Ferguson Enterprises Inc. · NYSE:FERG

Ferguson Enterprises — H1 FY2012 Earnings Presentation

57 slides from Ferguson Enterprises's earnings presentation, Mar 27, 2012

  1. Slide 1: FY12 Half Year Results

    FY12 Half Year Results

  2. Slide 2: Welcome and highlights

    Welcome and highlights Ian Meakins , Chief Executive

  3. Slide 3: Performance Highlights

    Performance Highlights ƒ Like-for-like Like for like growth and market share gains ƒ Gross margins held despite fierce pricing environment ƒ Cost C t reduction d ti plans l executed t d ƒ Trading profit +13% EPS +30% ƒ Customer service and employee engagement improving ƒ Targeted plans by business u

  4. Slide 4: Business Environment

    Business Environment ƒ Decent market environment in USA ƒ European markets fragile – especially France – Co Consumer su e co confidence de ce dec declining g – Unemployment remains high – Housing starts/transactions/prices depressed – Industrial and commercial activity recovering ƒ Challenging prici

  5. Slide 5: Operating and financial review

    Operating and financial review John Martin, Chief Financial Officer

  6. Slide 6: Financial Highlights

    Financial Highlights Lik ffor Lik Like Like £m H1 2012 H1 2011 Change Change Revenue 6,841 6,629 +3% +5% Trading profit* 310 275 +13% Trading margin 4.5% 4.1% +0.4% Profit before tax 250 195 +28% Headline EPS* 78p 60p +30% Adjusted net debt 529 933 404 Dividend per share 20p 15p +33% * Before except

  7. Slide 7: Underlying Performance of the Ongoing Business

    Underlying Performance of the Ongoing Business £m H1 2012 H1 2011 Change Revenue 6,325 5,909 +7% Gross margin 27.4% 27.4% - Trading profit* 318 274 +16% Trading margin* 5.0% 4.6% +0.4% * Excluding the impact of £16m of non-recurring charges and excluding trading profits and losses of businesses sold

  8. Slide 8: Quarterly Performance

    Quarterly Performance Q1 Q2 Q3 Q4 Q1 Q2 Like-for-like growth last year last year last year last year this year this year USA +6% +11% +10% +7% +10% +7% Canada +7% +4% - (2%) +2% +5% UK +5% +8% +1% (2%) (3%) (2%) Nordic +4% +4% +6% +2% +2% +7% France +2% +2% +8% +4% +3% +5% Central Europe (3%) (4%) -

  9. Slide 9: USA

    USA Like-for-like Lik f lik £m H1 2012 H1 2011 Change Change Revenue 2,966 2,678 +11% +9% Trading profit 173 146 +18% Non-recurring costs 11 - Underlying trading margin* 6.2% 5.5% +0.7% Branches 1,276 1,257 +19 Headcount 17,807 16,980 +5% *Excludes non-recurring costs 9

  10. Slide 10: Canada

    Canada Like-for-like Lik f lik £m H1 2012 H1 2011 Change Change Revenue 426 408 +4% +3% Trading profit 25 23 +9% Trading margin 5.9% 5.6% +0.3% Branches 220 221 (1) Headcount 2,559 2,650 (3%) 10

  11. Slide 11: UK ongoing

    UK ongoing Like-for-like Lik f lik £m H1 2012 H1 2011 Change Change Revenue 852 858 (1%) (3%) Trading profit 44 48 (8%) Non-recurring costs 3 - Underlying trading margin* 5.5% 5.6% (0.1%) Branches 939 927 +12 H d t Headcount 6 050 6,050 6 229 6,229 (3%) *Excludes non-recurring costs 11

  12. Slide 12: Nordic

    Nordic Like-for-like £m H1 2012 H1 2011 Change Change Revenue 1,098 1,020 +8% +5% Trading profit 47 48 (2%) Trading margin 4.3% 4.7% (0.4%) Branches 291 287 +4 Headcount 6,400 6,330 +1% 12

