Ferguson Reports Third Quarter Results
Return to Volume Growth Driven by Continued Execution
Third quarter highlights
- Sales grew 2.4% driven by volume improvement despite continued deflation of approximately 2%.
- Operating margin of 8.6% (9.2% on an adjusted basis).
-
Diluted earnings per share of
$2.18 ($2.32 on an adjusted basis) grew by 33.7% over the prior year (up 5.5% on an adjusted basis). -
Operating cash flow of
$1,507 million on a fiscal year to date basis. -
Declared quarterly dividend of
$0.79 , reflecting a 5% increase over the prior year. -
Completed three acquisitions during the quarter and two subsequent to the quarter. We have now made eight acquisitions on a fiscal year to date basis with aggregate annualized revenues of approximately
$350 million . -
Share repurchases of
$171 million during the quarter. -
Share repurchase program increased by an additional
$1.0 billion . - Balance sheet remains strong with net debt to adjusted EBITDA of 1.0x.
WOKINGHAM,
FY2024 Guidance
|
Prior 2024 Guidance |
Updated 2024 Guidance |
Net sales* |
Broadly flat |
Broadly flat |
Adjusted operating margin** |
9.2% - 9.8% |
9.2% - 9.6% |
Interest expense |
|
|
Adjusted effective tax rate** |
Approximately 25% |
Approximately 25% |
Capital expenditures |
|
|
* Net sales guidance assumes mid-single digit market decline with continued Company market outperformance, contribution from completed acquisitions and one additional sales day. Overall impact of price deflation now expected to be approximately 2% for the fiscal year (previously ‘broadly neutral’). |
||
** The Company does not reconcile forward-looking non-GAAP measures. See “Non-GAAP Reconciliations and Supplementary information”. |
“Our fiscal 2024 financial guidance reflects continued volume growth and resilient gross margin despite the impact of continuing mild deflation expected for the remainder of the fiscal year. We remain well positioned to leverage multi-year tailwinds in both residential and non-residential end markets as we support the complex project needs of our specialist pro customers.”
|
Three months ended |
|
|
|||
US$ (In millions, except per share amounts) |
2024 |
2023 |
Change |
|||
|
Reported |
Adjusted(1) |
Reported |
Adjusted(1) |
Reported |
Adjusted |
Net sales |
7,308 |
7,308 |
7,140 |
7,140 |
+2.4% |
+2.4% |
Gross margin |
30.5% |
30.5% |
30.0% |
30.0% |
+50 bps |
+50 bps |
Operating profit |
625 |
674 |
497 |
657 |
+25.8 % |
+2.6% |
Operating margin |
8.6% |
9.2% |
7.0 % |
9.2% |
+160 bps |
Flat |
Earnings per share - diluted |
2.18 |
2.32 |
1.63 |
2.20 |
+33.7% |
+5.5% |
Adjusted EBITDA |
|
722 |
|
705 |
|
+2.4% |
Net debt(1) : Adjusted EBITDA |
|
1.0x |
|
1.1x |
|
|
|
Nine months ended |
|
|
|||
US$ (In millions, except per share amounts) |
2024 |
2023 |
Change |
|||
|
Reported |
Adjusted(1) |
Reported |
Adjusted(1) |
Reported |
Adjusted |
Net sales |
21,689 |
21,689 |
21,896 |
21,896 |
(0.9)% |
(0.9)% |
Gross margin |
30.4% |
30.4% |
30.2% |
30.2% |
+20 bps |
+20 bps |
Operating profit |
1,841 |
1,967 |
1,877 |
2,103 |
(1.9)% |
(6.5)% |
Operating margin |
8.5% |
9.1% |
8.6% |
9.6% |
(10) bps |
(50) bps |
Earnings per share - diluted |
6.30 |
6.72 |
6.28 |
7.07 |
+0.3% |
(5.0)% |
Adjusted EBITDA |
|
2,109 |
|
2,247 |
|
(6.1)% |
Net debt(1) : Adjusted EBITDA |
|
1.0x |
|
1.1x |
|
|
(1) The Company uses certain non-GAAP measures, which are not defined or specified under |
Summary of financial results
Third quarter
Net sales of
Gross margin of 30.5% was 50 basis points higher than last year driven by strong pricing execution from our associates. Operating expenses were appropriately managed against volume growth as we continued to focus on productivity initiatives and investment in core capabilities for future growth.
