: $2.84),
a decrease of 10.6%, and adjusted diluted earnings per share of
$2.65 decreased 10.2% due to lower adjusted operating profit,
partially offset by the impact of share repurchases.
USA - first quarter
Net sales in the US business declined 2.7%, with an organic
revenue decline of 5.0% partially offset by a 2.3% contribution
from acquisitions.
Residential end markets, which comprise just over half of US
revenue, remained subdued. New residential housing start and permit
activity was relatively stable on a sequential basis but remains
below prior year levels, while repair, maintenance and improvement
("RMI") work continued to show greater resilience. Overall,
residential revenue declined by approximately 7% in the first
quarter.
Non-residential end markets, representing just under half of US
revenue, showed sequential stability with non-residential revenues
growing by approximately 2% in the first quarter. Commercial and
Industrial activity held up well in the quarter and we have
continued to see good levels of megaproject related bid
activity.
Adjusted operating profit of $766 million was 9.3% or $79
million behind last year.
We completed one acquisition during the quarter, SecureVision of
America, Inc., a waterworks metering distributor serving customers
in Dallas, Austin, San Antonio and Western Texas.
Canada - first quarter
Net sales compressed by 5.0%, with an organic revenue decline of
3.3% and a 1.7% adverse impact from foreign exchange rates.
Non-residential end markets have been more resilient than
residential end markets. Adjusted operating profit of $23 million
declined by $10 million compared to last year.
Segment overview
Three months ended October 31,
US$ (In millions) 2023 2022 Change
Net sales:
USA 7,329 7,532 (2.7 )%
Canada 379 399 (5.0 )%
Total net sales 7,708 7,931 (2.8 )%
Adjusted operating
profit:
USA 766 845 (9.3 )%
Canada 23 33 (30.3)%
Central and other costs (16 ) (14 )
Total adjusted operating
profit 773 864 (10.5)%
Financial position
Net debt to adjusted EBITDA at October 31, 2023 was 1.0x and
during the quarter we completed share repurchases of $0.1
billion.
We declared a quarterly dividend of $0.79, reflecting a 5%
increase over the prior year. The dividend will be paid on February
6, 2024 to shareholders on the register as of December 15,
2023.
There have been no other significant changes to the financial
position of the Company.
Evaluation of domiciling the Group's ultimate parent company in
the United States
Since 2019, the Company's Board of Directors (the "Board") has
considered North America to be the natural long-term location for
Ferguson and has worked methodically and transparently with
shareholders on this transformative journey, creating an additional
listing on the NYSE in 2021, and then moving the Company's primary
listing from London to New York in 2022. During this period, a
significant majority of our shareholding base has become American,
and the Company achieved U.S. domestic status under Securities and
Exchange Commission ("SEC") rules as of August 1, 2023.
The Board is now evaluating the best manner and timing for the
Company to take the next step on this journey, domiciling the
Group's ultimate parent company in the United States, which would
fully align the Company's headquarters and governance with its
operations and leadership.
The associated corporate steps needed to achieve this outcome
are being assessed, and the Company will further advise
shareholders of the Board's recommended way forward in due
course.
Investor conference call and webcast
A call with Kevin Murphy, CEO and Bill Brundage, CFO will
commence at 8:30 a.m. ET (1:30 p.m. GMT) today. The call will be
recorded and available on our website after the event at
corporate.ferguson.com.
Dial in number US: +1 646 787 9445
UK: +44 (0) 20 3936 2999
Ask for the Ferguson call quoting 216045. To access the call via
your laptop, tablet or mobile device please go to
corporate.ferguson.com. If you have technical difficulties, please
click the "Listen by Phone" button on the webcast player and dial
the number provided.
About us
Ferguson plc (NYSE: FERG; LSE: FERG) is a leading value-added
distributor in North America providing expertise, solutions and
products from infrastructure, plumbing and appliances to HVAC,
fire, fabrication and more. We exist to make our customers' complex
projects simple, successful and sustainable. Ferguson is
headquartered in the U.K., with its operations and associates
solely focused on North America and managed from Newport News,
Virginia. For more information, please visit corporate.ferguson.com
or follow us on LinkedIn
linkedin.com/company/ferguson-enterprises.
