Ferguson plc(US:FERG)2023-09-26 15:53Financial Data and Key Metrics Changes - Revenue for the year was $29.7 billion, representing a 4.1% increase compared to the previous year, building on a 25% growth in fiscal year 2022 [15] - Adjusted operating profit was $2.9 billion, down 1% year-over-year, with adjusted diluted earnings per share increasing by 1% [15][26] - Gross margin for the year was 30.4%, a decrease of 30 basis points from the previous year [25] Performance by Business Lines - Residential revenues, which accounted for over half of U.S. revenue, declined by 4% during the quarter [17] - The commercial mechanical customer group saw a 1% decline, while industrial, fire, fabrication, and facility supply businesses delivered a combined 6% growth [18] - HVAC segment grew by 4%, with a two-year stack of 22%, driven by the execution of the HVAC growth strategy [34] Market Data and Key Metrics Changes - U.S. organic revenue growth for non-residential markets was 7%, outperforming a modestly growing market [36] - Canadian segment net sales declined by 5.1%, with organic revenue down 2.7% against a strong prior year comparable [42] - The overall residential market is expected to decline in the mid to high-single-digit range, while non-residential markets are anticipated to be down in the low-single-digit range [56] Company Strategy and Industry Competition - The company is focused on investing in organic growth, consolidating fragmented markets through acquisitions, and maintaining a strong balance sheet [66] - The strategy includes expanding HVAC capabilities and enhancing Waterworks business to capture a larger market share [89] - The company aims to leverage its scale and multi-customer group proposition to capture growth from significant megaprojects over the medium term [51][65] Management's Comments on Operating Environment and Future Outlook - Management anticipates a broadly flat revenue environment for fiscal year 2024, with expectations of mid-single-digit declines in end markets [46][56] - The company is seeing structural tailwinds from megaproject construction spend over the next five years, supported by on-shoring activity and aging infrastructure [65] - Management expressed confidence in the business's ability to adapt to changing market conditions, highlighting a balanced business mix and flexible cost base [52] Other Important Information - The company returned $1.6 billion to shareholders through dividends and share buybacks during the year [33] - The adjusted operating margin for the year is expected to be between 9.2% to 9.8%, reflecting modest normalization driven by strong first-half comparables [63] Q&A Session Summary Question: What does organic growth look like quarter-to-date? - Management indicated that organic decline is similar to Q4, with expectations for continued pressure in the first half of the fiscal year [55] Question: Can you elaborate on the margin guidance? - The guidance implies a 30 basis point decline in operating margin, driven by strong first-half comparables and expected organic decline [57] Question: How is the pricing environment expected to evolve? - Management expects a broadly neutral pricing environment for the fiscal year, with some pressure on prices due to commodity dynamics [61][85] Question: What is the focus for capital deployment? - The company remains committed to investing for organic growth, sustaining dividends, and pursuing bolt-on M&A opportunities [125] Question: How does the company view the non-residential market outlook? - Management noted softness in traditional non-residential areas but highlighted increased bidding activity for megaprojects [93][104]