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Key Performance Indicators

Ongoing organic revenue growth

Definition

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

Performance

Organic revenue growth was 4.4 per cent in 2018/19. Growth 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.

Performance

Gross margin improved by 10 basis points compared to 2017/18 principally as a result of disciplined pricing controls combined with the favourable impact of acquisitions.

Ongoing trading margin

Definition

The ratio of ongoing trading profit to ongoing revenue.

Performance

The trading margin rose to 7.4 per cent. Trading margin expansion was due to gross margin improvements and operating cost efficiencies.

Operating cash flow

Definition

Cash generated from operations before interest and tax.

Performance

Cash flow from operations was $1.6 billion in the year. This improvement was mainly due to a strong performance in the US business for 2018/19 and a one off payment to pension plans in 2017/18. 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 ongoing revenue from own brand products to total ongoing revenue.

Performance

The percentage of own brand revenue increased by 1.7 per cent in 2018/19 to 8.3 per cent. All regions grew own brand revenue with acquisitions also contributing significantly to the overall increase.

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.

Performance

Return on gross capital employed was 26.2 per cent with the increase partially due to the divestment of businesses carrying lower returns than the remaining Group. This is in line with our investment case and long-term objective of generating attractive returns on capital.

Associate engagement

Definition

In 2018/19 we launched a new Group-wide associate engagement survey ensuring we understand the drivers impacting engagement, retention and advocacy. The survey offers global and country specific benchmarks allowing us greater insight into how we compare externally. The survey focuses on four engagement questions on advocacy, pride, satisfaction and commitment. Associates must agree with all four questions to be recognised as “engaged”.


Performance

The initial survey result across the Group was 51 per cent. This sets a high bar as “engaged associates” must agree with all four engagement questions. This demanding score will now act as a baseline for performance moving forward and we will report on improvement actions in the Annual Report next year. We will conduct future global surveys every 18 months. N.B. The global survey results are not comparable with previous country surveys published in prior year Annual Reports.

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.

Performance

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.

The methodology was changed in 2019 to align to industry best practice whilst also collating a broader number of responses. As such, prior year scores are not comparable.

Group recordable injury rate

Definition

Total number of injuries per 200,000 worker hours. The change to 200,000 hours (from 100,000 hours last year) is in line with globally recognised standards (including the US Depart of Labor’s Occupational Safety and Health Administration regulations).
The injury number is based on associates receiving medical treatment beyond first aid that requires them to leave the workplace. 2017/18 figures have been restated in line with this calculation.

Performance

The Group recordable injury rate improved by 22 per cent compared to the previous year. This is primarily as a result of our continued focus on health and safety, a robust associate engagement programme, senior leadership commitment and deployment of safety professionals in the field to focus on areas such as material handling and training.