Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — FY2014 Earnings Presentation
49 slides from Ferguson Enterprises's earnings presentation, Sep 30, 2014
Slide 1: Full Year Results
2014 Full Year Results
Slide 2: Highlights
Highlights • Improvement in like-for-like growth rate in H2 − market share performance – except UK − margin improvement to 6.0% • Very strong H2 in US – rest of Group still tough • Strong cash generation − dividend up 25% − £250m share buyback • Continued investment in more efficient / productive bu
Slide 3: Operating and Financial Review
Operating and Financial Review John Martin, Chief Financial Officer
Slide 4: Financial highlights
Financial highlights Like-for- Change like 2013 (at constant 2014 Restated** Change exchange rates) Change Ongoing revenue £12,773m £12,496m +2.2% +6.1% +4.2% Foreign exchange impact (£457m) Ongoing gross margin % 28.1% 27.9% +0.2% Ongoing trading profit* £761m £731m +4.1% +8.6% Foreign exchange imp
Slide 5: 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% +7.4% +5.0% +9.0% +11.1% Canada +3.0% (0.6%) (3.5%) (1.6%) +1.8% UK +5.1% +4.3% +2.0% (3.5%) (2.6%) Nordic (3.1%) (2.5%) +0.5% +7.6% (2.4%) Central Europe and France (3.6%) (1.2%) +1.3% (1.7%) (5.5%) Ongo
Slide 6: USA ongoing
USA ongoing Change Like-for-like (at constant £m 2014 2013* Change exchange rates) Change Revenue 7,045 6,757 +4.3% +9.5% +8.2% Trading profit 542 490 +10.6% +16.1% Foreign exchange impact (23) Trading margin 7.7% 7.3% +0.4% Branches 1,377 1,346 +31 Headcount 20,307 18,911 +7.4% * 2013 restated to e
Slide 7: USA ongoing
USA ongoing Revenue Like-for-like Business unit £m Change % Blended Branches (see regional analysis below) 4,410 +7.7% Waterworks 1,135 +13.3% HVAC, Industrial, Fire & Fabrication, B2C 1,500 +6.1% 7,045 +8.2% Central AK 33% WA ME MT ND MN OR V MA ID WI NY T NH RI SD WY MI West NV IA PA CT NE NJ 30%
Slide 8: Canada
Canada Change Like-for-like (at constant £m 2014 2013 Change exchange rates) Change Revenue 779 875 (11.0%) (0.5%) (0.8%) Trading profit 44 51 (13.7%) (2.9%) Foreign exchange impact (5) Trading margin 5.6% 5.8% (0.2%) Branches 222 219 +3 Headcount 2,503 2,511 (0.3%) 8
Slide 9: UK
UK Change Like-for-like (at constant £m 2014 2013 Change exchange rates) Change Revenue 1,853 1,769 +4.7% n/a (0.1%) Trading profit 96 95 +1.1% Trading margin 5.2% 5.4% (0.2%) Branches 768 765 +3 Headcount 5,978 5,952 +0.4% 9
Slide 10: Nordic ongoing
Nordic ongoing Change Like-for-like (at constant £m 2014 2013* Change exchange rates) Change Revenue 1,892 1,867 +1.3% +3.5% +0.4% Trading profit 80 89 (10.1%) (7.9%) Foreign exchange impact (2) Trading margin 4.2% 4.8% (0.6%) Branches 267 235 +32 Headcount 6,250 5,878 +6.3% * 2013 restated to exclu
Slide 11: Central Europe and France ongoing
Central Europe and France ongoing Change Like-for-like (at constant £m 2014 2013* Change exchange rates) Change Revenue 1,204 1,228 (2.0%) (1.5%) (1.9%) Trading profit 34 46 (26.1%) (27.5%) Trading margin 2.8% 3.7% (0.9%) Branches 244 247 (3) Headcount 4,410 4,693 (6.0%) Exploring exit options for I
Slide 12: Other
Other • Central costs of £35m (2013: £40m) including £5m non-recurring insurance gains • Closed, sold or held for sale includes: – France building materials disposals and closures announced last year – Disposal of ÖAG in Austria – Exit of Cheapy format in Sweden – Small, profitable, non-core busines
Slide 13: Revenue and gross profit in the ongoing business
Revenue and gross profit in the ongoing business £248m (£457m) £486m £12,773m Revenue £12,496m £35m £53m (£128m) £139m £3,590m £3,491m Gross profit 2013 Organic growth Acquisitions Gross margin Exchange 2014 improvement Gross margin 27.9% - (0.1%) +0.3% - 28.1% 13
Slide 14: Operating expenses of the ongoing businesses
Operating expenses of the ongoing businesses £30m £10m (£98m) £48m £47m (£40m) £72m £2,829m £2,760m 2013 Variable costs Acquisitions US Healthcare Opex investment Exchange Efficiency savings 2014 from organic Operating cost growth increases Trading profit / 21.0% 21.2% gross profit 14
Slide 15: Income statement
Income statement 2013 £m 2014 Restated* Trading profit Ongoing 761 731 Non-ongoing (6) (6) 755 725 Amortisation (46) (55) Impairments and exceptional items 18 (174) Financing charges (29) (36) Profit before tax 698 460 Tax (194) (176) Discontinued operations - 12 Profit for the year 504 296 * Restat
Slide 16: Financing and tax
