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www.wolseley.com

Key Performance Indicators

Organic revenue growth

Definition

The percentage increase or decrease in revenue year-on-year excluding the effect of currency exchange, acquisitions and disposals and trading days.

The measured KPI has changed from like-for-like revenue growth to organic revenue growth in line with the change in management reporting.

Description

Organic revenue growth was 7.5 per cent in 2017/18. The improved growth rate from 2016/17 was due to a strong outperformance of the market in the USA.

Ongoing gross margin

Definition

The ratio of ongoing gross profit, excluding exceptional items, to ongoing revenue.

Description

Gross margin improved by 30 basis points compared to 2016/17 principally as a result  of the USA and Canada and Central Europe improving their mix of business towards higher margin product categories and improved procurement.

Ongoing trading margin

Definition

The ratio of ongoing trading profit to ongoing revenue.

Description

The trading margin improved and rose to 7.3 per cent. Revenue growth was good and flowed well in to trading profit due to gross margin improvements and operating cost efficiencies.

Operating cash flow

Definition

Cash generated from operations before interest and tax.

The measured KPI has changed from average cash-to-cash days to operating cash flow. Operating cash flow is one of three performance measures for awards under the Long Term Incentive Plan (“LTIP”) and is a relevant measure of performance and working capital efficiency.

Description

Cash flow from operations was $1.3 billion in the year. Continued good cash flow is a key part of the Group’s long-term generation of cash to fund investment and returns to shareholders.

Own brand percentage of revenue

Definition

The proportion of revenue from own brand products to total revenue.

Own brand percentage of revenue has been added as a KPI. Growing the percentage of own brand revenue is a key driver of profitable growth.

Description

The percentage of own brand revenue decreased by 0.1 per cent in 2017/18 to 7.0 per cent. All regions grew own brand revenue, but at a lower rate than total revenue growth in the USA and Canada and Central Europe.

Return on gross capital employed

Definition

The ratio of trading profit to the average year-end aggregate of shareholders’ equity, adjusted net debt and cumulative goodwill and other acquired intangible assets written off. This is for continuing and discontinued operations.

Description

Return on gross capital employed was 22.7 per cent which remains at attractive levels. This is in line with our investment case and long-term objective of generating attractive returns on capital.

Associate engagement

Definition

Engaged associates deliver excellent customer service, consequently we measure associate engagement in every region. Engagement surveys are periodically sent to associates at all levels asking: “Would you recommend Ferguson as a place to work to a good friend?"

Description

The process of tracking and reporting engagement differs by region, therefore an example is given for the USA. Average engagement was 84.0 per cent and remains a very high score, well above industry averages.

A new methodology using an annual associate-wide survey rather than more frequent pulse surveys, was launched in 2016.

 

Customer service

Definition

There is a good correlation in our business between high customer service scores in a branch and better financial performance. The net promoter score is a means of measuring customer service. The survey asks: “How likely is it that you would recommend Ferguson to a friend or colleague?” and customers respond with a score between zero (bad) and 10 (exceptional). We look at the four quarter average of the proportion of customers who scored nine or more, less those customers scoring six or less. The methodology was changed in 2017 and prior years restated to weight the responses by business unit revenue.

Description

The process of tracking and reporting customer service differs by region, therefore an example is given for the USA. The average net promoter score remains an excellent score and is best in class in our industry and is among the highest levels achieved in any industry.

Injury rate

Definition

Total number of injuries per 100,000 hours  worked. The numbers are based on injuries requiring an associate to leave the workplace for medical treatment. The hours worked are calculated using full-time equivalent associate numbers and average work days by business  and assume an eight-hour working day. This is  for continuing and discontinued operations.

Description

Injuries requiring medical treatment per 100,000 hours worked improved by 0.6 per cent compared to the previous year. This is primarily as a result of the increased focus on health and safety.

Prior year data has been restated to reflect improved historic data.