REG-Ferguson Enterprises Inc. Ferguson Reports First Quarter Results
10/12/2024 11:45
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20241210:nBw703VdFa&default-theme=true
Ferguson Reports First Quarter Results
Continued Volume Growth with Full Year Guidance Unchanged
First quarter highlights
* Sales of $7.8 billion, an increase of 0.8%.
* Sales volume grew 3%, partially offset by continued deflation of approximately
2%.
* Gross margin of 30.1%, down 10 bps from prior year.
* Operating margin of 8.6% (9.1% on an adjusted basis).
* Diluted earnings per share of $2.34 ($2.45 on an adjusted basis).
* Declared quarterly dividend of $0.83, reflecting a 5% increase over the prior
year.
* Completed one acquisition during the quarter and one subsequently.
* Share repurchases of $256 million during the quarter.
* Balance sheet remains strong with net debt to adjusted EBITDA of 1.2x.
Kevin Murphy, Ferguson CEO, commented, “Our associates remained focused on
execution, delivering revenue growth in the quarter, despite continued market
headwinds and commodity price deflation. The year has started largely as
expected and our balanced business mix and ability to deploy scale locally
give us confidence in our continued market outperformance. Our strong balance
sheet and cash generative model allow us to continue to invest for organic
growth, consolidate our fragmented markets through acquisitions and return
capital to shareholders.”
“Our fiscal 2025 financial guidance remains unchanged, reflecting modest
full year revenue growth with continued outperformance. While we anticipate an
ongoing challenging near term market environment, we will continue to invest
in scale and capabilities to take advantage of multi-year structural tailwinds
such as underbuilt and aging U.S. housing, non-residential large capital
projects and our opportunity with the plumbing and HVAC specialized
professional.”
FY2025 Guidance (unchanged)
2025 Guidance
Net sales* Low single digit growth
Adjusted operating margin** 9.0% - 9.5%
Interest expense $180 - $200 million
Adjusted effective tax rate** ~26%
Capital expenditures $400 - $450 million
* Net sales guidance assumes our markets are down low single digits, inclusive
of pricing slightly down for the year. We assume continued Company market
outperformance and contribution from already completed acquisitions, offset in
part by one fewer sales day.
** The Company does not reconcile forward-looking non-GAAP measures. See
“Non-GAAP Reconciliations and Supplementary information”.
Three months ended October 31,
US$ (In millions, except per share amounts) 2024 2023 Change
Reported Adjusted((1)) Reported Adjusted((1)) Reported Adjusted
Net sales 7,772 7,772 7,708 7,708 +0.8 % +0.8 %
Gross margin 30.1 % 30.1 % 30.2 % 30.2 % (10) bps (10) bps
Operating profit 665 706 739 773 (10.0) % (8.7) %
Operating margin 8.6 % 9.1 % 9.6 % 10.0 % (100) bps (90) bps
Earnings per share - diluted 2.34 2.45 2.54 2.65 (7.9) % (7.5) %
Adjusted EBITDA 758 819 (7.4) %
Net debt((1)) : Adjusted EBITDA 1.2x 1.0x
((1)) The Company uses certain non-GAAP measures, which are not defined or
specified under U.S. GAAP. See the section titled “Non-GAAP Reconciliations
and Supplementary Information.”
Summary of financial results
First quarter
Net sales of $7.8 billion were 0.8% ahead of last year driven by an organic
revenue decline of 0.3%, offset by acquisition growth of 1.1%. On a volumetric
basis, total volume increased by approximately 3% with organic volume up
approximately 2%. Continued weakness in certain commodity related categories
drove modest overall price deflation of around 2%.
Gross margin of 30.1% was 10 basis points lower than last year. Operating
expense growth was driven by volumetric growth, cost inflation and continued
investment in core capabilities for future growth.
Reported operating profit was $665 million (8.6% operating margin), 10.0%
lower than last year. Adjusted operating profit of $706 million (9.1% adjusted
operating margin) was 8.7% below last year.
Reported diluted earnings per share was $2.34 (Q1 2024: $2.54), a decrease of
7.9% compared to last year, and adjusted diluted earnings per share of $2.45
decreased 7.5% due to the lower adjusted operating profit, partially offset by
the impact of share repurchases.