  13. Slide 13: France ongoing

    France ongoing Like-for-like £m H1 2012 H1 2011 Change Change Revenue 606 584 +4% +4% Trading profit 8 11 (27%) Non-recurring costs 2 - Underlying trading margin* 1.7% 1.9% (0.2%) Branches 316 326 (10) Headcount 5,411 5 470 5,470 (1%) *Excludes non-recurring costs Seasonality in France - typically 7

  14. Slide 14: Central Europe ongoing

    Central Europe ongoing Like-for-like £m H1 2012 H1 2011 Growth Change Revenue 377 361 +4% +1% Trading profit 20 17 +18% Trading margin 5.3% 4.7% +0.6% Branches 146 143 +3 Headcount 2,019 1,990 +1% 14

  15. Slide 15: Central and Other Costs

    Central and Other Costs £m H1 2012 H1 2011 p costs Group ((15)) ((17)) Non-recurring costs - (3) Construction loans - (2) (15) (22) Group costs are not recharged to the regions 15

  16. Slide 16: Operating Expenses of the Ongoing Business

    Operating Expenses of the Ongoing Business (£8m) £40m (£21m) £30m £9m £7m £10m £1,418m £7m £1,344m H1 2011 Exchange Acquisitions / net Pensions / 401k Share based Variable costs Pay rises and cost Depreciation Efficiency savings H1 2012 underlying new branches payments from additional increases unde

  17. Slide 17: Productivity in the Ongoing Business

    Productivity in the Ongoing Business Trading profit / gross profit H1 2011 16.9% Labour productivity +0.6% Other cost productivity +0.8% Trading profit / gross profit H1 2012 18.3% non recurring costs Excludes non-recurring 17

  18. Slide 18: Income Statement

    Income Statement £m H1 2012 H1 2011 Trading profit 310 275 Exceptional items (13) (11) Amortisation (32) (38) Financing charges (15) (31) Profit before tax 250 195 Tax (70) (62) Profit from continuing operations 180 133 Discontinued operations (2) - P fit for Profit f the th year 178 133 18

  19. Slide 19: Financing and Tax

    Financing and Tax £m H1 2012 H1 2011 Financing Net interest and margin (9) (18) Pensions and provisions (4) (6) Facility charges (2) (7) (15) (31) Tax P&L charge h (70) (62) Exceptionals, intangibles and other adjustments (5) (11) Underlying P&L charge (75) (73) Trading profit less financing charges

  20. Slide 20: Cash Flow

    Cash Flow 60 119 36 41 64 disposals 81 investment 85 374 32 176 EBITDA Asset M&A UK pension Tax and Capex Working Dividends Fx / other Reduction disposals payment interest capital and in adjusted provisions net debt 20

  21. Slide 21: Investment

    Investment ƒ Acquisitions - £41m invested in 6 small acquisitions since 1 August 2011 with aggregate annual revenue of £100 million ƒ N New b branches h - £6m £6 capex invested i t d iin 39 new b branches h ƒ Other capex – principally refurbishment and technology of £58m Capex for the full year is n

  22. Slide 22: Net Debt and Pensions

    Net Debt and Pensions 31 Jan 31 Jul 31 Jan £m 2012 2011 2011 Net debt as reported (470) (523) (714) Receivables factoring (59) (68) (156) Period end working capital adjustment - (114) - Construction loans - - (63) Adjusted net debt (529) (705) (933) Net pension liabilities (351) (360) (338) Cash pro

  23. Slide 23: Return on Capital

    Return on Capital Return on Capital 27.2% Employed 24.3% 25.4% excluding goodwill* 16.4% 14.4% Return on Gross Capital Employed* 12 5% 12.5% 11 6% 11.6% 10.6% 6.9% 7.1% 2008 2009 2010 2011 2012 H1 *As defined in the Group’s financial statement for the year ended 31 July 2011 23

  24. Slide 24: Dividend Policy

    Dividend Policy ƒ Rebased interim dividend of 20p per share share, increased by 33% ƒ Interim payment expected to be one third of total dividend for the year ƒ Dividend cover of 2 2.7x 7x based on current consensus expectations ƒ Future dividends to grow in line with long term earnings growth ƒ Main

