Important Notice This Offering Is Available Only

IMPORTANT NOTICE THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIED INSTITUTIONAL BUYERS (‘‘QIBs’’) WITHIN THE MEANING OF RULE 144A (‘‘RULE 144A’’) UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR (2) NON-U.S. PERSONS PURCHASING THE SECURITIES OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S (‘‘REGULATION S’’) UNDER THE SECURITIES ACT. IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the offering memorandum following this notice and you are therefore advised to read this disclaimer page carefully before reading, accessing or making any other use of the offering memorandum. In accessing the offering memorandum, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access. The offering memorandum has been prepared in connection with the proposed offer and sale of the Notes described herein. The offering memorandum should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER FOR SALE OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION, AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT TO QIBs IN ACCORDANCE WITH RULE 144A. THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORIZED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE NOTES DESCRIBED HEREIN. Confirmation of your representation. In order to be eligible to view the offering memorandum or make an investment decision with respect to the securities, investors must be either (1) QIBs or (2) non-U.S. persons (within the meaning of Regulation S under the Securities Act) purchasing the securities outside the United States in reliance on Regulation S. By accepting the email and accessing the offering memorandum, you shall be deemed to have represented to us that: (1) you consent to delivery of such offering memorandum by electronic transmission, and (2) either: (a) you and any customers you represent are QIBs; or (b) you are outside the United States and not a U.S. person as defined in Regulation S, and not acting on behalf of a person in the United States or a U.S. person and, to the extent you purchase the securities described in the attached offering memorandum, you will be doing so pursuant to Regulation S. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the initial purchasers or any affiliate of the initial purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the initial purchasers or such affiliate on behalf of us in such jurisdiction. The offering memorandum has not been approved by an authorized person in the United Kingdom and is for distribution only to persons who are (i) outside the United Kingdom (ii) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘‘Financial Promotion Order’’), (iii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Promotion Order or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) in connection with the issue or sale of any Notes may otherwise lawfully be communicated or caused to be communicated pursuant to the Financial Promotion Order (all such persons together being referred to as ‘‘relevant persons’’). The offering memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which the offering memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. No person may communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of the securities other than in circumstances in which Section 21(1) of the FSMA does not apply to us. The offering memorandum has been sent to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission, and consequently none of the initial purchasers, or any person who controls any of the initial purchasers, Ferguson Finance plc, Ferguson plc, Wolseley Limited, or any of their respective directors, officers, employees or agents accepts any liability or responsibility whatsoever in respect of any difference between the offering memorandum distributed to you in electronic format and the hard copy version available to you on request from the initial purchasers. This transmission is personal to you and must not be forwarded. You are reminded that you have accessed the following offering memorandum on the basis that you are a person into whose possession this offering memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorized to deliver this offering memorandum, electronically or otherwise, to any other person, or to disclose any of its contents, whether orally or in writing, to any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the securities described therein. Actions that you may not take. You should not reply by email to this announcement, and you may not purchase any securities by doing so. Any reply email communications, including those you generate by using the ‘‘Reply’’ function on your email software, will be ignored or rejected. You are responsible for protecting against viruses and other destructive items. Your use of this email is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. PRIIPs / IMPORTANT—EEA/U.K. RETAIL INVESTORS The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (‘‘EEA’’) or the United Kingdom (‘‘U.K.’’). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, ‘‘MiFID II’’) or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the ‘‘Insurance Distribution Directive’’), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the ‘‘Prospectus Regulation’’). Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the ‘‘PRIIPs Regulation’’) for offering or selling the Notes or otherwise making them available to retail investors in the EEA or the U.K. has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA or the U.K. may be unlawful under the PRIIPs Regulation. OFFERING MEMORANDUM NOT FOR GENERAL CIRCULATION IN THE UNITED STATES

9OCT201809444170 Ferguson Finance plc U.S.$600,000,000 3.250% Notes due 2030 Guaranteed by Ferguson plc and Wolseley Limited

Ferguson Finance plc (the ‘‘Issuer’’) is offering U.S.$600 million of its 3.250% Notes due 2030 (the ‘‘Notes’’) with such Notes to be guaranteed (the ‘‘Guarantees’’) by each of Ferguson plc (the ‘‘Company’’, ‘‘Parent Guarantor’’ or ‘‘Ferguson’’ and, together with the Company’s subsidiaries, the ‘‘Group’’) and Wolseley Limited (the ‘‘Subsidiary Guarantor’’ and, together with the Parent Guarantor, the ‘‘Guarantors’’). Interest will be paid on the Notes semi-annually on December 2 and June 2 of each year, commencing on December 2, 2020. The Notes will mature on June 2, 2030. The Notes will constitute direct, unsubordinated and unsecured senior obligations of the Issuer and rank pari passu and ratably without any preference or priority among themselves and equally with all other existing and future unsecured and unsubordinated obligations of the Issuer from time to time outstanding (subject to certain obligations required to be preferred by law). The Guarantees will constitute a direct, unsubordinated and unsecured senior obligation of each Guarantor and rank equally with all other existing and future unsecured and unsubordinated obligations of the Guarantors from time to time outstanding (subject to certain obligations required to be preferred by law). The Issuer has the option to redeem all or a portion of the Notes at any time at the redemption prices set forth in this offering memorandum (the ‘‘Offering Memorandum’’), including at 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest upon redemption on or after March 2, 2030. The Notes will be issued in fully registered form and only in denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. For a more detailed description of the Notes, see ‘‘Description of the Notes and the Guarantees’’ beginning on page 109. An investment in the Notes involves risks. For a discussion of these risks, see ‘‘Risk Factors’’ beginning on page 24.

Offering Price for the Notes: 99.552% plus accrued interest, if any, from June 2, 2020

Application has been made to the Irish Stock Exchange plc trading as Euronext Dublin (‘‘Euronext Dublin’’) for the approval of this Offering Memorandum as listing particulars (‘‘Listing Particulars’’) and for the Notes to be admitted to the Official List of Euronext Dublin (the ‘‘Official List’’) and to trading on the Global Exchange Market of Euronext Dublin (the ‘‘Global Exchange Market’’). This Offering Memorandum comprises a Listing Particulars for the purposes of this listing application and has been approved by Euronext Dublin. The Global Exchange Market is not a regulated market for the purposes of Directive 2014/65/EU (‘‘MiFID II’’) or Directive 2004/39/EC (the ‘‘Directive on Markets in Financial Instruments’’). Neither the Notes nor the Guarantees have been recommended by the United States Securities and Exchange Commission (the ‘‘SEC’’) or any other U.S. federal or state securities commission or regulatory authority nor have such authorities confirmed the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense in the United States. The Notes and the Guarantees have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or any securities laws of any other jurisdiction. Accordingly, the Notes are being offered and sold in the United States only to qualified institutional buyers (‘‘QIBs’’) in accordance with Rule 144A under the Securities Act (‘‘Rule 144A’’) and outside the United States to certain non-U.S. persons in accordance with Regulation S under the Securities Act (‘‘Regulation S’’). Prospective purchasers that are QIBs are hereby notified that the seller of the Notes and the related Guarantees may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For further details about eligible offerees and transfer restrictions, see ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’.

Barclays Capital Inc., BofA Securities, Inc., BNP Paribas Securities Corp., J.P. Morgan Securities LLC, RBC Capital Markets, LLC and SMBC Nikko Securities America, Inc. (collectively, the ‘‘Joint Bookrunners’’ or the ‘‘Initial Purchasers’’) expect to deliver the Notes to purchasers on or about June 2, 2020 through the facilities of The Depository Trust Company (‘‘DTC’’), including through its participants Euroclear Bank S.A./N.V. (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’).

Joint Bookrunners Barclays BofA Securities BNP PARIBAS J.P. Morgan RBC Capital Markets SMBC Nikko

The date of this Offering Memorandum is June 2, 2020 TABLE OF CONTENTS

Page Important Information ...... ii Notice to Prospective Investors in the United States ...... iii Notice to Investors in the European Economic Area and the United Kingdom ...... iii Prohibition on Circulation in Jersey ...... iv Service of Process and Enforceability of Certain Civil Liabilities ...... iv Available Information ...... v Forward-Looking Statements ...... vi Presentation of Financial, Market and Other Information ...... 1 Overview ...... 9 Risk Factors ...... 24 Capitalization ...... 40 Use of Proceeds ...... 41 Selected Financial Information ...... 42 Operating and Financial Review ...... 61 Description of the Group and Its Business ...... 91 Directors and Senior Management ...... 108 Related-Party Transactions ...... 111 Description of the Notes and the Guarantees ...... 112 Book-Entry Settlement and Clearance ...... 129 Certain United Kingdom Tax Considerations ...... 131 Certain U.S. Federal Tax Considerations ...... 133 Plan of Distribution ...... 135 Transfer Restrictions ...... 140 General Information ...... 143 Legal Matters ...... 146 Independent Auditors ...... 147 Index to Financial Statements ...... F-1

i IMPORTANT INFORMATION This Offering Memorandum has been prepared by the Company and the Issuer solely for use in connection with the Offering of the Notes described in this Offering Memorandum, and you are authorized to use this Offering Memorandum solely for the purpose of considering an investment in the Notes and the Guarantee. You should not assume that the information contained in this Offering Memorandum is accurate as at any date other than the date on the front of this Offering Memorandum. This Offering Memorandum is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire the Notes. Distribution of this Offering Memorandum to any other person other than the prospective investor and any person retained to advise such prospective investor with respect to its purchase is unauthorized, and any disclosure of any of its contents, without the Company’s and the Issuer’s prior written consent, is prohibited. Each prospective investor, by accepting delivery of this Offering Memorandum, agrees to the foregoing and to make no copies of this Offering Memorandum or any documents referred to in this Offering Memorandum. The Initial Purchasers and their respective affiliates make no representation or warranty, express or implied, as to the accuracy, completeness or verification of the information contained in this Offering Memorandum. Nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise or representation by the Initial Purchasers in this respect, whether as to the past or future. The Company, Subsidiary Guarantor and the Issuer have furnished the information contained in this Offering Memorandum. The Initial Purchasers assume no responsibility for the accuracy, completeness or verification of any such information and accordingly, disclaim to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this Offering Memorandum or any such information. In making an investment decision, prospective investors must rely on their own examination of the Company, the Subsidiary Guarantor, the Issuer and their subsidiaries and the terms of the offering described in this Offering Memorandum (the ‘‘Offering’’), including the merits and risks involved. Prospective investors should not construe anything in this Offering Memorandum as legal, business or tax advice. Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase the Notes under applicable legal investment or similar laws or regulations. The laws of certain jurisdictions may restrict the distribution of this Offering Memorandum and the offer and sale of the Notes. Persons into whose possession this Offering Memorandum or any of the Notes come must inform themselves about, and observe, any such restrictions. This Offering Memorandum does not constitute an offer or an invitation to purchase any of the Notes in any jurisdiction in which such offer or sale would be unlawful. None of the Company, the Subsidiary Guarantor, the Issuer, the Initial Purchasers or their respective affiliates or representatives are making any representation to any offeree or any purchaser of the Notes regarding the legality of any investment in the Notes by such offeree or purchaser under applicable legal investment or similar laws or regulations. Investors also acknowledge that they have not relied, and will not rely, on the Initial Purchasers in connection with their investigation of the accuracy of any information or their decision whether to invest in the Notes. The Initial Purchasers reserve the right to withdraw this Offering of Notes at any time and to reject any commitment to subscribe for the Notes, in whole or in part. The Initial Purchasers also reserve the right to allot less than the full amount of the Notes sought by a prospective investor. The Initial Purchasers and certain related entities may acquire a portion of the Notes for their own account. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws pursuant to registration or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. Please refer to the sections in this Offering Memorandum entitled ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’. This Offering Memorandum contains summaries of certain documents. Investors should make reference to the actual documents for complete information. Copies of certain documents referred to herein will be made available to prospective investors upon request to the Company, the Initial Purchasers or the Trustee.

ii STABILIZATION In connection with the issuance of the Notes, BofA Securities, Inc. (the ‘‘Stabilization Manager’’) (or persons acting on behalf of the Stabilization Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, stabilization may not necessarily occur. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the Issue Date of the Notes (as defined herein) and 60 days after the date of the allotment of the Notes. Any stabilization action or over-allotment must be conducted by the Stabilization Manager (or persons acting on behalf of the Stabilization Manager) in accordance with all applicable laws and rules.

NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES This Offering is being made in reliance upon an exemption from registration under the Securities Act for offers and sales of securities that do not involve a public offering. By purchasing the Notes, investors are deemed to have made the acknowledgements, representations, warranties and agreements set forth under ‘‘Plan of Distribution—Selling Restrictions’’. The Notes and the Guarantees have not been, and will not be, registered with, or recommended or approved by, the SEC or any other U.S. federal or state or foreign securities commission or regulatory authority, nor has any such commission or regulatory authority reviewed or passed upon the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and the applicable state securities laws pursuant to registration or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. See ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’.

NOTICE TO INVESTORS IN THE EUROPEAN ECONOMIC AREA AND THE UNITED KINGDOM This Offering Memorandum has been prepared on the basis that all offers and sales of the Notes will be made only in circumstances where there is an exemption from the obligation under the Prospectus Regulation to produce and/or publish a prospectus. As a result, any offer of Notes in any Member State of the European Economic Area (‘‘EEA’’) or the United Kingdom (‘‘U.K.’’) (each, a ‘‘Relevant State’’) must be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of Notes. Accordingly, any person making or intending to make any offer of Notes in that Relevant State may only do so in circumstances in which no obligation arises for the Issuer or any of the Initial Purchasers to produce and/or publish a prospectus pursuant to the Prospectus Regulation, including Article 3 thereof, or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, in each case, in relation to such offer. Neither the Issuer nor any of the Initial Purchasers have authorized, nor do they authorize, the making of any offer of the Notes in circumstances in which an obligation arises for the Issuer or any of the Initial Purchasers to produce and/or publish or supplement a prospectus for such offer. For the purposes of the above, the expression ‘‘Prospectus Regulation’’ means Regulation (EU) 2017/1129.

PROHIBITION OF SALES TO RETAIL INVESTORS IN THE EUROPEAN ECONOMIC AREA AND THE UNITED KINGDOM The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA or the U.K. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the ‘‘Insurance Distribution Directive’’), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the ‘‘PRIIPs Regulation’’) for offering or selling the Notes or otherwise making them available to retail investors in the EEA or the U.K. has been prepared and therefore offering or selling Notes or otherwise making them available to any retail investor in the EEA or the U.K. may be unlawful under the PRIIPs Regulation.

iii SINGAPORE SFA PRODUCT CLASSIFICATION In connection with Section 309B of the Securities and Futures Act (Chapter 289) of Singapore (the ‘‘SFA’’) and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the ‘‘CMP Regulations 2018’’), the Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309(A)(1) of the SFA), that the Notes are ‘prescribed capital markets products’ (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

PROHIBITION ON CIRCULATION IN JERSEY This Offering Memorandum shall not be circulated or otherwise made available in Jersey. The consent of the Jersey Financial Services Commission pursuant to Article 8 of the Control of Borrowing (Jersey) Order 1958, as amended, (‘‘COBO’’) to the circulation of this Offering Memorandum in Jersey has not been obtained and therefore circulating or otherwise making this Offering Memorandum available in Jersey may be unlawful pursuant to COBO and the Control of Borrowing (Jersey) Law 1947, as amended.

SERVICE OF PROCESS AND ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES The Company is a public limited company registered in Jersey; the Subsidiary Guarantor is a private limited company organized under the laws of England and Wales; and the Issuer is a public limited company registered in England and Wales. A majority of the directors of the Company, the Subsidiary Guarantor and the Issuer are not residents of the United States and a portion of the assets of the Company, the Subsidiary Guarantor and Issuer and their respective directors and officers are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons with respect to matters arising under the Securities Act or to enforce against them judgments of courts of the United States predicated upon civil liability under the Securities Act. Original actions, or actions for the enforcement of judgements of United States courts, relating to the civil liability provisions of the federal or state securities laws of the United States are not directly enforceable in Jersey or in England and Wales. The United States and Jersey and the United States and England and Wales currently do not have treaties providing for reciprocal recognition and enforcement of judgments, other than arbitration awards in civil and commercial matters. A final and conclusive judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon U.S. federal securities laws, would not automatically be recognized or enforceable in Jersey or in England and Wales. However, such U.S. judgment could be enforced subject to compliance with Jersey or English and Welsh procedures and provided that all Jersey law or English and Welsh law requirements for enforcement of foreign court awards are complied with. We have been advised by our Jersey counsel, Carey Olsen Jersey LLP, that, subject to the principles of private international law as applied by Jersey law, by which, for example, foreign judgments may be impeachable, if a final and conclusive judgment under which a debt or a definite sum of money is payable (excluding sums payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty or multiple damages) were obtained against the Company or its directors or officers in any United States court having jurisdiction against the relevant party in respect of the relevant matter(s), (a) the courts of Jersey would, on an application properly made, recognize such judgment and give a judgment for liquidated damages in the amount of such judgment without reconsidering its merits and (b) such judgment of the courts of Jersey would thereafter be enforceable. A judgment of a United States court will generally not be impeached by the courts of Jersey unless the relevant United States court did not have jurisdiction to give the judgment, where it was obtained by fraud, where the recognition or enforcement of the judgment is contrary to public policy in Jersey or where the proceedings in which the judgment was obtained were opposed to natural justice. Certain defendants may qualify for protection under Protection of Trading Interests Act 1980, an act of the United Kingdom extended to Jersey and amended by the Protection of Trading Interests Act 1980 (Jersey) Order, 1983, or the ‘‘PTI Act’’. The PTI Act provides that no court in England and Wales or Jersey shall entertain proceedings at common law against a qualifying defendant (i) for multiple damages, in excess of that required for actual compensation, (ii) based on a provision or rule of law specified or described in an

iv order made under the relevant section of the PTI Act (Carey Olsen Jersey LLP have confirmed that, as of the date of this Offering Memorandum, they are not aware of any rule of law that has been so specified or described) or (iii) on a claim for contribution in respect of damages awarded by a judgment falling within (i) or (ii) above. A ‘‘qualifying defendant’’ for the purposes of the PTI Act is a citizen of the United Kingdom and Colonies, a corporation or other body corporate organized under the laws of the United Kingdom, Jersey or other territory for whose international relations the United Kingdom is responsible or a person carrying on business in Jersey. Investors may also have difficulties pursuing an original action brought in a court in a jurisdiction outside the Unites States for liabilities under U.S. securities laws. The Notes and the Guarantees thereof are governed by the laws of the State of New York. Each of the Company, the Subsidiary Guarantor and the Issuer has expressly submitted to the non-exclusive jurisdiction of the courts of the State of New York and U.S. federal courts sitting in New York City for the purpose of any suit, action or proceeding arising out of the Notes and has appointed Corporate Creations Network Inc. at 15 North Mill Street, Nyack, New York, 10960, United States as its agent to accept service of process in any such action.

AVAILABLE INFORMATION None of the Company, the Subsidiary Guarantor or the Issuer is currently subject to the periodic reporting and other information requirements of the U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). While any Notes remain outstanding, the Company will make available, upon request, to any holder and any prospective purchaser of Notes, the information required pursuant to Rule 144A(d)(4) under the Securities Act in order to permit resales under Rule 144A, if, at the time of such request, the Company is neither a reporting company pursuant to the Exchange Act nor exempt from reporting under the Exchange Act pursuant to Rule 12g3-2(b) thereunder. As of the date of this Offering Memorandum, the Company is exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Any such request may be made at Ferguson Finance plc, 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire RG41 5TS, England.

v FORWARD-LOOKING STATEMENTS This Offering Memorandum includes ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements, including without limitation those concerning our expectations for future operating and financial performance; growth prospects and outlook of our operations, individually or in the aggregate; economic outlook; financial condition including as a result of impairments; expectations regarding exchange rates, interest rates, commodity prices, orders, and other operating results; likelihood of retaining, renewing or obtaining leases and other approvals or concluding joint ventures or other agreements and the risk of unfavorable changes to, interpretations of and/or application or enforcement of the tax laws and regulations in the countries in which we operate; the completion of acquisitions and dispositions and expected related expenditure; our liquidity and capital resources and expenditure; the outcome and consequences of any pending litigation, regulatory or similar proceedings; and our ability to maintain or improve our competitive position. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events and generally may be identified by the use of forward- looking words or phrases such as ‘‘believe’’, ‘‘aim’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘intend’’, ‘‘foresee’’, ‘‘forecast’’, ‘‘likely’’, ‘‘should’’, ‘‘planned’’, ‘‘may’’, ‘‘estimated’’, ‘‘potential’’, ‘‘projected’’, ‘‘will’’, ‘‘continue’’ or other similar words and phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The risk factors described in this Offering Memorandum under ‘‘Risk Factors’’ could affect our future results, causing these results to differ materially from those expressed in any forward-looking statements. These factors are not necessarily all the important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements but include the following: • weakness in the economy, market trends, uncertainty and other conditions in the markets, for example caused by the COVID-19 virus outbreak, potential tariffs or a global trade war; • decreased demand for our products as a result of operating in highly competitive industries and the impact of declines in the residential and non-residential repair, maintenance and improvement markets as well as the new construction market; • failure to rapidly identify or effectively respond to consumer wants, expectations or trends; • fluctuations in foreign currency and inflation, fluctuating commodity prices, unexpected product shortages as well as ineffectiveness of or disruption to our domestic or international supply chain or the fulfillment network; • inherent risks associated with acquisitions, partnerships, joint ventures, demergers and other business combination or strategic transactions and unsuccessful execution of our operational strategies; • a failure of a key information technology system or process as well as exposure to fraud or theft resulting from payment-related risks; • regulatory, product liability and reputational risks and the failure to achieve and maintain a high level of product quality as a result of our suppliers’ or manufacturers’ mistakes or inefficiencies; • exposure of associates, contractors, customers, suppliers and other individuals to health and safety risks; • legal proceedings as well as failure to comply with domestic and foreign laws and regulations or the occurrence of unforeseen developments such as litigation; • failure to attract, retain and motivate key associates; • privacy and protection of user data failures; • changes in, or interpretations of, United States, United Kingdom or Canadian tax laws;

vi • inability to renew leases on favorable terms or at all as well as any obligation under the applicable lease; • funding risks related to our defined benefit pension schemes; • our indebtedness and changes in our credit ratings and outlook; and • changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters and uncertainty caused by the COVID-19 virus outbreak. You should review carefully all information, including the financial statements and the notes to the financial statements, which are included in this Offering Memorandum. All forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. You should not place undue reliance on forward-looking statements. The forward-looking statements included in this Offering Memorandum are made only as of the last practicable date prior to the date hereof. Neither we nor the Initial Purchasers undertake any obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Offering Memorandum or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section.

vii PRESENTATION OF FINANCIAL, MARKET AND OTHER INFORMATION In this Offering Memorandum, references to ‘‘Ferguson’’, ‘‘Group’’, ‘‘we’’, ‘‘us’’ and ‘‘our’’ each refer to Ferguson plc and its subsidiaries. References to the ‘‘Company’’ and the ‘‘Parent Guarantor’’ are to Ferguson plc. References to the ‘‘Issuer’’ are to Ferguson Finance plc.

General The financial information in this Offering Memorandum principally comprises the consolidated financial information for the Group. The unaudited condensed consolidated interim financial information of the Group as at and for the six months ended January 31, 2020 (the ‘‘2020 Interim Consolidated Financial Statements’’) has been prepared in accordance with International Accounting Standard 34 ‘‘Interim Financial Reporting’’ as adopted by the European Union which have been reviewed in accordance with ISRE 2410 (as defined below) and are included in this Offering Memorandum together with the related independent auditor’s review report. The 2020 Interim Consolidated Financial Statements include comparative financial information for the six months ended January 31, 2019 (the ‘‘2019 Interim Consolidated Financial Statements’’). The consolidated financial statements of the Group and the notes as at and for the financial year ended July 31, 2019 (the ‘‘2019 Consolidated Financial Statements’’) have been audited and are included in this Offering Memorandum together with the related independent auditor’s report. The 2019 Consolidated Financial Statements include comparative financial information as at and for the financial year ended July 31, 2018. The 2018 consolidated financial statements of the Group as at and for the financial year ended July 31, 2018 (the ‘‘2018 Consolidated Financial Statements’’) have been audited and are included in this Offering Memorandum together with the related independent auditor’s report. The 2018 Consolidated Financial Statements include comparative financial information as at and for the financial year ended July 31, 2017. The 2019 Consolidated Financial Statements and 2018 Consolidated Financial Statements are collectively referred to as the ‘‘Annual Consolidated Financial Statements’’, and together with the 2020 Interim Consolidated Financial Statements, the ‘‘Consolidated Financial Statements’’. The consolidated financial information of the Group as at and for the six months ended January 31, 2020 and 2019 included in this Offering Memorandum has, unless otherwise indicated, been derived from the 2020 Interim Consolidated Financial Statements. The consolidated financial information of the Group as at and for the financial year ended July 31, 2019 included in this Offering Memorandum has, unless otherwise indicated, been derived from the 2019 Consolidated Financial Statements. The consolidated financial information of the Group as at and for the financial years ended July 31, 2018 and 2017 included in this Offering Memorandum has been derived from the 2018 Consolidated Financial Statements. Deloitte LLP (the ‘‘Auditors’’) is registered to carry out audit work in the United Kingdom and Ireland by the Institute of Chartered Accountants in England and Wales. Its business address is 1 New Street Square, London, EC4A 3HQ, United Kingdom. Unless otherwise indicated, the Consolidated Financial Statements have been prepared on the basis of International Financial Reporting Standards issued by the International Accounting Standards Board (‘‘IASB’’) as adopted for use in the European Union (‘‘EU IFRS’’) effective for the relevant periods. As used in this Offering Memorandum in connection with the Consolidated Financial Statements of the Group, ‘‘reported’’ means reported in accordance with EU IFRS. The 2020 Interim Consolidated Financial Statements, the 2019 Interim Consolidated Financial Statements, the 2019 Consolidated Financial Statements and the 2018 Consolidated Financial Statements are presented in U.S. dollars which is the Company’s functional currency as of August 1, 2017. In this Offering Memorandum, ‘‘HYE2020’’ refers to the six months ended January 31, 2020, ‘‘HYE2019’’ refers to the six months ended January 31, 2019, ‘‘FYE2019’’ refers to the financial year ended July 31, 2019, ‘‘FYE2018’’ refers to the financial year ended July 31, 2018, and ‘‘FYE2017’’ refers to the financial year ended July 31, 2017. The Group currently operates in three geographic regions, the United States, the United Kingdom and Canada, each of which is an operating segment for financial reporting purposes. The Group disposed of Wasco Holding B.V. (its Netherlands B2B business) (‘‘Wasco’’), which was the last of its Central European business, on January 30, 2019. Until January 31, 2019, the ‘‘Canada’’ operating segment was combined with the ‘‘Central Europe’’ operating segment and was disclosed as ‘‘Canada and Central Europe’’ as

1 individually they did not meet the reportable segments quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’. Unless otherwise indicated in this Offering Memorandum, these combined operating segments are referred to as ‘‘Canada’’. Some financial and other information in this Offering Memorandum has been rounded and, as a result, the figures shown as totals in this Offering Memorandum may vary slightly from the exact arithmetic aggregation of the figures that precede them. For more information on the basis of consolidation of the Group, see Note 1 to the Annual Consolidated Financial Statements.