Analyst resources
For further information on quarterly financial breakdowns, visit
corporate.ferguson.com on the Investors menu under Analyst
Consensus and Resources.
Provisional financial calendar
Q2 Results for period ending January March 5, 2024 with call from 8:30 a.m.
31, 2024 ET
Timetable for the quarterly dividend
The timetable for payment of the quarterly dividend of $0.79 per
share is as follows:
Ex-dividend date: December 14, 2023
Record date: December 15, 2023
Payment date: February 6, 2024
The quarterly dividend is declared in U.S. dollars and since
March 2021, the default currency for dividends is also U.S.
dollars. Those shareholders who have not elected to receive the
dividend in pounds sterling and who would like to make such an
election may do so online by going to Computershare's Investor
Center and returning the completed form to the address located in
the upper--right corner of the form. The deadline to elect to
receive the quarterly dividend in pounds sterling, or to amend an
existing election, is 5:00 p.m. ET on January 9, 2024 and any
requests should be made in good time ahead of that date.
The form is available at
www--us.computershare.com/investor/#home and navigating to Company
Info > FERG > GBP Dividend Election and Mandate Form.
The completion of cross-border movements of shares between the
U.K. and the U.S. is contingent upon the receiving broker
identifying and acknowledging any such movements. Where a
cross-border movement of shares has been initiated but not
completed by the relevant dividend record date (being December 15,
2023 for this quarterly dividend), there is a risk that the
dividend in respect of such shares will not be received on the
dividend payment date. Accordingly, shareholders are advised not to
initiate any cross-border movements of shares during the period
from December 14, 2023 through December 18, 2023 inclusive.
Cautionary note on forward-looking statements
Certain information included in this announcement is
forward-looking, including within the meaning of the Private
Securities Litigation Reform Act of 1995, and involves risks,
assumptions and uncertainties that could cause actual results to
differ materially from those expressed or implied by
forward-looking statements. Forward-looking statements cover all
matters which are not historical facts and include, without
limitation, statements or guidance regarding or relating to our
future financial position, results of operations and growth,
projected interest in and ownership of our ordinary shares by
investors including as a result of inclusion in North American
market indices, any plans with respect to domiciling our ultimate
parent company in the United States, plans and objectives for the
future including our capabilities and priorities, risks associated
with changes in global and regional economic, market and political
conditions, ability to manage supply chain challenges, ability to
manage the impact of product price fluctuations, our financial
condition and liquidity, legal or regulatory changes, statements
regarding our expectations for U.S. residential and non-residential
growth drivers and other statements concerning the success of our
business and strategies. Forward-looking statements can be
identified by the use of forward-looking terminology, including
terms such as "believes," "estimates," "anticipates," "expects,"
"forecasts," "guidance," "intends," "continues," "plans,"
"projects," "goal," "target, " "aim," "may," "will," "would,"
"could" or "should" or, in each case, their negative or other
variations or comparable terminology and other similar references
to future periods. Forward-looking statements speak only as of the
date on which they are made. They are not assurances of future
performance and are based only on our current beliefs, expectations
and assumptions regarding the future of our business, future plans
and strategies, projections, anticipated events and trends, the
economy and other future conditions. Therefore, you should not
place undue reliance on any of these forward-looking statements.