Reported operating profit was
Reported diluted earnings per share was
Net sales in the US business increased by 2.2%, with an organic revenue decline of 0.9% offset by a 1.5% contribution from acquisitions and 1.6% from one additional sales day.
Residential end markets, which comprise just over half of US revenue, remained muted but showed a slight sequential improvement from the second quarter. Overall, residential revenue grew by approximately 1% in the third quarter.
Non-residential end markets, representing just under half of US revenue, showed relative resilience with non-residential revenue growth of approximately 4% in the third quarter. Sales in commercial and civil/infrastructure end markets were solid, while industrial sales were slightly down against strong comparables. We continued to see good levels of bidding activity on large capital projects.
Adjusted operating profit of
We completed two acquisitions during the quarter, AVCO Supply, a leading distributor of boilers and water heaters in residential and commercial end markets in
Net sales grew by 6.7%, with an organic revenue decline of 0.6% offset by a 5.1% contribution from acquisitions and 2.2% from the combined impact of one additional sales day and the impact of foreign exchange rates. Markets have been similar to that of
During the quarter we acquired
Segment overview
|
Three months ended |
|
|
Nine months ended |
|
||
US$ (In millions) |
2024 |
2023 |
Change |
|
2024 |
2023 |
Change |
Net sales: |
|
|
|
|
|
|
|
|
6,974 |
6,827 |
2.2% |
|
20,667 |
20,863 |
(0.9)% |
|
334 |
313 |
6.7% |
|
1,022 |
1,033 |
(1.1)% |
Total net sales |
7,308 |
7,140 |
2.4% |
|
21,689 |
21,896 |
(0.9)% |
|
|
|
|
|
|
|
|
Adjusted operating profit: |
|
|
|
|
|
|
|
|
685 |
664 |
3.2% |
|
1,976 |
2,088 |
(5.4)% |
|
6 |
7 |
(14.3)% |
|
38 |
54 |
(29.6)% |
Central and other costs |
(17) |
(14) |
|
|
(47) |
(39) |
|
Total adjusted operating profit |
674 |
657 |
2.6% |
|
1,967 |
2,103 |
(6.5)% |
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
FEI Board changes
Effective
Investor conference call and webcast
A call with
Dial in number |
US: |
+1 646 787 9445 |
|
|
+44 (0) 20 3936 2999 |
Ask for the
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
Q4 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: |
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Payment date: |
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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:
|
Q3 2024 |
Q2 2024 |
Q1 2024 |
Q4 2023 |
Q3 2023 |
|||||
|
Revenue |
Organic
|
Revenue |
Organic
|
Revenue |
Organic
|
Revenue |
Organic
|
Revenue |
Organic
|
|
2.2% |
(0.9)% |
(2.2)% |
(3.7)% |
(2.7)% |
(5.0)% |
(1.5)% |
(5.5)% |
(1.6)% |
(2.5)% |
|
6.7% |
(0.6)% |
(3.7)% |
(3.3)% |
(5.0)% |
(3.3)% |
(5.1)% |
(2.7)% |
(9.5)% |
(1.5)% |
Continuing operations |
2.4% |
(0.9)% |
(2.2)% |
(3.7)% |
(2.8)% |
(4.9)% |
(1.7)% |
(5.3)% |
(2.0)% |
(2.5)% |
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 |
|
Nine months ended |
||||
|
|
|
|
||||
(In millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Net income |
|
|
|
|
|
|
|
Provision for income taxes |
138 |
|
111 |
|
421 |
|
429 |
Interest expense, net |
43 |
|
48 |
|
132 |
|
136 |
Other expense, net |
1 |
|
2 |
|
4 |
|
7 |
Operating profit |
625 |
|
497 |
|
1,841 |
|
1,877 |
Corporate restructurings(1) |
12 |
|
— |
|
20 |
|
— |
Impairments and other charges(2) |
