Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — Wolseley — FY2012 Earnings Presentation
58 slides from Ferguson Enterprises's earnings presentation, Oct 2, 2012
Slide 1: 2012 Full Year Results
2012 Full Year Results
Slide 2: Welcome and Highlights
Welcome and Highlights Ian Meakins, Chief Executive
Slide 3: Performance Highlights
Performance Highlights Like-for-like Like for like growth and market share gains Pricing remains fierce – pressure on gross margins Disappointing Di i ti performance f in i FFrance and dNNordics di Share gains in North America and UK Cost reduction initiatives executed and more planned S
Slide 4: Business Environment
Business Environment North America remains reasonable European markets declining − Consumer confidence worsening − Unemployment increasing − Housing starts / transactions / prices depressed − Industrial and commercial activity slowing again Very challenging pricing environment Markets tough
Slide 5: Operating and Financial Review
Operating and Fi Financial i lRReview i John Martin, Chief Financial Officer
Slide 6: Financial Highlights
Financial Highlights Like-for-Like Like for Like 2012 2011 Change Change Ongoing revenue £12,716m £12,061m +5.4% +3.8% Ongoing gross margin % 27.5% 27.7% (0.2%) Ongoing trading profit* £658m £596m +10.4% O Ongoing i ttrading di margin i % 5 2% 5.2% 4 9% 4.9% +0.3% 0 3% Goodwill impairment (£353m) (£
Slide 7: Like-for-like growth
Like-for-like growth Q4 Q1 Q2 Q3 Q4 last year this year this year this year this year USA +7.4% +10.2% +7.4% +9.4% +6.7% Canada (2.2%) +1.7% +4.9% +7.9% +4.5% UK (2.9%) (3.3%) (2.4%) (0.4%) +3.5% Nordic +1.6% +2.3% +6.6% (1.7%) (2.9%) France +1.7% +2.5% +4.4% (6.1%) (5.6%) Central Europe +0.6% +0.5%
Slide 8: USA
USA Like-for-like Lik f lik £m 2012 2011 Change Change Revenue 6,168 5,500 +12.1% +8.4% Trading profit 389 314 +23.9% Trading margin 6.3% 5.7% Branches 1,274 1,261 Headcount 18,245 17,481 8
Slide 9: Canada
Canada Like-for-like £m 2012 2011 Change Change Revenue 850 811 +4.8% +4.5% Trading profit 49 39 +25.6% Trading margin 5.8% 4.8% Branches 220 221 Headcount 2,607 2,693 9
Slide 10: UK ongoing
UK ongoing* Like-for-like £m 2012 2011 Change Change Revenue 1,670 1,655 +1.0% (0.8%) Trading profit 92 89 +3.4% Trading margin 5.5% 5.3% Branches 919 933 Headcount 5,913 6,234 * Excludes Build Center, Encon and Bathstore 10
Slide 11: Nordic ongoing
Nordic ongoing* Like-for-like £m 2012 2011 Change Change Revenue , 2,062 2,060 , +0.1% % +1.1% % Trading profit 96 113 (15.0%) Trading margin 4.6% 5.5% Branches 264 255 Headcount 6,340 6,375 * Excludes Woodcote 2.5% 8.0% 6.0% Denmark GDP Sweden GDP 5.0% Finland GDP 2.0% 6.0% 4 0% 4.0% 1.5% 4.0% 3.0%
Slide 12: France ongoing
France ongoing* Like for like Like-for-like £m 2012 2011 Change Change Revenue 1,252 1,317 (4.9%) (1.4%) Trading profit 30 46 (34.8%) Trading margin 2.4% 3.5% B Branches h 313 322 Headcount 5,293 5,421 * Excludes Brossette 2 5% 2.5% F France GDP 2.0% 1.5% 1.0% 0.5% ‐ Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1
Slide 13: Central Europe ongoing
Central Europe ongoing* Like for like Like-for-like £m 2012 2011 Growth Change Revenue 714 718 (0.6)% +0.8% Trading profit 30 31 (1.8%) Trading margin 4.2% 4.3% Branches 142 144 Headcount 2,023 1,965 * Excludes Italy 4.0% 2.5% 5.0% Switzerland ‐ GDP Netherlands ‐ GDP Austria ‐ GDP 2.0% 4.0% 3.0% 1.5
Slide 14: Central and Other Costs
Central and Other Costs £m 2012 2011 p costs Group 32 31 Other (4) 5 28 36 Group costs are not recharged to the regions 14
Slide 15: Continental Europe Restructuring
Continental Europe Restructuring N d tto adjust Need dj t ffor challenging h ll i market k t conditions diti Sharp focus on cost control and reduction in place R i Review and d challenge: h ll – Headcount levels – Branch network – Logistics, support and other infrastructure Restructuring cha
Slide 16: Operating Expenses of the Ongoing Business
Operating Expenses of the Ongoing Business £17m £(11)m £(8)m £43m £(55)m £59m £28m £(7)m £27m £2,835m £2,742m 2011 Exchange Acquisitions / Pensions and Variable costs Pay rises and Restructuring Depreciation Credit Efficiency 2012 net new Share based from additional cost increases management savings
Slide 17: Trading Profit / Gross Profit in the Ongoing Business
