Ferguson Enterprises Inc. · NYSE:FERG
Ferguson Enterprises — Wolseley — H1 FY2010 Earnings Presentation
45 slides from Ferguson Enterprises's earnings presentation, Mar 22, 2010
Slide 1: Half Year results for the six months ended 31 January 2010
Half Year results for the six months ended 31 January 2010 Driving Profitable Growth 22 March 2010 The name the world builds on 1
Slide 2: Ian Meakins, Group Chief Executive
Ian Meakins Group Chief Executive 2
Slide 3: Highlights
Highlights Revenue of £6,331 million, 15.1% below last year. Gross margin broadly maintained despite tough trading environment. Distribution and other administration costs in the half year reduced by £272 million o ((14.7%). %) Monthly o t y run u rate ate broadly b oad y flat. at Generated trading
Slide 4: Steve Webster, Chief Financial Officer
Steve Webster Chief Financial Officer 4
Slide 5: Summary of Results
Summary of Results H1 H1 Reported Constant 2010 2009 change currency £ £m £ £m (%) (%) Revenue 6,331 7,458 (15.1) (17.1) Trading profit* 167 251 (33.5) (34.1) Exceptional items (excluding associates) (255) (120) Amortisation and impairment of acquired intangibles (119) (512) Operating loss (207) (38
Slide 6: Revenue, Margin and Operating Costs Analysis
Revenue, Margin and Operating Costs Analysis H1 H2 H1 2010 2009 2009 Like for like revenue movement (12.2%) (18.3%) (9.2%) Gross margin %* 27.5% 27.7% 27.8% Trading margin * 2.6% 2.8% 3.4% Average monthly labour cost (£m) 151 164 176 Average monthly other operating cost (£m) 112 125 128 *Before exce
Slide 7: Quarterly like for like Sales Growth Trends
Quarterly like for like Sales Growth Trends Q2 Q1 Q4 Q3 2010 2010 2009 2009 (%) (%) (%) (%) UK and Ireland (3.5) (4.7) (11.5) (14.7) Nordic ((8.9)) ((15.3)) ((21.6)) ((23.1)) France (11.2) (12.7) (14.8) (14.5) C&EE Continuing Operations (4.1) (3.7) (5.0) (7.9) Ferguson (14.3) (20.9) (25.8) (19.4) Ca
Slide 8: Operating Cash Flow
Operating Cash Flow H1 H1 2010 2009 (£m) (£m) Trading profit (including discontinued operations in 2009) 167 182 Exceptional items (including discontinued operations in 2009) (255) (262) Loss/(profit) on disposal of businesses and revaluation of disposal groups 49 (4) Depreciation and impairment of
Slide 9: Exceptional Items
Exceptional Items 2010 2009 £m £m Restructuring costs 42 120 Loss on disposal of businesses 49 - Impairment of BCP asset and other associated provisions 164 - 255 120 Estimated additional £8 million charge in H2 relating to North American SAP pilot Restructuring costs in H2 2010 likely to be modest
Slide 10: Exceptional Restructuring Costs and Benefits since 1 August 2007
Exceptional Restructuring Costs and Benefits since 1 August g 2007 Cost Headcount Benefit* £m reduction £m pa UK and Ireland 210 4,109 160 France 49 1,798 42 Nordic 25 1 878 1,878 51 Central and Eastern Europe 43 723 28 Europe 327 8,508 281 US plumbing and heating 106 6,946 271 Canada 12 184 9 North
Slide 11: Exceptional Restructuring Costs and Benefits half year to 31 January 2010
Exceptional Restructuring Costs and Benefits half year to 31 January y 2010 Cost Headcount 2010 Benefit £m Reduction Benefit £m pa £m UK and Ireland 15 745 7 11 France 4 68 2 3 Nordic 11 115 2 4 Central and Eastern Europe 3 114 3 7 Europe p 33 1,042 , 14 25 US Plumbing and Heating 5 835 26 33 Canada
Slide 12: Ferguson
Ferguson H1 H1 2009 Exch Disp Acqn Organic Change 2010 Change Const £m £m £m £m £m % £m % Cur % Revenue 3,038 (20) - 8 (653) (21.6) 2,373 (21.9) (21.4) Trading profit 188 (1) - - (88) (47.1) 99 (47.3) (46.9) Trading margin 6.2% 4.2% Strong overall trading performance ahead of the market New resident
Slide 13: Canada
Canada H1 H1 2009 Exch Disp Acqn Organic Change 2010 Change Const £m £m £m £m £m % £m % Cur % Revenue 369 32 - - (48) (12.0) 353 (4.3) (12.0) Trading profit 18 1 - - (1) (7.1) 18 1.1 (7.1) Trading margin 4.7% 5.0% Market holding up relatively well in line with improving GDP trends Business continues
Slide 14: North America Loan Services