Although we believe that the forward-looking statements contained
in this announcement are based on reasonable assumptions, you
should be aware that many factors could cause actual results to
differ materially from those in such forward-looking statements,
including but not limited to: weakness in the economy, market
trends, uncertainty and other conditions in the markets in which we
operate, and other factors beyond our control, including disruption
in the financial markets and any macroeconomic or other
consequences of political unrest, disputes or war; failure to
rapidly identify or effectively respond to direct and/or end
customers' wants, expectations or trends, including costs and
potential problems associated with new or upgraded information
technology systems or our ability to timely deploy new omni-channel
capabilities; decreased demand for our products as a result of
operating in highly competitive industries and the impact of
declines in the residential and non--residential markets, as well
as the RMI and new construction markets; changes in competition,
including as a result of market consolidation or competitors
responding more quickly to emerging technologies (such as
generative artificial intelligence ("AI")); failure of a key
information technology system or process as well as exposure to
fraud or theft resulting from payment--related risks; privacy and
protection of sensitive data failures, including failures due to
data corruption, cybersecurity incidents or network security
breaches; ineffectiveness of or disruption in our domestic or
international supply chain or our fulfillment network, including
delays in inventory availability at our distribution facilities and
branches, increased delivery costs or lack of availability; failure
to effectively manage and protect our facilities and inventory or
to prevent personal injury to customers, suppliers or associates,
including as a result of workplace violence; unsuccessful execution
of our operational strategies; failure to attract, retain and
motivate key associates; exposure of associates, contractors,
customers, suppliers and other individuals to health and safety
risks; inherent risks associated with acquisitions, partnerships,
joint ventures and other business combinations, dispositions or
strategic transactions; regulatory, product liability and
reputational risks and the failure to achieve and maintain a high
level of product and service quality; inability to renew leases on
favorable terms or at all, as well as any remaining obligations
under a lease when we close a facility; changes in, interpretations
of, or compliance with tax laws in the United States, the United
Kingdom, Switzerland or Canada; our indebtedness and changes in our
credit ratings and outlook; fluctuations in product prices (e.g.,
commodity-priced materials, inflation/deflation) and foreign
currency; funding risks related to our defined benefit pension
plans; legal proceedings as well as failure to comply with domestic
and foreign laws, regulations and standards, as those laws,
regulations and standards or interpretations and enforcement
thereof may change, or the occurrence of unforeseen developments
such as litigation; our failure to comply with the obligations
associated with being a U.S. domestic issuer and the costs
associated therewith; the costs and risk exposure relating to
environmental, social and governance ("ESG") matters, including
sustainability issues, regulatory or legal requirements, and
disparate stakeholder expectations; adverse impacts caused by a
public health crisis; and other risks and uncertainties set forth
under the heading "Risk Factors" in our Annual Report on Form 10-K
for the fiscal year ended July 31, 2023 as filed with the SEC on
September 26, 2023, and in other filings we make with the SEC in
the future.
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 our legal or regulatory obligations, we undertake
no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
Ferguson plc
Non-GAAP Reconciliations and Supplementary Information
(unaudited)
Non-GAAP items
This announcement contains certain financial information that is
not presented in conformity with U.S. GAAP. These non-GAAP
financial measures include adjusted operating profit, adjusted
operating margin, adjusted net income, adjusted earnings per share
- diluted, adjusted EBITDA, adjusted effective tax rate, net debt
and net debt to adjusted EBITDA ratio. The Company believes that
these non-GAAP financial measures provide users of the Company's
financial information with additional meaningful information to
assist in understanding financial results and assessing the
Company's performance from period to period. Management believes
these measures are important indicators of operations because they
exclude items that may not be indicative of our core operating
results and provide a better baseline for analyzing trends in our
underlying businesses, and they are consistent with how business
performance is planned, reported and assessed internally by
management and the Company's Board of Directors. Such non-GAAP
adjustments include amortization of acquired intangible assets,
discrete tax items, and any other items that are non-recurring.
Non-recurring items may include business restructuring charges,
corporate restructuring charges, which includes costs associated
with the Company's listing in the United States, gains or losses on
the disposals of businesses which by their nature do not reflect
primary operations, as well as certain other items deemed
non-recurring in nature and/or that are not a result of the
Company's primary operations. Because non-GAAP financial measures
are not standardized, it may not be possible to compare these
financial measures with other companies' non-GAAP financial
measures having the same or similar names. These non-GAAP financial
measures should not be considered in isolation or as a substitute
for results reported under U.S. GAAP. These non-GAAP financial
measures reflect an additional way of viewing aspects of operations
that, when viewed with U.S. GAAP results, provide a more complete
understanding of the business. The Company strongly encourages
investors and shareholders to review the Company's financial
statements and publicly filed reports in
their entirety and not to rely on any single financial
measure.
The Company does not provide a reconciliation of forward-looking
non-GAAP financial measures to the most directly comparable U.S.
GAAP financial measures on a forward-looking basis because it is
unable to predict with reasonable certainty or without unreasonable
effort non-recurring items, such as those described above, that may
arise in the future. The variability of these items is
unpredictable and may have a significant impact.
