Ferguson plc Reports FY2024 First Quarter Results

Solid Performance with Full Year Guidance Unchanged

First Quarter Highlights

• Sales decline of 2.8%, against a 16.6% prior year growth comparable.
• Operating margin of 9.6% (10.0% on an adjusted basis) in the quarter.
• Diluted earnings per share of $2.54 ($2.65 on an adjusted basis).
• Operating cash flow of $557 million, an increase of $59 million over the prior year.
• Declared quarterly dividend of $0.79, reflecting a 5% increase over the prior year.
• Completed one acquisition during the quarter.
• Share repurchases of $108 million during the quarter with an outstanding balance of approximately $400 million remaining under the current share repurchase program at October 31, 2023.
• Balance sheet remains strong with net debt to adjusted EBITDA of 1.0x. 

FY2024 Guidance (unchanged)

Total Company	2024 Guidance
Net sales*	Broadly flat
Adjusted operating margin**	9.2% – 9.8%
Interest expense	$190 – $210 million
Adjusted effective tax rate**	Approximately 25%
Capital expenditures	$400 – $450 million
* Net sales guidance assumes mid-single digit market decline with continued Company market outperformance, contribution from completed acquisitions and one additional sales day. Overall impact of price inflation estimated to be broadly neutral for the year.
** The Company does not reconcile forward-looking non-GAAP measures. See “Non-GAAP Reconciliations and Supplementary information”.

Kevin Murphy, Ferguson CEO, commented, “The year has started in line with our expectations. I would like to thank our associates for their strong execution in delivering solid results with continued market outperformance against a challenging backdrop. Our cash generative model and strong balance sheet allow us to invest for organic growth, sustainably grow our dividend, consolidate our fragmented markets through acquisitions and return capital to shareholders.

“Our FY2024 financial guidance is unchanged and our balanced end market exposure positions us well to leverage emerging multi-year structural tailwinds such as non-residential megaprojects. We remain confident in the strength of our markets over the medium and longer term and expect to capitalize on attractive growth opportunities.”

Summary of Financial Results

First quarter

Net sales of $7.7 billion were 2.8% below last year against a strong prior year comparable. Organic revenue declined 4.9% with foreign exchange rates having a 0.1% adverse impact, both of which were partially offset by acquisition contributions of 2.2%. The Company’s decrease in net sales was principally driven by a decline in residential, partially offset by growth in non-residential sales compared to the prior year period. As expected, weakness in certain commodity categories drove modest overall price deflation of approximately 2% as we lapped strong inflation comparables.

Gross margin of 30.2% was 30 basis points lower than last year, impacted by certain commodity categories. Operating expenses were diligently managed and we remain focused on driving productivity and efficiencies while investing in core capabilities for future growth.

Reported operating profit was $739 million (9.6% operating margin), 11.1% lower than last year. Adjusted operating profit of $773 million (10.0% adjusted operating margin) was 10.5% lower than last year.

Reported diluted earnings per share was $2.54 (Q1 2023: $2.84), a decrease of 10.6%, and adjusted diluted earnings per share of $2.65 decreased 10.2% due to lower adjusted operating profit, partially offset by the impact of share repurchases.

USA – first quarter

Net sales in the US business declined 2.7%, with an organic revenue decline of 5.0% partially offset by a 2.3% contribution from acquisitions.

Residential end markets, which comprise just over half of US revenue, remained subdued. New residential housing start and permit activity was relatively stable on a sequential basis but remains below prior year levels, while repair, maintenance and improvement (“RMI”) work continued to show greater resilience. Overall, residential revenue declined by approximately 7% in the first quarter.

Non-residential end markets, representing just under half of US revenue, showed sequential stability with non-residential revenues growing by approximately 2% in the first quarter. Commercial and Industrial activity held up well in the quarter and we have continued to see good levels of megaproject related bid activity.

Adjusted operating profit of $766 million was 9.3% or $79 million behind last year.

We completed one acquisition during the quarter, SecureVision of America, Inc., a waterworks metering distributor serving customers in Dallas, Austin, San Antonio and Western Texas.

Canada – first quarter

Net sales compressed by 5.0%, with an organic revenue decline of 3.3% and a 1.7% adverse impact from foreign exchange rates. Non-residential end markets have been more resilient than residential end markets. Adjusted operating profit of $23 million declined by $10 million compared to last year.

Financial Position

Net debt to adjusted EBITDA at October 31, 2023 was 1.0x and during the quarter we completed share repurchases of $0.1 billion.

We declared a quarterly dividend of $0.79, reflecting a 5% increase over the prior year. The dividend will be paid on February 6, 2024 to shareholders on the register as of December 15, 2023.

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

Evaluation of Domiciling the Group’s Ultimate Parent Company in the United States

Since 2019, the Company’s Board of Directors (the “Board”) has considered North America to be the natural long-term location for Ferguson and has worked methodically and transparently with shareholders on this transformative journey, creating an additional listing on the NYSE in 2021, and then moving the Company’s primary listing from London to New York in 2022. During this period, a significant majority of our shareholding base has become American, and the Company achieved U.S. domestic status under Securities and Exchange Commission (“SEC”) rules as of August 1, 2023.

The Board is now evaluating the best manner and timing for the Company to take the next step on this journey, domiciling the Group’s ultimate parent company in the United States, which would fully align the Company’s headquarters and governance with its operations and leadership.

The associated corporate steps needed to achieve this outcome are being assessed, and the Company will further advise shareholders of the Board’s recommended way forward in due course.

For the complete press release, 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 LinkedIn https://www.linkedin.com/company/ferguson-enterprises.

Source: Ferguson plc