North America Loan Services H1 H1 2009 Exch Disp Acqn Organic Change 2010 Change Const £m £m £m £m £m % £m % Cur % Trading loss (11) - - - 8 77.3 (3) 77.5 77.3 Phased orderly reduction of loan portfolio with a view to ultimate exit Net construction loan receivables 54% below 2009 at £124 million Net
Slide 15: UK and Ireland
UK and Ireland H1 H1 2009 Exch Disp Acqn Organic Change 2010 Change Const £m £m £m £m £m % £m % Cur % Revenue 1,401 6 (16) - (158) (11.2) 1,233 (12.0) (12.4) Trading profit 20 - 1 - 12 62.8 33 67.9 67.9 Trading margin 1.4% 2.7% Irish business sold – loss of £4m in H1 2010 Residential markets stabili
Slide 16: France
France H1 H1 2009 Exch Disp Acqn Organic Change 2010 Change Const £m £m £m £m £m % £m % Cur % Revenue 1,055 65 (7) - (179) (16.0) 934 (11.5) (16.6) Trading Profit/(loss) 22 1 (4) - (24) (100.6) (5) (121.6) (120.4) Trading margin 2.1% (0.5%) Weak business environment H1 2010 like for like revenue dec
Slide 17: Nordic
Nordic H1 H1 2009 Exch Disp Acqn Organic Change 2010 Change Const £m £m £m £m £m % £m % Cur % Revenue 1,088 64 - - (168) (14.6) 984 (9.6) (14.6) Trading profit 44 3 - - (1) (0.7) 46 5.8 (0.7) Trading margin 4.0% 4.7% Danish construction markets (47% revenue) remain worst affected Other markets have
Slide 18: Central and Eastern Europe
Central and Eastern Europe 2009 Exch Disp Acqn Organic Change 2010 Change Cons’t £m £m £m £m £m % £m % Cur’y Cur y% Revenue 507 33 (53) - (33) (6.0) 454 (10.5) (15.9) Trading (loss)/profit (1) - 3 - 3 459.6 5 616.1 775.4 Trading g margin g - 1.0% Improved trading performance due to benefits of prior
Slide 19: Driving Profitable Growth
Driving Profitable Growth Ian Meakins Group Chief Executive 19
Slide 20: Agenda
Agenda Assessment Value Creation Actions Taken Resource Allocation Business Unit Strategy Operational Performance Outlook 20
Slide 21: First Impressions – September Presentation
First Impressions – September Presentation Construction materials distribution – Attractive Att ti over the th long l tterm – Cyclical Attractive portfolio of businesses in its core geographies – Strategically strong locally and nationally Clear Leadership – Customer Service fundamental for success
Slide 22: Assessment
Assessment For many years Wolseley performed well Last few years lack of: − Strategic approach to capital and resource Allocation − focus on operational performance and organic growth Many acquisitions – unrelated segments – not fully integrated Focus on global model at expense of winning locally Ba
Slide 23: Delivery Since September
Delivery Since September Financial performance year to date Customer service measures in place Performance review process established Further cost reductions in H1 Market share performance Resource Allocation complete for FY 10 Senior team changes g made in H1 Postponed SAP deployment Disposal of no
Slide 24: Value Creation
Value Creation Operational Strategy Performance Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 24
Slide 25: Process
Process Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Strategic Assessment of BUs ‘Where to win’ BU Strategic Planning ‘How Budget to win’ Resource Allocation Business Unit Strategies Functional Strategies Operational Performance 25
Slide 26: Value Creation: Resource Allocation
Value Creation Strategy - Resource Allocation Operational Strategy Performance Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 26
Slide 27: Resource Allocation
Resource Allocation Selection Criteria Attractive Market Market size Market growth Profit pool Cyclicality Performance Strategic Position Track record of team Market position ROCI / Margins Wolseley opportunity Cash performance Scale Customer strength Synergies Synergies with other Business Units I
Slide 28: Resource Allocation: Classification of Business Units
Resource Allocation Classification of Business Units ‘Growth Engine’ Invest to create profitable growth ‘Synergy Synergy Driver Driver’ g of Growth Engine Take advantage g synergies y g ‘Performance Builder’ Drive performance, then reclassify or exit 28
Slide 29: Resource Allocation: Classification of Business Units