USA - first quarter
Net sales in the US business increased by 0.5%, with an organic revenue
decline of 0.4% offset by a 0.9% contribution from acquisitions.
Residential end markets, which comprise just over half of US revenue, remained
down year-over-year with market activity similar to the fourth quarter.
Overall, our residential revenue was flat in the first quarter.
Non-residential end markets, representing just under half of US revenue, were
slightly more resilient but also remain down year-over-year. We continue to
take share with non-residential revenue growth of approximately 1% in the
first quarter. Sales in civil/infrastructure and industrial end markets were
stronger with commercial broadly flat. We continued to see good levels of
shipment and bidding activity on large capital projects.
Adjusted operating profit of $697 million was 9.0% or $69 million below last
year.
We completed one acquisition during the quarter, Fresno Pipe and Supply, a
leading distributor of industrial pipes, valves and fitting products in
California. Additionally, subsequent to quarter end we acquired Templeton and
its affiliate, TEMSCO, which serve the water and wastewater industries in the
southeast.
Canada - first quarter
Net sales grew by 6.3%, with an organic revenue growth of 1.3% and a 5.6%
contribution from acquisitions, partially offset by a 0.6% adverse impact from
foreign exchange rates. Markets have been similar to that of the United States
with non-residential activity remaining more resilient than residential.
Adjusted operating profit of $23 million was flat to last year.
Segment overview
Three months ended October 31,
US$ (In millions) 2024 2023 Change
Net sales:
USA 7,369 7,329 +0.5 %
Canada 403 379 +6.3 %
Total net sales 7,772 7,708 +0.8 %
Adjusted operating profit:
USA 697 766 (9.0) %
Canada 23 23 Flat
Central and other costs (14) (16)
Total adjusted operating profit 706 773 (8.7) %
Financial position
Net debt to adjusted EBITDA at October 31, 2024 was 1.2x and during the
quarter we completed share repurchases of $256 million with approximately $600
million remaining under our current share repurchase program.
We declared a quarterly dividend of $0.83 representing a 5% growth over prior
year. The dividend will be paid on February 6, 2025 to stockholders of record
as of December 20, 2024.
During the quarter, we completed a public offering of $750 million of senior
unsecured notes due in 2034. We used a portion of the net proceeds from the
sale of the notes to prepay certain outstanding term loans, with the remaining
proceeds to be used for general corporate purposes.
There have been no other significant changes to the financial position of the
Company.
Investor conference call and webcast
A call with Kevin Murphy, CEO and Bill Brundage, CFO will commence at 8:30
a.m. ET (1:30 p.m. GMT) today. The call will be recorded and available on our
website after the event at corporate.ferguson.com.
Dial in number US: +1 646 233 4753
UK: +44 (0) 20 3936 2999
Ask for the Ferguson call quoting 562266. To access the call via your laptop,
tablet or mobile device please go to corporate.ferguson.com. If you have
technical difficulties, please click the “Listen by Phone” button on the
webcast player and dial the number provided.
About Ferguson
Ferguson (NYSE: FERG; LSE: FERG) is the largest value-added distributor
serving the specialized professional in our $340B residential and
non-residential North American construction market. We help make our
customers’ complex projects simple, successful and sustainable by providing
expertise and a wide range of products and services from plumbing, HVAC,
appliances, and lighting to PVF, water and wastewater solutions, and more.
Headquartered in Newport News, Va., Ferguson has sales of $29.6 billion
(FY’24) and approximately 35,000 associates in nearly 1,800 locations. For
more information, please visit corporate.ferguson.com.
Analyst resources
For further information on quarterly financial breakdowns, visit
corporate.ferguson.com on the Investors menu under Analysts and Resources.
Provisional financial calendar
Q2 Results for period ending January 31, 2025 March 11, 2025 with call from 8:30 a.m. ET
Timetable for the quarterly dividend
The timetable for payment of the quarterly dividend of $0.83 per share is as
follows:
Ex-dividend date: December 20, 2024
Record date: December 20, 2024
Payment date: February 6, 2025
Further details can be found on our website corporate.ferguson.com, navigating
to Investors, Shareholder Center, Dividends / Dividend History.