  25. Slide 25: Business Review and Strategy Update

    Business Review and Strategy Update Ian Meakins, Chief Executive

  26. Slide 26: Wolseley Strategy – Recap

    Wolseley Strategy – Recap ƒ Focus on service and distribution in plumbing & heating and building materials ƒ St Strengthen e gt e leadership eade s p positions pos t o s in existing e st g bus businesses esses / geog geographies ap es ƒ Prioritise profitable organic market share gain ƒ Targeted stra

  27. Slide 27: Market Share and Opportunity

    Market Share and Opportunity USA Canada UK 100% 100% 100% 80% 80% 80% 60% 2.0x 60% 0.9x 60% 0.9x RMS RMS RMS 40% 40% 40% 20% 20% 20% 17% 13% 20% 0% 0% 0% Blended Branches Blended Bl d d Branches B h Plumb l b & Parts Center C +1% market share of Blended Branches = £200m revenue Nordic France Central

  28. Slide 28: Value Creation Framework

    Value Creation Framework Operational Strategy Performance US Blended Branches Within Cross Resource Business Unit Business Business Allocation Strategies Unit Unit Profitable Growth 28

  29. Slide 29: Business Unit Strategies and Results Expected

    Business Unit Strategies and Results Expected St t Strategy ffor P Profitable fit bl Growth G th B i Business Unit U it Results R lt EExpected t d Gain Market Share Gain share of existing customers and gain new customers Best Customer Preferred Vendor Service Relationship Expand Profitable Improve g

  30. Slide 30: US Market Dynamics

    20 30 40 50 60 70 80 7% 8% 9% 10% 11% Dec-08 Jan-09 Mar-09 Apr-09 Jun-09 Jul-09 Sep-09 Oct-09 Dec-09 Jan-10 Mar-10 Apr-10 Jun-10 Jul-10 Sep-10 Oct-10 Dec-10 Jan-11 Mar-11 Unemployment Consumer Confidence Apr-11 Jun-11 Sep-11 Jul-11 Dec-11 Oct-11 Mar-12 Jan-12 US Market Dynamics 102 104 106 108 110 1

  31. Slide 31: Blended Branches Overview

    Blended Branches Overview Total US Revenue FY11 £5.5bn ƒ Market M k t share: h 17% B2C 3% HVAC ƒ 2x Relative market share 7% Industrial ƒ Trading margin - 6.5% 6 5% 12% Blended ƒ 733 branches Waterworks Branches 15% 60% ƒ 87,000 87 000 customers Fire & Fab 3% ƒ 5,000 suppliers , ƒ 275,000 SKUs Total

  32. Slide 32: Blended Branches – Market Share by State

    Blended Branches – Market Share by State Top 10 Markets by Size WA $m ME MT ND New York 2,100 MN OR VT MA L Angeles Los A l 1 050 1,050 ID NH WI SD NY RI Chicago 920 WY MI PA CT Dallas 870 NV IA NJ NE OH Houston 780 IL IN UT DE CO WV Washington 720 KS VA MD CA MO KY Philadelphia 580 DC TN NC Atlanta

  33. Slide 33: Blended Branches – Performance Metrics

    Blended Branches – Performance Metrics LFL Growth vs. Market 6% 6% 3% 2010 FY 2011 FY 2012 H1 Gain Market Share Change in Gross Margin Trading Profit as % Gross Profit 0.3% Expand Profitable Improve 25.2% 0.1% gross margin Growth productivity 22.3% 19.6% 2010 H1 2011 H1 2012 H1 -0.4% 2010 H1 2011 H1

  34. Slide 34: Managing Performance

    Managing Performance Customer Service Customer Service Self-Service Events Predictive Fill Rate % Managed Pricing* Net Promoter Score Overall Rating Dec Jan Rank Dec Jan Rank Dec Jan Rank Dec Jan Rank Dec Jan Rank Score Rank Branch A 94.5 94.2 5 38.4 44.3 12 97.7 96.1 5 100 96 18 67.7 46.6 21 12.2 9