Trading Profit / Gross Profit in the Ongoing Business 21.4% 18 8% 18.8% 17.9% Other cost improvement since 2010 Labour improvement since 2010 14.9% 14.5% 2008 2009 2010 2011 2012 17
Slide 18: Income Statement
Income Statement £m 2012 2011 Trading profit 665 622 Losses on disposal (24) (51) Amortisation (60) (75) Impairment (353) (39) Financing charges (30) (66) Profit before tax 198 391 Tax (138) (110) Discontinued operations (3) (10) P fit for Profit f the th year 57 271 18
Slide 19: Financing and Tax
Financing and Tax £m 2012 2011 Financing Net interest charges 17 42 Pensions and provisions 9 18 Facility charges 4 6 30 66 Tax P&L charge 138 110 Exceptionals, intangibles and other adjustments 20 42 Underlying P&L charge 158 152 Trading profit less financing charges 635 556 Effective tax rate 25%
Slide 20: Cash Flow
Cash Flow £(60)m £256m £(105)m £(176) £(176)m £61m £(26)m Disposals Investment £(142)m £(30)m £790m £568m EBITDA Asset Business One-off Tax and Capex and Working Dividends Fx / other Reduction in disposals disposals pension interest Acquisitions capital and net debt payment provisions 20
Slide 21: Capital Employed
Capital Employed £3.6bn 29% £3.0bn 25% 24% £2.5bn £2.4bn £2 1b £2.1bn Adjusted Net Working Capital Fixed Assets 16% 14% Return on Capital Employed excluding l di goodwill d ill 2008 2009 2010 2011 2012 Note: EU Payment Directive is to be implemented March 2013 21
Slide 22: Net Debt, Pensions and Leases
Net Debt, Pensions and Leases £2 938m £2,938m Adjusted net debt Reported net debt / (cash) £1,690m £1 195m £1,195m £705m £100m 2008 2009 2010 2011 2012 Net pension liabilities 236 341 432 360 358 Operating leases 1,503 1,329 1,292 1,126 842 Committed credit facilities >1 year of £1.4 billion 22
Slide 23: Capital Structure Priorities
Capital Structure Priorities 1. Organic growth Investment in IT, branch refurbishment and new branches up to £175m Working capital investment expected to be 12-13% of incremental sales 2. Dividends - progressive dividend policy 3. Acquisitions Hard synergies, properly integrated, meet investme
Slide 24: Dividend and Return of Capital
Dividend and Return of Capital Finall dividend Fi di id d off 40 40p per share h (f (fullll year off 60p 60 per share; h +33%), 33%) covered d 2.8x by headline EPS: Pence / share £m Interim 20 57 Final 40 115 Year 60 172 H1 commitments of £270m (acquisitions (£30m); share scheme hedging (£90m);
Slide 25: Business Review and Strategy Update
Business Review and Strategy Update Ian Meakins, Chief Executive
Slide 26: Wolseley Strategy
Wolseley Strategy 1 Develop our great portfolio of strong businesses 1. 2. Drive performance systematically across Group 3. Accelerate profitable growth − organic / bolt-ons / adjacent businesses 4. Drive evolution of business models 5 Deliver Group synergies 5. 6. Underpin strategy with strong bala
Slide 27: Current Portfolio
1. Develop portfolio Current Portfolio 2. Drive performance 3. Accelerate profitable growth 4. Evolution of business models 5. Deliver Group synergies 6. Strong balance sheet Significant Disposals 14% Other Brandon Hire Encon El t i C Electric Center t 40% Build Center Number 2 Bathstore Brossette I
Slide 28: Wolseley Strategy
Wolseley Strategy 1 Develop 1. D l our greatt portfolio tf li off strong t businesses b i 2. Drive performance systematically across Group 3. Accelerate profitable growth − organic g / bolt-ons / adjacent j businesses 4. Drive evolution of business models 5 Deliver Group synergies 5. 6. Underpin str
Slide 29: Organic Growth - Performance Metrics
1. Develop portfolio Organic Growth - Performance Metrics 2. Drive performance 3. Accelerate profitable growth 4. Evolution of business models 5. Deliver Group synergies 6. Strong balance sheet Customer service / employee engagement – Embedded across Group Market share / wallet share – Embedded acro
Slide 30: Organic Growth - Performance Metrics
Organic Growth - Performance Metrics Customer Service Customer Service – By Customer Ferguson Employee Engagement Local Market Share Stark Gain Market Share – Change in Share by State Loyalty I will recommend others to seek jjob with STARK I expect to be employed by STARK in 2 years I am proud of wo
Slide 31: Organic Growth - Performance Metrics
