Ferguson Reports Third Quarter Results

Return to Volume Growth Driven by Continued Execution

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

Third quarter highlights

• Sales grew 2.4% driven by volume improvement despite continued deflation of approximately 2%.
• Operating margin of 8.6% (9.2% on an adjusted basis).
• Diluted earnings per share of $2.18 ($2.32 on an adjusted basis) grew by 33.7% over the prior year (up 5.5% on an adjusted basis).
• Operating cash flow of $1,507 million on a fiscal year to date basis.
• Declared quarterly dividend of $0.79, reflecting a 5% increase over the prior year.
• Completed three acquisitions during the quarter and two subsequent to the quarter. We have now made eight acquisitions on a fiscal year to date basis with aggregate annualized revenues of approximately $350 million.
• Share repurchases of $171 million during the quarter.
• Share repurchase program increased by an additional $1.0 billion.
• Balance sheet remains strong with net debt to adjusted EBITDA of 1.0x.

Kevin Murphy, Ferguson CEO, commented, “Our associates have remained focused on execution as we returned to revenue growth in the quarter. The year is progressing largely as expected and our volume growth supports our view of continued improvement through the remainder of the fiscal year. Our strong year-to-date cash flow and balance sheet position allow for continued investment in organic growth, sustainable dividend growth, consolidation of our fragmented markets through acquisitions and the continuation of our share repurchase program.

“Our fiscal 2024 financial guidance reflects continued volume growth and resilient gross margin despite the impact of continuing mild deflation expected for the remainder of the fiscal year. We remain well positioned to leverage multi-year tailwinds in both residential and non-residential end markets as we support the complex project needs of our specialist pro customers.”

Summary of financial results

Third quarter

Net sales of $7.3 billion were 2.4% ahead of last year. Organic revenue declined 0.9% which was offset by acquisition contributions of 1.7% and one additional sales day that contributed 1.6% to growth. Weakness in certain commodity related categories persisted, driving modest overall price deflation of approximately 2%. Consequently, volumes on an organic basis were up approximately 1%.

Gross margin of 30.5% was 50 basis points higher than last year driven by strong pricing execution from our associates. Operating expenses were appropriately managed against volume growth as we continued to focus on productivity initiatives and investment in core capabilities for future growth.

Reported operating profit was $625 million (8.6% operating margin), 25.8% ahead of last year. Adjusted operating profit of $674 million (9.2% adjusted operating margin) was 2.6% ahead of last year.

Reported diluted earnings per share was $2.18 (Q3 2023: $1.63), an increase of 33.7% compared to last year, and adjusted diluted earnings per share of $2.32 increased 5.5% due to the increase in adjusted operating profit and impact of share repurchases.

USA – third quarter

Net sales in the US business increased by 2.2%, with an organic revenue decline of 0.9% offset by a 1.5% contribution from acquisitions and 1.6% from one additional sales day.

Residential end markets, which comprise just over half of US revenue, remained muted but showed a slight sequential improvement from the second quarter. Overall, residential revenue grew by approximately 1% in the third quarter.

Non-residential end markets, representing just under half of US revenue, showed relative resilience with non-residential revenue growth of approximately 4% in the third quarter. Sales in commercial and civil/infrastructure end markets were solid, while industrial sales were slightly down against strong comparables. We continued to see good levels of bidding activity on large capital projects.

Adjusted operating profit of $685 million was 3.2% or $21 million ahead of last year.

We completed two acquisitions during the quarter, AVCO Supply, a leading distributor of boilers and water heaters in residential and commercial end markets in Philadelphia, and Safe Step Tubs of Minnesota, an independent dealer licensed to sell and install Safe Step products in the Midwest. Subsequent to the quarter end we acquired Southwest Geo-Solutions, a distributor of erosion control, containment, geotextile and geogrid products which expands our Waterworks footprint in the central and southwest regions. Additionally, we acquired GAR Engineering, a fire protection engineering service and design firm based out of North Carolina.

Canada – third quarter

Net sales grew by 6.7%, with an organic revenue decline of 0.6% offset by a 5.1% contribution from acquisitions and 2.2% from the combined impact of one additional sales day and the impact of foreign exchange rates. Markets have been similar to that of the United States and we have seen signs of stabilization. Adjusted operating profit of $6 million declined by $1 million compared to last year.

During 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 April 30, 2024 was 1.0x and during the quarter we completed share repurchases of $171 million. Taking into account the Company’s strong financial position, we have extended the share repurchase program by an additional $1.0 billion, resulting in a remaining outstanding balance of approximately $1.1 billion.

We declared a quarterly dividend of $0.79, reflecting a 5% increase over the prior year. The dividend will be paid on July 31, 2024 to shareholders on the register as of June 14, 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 May 30, 2024, we held a special meeting of shareholders in order that shareholders could vote on whether to proceed with establishing a new corporate structure to domicile Ferguson’s ultimate parent company in the United States, and on related governance matters. Of the shares voted, over 99% were in support of the transaction and 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.

For full third 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 www.corporate.ferguson.com or follow us on LinkedInlinkedin.com/company/ferguson-enterprises.

Contact:

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

Source: Ferguson plc