Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — Wolseley — H1 FY2014 Earnings Presentation
47 slides from Ferguson Enterprises's earnings presentation, Mar 25, 2014
Slide 1: FY14 Half Year Results
FY14 Half Year Results
Slide 2: Highlights
Highlights • Like-for-like growth, market share performance, margins ahead • Strong cash generation and re-based dividend +25% • Investment in more efficient / productive business models • Continued performance management improvement • Three bolt-on acquisitions completed 2
Slide 3: Operating and Financial Review
Operating and Financial Review John Martin, Chief Financial Officer
Slide 4: Financial highlights
Financial highlights Change H1 2013 (at constant Like-for-like £m H1 2014 Restated** Change exchange rates) change Ongoing revenue 6,412 6,096 +5.2% +5.1% +3.2% Ongoing gross margin % 28.2% 27.8% +0.4% Ongoing trading profit* 360 331 +8.8% +9.4% Ongoing trading margin %* 5.6% 5.4% +0.2% Net debt 927
Slide 5: Like-for-like growth
Like-for-like growth Q1 Q2 Q3 Q4 Q1 Q2 last year last year last year last year this year this year USA +7.1% +9.7% +8.3% +7.7% +7.4% +5.0% Canada +3.1% +1.2% - +3.0% (0.6%) (3.5%) UK (0.3%) +0.3% +5.2% +5.1% +4.3% +2.0% Nordic (4.7%) (7.6%) (7.3%) (3.1%) (2.5%) +0.5% France (8.2%) (12.5%) (10.0%) (4
Slide 6: USA ongoing
USA ongoing Change (at constant Like-for-like £m H1 2014 H1 2013 Change exchange rates) change Revenue 3,426 3,189 +7.4% +8.0% +6.2% Trading profit 255 223 +14.3% +15.2% Trading margin 7.4% 7.0% +0.4% Branches 1,360 1,336 +24 Headcount 19,163 18,336 +4.5% 6
Slide 7: Canada
Canada Change (at constant Like-for-like £m H1 2014 H1 2013 Change exchange rates) change Revenue 406 440 (7.7%) (1.4%) (1.9%) Trading profit 24 28 (14.3%) (9.3%) Trading margin 5.9% 6.4% (0.5%) Branches 222 220 +2 Headcount 2,461 2,506 (1.8%) 7
Slide 8: UK
UK Change (at constant Like-for-like £m H1 2014 H1 2013 Change exchange rates) change Revenue 943 850 +10.9% n/a +3.2% Trading profit 48 46 +4.3% n/a Trading margin 5.1% 5.4% (0.3%) Branches 759 758 +1 Headcount 5,835 6,212 (6.1%) 8
Slide 9: Nordic ongoing
Nordic ongoing Change (at constant Like-for-like £m H1 2014 H1 2013* Change exchange rates) change Revenue 916 917 (0.1%) (2.6%) (1.2%) Trading profit 31 40 (22.5%) (23.4%) Trading margin 3.4% 4.4% (1.0%) Branches 233 236 (3) Headcount 5,372 5,347 +0.5% Denmark GDP Sweden GDP Finland GDP 5.0% 5.3% 3
Slide 10: France ongoing
France ongoing Change (at constant Like-for-like £m H1 2014 H1 2013 Change exchange rates) change Revenue 285 273 +4.4% (0.1%) +0.4% Trading profit 5 (3) n/a n/a Trading margin 1.8% (1.1%) +2.9% Branches 140 145 (5) Headcount 2,550 2,791 (8.6%) 10
Slide 11: Central Europe ongoing
Central Europe ongoing Change (at constant Like-for-like £m H1 2014 H1 2013 Change exchange rates) change Revenue 436 427 +2.1% (1.5%) (2.6%) Trading profit 19 19 - (5.1%) Trading margin 4.4% 4.4% - Branches 166 172 (6) Headcount 2,707 2,798 (3.3%) Switzerland GDP Netherlands GDP Austria GDP 4.0% 3.