Subsequent Events The impact of the COVID-19 virus outbreak on Ferguson is considered a non-adjusting post-balance sheet event, and is therefore not reflected in the 2020 Interim Consolidated Financial Statements, and may have a material adverse effect on Ferguson’s business, financial condition and results of operations. For further information on the impact of COVID-19, see ‘‘Risk Factors—Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Adoption of IFRS 16 On August 1, 2019, the Group adopted IFRS 16 ‘‘Leases’’ (‘‘IFRS 16’’). The standard makes changes to the treatment of leases in the Group’s financial statements, requiring the use of a single model to recognize a lease liability and a right of use asset for all leases, including those classified as operating leases under International Accounting Standard (‘‘IAS’’) 17 ‘‘Leases’’ the previously applicable standard (‘‘IAS 17’’), unless the underlying asset has a low value or the lease term is 12 months or less. Rental charges in the income statement previously recorded under IAS 17 are replaced with depreciation and interest charges under IFRS 16 and right of use assets will be subject to impairment reviews in accordance with IAS 36 ‘‘Impairment of Assets’’ replacing the previous requirement to recognize a provision for onerous lease contracts. For purposes of the 2020 Interim Consolidated Financial Statements, the Group has applied the modified retrospective transition method meaning the condensed consolidated financial information for HYE2020 includes the impact of IFRS 16. As the Group transitioned to IFRS 16 on August 1, 2019 using the modified retrospective transition method, the comparative financial information for HYE2019 included in the 2020 Interim Consolidated Financial Statements has not been restated and is presented based on the IAS 17 standard. The financial information for FYE2019, FYE2018 and FYE2017 included in the Annual Consolidated Financial Statements have similarly not been restated and are presented based on the IAS 17 standard. For the majority of leases, the right of use asset on transition has been measured as if IFRS 16 had been applied since the commencement of the lease, discounted using the Group’s incremental borrowing rate as at August 1, 2019, with the difference between the right of use asset and the lease liability taken to retained earnings. For the remaining leases which relate to the Group’s U.S. fleet, where sufficient historic information has not been available, the right of use asset has been measured as equal to the lease liability on transition. The Group has elected to apply the following practical expedients on transition: • To not reassess whether contracts are, or contain, a lease at the date of initial application; • Application of a single discount rate to a portfolio of leases with reasonably similar characteristics; • Reliance on previous assessment of whether leases are onerous in accordance with IAS 37 ‘‘Provisions, Contingent Liabilities and Contingent Assets’’ immediately before the date of initial application as an alternative to performing an impairment review; • Election to not apply the measurement requirements of the standard to leases where the term ends within 12 months of the date of initial application; • Exclusion of initial direct costs from the measurement of the right of use asset at the date of initial application; and • Use of hindsight, such as in determining the lease term.

2 The impact of the adoption of IFRS 16 on the income statement in HYE2020, was to decrease rental costs by $166 million, increase depreciation by $131 million and increase finance costs by $27 million. The impact on the cashflow statement for HYE2020, was to increase cash generated from operations by $171 million, increase interest paid by $27 million and increase lease liability capital payments by $144 million. There was no impact on the net decrease in cash, cash equivalents and bank overdrafts. The impact of the adoption of IFRS 16 on the opening balance sheet as at August 1, 2019 was as follows:

$ million Right of use assets ...... 1,220 Property, plant and equipment ...... (6) Net deferred tax assets ...... 69 Lease liabilities ...... (1,481) Obligations under finance leases ...... 6 Other ...... 5 Net retained earnings adjustment ...... (187)

A reconciliation of the operating lease commitments previously reported under IAS 17 in the 2019 Consolidated Financial Statements to the lease liability as at August 1, 2019 under IFRS 16 is as follows:

$ million Operating lease commitments as at July 31, 2019 ...... 1,126 Leases of low value assets ...... (20) Long term leases that expire before July 31, 2020 ...... (12) Reasonably certain extension or termination options ...... 564 Effect from discounting(1) ...... (183) Lease liabilities due to initial application of IFRS 16 as at August 1, 2019 ...... 1,475 Lease liabilities from finance leases under IAS 17 as at July 31, 2019 ...... 6 Total lease liabilities as at August 1, 2019 ...... 1,481

(1) The weighted average incremental borrowing rate applied by the Group upon transition was 3.5%.

Adoption of IFRS 15 On August 1, 2018, the Group adopted IFRS 15 ‘‘Revenue from Contracts with Customers’’ applying the modified retrospective approach which does not require the restatement of comparatives. The standard introduces revised principles for the recognition of revenue with a new five-step model that focuses on the transfer of control instead of a risks and rewards approach. The adoption of IFRS 15 did not have a material impact on the 2019 Consolidated Financial Statements and there was no adjustment required to opening retained earnings. The presentation of the provision for sales returns changed from a net basis to a gross basis on the balance sheet, with a liability for expected refunds to customers included within trade and other payables and an associated asset for the value of returned goods included within inventory. As the Group transitioned to IFRS 15 on August 1, 2018, using the modified retrospective transition method, the comparative financial information for FYE2018 and FYE2017 has not been restated and is presented based on IAS 18 ‘‘Revenue’’.

Adoption of IFRS 9 On August 1, 2018, the Group adopted IFRS 9 ‘‘Financial Instruments’’ (‘‘IFRS 9’’). The standard makes changes to the classification and measurement of financial assets and liabilities, revises the requirements of hedge accounting and introduces a new impairment model for financial assets. The adoption of IFRS 9 did not have a material impact on the 2019 Consolidated Financial Statements and there was no adjustment required to opening retained earnings. As permitted by IFRS 9 the Group elected not to restate the comparative financial information for FYE2018 and FYE2017.

Change in Reporting Currency From the year beginning August 1, 2017 onwards, the Company’s functional currency changed from pounds sterling to U.S. dollar due to the majority of revenue (and therefore, a majority of dividends paid

3 by subsidiaries to the Company) being generated in U.S. dollars which is driven by a change in the underlying currency mix of the business. In addition, the Group has changed its presentational currency for its consolidated financial statements to U.S. dollars from pounds sterling. Up until the year ended July 31, 2017, the Group reported its results in pounds sterling and its main currency exposure arose on the translation of overseas earnings into pounds sterling. However, due to the change outlined above, the 2018 Consolidated Financial Statements reflect the results of the non-U.S. dollar denominated subsidiaries translated into U.S. dollars at the average exchange rate for the period in respect of the income statement, and at the relevant period end rate in respect of the balance sheet, with retrospective restatement of the comparative period. Therefore, in order to present information on a consistent basis with the presentation adopted in the 2018 Consolidated Financial Statements, the consolidated financial information as at and for FYE2017 included in the Offering Memorandum (that is presented in U.S. dollars) has been derived from the unaudited comparative information included in the 2018 Consolidated Financial Statements and which reflects these restatements.

Non-EU IFRS Financial Measures/Alternative Performance Measures In this Offering Memorandum, we present certain financial measures that are not recognized by EU IFRS or any other internationally recognized generally accepted accounting principles. Such financial measures, included in this document, are (i) results presented on a constant exchange rate basis, (ii) organic revenue growth, (iii) like-for-like revenue growth, (iv) organic revenue growth by segment, (v) revenue from non-ongoing operations, (vi) revenue from ongoing operations, (vii) gross profit from ongoing operations, (viii) ongoing gross margin, (ix) underlying trading profit from ongoing operations, (x) underlying trading profit from non-ongoing operations, (xi) underlying trading profit from continuing operations, (xii) underlying ongoing trading margin, (xiii) underlying trading profit from non-ongoing operations by segment, (xiv) underlying trading profit from ongoing operations by segment, (xv) underlying trading profit from continuing operations by segment, (xvi) underlying ongoing trading margin by segment, (xvii) Adjusted EBITDA, (xviii) Adjusted EBITDA from discontinued operations, (xix) net debt, (xx) cash conversion rate and (xxi) exceptional items. The Group believes these performance measures provide additional helpful information. They are consistent with how business performance is planned, reported and assessed internally by management. These performance measures may not be comparable to other similarly titled measures as reported by other companies, as other companies may calculate these measures differently than we do and these measures may not be permitted to appear on the face of the primary financial statements, or footnotes thereto, and in some cases, may not be permitted at all, in U.S. filings made to the SEC in the United States. These performance measures have limitations as analytical tools, and none of these measures should be considered in isolation, or as a substitute for analysis of the Group’s operating results, including our income statements and cash flow statements, as reported under EU IFRS. An explanation of the relevance of each of the performance measures and a discussion of their limitations is set out below. A reconciliation of each of the performance measures to the most directly comparable measures calculated and presented in accordance with EU IFRS is set out in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’ in this Offering Memorandum. The Group does not regard these performance measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with EU IFRS or those calculated using financial measures that are calculated in accordance with EU IFRS.

Ongoing and Non-ongoing Financial Measures Ongoing: Financial measures presented on an ongoing basis are derived from continuing operations less non-ongoing operations as described below. Non-ongoing: The Group reports some financial measures from businesses or branches that have been disposed of, closed or classified as held for sale, which do not meet the criteria to be classified as discontinued operations under IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’ (‘‘IFRS 5’’). For the six months ended January 31, 2020, due to the U.K. Demerger, the Group’s U.K. business is classified as non-ongoing, in FYE2019 the Group’s U.K. business was presented as ongoing, and as a result, the comparative financial information for HYE2019 has been reclassified for consistency and comparability purposes. In FYE2019, the Group’s Netherlands business, Wasco, and a small non-core U.K. business (soak.com) were sold and classified as non-ongoing, these were presented as ongoing in the

4 2018 Consolidated Financial Statements, and as a result the comparative financial information for FYE2018 included in the 2019 Consolidated Financial Statements has been restated for consistency and comparability purposes. See Note 2 of the 2019 Consolidated Financial Statements. Financial measures presented on an Ongoing and Non-ongoing basis are outlined below and are Non-EU IFRS measures. Exceptional items are those which are considered significant by virtue of their nature, size or incidence. These items are presented as exceptional within their relevant income statement category to assist in the understanding of the trading and financial results of the Group as these types of cost/credit distort understanding of the Group’s financial performance for the financial year and the comparability between periods. See Note 5 and 8 to the 2019 Financial Statements and 2018 Financial Statements and Note 4 to the 2020 Interim Consolidated Financial Statements. Constant exchange rates presentation is used because the Group’s international operations give rise to fluctuations in foreign exchange rates. To neutralize foreign exchange impact and to illustrate the underlying change in certain financial statement line items from one year to the next, the Group has adopted the practice of discussing results in both presentational currency and constant currency. Constant exchange rates are used as a performance measure to provide a more transparent comparison of year-on-year performance. The constant exchange rate basis re-translates the prior year at the current year exchange rates to eliminate the effect of exchange rate fluctuations when comparing information year-on-year. Organic revenue growth provides a consistent measure of the percentage increase/decrease in revenue year-on-year, excluding the effect of currency exchange rate fluctuations, trading days, acquisitions and disposals. Organic revenue growth is determined as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the period to the corresponding acquisition date, and trading days, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. Like-for-like revenue growth is only used for the United Kingdom segment. Like-for-like revenue growth provides a consistent measure of the percentage increase/decrease in revenue year-on-year, excluding the effect of currency exchange rate fluctuations, trading days, acquisitions and disposals, branch openings and closures and the exit of low margin business (net closed branches). Like-for-like revenue growth is determined as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the current period to the corresponding acquisition date in the current year, trading days and net closed branches, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. Ongoing revenue by segment is defined as revenue by segment less revenue from non-ongoing operations by segment. Organic revenue growth by segment provides a consistent measure of the percentage increase/decrease in segment revenue year-on-year, excluding the effect of currency exchange rate fluctuations, trading days, acquisitions and disposals. Organic revenue growth by segment is determined as increase/decrease in current year segment revenue excluding non-ongoing segment revenue, segment revenue growth/decline attributable to acquisitions, disposals and trading days, over the preceding financial year’s ongoing segment revenue shown on a constant exchange rates basis. Revenue from non-ongoing operations is revenue from businesses and groups of branches, which do not meet the criteria to be classified as discontinued operations under IFRS 5, which have been disposed of, closed or classified as held for sale. Revenue from ongoing operations (also described as ongoing revenue) is defined as revenue less revenue from non-ongoing operations. Gross profit from non-ongoing operations is defined as gross profit, less exceptional items related to businesses and groups of branches, which do not meet the criteria to be classified as discontinued operations under IFRS 5, which have been disposed of, closed or classified as held for sale. Gross profit from ongoing operations (also described as ongoing gross profit) is defined as gross profit less gross profit from non-ongoing operations and exceptional items other than those related non-ongoing operations.

5 Ongoing gross margin is a measure of the ratio of ongoing gross profit, to ongoing revenue. Ongoing gross margin is used as a performance measure by the Group for assessing business unit performance. Underlying trading profit from continuing operations (also described as underlying trading profit) is a performance measure that is defined by the Group as profit for the period, less profit/(loss) from discontinued operations, tax, impairment of interests in associates, share of profit/(loss) after tax of associate, gain/(loss) on disposal of interest in associates, net finance costs, amortization and impairment of acquired intangible assets, and exceptional items and excluding the impact of IFRS 16 in respect of information presented for HYE2020 (which was the first period reported under the IFRS 16 standard). Underlying trading profit from ongoing operations, non-ongoing operations and continuing operations are used as performance measures because the Group believes they provide valuable additional information for users of its financial statements in assessing the Group’s performance because they exclude costs and other items that do not form part of the underlying trading business. The underlying trading profit and underlying ongoing trading margin measures above exclude the impact of IFRS 16 in respect of the condensed consolidated financial information for HYE2020, which is taken from the 2020 Interim Consolidated Financial Statements that were prepared under IFRS 16 (which applied the standard for the first time) and presented to allow for comparison with the periods prepared under IAS 17. Prior to the Group’s adoption of IFRS 16, these measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’, rather than being ‘‘underlying’’ measures, and such measures in respect of the consolidated financial information for FYE2019, FYE2018 and FYE2017 and HYE2019 are unchanged from their previous calculation. See ‘‘—Adoption of IFRS 16’’ above for further details. Unless otherwise indicated in this Offering Memorandum, ‘‘trading profit’’ and ‘‘ongoing trading margin’’ for FYE2019, FYE2018 and FYE2017 and HYE2019 are referred to as underlying trading profit and underlying ongoing trading margin. The Group disaggregates underlying trading profit into underlying trading profit from non-ongoing operations and ongoing operations. In addition, the Group utilizes certain other financial data calculated by reference to underlying trading profit, including underlying ongoing trading margin, underlying trading profit from ongoing operations by segment, and underlying ongoing trading margin by segment. a. Underlying trading profit from ongoing operations (also described as underlying ongoing trading profit from ongoing operations) is defined as operating profit before exceptional items and the amortization and impairment of acquired intangible assets excluding non-ongoing operations and excluding the impact of IFRS 16 in respect of information presented for HYE2020 (which was the first period reported under the IFRS 16 standard). b. Underlying trading profit from non-ongoing operations is defined as operating profit before exceptional items and the amortization and impairment of acquired intangible assets for businesses and groups of branches, which do not meet the criteria to be classified as discontinued operations under IFRS 5, which have been disposed of, closed or classified as held for sale and excluding the impact of IFRS 16 in respect of information presented for HYE2020 (which was the first period reported under the IFRS 16 standard). c. Underlying ongoing trading margin is a measure of the ratio of underlying ongoing trading profit from ongoing operations (as defined above) to ongoing revenue. d. Underlying trading profit from ongoing operations by segment is defined as trading profit by segment (segment measure of profit and loss) excluding underlying trading profit from non-ongoing operations by segment and the impact of IFRS 16 in respect of information presented for the six months ended January 31, 2020 (which was the first period reported under the IFRS 16 standard). e. Underlying trading profit from non-ongoing operations by segment is defined as trading profit by segment (segment measure of profit and loss) excluding underlying trading profit from ongoing operations and excluding the impact of IFRS 16 in respect of information presented for the six months ended January 31, 2020 (which was the first period reported under the IFRS 16 standard). f. Underlying ongoing trading margin by segment is defined as the ratio of underlying trading profit from ongoing operations for each segment (United States, United Kingdom and Canada) divided by ongoing revenue for each segment.

6 Adjusted EBITDA (also called Adjusted EBITDA from continuing operations) is a measure of profit for the period less profit/(loss) from discontinued operations, tax, impairment of interests in associates share of profit/(loss) of associate, gain/(loss) on disposal of interest in associates, net finance costs, amortization and impairment of acquired intangible assets, exceptional items, and depreciation, amortization and impairment of property, plant, equipment, software and the impact of IFRS 16, as applicable to the 2020 Interim Consolidated Financial Statements. Adjusted EBITDA from discontinued operations is a measure of profit/(loss) from discontinued operations, less tax from discontinued operations, net finance costs from discontinued operations, exceptional items related to discontinued operations, and depreciation, amortization and impairment of property, plant, equipment, software and the impact of IFRS 16, as applicable to the 2020 Interim Consolidated Financial Statements. Underlying trading profit, Adjusted EBITDA and similar performance measures have limitations as analytical tools. Some of these limitations are: • they do not reflect the Group’s cash expenditures or future requirements for capital expenditure or contractual commitments; • they do not reflect changes in, or cash requirements for, the Group’s working capital needs; • they do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Group’s debt; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and underlying trading profit and Adjusted EBITDA do not reflect any cash requirements for such replacements; • they are not adjusted for all non-cash income or expense items that are reflected in the Group’s statements of cash flows; and • the further adjustments made in calculating underlying trading profit and Adjusted EBITDA are those that management consider are not representative of the trading operations of the Group and therefore are subjective in nature.

Non-EU IFRS Liquidity and Indebtedness Measures Net debt is calculated as the sum of current bank loans and overdrafts, current obligations under finance leases under IAS 17 (applied to all period end determinations), current derivative financial liabilities, non-current bank loans, non-current obligations under finance leases under IAS 17 (applied to all period end determinations) and non-current derivative financial liabilities, less cash and cash equivalents and current and non-current derivative financial assets. The nearest financial measure under EU IFRS is debt, which is the sum of current and non-current loans and bank overdrafts. Net debt is used as a performance measure because it is a good indicator of the strength of the Group’s balance sheet position and is widely used by credit rating agencies. As noted above, for FYE2019, FYE2018 and FYE2017, there were no lease liabilities recognized under IFRS 16. See ‘‘Presentation of Financial, Market and Other Information— Adoption of IFRS 16’’. Cash conversion rate is defined as the ratio of net cash generated from operations divided by Adjusted EBITDA. The nearest EU IFRS measure is net cash generated from operations divided by profit for the period attributable to shareholders of the Company. Cash conversion rate is used as a liquidity measure because it indicates the strength of the Group and its ability to generate cash.

Market and Industry Data The data included in this Offering Memorandum regarding industry, markets and ranking are based in some instances on our own assessment and knowledge of the market, regions and countries in which we operate. We have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, industry forecasts and market research, which we believe to be reliable based upon our management’s knowledge of the industry, have not been independently verified. Forecasts, particularly in light of market volatility and especially at the date of this Offering Memorandum, are likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the

7 forecasts we cite. We do not make any representation as to the accuracy of data from third-party sources, industry forecasts and market research. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements or omissions regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading ‘‘Risk Factors’’ in this Offering Memorandum. Neither we nor the Initial Purchasers can guarantee the accuracy or completeness of any such industry data contained in this Offering Memorandum.

Trademarks and Trade Names We have proprietary rights to trademarks, service marks and trade names used in this Offering Memorandum which are important to our business. Solely for convenience, we have omitted the ‘‘↧’’ and ‘‘↩’’ designations for such trademarks, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names. Each trademark, trade name or service mark of any other company appearing in this Offering Memorandum belongs to its respective holder.

8 OVERVIEW This overview highlights certain information contained in this Offering Memorandum. This overview does not contain all the information you should consider before purchasing the Notes. You should read this entire Offering Memorandum carefully, including the sections entitled ‘‘Forward-Looking Statements’’, ‘‘Risk Factors’’, ‘‘Description of the Group and its Business’’ and ‘‘Operating and Financial Review’’ and the financial information and the notes thereto included in this Offering Memorandum.

Overview of Our Business We are a leading specialist distributor of plumbing and heating products. Our business serves customers throughout North America and the United Kingdom, predominantly serving the repair, maintenance and improvement (‘‘RMI’’) markets. We operate in fragmented markets, that offer growth opportunities and seek to provide a differentiated service offering and strong, consistent returns for shareholders. We are a specialist distributor that creates value through the expertise of our people, our scale, bespoke logistics network, technology and the support and service we give our customers. We partner with them to improve their construction, renovation and maintenance projects. Our ongoing business has a diverse supplier base of approximately 42,000 suppliers providing us with a wide range of over one million products worldwide. We serve over one million customers, offering products, support and advice through a network of 11 distribution centers and 1,708 branches, as well as through showrooms, e-commerce and central accounts. We operate in three geographic regions, the United States, the United Kingdom and Canada, each of which is an operating segment for financial reporting purposes.

United States The United States is our largest market and we believe it offers the greatest growth opportunities. It is highly fragmented with no market dominated by any single distributor. We have progressively focused more resources on our business in the United States. The United States generated 93.9% of our underlying trading profit for FYE2019. The Group operates nine strategic business units in the United States providing a broad range of plumbing and heating products and solutions delivered through specialist sales associates, counter service, showroom consultants and e-commerce. Our U.S. business operates primarily under the Ferguson brand and is a market leading distributor of plumbing and heating products in the United States. It operates nationally, serving the residential, commercial, civil and industrial markets. The largest end markets for Ferguson in FYE2019 were residential which represented 53% of sales and commercial which represented 33% of sales (the remainder was split between civil/infrastructure and industrial). Ferguson predominantly serves the RMI markets, with relatively low exposure to the new construction market. As at July 31, 2019, our U.S. business had approximately 27,000 employees (who we call associates) and 1,491 branches, which cover all 50 U.S. states. These are served by 10 distribution centers enabling effective availability of stock for customers. For HYE2020 and HYE2019, the United States segment’s revenue was $9,318 million and $8,874 million, respectively. This represented 85.0% and 81.8% of the Group’s total revenue for HYE2020 and HYE2019, respectively. The United States segment’s underlying trading profit was $740 million and $700 million for HYE2020 and HYE2019, respectively. This represented 95.2% and 93.0% of the Group’s total underlying trading profit. The United States segment’s revenue was $18,358 million, $16,670 million and $15,193 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 83.4%, 80.3% and 78.8% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. The United States segment’s underlying trading profit was $1,508 million, $1,406 million, and $1,224 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 93.9%, 93.3% and 91.3% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

9 business mainly serves RMI markets and has relatively low exposure to the new residential construction market. On September 3, 2019, we announced our intention to demerge (spin off) our U.K. operations to our shareholders (the ‘‘U.K. Demerger’’), subject to shareholder approval. The decision marked the conclusion of a detailed review of the Group’s assets over several years. On completion of the transaction, Wolseley U.K. will become an independent listed company serving residential and commercial tradespeople and customers. The separation will further simplify the Group and will enable Wolseley U.K. to pursue its independent strategy. Following the U.K. Demerger, Ferguson will be wholly focused on serving customers in North America. We continue to progress the U.K. Demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘—Recent Developments—Results of operations for the three month period ended April 30, 2020’’. As at July 31, 2019, our U.K. business had over 5,000 associates operating through 551 branches covering the entire country, which were in turn served by four distribution centers. For HYE2020 and HYE2019, the United Kingdom segment’s revenue was $1,073 million and $1,177 million, respectively. This represented 9.8% and 10.9% of the Group’s total revenue for HYE2020 and HYE2019, respectively. The United Kingdom segment’s underlying trading profit was $30 million for HYE2020 and $30 million for HYE2019. The United Kingdom segment’s revenues were $2,281 million, $2,568 million and $2,548 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 10.4%, 12.4% and 13.2% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. The United Kingdom segment’s underlying trading profit was $65 million, $73 million and $96 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 4.0%, 4.8% and 7.2% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

Canada (previously disclosed as ‘‘Canada and Central Europe’’) Wolseley Canada is a wholesale distributor of plumbing, heating, ventilation and air conditioning, refrigeration, waterworks, fire protection, pipes, valves and fittings and industrial products. We predominantly serve trade customers across the residential, commercial and industrial sectors in both RMI and new construction. The Canada operating segment which was combined and disclosed with the Central Europe operating segment operated across two countries for FYE2019, Canada and the Netherlands, which contributed 86.9% and 13.1%, respectively, to the combined revenue. We disposed of Wasco (our Netherlands B2B business), which was the last of our Central European business, on January 30, 2019. For FYE2019, Wasco contributed revenue of $179 million ($321 million for FYE2018) and underlying trading profit of $8 million ($13 million for FYE2018). For HYE2020 and HYE2019, the segment’s revenue was $575 million and $796 million, respectively. This represented 5.2% and 7.3% of the Group’s total revenue for HYE2020 and HYE2019, respectively. Canada’s underlying trading profit was $29 million and $48 million, which represented 3.7% and 6.4% of the Group’s total underlying trading profit for HYE2020 and HYE2019, respectively. As at July 31, 2019, our Canada business had approximately 3,000 associates, operating through 217 branches, which were in turn served by one distribution center. Canada’s revenues were $1,371 million, $1,514 million and $1,543 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 6.2%, 7.3% and 8.0% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. Canada’s underlying trading profit was $76 million, $83 million and $71 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 4.7%, 5.5% and 5.3% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

Recent Developments Change in Group Chief Financial Officer On May 26, 2020, we announced that Mike Powell, Group Chief Financial Officer (‘‘CFO’’) has resigned in order to take up a role as Group CFO of Mondi plc. Mr. Powell is committed to assisting the Company with an orderly transition and the search for his successor is underway. The new Group CFO role will in future be based at Ferguson’s Newport News, Virginia headquarters in the United States. The Company will confirm Mr. Powell’s leaving date in due course.

