Ferguson Reports Second Quarter Results
Continued Execution with Full Year Guidance Unchanged
Second quarter highlights
- Sales decline of 2.2%, largely driven by deflation of approximately 2%.
- Operating margin of 7.1% (7.8% on an adjusted basis) in our seasonally lightest quarter with fiscal year to date operating margin of 8.5% (9.0% on an adjusted basis).
-
Diluted earnings per share of
$1.58 ($1.74 on an adjusted basis). -
Operating cash flow of
$863 million on a fiscal year to date basis. -
Declared quarterly dividend of
$0.79 , reflecting a 5% increase over the prior year. -
Completed two acquisitions during the quarter and one subsequent to the quarter with aggregate annualized revenues of approximately
$220 million . -
Share repurchases of
$142 million during the quarter. - Balance sheet remains strong with net debt to adjusted EBITDA of 1.1x.
WOKINGHAM,
FY2024 Guidance (unchanged)
|
2024 Guidance |
Net sales* |
Broadly flat |
Adjusted operating margin** |
9.2% - 9.8% |
Interest expense |
|
Adjusted effective tax rate** |
Approximately 25% |
Capital expenditures |
|
* Net sales guidance assumes mid-single digit market decline with continued Company market outperformance, contribution from completed acquisitions and one additional sales day. Overall impact of price inflation estimated to be broadly neutral for the year. |
|
** The Company does not reconcile forward-looking non-GAAP measures. See “Non-GAAP Reconciliations and Supplementary information.” |
“Our FY2024 financial guidance is unchanged. We are well positioned to leverage emerging multi-year structural tailwinds in non-residential construction and opportunities to further support the residential trade professional.”
|
Three months ended |
|
|
|||
US$ (In millions, except per share amounts) |
2024 |
2023 |
Change |
|||
|
Reported |
Adjusted(1) |
Reported |
Adjusted(1) |
Reported |
Adjusted |
Net sales |
6,673 |
6,673 |
6,825 |
6,825 |
(2.2)% |
(2.2)% |
Gross margin |
30.4% |
30.4% |
30.2% |
30.2% |
+20 bps |
+20 bps |
Operating profit |
477 |
520 |
549 |
582 |
(13.1)% |
(10.7)% |
Operating margin |
7.1% |
7.8% |
8.0% |
8.5% |
(90) bps |
(70) bps |
Earnings per share - diluted |
1.58 |
1.74 |
1.80 |
1.91 |
(12.2)% |
(8.9)% |
Adjusted EBITDA |
|
568 |
|
630 |
|
(9.8)% |
Net debt(1) : Adjusted EBITDA |
|
1.1x |
|
1.1x |
|
|
|
Six months ended |
|
|
|||
US$ (In millions, except per share amounts) |
2024 |
2023 |
Change |
|||
|
Reported |
Adjusted(1) |
Reported |
Adjusted(1) |
Reported |
Adjusted |
Net sales |
14,381 |
14,381 |
14,756 |
14,756 |
(2.5)% |
(2.5)% |
Gross margin |
30.3% |
30.3% |
30.4% |
30.4% |
(10) bps |
(10) bps |
Operating profit |
1,216 |
1,293 |
1,380 |
1,446 |
(11.9)% |
(10.6)% |
Operating margin |
8.5% |
9.0% |
9.4% |
9.8% |
(90) bps |
(80) bps |
Earnings per share - diluted |
4.12 |
4.40 |
4.64 |
4.87 |
(11.2)% |
(9.7)% |
Adjusted EBITDA |
|
1,387 |
|
1,542 |
|
(10.1)% |
Net debt(1) : Adjusted EBITDA |
|
1.1x |
|
1.1x |
|
|
(1) The Company uses certain non-GAAP measures, which are not defined or specified under |
Summary of financial results
Second quarter
Net sales of
Gross margin of 30.4% was 20 basis points higher than last year driven by strong pricing execution from our associates. Operating expenses were appropriately managed with targeted cost control actions and productivity initiatives balanced with investing in core capabilities for future growth.