Summary of Organic Revenue
Management evaluates organic revenue as it provides a consistent
measure of the change in revenue year-on-year. Organic revenue
growth (or decline) is determined as the growth (or decline) in
total reported revenue excluding the growth (or decline)
attributable to currency exchange rate fluctuations, sales days,
acquisitions and disposals, divided by the preceding financial
year's revenue at the current year's exchange rates.
A summary of the Company's historical revenue and organic
revenue growth is below:
Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
Organic Organic Organic Organic Organic
Revenue Revenue Revenue Revenue Revenue Revenue Revenue Revenue Revenue Revenue
USA (2.7)% (5.0)% (1.5)% (5.5)% (1.6)% (2.5)% 5.4% 2.6% 17.4% 13.0%
Canada (5.0)% (3.3)% (5.1)% (2.7)% (9.5)% (1.5)% (4.5)% 3.0% 3.6% 8.2%
Continuing
operations (2.8)% (4.9)% (1.7)% (5.3)% (2.0)% (2.5)% 4.9% 2.7% 16.6% 12.7%
For further details regarding organic revenue growth, visit
corporate.ferguson.com on the Investors menu under Analyst
Consensus and Resources.
Reconciliation of Net Income to Adjusted Operating Profit and Adjusted
EBITDA
Three months ended
October 31,
(In millions) 2023 2022
Net income $519 $595
Provision for income taxes 172 197
Interest expense, net 45 41
Other expense (income), net 3 (2 )
Operating profit 739 831
Amortization of acquired intangibles 34 33
Adjusted Operating Profit 773 864
Depreciation & impairment of PP&E 39 37
Amortization of non-acquired intangibles 7 11
Adjusted EBITDA $819 $912
Net Debt : Adjusted EBITDA Reconciliation
To assess the appropriateness of its capital structure, the
Company's principal measure of financial leverage is net debt to
adjusted EBITDA. The Company aims to operate with investment grade
credit metrics and keep this ratio within one to two times.
Net debt
Net debt comprises bank overdrafts, bank and other loans and
derivative financial instruments, excluding lease liabilities, less
cash and cash equivalents. Long-term debt is presented net of debt
issuance costs.
As of October 31,
(In millions) 2023 2022
Long-term debt $3,663 $3,759
Short-term debt 55 --
Bank overdrafts(1) 28 38
Derivative liabilities 15 21
Cash and cash equivalents (743 ) (638 )
Net debt $3,018 $3,180
(1) Bank overdrafts are included in other current liabilities in the
Company's Consolidated Balance Sheet.
Adjusted EBITDA (Rolling 12-month)
Adjusted EBITDA is net income before charges/credits relating to
depreciation, amortization, impairment and certain non-GAAP
adjustments. A rolling 12-month adjusted EBITDA is used in the net
debt to adjusted EBITDA ratio to assess the appropriateness of the
Company's financial leverage.
Twelve months ended
(In millions, except ratios) October 31,
2023 2022
Net income $1,813 $2,157
Loss (income) from discontinued operations (net
of tax) -- 2
Provision for income taxes 550 630
Interest expense, net 188 125
Other expense (income), net 16 (2 )
Corporate restructurings(1) -- 16
Impairments and other charges(2) 125 --
Depreciation and amortization 320 323
Adjusted EBITDA $3,012 $3,251
Net Debt: Adjusted EBITDA 1.0x 1.0x
(1) For the rolling twelve months ended October 31, 2022, the corporate
restructuring costs primarily related to incremental costs in connection
with the Company's listing in the United States.
(2) For the rolling twelve months ended October 31, 2023, impairments and
other charges related to $107 million in software impairment charges in
the United States, as well as $18 million in charges associated with the
closure of certain smaller, underperforming branches in the United
States. Such amounts were mainly recorded in the third quarter of fiscal
year 2023.
Reconciliation of Net Income to Adjusted Net Income and Adjusted
EPS - Diluted
Three months ended
October 31,
(In millions, except
per share amounts) 2023 2022
per share(1) per share(1)
Net income $519 $2.54 $595 $2.84
Amortization of
acquired intangibles 34 0.16 33 0.15
Tax impact-non-GAAP
adjustments(2) (10 ) (0.05 ) (8 ) (0.04 )
Adjusted net income $543 $2.65 $620 $2.95
Diluted
weighted-average
shares outstanding 204.6 209.8
(1) Per share on a dilutive basis.
