Ferguson announced its interim financial results for the first quarter of fiscal year 2022. 

Some highlights are:

• Supportive end markets and continued market share gains drove substantial sales growth;
• Price inflation increased to low teens in the quarter;
• Ability to manage price inflation along with good cost control generated particularly strong profit growth;
• Completed four acquisitions since the start of the fiscal year with annualized revenues of $125 million; and
• Completed $97 million of the $1 billion share buy back program.

Kevin Murphy, group chief executive, commented, “Our associates have continued to drive strong market share gains while navigating industry supply chain pressures, delivering particularly strong profit growth. We are pleased with earnings growth that significantly outpaced revenue growth to generate strong operating leverage, demonstrating the agility of our business model. Our balance sheet remains strong as we continue to invest in inventory availability to service our customers and return capital to shareholders through the ongoing share buy back program," he said. “Since the start of the second quarter, Ferguson has generated revenue growth similar to that of Q1 2022. We continue to expect a tapering of growth in the second half on tougher prior year comparatives and we 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 our business model, our full year expectations have increased.”

Summary of financial results

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.

Gross margins of 31.3% were 170 basis points ahead of last year driven primarily by our ability to service customers while managing price inflation, enabled by the hard work of our sales associates and the strength of our supply chain. 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 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.

Financial position and corporate updates

Net debt at October 31, 2021 was $1,442 million and during the quarter we completed $97 million of the $1 billion share buy back announced on September 28, 2021. Since the end of the quarter, we have purchased a further $126 million of the buy back program through December 3, 2021.

Following shareholder approval at the Annual General Meeting, the final dividend of 166.5 cents per share, amounting to approximately $368 million, will be paid to shareholders on December 10, 2021.

The shareholder vote on U.S. primary listing remains on track for Spring 2022.

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

Outlook

Since the start of the second quarter, Ferguson has generated revenue growth similar to that of Q1 2022. The company continues to expect a tapering of growth in the second half on tougher prior year comparatives and remains 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 our business model, Ferguson's full year expectations have increased.