Organic Growth - Performance Metrics Financial Reporting Dashboard Ferguson - Blended Branches - Managing Performance Customer Service Customer Service Rating Self-Service Events Predictive Fill Rate % Managed Pricing* Net Promoter Score Overall Dec Jan Rank Dec Jan Rank Dec Jan Rank Dec Jan Rank De
Slide 32: Group Performance Metrics
Group Performance Metrics Return on Sales* Return on Capital Employed 29.3% 5.9% 24.3% 25.4% 5.2% 4.9% 4.1% 3.9% 16.4% 14.4% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 *Ongoing businesses 32
Slide 33: Wolseley Strategy
Wolseley Strategy 1 Develop 1. D l our greatt portfolio tf li off strong t businesses b i 2. Drive performance systematically across Group 3. Accelerate profitable growth − organic / bolt-ons / adjacent businesses 4. Drive evolution of business models 5 Deliver Group synergies 5. 6. Underpin strateg
Slide 34: Business Priorities
Business Priorities Business Unit Strategy Results Expected Market Share Gain share of existing customers and gain new customers Best Customer Preferred Vendor Gross Profitable Improve Margin Growth Productivity Service Relationship Best Branch Staff Improve Most efficient operating p g model Return
Slide 35: Accelerate Profitable Growth Profit Levers
1. Develop portfolio Accelerate Profitable Growth 2. Drive performance P fit Levers Profit L 3. Accelerate profitable growth 4. Evolution of business models 5. Deliver Group synergies 6. Strong balance sheet Market Share Gross Margin – Customer service – Pricing matrix – New branches / channels / se
Slide 36: USA
USA Market Share Gross Margin – Improve customer service – Pricing matrix compliance – Customer loyalty programme – Category C management – New customer segments – Showroom sales – B2C growth – Bolt-on acquisitions Profitable Growth Improve Productivity Improve Returns – B2B e e-commerce commerce –
Slide 37: Canada
Canada Market Share Gross Margin – Improve customer service – Pricing matrix compliance – New branches – Distribution centre unbundling – Bolt-on acquisitions – limited availability Profitable Growth Improve Productivity Improve Returns – Leverage new distribution centre – Working capital efficiency
Slide 38: UK
UK Market Share Gross Margin – Improve customer service – Category management – exclusives – Maximise green deal opportunity – Evolve showroom strategy – B2B and B2C growth – Bolt-on acquisitions attractive – limited availability Profitable Growth Improve Productivity Improve Returns – Local network
Slide 39: Nordics
Nordics Market Share Gross Margin – Maintain service / share – Customer segmentation – Bolt-on acquisitions – selective – Compliance C with customer terms structure – DIY customers Profitable Growth Improve Productivity Improve Returns – Cost reduction / centralisation – Maintain working capital – N
Slide 40: France
France Market Share Gross Margin – Maintain service / share – Sourcing / procurement management – No acquisitions – Pricing matrix compliance Profitable Growth Improve Productivity Improve Returns – Centralisation and cost restructuring – Working capital improvements – “Hub and spoke” network manage
Slide 41: Central Europe
Central Europe Market Share Gross Margin – Improve customer service – Price matrix uplift and compliance – Expand sanitary offering - Tobler – Exit loss making customers - Wasco – B2B Profitable Growth Improve Productivity Improve Returns – Cost reduction – Working capital improvements – Distributio
Slide 42: Grow Adjacent Businesses
Grow Adjacent Businesses Adjacency dependent on shared: − Customers Leverage − Products / suppliers existing businesses − Infrastructure − Business processes / experience Core business Adjacent business Approximate revenue adjacent businesses USA Blended Branches Waterworks £900m Industrial £750m
Slide 43: Wolseley Strategy
Wolseley Strategy 1 Develop our great portfolio of strong businesses 1. 2. Drive performance systematically across Group 3. Accelerate profitable growth − organic / bolt-ons / adjacent businesses 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balanc
Slide 44: Business Model Development - Current Trends