Reported operating profit was
Reported diluted earnings per share was
Net sales in the US business declined 2.2%, with an organic revenue decline of 3.7% partially offset by a 1.5% contribution from acquisitions.
Residential end markets, which comprise just over half of US revenue, remained subdued. New residential housing start and permit activity improved slightly in the quarter, while repair, maintenance and improvement (“RMI”) work remained soft. Overall, residential revenue declined by approximately 4% in the second quarter.
Non-residential end markets, representing just under half of US revenue, showed comparative resilience with non-residential revenues declining by approximately 1% in the second quarter. Commercial and civil/infrastructure activity held flat in the quarter with industrial more pressured against a strong prior year comparable. We continued to see good levels of megaproject related bid activity.
Adjusted operating profit of
We completed two acquisitions during the quarter,
Net sales compressed by 3.7%, with an organic revenue decline of 3.3% and a 0.4% adverse impact from foreign exchange rates. Markets have remained challenging and saw similar trends to that of
Subsequent to the quarter we acquired
Segment overview
|
Three months ended |
|
|
Six months ended |
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||
US$ (In millions) |
2024 |
2023 |
Change |
|
2024 |
2023 |
Change |
Net sales: |
|
|
|
|
|
|
|
|
6,364 |
6,504 |
(2.2)% |
|
13,693 |
14,036 |
(2.4)% |
|
309 |
321 |
(3.7)% |
|
688 |
720 |
(4.4)% |
Total net sales |
6,673 |
6,825 |
(2.2)% |
|
14,381 |
14,756 |
(2.5)% |
|
|
|
|
|
|
|
|
Adjusted operating profit: |
|
|
|
|
|
|
|
|
525 |
579 |
(9.3)% |
|
1,291 |
1,424 |
(9.3)% |
|
9 |
14 |
(35.7)% |
|
32 |
47 |
(31.9)% |
Central and other costs |
(14) |
(11) |
|
|
(30) |
(25) |
|
Total adjusted operating profit |
520 |
582 |
(10.7)% |
|
1,293 |
1,446 |
(10.6)% |
Financial position
Net debt to adjusted EBITDA at
We declared a quarterly dividend of
There have been no other significant changes to the financial position of the Company.
Domiciling our ultimate parent company in
On
The Company expects the change to be effective on or about
No action is needed by shareholders at this time.
Investor conference call and webcast
A call with
Dial in number |
US: |
+1 646 787 9445 |
|
|
+44 (0) 20 3936 2999 |
Ask for the Ferguson call quoting 422862. 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
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
Q3 Results for period ending |
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Timetable for the quarterly dividend
The timetable for payment of the quarterly dividend of
Ex-dividend date: |
|
Record date: |
|
Payment date: |
|
The quarterly dividend is declared in
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
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, plans and objectives for the future including our capabilities and priorities, domiciling our ultimate parent company in
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.