The completion of cross-border movements of shares between the U.K. and the
U.S. is contingent upon the receiving broker identifying and acknowledging any
such movements. Where a cross-border movement of shares has been initiated but
not completed by the relevant dividend record date (being December 20, 2024
for this quarterly dividend), there is a risk that the dividend in respect of
such shares will not be received on the dividend payment date. Accordingly,
shareholders are advised not to initiate any cross-border movements of shares
during the period from December 18, 2024 through December 23, 2024 inclusive.
Cautionary note on forward-looking statements
Certain information included in this announcement is forward-looking,
including within the meaning of the Private Securities Litigation Reform Act
of 1995, and involves risks, assumptions and uncertainties that could cause
actual results to differ materially from those expressed or implied by
forward-looking statements. Forward-looking statements cover all matters which
are not historical facts and include, without limitation, statements or
guidance regarding or relating to our future financial position, results of
operations and growth, plans and objectives for the future including our
capabilities and priorities, risks associated with changes in global and
regional economic, market and political conditions, ability to manage supply
chain challenges, ability to manage the impact of product price fluctuations,
our financial condition and liquidity, legal or regulatory changes and other
statements concerning the success of our business and strategies.
Forward-looking statements can be identified by the use of forward-looking
terminology, including terms such as “believes,” “estimates,”
“anticipates,” “expects,” “forecasts,” “guidance,”
“intends,” “continues,” “plans,” “projects,” “goal,”
“target,” “aim,” “may,” “will,” “would,” “could” or
“should” or, in each case, their negative or other variations or
comparable terminology and other similar references to future periods.
Forward-looking statements speak only as of the date on which they are made.
They are not assurances of future performance and are based only on our
current beliefs, expectations and assumptions regarding the future of our
business, future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions. Therefore, you should not
place undue reliance on any of these forward-looking statements. Although we
believe that the forward-looking statements contained in this announcement are
based on reasonable assumptions, you should be aware that many factors could
cause actual results to differ materially from those contained in such
forward-looking statements, including but not limited to: weakness in the
economy, market trends, uncertainty and other conditions in the markets in
which we operate, and other factors beyond our control, including disruption
in the financial markets and any macroeconomic or other consequences of
political unrest, disputes or war; failure to rapidly identify or effectively
respond to direct and/or end customers’ wants, expectations or trends,
including costs and potential problems associated with new or upgraded
information technology systems or our ability to timely deploy new
omni-channel capabilities; decreased demand for our products as a result of
operating in highly competitive industries and the impact of declines in the
residential and non-residential markets; changes in competition, including as
a result of market consolidation or competitors responding more quickly to
emerging technologies (such as generative artificial intelligence (“AI”));
failure of a key information technology system or process as well as exposure
to fraud or theft resulting from payment-related risks; privacy and protection
of sensitive data failures, including failures due to data corruption,
cybersecurity incidents or network security breaches; ineffectiveness of or
disruption in our domestic or international supply chain or our fulfillment
network, including delays in inventory availability at our distribution
facilities and branches, increased delivery costs or lack of availability;
failure to effectively manage and protect our facilities and inventory or to
prevent personal injury to customers, suppliers or associates, including as a
result of workplace violence; unsuccessful execution of our operational
strategies; failure to attract, retain and motivate key associates; exposure
of associates, contractors, customers, suppliers and other individuals to
health and safety risks; risks associated with acquisitions, partnerships,
joint ventures and other business combinations, dispositions or strategic
transactions; regulatory, product liability and reputational risks and the
failure to achieve and maintain a high level of product and service quality or
comply with responsible sourcing standards; inability to renew leases on
favorable terms or at all, as well as any remaining obligations under a lease
when we close a facility; changes in, interpretations of, or compliance with
tax laws; our indebtedness and changes in our credit ratings and outlook;
fluctuations in product prices (e.g., commodity-priced materials,
inflation/deflation) and foreign currency; funding risks related to our
defined benefit pension plans; legal proceedings in the course of our business
as well as failure to comply with domestic and foreign laws, regulations and
standards, as those laws, regulations and standards or interpretations and
enforcement thereof may change, or the occurrence of unforeseen developments
such as litigation, investigations, governmental proceedings or enforcement
actions; our failure to comply with the obligations associated with being a
public company listed on the New York Stock Exchange and London Stock Exchange
and the costs associated therewith; the costs and risk exposure relating to
environmental, social and governance (“ESG”) matters, including
sustainability issues, regulatory or legal requirements, and disparate
stakeholder expectations; adverse impacts caused by a public health crisis;
and other risks and uncertainties set forth under the heading “Risk
Factors” in our Annual Report on Form 10-K for the fiscal year ended July
31, 2024 filed with the Securities and Exchange Commission (“SEC”) on
September 25, 2024 and in other filings we make with the SEC in the future.
