Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — Wolseley — FY2009 Earnings Presentation
46 slides from Ferguson Enterprises's earnings presentation, Sep 28, 2009
Slide 1: Final results for the year ended 31 July 2009
Wolseley plc Final results for the year ended 31 July 2009 The name the world builds on
Slide 2: Ian Meakins, Group Chief Executive
Ian Meakins Group Chief Executive The name the world builds on
Slide 3: Agenda
Agenda • Background • Financial review • First impressions and key focus areas • Outlook • Q&A 3 3
Slide 4: Background
Background • Market conditions remain extremely difficult – Residential – Commercial & Industrial • 2009 results reflect tough conditions – Trading profit – Margin management – But cost reductions delivered – Strong cash performance • Immediate focus – Understanding the business – Improving operatin
Slide 5: Financial Review
Financial Review Steve Webster Chief Financial Officer The name the world builds on
Slide 6: Summary of results
Summary of results Strong cash flow, lower profit reflects challenging conditions 2009 2008 Change Con’t curr’cy £m £m % change % Revenue 14,441 14,814 (2.5) (16.3) Trading profit* 447 787 (43.0) (52.0) Exceptional items (458) (70) Goodwill and acquired intangibles (595) (162) Operating (loss) / pro
Slide 7: Trading profit bridge
Trading profit bridge Organic declines in all areas 147 787 (188) (11) (121) 9 447 (88) (85) (3) Jul-08 Exchange Ferguson Canada UK & France Nordic C&EE Other Jul-09 Ireland • Trading profit was impacted by the following one-off items during the year – Increase in bad debt provision of £29m – Asset
Slide 8: Cash flow
Cash flow Strong cash flow performance in a tough year 2009 (£m) 2008 (£m) Trading profit 447 787 Exceptional items (458) (70) Discontinued trading loss after exceptional items (273) (110) Depreciation and profits on sale of property 351 226 Decrease in working capital 846 406 Change in provisions a
Slide 9: Working capital - cash to cash days
Working capital - cash to cash days 57.5% improvement over last three years Improvement over FY09 FY08 FY07 3 years 2 years 1 year Spot inventory days 55.9 62.6 67.9 18.9 12.0 6.7 Spot receivables days * 43.6 49.0 51.8 10.3 8.2 5.4 Spot payables days (71.5) (67.8) (67.7) 8.8 3.8 3.7 Spot cash to cas
Slide 10: Exceptional items
Exceptional items Restructuring and other exceptional costs FY09 (£m) Staff redundancy cost (75) Provision for future lease cost on closed branches (271) Trading operation restructuring items (346) Loan Services loan provision on separation from Stock (31) Impairment of Business Change Programme IT
Slide 11: Exceptional restructuring costs and benefits
Exceptional restructuring costs and benefits Incremental benefit of £233 million expected in 2010 Cost Headcount Benefit Benefit £m reduction £m 2009 £m pa UK and Ireland 183 2,914 74 160 France 24 1,020 6 34 Nordic 11 1,413 18 44 Central and Eastern Europe 38 489 7 20 Europe 256 5,836 105 257 US pl
Slide 12: Goodwill and intangibles
Goodwill and intangibles £21m of impairment provisions in second-half FY09 FY08 £m £m Amortisation of acquired intangibles 105 105 Goodwill and acquired intangibles impairment - DT 359 - - UK and Ireland 109 46 - Italy - 11 - Benelux 22 - Total 595 162 12 12
Slide 13: Covenant position and liquidity
Covenant position and liquidity Comfortable covenant headroom at 31 July 2009 • Significant banking covenant headroom – Covenant headroom of over £1bn – Net debt : EBITDA ratio of 1.4x (2008 : 2.7x) • Strong liquidity position – €1 billion two year forward-start bank facility commencing August 2011
Slide 14: US plumbing and heating
US plumbing and heating Strong market outperformance – 5.4% trading margin 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Revenue 5,613 1,533 - 12 (1,338) (18.7) 5,820 3.7 (18.6) Trading profit 397 108 - 2 (190) (37.6) 317 (20.1) (37.3) Trading margin 7.1% 5.4% •
Slide 15: Canada
Canada Solid performance despite market deterioration 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Revenue 684 61 - - (45) (6.0) 700 2.4 (6.0) Trading profit 39 4 - - (11) (25.6) 32 (18.9) (25.6) Trading margin 5.7% 4.6% • Strong market outperformance in challe