Slide 12: Other
Other • Central costs of £22m (H1 2013: £22m) in line with last year • Operations that have been closed, sold or are held for sale contributed: – Revenue of £109m (H1 2013: £180m) – Trading losses of £8m (H1 2013: £7m) arose from businesses being exited – Principally relate to France and Cheapy, a s
Slide 13: Revenue and gross profit in the ongoing businesses
Revenue and gross profit in the ongoing businesses £7m £13m £100m £196m £6,412m Revenue £6,096m £2m £2m £29m £21m £55m £1,806m Gross profit £1,697m H1 2013 Like-for-like growth Acquisitions Gross margin Exchange Other H1 2014 improvement Gross margin 27.8% - (0.1%) +0.5% - - 28.2% 13
Slide 14: Operating expenses of the ongoing businesses
Operating expenses of the ongoing businesses £3m £14m (£20m) £8m £27m £17m £31m £1,446m £1,366m H1 2013 Variable costs from Acquisitions US Healthcare Opex investment Exchange Efficiency savings H1 2014 like-for-like growth Operating cost increases 14
Slide 15: Income statement
Income statement H1 2013 £m H1 2014 Restated* Ongoing trading profit 360 331 Trading loss from operations closed, disposed of or held for sale (8) (7) Amortisation (23) (27) Exceptional items 1 (87) Financing charges (14) (17) Profit before tax 316 193 Tax (87) (69) Discontinued operations - 9 Profi
Slide 16: Financing and tax
Financing and tax H1 2013 £m H1 2014 Restated* Financing Net interest charges 10 8 Pensions and provisions 2 7 Facility charges 2 2 14 17 Tax Income statement charge 87 69 Exceptionals, intangibles and other adjustments 6 15 Underlying income statement charge 93 84 Trading profit less financing char
Slide 17: Cash flow from operating activities
Cash flow from operating activities £m H1 2014 H1 2013 Trading profit 352 324 Depreciation and amortisation 53 60 EBITDA 405 384 Working capital (304) (342) Special pension contributions - (125) Provisions, other movements and exceptional costs (10) (33) Cash flow from operating activities 91 (116)
Slide 18: Other cash flow
Other cash flow £m H1 2014 H1 2013 Cash flow from operating activities 91 (116) Net interest (17) (12) Tax paid (97) (100) Acquisitions (19) (101) Disposals 14 26 Capex (90) (50) Dividends (including special dividends) (417) (462) Net purchase of shares by Employee Benefit Trusts (26) (110) FX and o
Slide 19: Acquisitions
Acquisitions Acquisition Business unit Date Annual revenue US Blended Jan 2014 £37m Branches Beijer Jan 2014 £15m Starkki Mar 2014 £190m Total consideration £64m 19
Slide 20: Organic investment
Organic investment H1 2014 H1 2014 £m Capex Opex Freehold DCs and hubs 32 - Branch expansion, showrooms and refurbishment 34 3 Network infrastructure 5 1 Technology and processes 19 10 90 14 20
Slide 21: Net debt and pensions
Net debt and pensions 31 Jan 31 Jul 31 Jan £m 2014 2013 2013 Net debt as reported 927 411 871 Impact of timing of payment runs - 160 - Adjusted net debt 927 571 871 Net pension liability / (asset) (1) 133 318 Committed facilities of £2.4bn 21
Slide 22: Foreign exchange impact
Foreign exchange impact • First half P&L impact not material overall • 31 January 2014 balance sheet impact : £283m gross, £204m net of hedging • Second half P&L impact is likely to be material as shown by the recalculation of H2 last year at the current rates: H2 2013 retranslation Current H2 2013
Slide 23: FY14 guidance
FY14 guidance Latest guidance for FY14 Change H2 like-for-like revenue growth About 4% - Capital investment £200m - £220m - Incremental opex in technology, processes and projects £25m to £30m £5m to £10m higher Trading profit impact of FX at current rates > £30m - Impact of trading days In line with
Slide 24: Dividends and capital structure
Dividends and capital structure • Reminder of capital structure priorities – Organic growth – Ordinary dividends – Acquisitions that meet our investment criteria – Return of surplus cash to shareholders • Interim dividend of 27.5p per share, increased by 25% – Rebased by 15% – Growth of 10% • No cha
Slide 25: Business Review and Strategy Update
Business Review and Strategy Update Ian Meakins, Chief Executive
Slide 26: Wolseley Strategy Re-cap
Wolseley Strategy Re-cap 1. Develop our great portfolio of strong businesses 2. Drive performance systematically across Group 3. Accelerate profitable growth 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balance sheet 26
Slide 27: Accelerate Profitable Growth Profit Levers – Re-cap
Accelerate Profitable Growth Profit Levers – Re-cap Market Share Gross Margin Customer service Pricing matrix New branches / channels / segments Customer terms Bolt-on acquisitions Category management Profitable Sourcing growth Improve Productivity Improve Returns Cost reduction Investment Better bu
Slide 28: Accelerate Profitable Growth US Blended Branches
Accelerate Profitable Growth US Blended Branches Market Share Gross Margin Customer service improvement Gross margin Over-market revenue growth +2% Price matrix compliance Facilities Maintenance growth Private label revenue growth +10% Customer on-time-in-full measure Counter revenue growth Showroom
Slide 29: Accelerate Profitable Growth US Waterworks
