Ferguson Reports Second Quarter Results

Continued Execution with Full Year Guidance Unchanged

Ferguson plc (“Ferguson”) reports second quarter results:

Second quarter highlights

• Sales decline of 2.2%, largely driven by deflation of approximately 2%.
• Operating margin of 7.1% (7.8% on an adjusted basis) in our seasonally lightest quarter with fiscal year to date operating margin of 8.5% (9.0% on an adjusted basis).
• Diluted earnings per share of $1.58 ($1.74 on an adjusted basis).
• Operating cash flow of $863 million on a fiscal year to date basis.
• Declared quarterly dividend of $0.79, reflecting a 5% increase over the prior year.
• Completed two acquisitions during the quarter and one subsequent to the quarter with aggregate annualized revenues of approximately $220 million.
• Share repurchases of $142 million during the quarter.
• Balance sheet remains strong with net debt to adjusted EBITDA of 1.1x.

Kevin Murphy, Ferguson CEO, commented, “Our associates continued to execute well during our seasonally lightest quarter. While sales were slightly lower than the prior year, organic performance improved from the first quarter. Current open orders and sales per day trends support our expectation of improvement through the balance of the fiscal year against easing comparables. We are appropriately managing costs as we prepare for our seasonally stronger second half. We delivered strong operating cash flow during the first half of our fiscal year and our strong balance sheet positions us for continued investment in organic growth, sustainable dividend growth, consolidation of our fragmented markets through acquisitions and the continued return of capital to shareholders.

Summary of financial results

Second quarter

Net sales of $6.7 billion were 2.2% below last year against a strong prior year comparable. Organic revenue declined 3.7% driven by a decline in residential sales with a smaller decline in non-residential sales. These declines were partially offset by acquisition contributions of 1.5%. As expected, weakness in certain commodity related categories drove modest overall price deflation of approximately 2% as we continued to lap strong inflation comparables.

Gross margin of 30.4% was 20 basis points higher than last year driven by strong pricing execution from our associates. Operating expenses were appropriately managed with targeted cost control actions and productivity initiatives balanced with investing in core capabilities for future growth.

Reported operating profit was $477 million (7.1% operating margin), 13.1% lower than last year. Adjusted operating profit of $520 million (7.8% adjusted operating margin) was 10.7% lower than last year.

Reported diluted earnings per share was $1.58 (Q2 2023: $1.80), a decrease of 12.2%, and adjusted diluted earnings per share of $1.74 decreased 8.9% due to lower adjusted operating profit, partially offset by the impact of share repurchases.

USA – second quarter

Net sales in the US business declined 2.2%, with an organic revenue decline of 3.7% partially offset by a 1.5% contribution from acquisitions.

Residential end markets, which comprise just over half of US revenue, remained subdued. New residential housing start and permit activity improved slightly in the quarter, while repair, maintenance and improvement (“RMI”) work remained soft. Overall, residential revenue declined by approximately 4% in the second quarter.

Non-residential end markets, representing just under half of US revenue, showed comparative resilience with non-residential revenues declining by approximately 1% in the second quarter. Commercial and civil/infrastructure activity held flat in the quarter with industrial more pressured against a strong prior year comparable. We continued to see good levels of megaproject related bid activity.

Adjusted operating profit of $525 million was 9.3% or $54 million behind last year.

We completed two acquisitions during the quarter, Grove Supply, Inc., a 17 location plumbing and HVAC distributor serving customers in Pennsylvania and New Jersey, and Harway Appliances, a premier distributor of high-end kitchen appliances in Texas.

Canada – second quarter

Net sales compressed by 3.7%, with an organic revenue decline of 3.3% and a 0.4% adverse impact from foreign exchange rates. Markets have remained challenging and saw similar trends to that of the United States. Adjusted operating profit of $9 million declined by $5 million compared to last year.

Subsequent to the quarter we acquired Yorkwest Plumbing Supply Inc., a leading distributor of plumbing, municipal, hydronics, institutional, HVAC and industrial products in the greater Toronto area.

Financial position

Net debt to adjusted EBITDA at January 31, 2024 was 1.1x and during the quarter we completed share repurchases of $142 million.

We declared a quarterly dividend of $0.79, reflecting a 5% increase over the prior year. The dividend will be paid on May 7, 2024 to shareholders on the register as of March 15, 2024.

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

Domiciling our ultimate parent company in the United States

On January 18, 2024, the Company’s Board of Directors (the “Board”) announced that it would be in the best interests of the Company and its shareholders as a whole to proceed with establishing a new corporate structure to domicile our ultimate parent company in the United States. This step better aligns the Company’s headquarters and governance with its operations and leadership.

The Company expects the change to be effective on or about August 1, 2024, subject to the satisfaction of the conditions to the completion of the transaction, including shareholder approval.

No action is needed by shareholders at this time.

For the full second quarter results, click here.

About Ferguson

Ferguson plc (NYSE: FERG; LSE: FERG) is a leading value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. We exist to make our customers’ complex projects simple, successful and sustainable. Ferguson is headquartered in the U.K., with its operations and associates solely focused on North America and managed from Newport News, Virginia. For more information, please visit corporate.ferguson.com or follow us on LinkedIn linkedin.com/company/ferguson-enterprises.

Contact:

Brian Lantz – Vice President IR and Communications – (224) 285-2410

Source: Ferguson plc