Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — H1 2020 Earnings Presentation
35 slides from Ferguson Enterprises's earnings presentation, Mar 17, 2020
Slide 1: Half Year Results Presentation
2019/20 Half Year Results Presentation Six months to 31 January 2020
Slide 2: Introduction and financial highlights
Introduction and financial highlights 1 Kevin Murphy, Group Chief Executive Ferguson plc | 2019/20 Half Year Results presentation | 17 March 2020 2
Slide 3: Agenda
2019/20 Half Year Results Presentation Agenda 1. Introduction and financial highlights Kevin Murphy, Chief Executive 2. Operating and financial review Mike Powell, Group CFO 3. Business update and outlook Kevin Murphy, Chief Executive 4. Q&A Ferguson plc | 2019/20 Half Year Results Presentation | 17
Slide 4: Strategy is delivering – expect evolution not a major refresh
2019/20 Half Year Results Presentation Viewpoint Key strategic themes • Making customers’ projects better because they worked with Ferguson • Acting as trusted advisor to customers giving them unrivalled choice of products • Ensuring scale delivers customer benefits where and when they need • Invest
Slide 5: Financial performance
2019/20 Half Year Results Presentation Financial performance $19.5bn Revenue growth1 Underlying trading profit growth1 +4.3% +4.6% $1.5bn 30.0% $10.1bn Gross margin1 Headline EPS growth Flat +1.6% 27.5% $0.4bn '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 Ongoing Revenue Ongoing Trading Profit Ongoing
Slide 6: Capital and returns
2019/20 Half Year Results Presentation Capital and returns Return on gross capital employed Strong balance sheet Excellent cash generation 30.0% 26.2% 1.1x $465m 1 25.0% net debt: adjusted EBITDA cash from operations 20.0% 15.0% Buyback commenced February 2020 Interim dividend 10.0% 6.9% $500m +7.0%
Slide 7: Operations and strategy
2019/20 Half Year Results Presentation Operations and strategy Highlights • Health and safety: ongoing improvement in recordable injury rate in H11 • Invested $141m in acquisitions in H1, including SW Anderson. Recently announced Columbia Pipe & Supply • Own brand grew to 8.9% of Group ongoing sales
Slide 8: Operating and financial review
Operating and financial review 2 Mike Powell, Group CFO Ferguson plc | 2019/20 Half Year Results presentation | 17 March 2020 8
Slide 9: Financial highlights
Section Half 2019/20 heading Year Results Presentation Financial highlights H1 2020 H1 2019 Change Ongoing revenue $9,893m $9,489m +4.3% Ongoing gross margin % 30.2% 30.2% Ongoing trading profit 1 $782m $714m Less impact of IFRS16 ($35m) - Underlying trading profit 2 $747m $714m +4.6% Ongoing underl
Slide 10: Revenue and trading profit growth
Section Half 2019/20 heading Year Results Presentation Revenue and trading profit growth H1 2020 Underlying trading Revenue profit Organic growth +2.0% +3.4% Acquisition growth +2.3% +1.2% FX and trading day impact - - +4.3% +4.6% Trading profit growth outpaced revenue growth Ferguson plc | 2019/20
Slide 11: USA
Section Half 2019/20 heading Year Results Presentation USA $m H1 2020 H1 2019 Change Revenue 9,318 8,874 +5.0% Organic revenue growth +2.6% +9.7% Underlying trading profit ¹ 740 700 +5.7% Underlying trading margin % ¹ 7.9% 7.9% H1 2020 Underlying trading Revenue profit Organic growth +2.6% +4.6% Acq
Slide 12: USA revenue growth
Section Half 2019/20 heading Year Results Presentation USA revenue growth Revenue Total Business unit $m growth Blended Branches 5,302 +3.7% (see regional analysis right) West Central Waterworks standalone 1,541 +12.8% +0.4% +2.6% HVAC standalone 671 +10.5% East +7.8% eBusiness, Industrial standalon
Slide 13: Canada
Section Half 2019/20 heading Year Results Presentation Canada Change (in local $CADm H1 2020 H1 2019 currency) Revenue 759 810 (6.3%) Organic revenue growth (6.6%) +2.1% Underlying trading profit ¹ 38 51 (25.5%) Underlying trading margin % ¹ 5.0% 6.3% • Markets remained challenging throughout the pe
Slide 14: UK (non-ongoing)
Section Half 2019/20 heading Year Results Presentation UK (non-ongoing) Change (in local £m H1 2020 H1 2019 currency) Revenue 845 873 (3.2%) Organic revenue growth (5.2%) (0.1%)1 Underlying trading profit 2 23 25 (8.0%) Underlying trading margin % 2 2.8% 2.8% • We continue to actively manage the cos
Slide 15: Financing and tax
Section Half 2019/20 heading Year Results Presentation Financing and tax $m H1 2020 H1 2019 Financing Net finance costs - pre-IFRS 16 43 35 - IFRS 16 charge 27 - Reported P&L charge 70 35 Tax Ongoing P&L charge 181 155 Ongoing effective tax rate 25.4% 22.8% Tax rate increase due to Swiss tax reform
Slide 16: Cash flow
Section Half 2019/20 heading Year Results Presentation Cash flow $m H1 2020* H1 2019 Adjusted EBITDA from continuing operations 872 842 Cash generated from operations 465 287 Interest & tax (215) (166) Capex (164) (244) Dividends (327) (300) Share buy backs (350) - Acquisitions of businesses (141) (
Slide 17: Capital structure
Section Half 2019/20 heading Year Results Presentation Capital structure H1 2020 H1 2019 Net debt $1,944m $1,885m Net debt : Adjusted EBITDA 1.1x 1.1x Lease Liabilities $1,445m Net debt including leases $3,389m Net debt including leases : EBITDA including leases1 1.6x Net pension asset $113m $154m S
Slide 18: Technical guidance for the full year to July 2020