Non-GAAP Reconciliations and Supplementary Information
(unaudited)
Non-GAAP items
This announcement contains certain financial information that is not presented in conformity with
The Company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable
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:
|
Q2 2024 |
Q1 2024 |
Q4 2023 |
Q3 2023 |
Q2 2023 |
|||||
|
Revenue |
Organic
|
Revenue |
Organic
|
Revenue |
Organic
|
Revenue |
Organic
|
Revenue |
Organic
|
|
(2.2)% |
(3.7)% |
(2.7)% |
(5.0)% |
(1.5)% |
(5.5)% |
(1.6)% |
(2.5)% |
5.4% |
2.6% |
|
(3.7)% |
(3.3)% |
(5.0)% |
(3.3)% |
(5.1)% |
(2.7)% |
(9.5)% |
(1.5)% |
(4.5)% |
3.0% |
Continuing operations |
(2.2)% |
(3.7)% |
(2.8)% |
(4.9)% |
(1.7)% |
(5.3)% |
(2.0)% |
(2.5)% |
4.9% |
2.7% |
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 |
|
Six months ended |
||||
|
|
|
|
||||
(In millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Net income |
|
|
|
|
|
|
|
Provision for income taxes |
111 |
|
121 |
|
283 |
|
318 |
Interest expense, net |
44 |
|
47 |
|
89 |
|
88 |
Other expense (income), net |
— |
|
7 |
|
3 |
|
5 |
Operating profit |
477 |
|
549 |
|
1,216 |
|
1,380 |
Corporate restructurings(1) |
8 |
|
— |
|
8 |
|
— |
Amortization of acquired intangibles |
35 |
|
33 |
|
69 |
|
66 |
Adjusted Operating Profit |
520 |
|
582 |
|
1,293 |
|
1,446 |
Depreciation & impairment of PP&E |
41 |
|
36 |
|
80 |
|
73 |
Amortization of non-acquired intangibles |
7 |
|
12 |
|
14 |
|
23 |
Adjusted EBITDA |
|
|
|
|
|
|
|
(1) For the three and six months ended |
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 |
||
(In millions) |
2024 |
|
2023 |
Long-term debt |
|
|
|
Short-term debt |
150 |
|
55 |
Bank overdrafts(1) |
23 |
|
36 |
Derivative liabilities |
11 |
|
17 |
Cash and cash equivalents |
(639) |
|
(597) |
Net debt |
|
|
|
(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) |
|
||
|
2024 |
|
2023 |
Net income |
|
|
|
Loss from discontinued operations (net of tax) |
— |
|
2 |
Provision for income taxes |
540 |
|
655 |
Interest expense, net |
185 |
|
150 |
Other expense (income), net |
9 |
|
4 |
Corporate restructurings(1) |
8 |
|
10 |
Impairments and other charges(2) |
125 |
|
— |
Depreciation and amortization |
322 |
|
317 |
Adjusted EBITDA |
|
|
|
Net Debt: Adjusted EBITDA |
1.1x |
|
1.1x |
(1) For the rolling twelve months ended |
|||
(2) For the rolling twelve months ended |
Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS - Diluted
|
Three months ended |
||||||
|
|
||||||
(In millions, except per share amounts) |
2024 |
|
2023 |
||||
|
|
|
per share(1) |
|
|
|
per share(1) |
Net income |
|
|
|
|
|
|
|
Corporate restructurings(2) |
8 |
|
0.04 |
|
— |
|
— |
Amortization of acquired intangibles |
35 |
|
0.17 |
|
33 |
|
0.16 |
Discrete tax adjustments(3) |
(2) |
|
(0.01) |
|
(3) |
|
(0.01) |
Tax impact-non-GAAP adjustments(4) |
(8) |
|
(0.04) |
|
(8) |
|
(0.04) |
Adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares outstanding |
203.9 |
|
207.8 |
|
Six months ended |
||||||
|
|
||||||
(In millions, except per share amounts) |
2024 |
|
2023 |
||||
|
|
|
per share(1) |
|
|
|
per share(1) |
Net income |
|
|
|
|
|
|
|
Corporate restructurings(2) |
8 |
|
0.04 |
|
— |
|
— |
Amortization of acquired intangibles |
69 |
|
0.34 |
|
66 |
|
0.32 |
Discrete tax adjustments(3) |
(2) |
|
(0.01) |
|
(3) |
|
(0.01) |
Tax impact-non-GAAP adjustments(4) |
(18) |
|
(0.09) |
|
(16) |
|
(0.08) |
Adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares |
204.2 |
|
208.8 |
||||
(1) Per share on a dilutive basis. |
|||||||
(2) For the three and six months ended |
|||||||
(3) For the three and six months ended |
|||||||
