CORE STRENGTHS DRIVE STRONG PERFORMANCE
|US$ (In millions, except per share amounts)||Q1 2022||Q1 2021||Change|
|Net sales||6,803||6,803||5,372||5,372||+26.6 %||+26.6 %|
|Earnings per share - diluted||2.40||2.50||1.40||1.52||+71.4%||+64.5%|
|Net debt2 : Adjusted EBITDA||0.6x||0.5x|
First quarter highlights
- Supportive end markets and continued market share gains drove substantial sales growth.
- Price inflation increased to low teens in the quarter.
- Ability to manage price inflation along with good cost control generated particularly strong profit growth.
- Completed four acquisitions since the start of the fiscal year with annualized revenues of $125 million.
- Completed $97 million of the $1 billion share buy back program.
Kevin Murphy, Group Chief Executive, commented:
“Our associates have continued to drive strong market share gains while navigating industry supply chain pressures, delivering particularly strong profit growth. We are pleased with earnings growth that significantly outpaced revenue growth to generate strong operating leverage, demonstrating the agility of our business model. Our balance sheet remains strong as we continue to invest in inventory availability to service our customers and return capital to shareholders through the ongoing share buy back program.
“Since the start of the second quarter, Ferguson has generated revenue growth similar to that of Q1 2022. We continue to expect a tapering of growth in the second half on tougher prior year comparatives and we remain mindful that the recent tailwinds from inflation on gross margins will likely moderate, although the timing and extent remain uncertain. Given the strong momentum in the business and the agility of our business model, our full year expectations have increased.”
1. The results are presented in accordance with U.S. GAAP on a continuing operations basis.
2. Ferguson plc (the “Company”) uses certain non-GAAP measures, which are not defined or specified under U.S. GAAP, to provide additional helpful information. These measures are not considered a substitute for U.S. GAAP and are consistent with how business performance is planned, reported and assessed internally by management and the Board. See the section titled “Non-GAAP Information and Reconciliations.”
Summary of financial results
Net sales of $6,803 million were 26.6% ahead of last year, 24.5% higher on an organic basis with 1.8% from acquisitions and a further 0.3% from the impact of foreign exchange. Inflation in the first quarter was in the low teens.
Gross margins of 31.3% were 170 basis points ahead of last year driven primarily by our ability to service customers while managing price inflation, enabled by the hard work of our sales associates and the strength of our supply chain. Operating expenses continued to be well controlled as we focused on productivity and efficiencies while investing in our talented associates, supply chain capabilities and technology program.
Reported operating profit was $739 million (adjusted operating profit: $767 million), 64.2% ahead of last year (adjusted operating profit growth: 58.5%) as strong revenue, gross margin expansion and good cost control led to strong operating leverage.
Earnings per share on a diluted basis was $2.40 (adjusted earnings per share – diluted: $2.50), an increase of 71.4% (adjusted earnings per share – diluted growth: 64.5%) with the increase due to the strength of the profit performance in the period and the lower share count arising from share buy back programs.
The US business grew net sales by 27.1% which comprised 25.2% organic growth and a further 1.9% from acquisitions. Price inflation was in the low teens during the quarter.
Residential end markets, which comprise just over half of our US revenue, remained robust in the first quarter. New residential housing starts and permits continued to grow in the quarter, as did residential repair, maintenance and improvement (“RMI”) which performed strongly. Overall, Ferguson’s residential revenue grew by approximately 24% in the first quarter.
Non-residential end markets saw strong growth as increased demand lapped weaker comparators. Our non-residential revenue grew by approximately 31% in the first quarter with leading non-residential economic indicators strengthening in recent months.
Adjusted operating profit was strong at $752 million, $280 million ahead of last year, driven by excellent revenue growth, expansion in gross margins and strong operating leverage.
We completed two acquisitions during the quarter, Sunstate Meter & Supply, a waterworks meter distributor serving the Florida municipal market, and Meyer Appliance, a high-end appliance showroom serving consumers, builders and designers in the San Francisco Bay Area. Subsequent to the quarter end, we acquired Safe Step California, an independent dealer licensed to sell and install our Safe Step products in California and Nevada, and RP Lighting & Fans, an own brand distributor based in Albuquerque, New Mexico.
Net sales grew by 19.6% with inflation of high single digits. Organic revenue grew by 13.9% with a further 5.7% of growth due to the impact of foreign exchange rates. Residential end markets saw good growth and non-residential markets returned to growth. Adjusted operating profit of $34 million grew by 47.8%, significantly outpacing revenue growth as a result of good operating leverage.
Financial position and corporate updates
Net debt at October 31, 2021 was $1,442 million and during the quarter we completed $97 million of the $1 billion share buy back announced on September 28, 2021. Since the end of the quarter, we have purchased a further $126 million of the buy back program through December 3, 2021.
Following shareholder approval at the Annual General Meeting, the final dividend of 166.5 cents per share, amounting to approximately $368 million, will be paid to shareholders on December 10, 2021.
The shareholder vote on U.S. primary listing remains on track for Spring 2022.
There have been no other significant changes to the financial position of the Company.
Since the start of the second quarter, Ferguson has generated revenue growth similar to that of Q1 2022. We continue to expect a tapering of growth in the second half on tougher prior year comparatives and we remain mindful that the recent tailwinds from inflation on gross margins will likely moderate, although the timing and extent remain uncertain. Given the strong momentum in the business and the agility of our business model, our full year expectations have increased.
For further information please contact
|Brian Lantz, Vice President IR and Communications||Mobile: +1 224 285 2410|
|Pete Kennedy, Director of Investor Relations||Mobile: +1 757 603 0111|
|Mike Ward, Head of Corporate Communications||Mobile: +44 (0) 7894 417060|
|Nina Coad, David Litterick (Brunswick)||Tel: +44 (0) 20 7404 5959|
|Jonathan Doorley (Brunswick)||Tel: +1 (917) 459 0419|
Investor conference call and webcast
A call with Kevin Murphy, Group Chief Executive and Bill Brundage, Group Chief Financial Officer will commence at 1200 UK time (0700 ET) today. The call will be recorded and available on our website after the event at www.fergusonplc.com.
Dial in number
UK: +44 (0) 20 3936 2999
US: +1 646 664 1960
Ask for the Ferguson call quoting 002159. To access the call via your laptop, tablet or mobile device please click here. If you have technical difficulties, please click the “Listen by Phone” button on the webcast player and dial the number provided.
Ferguson is a leading value-added distributor in North America, providing products, expertise and solutions to make customers' projects better. From underground infrastructure to plumbing, appliances, lighting, HVAC, commercial mechanical and more, Ferguson simplifies the life of the project. Revenue for the year ended July 31, 2021, was $22.8 billion. Ferguson plc is listed on the London Stock Exchange (LSE: FERG) and the New York Stock Exchange (NYSE: FERG) and the company is in the FTSE 100 index of listed companies. For more information, please visit www.fergusonplc.com or follow us on Twitter https://twitter.com/Ferguson_plc.