• Ferguson is the world's leading value-added distributor of plumbing and heating products
  • Ferguson operate in two geographic regions - the United States and Canada.
  • The company principally serve the Repair, Maintenance and Improvement (RMI) markets and hold leading positions in many of these markets
  • With 1,679 branches spread across the US and Canada Ferguson is a North American business.


Company Overview

Ferguson (NYSE:FERG, LSE:FERG) is the world's leading value-added distributor of plumbing and heating products1

The company operate in two geographic regions - the United States and Canada.

The company principally serve the Repair, Maintenance and Improvement (RMI) markets and hold leading positions in many of these markets. The company bridge the gap between the large supplier base and geographically dispersed professional customers.

With 1,679 branches spread across the US and Canada Ferguson is a North American business. But we’re a local business too – the majority of its customers operate within 20 miles of their home base and may visit their local branch several times a week. The company therefore look to build long-term relationships with its customers by providing a great experience, in branch or online, rooted in exceptional service.


Business Overview

The company create value by going beyond for its customers using the expertise of its people, its scale, bespoke logistics network, technology and its value added service offering.

Ferguson distributes over one million products from over 34,000 reputable suppliers across the world.

Distributors, including Ferguson, bridge the gap between a fragmented supplier base and the large and geographically dispersed professional customer base.

The USA continues to be its largest market with the greatest opportunities for growth. It is highly fragmented with no market dominated by any single distributor.

Ferguson is a leading value-added distributor providing expertise, solutions, and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. With large scale distribution, branch and showroom networks Ferguson is able to supply its customers whenever and wherever they need it.



The US business operates primarily under the Ferguson brand and is a value added distributor of plumbing and heating products in the USA. It operates nationally, serving the residential, commercial, civil and industrial end markets. Ferguson predominantly serves the Repair, Maintenance and Improvement (RMI) markets, with relatively low exposure to the new construction market.2

Ferguson operates 1,470 branches serving all 50 states with approximately 28,000 associates. The branches are served by 10 distribution centers, providing same-day and next-day product availability, a key competitive advantage and an important requirement for customers.

The company's operations and associate expertise align with the nine customer groups where the company predominantly serve trade customers. By differentiating between the customer types, Ferguson is able to provide bespoke services and better cater to specific requirements. Each group has its own set of competitors that range from large national companies, including trade sales by large home improvement chains, to small, privately owned distributors. In line with the Group’s strategy the business aims to strengthen its position in existing and adjacent markets through bolt-on acquisitions.



A wholesale distributor of plumbing, heating, ventilation and air conditioning, refrigeration, waterworks, fire protection, pipes, valves and fittings and industrial products.

Wolseley Canada predominantly serves trade customers across the residential, commercial and industrial sectors in both RMI and new construction. The business operates 209 branches with one distribution center. At the year-end Canada had approximately 3,000 associates.

Canada operates primarily under the Wolseley brand and supplies plumbing, heating, ventilation, air conditioning and refrigeration products to residential and commercial contractors. It also supplies specialist water and wastewater treatment products to residential, commercial and municipal contractors, and supplies PVF solutions to industrial customers.  Ferguson is one of the largest businesses serving the plumbing and heating customer group in Canada.


Financial Highlights

Revenue for the  year ended July 31, 2021, $22,792 million (2019/20 restated: $19,940 million) was 14.3 per cent higher than last year, 13.0 per cent higher on an organic basis with a further 1.5 per cent from acquisitions offset by 0.2 per cent from trading days and the impact of foreign exchange.3

Operating profit of $2,034 million (2019/20 restated: $1,449 million) was 40.4 per cent higher than last year as a result of the strong trading performance in both the USA and Canada and lower net exceptional charges.

Profit for the year attributable to shareholders increased to $1,508 million (2019/20: $961 million) as a result of the higher operating profit as mentioned above and lower tax charge partially offset by the discontinued exceptional loss on disposal.