10 Results of operations for the three month period ended April 30, 2020 On May 13, 2020, we announced our unaudited headline results of operations for the three month period ended April 30, 2020 (‘‘Q3 FYE2020’’). At the time we announced our results of operations for HYE2020 on March 17, 2020, we were trading in line with expectations. As outlined in our trading update on April 15, 2020, since the middle of March we rapidly changed our operating procedures due to the impact of the COVID-19 virus outbreak to protect the safety and wellbeing of our associates and our customers. This is against a background of the unprecedented action taken by governments to contain the COVID-19 virus and the societal impact which has resulted in adverse trading conditions within the Group’s end markets.

Current trading During the COVID-19 virus outbreak in our markets, the Group has remained focused on three key areas: (1) protecting the health and wellbeing of our associates, (2) continuing to serve our customers during the crisis phase of the virus - a critical time of need and (3) protecting and preserving the strength of our businesses for the long-term. To safeguard the wellbeing of our associates and support our customers we are operating our business in adherence with the recommended Center for Disease Control guidelines. Cleaning protocols at all sites are in operation alongside appropriate social distancing measures. Our branches are operating pick-up and delivery only with customers encouraged to order ahead with pick up in store at the curbside and touchless signature at the point of delivery or pick-up location. Associates who can work remotely continue to do so. Our showroom networks were closed in March 2020 and have remained closed through the month of April 2020 and we have served customers using virtual consultations. In select markets we are starting to book face-to-face consultations with the necessary social distancing measures in place in line with local governmental guidance. Trading volumes were lower in the month of April 2020 as a result of the impact of the COVID-19 virus pandemic. In the United States, our revenue decline in the month of April 2020 was 9.3% compared to April 2019. The major impact on volume continues to be highly correlated to the degree of disruption locally which has been variable across US states and localities. Our Blended Branches business revenue was down 15.3% in the month of April 2020 compared to April 2019, and in the major hotspots, where infection rates have been highest, such as New England, New York, Michigan, the Pacific North West and Northern California, revenue was down significantly. However, our Waterworks business grew revenue by 8.5% in the month of April 2020 compared to April 2019, benefiting from fewer restrictions. Standalone eBusiness also grew well with a revenue increase of 14.6% in the month of April 2020 compared to April 2019, as a result of strong consumer demand for home improvement products. In Canada, revenue was down 33.6% in the month of April 2020 compared to April 2019, reflecting widespread lockdowns in place. The United Kingdom remained very challenging due to the national lockdown severely impacting activity levels with revenue down 60.2% during the month of April 2020 compared to April 2019. See ‘‘—Three month period ended April 30, 2020 trading summary’’ below for more details of our Q3 FYE2020 trading performance.

Cost actions, cash optimization and liquidity As we have started to see short-term revenue pressure, our approach has been to protect our skilled workforce, which is critical to the long-term success of the business. We have already taken a number of prudent cost saving measures to minimize impact on short-term profitability. This has included a hiring freeze, reduced overtime and restricting the use of temporary labor. Currently in markets where there has been a decline in revenue we are implementing a combination of reduced associate hours and temporary lay-offs based on business and market needs. The Company has also introduced the following measures to protect its cash position: • Suspended the $500 million share buy-back announced on February 4, 2020. As of April 30, 2020, the Group had completed $101 million of the program. • Paused current M&A activity due to current market uncertainty. To date during the financial year ending July 31, 2020, we have invested $343 million in six businesses which are in the process of being

11 integrated. Selective bolt-on and M&A capability remains an important part of the Company’s strategy. • Withdrawn the interim dividend that was due for payment on April 30, 2020. The Board believes this is currently in the Company’s immediate best interests, balancing all our stakeholders’ interests against a background of significant uncertainty as to the impact and duration of the current COVID-19 disruption. We recognize the importance of the dividend to our shareholders and the Board will review this decision later in the current financial year as trading conditions become clearer. • Reviewed existing capital expenditure plans and we now expect capital expenditure to be in the region of $280-300 million for the year ending July 31, 2020. The Board’s intention remains to scale future capital investment to ensure we continue to invest in and develop the business and execute our strategy for the long-term. As of April 30, 2020, the Company’s net debt was $1.8 billion, the ratio of net debt (as so defined) to the last 12 months Adjusted EBITDA, on an accounting basis, was 1.0 times and the Group had $3.1 billion of available liquidity (comprising readily available cash of $1.3 billion and $1.8 billion of undrawn facilities).

Three month period ended April 30, 2020 trading summary The table below summarizes the revenue trends in the Group’s business for the periods indicated.

Six months Two months Three months ended ended ended January 31, March 31, April 30, 2020 compared 2020 compared Month ended 2020 compared to the six to the two April 30, 2020 to the three months ended months ended compared to the months ended January 31, March 31, month ended April 30, Revenue growth/(decline)% 2019 2019(1) April 30, 2019 2019(1) United States ...... 5.0% 8.2% (9.3)% 1.9% Canada(3) ...... (6.5)% (7.7)% (33.6)% (16.4)% Ongoing operations ...... 4.3% 7.3% (10.5)% 0.9% United Kingdom ...... (4.7)%(2) (10.3)%(2) (60.2)% (26.5)%(2) Continuing operations ...... 1.1% 5.1% (15.3)% (2.2)%

(1) One additional trading day in the current period added 2.5% to both ongoing operations and U.S. revenue growth, in the two months to March 31, 2020 and 1.6% to both ongoing operations and U.S. revenue growth, in Q3 FYE2020. (2) The comparative revenue excludes revenue from soak.com as the Group completed the sale of this business in FYE2019. The total revenue for Soak.com was $49 million in HYE2019, $8 million in the two months ended March 31, 2019 and $8 million in Q3 FYE2019. (3) Until January 30, 2019, when the Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, the ‘‘Canada’’ operating segment was combined with the ‘‘Central Europe’’ operating segment and was disclosed as ‘‘Canada and Central Europe’’ as individually they did not meet the reportable segment quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’. See ‘‘Presentation of Financial, Market and Other Information’’ and ‘‘Overview—Overview of our Business’’. The table below sets forth certain other financial data of the Group for the periods indicated.

As at or for the As at or for the three months three months ended ended April 30, 2020 April 30, 2019 Change $ million, except as otherwise indicated Ongoing revenue(1) ...... 4,750 4,707 0.9% Trading profit from ongoing operations(1)(2) ...... 351 339 Less impact of IFRS 16(1) ...... (17) — Underlying trading profit from ongoing operations ...... 334 339 (1.5)% Trading days ...... 64 63 Net debt to LTM Adjusted EBITDA(3) ...... 1.0x 0.9x

(1) ‘‘Ongoing operations’’ excludes businesses that have been closed, disposed of or are classified as held for sale. The United Kingdom has been moved to ‘‘Non-ongoing operations’’. (2) Before exceptional items and amortization of acquired intangible assets.

12 (3) Ratio of net debt (which excludes lease liabilities) to last twelve months Adjusted EBITDA. Net debt as at April 30, 2020 was $1,823 million and last twelve months Adjusted EBITDA was $1,790 million.

Group results The Group generated revenue in its ongoing businesses of $4,750 million for Q3 FYE2020, an increase of 0.9% (or a decrease of 1.7% on an organic basis) compared to the result for the three month period ended April 30, 2019 (‘‘Q3 FYE2019’’). Gross margins were 40 basis points lower at 29.8% for Q3 FYE2020 compared to Q3 FYE2019, with underlying trading profit of $334 million for Q3 FYE2020, $5 million lower than for Q3 FYE2019. The impact of IFRS 16 contributed a further $17 million to trading profit for Q3 FYE2020. There was also one additional trading day in Q3 FYE2020 compared to Q3 FYE2019.

Regional analysis Three months ended April 30, 2020 2019 2020 2019 Underling Trading Less impact trading Trading Revenue Revenue Change profit of IFRS 16 profit profit Change $ million, except as otherwise indicated United States ...... 4,541 4,457 1.9% 360 (17) 343 346 (0.9)% Canada ...... 209 250 (16.4)% (1) — (1) 4 (125)% Central and other costs ...... — — (8) — (8) (11) Ongoing operations ...... 4,750 4,707 0.9% 351 (17) 334 339 (1.5)% United Kingdom (non-ongoing) . . . 417 567(1) (26.5)% (12) — (12) 20 (160)%

(1) Excludes $8 million of revenue from soak.com as the Group completed the sale of this business in FYE2019.

United States Our US business grew well during February and March 2020 but revenue was lower in April 2020 due to the impact from COVID-19 related restrictions and safety measures. Growth was supported by growth from acquisitions and an additional trading day in Q3 FYE2020. Price inflation during the quarter was broadly flat. Gross margins were slightly lower due to the mix of business with no discernible pricing changes in the marketplace. Underlying trading profit was $343 million for Q3 FYE2020, 0.9% lower than for Q3 FYE2019. Before pausing M&A activity, we completed three acquisitions in Q3 FYE2020. These three businesses generated a combined $229 million of annualized revenue on a pre COVID-19 basis.

Canada (previously disclosed as ‘‘Canada and Central Europe’’) Revenue in Canada was 16.4% lower for Q3 FYE2020 with markets remaining challenging in February and March 2020 prior to lockdowns in the balance of the quarter. Gross margins were slightly lower, contributing towards an underlying trading loss of $1 million for Q3 FYE2020, $5 million below Q3 FYE2019.

Non-ongoing operations (Wolseley UK) In the United Kingdom, revenue declined 26.5% for Q3 FYE2020 compared to Q3 FYE2019 as the national lockdown severely impacted demand. An underlying trading loss of $12 million for Q3 FYE2020, was $32 million lower than for Q3 FYE2019. We continue to actively manage the cost base given the challenging market environment. The Board’s strategic intent to demerge the United Kingdom business is unchanged and we continue to progress the demerger process, although timing will depend upon the stabilization of market conditions.

Other matters During Q3 FYE2020, there were cash outflows of $202 million relating to acquisitions, $74 million relating to capital expenditure (defined as the sum of cash used for purchases of property, plant and equipment and purchases of non-acquired intangible assets) and $101 million of share buy backs. The IFRS 16 lease liability recognized on the balance sheet as at April 30, 2020 was $1,405 million. An exceptional charge of $8 million was taken in Q3 FYE2020 (compared with an exceptional charge of $18 million taken in Q3 FYE2019), that included $5 million of demerger costs relating to the United

13 Kingdom business and $2 million of costs relating to the Group’s listing assessment and shareholder consultation. In May 2020, the Group completed the sale of its investment in Meier Tobler for $31 million completing the exit of all trading operations in Continental Europe. This is in line with our strategy to focus the Group’s activities on North American markets.

Outlook Given the unprecedented uncertainty around the impact of the COVID-19 virus, it is not possible to currently assess with certainty the impact the COVID-19 virus will have on the Group’s financial performance, so the Company has withdrawn guidance for the financial year ending July 31, 2020. For more information, see ‘‘Risk Factors—Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’.

The Company Ferguson plc is a public limited company organized under the laws of Jersey, Channel Islands on March 26, 2019, with registration number 128484. The registered offices of Ferguson plc are located at 26 New Street, St. Helier, Jersey, JE2 3RA, Channel Islands and its headquarters are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham RG41 5TS, United Kingdom. The Company is the parent company of the Group. Prior to having our headquarters in the United Kingdom, we had our headquarters in Grafenausweg 10, CH 6301, Zug, Switzerland. On March 26, 2019, the Group underwent a corporate restructuring whereby it moved the Group’s headquarters and the tax residence of its parent holding company from Switzerland to the United Kingdom. This change was effected by introducing a new, Jersey incorporated and U.K. tax-resident company, as the new parent company of the Group. In connection with the corporate restructuring, the new parent holding company changed its name to ‘‘Ferguson plc’’, and the previous parent holding company was renamed Ferguson Holdings Limited and became a wholly-owned subsidiary of Ferguson plc. Alongside the U.K. Demerger, the Board of Directors of the Company announced on September 3, 2019 that it was considering the most appropriate listing structure for the Group going forward. Following the U.K. Demerger in 2020, the Group’s Chief Executive Officer and operational management team will be based in North America and the entirety of the Group’s revenues and profits will be generated there. The Board of Directors of the Company believes that the United States is the natural long-term listing location for the Company and consulted with institutional shareholders on two potential listing structures which aim to facilitate greater participation by North American domestic investors in the Company. These structures include seeking shareholder approval for (i) an additional listing of the Company’s ordinary shares in the United States or (ii) a primary listing of the Company in the United States. On April 15, 2020, the Board of Directors of the Company announced that, following the conclusion of its consultations with institutional shareholders, the Board will seek shareholder approval for option (i) above to enable an additional listing of the Company’s ordinary shares in the United States. It is envisaged that a General Meeting will be convened once the general uncertainty arising from the COVID-19 virus has lessened, and if approved, the additional listing is expected to take effect in the first half of calendar year 2021. Within 12 months of the effective date of the additional listing in the United States, or earlier should there be a meaningful change in ownership, the Board of Directors intends to put forward a further shareholder resolution to relocate the Company’s primary listing to the United States.

The Subsidiary Guarantor Wolseley Limited is a private limited company organized under the laws of England and Wales on April 14, 1986, with registration number 00029846 and is wholly owned by the Company. The principal offices of Wolseley Limited are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, RG41 5TS, United Kingdom.

The Issuer Ferguson Finance plc is a public limited company organized under the laws of England and Wales on September 21, 2018, with registration number 11581816 and is wholly owned by the Company. The principal offices of Ferguson Finance plc are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, RG41 5TS, United Kingdom.

14 OVERVIEW OF THE NOTES Certain of the terms and conditions described below are subject to important limitations and exceptions. The ‘‘Description of the Notes and the Guarantees’’ section of this Offering Memorandum contains a more detailed description of the terms and conditions of the Notes and the Guarantee. Capitalized terms used but not defined in this section have the meanings set forth in ‘‘Description of the Notes and the Guarantees’’.

Issuer ...... Ferguson Finance plc Guarantors ...... Ferguson plc and Wolseley Limited Notes ...... $600 million aggregate principal amount of 3.250% Notes due 2030 (the ‘‘Notes’’). The Notes will be issued under an indenture to be dated as of the Issue Date (as defined below) (the ‘‘Indenture’’), among the Issuer, the Company, Wolseley Limited, BNY Mellon Corporate Trustee Services Limited, as trustee (the ‘‘Trustee’’), The Bank of New York Mellon SA/NV, Luxembourg Branch, as registrar (the ‘‘Registrar’’) and as transfer agent (the ‘‘Transfer Agent’’) and The Bank of New York Mellon, London Branch, as principal paying agent (the ‘‘Paying Agent’’). Guarantees ...... The obligations of the Issuer under the Notes will be fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis by each Guarantor pursuant to the Indenture. Offering ...... The Notes are being offered in the United States to QIBs in reliance on Rule 144A under the Securities Act and outside the United States to persons other than U.S. persons in reliance upon Regulation S under the Securities Act. Issue Price ...... 99.552%, plus accrued interest, if any, from June 2, 2020. Issue Date ...... June 2, 2020. Maturity Date ...... June 2, 2030. Interest ...... The Notes will bear interest from the Issue Date at the rate of 3.250% per annum, payable semi-annually. Interest Payment Dates ...... December 2 and June 2, commencing December 2, 2020 until the Maturity Date. Record Dates ...... November 17 or May 18 (whether or not a business day in Luxembourg) immediately preceding the Interest Payment Date. Status of the Notes and the Guarantee ...... The Notes will constitute direct, unsubordinated and unsecured senior obligations of the Issuer and rank pari passu and ratably without any preference or priority among themselves and equally with all other existing and future unsecured and unsubordinated obligations of the Issuer from time to time outstanding (subject to certain obligations required to be preferred by law). The Guarantees will constitute direct, unsubordinated and unsecured senior obligations of each Guarantor and rank equally with all other existing and future unsecured and unsubordinated obligations of the Guarantors from time to time outstanding (subject to certain obligations required to be preferred by law).

15 Use of Proceeds ...... The net proceeds of the offering will be used for our general corporate purposes, including the repayment of existing debt, and to increase liquidity. Covenants ...... The Issuer and the Guarantors have agreed to certain covenants, subject to certain exceptions, with respect to the Notes and the Guarantees, including limitations on: • liens; and • mergers and acquisitions. Change of Control Repurchase Event If a Change of Control Repurchase Event occurs, the Issuer may be required to repurchase the Notes at a purchase price equal to 101% of their principal amount, plus any accrued and unpaid interest. See ‘‘Description of the Notes and the Guarantees— Change of Control Repurchase Event’’. Optional Redemption ...... The Issuer may redeem the Notes in whole or in part, at the Issuer’s option: (1) at any time and from time to time prior to March 2, 2030 (three months prior to the Maturity Date of the Notes) (the ‘‘Par Call Date’’) at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) as determined by the Independent Investment Banker, the sum of the present values of the applicable Remaining Scheduled Payments discounted to the date fixed for redemption (the ‘‘Redemption Date’’) on a semi-annual basis (assuming a 360 day year consisting of twelve 30 day months and a redemption on the Par Call Date) at the Treasury Rate plus 40 basis points, together with any accrued and unpaid interest (including Additional Amounts, if any) on the principal amount of the Notes to be redeemed to (but excluding) the Redemption Date; and (2) at any time and from time to time on or after the Par Call Date, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest on the principal amount being redeemed to (but excluding) the date of redemption. Optional Tax Redemption ...... The Notes are redeemable by the Issuer, in whole but not in part, at 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to the applicable Redemption Date and any Additional Amounts payable with respect thereto at the Issuer’s option at any time prior to their maturity if due to a Change in Tax Law (as defined below) (i) the Issuer or, if applicable, either of the Guarantors, respectively, has, or would, become obligated to pay any Additional Amounts with respect to the Notes; (ii) in the case of each Guarantor, (A) such Guarantor would be unable to procure payment by the Issuer or (B) the procuring of such payment by the Issuer would be subject to withholding taxes imposed by a Relevant Jurisdiction; and (iii) the obligation to pay such Additional Amounts described in (i) cannot otherwise be avoided by the Issuer or, if applicable, such Guarantor taking reasonable measures available to it. In such case, the Issuer may redeem the Notes in whole, but not in part, upon not less than 10 nor more than 60 days’ notice.

16 Denomination, Form and Registration of Notes ...... The Notes will be issued in fully registered form and only in denominations of $200,000 and integral multiples of $1,000 in excess thereof. The Notes will be issued initially as Global Notes. DTC will act as depositary for the Notes. Except in limited circumstances, Global Notes will not be exchangeable for certificated notes. Further Issues ...... The Issuer may, from time to time, without notice to or the consent of the Holders of the Notes, ‘‘reopen’’ the Notes and issue additional notes having identical terms and conditions as the Notes, except for the issue date, issue price, payment of interest accruing prior to the Issue Date of such additional notes and/or except for the first payment of interest following the issue date of such additional notes, so that the additional notes may be consolidated and form a single series of notes with the Notes (a ‘‘Further Issue’’); provided that any additional notes that are not fungible with the outstanding Notes for U.S. federal income tax purposes will not have the same CUSIP, ISIN or other identifying number as the outstanding Notes. Trustee ...... BNY Mellon Corporate Trustee Services Limited. Registrar and Transfer ...... The Bank of New York Mellon SA/NV, Luxembourg Branch Principal Paying Agent ...... The Bank of New York Mellon, London Branch Settlement ...... The Issuer expects to deliver the Notes on or about June 2, 2020 (the ‘‘Settlement Date’’). Transfer Restrictions ...... Neither the Notes nor the Guarantees have been or will be registered under the Securities Act and each is subject to certain restrictions on resale and transfer. Governing Law ...... The Indenture, the Notes and the Guarantees will be governed by and construed in accordance with the laws of the State of New York. Ratings ...... The Company has credit ratings of Baa2 (stable outlook) by Moody’s Investor Services Ltd. (‘‘Moody’s’’) and BBB+ (stable outlook) by S&P Global Ratings Europe Limited (‘‘S&P’’). It is expected that the Notes will be rated Baa2 (stable outlook) by Moody’s, and BBB+ (stable outlook) by S&P, subject to confirmation on the Settlement Date. A credit rating is not a recommendation to buy or hold securities and may be subject to revisions, suspension or withdrawal at any time by the assigning rating agency. Listing ...... Application has been made to Euronext Dublin for the Notes to be admitted to the Official List and to trading on the Global Exchange Market thereof. Risk Factors ...... We urge you to consider carefully the risks described in ‘‘Risk Factors’’ beginning on page 23 of this Offering Memorandum before making an investment decision. Issuer LEI Code ...... 2138003A7ZEU931DZL61

17 SUMMARY FINANCIAL INFORMATION The following tables set forth summary historical consolidated financial data for the Group, as well as certain other financial and operating data. The summary historical consolidated financial data set forth below as of and for HYE2020 and HYE2019 has, unless otherwise indicated been derived from the 2020 Interim Consolidated Financial Statements. The summary historical consolidated financial data as of and for FYE2019 has, unless otherwise indicated been derived from the 2019 Consolidated Financial Statements. The summary historical consolidated financial data set forth below as at and for FYE2018 and FYE2017 has, unless otherwise indicated, been derived from the 2018 Consolidated Financial Statements. This summary historical financial information and other data should be read in conjunction with and are qualified in their entirety by reference to the Consolidated Financial Statements, including the notes thereto, included in this Offering Memorandum and the information set forth under ‘‘Use of Proceeds’’, ‘‘Capitalization’’, ‘‘Selected Financial Information’’, ‘‘Operating and Financial Review’’, ‘‘Presentation of Financial, Market and Other Information’’ and ‘‘Description of the Group and its Business’’, each of which is included elsewhere in this Offering Memorandum. The Consolidated Financial Statements have been prepared in accordance with EU IFRS. The 2020 Interim Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34 ‘‘Interim Financial Reporting’’ as adopted by the European Union which have been reviewed, as stated in the independent review report of Deloitte LLP, included in this Offering Memorandum. The Group Annual Consolidated Financial Statements have been audited, as stated in the independent auditor’s reports of Deloitte LLP, included in this Offering Memorandum.

Key Reported Consolidated Financial Information Income Statement

Six months ended January 31, Year ended July 31, 2017 2020(1) 2019 2019 2018 (Restated)(2) $ million Revenue ...... 10,966 10,847 22,010 20,752 19,284 Cost of sales ...... (7,724) (7,654) (15,552) (14,708) (13,701) Gross profit ...... 3,242 3,193 6,458 6,044 5,583 Operating costs: Amortization of acquired intangible assets ...... (60) (44) (110) (65) (81) Other ...... (2,449) (2,440) (4,946) (4,619) (4,024) Operating costs ...... (2,509) (2,484) (5,056) (4,684) (4,105) Operating profit ...... 733 709 1,402 1,360 1,478 Net finance costs ...... (70) (35) (74) (53) (54) Share of profit/(loss) after tax of associate ...... (1) 2 2 2 (1) Gain on disposal of interests in associates ...... — 3 3 — — Impairment of interests in associates ...... (22) — (9) (122) — Profit before tax ...... 640 679 1,324 1,187 1,423 Tax...... (173) (139) (263) (346) (370) Profit from continuing operations ...... 467 540 1,061 841 1,053 Profit/(loss) from discontinued operations ...... — 46 47 426 (133) Profit for the period ...... 467 586 1,108 1,267 920

18 Balance Sheet Data

As at January 31, As at July 31, 2017 2020(1) 2019(2) 2019(2) 2018 (Restated)(3) $ million Assets Non-current assets ...... 5,821 4,101 4,191 3,545 3,142 Current assets ...... 6,760 6,599 7,194 6,453 7,700 Assets held for sale ...... 2 51 1 151 1,715 Total assets ...... 12,583 10,751 11,386 10,149 12,557 Liabilities Current liabilities ...... 4,435 3,622 4,181 4,016 5,399 Non-current liabilities ...... 4,043 2,839 2,855 2,076 1,533 Liabilities held for sale ...... ————1,085 Total liabilities ...... 8,478 6,461 7,036 6,092 8,017 Net assets ...... 4,105 4,290 4,350 4,057 4,540 Equity Equity attributable to shareholders of the Company . . . 4,105 4,291 4,350 4,058 4,543 Non-controlling interest ...... — (1) — (1) (3) Total equity ...... 4,105 4,290 4,350 4,057 4,540

(1) The Group has adopted IFRS 16 since August 1, 2019 (i.e., from the start of the year ending July 31, 2020 and accordingly for the financial information for HYE2020). Under the transition methods chosen, financial information for HYE2019 and FYE2019, FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 17. As such, the financial information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’. (2) The Group adopted IFRS 15 on August 1, 2018 (i.e., from the start of FYE2019 and accordingly for the financial information for HYE2019). Under the transition method chosen, the comparative financial information for FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 18. For further information regarding IFRS 15 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 15’’. (3) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. For further information, please see ‘‘Presentation of Financial, Market and Other Information—Change in Reporting Currency’’.