(2) For the three months ended October 31, 2023 and 2022, the tax impact on
non-GAAP adjustments primarily related to the amortization of acquired
intangibles.
Ferguson plc
Condensed Consolidated Statements of Earnings
(unaudited)
Three months ended
October 31,
(In millions, except per share amounts) 2023 2022
Net sales $7,708 $7,931
Cost of sales (5,377 ) (5,510 )
Gross profit 2,331 2,421
Selling, general and administrative expenses (1,512 ) (1,509 )
Depreciation and amortization (80 ) (81 )
Operating profit 739 831
Interest expense, net (45 ) (41 )
Other (expense) income, net (3 ) 2
Income before income taxes 691 792
Provision for income taxes (172 ) (197 )
Net income $519 $595
Earnings per share - Basic $2.55 $2.85
Earnings per share - Diluted $2.54 $2.84
Weighted average number of shares outstanding:
Basic 203.8 208.7
Diluted 204.6 209.8
Ferguson plc
Condensed Consolidated Balance Sheets
(unaudited)
As of
(In millions) October 31, 2023 July 31, 2023
Assets
Cash and cash equivalents $743 $601
Accounts receivable, net 3,600 3,597
Inventories 4,106 3,898
Prepaid and other current assets 993 953
Assets held for sale 28 28
Total current assets 9,470 9,077
Property, plant and equipment, net 1,625 1,595
Operating lease right-of-use assets 1,526 1,474
Deferred income taxes, net 299 300
Goodwill 2,242 2,241
Other non-current assets 1,256 1,307
Total assets $16,418 $15,994
Liabilities and shareholders' equity
Accounts payable $3,555 $3,408
Other current liabilities 1,982 2,021
Total current liabilities 5,537 5,429
Long-term debt 3,663 3,711
Long-term portion of operating lease
liabilities 1,172 1,126
Other long-term liabilities 686 691
Total liabilities 11,058 10,957
Total shareholders' equity 5,360 5,037
Total liabilities and shareholders' equity $16,418 $15,994
Ferguson plc
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In millions) Three months ended
October 31,
2023 2022
Cash flows from operating activities:
Net income $519 $595
Depreciation and amortization 80 81
Share-based compensation 13 13
(Increase) decrease in inventories (217 ) 94
Increase in receivables and other assets (29 ) (56 )
Increase (decrease) in accounts payable and other
liabilities 27 (395 )
Other operating activities 164 169
Net cash provided by operating activities of
continuing operations 557 501
Net cash used in operating activities of
discontinued operations -- (3 )
Net cash provided by operating activities 557 498
Cash flows from investing activities:
Purchase of businesses acquired, net of cash
acquired (12 ) (5 )
Capital expenditures (91 ) (95 )
Other investing activities 7 (4 )
Net cash used in investing activities (96 ) (104 )
Cash flows from financing activities:
Purchase of treasury shares (108 ) (366 )
Net change in debt and bank overdrafts (39 ) (148 )
Cash dividends (152 ) --
Other financing activities (14 ) (5 )
Net cash used in financing activities (313 ) (519 )
Change in cash, cash equivalents and restricted
cash 148 (125 )
Effects of exchange rate changes (9 ) (8 )
Cash, cash equivalents and restricted cash,
beginning of period 669 785
Cash, cash equivalents and restricted cash, end of
period $808 $652
For further information please contact
Investor relations
Brian Lantz, Vice President IR and Communications
Mobile: +1 224 285 2410
Pete Kennedy, Director of Investor Relations
Mobile: +1 757 603 0111
Media inquiries
Christine Dwyer, Senior Director of Communications and PR
Mobile: +1 757 469 5813
View source version on businesswire.com:
https://www.businesswire.com/news/home/20231205564440/en/
CONTACT:
Ferguson plc
SOURCE: Ferguson plc
Copyright Business Wire 2023
(END) Dow Jones Newswires
December 05, 2023 06:45 ET (11:45 GMT)
Ferguson (LSE:FERG)
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