Slide 16: North America Loan Services
North America Loan Services Phased reduction in portfolio continues 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Trading profit (19) (5) - - - - (24) - - • Business retained following exit of Stock • Selective lending and phased orderly reduction of portfolio o
Slide 17: UK and Ireland
UK and Ireland Strong Lightside performance but tough conditions continue to impact Ireland and Heavyside 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Revenue 3,203 46 - 1 (551) (17.0) 2,699 (15.8) (16.9) Trading profit 176 - - - (121) (68.7) 55 (68.6) (68.6) T
Slide 18: France
France Continued focus on Lightside repositioning 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Revenue 2,116 342 (20) 22 (316) (12.9) 2,144 1.3 (12.8) Trading profit 103 17 (1) 1 (88) (73.0) 32 (68.8) (73.1) Trading margin 4.9% 1.5% • Outperformed market in Hea
Slide 19: Nordic
Nordic Resilient performance despite challenging markets 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Revenue 2,290 299 - - (476) (18.4) 2,113 (7.7) (18.4) Trading profit 159 22 - - (85) (47.1) 96 (39.4) (47.1) Trading margin 6.9% 4.6% • Market deterioration is
Slide 20: Central and Eastern Europe
Central and Eastern Europe Improved performance following strategic review 2008 Exch Disp Acqn Organic Change 2009 Change Cons’t £m £m £m £m £m % £m % Cur’y % Revenue 908 158 (15) 9 (95) (8.9) 965 6.3 (9.5) Trading profit - 3 1 - (4) (127.4) - - - Trading margin 0.0% 0.0% • Gross margins held with i
Slide 21: FY10 indicative financial calendar
FY10 indicative financial calendar Moving to four reporting periods in FY2010 2009 18 November Annual general meeting and interim management statement 2010 22 March Half year results for the six months ended 31 January 2010 24 May Interim management statement 31 July Financial year end 27 September
Slide 22: Ian Meakins, Group Chief Executive
Ian Meakins Group Chief Executive The name the world builds on
Slide 23: First impressions
First impressions • Construction materials distribution – Attractive over the long term – Cyclical • Attractive portfolio of businesses in its core geographies: – Strategically strong locally and nationally – Large profit pool available – Customer service fundamental for success – Competitive logist
Slide 24: Immediate focus on operating performance
Immediate focus on operating performance • The performance of all our businesses can still be improved both short and long term by a ruthless focus on performance management: Performance management process Improving customer service Protect and build our market Further cost reduction to Improved cas
Slide 25: Strategic focus
Strategic focus UK markets UK Plumbing and drainage market (£4bn) UK Bricks, blocks and concrete market (£3.4bn) B at hr o o m A ccesso r i es Sho wer Encl o sur es Pi p es & F i t t i ng s T iles & F lag s Pr e- cast Sho wer C o nt r o l s C o ncr et e Pr o d uct s B r asswar e Sani t ar ywar e B l
Slide 26: US Plumbing and Heating
US Plumbing and Heating 2009 Group Revenue c.c. 40% 40% Key units % Revenue Plumbing & heating 60% Waterworks 15% Industrial 15% HVAC 8% MRO / distribution 2% First impressions Focus areas – plumbing & heating Strong strategic positions Gain share of existing customers Good margin management Counter
Slide 27: UK and Ireland
UK and Ireland 2009 Group Revenue c.c.19% 19% Key units % Revenue Plumb / Parts / William Wilson 38% Build 13% Pipe 8% Encon 8% Electric 5% Brandon Hire, Bathstore, BCG, Climate, Drain 28% First impressions Focus areas – Build Strong Plumb / Parts / Pipe / William Wilson Further cost reductions busi
Slide 28: France
France 2009 Group Revenue c. c. 15% 15% Key units % Revenue Building materials 55% Plumbing and Heating 30% Import and Wood 11% Panofrance, Confortique 4% First impressions Focus areas – Plumbing and Heating No magic bullets – long haul, strategically challenged Strengthen management Weak strategic
Slide 29: Nordic
Nordic 2009 Group Revenue c. 15% Key points % Revenue Stark (Denmark) 40% Beijer (Sweden) 25% Starki (Finland) 19% Silvan (Denmark) 9% Norway, Cheapy, Woodcote 7% First impressions Focus areas Excellent strategic positions Branch optimisation across portfolio Good margin management Product range imp