19 Cash Flow Statement Data

Six months ended January 31, Year ended July 31, 2017 2020(2) 2019 2019 2018 (Restated)(1) $ million Net cash generated from operating activities ...... 394 121 1,290 1,036 950 Net cash generated from/(used in) investing activities .... (300) (587) (783) 700 (209) Net cash (used)/generated by financing activities ...... (691) 414 131 (1,857) (472) Net cash (used)/generated ...... (597) (52) 638 (121) 269 Effects of exchange rate changes ...... (1) (3) (10) (7) (13) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... (598) (55) 628 (128) 256 Cash, cash equivalents and bank overdrafts at the beginning of the period ...... 1,086 458 458 586 330 Cash, cash equivalents and bank overdrafts at the end of the period ...... 488 403 1,086 458 586

Other Financial Data The tables below set forth certain other financial data of the Group as at or for HYE2020 and HYE2019 and as at or for FYE2019, FYE2018 and FYE2017. For further information on the use of non-EU IFRS measures including reconciliations to the nearest IFRS measures with respect to the Annual Consolidated Financial Statements see ‘‘Presentation of Financial, Market and Other Information’’, Note 2 to the 2020 Interim Consolidated Financial Statements, Note 2 to the 2019 Consolidated Financial Statements and Note 2 to the 2018 Consolidated Financial Statements, each included in this Offering Memorandum and,

20 in summary form, in the section titled ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’ in this Offering Memorandum.

As at or for the six months ended As at or for the year ended January 31, July 31, 2017 2020(4) 2019 2019 2018 (Restated)(1) ($ million, except as otherwise indicated) Revenue ...... 10,966 10,847 22,010 20,752 19,284 Ongoing revenue(2) ...... 9,893 9,489 21,771 20,334 18,845 Organic revenue growth(2) ...... 2.0% 9.1% 4.4% 7.5% NA Profit for the period ...... 467 586 1,108 1,267 920 Operating profit ...... 733 709 1,402 1,360 1,478 Underlying trading profit(2)(3) Underlying trading profit from ongoing operations(2)(3) ...... 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341 Underlying ongoing trading margin(2)(3) ...... 7.6% 7.5% 7.4% 7.3% 6.9% Adjusted EBITDA(2) ...... 876 844 1,788 1,687 1,519 Net debt(2) ...... (1,944) (1,885) (1,195) (1,080) (706)

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. For further information, please see ‘‘Presentation of Financial, Market and Other Information—Change in Reporting Currency’’. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details. (4) The Group has adopted IFRS 16 since August 1, 2019 (i.e., from the start of the year ending July 31, 2020 and accordingly for the financial information for HYE2020). Under the transition methods chosen, financial information for HYE2019 and FYE2019, FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 17. As such, the financial information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’. The following table sets forth a breakdown of revenue, revenue from ongoing operations, organic revenue growth, like-for-like revenue growth, operating profit, underlying trading profit from ongoing operations

21 and underlying ongoing trading margin for the Group’s operating segments for HYE2020 and HYE2019 and for FYE2019, FYE2018 and FYE2017.

Six months ended January 31, Year ended July 31, 2017 2020(4) 2019 2019 2018 (Restated)(1) $ million, except as otherwise indicated United States Segment Revenue ...... 9,318 8,874 18,358 16,670 15,193 Ongoing revenue(2) ...... 9,318 8,874 18,358 16,670 14,977 Organic revenue growth(2) ...... 2.6% 9.7% 6.2% 9.9% NA Underlying trading profit from ongoing operations(2)(3) ...... 740 700 1,406 1,204 1,508 Underlying ongoing trading margin(2)(3) ...... 7.9% 7.9% 8.2% 8.4% 8.0% United Kingdom Segment Revenue ...... 1,073 1,177 2,281 2,568 2,548 Ongoing revenue(2) ...... NA NA 2,222 2,568 2,548 Like-for-like revenue growth(2)(7) ...... NA 0.3% 0.6% 0.7% NA Organic revenue growth(2)(7) ...... (5.2)% NA NA NA NA Underlying trading profit from ongoing/non-ongoing operations(2)(3)(6) ...... 30 30 73 96 65 Underlying ongoing trading margin(2)(3) ...... NA NA 3.1% 2.8% 3.8% Canada and Central Europe(5) Revenue ...... 575 796 1,371 1,514 1,543 Ongoing revenue(2) ...... 575 615 1,191 1,514 1,320 Organic revenue growth(2) ...... (6.6)% 2.1% (1.1)% 6.9% NA Underlying trading profit from ongoing operations(2)(3) ...... 29 39 83 57 76 Underlying trading margin from ongoing operations(2)(3) ...... 5.0% 6.3% 5.6% 5.5% 4.3% Total Revenue ...... 10,966 10,847 22,010 20,752 19,284 Ongoing revenue(2) ...... 9,893 9,489 21,771 20,752 18,845 Organic revenue growth(2) ...... 2.0% 9.1% 4.4% 7.5% NA Underlying trading profit from ongoing operations(2)(3) ...... 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341 Underlying ongoing trading margin(2)(3) ...... 7.6% 7.5% 7.4% 7.3% 6.9%

(1) Restated in the Group’s 2018 Consolidated Financial Statements to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. For further information, please see ‘‘Presentation of Financial, Market and Other Information—Change in Reporting Currency’’. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details. (4) The Group has adopted IFRS 16 since August 1, 2019 (i.e., from the start of the year ending July 31, 2020 and accordingly for the financial information for HYE2020). Under the transition methods chosen, financial information for HYE2019 and FYE2019, FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 17. As such, the financial

22 information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’. (5) Until January 30, 2019, when the Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, the ‘‘Canada’’ operating segment was combined with the ‘‘Central Europe’’ operating segment and was disclosed as ‘‘Canada and Central Europe’’ as individually they did not meet the reportable segments quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’. See ‘‘Presentation of Financial, Market and Other Information’’ and ‘‘Overview—Overview of our Business’’. (6) For the six months ended January 31, 2020, due to the U.K. Demerger, the Group’s U.K. business is classified as non-ongoing, in FYE2019 the Group’s U.K. business was presented as ongoing, and as a result, the comparative financial information for HYE2019 has been reclassified for consistency and comparability purposes. Prior to this and for the consolidated financial information for FYE2019, FYE2018 and FYE2017, the Group’s U.K. business is classified as ongoing. See ‘‘Presentation of Financial, Market and Other Information— Ongoing and Non-ongoing Financial Measures’’ above for further details. (7) The Group reported organic revenue growth for its U.K. segment for HYE2020. Prior to this, the Group reported like-for-like revenue growth for its U.K. segment for HYE2019 and for FYE2019, FYE2018 and FYE2017 to aid comparability. Like-for-like revenue growth is determined as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the current period to the corresponding acquisition date in the current year, trading days and net closed branches, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details.

23 RISK FACTORS Prospective investors should read and carefully consider the following risk factors and other information in this Offering Memorandum before deciding to purchase the Notes, including ‘‘Operating and Financial Review’’ and ‘‘Description of the Group and its Business.’’ The summary factors below contain a description of material risks that may affect the Company’s or the Issuer’s ability to fulfill their obligations to investors and those that are material to the securities to be admitted to trading in order for the investor to assess the market risk associated with the Notes and/or that may affect the Company’s ability to achieve its business strategy, projections, targets and objectives. There may be additional risks that we currently consider immaterial or of which we are currently unaware, and any of these risks could have the effects set forth below. The following risk factors address risks that the Directors have identified as material to investors in investing in the Notes, but we do not represent that the statements below regarding the risks of holding the Notes are exhaustive. This is not an exhaustive list or explanation of all risks which investors may face when investing in the Notes and should be used as guidance only. The order in which the following risk factors are presented does not necessarily reflect the likelihood of their occurrence or the relative magnitude of their potential material adverse effect on our business, results of operations, financial condition and/or prospects. This Offering Memorandum also contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors described below and elsewhere in this Offering Memorandum. Unless otherwise specified by reference to the Issuer or the Company, the risks apply in the context of the Group and are also applicable to each of the Company or the Issuer.

Risks Relating to Our Business Weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, particularly the United States, may adversely affect the profitability and financial stability of our customers, could negatively impact our sales growth and results of operations. Our financial performance depends significantly on industry trends and general economic conditions, including the state of the residential, commercial, civil/infrastructure and industrial markets as well as changes in gross domestic product in the geographic markets in which we operate, particularly in the United States where we generated 83.4% of our ongoing revenue in FYE2019 (and following completion of the U.K. Demerger, our exposure to the U.S. markets will be even greater). We serve several end-markets in which the demand for our products is sensitive to the construction activity, capital spending and demand for products of our customers. Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, costs of goods sold, currency exchange rates, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, wage inflation and a variety of other factors beyond our control. Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels or experience reductions in the demand for their own products or services. Adverse conditions in or uncertainty about the markets in which we operate, the economy or the political climate could also adversely impact the customers of our end-markets and their confidence or financial condition, causing them to decide not to purchase our products or delay purchasing decisions or construction contacts, and could also impact their ability to pay for products. Other factors beyond our control, including but not limited to: unemployment, mortgage delinquency and foreclosure rates; inventory loss due to theft; interest rate and foreign currency fluctuations; labor and healthcare costs; the availability of financing; the state of the credit markets, including mortgages, home equity loans and consumer credit; changes in tax laws affecting the real estate industry; weather; natural disasters; acts of terrorism; global pandemics; international trade tensions; and other conditions beyond our control, could have a material adverse effect on our business, financial condition, results of operations and/or prospects. See ‘‘—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’. Any of these events could impair the ability of our customers to make full and timely payments or reduce the volume of products these customers purchase from us and could cause increased pressure on our selling prices and terms of sale. Accordingly, a significant or prolonged slowdown in activity in our relevant markets could negatively impact revenue growth and results of operations. In addition, we may have to

24 close under-performing branches from time to time as warranted by general economic conditions and/or weakness in the industries in which we operate. Any such closures could have a material adverse effect on our business, financial condition, results of operations and/or prospects.

The industries in which we operate are highly competitive, and changes in competition, including as a result of consolidation, could result in decreased demand for our products and could have a material effect on our sales and profitability. We face competition in all markets we serve, from manufacturers (including some of our own suppliers) that sell directly to certain segments of the market, wholesale distributors, supply houses, retail enterprises and online businesses that compete with price transparency. In particular, wholesale and distribution businesses in other industry sectors have been disrupted by the arrival of new competitors with lower-cost transactional business models or new technologies to aggregate demand away from incumbents. In the event that one or more online marketplace companies, who in some cases have larger customer bases, greater brand recognition and greater resources than we do, focus resources on competing in our markets, it could have a material adverse effect on our business, financial condition, results of operations and/or prospects. In addition, such competitors may use aggressive pricing and marketing tactics and devote substantially more financial resources to website and system development (as well as to paid search marketing) than we do. It is expected that competition could further intensify in the future as online commerce continues to grow worldwide. Increased competition may result in reduced revenue, lower operating margins, reduced profitability, loss of market share and diminished brand recognition. The supplier industry is also consolidating as customers are increasingly aware of the total costs of fulfillment and of the need to have consistent sources of supply at multiple locations. This consolidation could cause the industry to become more competitive as greater economies of scale are achieved by competitors, or as competitors with new lower cost transactional business models are able to operate with lower prices. Additionally, we have experienced competitive pressure from certain of our suppliers who are now selling their products directly to customers. Suppliers can often sell their products at lower prices and maintain higher gross margins on their product sales than we can. Continued competition from our suppliers may negatively impact our business and results of operations, including through reduced sales, lower operating margins, reduced profitability, loss of market share and diminished brand recognition. In response to these competitive pressures, amongst other initiatives, we are applying technology as an important medium for delivering better customer service and to create dedicated tools to save customers time and money. To this end, we have introduced a dedicated team and increased resources for the purpose of the exploration and incubation of new business models and new technologies, as well as having acquired a number of online businesses over the last several years. However, we may not continue to realize benefits from such investments and such initiatives may not be successful. In addition, failure to effectively execute our strategies, including the development and acquisition of such new business models or technologies, or successfully identify future market and competitive pressures could have a material effect on revenue and profitability.

The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations. In December 2019, the COVID-19 virus, commonly known as ‘‘coronavirus’’, surfaced in Wuhan, China. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The COVID-19 disease has spread from China to many other countries including the United States, Canada and the United Kingdom, with the number of reported cases and related deaths increasing daily and, in many countries, at a very rapid pace. Many governments, including in the United States, Canada and the United Kingdom, imposed stringent restrictions to seek to mitigate, or slow down, the spread of COVID-19, including restrictions on international and local travel, public gatherings and participation in business meetings, as well as closures of workplaces, schools, and other public sites, and are continuing to encourage ‘‘social distancing’’. The duration of such measures is highly uncertain, but could be prolonged, and stricter measures may still be put in place or reintroduced in areas where such measures have very recently started to be gradually eased. The COVID-19 pandemic and related counter-measures have had and will continue to have an adverse effect on the Group’s results of operations. For example, our trading for the three month period ended April 30, 2020 was significantly affected by the COVID-19 virus and the counter measures taken globally.

25 The duration and extent of the counter measures taken in response to the COVID-19 virus, especially in the United States, will affect the extent of the future impact on our trading results. As a result of government measures, the Group was required to close some showrooms in the United States as they did not, in certain states, qualify as providing essential services. In addition, as the spread of the COVID-19 virus continues, we voluntarily closed showrooms in other locations and have moved to virtual consultation with our customers. Our counter locations remain open as they have been deemed to provide essential services as of the date of this Offering Memorandum, but we have also shifted to a model where customers submit orders online and visit our stores for pick up. In certain locations, we have closed some stores due to a decrease in demand and we have had to shift certain store support operations to remote or virtual and we may deem it appropriate or advisable to take further similar or additional actions in the future. Our distribution centers have not been affected by closures to date, but any change in the approach in respect of the government measures could result in the Group having to close distribution centers as well and could result in a decline of revenue. While the Group is in the process of reopening some showrooms and allowing customers back into our locations as government measures are eased, this will be a phased approach and implementing social distancing to keep employee and customer density down in our stores and other spaces may adversely affect sales volumes. The COVID-19 virus has also negatively affected our workforce. Due to measures implemented by the Group and the governments in the Group’s most significant markets to protect the health and safety of employees, some of our employees may in the future become unavailable, which may disrupt our operations. In order to protect our liquidity and cashflow, we have implemented a hiring freeze, a reduction in associate hours, overtime and the use of temporary staff, and temporary lay-offs in the worst hit regions in response to the COVID-19 virus. Globally, consumer behavior has also been affected by the COVID-19 virus, resulting in decreased customer demand, delayed payments by customers and increased impairments of receivables. The COVID-19 virus outbreak may also negatively impact our supply chain. In China, where some of our suppliers are located, the government imposed stringent restrictions to businesses in February 2020 to slow down the spread of COVID-19, including restrictions on travel, participation in business meetings and the closure of shops. While the Chinese government has in the meantime tentatively permitted some businesses to reopen, ongoing lockdowns in other regions, such as the United States, Canada and the United Kingdom may continue to negatively impact our supply chain. In late February 2020, the COVID-19 outbreak caused financial markets globally to experience significant decline and volatility. In March 2020, the COVID-19 pandemic, coupled with a sharp material decline in the oil price, caused financial markets globally to experience further material declines and elevated volatility, signaling a likely economic downturn and adverse impact on GDP, as well as broader economic conditions, including in the United States. There is no assurance that the responses from central banks (which include reductions in interest rates and liquidity support) and financial support and fiscal spending by certain governments will be sufficient to support the United States or other economies or that financial markets will return to normal. The effects of the COVID-19 pandemic on the financial markets may materially and adversely affect our access to capital and cost of capital. There is no guarantee that debt or equity financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. There is significant uncertainty relating to the potential effect of the COVID-19 virus on our business. Any of the factors above could have a material adverse effect on the Group’s business, financial condition, rating and results of operations and may also have the effect of heightening many of the other risks described in this ‘‘Risk Factors’’ section. For more information, see ‘‘Overview—Recent Developments— Results of operations for the three month period ended April 30, 2020.’’

We may not rapidly identify or effectively respond to consumer wants, expectations or trends, which could adversely affect our relationship with customers, our reputation, the demand for our products and our market share. The success of our business depends in part on our ability to identify and respond promptly to evolving trends in demographics, as well as customer wants, preferences and expectations, while also managing appropriate inventory levels and maintaining our focus on delivering an excellent customer experience. For example, our customers are currently facing challenges in the form of a shortage of skilled trade professionals and a need for improved construction productivity. It is also difficult to successfully predict the products that customers will require. In addition, each of the primary end-markets we serve has different needs and expectations, many of which evolve as the demographics in a particular market change.

26 We also need to offer more localized assortments of our products to appeal to needs within each customer group. If we do not successfully evolve and differentiate to meet the individual needs and expectations of, or within, a particular end-market, we may lose market share. We are continuing to invest in our e-commerce and omni-channel capabilities and other technology solutions, including significant upgrades to our enterprise-wide resource planning systems, to simplify our customer propositions and to optimize the supply chain and branch network to deliver a more efficient business. Our corporate venture capital and strategic partnering arm, Ferguson Ventures, is continuing to help discover, invest in and partner with technology companies and start-ups to, among other things, help address industry problems, including the shortage of skilled trade professionals and the need for improved construction productivity. The cost and potential problems and interruptions associated with these initiatives could disrupt or reduce the efficiency of our online and in-store operations in the near term, lead to product availability issues and negatively affect our relationship with our customers. Furthermore, accomplishing these initiatives will require a substantial investment in additional information technology associates and other specialized associates along with organizational change management. We may face significant competition in the market for these resources and may not be successful in our hiring efforts. Failure to choose the right investments and implement them in the right manner and at the right pace could adversely affect our relationship with customers, our reputation, the demand for our products, and our market share. In addition, our branch and omni-channel initiatives, enhanced supply chain, and new or upgraded information technology systems might not provide the anticipated benefits. It might take longer than expected to realize the anticipated benefits, or the initiatives might fail altogether, each of which could adversely impact our competitive position and our financial condition, results of operations, or cash flows.

We could be adversely impacted by declines in the residential and non-residential repair, maintenance and improvement markets as well as the new construction market. Our business units operating in the residential and non-residential RMI and new construction markets are dependent, in part, upon certain macroeconomic trends in these markets. For example, for FYE2019, the Group’s businesses operating in the RMI markets in the United States, United Kingdom and Canada generated 60%, 66% and 60% of the total revenue for each segment. In addition, economic weakness may cause unanticipated shifts in our end-market preferences and purchasing practices and in the business models and strategies of our customers. Such shifts may alter the nature and prices of products demanded by the end consumer, and, in turn, our customers and could adversely affect our operating performance. Management monitors the activity levels of these markets through various indicators of home improvement and repair spending and commercial/industrial construction spending. For example, one of the indicators we use in the residential RMI market is the Leading Indicator of Remodeling Activity (‘‘LIRA’’) as it provides a short-term outlook of national home improvement and repair spending to owner-occupied homes in the United States. Prior to the outbreak of the COVID-19 virus, LIRA projections suggested continued absolute growth in 2020. In our commercial and civil/infrastructure markets, management uses the American Institute of Architects Billings Index—Commercial/Industrial (‘‘AIA Billings Index’’) as it is a leading economic indicator of construction activity and is widely seen as reflecting prospective construction spending. Any score below 50 indicates a decline in the business activity across the architecture profession, whereas an index score above 50 indicates growth. While the AIA Billings Index averaged above 50 throughout FYE2019, dipping below 50 in only two months during that year, the index score has dipped below 50 for three out of the last nine months since July 2019 with the most recent reading of 29.5 in April 2020. See ‘‘—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020.’’

Fluctuating commodity prices, as well as unexpected product shortages, may adversely affect the Group’s business, financial condition or results of operations. Some of our products contain significant amounts of commodity-priced materials, predominantly plastic, copper and steel, and other components which are subject to price changes based upon fluctuations in the commodities market. To a lesser extent, fluctuations in the price of fuel could affect transportation costs. Volatility in prices has increased in recent months due in part to the expected impact of the COVID-19

27 pandemic on the global economy. Our ability to adjust prices in a timely manner to account for such fluctuations may often depend on market conditions, our fixed costs and other factors. In the event circumstances require us to adapt our product prices and operational strategies to reflect fluctuating commodity prices, there can be no assurance that such adaptations will be effective and a failure to successfully adapt could, for example, result in write downs of inventories which could have a material adverse effect on our business, financial condition, results of operations and/or prospects.

Acquisitions, partnerships, joint ventures, demergers and other business combination or strategic transactions involve a number of inherent risks, any of which could result in the benefits anticipated not being realized and could have an adverse effect on results of operations. Acquisitions are an important part of our growth model and we regularly consider and enter into strategic transactions, including mergers, acquisitions, investments and other growth, market and geographic expansion strategies, with the expectation that these transactions will result in increases in sales, cost savings, synergies and various other benefits. During the years ended July 31, 2019 and 2018, we invested $657 million and $416 million in acquisitions, respectively. We may not realize any anticipated benefits from such transactions or partnerships, or any future ones, we may be exposed to additional liabilities of any acquired business or joint venture and we may be exposed to litigation in connection with any transaction. Furthermore, we may have trouble identifying suitable acquisition targets in the future. Our ability to deliver the expected benefits from any strategic transactions that we do complete is subject to numerous uncertainties and risks, including our ability to integrate personnel, labor models, financial, supply chain and logistics, IT and other systems successfully; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; and increasing the scope, geographic diversity and complexity of our operations. On September 3, 2019, we announced our intention to demerge our U.K. operations subject to shareholder approval. We face a variety of risks and uncertainties relating to this transaction, including but not limited to costs and diversion of management attention, as well as other resources. While our strategic intent to complete the U.K. Demerger is unchanged and we continue to progress the demerger process, timing will depend upon the stabilization of market conditions. In addition, on April 15, 2020, we announced a pause of current merger and acquisition activity due to the market uncertainty caused by the COVID-19 virus and in order to protect our cash position. The risks and uncertainties associated with these activities could result in operational and administrative inefficiencies and added costs and may harm our reputation, which could adversely impact our business and results of operations. See ‘‘—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020.’’ Effective internal controls are necessary to provide reliable and accurate financial reports, and the integration of businesses may create complexity in our financial systems and internal controls and make them more difficult to manage. Integration of businesses into our internal control system could cause us to fail to meet our financial reporting obligations. Additionally, any impairment of goodwill or other assets acquired in a strategic transaction or charges to earnings associated with any strategic transaction, may materially reduce our profitability. Following integration, an acquired business may not produce the expected margins or cash flows. Our shareholders may react unfavorably to substantial strategic transactions. Furthermore, we may finance these strategic transactions by incurring additional debt or raising equity, which could increase leverage or impact our ability to access capital in the future.

Execution of our operational strategies could prove unsuccessful, which could have a material adverse effect on our business, financial condition, results of operations and/or prospects. To achieve our key priorities, we must drive profitable growth across our operational businesses by fulfilling customer wants, capitalizing on attractive growth opportunities and achieving excellent execution. Fulfilling customer wants is a key part of our strategy to drive profitable growth. If service levels were to significantly decrease, customers might purchase from our competitors instead, resulting in reduced revenue, lower operating margins, reduced profitability, loss of market share and/or diminished brand recognition. Development of our operating model is a key part of driving profitable growth. There is a risk that we are not sufficiently agile in adapting our operating model and therefore cannot adapt to changing customer

28 wants and/or are unable to flex our cost base when required. Any failure to appropriately address some or all of these risks could damage our reputation and have a significant adverse effect on our business. In response to these risks, we develop and invest in new business models, including e-commerce applications and omni-channel opportunities and update our cloud-based information technology systems to respond to changing customer and consumer wants. This is expected to enable us to accelerate the time to market for new revenue streams and gain insight on new technologies and trends. We remain vigilant to the threats and opportunities in this space. The development of new business models in our markets are closely evaluated—both for investment potential and threats. In addition, we invest in well trained, highly engaged associates, driving a strong sales culture that works consistently to understand customer wants more accurately. However, there can be no assurance that we will be successful in identifying emerging threats or opportunities, or that we will be able to effectively address threats or capitalize on opportunities once identified.