Section Half 2019/20 heading Year Results Presentation Technical guidance for the full year to 31 July 2020 One additional trading day impact on trading profit $12m* Full year FY20 impact from completed acquisitions Revenue $375m, Trading profit $20m Exceptional income statement costs $50m 1 (Cash e
Slide 19: Business update and outlook
Business update and outlook 3 Kevin Murphy, Group Chief Executive Ferguson plc | 2019/20 Half Year Results presentation | 17 March 2020 19
Slide 20: Ferguson today: simpler, stronger, more profitable
Section Half 2019/20 heading Year Results Presentation Ferguson today: simpler, stronger, more profitable 2008 2019 Business units 45 91 Simpler Number of countries 27 32 Presentational currency £ $ Net debt: adjusted EBITDA 2.7x 0.7x Stronger Minimum operating lease commitments ($3.0bn) ($1.1bn) Re
Slide 21: Strategy: USA - attractive market structure
Section Half 2019/20 heading Year Results Presentation Strategy: USA - attractive market structure RMI revenue accounts for 60% of total revenue 11% 8% Highly fragmented industry 32% Organic sales growth culture 58% Bolt-on acquisition opportunities 60% The RMI market now represents Benefits of scal
Slide 22: Market size ($bn)
Section Half 2019/20 heading Year Results Presentation Strategy: USA - attractive market structure #3 #4 #6 30 25 #1 #2 20 #4 Market size ($bn) #1 15 #1 5 10 5 5 3 4 Home Depot 5 8 6 4 #1 Amazon Watsco MRC HD Supply 17% 23% 11% 20% 4% 6 5% 1% 10% - 22% Residential Trade Residential Showrooms Commerc
Slide 23: Value added distribution
Section Half 2019/20 heading Year Results Presentation Value added distribution Key resources Sell and relationships Source Distribute How our customers buy How we fulfil Our Central account orders management and call associates centers 42,000 2% Our Suppliers 16% customers Delivered e-commerce from
Slide 24: Projects are better because you worked with Ferguson
2019/20 Half Year Results Presentation Projects are better because you worked with Ferguson Bidding Sourcing Customised Delivery Sales channels Pick up •Own Brand solutions •Take off software •Same day •Inside sales •24/7 secure access •Exclusive •Valve and •Value engineering •Specialist eg white •S
Slide 25: Business update
2019/20 Half Year Results Presentation Business update • Strong operational delivery in the first half • Good healthy momentum going into March • COVID approach: • Priority to safeguard the wellbeing of our associates • Following guidance of World Health Organization and Center for Disease Control •
Slide 26: Outlook
2019/20 Half Year Results Presentation Outlook • Given the strength of H1 had intended to confirm our full-year trading profit outlook for 2020 • Too early to understand the impact on current trading from COVID-19 today • Recent Government actions, societal reactions and potential mitigating actions
Slide 27: Summary
2019/20 Half Year Results Presentation Summary • Strong operational delivery in flat US markets • No change of strategy - evolution • UK demerger on track for completion in calendar 2020 • Listing assessment: Board will set out a firm proposal later in the spring • Manage the business carefully as i
Slide 28: FERGUSON
FERGUSON
Slide 29: Appendix
Appendix 4 Ferguson plc | 2019/20 Half Year Results presentation | 17 March 2020 29
Slide 30: Exceptional items
Section Half 2019/20 heading Year Results Presentation Exceptional items Future H1 2020 $m H1 Cash cash P&L total De-merger of UK business 4 4 8 UK restructuring costs 2 7 9 Other exceptional costs 1 1 2 Total included in operating profit 7 12 19 Total included in profit before tax 19 Ferguson plc |
Slide 31: Regional analysis
Section Half 2019/20 heading Year Results Presentation Regional analysis Underlying trading Trading Revenue Revenue profit profit $m H1 2020 H1 2019 H1 2020 H1 2019 USA 9,318 8,874 740 700 Canada 575 615 29 39 Central costs - - (22) (25) Group ongoing 9,893 9,489 747 714 Non-ongoing - UK 1,073 1,126
Slide 32: Revenue and trading profit growth
Section Half 2019/20 heading Year Results Presentation Revenue and trading profit growth Ongoing revenue ($m) Ongoing underlying trading profit ($m) 24 9 - +2.3% - +2.0% 211 194 (1) 747 714 714 9,893 9,489 9,488 H1 2019 Exchange H1 2019 inc. Organic growth Trading days Acquisitions H1 2020 H1 2019 E
Slide 33: Net debt reconciliation
Section Half 2019/20 heading Year Results Presentation Net debt reconciliation H1 2020 H1 2020 IFRS16 Post $m Pre-IFRS16 adjustment IFRS16 Adjusted EBITDA from continuing operations 872 166 1,038 Cash generated from operations 465 171 636 Interest & tax (215) (27) (242) Capex (164) - (164) Dividends
Slide 34: Branch numbers and headcount
Section Half 2019/20 heading Year Results Presentation Branch numbers and headcount Branch numbers Headcount1 Carried Brought Carried Net joiners / forward Brought forward Acquired Net opened / forward (leavers) 31 January forward Acquired 31 July 2019 (closed) 31 January 2020 31 July 2019 2020 USA
Slide 35: IFRS16 impact
2019/20 Half Year Results Presentation IFRS16 impact • Applies to year ending 31 July 2020 for Ferguson • No impact on economics of lease transactions, cash payments made or capital allocation • Impact on opening financial statements (i.e. balance sheet as at 1 August 2019) and estimated impact for