Slide 30: Summary
Summary • Most of our businesses are attractive – Market growth longer term – Strategically well placed – Performance and share gain opportunities – Some more attractive than others • Immediate focus on performance management across Group – Local customer service improvements to drive share gain – P
Slide 31: Outlook
Outlook • Market trends since the July trading update continue to support the Group’s view that in the short term market conditions will remain challenging driven by tight credit conditions, high levels of foreclosures and rising unemployment rates. – New residential markets are expected to show con
Slide 32: Q&A
Q&A
Slide 33: Appendices
Appendices
Slide 34: Group overview
Group overview A strong business with a good track record and solid fundamentals Group revenue (£m) 20,000 15,000 • Fundamentally attractive 10,000 business sector 5,000 0 • Market leading positions in highly 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2
Slide 35: Group revenue & trading profit
Group revenue & trading profit Twelve months ended 31 July 2009 US plumbing and heating UK and Ireland 40% 19% France 15% Trading profit US plumbing Loan services and heating -5% CEE 6% 61% Nordic UK and Ireland 15% Canada 5% 11% Revenue France 7% Nordic CEE 0.0% Canada 20% 6% 35
Slide 36: Our diverse customer mix
Our diverse customer mix % of group revenue, twelve months ended 31 July 2009 HVAC 6% Industrial 13% Utilities 9% Mechanical contractors 9% Plumbing and heating contractors 23% Building contractors 26% End users 12% Electrical contractors 2% 36
Slide 37: North America
North America Plumbing & Heating Alaska Wolseley Canada FY 2009 - 225 branches Hawaii Distribution Centre Pipeyard Ferguson FY 2009 – 1,228 branches Ferguson also in Puerto Rico, Panama, Trinidad & Tobago, Mexico and Barbados 37
Slide 38: Europe
Europe Branch numbers, twelve months ended 31 July 2009 1 UK (1,561) 2 Ireland (82) 3 France (776) 20 4 Belgium (8) 5 Netherlands (29) 6 Luxemburg (2) 7 Switzerland (41) 8 Italy (45) 18 9 San Marino (1) 19 10 Romania (7) 17 11 Hungary (4) 12 Slovakia (17) 2 13 Austria (66) 1 16 14 Czech Republic (33
Slide 39: Business drivers 2009 & 2008
Business drivers 2009 & 2008 % of divisional sales North America Plumbing & Heating Europe Group 16,000 8% 9% 14,000 16% 12,000 17% 10,000 4% 24% 24% 5% 8,000 14% 13% 14% 17% 6,000 17% 15% 30% 19% 31% 18% 4,000 34% 41% 34% 43% 2,000 16% 14% 19% 22% 20% 24% 18% 20% 0 2009 2008 2009 2008 2009 2008 Res
Slide 40: Branch numbers
Branch numbers (Restated)* Net 31 July 31 July 2008 reduction 2009 UK & Ireland 1,927 (284) 1,643 France 848 (72) 776 Nordic 324 (28) 296 Central & Eastern Europe 290 (64) 226 US Plumbing & Heating 1,382 (154) 1,228 Canada 254 (29) 225 Group total 5,025 (631) 4,394 *46 branches moved from Central &
Slide 41: Branch growth
Branch growth 6,000 5,000 1,677 1,636 4,000 1,483 1,453 3,000 1,179 1,008 961 940 2,000 911 504 591 3,349 3,389 2,906 2,941 2,266 2,393 2,486 1,000 1,799 1,357 1,443 1,615 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year to July Europe North America 41
Slide 42: Market information
Market information
Slide 43: US housing starts
US housing starts 2400 2100 1800 1500 000’s 1200 900 600 300 0 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 43 Source: US Census
Slide 44: US new residential construction activity
US new residential construction activity Total US housing starts 1959 – 2009 2,500 2,000 1,500 1,000 500 0 j) 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 09 07 ro 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 (P Single-family Starts Multi-f
Slide 45: New residential construction activity in US
New residential construction activity in US Total US housing starts 1959 – 2009, year over year % change 80% 60% 40% 20% 0% -20% -40% -60% 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 j) ro 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 (P 09
Slide 46: Repair and remodeling (RMI) activity in the US
Repair and remodeling (RMI) activity in the US RMI expenditure vs expenditures for new residential construction 1964–2009 (Mil. $ NSA) 46 Source: U.S. Census: C-30 and U.S. Census C-50 Reports