Financing and tax 2013 £m 2014 Restated* Financing Net interest charges 20 21 Pensions and provisions 3 11 Facility charges 6 4 29 36 Tax P&L charge 194 176 Exceptionals, intangibles and non-recurring items 10 21 Underlying P&L charge 204 197 Ongoing trading profit less financing charges 732 695 Eff
Slide 17: Cash flow from operating activities
Cash flow from operating activities 2014 2013 £m Non- Ongoing ongoing Reported Reported Trading profit 761 (6) 755 725 Depreciation and amortisation 105 1 106 116 EBITDA 866 (5) 861 841 Working capital - Timing of year-end payment runs (70) - - Other working capital movements (63) (14) Special pensi
Slide 18: Other cash flow
Other cash flow £m 2014 2013 Cash flow from operating activities 678 633 Net interest (34) (35) Tax paid (192) (184) Acquisitions (194) (111) Disposals of businesses and proceeds from sale of assets 71 44 Capex (201) (140) Ordinary and special dividends (489) (521) Net purchase of shares by Employee
Slide 19: Acquisitions
Acquisitions Business Annual Business Annual Acquisition Date Acquisition Date unit revenue unit revenue US Blended US Jan 2014 £37m Mar 2014 £5m Branches Waterworks Nordics US Blended Jan 2014 £15m Apr 2014 £36m Beijer Branches Nordics Mar 2014 £190m US May 2014 n/a Starkki UK Civils Mar 2014 £55m
Slide 20: Organic investment
Organic investment 2014 2014 £m Capex Opex Technology - Network infrastructure 14 4 - Processes and systems development 45 14 59 18 Freehold DCs and hubs 62 2 Branch expansion, showrooms and refurbishment 80 10 201 30 20
Slide 21: Net debt, pensions and commitments
Net debt, pensions and commitments £m 2014 2013 Net debt as reported 711 411 Impact of timing of payment runs 90 160 Adjusted net debt 801 571 Net pension assets / (liabilities) 7 (133) Operating lease commitments 788 868 Committed facilities of £2.2bn 21
Slide 22: Guidance
Guidance FY15 Expected like-for-like revenue growth over the next 6 months About 5% Capital investment £200m - £220m Incremental opex in technology and processes £30m Trading profit impact of FX at current rates £5m lower profit Trading days Same as FY14 Restructuring costs to be charged to trading
Slide 23: Dividends and capital structure
Dividends and capital structure • Final dividend – Recommended 55.0p per share (full year of 82.5p per share; +25.0%) – Covered 2.4x by headline EPS • Balance sheet – Net debt / EBITDA 0.8x – £250m share buyback programme 23
Slide 24: Outlook
Outlook • Growth rates since the beginning of the new financial year similar to Q4 • Expectations for the next 6 months: like for like growth of 5% 24
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 − Organic − Bolt-on acquisitions 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balance she
Slide 27: 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 − Organic − Bolt-on acquisitions 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balance she
Slide 28: 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 29: Accelerate Profitable Growth US Blended Branches
Accelerate Profitable Growth US Blended Branches Market Share Gross Margin Revenue growth vs market +3% Gross margin Customer service improvement Price matrix compliance +2% Facilities Maintenance growth +12% Private label revenue growth Branch SKU availability Counter revenue growth Showroom revenu
Slide 30: Accelerate Profitable Growth US Waterworks
Accelerate Profitable Growth US Waterworks Market Share Gross Margin Revenue growth vs market Gross margin Customer service improvement +13% Price matrix compliance -1% Branch SKU availability +1% Private label revenue growth +15% Counter revenue growth +23% Profitable growth Productivity Improve Re
Slide 31: Accelerate Profitable Growth UK Plumb & Parts
Accelerate Profitable Growth UK Plumb & Parts Market Share Gross Margin Revenue growth vs market -2% Gross margin Plumbing category revenue growth +6% Price matrix compliance +6% Customer on-time-in-full measure +4% Showroom revenue growth Customer service improvement Profitable growth Productivity
Slide 32: Accelerate Profitable Growth Stark
Accelerate Profitable Growth Stark Market Share Gross Margin Revenue growth vs market Gross margin Share of loyal customers +5.0% Consumer % total revenue -1% Active account customers +1.8% Private label % total revenue Customer service improvement E-sourcing +87% Profitable growth Productivity Impr
Slide 33: 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 − Organic − Bolt-on acquisitions 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balance she
Slide 34: Bolt-on Acquisitions USA - Davis & Warshow
