EXECUTING OUR STRATEGY TO DELIVER STRONG OPERATING PERFORMANCE
Fourth quarter highlights
Full year highlights
Sales growth of 25.3% driven by organic growth and further consolidation of our markets through acquisitions.
Operating profit growth of 44.6% (adjusted operating profit growth of 41.1%) outpaced net sales growth, resulting in operating margin of 9.9%, up 130 basis points (10.3% on an adjusted basis, up 110 basis points).
Final dividend increased by 15% to $1.91 per share bringing the total dividend to $2.75 per share, an increase of 15% for the year.
The Company will move to a quarterly interim dividend schedule in FY2023 with our first expected dividend declaration alongside our Q1 results.
Invested $650 million in seventeen acquisitions with annualized revenues of approximately $750 million.
Completed $1.5 billion of our $2.0 billion share repurchase program and extended the program by a further $0.5 billion, expected to complete within the next 12 months.
Net sales growth of low single digits driven by market outperformance and completed acquisitions
Adjusted operating margin of 9.3% to 9.9%
Interest expense of $170 - $190 million
Adjusted effective tax rate of approximately 25%
Capital expenditures of $350 - $400 million
Kevin Murphy, Ferguson CEO, commented “Our associates delivered another quarter of strong financial performance driven by continued market share gains and our ability to appropriately manage and pass through price inflation. Ongoing cost control ensured a robust profit performance in the quarter as we ran up against tough prior year comparables. For the full year, our teams achieved excellent results despite labor and supply chain challenges. The balance sheet remains strong as we continue to invest for organic growth, consolidate our fragmented markets through acquisitions and return capital to shareholders.
“We are well positioned for the year ahead with diversified end market exposure and a strong balance sheet. The agility of our business model will enable us to navigate macro economic headwinds. Importantly, we remain confident in the strength of our markets over the longer term and our financial guidance continues to reflect market outperformance, both organically and from acquisitions.”
|Three months ended July 31,|
|US$ (In millions, except per share amounts)||2022||2021||Change|
|Net sales||7,971||7,971||6,567||6,567||+21.4 %||+21.4 %|
|Gross margin||30.5%||30.5%||31.4%||31.4%||(90) bps||(90) bps|
|Operating margin||10.2%||10.7%||10.1%||10.6%||+10 bps||+10 bps|
|Earnings per share - diluted||2.73||2.85||2.98||2.37||(8.4)%||20.3%|
|Twelve months ended July 31,|
|US$ (In millions, except per share amounts)||2022||2021||Change|
|Gross margin||30.7%||30.7%||30.6%||30.6%||+10 bps||+10 bps|
|Operating margin||9.9%||10.3%||8.6%||9.2%||+130 bps||+110 bps|
|Earnings per share - diluted||9.59||9.76||7.25||6.75||+32.3%||+44.6%|
|Net debt2 : Adjusted EBITDA||1.0x||0.5x|
(1) The results are presented in accordance with U.S. GAAP on a continuing operations basis.
(2) The Company uses certain non-GAAP measures, which are not defined orspecified under U.S. GAAP. See the section titled “Non-GAAP Reconciliations and Supplementary Information.”
Summary of financial results
Net sales of $7,971 million were 21.4% ahead of last year, 19.5% higher on an organic basis with a further 2.1% contribution from acquisitions, partially offset by a 0.2% adverse impact from foreign exchange rates. Inflation in the fourth quarter was approximately 20%.
Gross margins of 30.5% were 90 basis points lower than last year driven primarily by strong prior year comparables, during a period of rapid commodity price inflation. Operating expenses continued to be well controlled, resulting in a net operating margin increase of 10 basis points on a reported and adjusted basis. We remain focused on productivity and efficiencies while investing in our talented associates, supply chain capabilities and technology.
Reported operating profit was $814 million, 23.1% ahead of last year. Adjusted operating profit of $849 million, increased 21.5% compared to last year.
Reported diluted earnings per share was $2.73 (Q4 FY2021: $2.98), a decrease of 8.4% due to a non- recurring prior year tax benefit. Adjusted diluted earnings per share of $2.85 increased 20.3% with the increase due to the strength of the operating profit performance in the quarter and the lower share count from share repurchases, partially offset by higher interest and tax.
Net sales of $28,566 million were 25.3% ahead of last year, 23.5% higher on an organic basis with an additional 1.8% from acquisitions. Inflation during the year was approximately high teens.
Gross margins of 30.7% were 10 basis points ahead of last year and operating expenses continued to be well controlled, resulting in an operating margin increase of 130 basis points(adjusted operating margin +110 basis points).
Reported operating profit was $2,820 million, 44.6% ahead of last year. Adjusted operating profit was $2,951 million, an increase of 41.1%.
