Company Announcements

Three months to 30 April by region

Quarterly organic revenue growth

USA

The US business grew revenue 3.3% on an organic basis with acquisitions contributing a further 5.1%. Revenue growth rates remained positive in the quarter but moderated across the country. The major business units of Blended Branches, Waterworks, Industrial and HVAC continued to grow across all regions. Organic revenue in our standalone eBusiness was slightly lower as we continued our strategy of focusing on fewer trading websites.

Gross margins were slightly ahead of last year including the impact of acquisitions. Operating expenses were well controlled and headcount was lower than Q2. Trading profit of $346 million (2018: $334 million) was $12 million ahead of last year. During the quarter we acquired Kitchen Art, a high-end kitchen cabinetry design, installation and remodelling business.

In line with our guidance at the half year, the overall market environment has moderated to low growth and we continued to gain market share. Recent results for our largest quoted suppliers² show an average growth rate of 0% in the first calendar quarter compared to 8% in the same period last year. New residential housing starts and residential construction put-in-place data from the US Census Bureau declined in the quarter. The Case Schiller house price index and JCHS LIRA remodelling spend indicators both softened, though remained positive. Commercial construction put-in-place data grew very modestly and the Architectural Billings Index increased slightly in April. Our orderbooks continued to grow year-on year suggesting modest growth over the coming months.

UK

Like-for-like revenue growth was 2.8% in the quarter. Gross margins were lower but costs were well controlled. Trading profit of $20 million was flat at constant currency but $2 million lower than last year due to adverse foreign exchange rate movements.

Canada

In Canada organic revenue declined 2.9% with residential markets slowing as a result of rising interest rates and government initiatives to restrict mortgage credit. Acquisitions contributed 5.8% of additional revenue growth. Gross margins were firm, though trading profit was $3 million below last year and we are continuing to lower the cost base.
 

1)        The UK revenue growth rate is presented on a like-for-like basis to remove the impact of closed branches and the exit of low margin business.

2)        Refers to published data for the relevant divisions of Mueller, Fortune Brands, Masco, Lixil, Whirlpool, A O Smith.

Nine months trading performance

Financial position

The Group's cash generation has been strong resulting in net debt at 30 April 2019 of $1,588 million (30 April 2018: $1,582 million¹) and the ratio of net debt to the last twelve months EBITDA was 0.9x (30 April 2018: 0.9x¹). The Group aims to operate with a net debt to EBITDA ratio of between 1x and 2x.

Board changes

In May, Geoff Drabble joined the Board as a Non-Executive Director and will succeed Gareth Davis as Chairman after the 2019 Annual General Meeting, subject to shareholder approval. Gareth will step down as a Director in January 2020 to ensure an orderly handover of responsibilities. Geoff joins Ferguson following a 12-year period as Chief Executive of Ashtead, 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. Gareth has served as a Non-Executive Director of Ferguson for 16 years including nearly nine years as the Company's Chairman. The Board would like to express its thanks to Gareth for the significant contribution he has made to Ferguson and his outstanding stewardship of the Board.

Capital allocation policy and shareholder returns

Ferguson consistently generates strong operating cash flows with free cash flows² in excess of $700 million in each of the last four years. In normal economic conditions the business reinvests in fixed and working capital to support strong growth. In periods of lower growth, reinvestment needs are more modest and free cash flows tend to be higher with maintenance capital expenditure of less than 1% of revenue. The Company aims to grow ordinary dividends over time commensurate with the long-term earnings growth of the business. Investment in selective bolt-on acquisitions has typically been in the range $200 million to $300 million per year.

Ferguson has returned $3.5 billion of surplus cash to shareholders over the last 6 years and we expect to continue to generate significant free cash flows which are beyond our immediate re-investment needs. The Group currently has surplus cash and in line with the Company's capital allocation policy, we are proposing to buy back $500 million of our shares over the next 12 months.
 

Outlook

We are confident that Ferguson will continue to make progress as we remain firmly focused on delivering superior customer service. We expect to generate ongoing Group trading profit in the year ended 31 July 2019 in line with current analysts' consensus forecasts.³

1)        Adjusted for approx. $1.3 billion proceeds from sale of Nordic businesses, $1.0 billion of which was returned to shareholders on 29 June 2018. Q3 2018 reported net debt to EBITDA was 0.1x.

2)        Free cash flow is cash generated from operations less interest, tax and capex.

3)        Analysts' consensus for 2019 trading profit on the Company's website is an average of $1,585 million (ranging from $1,570 million to $1,597 million)

For further information please contact 

Ferguson plc

Media Enquiries

Investor conference call

A conference call with John Martin, Group Chief Executive, and Mike Powell, Group Chief Financial Officer, will commence at 08.00 UK time today. The call will be recorded and available on our website after the event at www.fergusonplc.com.

Ask for the Ferguson call quoting 8638361.

Notes to Editors

1.    US organic revenue growth by quarter

http://www.rns-pdf.londonstockexchange.com/rns/5948B_1-2019-6-7.pdf

2.    About Ferguson plc

Ferguson plc is the world's largest specialist trade distributor of plumbing and heating products to professional contractors principally operating in North America and the UK. Revenue for the year ended 31 July 2018 was $20.8 billion and ongoing trading profit was $1.5 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. 

Financial calendar

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. These 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 and building materials 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.

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