Additionally, forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future. Other than in accordance with our legal or regulatory
obligations, we undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise.
Ferguson Enterprises Inc.
Non-GAAP Reconciliations and Supplementary Information
(unaudited)
Non-GAAP items
This announcement contains certain financial information that is not presented
in conformity with U.S. GAAP. These non-GAAP financial measures include
adjusted operating profit, adjusted operating margin, adjusted net income,
adjusted earnings per share - diluted, adjusted EBITDA, adjusted effective tax
rate, net debt and net debt to adjusted EBITDA ratio. The Company believes
that these non-GAAP financial measures provide users of the Company’s
financial information with additional meaningful information to assist in
understanding financial results and assessing the Company’s performance from
period to period. Management believes these measures are important indicators
of operations because they exclude items that may not be indicative of our
core operating results and provide a better baseline for analyzing trends in
our underlying businesses, and they are consistent with how business
performance is planned, reported and assessed internally by management and the
Board. Such non-GAAP adjustments include amortization of acquired intangible
assets, discrete tax items, and any other items that are non-recurring.
Non-recurring items may include various restructuring charges, gains or losses
on the disposals of businesses which by their nature do not reflect primary
operations, as well as certain other items deemed non-recurring in nature
and/or that are not a result of the Company’s primary operations. Because
non-GAAP financial measures are not standardized, it may not be possible to
compare these financial measures with other companies' non-GAAP financial
measures having the same or similar names. These non-GAAP financial measures
should not be considered in isolation or as a substitute for results reported
under U.S. GAAP. These non-GAAP financial measures reflect an additional way
of viewing aspects of operations that, when viewed with U.S. GAAP results,
provide a more complete understanding of the business. The Company strongly
encourages investors and shareholders to review the Company’s financial
statements and publicly filed reports in their entirety and not to rely on any
single financial measure.
The Company does not provide a reconciliation of forward-looking non-GAAP
financial measures to the most directly comparable U.S. GAAP financial
measures on a forward-looking basis because it is unable to predict with
reasonable certainty or without unreasonable effort non-recurring items, such
as those described above, that may arise in the future. The variability of
these items is unpredictable and may have a significant impact.
Summary of Organic Revenue
Management evaluates organic revenue as it provides a consistent measure of
the change in revenue year-on-year. Organic revenue growth (or decline) is
determined as the growth (or decline) in total reported revenue excluding the
growth (or decline) attributable to currency exchange rate fluctuations, sales
days, acquisitions and disposals, divided by the preceding financial year’s
revenue at the current year’s exchange rates.
A summary of the Company’s historical revenue and organic revenue growth is
below:
Q1 2025 Q4 2024 Q3 2024 Q2 2024 Q1 2024
Revenue Organic Revenue Organic Revenue Organic Revenue Organic Revenue Organic
Revenue
Revenue
Revenue
Revenue
Revenue
USA 0.5 % (0.4 )% 1.3 % (0.2 )% 2.2 % (0.9 )% (2.2 )% (3.7 )% (2.7 )% (5.0 )%
Canada 6.3 % 1.3 % 2.0 % (1.2 )% 6.7 % (0.6 )% (3.7 )% (3.3 )% (5.0 )% (3.3 )%
Total Company 0.8 % (0.3 )% 1.4 % (0.2 )% 2.4 % (0.9 )% (2.2 )% (3.7 )% (2.8 )% (4.9 )%
For further details regarding organic revenue growth, visit
corporate.ferguson.com on the Investors menu under Analysts and Resources.