  35. Slide 35: Gain Market Share – Change in Share by State

    Gain Market Gain Market Share – Change in Share by State Share Expand G Gross Profitable Improve Growth Productivity Margin Improve returns & cash WA ME MT ND NN MA VT OR MH RI ID SD WI AK NY MI WY CT IA PA NV NE OH NJ IN UT IL CA CO WV DE KS VA MO KY MD NC TN AZ OK NM DC AR SC GA MS AL TX LA Losing

  36. Slide 36: Gain Market Share - Customer Service

    Gain Market Gain Market Share - Customer Service Share Expand G Gross Profitable Improve Growth Productivity Margin Improve returns & cash Ferguson g Customer Dashboard - February y 2012 Market Research ‐ Pipe Up NPS Scores Top 3,000 SKU Service FEI Net Promoter Score (NPS) Prior Month FEI Average N

  37. Slide 37: Expand Gross Margin – Business Mix

    Gain Market Expand Gross Margin – Business Mix Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash Category development – own label (7% of revenue) +45% +17% H1 sales growth Gross profit v total Blended Showrooms (16% of revenue) Counters (27% of revenue) +16% +

  38. Slide 38: Improve Productivity - Supply Chain Efficiency

    Gain Market Improve Productivity - Supply Chain Efficiency Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash Versus 1 Key Facts Performance year ago 8 Regional DCs 96.1% 96 1% OTIF 3 Pipe Yards 99.1% OTIF à 1,300 Branches 82.5% compliance p à $350M DC 7.4 aver

  39. Slide 39: Improve Productivity – Key Metrics

    Gain Market Improve Productivity – Key Metrics Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash H1 2010 H1 2011 H1 2012 Labour cost as % of gross profit 49.5% 48.6% 48.9% Ã Other costs as % of gross profit 30.9% 29.1% 25.9% Ä Trading profit as % of gross prof

  40. Slide 40: Profitable Growth – Further Opportunities

    Gain Market Profitable Growth – Further Opportunities Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash ƒ Geographic expansion – new branches ƒ Acquisitions ƒ E- commerce ƒ New market segments 40

  41. Slide 41: Profitable Growth - Bolt-on Acquisitions

    Gain Market Profitable Growth - Bolt-on Acquisitions Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash Planned 5 Months $ million Pre-Acquisition Year 1 Actual R Revenue 22 +10% 10% +40% 40% Trading Profit 1.5 2 2.9 Consideration 12 R.O.I. 17% R.O.I. 24% Actio

  42. Slide 42: Profitable Growth - E-business

    Gain Market Profitable Growth - E-business Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash Consumer - B2C Trade - B2B / Total 2011 Sales $m 261 297 4 562 H1 2012 Sales +20% +36% +47% +29% Growth 42

  43. Slide 43: Profitable Growth – Segment Opportunities

    Gain Market Profitable Growth – Segment Opportunities Share Expand Profitable Improve G Gross Growth Productivity Margin Improve returns & cash New Market Segments Key Data – $2 billion addressable market Hospitality – 10% of hotel rooms renovated each year – Revenue of $115 million, up 38% – $10 bi

  44. Slide 44: Summary - Blended Branches

    Summary - Blended Branches ƒ P f Performance improving i i − Focus at a detailed level − Location by location plan ƒ Market is very attractive − Not reliant on New Residential ƒ Significant opportunities for growth − Existing branch network − Geographic expansion − Multi channel − New segments 44

  45. Slide 45: Best Practice Sharing

    Best Practice Sharing Wolseley Best Practice Sharing Website 45

  46. Slide 46: Group Synergies

    Group Synergies Future Current Potential Cross business unit sourcing Large ++ IT infrastructure / sourcing Medium + 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 Medium £

