Ferguson PLC Announces Results for the Three Months Ended October 31 2021

Rhea-AI Summary

Ferguson plc reported strong first-quarter results for the period ending October 31, 2021, with net sales reaching $6,803 million, up 26.6% from the previous year. Adjusted operating profit increased by 64.2% to $767 million, driven by robust market demand and effective cost management.

Significantly, earnings per share rose 71.4% to $2.40, despite challenges from price inflation, which averaged in the low teens. The company also completed four acquisitions, contributing an annualized $125 million in revenue. The outlook remains positive, with revenue growth expected to continue.

Positive

• Net sales increased by 26.6% to $6,803 million.
• Adjusted operating profit rose 64.2% to $767 million.
• Earnings per share grew by 71.4% to $2.40.
• Successful management of price inflation in a challenging market.
• Completed four acquisitions since the start of the fiscal year, adding $125 million in annualized revenues.
• Continued share buyback program with $97 million completed out of a $1 billion plan.

Negative

• Operating profit decreased from $767 million to $739 million, indicating challenges in profitability despite revenue growth.
• Price inflation was reported in the low teens, which may impact future margins.

WOKINGHAM, UK / ACCESSWIRE / December 7, 2021 / Ferguson plc reports results for the first quarter.

CORE STRENGTHS DRIVE STRONG PERFORMANCE

US$ (In millions, except per share amounts)	Q1 2022			Q1 2021				Change
	Reported1		Adjusted2	Reported1		Adjusted2		Reported	Adjusted
Net sales	6,803		6,803		5,372		5,372	+26.6%	+26.6%
Gross margin	31.3%		31.3%	29.6%		29.6%		+1.7%	+1.7%
Operating profit	739		767		450		484	+64.2%	+58.5%
Operating margin	10.9%		11.3%	8.4%		9.0%		+2.5%	+2.3%
Earnings per share - diluted		2.40	2.50	1.40		1.52		+71.4%	+64.5%
Adjusted EBITDA			814				524		+55.3%
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.

USA

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.

Canada

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.

Outlook

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

Ferguson plc
Brian Lantz, Vice President IR and Communications	Mobile:	+1 224 285 2410
Pete Kennedy, Director of Investor Relations	Mobile:	+1 757 603 0111
Media enquiries
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.

Analyst resources

For further information on quarterly financial breakdowns, visit www.fergusonplc.com on the Investors & Media page under Analyst Consensus and Resources.

Provisional financial calendar

Virtual Investor Day	January 13, 2022
H1 Results for period ending January 31, 2022	March 15, 2022

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SOURCE: Ferguson PLC

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FAQ

What were Ferguson plc's Q1 2022 net sales?

Ferguson plc reported net sales of $6,803 million for Q1 2022.

How much did Ferguson plc's earnings per share increase in Q1 2022?

Earnings per share for Ferguson plc increased by 71.4% to $2.40 in Q1 2022.

What is the operating profit for Ferguson plc in Q1 2022?

Ferguson plc's reported operating profit for Q1 2022 was $739 million.

How many acquisitions did Ferguson plc complete in Q1 2022?

Ferguson plc completed four acquisitions since the start of the fiscal year.

What is the share buyback amount completed by Ferguson plc?

Ferguson plc completed $97 million of its $1 billion share buyback program.