— |
|
127 |
|
— |
|
127 |
Amortization of acquired intangibles |
37 |
|
33 |
|
106 |
|
99 |
Adjusted Operating Profit |
674 |
|
657 |
|
1,967 |
|
2,103 |
Depreciation & impairment of PP&E |
40 |
|
38 |
|
120 |
|
111 |
Amortization of non-acquired intangibles |
8 |
|
10 |
|
22 |
|
33 |
Adjusted EBITDA |
|
|
|
|
|
|
|
(1) For the three and nine months ended |
|||||||
(2) For the three and nine 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) |
36 |
|
32 |
Derivative liabilities |
13 |
|
12 |
Cash and cash equivalents |
(691) |
|
(625) |
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 |
567 |
|
622 |
Interest expense, net |
180 |
|
176 |
Other expense, net |
8 |
|
6 |
Corporate restructurings(1) |
20 |
|
5 |
Impairments and other charges(2) |
(2) |
|
127 |
Depreciation and amortization |
326 |
|
320 |
Adjusted EBITDA |
|
|
|
Net Debt: Adjusted EBITDA |
1.0x |
|
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 |
||||||||||
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||||||||||
(In millions, except per share amounts) |
2024 |
|
2023 |
||||||||
|
|
|
per share(1) |
|
|
|
per share(1) |
||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
Corporate restructurings(2) |
12 |
|
|
0.06 |
|
|
— |
|
|
— |
|
Impairments and other charges(3) |
— |
|
|
— |
|
|
127 |
|
|
0.62 |
|
Amortization of acquired intangibles |
37 |
|
|
0.18 |
|
|
33 |
|
|
0.16 |
|
Discrete tax adjustments(4) |
(11 |
) |
|
(0.06 |
) |
|
(1 |
) |
|
(0.01 |
) |
Tax impact-non-GAAP adjustments(5) |
(9 |
) |
|
(0.04 |
) |
|
(41 |
) |
|
(0.20 |
) |
Adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted-average shares outstanding |
203.2 |
|
|
206.1 |
|
|
Nine months ended |
||||||||||
|
|
||||||||||
(In millions, except per share amounts) |
2024 |
|
2023 |
||||||||
|
|
|
per share(1) |
|
|
|
per share(1) |
||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
Corporate restructurings(2) |
20 |
|
|
0.10 |
|
|
— |
|
|
— |
|
Impairments and other charges(3) |
— |
|
|
— |
|
|
127 |
|
|
0.61 |
|
Amortization of acquired intangibles |
106 |
|
|
0.52 |
|
|
99 |
|
|
0.48 |
|
Discrete tax adjustments(4) |
(13 |
) |
|
(0.07 |
) |
|
(4 |
) |
|
(0.02 |
) |
Tax impact-non-GAAP adjustments(5) |
(27 |
) |
|
(0.13 |
) |
|
(57 |
) |
|
(0.28 |
) |
Adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted-average shares outstanding |
203.9 |
|
|
207.9 |
|
||||||
(1) Per share on a dilutive basis. | |||||||||||
(2) For the three and nine months ended |
|||||||||||
(3) For the three and nine months ended |
|||||||||||
(4) For the three and nine months ended |
|||||||||||
(5) For the three and nine months ended |
|
|||||||||||
Condensed Consolidated Statements of Earnings |
|||||||||||
(unaudited) |
|||||||||||
|
Three months ended |
|
Nine months ended |
||||||||
|
|
|
|
||||||||
(In millions, except per share amounts) |
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
(5,076 |
) |
|
(5,000 |
) |
|
(15,097 |
) |
|
(15,273 |
) |
Gross profit |
2,232 |
|
|
2,140 |
|
|
6,592 |
|
|
6,623 |
|
Selling, general and administrative expenses |
(1,522 |
) |
|
(1,435 |
) |
|
(4,503 |
) |
|
(4,376 |
) |
Impairments and other charges |
— |
|
|
(127 |
) |
|
— |
|
|
(127 |
) |
Depreciation and amortization |
(85 |
) |
|
(81 |
) |
|
(248 |
) |
|
(243 |
) |
Operating profit |
625 |
|
|
497 |
|
|
1,841 |
|
|
1,877 |
|
Interest expense, net |
(43 |
) |
|
(48 |
) |
|
(132 |
) |