  47. Slide 47: Summary

    Summary ƒ US encouraging g g ƒ Europe challenging ƒ Decent progress across most elements of strategy – long way to go ƒ Still significant potential to improve existing businesses ƒ Substantial growth opportunities in existing businesses / geographies ƒ Well placed for longer term growth and prepared

  48. Slide 48: Q&A

    Q&A

  49. Slide 49: Appendices

    Appendices

  50. Slide 50: Regional Analysis

    Regional Analysis Revenue Revenue Trading profit Trading profit £m H1 2012 H1 2011 H1 2012 H1 2011 Ongoing USA 2,966 2,678 173 146 Canada 426 408 25 23 UK 852 858 44 48 Nordic 1,098 , 1,020 , 47 48 France 606 584 8 11 Central Europe 377 361 20 17 Central and other costs - - (15) (22) 6,325 5,909 302

  51. Slide 51: Underlying Performance

    Underlying Performance Revenue £m H1 2012 H1 2011 Change Reported 6,841 6,629 Sold or held for sale (516) (720) Ongoing and underlying 6,325 5,909 +7% Gross Profit £m Reported 1,876 1,833 Sold or held for sale (151) (215) Non-recurring charges 11 - Underlying 1,736 1,618 +7% Underlying gross margin

  52. Slide 52: Cash Flow from Operating Activities

    Cash Flow from Operating Activities £m H1 2012 H1 2011 Trading profit 310 275 Depreciation and amortisation 64 78 EBITDA 374 353 Working capital - Unwind of year end position (114) (495) - Reduction in factoring (9) (118) - Other working capital movements (83) (72) One-off pension contribution (60)

  53. Slide 53: Other Cash Flow

    Other Cash Flow £m H1 2012 H1 2011 Cash flow from operating activities 110 (378) Net interest (8) (25) Tax paid (28) (46) Acquisitions and disposals 119 52 C Capex (64) (48) Asset disposals 41 34 Dividend ((85)) - FX and other items (32) 43 Decrease/(increase) in net debt 53 (368) Opening net debt (

  54. Slide 54: Branch Numbers

    Branch Numbers A 31 JJuly At l Disposals Di l / Other O h Ongoing O i at 2011 held for sale Acquisitions movement 31 Jan 2012 USA 1,261 - 12 3 1,276 Canada 221 - - (1) 220 UK 1,233 (300) - 6 939 Nordic 288 - 3 - 291 France 690 (369) - (5) 316 C. Europe 144 - - 2 146 3,837 (669) 15 5 3,188 54

  55. Slide 55: Headcount Numbers

    Headcount Numbers At 31 July Disposals / Other Ongoing at 2011 held for sale Acquisitions movement 31 Jan 2012 USA 17,481 - 199 127 17,807 Canada 2,693 - - (134) 2,559 UK 8,769 (2,545) - (174) 6,050 Nordic 6 754 6,754 - 20 (374) 6 400 6,400 France 8,072 (2,623) - (38) 5,411 C. Europe 1,965 - - 54 2,

  56. Slide 56: Currency

    Currency H1 2012 H1 2011 Strengthening St th i @ 31 J Jan @ 31 JJan Average Average / (weakening 2012 2011 US$ 1.58 1.57 (0.4%) 1.58 1.60 CAN$ 1 60 1.60 1 60 1.60 +0 2% +0.2% 1 58 1.58 1 60 1.60 DKK 8.67 8.78 +1.3% 8.96 8.72 Euro 1.16 1.18 +1.2% 1.20 1.17 CHF 1.40 1.55 +10.9% 1.45 1.51 56

  57. Slide 57: Product Destination Analysis – Total Revenue

    Product Destination Analysis – Total Revenue 2% 2% 4% 3% 8% 15% 10% Civil Infrastructure 17% 17% 16% 37% 29% Non-Residential 14% New construction 10% 24% Residential New 20% Construction 14% 13% 36% Non-Residential 15% RMI 30% Residential RMI 32% 21% 30% 13% 8% 58% 36 49% % 23% 35% 29% 31% 27% 8% US

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