Bolt-on Acquisitions USA - Davis & Warshow VT MA Davis & Warshow NH NY RI • Acquired October 2012 Market share by State: CT • Blended Branches 0.0% to 7.0% 7.0% to 13.5% 13.5% to 18.5% 18.5% to 25.0% 25.0% + PA VA NJ • New York metro area • Revenue £72m, 11 locations, 3 showrooms Rationale Financial
Slide 35: Bolt-on Acquisitions UK - Burdens
Bolt-on Acquisitions UK - Burdens Burdens • Acquired November 2012 • Utilities and infrastructure distributor • 22 branches acquired • Revenue £120 million Rationale Financials (first full year) • Adjacent market ‐ profit pool • Revenue +17% ‐ market share • Operating synergies • No. 2 in Utilities/
Slide 36: Bolt-on Acquisitions USA – HP Products
Bolt-on Acquisitions USA – HP Products HP Products • Acquired June 2014 • MRO distributor, predominantly janitorial and sanitary • Regional leader in Midwest • Revenue £106 million Rationale Financials (expected first full year) • HP Products to Ferguson Customers • Revenue growth +24% • Expand HP’s
Slide 37: Bolt-on Acquisitions Capstone
Bolt-on Acquisitions Capstone Capstone • Acquired May 2014 • Taiwan-based sourcing agent • Predominantly supply Ferguson own label Rationale Financials (expected first full year) • Platform across Group for all sourcing activities in • Increased throughput 10% the Far East • Return on investment 17%
Slide 38: 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 − Organic − Bolt-on acquisitions 4. Drive evolution of business models 5. Deliver Group synergies 6. Underpin strategy with strong balance she
Slide 39: Evolution of Business Model – Major initiatives
Evolution of Business Model – Major initiatives Major Initiatives 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 Delivery options Pro
Slide 40: Evolution of Business Model – Progress on major initiatives
Evolution of Business Model – Progress on major initiatives Major Initiatives 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 Delivery
Slide 41: Business Model – Benefits for Our Customers
Business Model – Benefits for Our Customers BENEFITS • Product / service offering tailored accurately to their needs • Consistency of pricing / lower pricing Customer • Projects / contracts better supported – pre and post bid • Flexibility of order channel • Easier to do business with – convenience
Slide 42: Network Infrastructure, Processes and Systems Investment
Network Infrastructure, Processes and Branch Ops Systems Investment £59m capex, £18m opex in FY14 B2B E-commerce Major projects: USA ‐ E-commerce £3m • 12.0% of revenue • 61% growth ‐ Master data management £3m • 39% growth in SSEs • Mobile launch Jan ‘14 ‐ Finance transformation £4m ‐ Middleware an
Slide 43: Summary
Summary • Overall decent progress again at a Group level ‐ Organic growth market share / customer service / employee engagement / e-commerce ‐ Bolt-on M&A ‐ Investment in more efficient / productive business models • Business model improvements will benefit Wolseley significantly over time ‐ Service
Slide 44: Appendices
may yl Appendices
Slide 45: Regional analysis
Regional analysis Revenue Revenue Trading profit Trading profit £m 2014 2013 2014 2013 Ongoing USA 7,045 6,757 542 490 Canada 779 875 44 51 UK 1,853 1,769 96 95 Nordic 1,892 1,867 80 89 Central Europe and France 1,204 1,228 34 46 Central and other costs - - (35) (40) 12,773 12,496 761 731 Sold or he
Slide 46: FX impact
FX impact 2013 2014 2013 2014 2014 24-Sep 2014 2015 average average Trading impact average 2014 spot Trading impact rate rate profit gain/(loss) rate rate profit gain/(loss) £m £m £m £m USD 1.56 1.64 490 (23) USD 1.64 1.63 542 3 CAD 1.57 1.76 51 (5) CAD 1.76 1.81 44 (1) EUR 1.20 1.21 38 - EUR 1.21 1
Slide 47: Branch numbers
Branch numbers Closed, As at Ongoing at disposed of Acquired Opened 31 July 31 July 2013 or held for 2014 sale USA 1,348 24 44 (39) 1,377 Canada 219 - 7 (4) 222 UK 765 10 5 (12) 768 Nordic 260 25 12 (30) 267 Central Europe and France 325 - 1 (82) 244 Group 2,917 59 69 (167) 2,878 47
Slide 48: Headcount numbers
Headcount numbers Closed, As at disposed of Net joiners / Ongoing at Acquired 31 July 2013 or held for (leavers) 31 July 2014 sale USA 18,969 709 (57) 686 20,307 Canada 2,511 - - (8) 2,503 UK 5,952 195 - (169) 5,978 Nordic 6,145 501 (180) (216) 6,250 Central Europe and France 5,605 - (904) (291) 4,4
Slide 49: Product destination analysis
Product destination analysis 3% 3% 10% 11% 16% 9% 25% 19% Civil Infrastructure 15% 15% 14% 19% 7% Non-Residential New 20% 17% Construction 15% 14% 14% 36% Residential New 21% Construction 26% 25% 11% Non-Residential RMI 54% 55% Residential RMI 36% 36% 29% 30% 31% US Canada UK Nordic Central Europe G