STRONG EXECUTION CONTINUES TO DRIVE PERFORMANCE
WOKINGHAM, UK / ACCESSWIRE / March 15, 2022 / Ferguson PLC (LSE:FERG)(NYSE:FERG):
Three months ended January 31, | ||||||
US$ (In millions, except per share amounts) | 2022 | 2021 | Change | |||
Reported(1) | Adjusted(2) | Reported(1) | Adjusted(2) | Reported | Adjusted | |
Net sales | 6,508 | 6,508 | 4,937 | 4,937 | +31.8% | +31.8% |
Gross margin | 30.6% | 30.6% | 30.4% | 30.4% | +20 bps | +20 bps |
Operating profit | 555 | 588 | 319 | 350 | +74.0% | +68.0% |
Operating margin | 8.5% | 9.0% | 6.5% | 7.1% | +200 bps | +190 bps |
Earnings per share - diluted | 1.97 | 1.93 | 1.23 | 1.10 | +60.2% | +75.5% |
Adjusted EBITDA | 648 | 391 | +65.7% | |||
Net debt(2) : Adjusted EBITDA | 0.8x | 0.6 | ||||
Second quarter highlights
- Strong sales growth as core strengths drove market share gains in supportive end markets.
- Price inflation increased to high teens driven largely by finished goods.
- Operating leverage led to particularly strong profit growth.
First half highlights
- Sales growth of 29.1% and robust operating leverage led to operating profit growth of 68.3% (adjusted 62.5%).
- Completed six acquisitions, four within Q2, with annualized revenues of approximately $235 million.
- Repurchased $417 million of the $1.0 billion share buy back program announced September 28, 2021.
Corporate highlights
- Interim dividend increased by 15% to $0.84 per share.
- Increasing share buy back program by $1.0 billion to $2.0 billion. Through March 11, 2022 we have completed $659 million leaving $1,341 million outstanding which we expect to complete over the next 12 months.
- Vote to enable a US primary listing approved on March 10, 2022, expected to take effect May 12, 2022.
Kevin Murphy, Group Chief Executive, commented:
"Our associates delivered another excellent performance with continued market share gains and strong price realization while navigating industry supply chain pressures. We are pleased with earnings growth that significantly outpaced revenue growth to generate another quarter of strong operating leverage. Our balance sheet is strong and we continue to return capital to shareholders through the ongoing share buy back program, which we are increasing by an additional $1.0 billion.
"Markets remain supportive and we anticipate solid revenue growth in the second half as we begin to lap tougher comparatives. We continue to be mindful that first half tailwinds on gross margin will likely moderate but we are confident in our full year expectations."
(1) The results are presented in accordance with U.S. GAAP on a continuing operations basis.
(2) The Company uses certain non-GAAP measures, which are not defined or specified under U.S. GAAP. See the section titled "Non-GAAP Reconciliations and Supplementary Information."
Six months ended January 31, | ||||||
US$ (In millions, except per share amounts) | 2022 | 2021 | Change | |||
Reported(1) | Adjusted(2) | Reported(1) | Adjusted(2) | Reported | Adjusted | |
Net sales | 13,311 | 13,311 | 10,309 | 10,309 | +29.1% | +29.1% |
Gross margin | 30.9% | 30.9% | 30.0% | 30.0% | +90 bps | +90 bps |
Operating profit | 1,294 | 1,355 | 769 | 834 | +68.3% | +62.5% |
Operating margin | 9.7% | 10.2% | 7.5% | 8.1% | +220 bps | +210 bps |
Earnings per share - diluted | 4.38 | 4.43 | 2.63 | 2.61 | +66.5% | +69.7% |
Adjusted EBITDA | 1,462 | 915 | +59.8% | |||
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 $6,508 million were 31.8% ahead of last year, 28.5% higher on an organic basis with 1.4% from acquisitions, 1.8% from an additional trading day and a further 0.1% from the impact of foreign exchange rates. Inflation in the second quarter was in the high teens.
Gross margins of 30.6% were 20 basis points ahead of last year driven primarily by our ability to service customers while managing price inflation, offset in part by changes in business mix. 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.
Reported operating profit was $555 million (adjusted operating profit: $588 million), 74.0% ahead of last year (adjusted operating profit growth: 68.0%) as strong revenue, gross margin expansion and good cost control led to strong operating leverage.
Reported earnings per share on a diluted basis was $1.97 (adjusted earnings per share - diluted: $1.93), an increase of 60.2% (adjusted earnings per share - diluted growth: 75.5%) 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.
First half
Net sales of $13,311 million were 29.1% ahead of last year, 26.4% higher on an organic basis with 1.6% from acquisitions, 0.9% from an additional trading day and a further 0.2% from the impact of foreign exchange rates. Inflation in the first half was in the mid teens.
Reported operating profit was $1,294 million (adjusted operating profit: $1,355 million), 68.3% ahead of last year (adjusted operating profit growth: 62.5%) as strong revenue, gross margin expansion and good cost control led to strong operating leverage.
USA - second quarter
The US business grew net sales by 32.6% which comprised 29.4% organic growth with 1.4% from acquisitions and a further 1.8% from an additional trading day. Price inflation was in the high teens during the second quarter.
Residential end markets, which comprise just over half of our US revenue, remained robust during the quarter. New residential housing starts and permits continued to grow, as did residential repair, maintenance and improvement ("RMI") which performed strongly. Overall, Ferguson's residential revenue grew by approximately 29% in the second quarter.
Non-residential end markets experienced strong growth as demand continued to lap weaker comparators. Our non-residential revenue grew by approximately 37% in the second quarter and leading non-residential economic indicators continue to look strong.
Adjusted operating profit of $576 million was 64.6% or $226 million ahead of last year.
We completed four acquisitions during the quarter including, 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. We also acquired Plumbers Supply Company of St. Louis, a distributor serving residential end markets in the Midwest, and Hot Water Products, Inc., a distributor of commercial water heaters and boilers in Wisconsin and Nebraska.
Canada - second quarter
Net sales grew by 18.7% with inflation in the high single digits. Organic revenue grew by 13.8% with 3.3% from two additional trading days and a further 1.6% due to the impact of foreign exchange rates. Both residential and non-residential end markets saw good growth and adjusted operating profit of $23 million grew by 76.9%, significantly outpacing revenue growth as a result of good operating leverage.
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SOURCE: Ferguson PLC