A failure of a key information technology system or process could adversely affect the operations of our business. Technology systems and data are fundamental to the future growth and success of our business. In managing our business, we rely on the integrity and security of and consistent access to data from these systems such as sales, customer data, merchandise ordering, inventory replenishment and order fulfillment. For these information technology systems and processes to operate effectively, we or our service providers must periodically maintain and update them. In addition, our systems and the third-party systems on which we rely are subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses; security breaches; cyber-attacks, including the use of ransomware (as discussed below); catastrophic events such as fires, floods, earthquakes, tornadoes, or hurricanes; acts of war or terrorism; and design or usage errors by our associates, contractors or third-party service providers. Although we and our third-party service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise of the integrity, security and consistent operations of these systems, such efforts may not be successful. We rely on data centers and other technologies and services provided by third parties in order to manage our cloud-based infrastructure and operate our business. If any of these services becomes unavailable or otherwise is unable to serve our requirements due to extended outages, interruptions, facility closure, or because it is no longer available on commercially reasonable terms, expenses could increase and our operations could be disrupted or otherwise impacted until appropriate substitute services, if available, are identified, obtained, and implemented. Cyber-attacks against companies have increased in frequency, scope and potential harm since the beginning of the COVID-19 virus outbreak. Cybercriminals are seeking to use the pandemic for commercial gain, deploying a variety of ransomware and other malware including phishing and malware distribution, using the subject of coronavirus or COVID-19 as a lure, registration of new domain names containing wording related to coronavirus or COVID-19, and attacks against newly deployed remote access and teleworking infrastructure. As these strategies continue to evolve, we may not be able to successfully protect our operational and information technology systems and platforms against such threats and we may incur significant costs in the attempt to modify or enhance our protective measures or investigate or remediate any vulnerability, which could have a material adverse effect on our liquidity, financial condition and the operating results of our business. While we have instituted safeguards for the protection of our information systems and believe we use reputable third-party providers, during the normal course of business, we have experienced and expect to continue to experience attempts to breach our information systems, and we may be unable to protect sensitive data and/or the integrity of our information systems. A cybersecurity incident could be caused by malicious third-parties using sophisticated methods to circumvent firewalls, encryption and other security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. As a result, we or our service providers could experience errors, interruptions, delays or cessations of service in key portions of our information technology infrastructure, which could significantly disrupt our operations and be costly, time consuming and resource-intensive to remedy. As a result, we could forego revenue or profit margins if we are unable to trade. Furthermore, if critical information systems fail or otherwise become unavailable, our ability to process orders, maintain proper levels of inventories, collect

29 accounts receivable and disburse funds could be adversely affected. Any such interruption of the Group’s information systems could also subject us to additional costs. Loss of customer, supplier, associate or other business information could disrupt operations, damage our reputation and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, associates and others, any of which could have a material adverse effect on our business, financial condition, results of operations and/or prospects. See below ‘‘—Regulation in the areas of privacy and protection of user data could harm our business.’’

If our domestic or international supply chain or our fulfillment network for our products is ineffective or disrupted for any reason, or if these operations are subject to trade policy changes, our results of operations could be adversely affected. We source, distribute and sell products from domestic and international suppliers, and their ability to reliably and efficiently fulfill our orders is critical to our business success. In our ongoing business, we purchase from approximately 42,000 suppliers located in various countries around the world. Although the Company believes no single supplier or manufacturer accounted for more than 5% of our total material and supply purchases during the year ended July 31, 2019, disruptions could occur due to factors beyond our control which could adversely affect a supplier’s ability to manufacture or deliver products. The recent COVID-19 virus outbreak has led to work and travel restrictions within, to, and out of a number of countries, resulting in supply chain disruptions and delays. These restrictions and delays, which may expand depending on the progression of the pandemic, have impacted and may continue to impact suppliers and manufacturers of certain of our products. This may make it difficult for our suppliers to source and manufacture products in, and to export our products from, affected areas. As a result, we have faced and may continue to face supply chain disruptions and delays, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such products, they may cost more, which could adversely impact our profitability and financial condition. See ‘‘—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020.’’ Financial instability among key suppliers, political instability and labor unrest in source countries or elsewhere in our supply chain, changes in the total costs in our supply chain (also reflecting changes in fuel, labor and currency exchange rates), port labor disputes and security, the outbreak of pandemics, including COVID-19, weather-related events, natural disasters, work stoppages, shipping capacity restraints, changes in trade policy, retaliatory trade restrictions imposed by either the United States, Europe, China or another major source country, tariffs or duties, fluctuations in currency exchange rates and transport availability, capacity and costs are all beyond our control and could negatively impact our business if they seriously disrupted the movement of products through our supply chain or increased their costs. Additionally, as we add fulfillment capabilities or pursue strategies with different fulfillment requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If our fulfillment network does not operate properly or if a supplier fails to deliver on its commitments, we could experience delays in inventory, increased delivery costs or lack of availability, any of which could lead to lower revenue and decreased customer confidence, and adversely affect our results of operations. Furthermore, our existing suppliers may decide to supply products directly to end users that are existing or potential customers, which would have a detrimental effect on our ability to keep and procure customers, and maintain and win business, thereby having a material adverse effect on our business, financial condition, results of operations and/or prospects.

Fluctuations in foreign currency and inflation may have an adverse effect on reported results of operations Our exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of the Group’s financial statements, as well as from transaction exposure associated with transactions in currencies other than an entity’s functional currency. Up until FYE2017, the Group reported its results in pounds sterling and its main currency exposure arose on the translation of U.S. dollar and to a lesser extent Canadian dollar earnings into pounds sterling. From the year beginning August 1, 2017 onwards, the Group has presented its consolidated financial statements in U.S. dollars, as the majority of revenue and underlying trading profit is generated in U.S. dollars, the impact of foreign exchange rate movements will be reduced. For FYE2019, 83.4% of our revenue was reported in U.S. dollars, while the remaining 16.6% was in currencies other than U.S. dollars that is then translated into U.S. dollars for financial reporting purposes (this exposition will increase following the U.K. Demerger).

30 We are exposed to foreign currency exchange rate risk with respect to the U.S. dollar relative to the local currencies of our international subsidiaries, primarily the Canadian dollar and pounds sterling, arising from transactions in the normal course of business, such as sales and loans to wholly-owned subsidiaries, sales to third-party customers, purchases from suppliers and bank loans and lines of credit denominated in foreign currencies. Following the U.K. Demerger, our only significant foreign exchange exposure from a revenue perspective will be Canadian dollars. We also have foreign currency exposure to the extent receipts and expenditures are not denominated in the subsidiary’s functional currency and that could have an impact on sales, costs and cash flows. Volatility arising from movements of the U.S. dollar relative to the Canadian dollar and pounds sterling has increased in recent months due in part to the expected impact of the COVID-19 pandemic on the global economy. Fluctuations in foreign currency exchange rates could affect the Group’s results of operations and impact reported net sales and net earnings.

Our own brand products subject us to certain increased risks such as regulatory, product liability and reputational risks. As we expand our own brand product offerings organically and through acquisitions, we may become subject to increased risks due to our greater role in the design, marketing and sale of those products. The risks include greater responsibility to administer and comply with applicable regulatory requirements, increased potential product liability and product recall exposure, and increased potential reputational risks related to the responsible sourcing of those products. To effectively execute on our product differentiation strategy, we must also be able to successfully protect our proprietary rights and successfully navigate and avoid claims related to the proprietary rights of third parties. In addition, an increase in sales of our own brand products may adversely affect sales of our suppliers’ products, which in turn could adversely affect our relationships with certain of our suppliers. Any failure to appropriately address some or all of these risks could damage our reputation and have an adverse effect on our business, results of operations, and financial condition.

Failure to achieve and maintain a high level of product quality as a result of our suppliers or manufacturers mistakes or inefficiencies could damage our reputation and negatively impact our revenue and results of operations. To continue to be successful, we must continue to preserve, grow and leverage the value of our brand in the marketplace. Reputational value is based in large part on perceptions of subjective qualities. Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if such incident or incidents result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish our brand and lead to adverse effects on our business. In particular, product quality issues as a result of our suppliers or manufacturers’ acts or omissions could negatively impact customer confidence in our brands and our products. As we do not have direct control over the quality of the products manufactured or supplied by such third-party suppliers, we are exposed to risks relating to the quality of the products we distribute. If our product offerings do not meet applicable safety standards or customers’ expectations regarding safety or quality, or are alleged to have quality issues or to have caused personal injury or other damage, we could experience lower revenue and increased costs and be exposed to legal, financial and reputational risks, as well as governmental enforcement actions. In addition, actual, potential or perceived product safety concerns could result in costly product recalls. We seek to enter into contracts with suppliers which provide for indemnification from any costs associated with the provision of defective products. However, there can be no assurance that such contractual rights will be obtained or adequate, or that related indemnification claims will be successfully asserted by us.

The nature of our operations may expose our associates, contractors, customers, suppliers and other individuals to health and safety risks and we may incur property, casualty or other losses not covered by our insurance policies. The nature of our operations can expose our associates, contractors, customers, suppliers and other individuals to health and safety risks, which can lead to loss of life or severe injuries. This includes potential exposure to COVID-19. See ‘‘—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020.’’ Such risks include exposure to the potential for litigation from third parties. In the United States, in particular, the risk of litigation is generally higher than in other parts of our business in areas such as workers’ compensation, general employer liability and environmental and asbestos litigation.

31 For example, as a result of our past business activities, we are exposed, principally through indemnification claims, to various claims related to asbestos, for which we recognized environmental and legal provisions amounting to $70 million on our balance sheet as at July 31, 2019. In future periods, we could be subject to cash costs or non-cash charges to earnings if any of such litigation matters are resolved on unfavorable terms. However, although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claims, we do not expect that our pending legal proceedings or claims will have a material adverse impact on our business, financial condition, results of operations and/or prospects. Although we maintain insurance we believe to be sufficient to cover estimated product liability claims and other types of claims in various jurisdictions, such insurance does not cover all matters in all circumstances and subjects us to counterparty risks. However, there can be no assurance that these estimates will prove correct. Factors which could cause actual results to differ from these estimates include: (i) increases in the number of, or adverse trends in, asbestos claims filed against any of the Group’s subsidiaries; (ii) increases in the cost of resolving current and future asbestos claims as a result of adverse trends relating to settlement costs, dismissal rates, legal fees and/or judgment sizes; (iii) decreases in the amount of insurance available to cover asbestos claims as a result of adverse changes in the interpretation of insurance policies or the insolvency of insurers; (iv) the emergence of new trends or legal theories that enlarge the scope of potential claimants and/or new procedural mechanisms that facilitate their claims; (v) the impact of bankruptcies of other companies whose share of liability may be imposed on the Group’s subsidiaries under state or national liability laws; (vi) unpredictable aspects of the litigation process; (vii) adverse changes in the mix of asbestos related diseases with respect to which asbestos claims are made against the Group’s subsidiaries; (viii) potential legislative changes; and (ix) changes in the discount rate used to determine the discounted liability. However, there can be no assurance that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate coverage against potential claims. If we do not have adequate contractual indemnification or insurance available, such claims could have a material adverse effect on our business, financial condition, results of operations and/or prospects.

We are and may continue to be involved in legal proceedings in the course of our business, and while we cannot predict the outcomes of those proceedings and other contingencies with certainty, some of these outcomes may adversely impact our business. We are and may continue to be involved in legal proceedings such as consumer and employment and other litigation that arises from time to time in the course of our business. Litigation is inherently unpredictable, and the outcome of some of these proceedings and other contingencies could require us to take or refrain from taking actions which could adversely impact the business or could result in excessive verdicts. Additionally, involvement in these lawsuits and related inquiries and other proceedings may involve significant expense, divert management’s attention and resources from other matters, and negatively affect our reputation.

Changes in our credit ratings and outlook may reduce access to capital and increase borrowing costs The Company’s credit ratings are based on a number of factors, including our financial strength and factors outside of our control, such as conditions affecting our industry generally or the introduction of new rating practices and methodologies. The COVID-19 pandemic could negatively impact our credit ratings and thereby adversely affect our access to capital and cost of capital. We cannot provide assurances that our current credit ratings will remain in effect or that the ratings will not be lowered, suspended or withdrawn entirely by the rating agencies. If rating agencies lower, suspend or withdraw the ratings, the market price or marketability of our securities may be adversely affected. Pressure on the ratings could also arise from higher shareholder payouts or larger acquisitions than we have currently planned that result in increased leverage, or in a deterioration in the metrics used by the rating agencies to asses creditworthiness. In addition, any change in ratings could make it more difficult for the Group to raise capital on acceptable terms, impact the ability to obtain adequate financing and result in higher interest costs on future financings.

32 In order to compete, we must attract, retain and motivate key associates, and the failure to do so could have an adverse effect on results of operations. We depend on our executive officers, as well as senior management, of all our businesses. As the Group develops new business models and new ways of working and as a result of the proposal to move its listing to the United States, it needs to develop suitable skill sets within the organization. Furthermore, as the Group continues to execute strategic change programs, including corporate migrations, it is important that existing skill sets and talent are retained. Failure to do so could delay the execution of strategic change programs, result in loss of ‘‘corporate memory’’ and reduce the Group’s supply of future management skill. As a result of the outbreak of the COVID-19 pandemic, several governments around the world have imposed restrictions to help avoid, or slow down, the spreading of COVID-19, including restrictions on international and local travel, public gatherings and participation in business meetings, as well as closures of universities, schools, stores and restaurants. These restrictions could negatively impact our workforce. If significant numbers of employees, key personnel and/or senior management became unavailable due to sickness, legal requirements or self-isolation, our operations could be disrupted and materially adversely affected. See ‘‘—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020.’’ We customarily negotiate employment agreements and non-competition agreements with key personnel of the companies we acquire in order to maintain key customer relationships and manage the transition of the acquired business. The loss of senior management and other key personnel, or the inability to hire and retain qualified replacements, both generally and in connection with the execution of key business strategies, including corporate migrations, could adversely affect the Group’s business, financial condition and/or results of operations. Furthermore, the Group’s ability to provide high-quality products, advice and services on a timely basis depends, to a significant extent, on having an adequate number of qualified employees, including those in managerial, technical, sales, marketing and support positions. Accordingly, our ability to increase productivity and profitability and support our growth strategies may be limited by our ability to employ, train, motivate and retain skilled personnel, which in turn may be hindered by any present or future restructurings and cost savings initiatives. Because we face significant competition in attracting skilled personnel, such as personnel with technical skills, we may be unsuccessful in attracting and retaining the personnel required to conduct and expand our operations and, in particular, develop our technology and grow our online presence, which could have a negative effect on our business, financial condition or results of operations. Our workforce constitutes a significant proportion of our cost base. Any inflationary pressures, as well as changes in applicable laws and regulations or other factors resulting in increased labor costs, could have a material adverse effect on our business, financial condition, results of operations and/or prospects.

We are subject to various risks related to the local and international nature of our business, including domestic and foreign laws, regulations and standards. Failure to comply with such laws and regulations or the occurrence of unforeseen developments such as litigation could adversely affect our business. Our business operates in the United States, Canada and the United Kingdom and is subject to specific risks of conducting business in different jurisdictions across these countries and other parts of the world. Our business is subject to a wide array of domestic and international laws, regulations and standards in jurisdictions where we operate, including advertising and marketing regulations, anti-bribery and corruption laws, anti-competition regulations, data protection (including payment card industry data security standards) and cybersecurity requirements (including protection of information and incident responses), environmental protection laws, foreign exchange controls and cash repatriation restrictions, government business regulations applicable to us as a government contractor selling to federal, state and local government entities, import and export requirements, intellectual property laws, labor laws, product compliance laws, supplier regulations regarding the sources of supplies or products, tax laws, zoning laws, unclaimed property laws and laws, regulations and standards applicable to other commercial matters. In particular, occupational health and safety or consumer product safety regulation may require Group members to take appropriate corrective action (including but not limited to product recall) in respect of products that they have distributed. Managing a product recall or other corrective action can be expensive and can divert the attention of management and other personnel for significant time periods. Moreover, we are also subject to audits and inquiries by government agencies in the normal course of business.

33 Failure to comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary penalties as well as potential damage to the Company’s reputation. Changes in these laws, regulations and standards, or in their interpretation, could increase the cost of doing business, including, among other factors, as a result of increased investments in technology and the development of new operational processes. Furthermore, while we have implemented policies and procedures designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that employees, contractors or agents will not violate such laws, regulations and standards or our policies. Any product recall or other corrective action may negatively affect customer confidence in the relevant Group member’s products and the Group itself, regardless of whether it is successfully implemented or not. Any such failure to comply or violation could individually or in the aggregate materially adversely affect our financial condition, results of operations and cash flows.

Regulation in the areas of privacy and protection of user data could harm our business. In addition to the actual and potential changes in law described elsewhere in these Risk Factors, in the course of our business, we receive and store a large volume of personal data. This data is increasingly subject to legislation and regulations in numerous jurisdictions around the world. The EU’s General Data Protection Regulation (the ‘‘GDPR’’) came into effect in May 2018. The GDPR has unified data protection within the EU under a single law, which has resulted and will result in significantly greater compliance burdens and costs for companies with users and operations in the EU. Under the GDPR, fines of up to A20 million or up to 4% of the annual global revenues of the infringer, whichever is greater, could be imposed. In the United Kingdom, the Data Protection Act entered into force in May 2018, which supplements the GDPR in the United Kingdom. The California Consumer Privacy Act 2018 (‘‘CCPA’’) came into force in 2020 and has created new data privacy rights for users effective in 2020. The functioning of the EU-U.S. Privacy Shield is subject to regular review and has been the source of disagreement between regulatory authorities in the EU and the United States. These laws and their interpretations continue to develop and may be inconsistent from jurisdiction to jurisdiction. Furthermore, in the United States, due to the absence of overarching federal law, there is a patchwork of privacy legislation formed by individual state laws. This government action is typically intended to protect the privacy of personal data that is collected, processed and transmitted in or from the governing jurisdiction. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. While we have invested and continue to invest significant resources to comply with CCPA, the GDPR and other privacy regulations, many of these regulations are new, extremely complex and subject to interpretation. Non-compliance with these laws could result in negative publicity, damage to our reputation, penalties or significant legal liability. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business.

Changes in, or interpretations of, United States, United Kingdom or Canadian tax laws could have a material adverse effect on our business, financial condition, results of operations and/or prospects. The wider macro political and economic situation is uncertain in many of the territories in which we operate and policy changes could affect our future tax rate. A combination of growing international trade pressures, rising debt levels and the impact of the COVID-19 pandemic is creating economic and political uncertainty which could lead to changes to the prevailing tax regime. Our future results could also be adversely affected by changes in the effective tax rate as a result of fluctuations in our overall profitability and changes in the mix of earnings in countries with differing statutory tax rates, changes in tax legislation, the results of the examination of previously filed tax returns and continuing assessment of our tax exposures any of which could have a material adverse effect on our business, financial condition, results of operations and/or prospects. Any future change in taxation legislation or the interpretation of tax legislation in either the United States, the United Kingdom or Canada could materially affect our results of operations.

Potential tariffs, a global trade war or Brexit could increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results. Trade tensions between the United States and China on the one hand and between the United Kingdom and the EU on the other escalated in 2018 generally, and remained elevated in 2019. Between July 2018

34 and December 2019, the U.S. government imposed tariffs on a variety of imports from China with rates ranging from 10% to 25% and the Chinese government retaliated with tariffs ranging from 5% to 10% on U.S. imports. On December 13, 2019, however, the United States and China each confirmed that the two countries had reached a ‘‘Phase One’’ deal in the ongoing trade war, resulting in the signing of economic and trade agreement on December 15, 2019 between the United States and China. It remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S., tax policy related to international commerce, or other trade matters. The current U.S. tariffs on China-origin goods and the related geopolitical uncertainty between the United States and China, which is a key market for the sourcing of our products, and between the United States and the EU, have caused, and may continue to cause, our product costs to increase, which could have a material adverse effect on our competitiveness of our products and our business, liquidity, financial condition and results of operations. The November 2020 U.S. Presidential elections and related campaigning could complicate the reaching of a long term comprehensive agreement on tariffs between the United States and China on the one hand and between the United States and the EU on the other. Similarly, the U.K.’s exit from the European Union (‘‘Brexit’’) on January 31, 2020, has created significant uncertainty around the future relationship between the U.K. and other countries (including those in the EU), and the introduction of customs duties and tariffs on trade is a possibility. The United Kingdom is expected to continue to follow European Union (‘‘EU’’) law during a transition period set to terminate on December 31, 2020. The effects of Brexit will depend, in part, on agreements the United Kingdom negotiates during the transitional period to retain access to markets in the EU, including current trade and finance agreements. Trade barriers between the United Kingdom and the EU and other governmental action related to tariffs has the potential to decrease demand for the Group’s products, increase the Group’s costs, negatively impact suppliers and/or adversely impact the economies in which the Group operates or certain sectors thereof and, thus, may have a material adverse effect on the Group’s business, financial condition, results of operations and/or prospects.

We occupy most of our facilities under short-term non-cancelable leases. We may be unable to renew leases on favorable terms or at all. Also, if we close a facility, we may remain obligated under the applicable lease. Most of our branches and distribution centers are located in leased premises. As at July 31, 2019, the Group had total operating lease commitments of $1,126 million (compared to $1,081 million as at July 31, 2018). Many of our current leases are non-cancelable and typically have terms of around five years, with options to renew for specified periods of time. There can be no assurance that we will be able to renew our current or future leases on favorable terms or at all which could have an adverse effect on our ability to operate our business and on our results of operations. In addition, if we close or cease to use a facility, we generally remain committed to perform our obligations under the applicable lease, which include, among other things, payment of the base rent for the balance of the lease term.

We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability, and potentially disrupt our business. We accept payments using a variety of methods, including trade credit, cash, checks, credit and debit cards, PayPal and gift cards, and we may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or be subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a

35 shift to other payment types or potential changes to our payment systems that may result in higher costs. As a result, our business and operating results could be adversely affected. Also, certain of the Group’s customers or suppliers or other third parties may seek to obtain products fraudulently from, or submit fraudulent invoices to, any member of the Group. The Group has sought to extend best practice with a number of processes and controls to minimize opportunities for fraud. If the Group is unsuccessful in detecting fraudulent activities, it could suffer loss directly and/or lose the confidence of its customers and/or suppliers, which could have a material adverse effect on the Group’s business, financial condition, results of operations and/or prospects. Because our business is working capital intensive, we rely on our ability to manage our product purchasing and customer credit policies. Our operations are working capital intensive, and our inventories, accounts receivable and accounts payable are significant components of our net asset base. We manage our inventories and accounts payable through our purchasing policies and our accounts receivable through our customer credit policies. If we fail to adequately manage our product purchasing or customer credit policies, our working capital and financial condition may be adversely affected.

We have funding risks related to our defined benefit pension schemes. Our pension fund liabilities are partially matched with a portfolio of assets, comprising equity and debt securities alongside diversified growth assets and further investments designed to hedge the underlying interest and inflation risk inherent in the associated liabilities. The U.K. Plan (as defined below) also has a buy-in insurance policy which covers a large proportion of the existing pensioner population. The market value of these assets can rise and fall over time which impact the funding position of the scheme. On an accounting basis, the liabilities of the Group’s pension plans are measured using a discount rate assessed by reference to corporate bond yields, which can also vary significantly between reporting periods. As at July 31, 2019, the Group had recognized on its balance sheet a net pension asset of $153 million in respect of defined benefit plans, a decrease of $21 million from a net asset of $174 million recognized at July 31, 2018. The Group’s pension plan liabilities are measured on a technical basis using actuarial valuations. In 2016, the Group agreed to a deficit reduction plan, amounting to £62.5 million to its main defined benefit plan in the United Kingdom (the ‘‘U.K. Plan’’). To date all contributions have been paid under this deficit reduction plan. As required by United Kingdom pensions regulation, the U.K. Plan is currently going through its triennial actuarial valuation exercise based on the U.K. Plan financial position as at April 30, 2019. The result of this valuation, together with any associated deficit reduction payments, are required to be formally agreed between the U.K. Plan Trustees and the Group by July 31, 2020. As part of the U.K. Demerger, which, subject to supportive external markets conditions, the Group is planning to complete in the calendar year ending December 31, 2020, we may decide that the U.K. Plan remains with the Ferguson Group rather than transferring with the U.K. business. Following the disposal of the Group’s business operations in the Nordic region in March 2018, the Group made a one-off contribution of $94 million to the U.K. Plan. Although we do not expect additional one-off contributions, any requirement to pay such additional sums, due to factors such as a deterioration in economic conditions or changes in actuarial assumptions, could have an adverse effect on our financial condition. In addition, actions by the Pensions Regulator or the trustees of our pension schemes or any material revisions to the existing pension legislation could result in us being required to incur significant additional costs immediately or in short timeframes. Such costs, in turn, could have an adverse effect on our financial condition.

The Group’s strategy could be materially adversely affected by its indebtedness. As at January 31, 2020, we had consolidated net debt of $1,944 million. We may incur substantial additional indebtedness in the future, in particular in connection with future acquisitions which remain a core part of our strategy, some of which may be secured by some or all of our assets. Our overall level of indebtedness from time to time may have an adverse effect on our strategy, including: • requiring us to dedicate portions of our cash flow to payments on our debt, thereby reducing funds available for reinvestment in the business; • restricting us from securing the financing, if necessary, to pursue acquisition opportunities; • limiting the our flexibility in planning for, or reacting to, changes in our business and industry; and • placing us at a competitive disadvantage compared to our competitors that have lower levels of indebtedness.

