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Ferguson plc Reports FY2023 Second Quarter Results

General News
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Second quarter highlights

  • Sales growth of 4.9%, with 2.7% organic growth, on top of a 31.8% total prior year comparable.
  • Gross margin of 30.2%.
  • Delivered solid operating margins of 8.0% (8.5% on an adjusted basis) in the quarter, with first half operating margins of 9.4% (9.8% on an adjusted basis).
  • Diluted earnings per share of $1.80 ($1.91 on an adjusted basis).
  • Strong net cash provided by operating activities of $1.2 billion on a fiscal year to date basis.
  • Declared quarterly dividend of $0.75, implying an annualized increase of 9% over the prior year.
  • Completed four acquisitions during the quarter with aggregate annualized revenues of approx. $300 million.
  • Share repurchases of $198 million during the quarter.
  • Balance sheet remains strong with net debt to adjusted EBITDA of 1.1x.
  • Full year net sales and adjusted operating margin guidance remain unchanged.

FY2023 Guidance

Total Company*2023 Guidance
Net salesLow single digit growth
Adjusted operating margin9.3% – 9.9%
Interest expense$185 – $205 million
Adjusted effective tax rateApproximately 25%
Capital expenditures$400 – $450 million

*Net sales guidance continues to reflect market outperformance, completed acquisitions and one additional sales day. Adjusted effective tax rate guidance remains unchanged. Interest expense and capital expenditure guidance increased by $15 million and $50 million, respectively.

Kevin Murphy, Ferguson CEO, commented “The year is unfolding as we expected and our associates continue to deliver solid results by leveraging our scale and core strengths to help our customers deliver their complex projects. We continue to appropriately manage costs to position the business for challenging end markets. Importantly, working capital management led to strong cash generation which enables us to continue investing for organic growth, consolidating our fragmented markets through acquisitions and returning capital to shareholders.

“Looking forward, our balanced exposure to both residential and non-residential end markets, combined with an agile business model, positions us well for near term uncertainties. Our financial guidance continues to reflect market outperformance, both organically and from acquisitions, and we believe our scale and advantaged platform position us to capture growth from emerging structural trends in our end markets.”

 US$ (In millions, except per share amounts)Three months ended January 31,2023                                       2022 Change
Net sales6,8256,8256,5086,508+4.9%+4.9%
Gross margin30.2%30.2%30.6%30.6%(40) bps(40) bps
Operating profit549582555588(1.1)%(1.0)%
Operating margin8.0%8.5%8.5%9.0%(50) bps(50) bps
Earnings per share – diluted1.801.911.971.93(8.6)%(1.0)%
Adjusted EBITDA630648(2.8)%
 US$ (In millions, except per share amounts)Six months ended January 31,2023                                       2022 Change
Net sales14,75614,75613,31113,311+10.9%+10.9%
Gross margin30.4%30.4%30.9%30.9%(50) bps(50) bps
Operating profit1,3801,4461,2941,355+6.6%+6.7%
Operating margin9.4%9.8%9.7%10.2%(30) bps(40) bps
Earnings per share – diluted4.644.874.384.43+5.9%+9.9%
Adjusted EBITDA1,5421,462+5.5%
Net debt(2) : Adjusted EBITDA1.1x0.8x

(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 or specified under U.S. GAAP. See the section titled “Non-GAAP Reconciliations and Supplementary Information.”

Summary of financial results

Second quarter

Net sales of $6.8 billion were 4.9% ahead of last year, with a sequential step down in growth rates from the first quarter as expected, against a prior year comparable growth of 31.8%. Organic revenue growth was 2.7% with a further 2.6% contribution from acquisitions, partially offset by a 0.3% adverse impact from foreign exchange rates and 0.1% impact from one fewer sales day in Canada. Inflation in the second quarter was approximately 10%.

Gross margins of 30.2% were 40 basis points lower than last year driven primarily by very strong prior year comparables. Operating expenses continued to be diligently managed and we remain focused on productivity and efficiencies while investing in core capabilities for future growth.

