Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — Wolseley — H1 2009 Earnings Presentation
48 slides from Ferguson Enterprises's earnings presentation, Mar 6, 2009
Slide 1: Half Year Financial Results for the six months ended 31 January 2009
Half Year Financial Results for the six months ended 31 January 2009 Wolseley Plc Strengthening the Group’s balance sheet and positioning Wolseley for the future 6 March 2009 The name the world builds on
Slide 2: Important notice and restrictions
THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE PROPOSED SHARE ISSUE (AS DEFINED BELOW) BY THE COMPANY AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OTHER PERSON OR P
Slide 3: Disclaimer and forward-looking statements
Neither the Company nor any of its directors, officers, employees, agents, affiliates or representatives or advisers or any other person makes any representation or warranty, express or implied, as to the accuracy or completeness of the information or opinions contained in this document. Nothing con
Slide 4: Overview
Overview Comprehensive package to strengthen the balance sheet and position Wolseley for the future Comprehensive financial restructuring Proposed firm placing and fully underwritten rights issue to raise aggregate net proceeds of approximately £1 billion Additional new committed 2 year debt facilit
Slide 5: Agenda
Agenda Markets and strategy Management actions Share issue Debt facilities and covenants Half year financial results for six months ended 31 January 2009 Summary 5
Slide 6: Wolseley's markets and strategy
Wolseley’s markets and strategy
Slide 7: Group overview
Group overview A strong business with a good track record and solid fundamentals Group revenue (£m) 20,000 Fundamentally attractive 15,000 % R 17 business sector 10,000 CAG 5,000 Market leading positions in highly 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Slide 8: Group strategy
Group strategy Going forward we will invest where we have strength Clear focus where Wolseley has leading positions, has built sufficient scale and can deliver an appropriate financial return North America Plumbing and Heating, UK & Ireland, France and Nordic are core businesses French business subj
Slide 9: North America Plumbing & Heating
North America Plumbing & Heating Consistently high level of returns—priority for future investment Strong brand and market position Contribution to group revenue 1 • Leading distributor of Plumbing & Heating in North America North American Plumbing & Heating • Continuing strong performance UK & Irel
Slide 10: Wolseley UK & Ireland
Wolseley UK & Ireland Capacity for a higher level of return once restructuring complete Strong brand & market position Contribution to group revenue 1 • “Wolseley” centers are strong, well-known brands targeted to specific customer groups North American Plumbing & Heating • Performing at or above th
Slide 11: Wolseley France
Wolseley France Good market opportunity but need to reduce complexity & improve returns Strong brand & market position Contribution to group revenue 1 • Brossette is the No. 2 distributor of plumbing and heating in France North American • Reseau pro is a leading distributor of Plumbing & Heating UK
Slide 12: Nordic—DT Group
Nordic—DT Group Best in class performer with expansion potential Strong brand & market position Contribution to group revenue 1 • A leading retailer and distributor of building materials in the Nordic markets North American Plumbing & Heating UK & Ireland • Stark & Beijer are market leaders in Denma
Slide 13: Stock: the time has come to exit the business
Stock The time has come to exit the business Market conditions continue to deteriorate • 750,000 annualised housing starts in October 2008 • 460,000 annualised housing starts in January 2009 Need to stop the losses Board committed to exit business by 1 August 2009 JV structure preferred to preserve
Slide 14: Management actions
Management actions
Slide 15: Management actions August 2007 to January 2009
Management actions (between 1 August 2007 to 31 January 2009) Decisive action plan resulting in a leaner and fitter business Annualised savings of over £500 million • c. 17,000 headcount reductions • c. 700 branch closures • Exceptional restructuring charges of £338 million Cash generated from worki
Slide 16: Share issue
Share issue
Slide 17: Reasons for the share issue