36 We may need to refinance some or all of our debt upon maturity either on terms which could potentially be less favorable than the existing terms or under unfavorable market conditions, which may also have an adverse effect on our strategy.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters and uncertainty caused by the COVID-19 virus outbreak, could significantly affect our financial results or financial condition. International Financial Reporting Standards and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, asset impairment, impairment of goodwill and other intangible assets, inventories, lease obligations, self-insurance, tax matters, pensions and litigation, are complex and involve many subjective assumptions, estimates and judgments. Changes in accounting standards or their interpretation or changes in underlying assumptions, estimates or judgments and uncertainty caused by the COVID-19 virus outbreak, could significantly change our reported or expected financial performance or financial condition. Specifically, changes to financial accounting standards require operating leases to be recognized on our balance sheet. We have significant obligations relating to our current operating leases. The IASB released IFRS 16 ‘‘Leases’’ (‘‘IFRS 16’’) replacing IAS 17 ‘‘Leases’’, which the Group adopted on August 1, 2019. The standard makes changes to the treatment of leases in the Group’s financial statements, requiring the use of a single model to recognize a lease liability and a right of use asset for all leases, including those classified as operating leases under IAS 17 ‘‘Leases’’ the previously applicable standard, unless the underlying asset has a low value or the lease term is 12 months or less. Rental charges in the income statement previously recorded under IAS 17 are replaced with depreciation and interest charges under IFRS 16 and right of use assets will be subject to impairment reviews in accordance with IAS 36 ‘‘Impairment of Assets’’ replacing the previous requirement to recognize a provision for onerous lease contracts. The new standard is effective for annual periods beginning on or after January 1, 2019, so is effective for the Group for the year ending July 31, 2020. For the 2020 Interim Consolidated Financial Statements, the Group has applied the modified retrospective transition method meaning the condensed consolidated financial information for HYE2020 includes the impact of IFRS 16. As the Group transitioned to IFRS 16 on August 1, 2019, the comparative financial information for HYE2019 included in the 2020 Interim Consolidated Financial Statements has not been restated. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

Risks Relating to the Notes Our corporate structure means that the Issuer and the Guarantors are dependent on other Group Company loan payments or distributions to them to be able to satisfy their respective obligations with respect to the Notes and the Guarantees, and the claims of creditors of subsidiaries of the Guarantors may be structurally senior to claims on the Notes and the Guarantees. The Issuer is a finance vehicle, the primary business of which is the raising of money for the purpose of on-lending to other members of the Group. Upon issuance of the Notes, the Issuer’s only substantial asset will be a receivable on the loan of the net proceeds of the Notes to another Group company. The ability of the Issuer to satisfy its obligations in respect of the Notes depends upon payments being made to it on such proceeds loan. The Parent Guarantor and Subsidiary Guarantor are each a holding company for the Group and both rely upon distributions from Group subsidiaries to generate funds necessary to meet their obligations, including any payments under the Guarantees. These operating subsidiaries have not guaranteed the Notes, and have no obligation, contingent or otherwise, to pay amounts due under the Notes or the Guarantees or to make funds available for these payments, whether in the form of loans, dividends or otherwise. The ability of the operating subsidiaries to make dividend or other payments to the Guarantors will depend on their cash flows and earnings which, in turn, will be affected by all of the factors discussed herein. In addition, under the corporate laws of many jurisdictions, including the United Kingdom, the ability of some subsidiaries to pay dividends is limited to the amount of distributable reserves of such companies.

37 The Notes and the Guarantees will not be secured by any of the Issuer’s or the Guarantors’ assets or those of their subsidiaries. The obligations of the Issuer under the Notes are unsecured and rank equally in right of payment with all unsecured, unsubordinated obligations of the Issuer. The obligations of the Guarantors under the Guarantees are unsecured and rank equally with all unsecured, unsubordinated obligations of the Guarantors. As a result, the Notes and the Guarantees are effectively subordinated to any secured debt that the Issuer or the Guarantors may incur. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of the Issuer’s or the Guarantors’ secured debt may assert rights against the secured assets in order to receive full payment of their debt before the assets may be used to pay the holders of the Notes. Holders of the Notes will have a direct claim based on the Notes against the Issuer and based on the Guarantees against the Guarantors, but will not have a direct claim based on the Notes or the Guarantees against any of our operating subsidiaries. The right of the Holders of the Notes to receive payments under the Notes and the Guarantees may be structurally subordinated to liabilities of our operating subsidiaries. As of July 31, 2019, the Group had consolidated debt of $2,344 million, of which $32 million was at the subsidiary level. The Group may incur substantial additional indebtedness in the future. The Indenture does not place any limitation on the amount of unsecured debt that may be incurred by the Guarantors or any of their subsidiaries (including the Issuer). There is no assurance to holders of the Notes that there will be sufficient assets to pay amounts due on the Notes or the Guarantees.

The Consolidated Financial Statements may be of limited use in assessing the financial position of the Guarantors. The Consolidated Financial Statements include both guarantor and non-guarantor companies on a consolidated basis. As the non-guarantor companies collectively represent greater than 25% of Group Adjusted EBITDA and net consolidated assets, the Consolidated Financial Statements may be of limited use in assessing the financial position of the Guarantors on a standalone basis.

We may incur substantially more debt in the future. We may incur substantial additional indebtedness in the future, including in connection with future acquisitions, some of which may be secured by some or all of our assets. The Notes and the Indenture will not limit the amount of indebtedness we may incur. Any such incurrence of additional indebtedness could exacerbate the related risks that we now face.

Ratings for the Notes may not reflect all risks of an investment in the Notes. The Notes will be rated by S&P and Moody’s. Any rating is not a recommendation to purchase, sell or hold any particular security, including the Notes and each agency’s rating should be evaluated independently of any other agency’s rating. These ratings are limited in scope and do not comment as to market price or suitability for a particular investor. The ratings for the Notes may not reflect the potential impact of all risks related to structure and other factors on any trading market for, or trading value of, the Notes. In addition, ratings may at any time be lowered or withdrawn in their entirety, including as a result of developments that are beyond our control. Actual or anticipated changes or downgrades in the ratings for the Notes could affect the market value of the Notes. We may redeem the Notes at any time in whole (but not in part) upon the occurrence of certain tax events, as more particularly described under ‘‘Description of the Notes and the Guarantees—Redemption for Tax Reasons.’’ Certain of such events may occur at any time after the Issue Date and it is therefore possible that we would be able to redeem the Notes at any time after the Issue Date. If we redeem the Notes in any of the circumstances mentioned above, you may not be able to reinvest the redemption proceeds in securities offering a comparable yield.

The transfer of the Notes is restricted, which may adversely affect their liquidity and the price at which they may be sold. The Notes have not been registered under, and the Issuer is not obliged to register the Notes under, the Securities Act or the securities laws of any state or other jurisdiction of the United States and, unless so registered, the Notes may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable laws. See ‘‘Important Information—Notice to Investors in the United States.’’ The Issuer has not agreed to, or otherwise undertaken to, register the Notes under the Securities Act or the securities laws of any state or

38 other jurisdiction of the United States or to effect any exchange offer for the Notes in the future, and the Issuer has no intention to do so. The Notes may only be transferred to purchasers outside the United States in offshore transactions to non-U.S. persons pursuant to Regulation S or to qualified institutional buyers within the United States pursuant to Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the regulation requirements of the Securities Act. You should read the discussion under the heading ‘‘Transfer Restrictions’’ for further information about the transfer restrictions that apply to the Notes. It is your obligation to ensure that your offers and sales of the Notes within the United States and other countries comply with all applicable securities laws.

There is no established trading market for the Notes and one may not develop. The Notes will be new securities for which there currently is no established trading market. The Notes have not been, and will not be, registered under the Securities Act and will be subject to significant restrictions on resale. See ‘‘Transfer Restrictions’’. There can be no assurance regarding the future development of a market for the Notes or the ability of Noteholders to sell their Notes or the price at which such Noteholders may be able to sell their Notes. If such a market were to develop, the Notes could trade at prices that may be lower than the initial offering prices depending on many factors, including prevailing interest rates, our operating results and the market for similar securities. Therefore, there can be no assurance as to the liquidity of any trading market for the Notes or that active markets for the Notes will develop.

Other risks Investors in the Notes may have limited recourse against the Auditors. See ‘‘Presentation of Financial, Market and Other Information’’ for a description of the Auditors’ reports on the Consolidated Financial Statements included on pages F-24, F-79 and F-146 of this Offering Memorandum, including language purporting to limit the auditors’ scope of duty in relation to such reports and the various financial statements to which they relate. In particular, the Auditors’ reports, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, includes the following wording with respect to the 2020 Interim Consolidated Financial Statements: ‘‘This report is made solely to the Company in accordance with International Standard on Review Engagements (U.K. and Ireland) 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.’’ and respect to the Group Annual Consolidated Financial Statements: ‘‘This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and/or those further any further matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for our report, or for the opinions we have formed.’’ Investors in the Notes should understand that these statements are intended to disclaim any liability to parties (such as the purchasers of the Notes) other than the members of the Group with respect to those reports. The SEC would not permit such limiting language to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act or in a report filed under the Exchange Act. If a U.S. court (or any other court) were to give effect to the language quoted above, the recourse that investors in the Notes may have against the Auditors based on their reports or the consolidated financial statements to which they relate could be limited.

Enforcement of United States judgments may be difficult. The Company is a public limited company registered in Jersey, the Subsidiary Guarantor is a private limited company organized under the laws of England and Wales and the Issuer is a public limited company registered in England and Wales, and a portion of all their respective assets are located in jurisdictions outside the United States. Accordingly, it could be difficult for holders of Notes to recover against the Issuer and the Company on judgments of United States courts predicated upon civil liabilities under the U.S. federal securities laws. See ‘‘Service of Process and Enforceability of Certain Civil Liabilities’’.

39 CAPITALIZATION The following table sets forth our historical consolidated capitalization, along with our cash and cash equivalents, as at January 31, 2020 (i) on an actual basis and (ii) as adjusted to give effect to the issuance of the Notes and the application of the net proceeds thereof (assuming the net proceeds are held as cash). You should read the following tables together with ‘‘Use of Proceeds’’, ‘‘Operating and Financial Review’’, ‘‘Description of the Notes and the Guarantees’’ and the 2020 Interim Consolidated Financial Statements and the notes thereto included in this Offering Memorandum:

At January 31, 2020 Actual As Adjusted $ million Cash and cash equivalents(1) ...... 775 1,370(2) Debt: Bank loans and overdrafts(3)(4) ...... 2,741 2,741 Notes offered hereby ...... — 595(2) Total Debt ...... 2,741 3,336 Equity: Share capital ...... 30 30 Share premium ...... 9 9 Reserves ...... 4,066 4,066 Total Equity ...... 4,105 4,105 Total capitalization ...... 6,846 7,441

(1) As at April 30, 2020, the Group’s cash and cash equivalents were $1,738 million. Included in cash and cash equivalents at April 30, 2020 is an amount of $318 million which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within bank loans and overdrafts. (2) Reflects the net proceeds of the offering of the notes. (3) Of which $722 million was current. Included in bank overdrafts at January 31, 2020 is an amount of $219 million which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within cash and cash equivalents. These amounts are subject to a master netting arrangement. (4) Since January 31, 2020, we have borrowed £450 million under the ECP Programme and $250 million has been advanced under the Trade Receivables Securitization Arrangements. The total outstanding amount under the ECP Programme and Trade Receivables Securitization Arrangements as at April 30, 2020 was £450 million and $400 million, respectively. See ‘‘Operating and Financial Review—Facilities’’.

40 USE OF PROCEEDS We estimate the net proceeds to us from our sale of Notes to be approximately $594.6 million after deducting the underwriting discount and offering expenses of $2.7 million. We will use the proceeds for general corporate purposes, including the repayment of existing debt, and to increase liquidity.

41 SELECTED FINANCIAL INFORMATION The following tables set forth selected historical consolidated financial data for the Group, as well as certain other financial and operating data. The summary historical consolidated financial data set forth below as of and for HYE2020 and HYE2019 has, unless otherwise indicated been derived from the 2020 Interim Consolidated Financial Statements. The summary historical consolidated financial data as of and for FYE2019 has, unless otherwise indicated been derived from the 2019 Consolidated Financial Statements. The selected historical consolidated financial data as at and for FYE2018 and FYE2017 has, unless otherwise indicated, been derived from the 2018 Consolidated Financial Statements. This selected historical financial information and other data should be read in conjunction with and are qualified in their entirety by reference to the financial statements, including the notes thereto included in this Offering Memorandum, and the information set forth under ‘‘Use of Proceeds’’, ‘‘Capitalization’’, ‘‘Summary Financial Information’’, ‘‘Operating and Financial Review’’, ‘‘Presentation of Financial, Market and Other Information’’ and ‘‘Description of the Group and its Business’’, each of which is included elsewhere in this Offering Memorandum. The Consolidated Financial Statements have been prepared in accordance with EU IFRS. The 2020 Interim Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34 ‘‘Interim Financial Reporting’’ as adopted by the European Union which have been reviewed, as stated in the independent review report of Deloitte LLP, included in this Offering Memorandum. The Group 2019 and 2018 Consolidated Financial Statements have been audited, as stated in the independent auditor’s reports of Deloitte LLP, included in this Offering Memorandum.

Reported Consolidated Financial Information Income Statement

42 Balance Sheet Data

As at January 31, As at July 31, 2017 2020(1) 2019 2019 2018 (Restated)(2) $ million Assets Non-current assets ...... 5,821 4,101 4,191 3,545 3,142 Current assets ...... 6,760 6,599 7,194 6,453 7,700 Assets held for sale ...... 2 51 1 151 1,715 Total assets ...... 12,583 10,751 11,386 10,149 12,557 Liabilities Current liabilities ...... 4,435 3,622 4,181 4,016 5,399 Non-current liabilities ...... 4,043 2,839 2,855 2,076 1,533 Liabilities held for sale ...... ————1,085 Total liabilities ...... 8,478 6,461 7,036 6,092 8,017 Net assets ...... 4,105 4,290 4,350 4,057 4,540 Equity Equity attributable to shareholders of the Company . . . 4,105 4,291 4,350 4,058 4,543 Non-controlling interest ...... — (1) — (1) (3) Total equity ...... 4,105 4,290 4,350 4,057 4,540

Cash Flow Statement Data

Six months ended January 31, Year ended July 31, 2017 2020(2) 2019 2019 2018 (Restated)(1) $ million Net cash generated from operating activities ...... 394 121 1,290 1,036 950 Net cash generated from/(used in) investing activities ..... (300) (587) (783) 700 (209) Net cash (used)/generated by financing activities ...... (691) 414 131 (1,857) (472) Net cash (used)/generated ...... (597) (52) 638 (121) 269 Effects of exchange rate changes ...... (1) (3) (10) (7) (13) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... (598) (55) 628 (128) 256 Cash, cash equivalents and bank overdrafts at the beginning of the period ...... 1,086 458 458 586 330 Cash, cash equivalents and bank overdrafts at the end of the period ...... 488 403 1,086 458 586

43 information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

As at or for the six months ended As at or for the year January 31, ended July 31, 2017 2020(4) 2019 2019 2018 (Restated)(1) ($ million, except as otherwise indicated) Revenue ...... 10,966 10,847 22,010 20,752 19,284 Ongoing revenue(2) ...... 9,893 9,489 21,771 20,334 18,845 Organic revenue growth(2) ...... 2.0% 9.1% 4.4% 7.5% NA Profit for the period ...... 467 586 1,108 1,267 920 Operating profit ...... 733 709 1,402 1,360 1,478 Underlying trading profit(2)(3) Underlying trading profit from ongoing operations(2)(3) ...... 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341 Underlying ongoing trading margin(2)(3) ...... 7.6% 7.5% 7.4% 7.3% 6.9% Adjusted EBITDA(2) ...... 876 844 1,788 1,687 1,519 Net debt(2) ...... (1,944) (1,885) (1,195) (1,080) (706)

44 The following table sets forth a breakdown of revenue, revenue from ongoing operations, organic revenue growth, like-for-like revenue growth, operating profit, underlying trading profit from ongoing operations, underlying ongoing trading margin for the Group’s operating segments for HYE2020 and HYE2019 and for FYE2019, FYE2018 and FYE2017.

Six months ended January 31, Year ended July 31, 2017 2020(4) 2019 2019 2018 (Restated)(1) $ million, except as otherwise indicated United States Segment Revenue ...... 9,318 8,874 18,358 16,670 15,193 Ongoing revenue(2) ...... 9,318 8,874 18,358 16,670 14,977 Organic revenue growth(2) ...... 2.6% 9.7% 6.2% 9.9% NA Underlying trading profit from ongoing operations(2)(3) ...... 740 700 1,508 1,406 1,204 Underlying ongoing trading margin(2)(3) ...... 7.9% 7.9% 8.2% 8.4% 8.0% United Kingdom Segment Revenue ...... 1,073 1,177 2,281 2,568 2,548 Ongoing revenue(2) ...... NA NA 2,222 2,568 2,548 Like-for-like revenue growth(2)(7) ...... NA 0.3% 0.6% 0.7% NA Organic revenue growth(2)(7) ...... (5.2)% NA NA NA NA Underlying trading profit from ongoing/non-ongoing operations(2)(3)(6) ...... 30 30 65 73 96 Underlying ongoing trading margin(2)(3) ...... NA NA 3.1% 2.8% 3.8% Canada and Central Europe(5) Revenue ...... 575 796 1,371 1,514 1,543 Ongoing revenue(2) ...... 575 615 1,191 1,514 1,320 Organic revenue growth(2) ...... (6.6)% 2.1% (1.1)% 6.9% NA Underlying trading profit from ongoing operations(2)(3) ...... 29 39 76 83 57 Underlying ongoing trading margin(2)(3) ...... 5.0% 6.3% 5.6% 5.5% 4.3% Total Revenue ...... 10,966 10,847 22,010 20,752 19,284 Ongoing revenue(2) ...... 9,893 9,489 21,771 20,752 18,845 Organic revenue growth(2) ...... 2.0% 9.1% 4.4% 7.5% NA Underlying trading profit from ongoing operations(2)(3) ...... 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341 Underlying ongoing trading margin(2)(3) ...... 7.6% 7.5% 7.4% 7.3% 6.9%

45 FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’. (5) Until January 30, 2019, when the Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, the ‘‘Canada’’ operating segment was combined with the ‘‘Central Europe’’ operating segment and was disclosed as ‘‘Canada and Central Europe’’ as individually they did not meet the reportable segments quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’. See ‘‘Presentation of Financial, Market and Other Information’’ and ‘‘Overview—Overview of our Business’’. (6) For the six months ended January 31, 2020, due to the U.K. Demerger, the Group’s U.K. business is classified as non-ongoing, in FYE2019 the Group’s U.K. business was presented as ongoing, and as a result, the comparative financial information for HYE2019 has been reclassified for consistency and comparability purposes. Prior to this and for the consolidated financial information for FYE2019, FYE2018 and FYE2017, the Group’s U.K. business is classified as ongoing. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details. (7) The Group reported organic revenue growth for its U.K. segment for HYE2020. Prior to this, the Group reported like-for-like revenue growth for its U.K. segment for HYE2019 and for FYE2019, FYE2018 and FYE2017 to aid comparability. Like-for-like revenue growth is determined as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the current period to the corresponding acquisition date in the current year, trading days and net closed branches, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details.

Reconciliations to Reported Financial Data Constant exchange rates The Group measures some financial metrics on both a reported basis and at constant exchange rates. The constant exchange rate basis re-translates the prior year at the current year exchange rate to eliminate the effect of exchange rate fluctuations when comparing information year-on-year.

Six months ended January 31, Year ended July 31, 2017 Constant exchange rates 2020 2019 2019 2018 (Restated)(1) $ million, except as otherwise indicated Revenue Prior period ongoing revenue(2) ...... 9,489 8,509 20,334(4) 18,845 — Impact of exchange rates ...... (1) (27) (155) 229 — Prior period ongoing revenue at constant exchange rates(2) ...... 9,488 8,482 20,179 19,074 — Current period ongoing revenue(2) ...... 9,893 9,489 21,771 20,752 18,845 Constant currency growth ...... 4.3% 11.8% 7.9% 8.8% — Underlying trading profit(2) Prior period underlying trading profit from ongoing operations(2) ...... 714 654 1,493 1,307 — Impact of exchange rates ...... — (1) (4) 7 — Prior period underlying trading profit from ongoing operations at constant exchange rates(2) ...... 714 653 1,489 1,314 — Constant currency growth ...... 4.6% 9.3% 7.5% 14.7% — Underlying trading profit from ongoing operations(2)(3) 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341

46 measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details. (4) In FYE2019, the Group completed the sale of Wasco and soak.com. Comparatives have been reclassified for the purpose of comparability.

United Kingdom organic revenue growth and like-for-like revenue growth Management used organic revenue growth for three months ended April 30, 2020 and HYE2020 and like-for-like revenue growth for HYE2019 and for FYE2019, FYE2018 and FYE2017 as it provided a consistent measure of the percentage increase/decrease in revenue year-on-year, excluding the effect of currency exchange, net closed branches, the exit of law margin businesses, trading days and acquisitions and disposals.

Six months Three months ended ended April 30, January 31, U.K. organic revenue growth 2020 2019 2020 2019 $ million, except as otherwise indicated Current year revenue ...... 417 575 1,073 1,177 Less: revenue growth from acquisitions ...... (11) — (23) — Less: revenue growth from trading days ...... (1) 14 — — Current year non-ongoing(1)(2)/ongoing revenue excluding growth from acquisitions and trading days ...... 405 589 1,050 1,177 Less: revenue decline from net closed branches ...... — (13) — 139 Current year non-ongoing(1)(2)/ongoing revenue(2) excluding growth from acquisitions, trading days and net closed branches ...... 405 576 1,050 1,316 Prior year revenue(1) ...... 575 NA 1,177 1,354(3) Less: prior year non-ongoing(2) revenue ...... — NA (49) — Less: impact of exchange rates ...... (23) NA (20) (42)(3) Prior period non-ongoing(1)(2)/ongoing(1) revenue at current year exchange rates ...... 552 NA 1,108 1,312(3) Like-for-like revenue growth/(decline)(4) ...... NA NA NA 4 Like-for-like revenue growth %(1)(5) ...... NA NA NA 0.3% Organic revenue growth/(decline)(4) ...... (147) NA (58) NA Organic revenue growth %(4)(6) ...... (26.6)% NA (5.2)% NA

47 Year ended July 31, 2017 U.K. like-for-like revenue growth 2019 2018 (Restated) $ million, except as otherwise indicated Current year revenue ...... 2,281 2,568 2,548 Less: current year non-ongoing revenue(1)(2) ...... (59) — — Less: revenue (growth)/decline from acquisitions and divestments ...... — — — Less: revenue (growth)/decline from trading days ...... (4) — (11) Current year ongoing revenue excluding growth from acquisitions, disposals and trading days ...... 2,218 2,568 2,537 Less: revenue decline from net closed branches ...... 159 163 15 Current year non-ongoing(1)/ongoing revenue(1)(2) excluding growth from acquisitions, disposals, trading days and net closed branches ...... 2,377 2,731 2,552 Prior year revenue(1) ...... 2,568 2,548 NA Less: prior year non-ongoing(2) revenue ...... (96) — NA Less: impact of exchange rates ...... (109) 163 NA Prior period non-ongoing/ongoing(1)(2) revenue at current year exchange rates 2,363 2,711 NA Like-for-like revenue growth/(decline)(4) ...... 14 20 NA Like-for-like revenue growth %(1)(5) ...... 0.6% 0.7% NA

(1) For the nine months ending April 30, 2020, the Group’s U.K. business is classified as non-ongoing which is reflected in the condensed consolidated financial information for HYE2020, the comparative financial information for the three months ended April 30, 2019 and HYE2019 has been reclassified to reflect the classification of the Group’s U.K. business as non-ongoing. Prior to this and for the consolidated financial information for FYE2019, FYE2018 and FYE2017, the Group’s U.K. business is classified as ongoing. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) This data is derived from the 2019 Interim Consolidated Financial Statements. (4) The Group reported organic revenue growth for its U.K. segment for HYE2020. Prior to this, the Group reported like-for-like revenue growth for its U.K. segment for HYE2019 and for FYE2019, FYE2018 and FYE2017 to aid comparability. Like-for-like revenue growth is determined as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the current period to the corresponding acquisition date in the current year, trading days and net closed branches, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details. (5) This is calculated as like-for-like revenue growth divided by prior year ongoing revenue at constant exchange rates. (6) This is calculated as organic revenue growth/(decline) divided by prior period non-ongoing/ongoing revenue at constant exchange rates.

48 Reconciliation of organic revenue growth by segment and in total to revenue by segment and in total Management uses organic revenue growth as it provides a consistent measure of the percentage increase/ decrease in revenue year-on-year, excluding the effect of currency exchange, trading days and acquisitions and disposals. The Group uses organic revenue growth both in total and by segment.