Resource Allocation Classification of Business Units 41 £1.7bn £13.6bn £440m 5% 19% 27% 12% Performance Builders 46% 11% 12% % Synergy Drivers 83% 27% 61% 70% 27% Growth Engines Number of BUs Capital Sales Trading Profit 29
Slide 30: Resource Allocation: Classification of Business Units
Resource Allocation Classification of Business Units 100 £m Sales FY09 G Growth Engines Stark Synergy Drivers Performance Builders 60% Plumb 50% Center 40% Ferguson Blended Branches CI % ROC 30% 20% 10% 0% ‐10% 10% 0.0 0.5 1.0 1.5 2.0 2.5 Relative Market Share 30
Slide 31: Resource Allocation: Outputs
Resource Allocation Outputs Proportionally resources will go to the “best” businesses − Larger less volatile markets − Leading share positions − Faster growth − Better ROCI and cash flow Greater focus on accelerating organic growth Bolt-on acquisitions to “best” businesses − Provided financial hurdl
Slide 32: Value Creation: Business Unit Strategies
Value Creation Strategy - Business Unit Strategies Operational Strategy Performance Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 32
Slide 33: Business Unit Strategies
Business Unit Strategies Driving Profitable Growth Gain s Ga share a eoof e existing st g custo customers e saand d ga gain new e custo customers es 1 2 Best Customer Preferred Vendor Service 3 Relationship Best Branch Staff 4 Most efficient operating model Beat the best local competitor 33
Slide 34: Business Unit Strategy
Business Unit Strategy HVAC Deep Dive Analyse the market Determine our position in the market Review our business Develop opportunities for growth 34
Slide 35: Value Creation: Operational Performance within Business Unit
Value Creation Operational Performance – within Business Unit Operational Strategy Performance Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 35
Slide 36: Within Business Unit
Within Business Unit Performance Review Process – FY10 Best Best Branch Preferred Customer Staff Vendor Service External surveys Performance Review Key vendor Internal supply chain Talent pool performance OTIF Category Market Share management nationally Operational Financial approach (start) Key cus
Slide 37: Within Business Unit: Performance Review Process - Brossette
Within Business Unit Performance Review Process - Brossette Strategic position is not cause of poor performance – g RMS 0.4x but regional g strengths Historically performed well – 5%+ ROS, >15%+ ROCI Performance caused by poor execution – Poor product P d t availability il bilit causedd share h llos
Slide 38: Value Creation: Operational Performance cross Business Unit
Value Creation Operational Performance – cross Business Unit Operational Strategy Performance Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 38
Slide 39: Cross Business Unit
Cross Business Unit Synergies Performance Synergy Growth Builders Drivers Engines Performance Review Process Best practice / Bench marking Management Corporate Finance Synergies y g Management Development Capital Allocation IT Infrastructure Operational Joint Sourcing Synergies Own Label Development
Slide 40: Value Creation
Value Creation Driving Profitable Growth Operational Strategy Performance Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 40
Slide 41: Profitable Growth
Profitable Growth Summary Markets still very tough-but stabilising Majority of our businesses are strategically attractive − Robust business models − Leadership positions − Great growth opportunities Future direction of Group is clear-Growth Engines/Synergy Drivers Performance Builders will be resol
Slide 42: Q&A
Q&A The name the world builds on
Slide 43: Appendices
Appendices The name the world builds on 43
Slide 44: Business drivers 2009 & 2008
Business drivers 2009 & 2008 % of divisional sales North America Europe Group 16 000 16,000 Plumbing & Heating 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 41% 34% 34% 43% 2,000 16% 14% 22% 19% 20% 24% 18% 20% 0 2009 2008 2009 2008 2009
Slide 45: 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 1,357 1,443 1,615 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year to July Europe North America The name the world builds on 45