Reasons for the share issue Substantially strengthen balance sheet and overall financial position Focus on investment in core businesses Return to a profitable focused growth strategy as markets recover Improve future access to sources of capital 17
Slide 18: Fully underwritten firm placing and rights issue
Fully underwritten firm placing and rights issue Gross proceeds of £1,050 million • Proceeds to be used to reduce indebtedness Firm placing • £270 million firm placing at 120 pence per share • Fully underwritten • Placing shares will have right to participate in rights issue Rights issue • £780 mill
Slide 19: Expected timetable
Expected timetable Announcement 6 March 2009 General Meeting 1 April 2009 Dealings in new shares nil paid commence 3 April 2009 Latest date for acceptance/payment 21 April 2009 New shares fully paid commence trading 22 April 2009 19
Slide 20: Debt facilities and covenants
Debt facilities and covenants
Slide 21: Pro forma balance sheet
Pro forma balance sheet Pro forma 2 £ million Pre-rights issue Post rights issue Net debt 2,486 1,486 EBITDA1 795 795 Net debt/EBITDA 1 3.1 1.9 Gearing 3 79.7% 36.1% Notes: 1 Annualised Adjusted EBITDA 2 Assumes net proceeds from placing and rights issue of £1 billion 3 Gearing ratio is the ratio of
Slide 22: Debt structure
Debt structure Comprehensive solution with support from our lending banks Facility maturity profile 5,000 4,290 4,190 3,827 4,000 £m 3,000 2,000 1,795 1,648 1,000 729 680 0 2009 2010 2011 2012 2013 2014 2015 Existing committed facilities Forward start No change to existing debt facility terms New €1
Slide 23: Half year financial results
Half year financial results for six months ended 31 January 2009
Slide 24: Summary of results
Summary of results Strong cash flow, lower profit reflects challenging conditions 2009 2008 Change Con’t curr’cy change £m £m % % Revenue 8,284 8,029 3.2 (12.1) Trading profit* 182 318 (42.7) (51.4) Trading margin* 2.2% 4.0% - Net finance costs (85) (67) PBT* 97 251 (61.4) (65.6) EPS* (p) 10.93 28.4
Slide 25: Cash flow - strong cash flow performance
Cash flow - strong cash flow performance 2009 £m 2008 £m Trading profit 182 318 Exceptional restructuring costs (262) (18) Depreciation and profits on sale of property 119 104 Decrease/(increase) in working capital 383 (41) Increase in provisions and other non cash items 151 4 Cash flow from operati
Slide 26: Debt covenant calculation
Debt covenant calculation 12 months 12 months ended 31 Jan ended 31 Jul 2009 2008 £m £m Operating (loss)/profit (725) 301 Amortisation and impairment of acquired intangibles 952 306 Depreciation and other amortisation 274 242 Exceptional items 320 76 Depreciation included in exceptional items (26) (
Slide 27: Exceptional costs and benefits from restructuring
Exceptional costs and benefits from restructuring actions identified – 1 August 2008 to 31 January 2009 Cost £m Headcount Benefit Benefit reduction £m 2009 £m pa UK and Ireland 62 2,485 61 95 France (2) - - - Nordic 2 860 18 34 Central and Eastern Europe 32 440 12 18 Europe 94 3,785 91 147 US plumbi
Slide 28: Outlook
Outlook Confident that measures announced represent a comprehensive package to strengthen the balance sheet and strongly position the Group for the future Downturn in the UK, Irish and Nordic economies is likely to be more severe than that experienced in the remainder of Continental Europe Ensure fu
Slide 29: Q&A
Q&A
Slide 30: Appendices
Appendices
Slide 31: Working capital - cash to cash days
Working capital - cash to cash days 27% improvement over last two years Improvement over H107 H108 H109 2 years 1 year Spot inventory days 68.1 65.3 64.1 4.0 1.2 Spot receivables days 55.4 59.2 49.9 5.5 9.3 Spot payables days (60.3) (68.5) (67.6) 7.3 (0.8) Spot cash to cash days 63.2 56.0 46.4 16.8
Slide 32: Goodwill and intangibles - One-off impairment provisions
Goodwill and intangibles - One-off impairment provisions H109 FY08 £m £m Amortisation of acquired intangibles 65 135 Goodwill and acquired intangibles impairment - DT 349 - Stock Building Supply 277 114 - UK and Ireland 88 735 46 171 - Italy 11 - Benelux 21 Total amortisation and impairment of acqui
Slide 33: Finance costs
Finance costs H1 2009 H1 2008 £m £m Net interest payable (82) (68) Other finance costs 2 (1) (80) (69) Pension finance income/(charge) (4) 2 Impairment of equity investment (1) - (85) (67) 33