Three months ended April 30, 2020 2019 Canada & Canada & United United Central United United Central States Kingdom(4) Europe(5) Group States Kingdom(4) Europe(5) Group $ million, except as otherwise indicated Current year revenue ...... 4,541 417 209 5,167 4,457 575 250 5,282 Less: current year non-ongoing revenue(2)(4) ...... — (417) — (417) — (575) — (575) Current year ongoing revenue(2) .... 4,541 — 209 4,750 4,457 — 250 4,707 Less: revenue growth from acquisitions ...... (61) — — (61) (208) — (14) (222) Less: revenue (growth)/decline from trading days ...... (70) — (4) (74) (4) — — (4) Current year ongoing revenue(2) excluding growth from acquisitions, disposals and trading days ...... 4,410 — 205 4,615 4,245 — 236 4,481 Prior year revenue ...... 4,457 575 250 5,282 NA NA NA NA Less: prior year non-ongoing revenue(2) ...... — (575) — (575) NA NA NA NA Less impact of exchange rates ...... — — (9) (9) NA NA NA NA Prior year ongoing revenue(2) at current year exchange rates ...... 4,457 — 241 4,698 NA NA NA NA Organic revenue growth(2)(3) ...... (47) — (36) (83) NA NA NA NA Organic revenue growth %(2)(3) ..... (1.0)% — (14.9)% (1.7)%NA NA NA NA

49 Six months ended January 31, 2020 2019 Canada & Canada & United United Central United United Central States Kingdom(4) Europe(5) Group States Kingdom(4) Europe(5) Group $ million, except as otherwise indicated Current year revenue ...... 9,318 1,073 575 10,966 8,874 1,177 796 10,847 Less: current year non-ongoing revenue(2)(4) ...... — (1,073) — (1,073) — (1,177) (181) (1,358) Current year ongoing revenue(2) . . . 9,318 — 575 9,893 8,874 — 615 9,489 Less: revenue growth from acquisitions ...... (210) — (1) (211) (256) — (33) (289) Less: revenue decline from trading days ...... — — — — 59 — — 59 Current year ongoing revenue(2) excluding growth from acquisitions, and trading days . . . 9,108 — 574 9,682 8,677 — 582 9,259 Prior year revenue ...... 8,874 1,177 796 10,847 7,911 1,354 761 10,026 Less: prior year non-ongoing revenue(2) ...... — (1,177) (181) (1,358) — (1,354) (163) (1,517) Less impact of exchange rates .... — — (1) (1) — — (27) (27) Prior year ongoing revenue(2) at current year exchange rates .... 8,874 — 614 9,488 7,911 — 570 8,482 Organic revenue growth(2)(3) ...... 234 — (40) 194 765 — 12 777 Organic revenue growth %(2)(3) .... 2.6% — (6.6)% 2.0% 9.7% — 2.1% 9.1%

Year ended July 31, 2019 2018 Canada & Canada & United United Central United United Central States Kingdom Europe(5) Group States Kingdom Europe(5) Group $ million, except as otherwise indicated Current year revenue ...... 18,358 2,281 1,371 22,010 16,670 2,568 1,514 20,752 Less: current year non-ongoing revenue(2)(4) ...... — (59) (180) (239) — — — — Current year ongoing revenue(2) .... 18,358 2,222 1,191 21,771 16,670 2,568 1,514 20,752 Less: revenue growth from acquisitions ...... (703) — (57) (760) (205) — (34) (239) Less: revenue (growth)/decline from trading days ...... 56 (4) — 52 — — — — Current year ongoing revenue(2) excluding growth from acquisitions, disposals and trading days ...... 17,711 2,218 1,134 21,063 16,465 2,568 1,480 20,513 Prior year revenue ...... 16,670 2,568 1,514 20,752 15,193 2,548 1,543 19,284 Less: prior year non-ongoing revenue(2) ...... — (96) (322) (418) (216) — (223) (439) Less impact of exchange rates ..... — (109) (46) (155) — 163 66 229 Prior year ongoing revenue(2) at current year exchange rates ..... 16,670 2,363 1,146 20,179 14,977 2,711 1,386 19,074 Organic revenue growth(2)(3) ...... 1,041 (145) (12) 884 1,488 (143) 94 1,439 Organic revenue growth %(2)(3) .... 6.2% (6.1)% (1.1)% 4.4% 9.9% (5.2)% 6.9% 7.5%

50 Year ended July 31, 2018 2017 (Restated)(1) Canada & Canada & United United Central United United Central States Kingdom Europe(5) Group States Kingdom Europe(5) Group $ million, except as otherwise indicated Current year revenue ...... 16,670 2,568 1,514 20,752 15,193 2,548 1,543 19,284 Less: current year non-ongoing revenue(2)(4) ...... — — — — (216) — (223) (439) Current year ongoing revenue(2) .... 16,670 2,568 1,514 20,752 14,977 2,548 1,320 18,845 Less: revenue growth from acquisitions ...... (205) — (34) (239) (361) — (11) (372) Less: revenue (growth)/decline from trading days ...... — — — — (58) (11) (8) (77) Current year ongoing revenue(2) excluding growth from acquisitions, disposals and trading days ...... 16,465 2,568 1,480 20,513 14,558 2,537 1,301 18,396 Prior year revenue ...... 15,193 2,548 1,543 19,284 Less: prior year non-ongoing revenue(2) ...... (216) — (223) (439) NA NA NA NA Less impact of exchange rates ..... — 163 66 229 NA NA NA NA Prior year ongoing revenue(2) at current year exchange rates ..... 14,977 2,711 1,386 19,074 NA NA NA NA Organic revenue growth(2)(3) ...... 1,488 (143) 94 1,439 NA NA NA NA Organic revenue growth %(2)(3) .... 9.9% (5.2)% 6.9% 7.5% NA NA NA NA

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. For further information, please see ‘‘Presentation of Financial, Market and Other Information—Change in Reporting Currency’’. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) This is calculated as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the period to the corresponding acquisition date, and trading days, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. (4) For the nine months ended April 30, 2020, due to the U.K. Demerger, the Group’s U.K. business is classified as non-ongoing, in FYE2019 the Group’s U.K. business was presented as ongoing, and as a result, the comparative financial information for the three months ended April 30, 2019 and HYE2019 has been reclassified for consistency and comparability purposes. Prior to this and for the consolidated financial information for FYE2019, FYE2018 and FYE2017, the Group’s U.K. business is classified as ongoing. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details. (5) Until January 30, 2019, when the Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, the ‘‘Canada’’ operating segment was combined with the ‘‘Central Europe’’ operating segment and was disclosed as ‘‘Canada and Central Europe’’ as individually they did not meet the reportable segments quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’. See ‘‘Presentation of Financial Market and Other Information’’ and ‘‘Overview—Overview of our Business.’’

51 Reconciliation of ongoing and non-ongoing revenue to revenue (from continuing operations)

Three months Six months ended ended April 30, January 31, 2020 2019 2020 2019 $ million Revenue United States ...... 4,541 4,457 9,318 8,874 United Kingdom ...... 417 575 1,073 1,177 Canada and Central Europe ...... 209 250 575 796 Total revenue ...... 5,167 5,282 10,966 10,847 Non-ongoing revenue(2) United States ...... — — — — United Kingdom ...... 417 575 1,073 1,177 Canada and Central Europe ...... — — — 181 Total non-ongoing revenue ...... 417 575 1,073 1,358 Ongoing revenue(2) United States ...... 4,541 4,457 9,318 8,874 United Kingdom ...... — — — — Canada and Central Europe ...... 209 250 575 615 Total ongoing revenue ...... 4,750 4,707 9,893 9,489

Year ended July 31, 2017 2019 2018 (Restated)(1) $ million Revenue United States ...... 18,358 16,670 15,193 United Kingdom ...... 2,281 2,568 2,548 Canada and Central Europe ...... 1,371 1,514 1,543 Total revenue ...... 22,010 20,752 19,284 Non-ongoing revenue(2) United States ...... — — 216 United Kingdom ...... 59 — — Canada and Central Europe ...... 180 — 223 Total non-ongoing revenue ...... 239 — 439 Ongoing revenue(2) United States ...... 18,358 16,670 14,977 United Kingdom ...... 2,222 2,568 2,548 Canada and Central Europe ...... 1,191 1,514 1,320 Total ongoing revenue ...... 21,771 20,752 18,845

52 Reconciliation of ongoing gross margin to gross profit (from continuing operations)

Six months ended January 31, Year ended July 31, 2017 2020 2019 2019 2018 (Restated)(1) $ million, except as otherwise indicated Ongoing revenue(2) ...... 9,893 9,489 21,771 20,752 18,845 Revenue ...... 10,966 10,847 22,010 20,752 19,284 Gross profit ...... 3,242 3,193 6,458 6,044 5,583 Non-ongoing gross profit(2) ...... (257) (324) (64) — (138) Exceptional items(2) ...... 212193 Ongoing gross profit(2) ...... 2,987 2,870 6,396 6,063 5,448 Ongoing gross margin(2)(3) ...... 30.2% 30.2% 29.4% 29.2% 28.9% Gross margin(4) ...... 29.6% 29.4% 29.3% 29.1% 29.0%

Reconciliation of underlying trading profit to profit

Six months ended January 31, 2020 2019 2020 2019 2020 2019 Continuing Non-ongoing Ongoing operations operations operations $ million, except as otherwise indicated Profit for the period ...... 467 586 (Profit)/loss from discontinued operations ...... — (46) Tax...... 173 139 Impairment of interests in associates ...... 22 — Share of loss/(profit) after tax of associate ...... 1 (2) Gain on disposal of interests in associates ...... — (3) Net finance costs ...... 70 35 Operating profit ...... 733 709 12 46 721 663 Amortization and impairment of acquired intangible assets ...... 60 44 9 1 51 43 Exceptional items from operating profit ...... 19 — 9 (8) 10 8 Less impact of IFRS 16 ...... (35) — — — (35) — Underlying trading profit(2)(3) ...... 777 753 30 39 747 714 Ongoing revenue(3) ...... 9,893 9,489 — — 9,893 9,489 Underlying ongoing trading margin(2)(3) ...... 7.6% 7.5% — — 7.6% 7.5% Revenue ...... 10,966 10,847 1,073 1,358 9,893 9,489 Profit margin(1) ...... 4.3% 5.4%

(1) Profit margin is calculated as profit for the period divided by revenue. (2) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

53 (3) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’.

Year ended July 31, 2019 2018 2019 2018 2019 2018 Continuing Non-ongoing Ongoing operations operations operations $ million, except as otherwise indicated Profit for the period ...... 1,108 1,267 Profit from discontinued operations ...... (47) (426) Tax...... 263 346 Impairment of interests in associates ...... 9 122 Share of profit after tax of associate ...... (2) (2) Gain on disposal of interests in associates ..... (3) — Net finance costs ...... 74 53 Operating profit ...... 1,402 1,360 27 — 1,375 1,360 Amortization and impairment of acquired intangible assets ...... 110 65 1 — 109 65 Exceptional items from operating profit(1) ...... 94 82 (23) — 117 82 Underlying trading profit(1)(3) ...... 1,606 1,507 5 — 1,601 1,507 Ongoing revenue(1) ...... 21,771 20,752 — — 21,771 20,752 Underlying ongoing trading margin(1)(3) ...... 7.4% 7.3% — — 7.4% 7.3% Revenue ...... 22,010 20,752 239 — 21,771 20,752 Profit margin(2) ...... 5.0% 6.1%

(1) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (2) Profit margin is calculated as profit for the period divided by revenue. (3) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent

54 ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

Year ended July 31, 2017 2017 2017 2018 (Restated)(1) 2018 (Restated)(1) 2018 (Restated)(1) Continuing operations Non-ongoing operations Ongoing operations $ million, except as otherwise indicated Profit for the period ...... 1,267 920 (Profit)/loss from discontinued operations . . (426) 133 Tax...... 346 370 Impairment of interests in associates ...... 122 — Share of (profit)/loss after tax of associate ...... (2) 1 Net finance costs ...... 53 54 Operating profit ...... 1,360 1,478 — 299 1,360 1,179 Amortization and impairment of acquired intangible assets ...... 65 81——6581 Exceptional items from operating profit(2) ...... 82 (218) — (265) 82 47 Underlying trading profit(2)(3) 1,507 1,341 — 34 1,507 1,307 Ongoing revenue(2) ...... 20,752 18,845 20,752 18,845 Underlying ongoing trading margin(2)(3) ...... 7.3% 6.9% 7.3% 6.9% Revenue ...... 20,752 19,284 — 439 20,752 18,845 Profit margin(4) ...... 6.1% 4.8%

55 Reconciliation of trading profit/(loss) by segment to underlying trading profit from ongoing operations by segment and underlying trading profit from continuing operations by segment

Six months ended January 31, 2020 2019 Canada & Central & Canada & Central & United United Central other United United Central other States Kingdom Europe costs Total States Kingdom Europe costs Total $ million, except as otherwise indicated Trading profit/(loss) ..... 774 30 30 (22) 812 700 30 48 (25) 753 Less: impact of IFRS 16 . . (34) — (1) — (35) — — — — — Underlying trading profit/ (loss) from continuing operations(1)(2) ...... 740 30 29 (22) 777 700 30 48 (25) 753 Less: underlying trading profit from non-ongoing operations(1)(2) ...... — (30) — — (30) — (30) (9) — (39) Underlying trading profit/ (loss) from ongoing operations(1)(2) ...... 740 — 29 (22) 747 700 — 39 (25) 714 Ongoing revenue(1) ..... 9,318 — 575 — 9,893 8,874 — 615 — 9,489 Underlying ongoing trading margin(1)(2) ...... 7.9% — 5.0% — 7.6% 7.9% — 6.3% — 7.5%

(2) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

Year ended July 31, 2019 2018 Canada & Central & Canada & Central & United United Central other United United Central other States Kingdom Europe costs Total States Kingdom Europe costs Total $ million, except as otherwise indicated Trading profit/(loss) ..... 1,508 65 76 (43) 1,606 1,406 73 83 (55) 1,507 Less: Underlying trading profit/(loss) from non-ongoing operations(1)(2) ...... — 4 (9) — (5) — — — — — Underlying trading profit/ (loss) from continuing operations(1)(2) ...... 1,508 69 67 (43) 1,601 1,406 73 83 (55) 1,507 Ongoing revenue(1) ..... 18,358 2,222 1,191 — 21,771 16,670 2,568 1,514 — 20,752 Underlying ongoing trading margin(1)(2) ...... 8.2% 3.1% 5.6% — 7.4% 8.4% 2.8% 5.5% — 7.3%

56 Year ended July 31, 2018 2017 (Restated)(1) Canada & Central & Canada & Central & United United Central other United United Central other States Kingdom Europe costs Total States Kingdom Europe costs Total $ million, except as otherwise indicated Trading profit/(loss) ..... 1,406 73 83 (55) 1,507 1,224 96 71 (50) 1,341 Less: Underlying trading profit from non-ongoing operations(1)(2) ...... — — — — — (20) — (14) — (34) Underlying trading profit/ (loss) from continuing operations(1)(2) ...... 1,406 73 83 (55) 1,507 1,204 96 57 (50) 1,307 Ongoing revenue(1) ...... 16,670 2,568 1,514 — 20,752 14,977 2,548 1,320 — 18,845 Underlying ongoing trading margin(1)(2) ...... 8.4% 2.8% 5.5% — 7.3% 8.0% 3.8% 4.3% — 6.9%

(1) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (2) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

Reconciliation of Adjusted EBITDA to profit for the period

Six months ended January 31, 2020 2019 Continuing Discontinued Group Continuing Discontinued Group $ million Profit for the period ...... 467 — 467 540 46 586 Exceptional items (net of tax) ...... 17 (1) 16 (7) (45) (52) Tax...... 175 6 181 143 1 144 Share of loss/(profit) after tax of associate ...... 1 — 1 (2) — (2) Impairment of interests in associates ...... 22 — 22 — — — Net finance costs ...... 70 (1) 69 35 — 35 Amortization of acquired intangible assets ...... 60 — 60 44 — 44 Less impact of IFRS 16 ...... (35) — (35) — — — Underlying trading profit(1) ...... 777 4 781 753 2 755 Depreciation and impairment of property, plant and equipment ...... 78 — 78 73 — — Amortization of non-acquired intangible assets .... 17 — 17 16 — 16 Adjusted EBITDA ...... 872 4 876 842 2 844

(1) The underlying trading profit measures above exclude the impact of IFRS 16 for the consolidated financial information for HYE2020, pursuant to the Group’s adoption of IFRS 16. Prior to this, these measures were

57 known as ‘‘trading profit’’ and were prepared pursuant to IAS 17. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details. Year ended July 31, 2019 2018 Continuing Discontinued Group Continuing Discontinued Group $ million Profit for the period ...... 1,061 47 1,108 841 426 1,267 Tax...... 263 4 267 346 31 377 Share of (profit) after tax of associate ...... (2) — (2) (2) — (2) Gain on disposal of interests in associates ...... (3) — (3) — — — Impairment of interests in associates ...... 9 — 9 122 — 122 Net finance costs ...... 74 (4) 70 53 4 57 Amortization and impairment of acquired intangible assets ...... 110 — 110 65 — 65 Exceptional items from operating profit ...... 94 (42) 52 82 (402) (320) Underlying trading profit ...... 1,606 5 1,611 1,507 59 1,566 Depreciation, amortization and impairment of property, plant and equipment and software .... 178 — 178 180 — 180 Impairment of assets held for sale ...... 4 — 4 — — — Adjusted EBITDA(2) ...... 1,788 5 1,793 1,687 59 1,746

Year ended July 31, 2018 2017 (Restated)(1) Continuing Discontinued Group Continuing Discontinued Group $ million Profit for the period ...... 841 426 1,267 1,053 (133) 920 Tax...... 346 31 377 370 (3) 367 Share of (profit)/loss after tax of associate ...... (2) — (2) 1 — 1 Net finance costs ...... 53 4 122 54 (5) 49 Amortization and impairment of acquired intangible assets ...... 65 — 57 81 135 216 Impairment of interests in associates ...... 122 — 65 — — — Exceptional items from operating profit ...... 82 (402) (320) (218) 86 (132) Underlying trading profit ...... 1,507 59 1,566 1,341 80 1,421 Depreciation, amortization and impairment of property, plant and equipment and software .... 180 — 180 178 33 211 Adjusted EBITDA(2) ...... 1,687 59 1,746 1,519 113 1,632

58 Reconciliation of Group total debt to net debt

As at January 31, As at July 31, As at April 30, 2017 2020 2020 2019 2019 2018 (Restated)(1) $ million Current debt Derivative financial liabilities ...... ————(2)— Borrowings(4) ...... (1,567) (722) (302) (52) (383) (2,150) Obligations under finance leases ...... — — (2) (2) (3) (4) Total current debt ...... (1,567) (722) (304) (54) (388) (2,154) Non-current debt Derivative financial liabilities ...... — — (7) — (17) — Borrowings ...... (2,037) (2,019) (2,280) (2,292) (1,522) (1,098) Obligations under finance leases ...... — — (3) (4) (3) (5) Total non-current debt. . . (2,037) (2,019) (2,290) (2,296) (1,542) (1,103) Total current and non-current debt ...... (3,604) (2,741) (2,594) (2,350) (1,930) (3,257) Cash and cash equivalents(4) 1,738 775 699 1,133 833 2,525 Derivative financial assets . . 43 22 10 22 17 26 Net debt(2)(3) ...... (1,823) (1,944) (1,885) (1,195) (1,080) (706)

59 Reconciliation of cash conversion

Six months ended January 31, Year ended July 31, 2017 2020 2019 2019 2018 (restated)(1) $ million, except as otherwise stated Adjusted EBITDA from continuing operations(3) ...... 872 842 1,788 1,687 1,519 Adjusted EBITDA from discontinued operations(3) ...... 4 2 5 59 113 Adjusted EBITDA from continuing and discontinued operations(3) . . 876 844 1,793 1,746 1,632 Cash generated from operations ...... 636 287 1,609 1,323 1,410 Cash conversion(2)(3) ...... 72.6% 34.0% 89.7% 75.8% 86.4% Profit for the period ...... 467 586 1,108 1,267 920 EU IFRS Cash conversion(4) ...... 136.2% 49.0% 145.2% 104.4% 153.3%

60 OPERATING AND FINANCIAL REVIEW This ‘‘Operating and Financial Review’’ section is intended to convey management’s perspective on our operational performance and financial performance as measured in accordance with EU IFRS. We intend this disclosure to assist readers in understanding and interpreting the financial statements included in this Offering Memorandum. This section is based on, and should be read in conjunction with, the Consolidated Financial Statements which are included in this Offering Memorandum, as well as the ‘‘Presentation of Financial, Market and Other Information’’ section. In this analysis, all references to ‘‘HYE2020’’ are to the six months ended January 31, 2020, ‘‘HYE2019’’ to the six months ended January 31, 2019, ‘‘FYE2019’’ to the year ended July 31, 2019, ‘‘FYE2018’’ to the year ended July 31, 2018 and ‘‘FYE2017’’ are to the year ended July 31, 2017. The following discussion also contains trend information and forward-looking statements. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Offering Memorandum, particularly under ‘‘Forward-Looking Statements’’ and ‘‘Risk Factors’’. We make reference herein to certain non-EU IFRS financial information. See ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’.

Overview of Our Business We are a leading specialist distributor of plumbing and heating products. Our business serves customers throughout North America and the United Kingdom, predominantly serving the RMI markets. We operate in fragmented markets that offer growth opportunities and seek to provide a differentiated service offering and strong, consistent returns for shareholders. We are a specialist distributor that creates value through the expertise of our people, our scale, bespoke logistics network, technology and the support and service we give our customers. We partner with them to improve their construction, renovation and maintenance projects. Our ongoing business has a diverse supplier base of approximately 42,000 suppliers providing us with a wide range of over one million products worldwide. We serve over one million customers, offering products, support and advice through a network of 11 distribution centers and 1,708 branches, as well as through showrooms, e-commerce and central accounts. We operate in three geographic regions, the United States, the United Kingdom and Canada, each of which is an operating segment for financial reporting purposes.

61 The United States segment’s revenue was $18,358 million, $16,670 million and $15,193 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 83.4%, 80.3% and 78.8% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. The United States segment’s underlying trading profit was $1,508 million, $1,406 million, and $1,224 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 93.9%, 93.3% and 91.3% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

United Kingdom A leading trade distributor operating in the large and fragmented U.K. plumbing, heating and infrastructure markets, our U.K. business principally operates under the Wolseley brand. The U.K. business mainly serves RMI markets and has relatively low exposure to the new residential construction market. On September 3, 2019, we announced our intention to demerge (spin off) our U.K. operations to our shareholders, subject to shareholder approval. The decision marked the conclusion of a detailed review of the Group’s assets over several years. On completion of the transaction, Wolseley U.K. will become an independent listed company serving residential and commercial tradespeople and customers. The separation will further simplify the Group and will enable Wolseley U.K. to pursue its independent strategy. Following the U.K. Demerger, Ferguson will be wholly focused on serving customers in North America. We continue to progress the U.K. Demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’. As at July 31, 2019, our U.K. business had over 5,000 associates operating through 551 branches covering the entire country, which were in turn served by four distribution centers. For HYE2020 and HYE2019, the United Kingdom segment’s revenue was $1,073 million and $1,177 million, respectively. This represented 9.8% and 10.9% of the Group’s total revenue for HYE2020 and HYE2019, respectively. The United Kingdom segment’s underlying trading profit was $30 million for HYE2020 and $30 million for HYE2019. The United Kingdom segment’s revenues were $2,281 million, $2,568 million and $2,548 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 10.4%, 12.4% and 13.2% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. The United Kingdom segment’s underlying trading profit was $65 million, $73 million and $96 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 4.0%, 4.8% and 7.2% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

62 and FYE2017, respectively. This represented 4.7%, 5.5% and 5.3% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

Presentation of Financial Information General The Company reports consolidated financial information in accordance with EU IFRS. The consolidation perimeter of the Company comprises the Company and all its subsidiaries. The preparation of our financial statements in conformity with EU IFRS requires the use of certain critical accounting estimates (see ‘‘—Accounting Policies and Critical Estimates and Judgements’’). It also requires our management to exercise its judgment in the process of applying our accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements, are disclosed in the applicable financial statements and discussed in ‘‘—Accounting Policies and Critical Estimates and Judgements’’. Please also refer to the Auditors’ unqualified review report on the 2020 Interim Consolidated Financial Statements and the Auditors’ unqualified audit report on the 2019 Consolidated Financial Statements and 2018 Consolidated Financial Statements as a whole which includes the auditor’s description of the risks of material misstatement to those financial statements that had the greatest effect on the audits, the key audit procedures to address those risks and the findings from those procedures.

Segments The Group’s reportable segments are the operating businesses overseen by distinct divisional management teams responsible for their performance based on the manner in which our services or products are internally reported to the Chief Operating Decision Maker (as defined in IFRS 8 ‘‘Operating Segments’’). All reportable segments derive their revenue from a single business activity, the distribution of plumbing, heating or related products. The Group’s business is not highly seasonal and the Group’s customer base is highly diversified, with no individually significant customer. In accordance with IFRS 8 ‘‘Operating Segments’’, we report two reportable segments, the United States and the United Kingdom. Until January 30, 2019, when the Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, the Canada and Central Europe operating segments were combined and disclosed as ‘‘Canada and Central Europe’’, as individually they did not meet the reportable segments quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’.

Results restatements Up until the year ended July 31, 2017, the Group reported its results in pounds sterling and its main currency exposure arose on the translation of overseas earnings into pounds sterling. From the year beginning August 1, 2017 onwards, the Group has presented its consolidated financial statements in U.S. dollars and, as the majority of revenue and underlying trading profit is generated in U.S. dollars, the impact of foreign exchange rate movements has been reduced. Statutory financial information included in the Group’s financial statements for FYE2017 (as contained in the Group’s 2018 Consolidated Financial Statements) previously reported in pounds sterling has been restated into U.S. dollars using (i) the closing exchange rates on the relevant balance sheet date for assets and liabilities denominated in non-U.S. dollar currencies and (ii) the average exchange rates prevailing for the relevant period in which income or expenditures were reported in non-U.S. dollar currencies. In the year ended July 31, 2018, the Group sold its business and property assets in the Nordic Operation and, in accordance with IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, the Nordic Operation has been classified as discontinued.

Adoption of IFRS 16 On August 1, 2019, the Group adopted IFRS 16 using the modified retrospective approach to transition and, consequently, the comparative information for the prior periods has not been restated but instead continue to reflect the accounting policies under IAS 17. The impact on the opening balance sheet at the date of initial application is the creation of a right of use asset of $1.2 billion and a lease liability of $1.5 billion. The lease liability on transition is greater than the operating lease commitments due to the inclusion of options to extend, which the Group is reasonably certain to exercise, partially offset by the effect of discounting. The net impact on profit for the period of adoption (year ending July 31, 2020) is not

63 expected to be material to the Group, however, Adjusted EBITDA will improve due to the reduction in rental charges which will be broadly offset in the income statement by an increase in depreciation and interest charges. Condensed consolidated financial information for HYE2020, as shown in the 2020 Interim Consolidated Financial Statements, includes the impact of IFRS 16. The Group transitioned to IFRS 16 on August 1, 2019 and accordingly the comparative financial information for HYE2019 included in the 2020 Interim Consolidated Financial Statements has not been restated and is presented based on the IAS 17 standard. The financial information for FYE2019, FYE2018 and FYE2017 included in the Annual Consolidated Financial Statements have similarly not been restated and are presented based on the IAS 17 standard. For the majority of leases, the right of use asset on transition has been measured as if IFRS 16 had been applied since the commencement of the lease, discounted using the Group’s incremental borrowing rate as at 1 August 2019, with the difference between the right of use asset and the lease liability taken to retained earnings. For the remaining leases, which relate to the Group’s U.S. fleet, where sufficient historic information has not been available, the right of use asset has been measured as equal to the lease liability on transition. For further information regarding this new accounting requirement, see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ and Note 1 to the 2020 Interim Consolidated Financial Statements and Note 1 to the 2019 Consolidated Financial Statements.