Reported diluted earnings per share was $9.59 (FY2021: $7.25). Adjusted diluted earnings per share of $9.76 increased 44.6% due to the strength of the profit performance through the year and the lower share count from share repurchases.
USA - fourth quarter
The US business grew net sales by 22.1%, driven by 19.8% organic growth and an additional 2.3% from acquisitions.
Residential end markets, which comprise just over half of US revenue, remained robust during the quarter. New residential housing start and permit activity has eased but RMI work has remained resilient. Overall, residential revenue grew by approximately 17% in the fourth quarter.
Non-residential end markets, representing just under half of US revenue, experienced continued strong growth. Non-residential revenue grew by approximately 28% in the fourth quarter.
Adjusted operating profit of $829 million was 20.5% or $141 million ahead of last year.
We completed seven acquisitions during the quarter with annualized revenues of approximately $470 million. Among others, these included Aaron & Company, a leading plumbing and HVAC distributor in New Jersey and Minka Lighting, an own brand lighting and fan company. Geographic bolt-on and capability acquisitions, such as these, remain core to our growth strategy as we continue to consolidate our fragmented markets.
Within the Waterworks customer group we expanded our capabilities in geosynthetic and erosion controlsolutions by acquiring D2 Land & Water Resource and Triton Environmental, geotextile and erosion control specialists operating across the Midwest, Colorado, Pennsylvania and Texas. Additionally, we acquired STE, giving broader distribution rights for certain geotextile products that remove contaminants from polluted water.
Canada - fourth quarter
Net sales grew by 10.5%, with organic revenue growth of 14.2% offset by 3.7% due to the adverse impact of foreign exchange rates. Both residential and non-residential end markets grew in the quarter against strong comparables. Adjusted operating profit of $35 million grew by 25.0%, significantly outpacing revenue growth as a result of good operating leverage.
|Three months ended July 31,||Twelve months ended July 31,|
|US$ (In millions)||2022||2021||Change||2022||2021||Change|
|Total net sales||7,971||6,567||21.4%||28,566||22,792||25.3 %|
|Adjusted operating profit:|
Central and other costs
|Total adjusted operating profit||849||699||21.5%||2,951||2,092||41.1 %|
Net debt at July 31, 2022 was $3.2 billion and during the year we invested $0.3 billion in capex, distributed $0.5 billion of dividends, invested $0.7 billion in 17 acquisitions, and repurchased $1.5 billion of the previously announced $2.0 billion share repurchase program.
Taking into account the Company’s strong financial position, we have extended the share repurchase program by an additional $0.5 billion, resulting in a remaining balance of approximately $1.0 billion, expected to be completed within the next 12 months.
If approved at the 2022 Annual General Meeting (“AGM”), the proposed final dividend of $1.91 per share (2021: $1.665 per share) representing an increase of 15% will be paid on December 8, 2022 to shareholders on the register on October 28, 2022. This brings the full year dividend to $2.75, a growth of 15% for the year.
In addition, the Company will move to a quarterly interim dividend payment from a semi-annual distribution schedule. Our first quarterly interim dividend is expected to be declared in December alongside our first quarter results announcement.
There have been no other significant changes to the financial position of the Company.
Jacky Simmonds will step down as a Non-Executive Director at the 2022 AGM. The Board has benefitted from Ms. Simmonds’ extensive experience and from her leadership over the years of the Remuneration Committee (which has now been renamed the Compensation Committee as part of our transition to a US governance model). We thank Ms. Simmonds for her excellent service as a Board member and committee Chair, especially through a period of significant change for Ferguson, and we wish her well for her future. Subject to re-election at the AGM, Kelly Baker will become the Chair of the Compensation Committee after the AGM in succession to Ms. Simmonds. Also as part of the Board’s long term succession planning, and subject to re-election at the AGM, Suzanne Wood will succeed Alan Murray and become the Chair of the Audit Committee following re-election at this year’s AGM. Subject to re-election at the AGM, Mr. Murray will remain a member of the Audit Committee and has taken over as Chair of the Nominations & Governance Committee.
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|
|John Pappas, Director of Financial Communications||Mobile: +1 484 790 2727|
|Jonathan Doorley (Brunswick)||Tel: +1 917 459 0419|
|Rebecca Kral (Brunswick)||Tel: +1 917 818 9002|
Investor conference call and webcast
A call with Kevin Murphy, CEO and Bill Brundage, CFO will commence at 7:30 a.m. ET (12:30 p.m. BST) 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 196425. To access the call via your laptop, tablet or mobile device please go to www.fergusonplc.com. If you have technical difficulties, please click the “Listen by Phone” button on the webcast player and dial the number provided.