(4) For the three and six months ended |
Condensed Consolidated Statements of Earnings (unaudited) |
|||||||
|
|
|
|
||||
|
Three months ended |
|
Six months ended |
||||
|
|
|
|
||||
(In millions, except per share amounts) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Net sales |
|
|
|
|
|
|
|
Cost of sales |
(4,644) |
|
(4,763) |
|
(10,021) |
|
(10,273) |
Gross profit |
2,029 |
|
2,062 |
|
4,360 |
|
4,483 |
Selling, general and administrative expenses |
(1,469) |
|
(1,432) |
|
(2,981) |
|
(2,941) |
Depreciation and amortization |
(83) |
|
(81) |
|
(163) |
|
(162) |
Operating profit |
477 |
|
549 |
|
1,216 |
|
1,380 |
Interest expense, net |
(44) |
|
(47) |
|
(89) |
|
(88) |
Other expense, net |
— |
|
(7) |
|
(3) |
|
(5) |
Income before income taxes |
433 |
|
495 |
|
1,124 |
|
1,287 |
Provision for income taxes |
(111) |
|
(121) |
|
(283) |
|
(318) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Basic |
203.4 |
|
207.1 |
|
203.6 |
|
207.9 |
Diluted |
203.9 |
|
207.8 |
|
204.2 |
|
208.8 |
Condensed Consolidated Balance Sheets (unaudited) |
|||
|
|
||
|
As of |
||
(In millions) |
|
|
|
Assets |
|
|
|
Cash and cash equivalents |
|
|
|
Accounts receivable, net |
3,092 |
|
3,597 |
Inventories |
3,968 |
|
3,898 |
Prepaid and other current assets |
891 |
|
953 |
Assets held for sale |
26 |
|
28 |
Total current assets |
8,616 |
|
9,077 |
Property, plant and equipment, net |
1,675 |
|
1,595 |
Operating lease right-of-use assets |
1,523 |
|
1,474 |
Deferred income taxes, net |
300 |
|
300 |
|
2,264 |
|
2,241 |
Other non-current assets |
1,309 |
|
1,307 |
Total assets |
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
Accounts payable |
|
|
|
Other current liabilities |
1,803 |
|
2,021 |
Total current liabilities |
4,788 |
|
5,429 |
Long-term debt |
3,595 |
|
3,711 |
Long-term portion of operating lease liabilities |
1,165 |
|
1,126 |
Other long-term liabilities |
721 |
|
691 |
Total liabilities |
10,269 |
|
10,957 |
Total shareholders' equity |
5,418 |
|
5,037 |
Total liabilities and shareholders' equity |
|
|
|
Condensed Consolidated Statements of Cash Flows (unaudited) |
|||
|
|
||
(In millions) |
Six months ended |
||
|
|||
2024 |
|
2023 |
|
Cash flows from operating activities: |
|
|
|
Net income |
|
|
|
Depreciation and amortization |
163 |
|
162 |
Share-based compensation |
24 |
|
27 |
(Increase) decrease in inventories |
(52) |
|
237 |
Decrease in receivables and other assets |
565 |
|
512 |
Decrease in accounts payable and other liabilities |
(626) |
|
(634) |
Other operating activities |
(52) |
|
(98) |
Net cash provided by operating activities of continuing operations |
863 |
|
1,175 |
Net cash used in operating activities of discontinued operations |
— |
|
(4) |
Net cash provided by operating activities |
863 |
|
1,171 |
Cash flows from investing activities: |
|
|
|
Purchase of businesses acquired, net of cash acquired |
(67) |
|
(179) |
Capital expenditures |
(192) |
|
(242) |
Other investing activities |
28 |
|
(4) |
Net cash used in investing activities |
(231) |
|
(425) |
Cash flows from financing activities: |
|
|
|
Purchase of treasury shares |
(250) |
|
(564) |
Net change in debt and bank overdrafts |
(24) |
|
74 |
Cash dividends |
(305) |
|
(403) |
Other financing activities |
(18) |
|
(13) |
Net cash used in financing activities |
(597) |
|
(906) |
Change in cash, cash equivalents and restricted cash |
35 |
|
(160) |
Effects of exchange rate changes |
— |
|
19 |
Cash, cash equivalents and restricted cash, beginning of period |
669 |
|
785 |
Cash, cash equivalents and restricted cash, end of period |
|
|
|
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