Business Model Development C Current t Trends T d Wants 100% availability on core SKUs and access to specials within few days Might source commodity SKUs Having to win new from ‘non’ non traditional customers suppliers • Winning Wi i new customers • Time and price pressure Negotiates prices Relies o
Slide 45: Business Model Development - Future Trends
Business Model Development F t Future Trends T d Wants 100% availability on larger Wants 100% range and specials in availability on core Use social media / 24 hours SKUs and access to marketing to generate specials within few new customers days Might source commodity SKUs Having to win new from ‘non
Slide 46: Business Model Development - Implications
Business Model Development Implications − Customer segmentation − Multi-channel approach − From ‘loose confederation’ to ‘systematically / centrally managed’ − Competitive propositions versus ‘non traditional’ competitors − Develop and test different business models Leading players have expertise
Slide 47: Wolseley Strategy
Wolseley Strategy 1. Develop our great portfolio of strong businesses 2. Drive p performance systematically y y across Group p 3. Accelerate profitable growth − organic / bolt-ons bolt ons / adjacent businesses 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy wit
Slide 48: Group Synergies
Group Synergies Future Current Potential Cross business unit sourcing Large + IT infrastructure / sourcing Medium Delivered Tax / treasury / financing Large Delivered B t Practice Best P ti sharing h i M di Medium +++ People / talent Small ++ Transferable business models Small +++ Key Small < £10m M
Slide 49: Best Practice Sharing
Best Practice Sharing Wolseley Best Practice Sharing Website
Slide 50: Best Practice Sharing – Silvan, Denmark
Best Practice Sharing – Silvan, Denmark L b Labour Scheduling S h d li Revenue by hour Planned manning on the day Monday Tuesday Wednesday Thursday Friday Saturday Sunday Excessive manning or backup Manning / revenue potential too tasks planned low or no back up tasks planned Staff can take time off
Slide 51: Transferrable Business Models
Transferrable Business Models “Hub Hub and spoke spoke” networks – better service / lower cost − Plumb UK, Ferguson US, Stark Denmark, France Adapt showroom strategies based on US experience − Plumb UK, Central Europe Multi channel development p − B2B common processes / platforms − B2C leverag
Slide 52: Summary
Summary Decent progress p g − Results − Bolt-ons and disposals − Synergies S nergies − Balance sheet Continue to driver performance across Group − Long way to go Aware of evolving trends − Opportunities to improve business models Investing behind growth, protecting where declining Confiden
Slide 53: Appendices
Appendices
Slide 54: Regional Analysis
Regional Analysis Revenue Revenue Trading profit Trading profit £m 2012 2011 2012 2011 Ongoing USA 6,168 5,500 389 314 C Canada d 850 811 49 39 UK 1,670 1,655 92 89 Nordic 2,062 2,060 96 113 France 1,252 1,317 30 46 Central Europe 714 718 30 31 Central and other costs - - (28) (36) 12,716 12,061 658
Slide 55: FX impact
FX impact 2011 2012 2012 2012 2012 Potential average average Sept Trading Exchange FY13 rate rate spot rate profit gain/(loss) impact* £m £m £m USD 1.60 1.58 1.62 389 +3 (11) CAD 1.59 1.59 1.58 49 - - EUR 1.16 1.19 1.25 60 (2) (2) CHF 1.49 1.44 1.51 27 +1 (1) Nordics 77 (2) (2) - (16) * Estimated im
Slide 56: Branch Numbers
Branch Numbers At 31 July Disposals / Other Ongoing at 2011 Held for sale Acqns movements 31 Jul 2012 USA 1 261 1,261 - 16 (3) 1 274 1,274 Canada 221 - - (1) 220 UK 1,233 (300) - (14) 919 Nordic 288 (28) 5 (1) 264 France 690 (368) - (9) 313 C Europe C. 144 - - (2) 142 3,837 (696) 21 (30) 3,132 Note:
Slide 57: Headcount Numbers
Headcount Numbers At 31 July Disposals / Other Ongoing at 2011 held for sale Acquisitions movement 31 Jul 2012 USA 17,481 - 384 380 18,245 Canada 2,693 - - (86) 2,607 UK 8,769 (2,535) - (321) 5,913 Nordic 6 754 6,754 (379) 90 (125) 6 340 6,340 France 8,072 (2,651) - (128) 5,293 C. Europe 1,965 - - 5
Slide 58: Product Destination Analysis – Total
Product Destination Analysis – Total 2% 2% 4% 8% 15% 11% 16% 17% 15% 35% 30% 14% Civil 9% 22% Infrastructure 18% Non-Residential 14% 14% 40% New construction 14% Residential New 31% Construction 34% 22% 30% Non-Residential 11% RMI 8% R id ti l RMI Residential 58% 51% 36 % 23% 37% 33% 27% 27% 8% USA