Net exceptional charges in operating profit were $11 million in the year (2019/20 restated: $97 million), principally relating to costs associated with the Group’s listing in the USA partially offset by some small business restructuring provision releases.

Net finance costs were broadly in line with last year at $144 million (2019/20 restated: $140 million) including $44 million (2019/20 restated: $49 million) of interest costs on lease liabilities.

The Group incurred a tax charge of $241 million (2019/20 restated: $317 million) on profit before tax of $1,891 million (2019/20 restated: $1,292 million) resulting in an effective tax rate of 12.7 per cent (2019/20 restated: 24.5 per cent). The decrease in the effective tax rate is primarily due to a release of provisions against uncertain tax positions following the closure of tax audits and lapsing of statute of limitation periods. The adjusted tax charge is $496 million (2019/20 restated: $376 million) which equates to an adjusted effective tax rate of 24.4 per cent (2019/20 restated: 24.9 per cent) on the adjusted profit before tax, exceptional items, the amortization and impairment of acquired intangible assets and the impairment of interests in associates of $2,034 million (2019/20 restated: $1,512 million). The decrease in the effective tax rate was driven by a reduction of prior period adjustments and decreased non-deductible expenses, the impact of which was partially offset by the tax effect of an increase in pre-tax earnings.

Headline earnings per share increased 35.5 per cent from 508.0 cents to 688.1 cents. Basic earnings per share from continuing operations were 738.3 cents (2019/20 restated: 433.7 cents) and diluted earnings per share were 733.7 cents (2019/20 restated: 429.7 cents). Total basic earnings per share, including discontinued operations, were 674.7 cents (2019/20: 427.5 cents) and total diluted earnings per share were 670.5 cents (2019/20: 423.5 cents).

The Group’s continuing operations generated strong adjusted EBITDA of $2,266 million (2019/20 restated: $1,760 million) as a result of the strong trading performance in the USA and Canada. The Group adjusted EBITDA of $2,323 million (2019/20: $1,802 million) includes discontinued operations.

The Group has continued to generate good cash flows during the year with cash generated from operations of $2,093 million (2019/20: $2,252 million) resulting in a cash conversion ratio of cash generated from operations/Group adjusted EBITDA of 90 per cent (2019/20: 125 per cent). Cash generated from operations in the year includes the impact of IFRS 16 of $342 million (2019/20: $348 million). Without this, the cash conversion would have been 75 per cent (2019/20: 106 per cent). The lower cash conversion was a result of continued investment in inventory availability to service its customers during a time of industry supply chain disruption.

1Q FY22 Result

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.4

Gross margins of 31.3% were 170 basis points ahead of last year driven primarily by its ability to service customers while managing price inflation, enabled by the hard work of its sales associates and the strength of its supply chain. Operating expenses continued to be well controlled as the company focused on productivity and efficiencies while investing in its 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.


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 its 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. The company's nonresidential 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.

The company 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, the company acquired Safe Step California, an independent dealer licensed to sell and install its Safe Step products in California and Nevada, and RP Lighting & Fans, an own brand distributor based in Albuquerque, New Mexico.


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 the company completed $97 million of the $1 billion share buy back announced on September 28, 2021. Since the end of the quarter, Ferguson has purchased a further $126 million of the buy back program through December 3, 2021.

Kevin Murphy, Group Chief Executive, commented:

“The company's associates have continued to drive strong market share gains while navigating industry supply chain pressures, delivering particularly strong profit growth. Ferguson is pleased with earnings growth that significantly outpaced revenue growth to generate strong operating leverage, demonstrating the agility of its business model. The company's balance sheet remains strong as the company continue to invest in inventory availability to service its 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. The company continue to expect a tapering of growth in the second half on tougher prior year comparatives and the company 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 its business model, its full year expectations have increased.”


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Created by Asif Farooqui on 2022/02/21 17:16

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