|
(136 |
) |
Other expense, net |
(1 |
) |
|
(2 |
) |
|
(4 |
) |
|
(7 |
) |
Income before income taxes |
581 |
|
|
447 |
|
|
1,705 |
|
|
1,734 |
|
Provision for income taxes |
(138 |
) |
|
(111 |
) |
|
(421 |
) |
|
(429 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share - Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share - Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
||||
Basic |
202.6 |
|
|
205.4 |
|
|
203.3 |
|
|
207.1 |
|
Diluted |
203.2 |
|
|
206.1 |
|
|
203.9 |
|
|
207.9 |
|
|
|||
Condensed Consolidated Balance Sheets |
|||
(unaudited) |
|||
|
As of |
||
(In millions) |
|
|
|
Assets |
|
|
|
Cash and cash equivalents |
|
|
|
Accounts receivable, net |
3,532 |
|
3,597 |
Inventories |
4,115 |
|
3,898 |
Prepaid and other current assets |
946 |
|
953 |
Assets held for sale |
30 |
|
28 |
Total current assets |
9,314 |
|
9,077 |
Property, plant and equipment, net |
1,692 |
|
1,595 |
Operating lease right-of-use assets |
1,511 |
|
1,474 |
Deferred income taxes, net |
306 |
|
300 |
|
2,325 |
|
2,241 |
Other non-current assets |
1,310 |
|
1,307 |
Total assets |
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
Accounts payable |
|
|
|
Other current liabilities |
1,891 |
|
2,021 |
Total current liabilities |
5,529 |
|
5,429 |
Long-term debt |
3,518 |
|
3,711 |
Long-term portion of operating lease liabilities |
1,155 |
|
1,126 |
Other long-term liabilities |
734 |
|
691 |
Total liabilities |
10,936 |
|
10,957 |
Total shareholders' equity |
5,522 |
|
5,037 |
Total liabilities and shareholders' equity |
|
|
|
|
|||||
Condensed Consolidated Statements of Cash Flows |
|||||
(unaudited) |
|||||
(In millions) |
Nine months ended |
||||
|
|||||
2024 |
|
2023 |
|||
Cash flows from operating activities: |
|
|
|
||
Net income |
|
|
|
|
|
Depreciation and amortization |
248 |
|
|
243 |
|
Share-based compensation |
39 |
|
|
38 |
|
Non-cash impact of impairments and net loss on disposal of assets |
— |
|
|
127 |
|
(Increase) decrease in inventories |
(194 |
) |
|
315 |
|
Decrease in receivables and other assets |
107 |
|
|
313 |
|
Increase (decrease) in accounts payable and other liabilities |
107 |
|
|
(441 |
) |
Other operating activities |
(84 |
) |
|
(94 |
) |
Net cash provided by operating activities of continuing operations |
1,507 |
|
|
1,806 |
|
Net cash used in operating activities of discontinued operations |
— |
|
|
(4 |
) |
Net cash provided by operating activities |
1,507 |
|
|
1,802 |
|
Cash flows from investing activities: |
|
|
|
||
Purchase of businesses acquired, net of cash acquired |
(185 |
) |
|
(179 |
) |
Capital expenditures |
(263 |
) |
|
(361 |
) |
Other investing activities |
30 |
|
|
(3 |
) |
Net cash used in investing activities |
(418 |
) |
|
(543 |
) |
Cash flows from financing activities: |
|
|
|
||
Purchase of treasury shares |
(421 |
) |
|
(784 |
) |
Net change in debt and bank overdrafts |
(86 |
) |
|
(29 |
) |
Cash dividends |
(465 |
) |
|
(557 |
) |
Other financing activities |
(23 |
) |
|
(19 |
) |
Net cash used in financing activities |
(995 |
) |
|
(1,389 |
) |
Change in cash, cash equivalents and restricted cash |
94 |
|
|
(130 |
) |
Effects of exchange rate changes |
(8 |
) |
|
20 |
|
Cash, cash equivalents and restricted cash, beginning of period |
669 |
|
|
785 |
|
Cash, cash equivalents and restricted cash, end of period |
|
|
|
|
|
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