Slide 34: Group revenue & trading profit
Group revenue & trading profit Six months ended 31 January 2009 US Plumbing US Building Materials and Heating 10.0% 36.7% Trading profit UK and Ireland 16.9% US Plumbing US Building and Heating Materials 89.1% (37.7)% UK and Ireland 9.6% Nordic France 12.7% 13.1% Canada 4.5% CEE 6.1% France 10.5% Re
Slide 35: Our diverse customer mix
Our diverse customer mix % of group revenue, six months ended 31 January 2009 HVAC 4.3% Industrial 12.4% Utilities 7.4% Mechanical Contractors 9.3% Plumbing and Heating Contractors 21.0% Building Contractors End Users 10.6% 33.8% Electrical Contractors 1.3% 35
Slide 36: North America Plumbing & Heating
North America Plumbing & Heating Alaska Wolseley Canada H1 2009 - 248 branches Distribution Centre Hawaii Pipeyard Ferguson H1 2009 – 1,338 branches Also in Puerto Rico, Panama, Trinidad & Tobago and Mexico 36
Slide 37: North America Building Materials
North America Building Materials Stock Building Supply H1 2009 – 202 branches Distribution Centre 37
Slide 38: Europe
Europe Branch numbers, six months ended 31 January 2009 1 UK (1,666) 2 Ireland (100) 3 France (792) 4 Belgium (11) 5 Netherlands (29) 20 6 Luxemburg (2) 7 Switzerland (40) 8 Italy (50) 9 San Marino (1) 10 Romania (9) 18 11 Hungary (29) 19 12 Slovakia (17) 17 13 Austria (66) 14 Czech Republic (33) 2
Slide 39: Business drivers FY 2008 & FY 2007
Business drivers FY 2008 & FY 2007 % of divisional sales North America North America Europe Plumbing & Heating Building Materials 9,000 4% Revenue £m 8,000 4% 14% 7,000 11% 17% 6,000 13% 14% 15% 5,000 17% 18% 4,000 41% 41% 31% 34% 3,000 8% 2,000 16% 13% 12% 14% 16% 1,000 23% 20% 79% 72% 29% 24% 0 20
Slide 40: Branch numbers
Branch numbers (Restated)* Net 31 Jan 31 July 2008 closures 2009 UK & Ireland 1,927 (161) 1,766 France 848 (56) 792 Nordic 326 (13) 313 Central & Eastern Europe 287 (29) 258 US Plumbing & Heating 1,382 (44) 1,338 Canada 254 (6) 248 US Building Materials 285 (83) 202 Group total 5,310 (393) 4,917 *48
Slide 41: Branch growth
Branch growth 5500 5000 4500 1677 1636 4000 1483 3500 308 285 1179 3000 1008 314 961 255 3311 3389 2500 940 222 236 2906 911 2486 2000 591 216 2393 504 220 2266 1500 131 210 1799 1443 1615 1000 1357 500 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year to July Europe US Building Materials US
Slide 42: Market information
Market information
Slide 43: Average lumber price 1995 - 2008
Average lumber price 1995 - 2008 $550 $550 $500 $500 feet board feet $445 $445 $450 $450 thousand board $390 $390 $400 $400 $400 $365 $365 $373 $373 $372 $372 $378$400 $378 US$ US$ $362 $362 $362 per thousand $362 $350 $350 $313 $313 $313 $313 $287 $287 $290 $290 $300 $300 per $263 $263 $250 $250 $2
Slide 44: Monthly lumber price 2003 - 2009
Monthly lumber price 2003 - 2009 2003 2003 450 450 2004 2004 2005 2005 400 400 feet board feet 2006 2006 2007 2007 thousand board 350 350 2008 2008 2009 2009 300 US$ 300 US$ per thousand 250 250 200 200 per 150 150 100 100 Aug Aug Sep Sep Oct Oct Nov Nov Dec Dec Jan Jan Feb Feb Mar Mar Apr Apr May M
Slide 45: US housing starts
US housing starts 2300 2200 2100 2000 1900 1800 1700 1600 000’s 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 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- 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07
Slide 46: New residential construction activity in US 1959-2008
New residential construction activity in US 2500 Total US housing starts 1959 – 2008 2000 1500 1000 500 0 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 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 Single-family Starts Multi-family Starts Sou
Slide 47: New residential construction activity in US, year over year change
New residential construction activity in US Total US housing starts 1960 – 2008, year over year % change 80 60 40 20 0 -20 -40 -60 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 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 Single-family Start
Slide 48: Repair and remodeling activity in the US
Repair and remodeling activity in the US Residential repair and remodeling expenditure vs expenditures for new 500000 residential construction 1970–2008 450000 400000 350000 300000 250000 200000 150000 100000 50000 (Mil. $ NSA) 0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 1