Reported operating profit was $549 million (8.0% operating margin), 1.1% lower than last year. Adjusted operating profit of $582 million (8.5% adjusted operating margin) was 1.0% lower than last year, during our seasonally weakest quarter.

Reported diluted earnings per share was $1.80 (Q2 2022: $1.97), a decrease of 8.6%, and adjusted diluted earnings per share of $1.91 decreased 1.0% with the decrease due to slightly lower adjusted operating profit and higher interest expense, partially offset by the impact of share repurchases.

USA – second quarter

The US business grew net sales by 5.4%, driven by 2.6% organic growth with a further 2.8% from acquisitions.

Residential end markets, which comprise just over half of US revenue, slowed meaningfully during the quarter as expected. New residential housing start and permit activity declined while repairs, maintenance and improvement (“RMI”) work remained more resilient. Overall, residential revenue grew by approximately 1% in the second quarter.

Non-residential end markets, representing just under half of US revenue, experienced continued growth. Non-residential revenue grew by approximately 11% in the second quarter.

Adjusted operating profit of $579 million was 0.5% or $3 million ahead of last year.

We completed four acquisitions during the quarter that included Airefco, a leading regional HVAC distributor serving customers in the Pacific Northwest across 11 locations and Guarino Distributing Company, an HVAC distributor operating in Louisiana and Mississippi. Additionally, we acquired Pipelines, a waterworks distributor serving markets in Eastern Ohio and Western Pennsylvania; and Power Process Equipment, an industrial distributor strengthening our position in the upper Midwest. In aggregate these four businesses generate annualized revenues of approximately $300 million and the annualized revenues of the five businesses acquired year to date is approximately $330 million.

Canada – second quarter

Net sales compressed by 4.5%, with organic revenue growth of 3.0%, offset by 1.2% due to one fewer sales day, and a further 6.3% due to the adverse impact of foreign exchange rates. Similar to the US segment, non-residential end markets have been more resilient than residential end markets. Adjusted operating profit of $14 million declined by $9 million compared to last year.

Segmental overview

Three months ended January 31,Six months ended January 31,
US$ (In millions)20232022Change20232022Change
Net sales:
USA6,5046,1725.4 %14,03612,59011.5 %
Total net sales6,8256,5084.9 %14,75613,31110.9 %
Adjusted operating profit:
USA5795760.5 %1,4241,3287.2 %
Central and other costs(11)(11)(25)(30)
Total adjusted operating profit582588(1.0)%1,4461,3556.7 %

Financial position

Net debt at January 31, 2023 was $3.4 billion and during the quarter we completed share repurchases of $0.2 billion, leaving approximately $0.4 billion remaining under our current share repurchase program.

We have declared a quarterly dividend of $0.75, having transitioned from a semi-annual distribution schedule earlier in the fiscal year. This implies a 9% increase, as compared to a quarter of the prior year’s total dividend, and will be paid on May 5, 2023 to shareholders on the register as of March 17, 2023.

There have been no other significant changes to the financial position of the Company.

Foreign private issuer status

As of January 31, 2023, we have determined that we no longer qualify as a foreign private issuer, as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, effective as of August 1, 2023, we will no longer be eligible to use the rules designed for foreign private issuers and will be considered a U.S. domestic issuer. We will be required to comply with, among other things, U.S. proxy requirements and Regulation FD and our officers, directors and principal shareholders will become subject to the beneficial ownership reporting and short-swing profit recovery requirements in Section 16 of the Exchange Act. We will continue to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (“SEC”).

For the complete press release, click here.

About Ferguson

Ferguson plc is a leading value added distributor of plumbing and heating products to professional contractors operating in North America. Ongoing revenue for the year ended July 31, 2020 was $19.9 billion and ongoing underlying trading profit was $1.6 billion. Ferguson plc is listed on the London Stock Exchange (LSE: FERG) and the New York Stock Exchange (NYSE:FERG) and is in the FTSE 100 index of listed companies. For more information, please visit


Brian Lantz – Vice President IR and Communications – 1 224 285 2410

Source: Ferguson plc