Accelerate Profitable Growth US Waterworks Market Share Gross Margin Customer service improvement +1.3% Gross margin Over-market revenue growth +4% Counter revenue growth +14% Branch SKU availability Price matrix utilisation Private label revenue growth Profitable growth Productivity Improve Returns
Slide 30: Accelerate Profitable Growth UK Plumb & Parts
Accelerate Profitable Growth UK Plumb & Parts Market Share Gross Margin Customer service improvement Gross margin Over-market revenue growth Accounts manual pricing B2B e-commerce growth Sourcing benefits Customer on-time-in-full measure Profitable growth Productivity Improve Returns Part-time emplo
Slide 31: Accelerate Profitable Growth Stark
Accelerate Profitable Growth Stark Market Share Gross Margin Customer service improvement +1.4% Gross margin Service to loyal customers +5.5% Consumer % total revenue Market share, low margin customers Private label revenue growth E-sourcing / auctions Price matrix compliance Profitable growth Produ
Slide 32: Wolseley Strategy Re-cap
Wolseley Strategy Re-cap 1. Develop our great portfolio of strong businesses 2. Drive performance systematically across Group 3. Accelerate profitable growth 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balance sheet 32
Slide 33: Evolution of Business Models Major Initiatives
Evolution of Business Models Major Initiatives Major Initiatives Current performance Segmentation Pricing Customer Order capture Sales management Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration Chain D
Slide 34: Progress On Business Model Initiatives USA
Segmentation Pricing Customer Order capture Sales management Progress On Business Model Initiatives Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration USA Chain Delivery options Productivity Transactional
Slide 35: Progress On Business Model Initiatives USA
Segmentation Pricing Customer Order capture Sales management Progress On Business Model Initiatives Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration USA Chain Delivery options Productivity Transactional
Slide 36: Progress On Business Model Initiatives USA
Segmentation Pricing Customer Order capture Sales management Progress On Business Model Initiatives Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration USA Chain Delivery options Productivity Transactional
Slide 37: Progress On Business Model Initiatives USA
Segmentation Pricing Customer Order capture Sales management Progress On Business Model Initiatives Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration USA Chain Delivery options Productivity Transactional
Slide 38: Progress On Business Model Initiatives USA
Segmentation Pricing Customer Order capture Sales management Progress On Business Model Initiatives Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration USA Chain Delivery options Productivity Transactional
Slide 39: Progress On Business Model Initiatives USA
Segmentation Pricing Customer Order capture Sales management Progress On Business Model Initiatives Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration USA Chain Delivery options Productivity Transactional
Slide 40: Progress On Strategic Initiatives: UK
Segmentation Pricing Customer Order capture Sales management Progress On Strategic Initiatives: Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration UK Chain Delivery options Productivity Transactional data
Slide 41: Progress On Strategic Initiatives: Nordics
Segmentation Pricing Customer Order capture Sales management Progress On Strategic Initiatives: Category management Rebate management Supplier Low cost country sourcing Lowest cost of goods Product availability Supply- Interface / integration Nordics Chain Delivery options Productivity Transactional
Slide 42: Summary
Summary • Performance management – progress made but still much to do • Investment in more productive business models − Required to deliver better leverage and benefits of scale − Speed of execution across multiple initiatives • Significant opportunity to continue to drive profitable share gain 42
Slide 43: Appendices
may iy ; : ——— / Appendices
Slide 44: Regional analysis
Regional analysis Revenue Revenue Trading profit Trading profit £m H1 2014 H1 2013 H1 2014 H1 2013 Ongoing USA 3,426 3,189 255 223 Canada 406 440 24 28 UK 943 850 48 46 Nordic 916 917 31 40 France 285 273 5 (3) Central Europe 436 427 19 19 Central costs - - (22) (22) 6,412 6,096 360 331 Non-ongoing
Slide 45: Branch numbers
Branch numbers As at Closed, disposed Ongoing at 31 July 2013 Acquired Opened of or held for sale 31 Jan 2014 USA 1,348 6 18 (12) 1,360 Canada 219 - 3 - 222 UK 765 - 2 (8) 759 Nordic 260 2 6 (35) 233 France 158 - - (18) 140 Central Europe 167 - - (1) 166 Ongoing 2,917 8 29 (74) 2,880 45
Slide 46: Headcount numbers
Headcount numbers As at Closed, disposed Net joiners / Ongoing at 31 July 2013 Acquired of or held for sale (leavers) 31 Jan 2014 USA 18,969 84 (27) 137 19,163 Canada 2,511 - - (50) 2,461 UK 5,952 - - (117) 5,835 Nordic 6,145 36 (180) (629) 5,372 France 2,869 - (187) (132) 2,550 Central Europe 2,736
Slide 47: Foreign exchange impact
Foreign exchange impact H1 2014 FY14 H1 2013 impact Current impact H1 2013 H1 2014 trading profit gain / (loss) spot rate gain / (loss) average rate average rate £m £m 28-Feb-14 £m* USD 1.60 1.61 223 (1) 1.67 (23) CAD 1.58 1.69 28 (2) 1.85 (6) EUR 1.24 1.19 10 +1 1.21 - Other 46 +1 (1) * Estimated i