Reconciliation of Net Income to Adjusted Operating Profit and Adjusted EBITDA
Three months ended
October 31,
(In millions) 2024 2023
Net income $ 470 $ 519
Provision for income taxes 154 172
Interest expense, net 46 45
Other expense, net (5 ) 3
Operating profit 665 739
Corporate restructurings((1)) 3 —
Amortization of acquired intangibles 38 34
Adjusted Operating Profit 706 773
Depreciation & impairment of PP&E 44 39
Amortization of non-acquired intangibles 8 7
Adjusted EBITDA $ 758 $ 819
(1) For the three months ended October 31, 2024, corporate restructurings
primarily related to incremental costs in connection with transition
activities following the establishment of our parent company’s domicile in
the United States.
Net Debt : Adjusted EBITDA Reconciliation
To assess the appropriateness of its capital structure, the Company’s
principal measure of financial leverage is net debt to adjusted EBITDA. The
Company aims to operate with investment grade credit metrics and keep this
ratio within one to two times.
Net debt
Net debt comprises bank overdrafts, bank and other loans and derivative
financial instruments, excluding lease liabilities, less cash and cash
equivalents. Long-term debt is presented net of debt issuance costs.
As of October 31,
(In millions) 2024 2023
Long-term debt $ 3,447 $ 3,663
Short-term debt 550 55
Bank overdrafts((1)) 5 28
Derivative liabilities 6 15
Cash and cash equivalents (601 ) (743 )
Net debt $ 3,407 $ 3,018
(1) Bank overdrafts are included in other current liabilities in the
Company’s Consolidated Balance Sheets.
Adjusted EBITDA (Rolling 12-month)
Adjusted EBITDA is net income before charges/credits relating to depreciation,
amortization, impairment and certain non-GAAP adjustments. A rolling 12-month
adjusted EBITDA is used in the net debt to adjusted EBITDA ratio to assess the
appropriateness of the Company’s financial leverage.
Twelve months ended
(In millions, except ratios) October 31,
2024 2023
Net income $ 1,686 $ 1,813
Provision for income taxes 711 550
Interest expense, net 180 188
Other expense, net 1 16
Corporate restructurings((1)) 31 —
Impairments and other charges((2)) — 125
Depreciation and amortization 345 320
Adjusted EBITDA $ 2,954 $ 3,012
Net Debt: Adjusted EBITDA 1.2x 1.0x
(1) For the rolling twelve months ended October 31, 2024, corporate
restructurings primarily related to incremental costs in connection with
establishing a new corporate structure to domicile our ultimate parent company
in the United States, including transition activities following the domicile.
(2) For the rolling twelve months ended October 31, 2023, impairments and
other charges related to $107 million in software impairment charges in the
United States, as well as $18 million in charges associated with the closure
of certain smaller, underperforming branches in the United States. Such
amounts were mainly recorded in the third quarter of fiscal year 2023.
Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS - Diluted
Three months ended
October 31,
(In millions, except per share amounts) 2024 2023
per share((1)) per share((1))
Net income $ 470 $ 2.34 $ 519 $ 2.54
Corporate restructurings((2)) 3 0.01 — —
Amortization of acquired intangibles 38 0.19 34 0.16
Discrete tax adjustments((3)) (7 ) (0.04 ) — —
Tax impact-non-GAAP adjustments((4)) (10 ) (0.05 ) (10 ) (0.05 )
Adjusted net income $ 494 $ 2.45 $ 543 $ 2.65
Diluted weighted-average shares outstanding 201.3 204.6
(1) Per share on a dilutive basis.
(2) For the three months ended October 31, 2024, corporate restructurings
primarily related to incremental costs in connection with transition
activities following the establishment of our parent company’s domicile in
the United States.
(3) For the three months ended October 31, 2024, discrete tax adjustments
mainly related to the tax treatment of certain compensation items that is not
material.
(4) For the three months ended October 31, 2024 and 2023, the tax impact on
non-GAAP adjustments primarily related to the amortization of acquired
intangibles.
Ferguson Enterprises Inc.
Condensed Consolidated Statements of Earnings
(unaudited)
Three months ended
October 31,
(In millions, except per share amounts) 2024 2023
Net sales $ 7,772 $ 7,708
Cost of sales (5,432 ) (5,377 )
Gross profit 2,340 2,331
Selling, general and administrative expenses (1,585 ) (1,512 )
Depreciation and amortization (90 ) (80 )
Operating profit 665 739
Interest expense, net (46 ) (45 )
Other income (expense), net 5 (3 )
Income before income taxes 624 691
Provision for income taxes (154 ) (172 )
Net income $ 470 $ 519
Earnings per share - Basic $ 2.34 $ 2.55
Earnings per share - Diluted $ 2.34 $ 2.54
Weighted average number of shares outstanding:
Basic 200.8 203.8
Diluted 201.3 204.6
Ferguson Enterprises Inc.
Condensed Consolidated Balance Sheets
(unaudited)
As of
(In millions) October 31, 2024 July 31, 2024
Assets
Cash and cash equivalents $ 601 $ 571
Accounts receivable, net 3,642 3,602
Inventories 4,393 4,188
Prepaid and other current assets 963 1,020
Assets held for sale 26 29
Total current assets 9,625 9,410
Property, plant and equipment, net 1,780 1,752
Operating lease right-of-use assets 1,610 1,565
Deferred income taxes, net 186 181
Goodwill 2,363 2,357
Other non-current assets 1,294 1,307
Total assets $ 16,858 $ 16,572
Liabilities and stockholders’ equity
Accounts payable $ 3,430 $ 3,410
Other current liabilities 2,309 1,806
Total current liabilities 5,739 5,216
Long-term debt 3,447 3,774
Long-term portion of operating lease liabilities 1,235 1,198
Other long-term liabilities 782 768
Total liabilities 11,203 10,956
Total stockholders' equity 5,655 5,616
Total liabilities and stockholders' equity $ 16,858 $ 16,572
Ferguson Enterprises Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In millions) Three months ended
October
31,
2024 2023
Cash flows from operating activities:
Net income $ 470 $ 519
Depreciation and amortization 90 80
Share-based compensation 11 13
Changes in inventories (203 ) (217 )
Changes in receivables and other assets (4 ) (29 )
Changes in accounts payable and other liabilities (169 ) 27
Other operating activities 150 164
Net cash provided by operating activities 345 557
Cash flows from investing activities:
Purchase of businesses acquired, net of cash acquired (22 ) (12 )
Capital expenditures (77 ) (91 )
Other investing activities — 7
Net cash used in investing activities (99 ) (96 )
Cash flows from financing activities:
Purchase of treasury shares (256 ) (108 )
Net change in debt and bank overdrafts 75 (39 )
Cash dividends — (152 )
Other financing activities (33 ) (14 )
Net cash used in financing activities (214 ) (313 )
Change in cash, cash equivalents and restricted cash 32 148
Effects of exchange rate changes (3 ) (9 )
Cash, cash equivalents and restricted cash, beginning of period 625 669
Cash, cash equivalents and restricted cash, end of period $ 654 $ 808
For further information please contact
Investor relations
Brian Lantz, Vice President IR and Communications
Mobile: +1 224 285 2410
Pete Kennedy, Director of Investor Relations
Mobile: +1 757 603 0111
Media inquiries
Christine Dwyer, Senior Director of Communications and PR
Mobile: +1 757 469 5813
View source version on businesswire.com:
https://www.businesswire.com/news/home/20241210923416/en/
(https://www.businesswire.com/news/home/20241210923416/en/)
Ferguson Enterprises Inc.
Copyright Business Wire 2024Recent news on Ferguson Enterprises
See all newsREG-Ferguson Enterprises Inc. Ferguson Announces Two Acquisitions
AnnouncementREG-Ferguson Enterprises Inc. Ferguson Enterprises Inc.: Notice of Dividend Currency Exchange Rate
AnnouncementREG-Ferguson Enterprises Inc. Ferguson Enterprises Inc. (“Company”): Director/PDMR Shareholding
AnnouncementREG-Ferguson Enterprises Inc. Ferguson Files Form 8-K
AnnouncementREG-Ferguson Enterprises Inc. Ferguson Files Form 10-Q
Announcement