Adoption of IFRS 9 On August 1, 2018, the Group adopted IFRS 9 ‘‘Financial Instruments’’. The standard makes changes to the classification and measurement of financial assets and liabilities, revises the requirements of hedge accounting and introduces a new impairment model for financial assets. The adoption of IFRS 9 did not have a material impact on the 2019 Consolidated Financial Statements and there was no adjustment required to opening retained earnings. As permitted by IFRS 9 the Group elected not to restate the comparative financial information for FYE2018 and FYE2017.

Non-EU IFRS measures In this Offering Memorandum, we present certain financial measures that are not recognized by EU IFRS or any other internationally recognized generally accepted accounting principles. Such financial measures, included in this document, are (i) results presented on a constant exchange rate basis, (ii) organic revenue growth, (iii) like-for-like revenue growth, (iv) organic revenue growth by segment, (v) revenue from non-ongoing operations, (vi) revenue from ongoing operations, (vii) gross profit from ongoing operations, (viii) ongoing gross margin, (ix) underlying trading profit from ongoing operations, (x) underlying trading profit from non-ongoing operations, (xi) underlying trading profit from continuing operations, (xii) underlying ongoing trading margin, (xiii) underlying trading profit from non-ongoing operations by segment, (xiv) underlying trading profit from ongoing operations by segment, (xv) underlying trading profit from continuing operations by segment, (xvi) underlying ongoing trading margin by segment, (xvii) Adjusted EBITDA, (xviii) Adjusted EBITDA from discontinued operations, (xix) net debt, (xx) cash conversion rate and (xxi) exceptional items. For further information on these non-EU IFRS measures including reconciliations to the nearest IFRS measures see ‘‘Presentation of Financial and Certain Other Information—Non-EU IFRS Financial Measures/

64 Alternative Performance Measures’’, Note 2 to the 2020 Interim Consolidated Financial Statements, Note 2 to the 2019 Consolidated Financial Statements and Note 2 to the 2018 Consolidated Financial Statements included in this Offering Memorandum and, in summary form, in the section titled ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’ in this Offering Memorandum. Non-EU IFRS financial measures have certain limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under EU IFRS. Because of such limitations, they should not be considered substitutes for the relevant EU IFRS measures. For further information on such limitations see ‘‘Presentation of Financial and Certain Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’.

Key factors affecting results of operations Our results of operations have been affected in the periods under review, and are expected to continue to be affected, by the following principal factors relating to our business.

Market trends The residential, commercial, industrial and municipal construction markets in which the Group operates are sensitive to changes in the economy and, as a result, changes in the economic conditions in any of the Group’s geographic markets, particularly the United States, affect the Group’s business, financial condition and results of operations. Management monitors the strength of these markets through indicators of home improvement and repair spending and commercial/industrial construction spending. In the United States residential RMI market, for example, management monitors the LIRA which provides a short-term outlook of national home improvement and repair spending on owner-occupied homes. LIRA is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters. Prior to the outbreak of the COVID-19 virus, LIRA projections suggested continued absolute growth in 2020. In addition, existing home sales is an indicator of the strength of the market. The seasonally adjusted annual rate of sales has remained at approximately 5.0 to 5.5 million over the four years to July 31, 2019. In the United States commercial RMI market, the AIA Billings Index—Commercial/Industrial is used as a leading economic indicator of construction activity. Any score below 50 indicates a decline in the business activity across the architecture profession, whereas an index score above 50 indicates growth. While the AIA Billings Index averaged above 50 throughout FYE2019, dipping below 50 in only two months during that year, the index score has dipped below 50 for three out of the last nine months since July 2019 with the most recent reading of 29.5 in April 2020. The AIA Billings Index—Commercial/Industrial is also an indicator for the U.S. Civil/Infrastructure market. The non-residential construction Put In Place measure is an indicator of growth in the market, reflecting the value spent each month on construction. The value of non-residential Put In Place rose year-over-year in all quarters throughout FYE2019. An indicator of the strength of the industrial market is the Institute for Supply Management Purchase Managers’ Index (‘‘ISM Purchase Managers’ Index’’). Any reading above 50 indicates that the manufacturing economy is generally expanding, whereas a reading below 50 indicates that it is generally declining. While the ISM Purchase Managers’ Index reading was above 50 throughout FYE2019, indicating strong growth in the market, it has averaged 48.0 in the months since with a reading of 41.5 in April 2020. In the context of overall economic health of a country, the gross domestic product (‘‘GDP’’) is a key indicator. GDP growth in the United States slowed slightly over FYE2019 but remained positive, indicating expansion in the economy. In the first quarter of 2020, GDP in the United States decreased by 4.8%, compared to growth of 3.1% in the first quarter of 2019, providing the first glimpse of the deep impact the COVID-19 virus outbreak has had on the U.S. economy. Consumer confidence levels have declined during the first quarter of 2020 and the unemployment rate is rising to historically high levels. In the United Kingdom, the markets remain challenging as GDP growth decreased by 1.6% in the first quarter of 2020 when compared with the first quarter of 2019 due to the impact of the COVID-19 virus outbreak. Consumer confidence has also been negative over the past few years and recently reached historic lows indicating adverse sentiment towards current and future economic conditions.

65 In Canada, GDP growth decreased from a high level of 2% in the first quarter of 2019 to (2.6)% in the first quarter of 2020, with consumer confidence also decreasing as a result of the COVID-19 virus outbreak and tumbling oil prices. Although conditions in the Group’s relevant markets were supportive during the periods covered by the Consolidated Financial Statements, the COVID-19 virus outbreak has had a significant impact on the Group’s markets and on global economic conditions. As a result, the COVID-19 virus outbreak and related counter-measures have had and will continue to have an adverse effect on the Group’s results of operations. For further information on the impact of COVID-19 on the Group, see ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’ and ‘‘Risk Factors— Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’.

Exchange rates The Group has international operations, principally in the United States, the United Kingdom and Canada, which provided 85.0%, 9.8% and 5.2%, respectively, of HYE2020 revenues and 83.4%, 10.4% and 6.2%, respectively, of FYE2019 revenues. The revenues of the foregoing segments are mainly denominated in the currencies of the countries in which the operations are located. Following the U.K. Demerger, the Group will have exposure only to the North American markets and will earn substantially all its revenue in U.S. dollars. The Group began reporting in U.S. dollars from the start of FYE2018. The results of the non-U.S. dollar denominated subsidiaries were translated into U.S. dollars at the average exchange rate for the period in respect of the income statement, and at the relevant period end rate in respect of the balance sheet, in the 2020 Interim Consolidated Financial Statements, 2019 Consolidated Financial Statements and 2018 Consolidated Financial Statements. Consequently, the Group’s reported results are affected by fluctuations in the rates of exchange between the U.S. dollar and the other currencies in which it receives revenues and incurs expenses, although this effect will be significantly reduced after the U.K. Demerger. Certain information in this document and in the Consolidated Financial Statements are presented both on a reported basis and at constant exchange rates, which removes the translation effect of foreign exchange movements, to enable a better understanding of the trading performance of each business in the context of the Group. For information on the actual exchange rates used in the preparation of the Group’s Consolidated Financial Statements, see ‘‘Operating and Financial Review—Presentation of Financial Information—Exchange rates’’). In HYE2020 and HYE2019, these currency effects primarily reflect a movement of the average U.S. dollar exchange rate against the pound sterling and Canadian dollar as follows:

Six months ended January 31, 2020 2019 Strengthening Strengthening of dollar of dollar Pounds sterling ...... 1.6% 3.1% Canadian dollars ...... 0.2% 4.5% In FYE2019, FYE2018 and FYE2017, these currency effects primarily reflect a movement of the average U.S. dollar exchange rate against the pound sterling, euro and Canadian dollar as follows:

Year ended July 31,(1) 2019 2018 2017 (Restated) Strengthening Weakening Strengthening of dollar of dollar of dollar Pounds sterling ...... 4.4% (6.4)% 13.3% Euro ...... 4.8% (9.2)% 1.6% Canadian dollars ...... 3.8% (4.0)% (0.2)%

(1) For more information, see ‘‘Foreign Currency Risk’’ in Note 22 to the 2019 Consolidated Financial Statements, included in this Offering Memorandum. Foreign exchange volatility increased significantly from February to April 2020 due to the impact of the COVID-19 pandemic on the global economy. Significant fluctuations in currency exchange rates to which we are exposed could have a material adverse effect on our future results of operations and financial condition. For further information on the impact of COVID-19, please see ‘‘Risk Factors—Risks Relating to

66 Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Acquisitions and disposals The Group has historically generated growth through a combination of organic growth, and selectively pursuing acquisitions which are a small part of our growth model. During HYE2020 and HYE2019, the Group completed a total of 3 and 11 acquisitions, respectively, investing $141 million and $589 million in acquisitions (which includes deferred consideration for prior year’s acquisitions in each case). During FYE2019, FYE2018 and FYE2017, the Group completed a total of 15, 13 and 11 acquisitions, respectively, investing $657 million, $416 million and $331 million, respectively, in acquisitions (which includes consideration for prior year’s acquisitions in each case). On May 6, 2020, the Group completed the sale of its remaining 28.875% minority holding in Meier Tobler AG for $31 million completing the exit of all trading operations in Continental Europe. This is in line with our strategy to focus the Group’s activities on North American markets. Acquisitions are reflected in the Group’s financial statements as from the date of each acquisition. Accordingly, the full year effects of acquisitions on the income statement and cashflow statement of the Group are generally not reflected in the financial statements during the financial year in which such acquisitions are completed, but only in the following financial year. Since 2010, the Group has concluded a number of disposals in order to focus our business where the most attractive returns are available. During HYE2020, the Group did not complete any disposals. During HYE2019, the Group completed disposals, totaling $199 million. The Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, on January 30, 2019, and received net proceeds of $111 million. During FYE2019, FYE2018 and FYE2017, the Group received a total of $201 million, $1,320 million and $300 million, respectively, for completed disposals, which represented 1.8%, 13.0% and 2.4%, respectively, of the Group’s total assets. These acquisitions and disposals are detailed in Note 13 to the 2020 Interim Consolidated Financial Statements, Notes 27 and 28 to the 2019 Consolidated Financial Statements and Notes 28 and 29 to the 2018 Consolidated Financial Statements. Also see ‘‘Operating and Financial Review—Overview of our Business—United Kingdom’’.

Significant restructuring initiatives Group restructuring costs were $108 million, $72 million and $51 million in FYE2019, FYE2018 and FYE2017, respectively, and $8 million and $31 million in HYE2020 and HYE2019, respectively. Group restructuring costs in FYE2018 and FYE2017 and for HYE2020 and HYE2019 relate to the United Kingdom segment and, in particular, to the costs of staff redundancies in the United Kingdom, providing for future lease costs on closed branches and writing down the carrying amount of assets. For the year ended July 31, 2019, business restructuring comprised costs incurred in the United States, the United Kingdom and Canada in respect of their business transformation strategies and costs relating to the change in the Group corporate headquarters. Such charges had an adverse effect on the results of our operations. On September 3, 2019, we announced our intention to demerge our U.K. operations subject to shareholder approval. The decision marked the conclusion of a detailed review of the Group’s assets over several years. On completion of the transaction, Wolseley U.K. will become an independent listed company serving residential and commercial tradespeople and customers. The separation will further simplify the Group and will enable Wolseley U.K. to pursue its independent strategy. Following the U.K. Demerger, Ferguson will be wholly-focused on serving customers in North America. Our strategic intent to complete the U.K. Demerger is unchanged and we continue to progress the demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Labor Our largest operating costs consists of staff costs from continuing operations, which were $1,581 million and $1,563 million in HYE2020 and HYE2019, respectively, primarily consisting of wages and salaries, which were $1,423 million (57.1% of total operating costs before exceptional items) and $1,396 million (56.2% of total operating costs before exceptional items), in HYE2020 and HYE2019, respectively. For

67 FYE2019, FYE2018 and FYE2017, staff costs were $3,163 million, $2,913 million and $2,710 million, respectively, primarily consisting of wages and salaries, which were $2,833 million (57.1% of total operating costs before exceptional items), $2,608 million (56.4% of total operating costs before exceptional items) and $2,449 million (56.6% of total operating costs before exceptional items), in FYE2019, FYE2018 and FYE2017, respectively. The average number of employees for continuing operations for HYE2020 and HYE2019 was 35,070 and 36,270. The average number of employees for continuing operations for FYE2019, FYE2018 and FYE2017 was 35,939, 34,056 and 33,511.

Raw materials and commodities Some of the Group’s products contain significant amounts of commodity-priced materials, predominantly plastic, copper and steel, and other components which are subject to price changes based upon fluctuations in the commodities market. To a lesser extent, fluctuations in the price of fuel could affect transportation costs. In general, increases in such prices increase the Group’s operating costs and negatively impact its operating profit to the extent that such increase cannot be passed on to customers. Conversely, if competitive pressures allow the Group to hold prices despite relevant raw material prices falling, profitability can increase.

Impact of COVID-19 virus outbreak Although conditions in the Group’s relevant markets were supportive during the periods covered by the Consolidated Financial Statements, the COVID-19 virus outbreak has had a significant impact on the Group’s markets and on global economic conditions. As a result, the COVID-19 virus outbreak and related counter-measures have had and will continue to have an adverse effect on the Group’s results of operations. For further information on the impact of COVID-19 on the Group, see ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’ and ‘‘Risk Factors— Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’.

Recent Developments See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Principal Income Statement Items The following section presents income statement line items derived from the Company’s consolidated income statement for HYE2020 and for the financial years ended July 31, 2019 and 2018. For a description of key accounting policies see ‘‘—Accounting Policies and Critical Estimates and Judgements’’ in this section and Note 1 to the Consolidated Financial Statements. Revenue. Revenue is the amount receivable for the provision of goods and services falling within the Group’s ordinary activities, excluding intra-group sales, estimated and actual sales returns, trade and early settlement discounts, value added tax and similar sales taxes. The Group acts as principal for direct sales which are delivered directly to the customer by the supplier. Revenue from the provision of goods is recognised when the customer obtains control of the goods. The customer is deemed to have obtained control of the goods when the goods have been received by the customer. Revenue from the provision of goods is only recognised when the transaction price is determinable and it is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods to be transferred to the customer. The Group offers a right of return to its customers for most of its goods sold. Revenue is reduced by the amount of expected returns, estimated based on historical data. The Group also provides customers with assurance-type warranties for some own brand goods. Obligations under these warranties are accounted for as provisions. The Group has no contracts with an expected duration of more than one year and has taken advantage of the practical expedient afforded by Section 121 of IFRS 15, and as such is not required to disclose information about its remaining performance obligations. Cost of sales. Cost of sales includes purchased goods, the cost of bringing inventory to its present location and condition and labor and overheads attributable to assembly and construction services. Gross profit. Gross profit is revenue less cost of sales.

68 Operating costs. Operating costs includes labor, infrastructure, fleet, marketing and advertising, information technology and other administrative costs. Operating profit. Operating profit is Gross profit less operating costs. Finance costs. Finance costs consist of interest payable and interest receivable, including interest on bank loans and overdrafts; the unwind of fair value adjustments to senior unsecured loan notes and finance lease charges; net interest expense or income on defined benefit obligations; and valuation gains or losses on financial instruments, including derivatives held at fair value through profit and loss. Share of result of associate. Share of result of associate represents the Group’s share of the profit or loss after tax of its associate undertakings. Tax. Tax expense reflects the taxes due or receivable in all applicable jurisdictions on estimated taxable profits or losses arising out of transactions in the relevant financial period. Profit from continuing operations. Profit from continuing operations represents the financial result from businesses that are not classified as discontinued under IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’. Profit/(Loss) from discontinued operations. Profit/(Loss) from discontinued operations represents the post-tax profit or loss from business classified as discontinued under IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’.

Results of Operations The following is a discussion of the Group’s key operating metrics and results of operations comparing HYE2020 and HYE2019 and FYE2019, FYE2018 and FYE2017.

Group Results of Operations for HYE2020 and HYE2019 The table below summarizes our income statement and certain other measures for the periods indicated and should be read in conjunction with, and is qualified in its entirety by reference to, the 2020 Interim Consolidated Financial Statements and notes thereto, which are included in this Offering Memorandum.

Six months ended January 31, 2020(1) 2019 $ million Revenue ...... 10,966 10,847 Cost of sales ...... (7,724) (7,654) Gross profit ...... 3,242 3,193 Operating costs: Amortization of acquired intangible assets ...... (60) (44) Other ...... (2,449) (2,440) Operating costs ...... (2,509) (2,484) Operating profit ...... 733 709 Net finance costs ...... (70) (35) Share of profit/(loss) after tax of associate ...... (1) 2 Impairment of interests in associates ...... (22) — Gain on disposal of interests in associates ...... — 3 Profit before tax ...... 640 679 Tax...... (173) (139) Profit from continuing operations ...... 467 540 Profit from discontinued operations ...... —46 Profit for the period ...... 467 586

69 FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

Revenue Group revenue for HYE2020 and HYE2019 was $10,966 million and $10,847 million, respectively. The $119 million, or 1.1%, increase in Group revenue from HYE2019 to HYE2020 was principally a result of acquisitions of $234 million and organic growth of $136 million (in particular as a result of market out-performance in the U.S. business) offset by a decrease in revenue of $230 million as a result of the completion of the disposals of Wasco and soak.com.

Cost of sales Cost of sales for HYE2020 and HYE2019 was $7,724 million and $7,654 million, respectively. The $70 million, or 1.0%, increase in cost of sales from 2019 to 2020 was principally a result of the factors discussed above.

Gross profit Gross profit for HYE2020 and HYE2019 was $3,242 million and $3,193 million, respectively. The $49 million, or 1.5%, increase in gross profit from 2019 to 2020 was principally a result of the increased revenue as discussed above.

Operating costs Operating costs for HYE2020 and HYE2019 was $2,509 million and $2,484 million, respectively. The $25 million, or 1.0%, increase in operating costs from 2019 to 2020 was principally a result of a $47 million increase in operating costs from acquisitions completed, a $16 million increase in amortization of acquired intangible assets and a $17 million increase in exceptional items, offset by $53 million of operating costs in the prior period from businesses disposed.

Operating profit Operating profit for HYE2020 and HYE2019 was $733 million and $709 million, respectively. The $24 million, or 3.4%, increase in operating profit from 2019 to 2020 was principally a result of the factors discussed above.

Finance costs Finance costs for HYE2020 and HYE2019 was $70 million and $35 million, respectively. The $35 million, or 100%, increase in finance costs from 2019 to 2020 was principally due to the adoption of IFRS 16 since August 1, 2019, resulting in a $27 million interest charge for HYE2020.

Share of result of associates Share of result of associate for HYE2020 and HYE2019 was $1 million loss and $2 million profit, respectively. The 150% decrease in share of result of associates from 2019 to 2020 was principally a result of $2 million profit from Meier Tobler AG in HYE2019 (Meier Tobler AG was no longer accounted for as an associate due to the disposal of a 10% interest in HYE2019).

Impairment of interests in associates Impairment of interests in associates for each of HYE2020 and HYE2019 was $22 million and nil, respectively. The $22 million increase in impairment of interests in associates from 2019 to 2020 is a result of an impairment to the Group’s interests in associates

Gain on disposal of interests in associates Gain on disposal of interests in associates for HYE2020 and HYE2019 was nil and $3 million, respectively. The $3 million, or 100%, decrease in gain on disposal of interests in associates from 2019 to 2020 was due to the disposal of 10% of the Group’s interest in Meier Tobler AG. Following the disposal, the Group held its remaining interest as an equity investment.

70 Profit before tax Profit before tax for HYE2020 and HYE2019 was $640 million and $679 million, respectively. The $39 million, or 5.7%, decrease in profit before tax from 2019 to 2020 was principally a result of the factors discussed above.

Tax Tax for HYE2020 and HYE2019 was $173 million and $139 million, respectively. The $34 million increase in tax from 2019 to 2020 was principally due to an increase in tax rates from the previously announced Swiss tax reform.

Profit from continuing operations Profit from continuing operations for HYE2020 and HYE2019 was $467 million and $540 million, respectively. The $73 million, or 13.5%, decrease in profit from continuing operations from 2019 to 2020 was principally a result of the above factors.

Profit/(loss) from discontinued operations Profit/(loss) from discontinued operations for HYE2020 and HYE2019 was nil and $46 million, respectively.

Profit for the period Profit for the period for HYE2020 and HYE2019 was $467 million and $586 million, respectively. The $119 million, or 20.3%, decrease in profit for the period from 2019 to 2020 was principally a result of the above factors.

71 Segment Results of Operations for HYE2020 and HYE2019 The table below summarizes our revenue and underlying trading profit by operating segment for HYE2020 and HYE2019.

Six months ended January 31, 2020 2019 $ million United States Segment Revenue ...... 9,318 8,874 Trading profit from ongoing operations ...... 774 700 Less impact of IFRS 16 ...... (34) — Underlying trading profit from ongoing operations(1)(2) ...... 740 700 United Kingdom Segment Revenue ...... 1,073 1,177 Trading profit from non-ongoing operations ...... 30 30 Less impact of IFRS 16 ...... — — Underlying trading profit from non-ongoing operations(1)(2) ...... 30 30 Canada and Central Europe Revenue ...... 575 796 Trading profit from continuing operations ...... 30 48 Less impact of IFRS 16 ...... (1) — Underlying trading profit from continuing operations(1)(2) ...... 29 48 Central and other costs Revenue ...... — — Trading profit from ongoing operations ...... (22) (25) Less impact of IFRS 16 ...... — — Underlying trading loss from ongoing operations(1)(2) ...... (22) (25) Total Revenue ...... 10,966 10,847 Trading profit from continuing operations ...... 812 753 Less impact of IFRS 16 ...... (35) — Underlying trading profit from continuing operations(1)(2) ...... 777 753

(1) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (2) The underlying trading profit measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

United States segment Revenue United States segment revenue accounted for 85.0% and 81.8% of total Group revenue for HYE2020 and HYE2019, respectively. United States segment revenue for HYE2020 and HYE2019 was $9,318 million and $8,874 million, respectively. The $444 million, or 5.0%, increase in the United States segment revenue from HYE2019 to HYE2020 was principally a result of organic growth of $234 million and acquisitions of $210 million. Organic revenue growth was 2.6% for the United States, due to strong performance across all geographic regions, major business units and end-markets as well as inflation.

Underlying trading profit United States segment underlying trading profit for HYE2020 and HYE2019 was $740 million and $700 million, respectively. The $40 million, or 5.7%, increase in United States segment underlying trading

72 profit from HYE2019 to HYE2020 was principally a result of an organic increase in sales offset by the related increase in operating costs (which increased underlying trading profit by $32 million) and acquisitions (acquisitions resulted in underlying trading profit of $8 million in the six months ended January 2020).

United Kingdom segment Revenue United Kingdom segment revenue accounted for 9.8% and 10.9% of total Group revenue for HYE2020 and HYE2019, respectively. United Kingdom segment revenue for HYE2020 and HYE2019 was $1,073 million and $1,177 million, respectively. The $104 million, or 8.8%, decrease in United Kingdom segment revenue from HYE2019 to HYE2020 was principally a result of an organic decline in sales (which decreased revenue by $58 million), the disposal of soak.com (which decreased revenue by $49 million) and movements in foreign exchange rates (which decreased revenue by $20 million) offset by an increase in revenue of $23 million from acquisitions.

Underlying trading profit United Kingdom segment underlying trading profit was $30 million for HYE2020 and $30 million for HYE2019. Gross profit reduced in HYE2020 as a result of the revenue decline discussed above. This was offset by cost-saving actions within operating costs.

Canada (previously disclosed as ‘‘Canada and Central Europe’’) Revenue Canada’s revenue accounted for 5.2% and 7.3% of total Group revenue for HYE2020 and HYE2019, respectively. Canada’s revenue for HYE2020 and HYE2019 was $575 million and $796 million, respectively. The $221 million, or 27.8% decrease in Canada’s revenue from HYE2019 to HYE2020 was principally a result of the Wasco disposal (which decreased revenue by $181 million) and an organic revenue decline (which decreased revenue by $40 million) with market conditions remaining challenging.

Underlying trading profit Canada’s underlying trading profit for HYE2020 and HYE2019 was $29 million and $48 million, respectively. The $19 million, or 39.6%, decrease in Canada’s underlying trading profit from HYE2019 to HYE2020 was principally a result of an organic decrease in underlying trading profit of $10 million and disposals (which decreased underlying trading profit by $9 million).

Central and Other Costs Underlying trading loss Central and other costs segment trading loss for HYE2020 and HYE2019 was $22 million and $25 million, respectively.

73 Group Results of Operations for the financial years ended July 31, 2019 and 2018 The table below summarizes our income statement and certain other measures for the periods indicated and should be read in conjunction with, and is qualified in its entirety by reference to, the 2019 Consolidated Financial Statements and notes thereto, which are included in this Offering Memorandum.

Year ended July 31, 2019 2018 $ million Revenue ...... 22,010 20,752 Cost of sales ...... (15,552) (14,708) Gross profit ...... 6,458 6,044 Operating costs: Amortization of acquired intangible assets ...... (110) (65) Other ...... (4,946) (4,619) Operating costs ...... (5,056) (4,684) Operating profit ...... 1,402 1,360 Net finance costs ...... (74) (53) Share of profit after tax of associate ...... 2 2 Gain on disposal of interests in associates ...... 3 — Impairment of interests in associates ...... (9) (122) Profit before tax ...... 1,324 1,187 Tax...... (263) (346) Profit from continuing operations ...... 1,061 841 Profit from discontinued operations ...... 47 426 Profit for the period ...... 1,108 1,267

Revenue Group revenue for the financial years ended July 31, 2019 and 2018 was $22,010 million and $20,752 million, respectively. The $1,258 million, or 6.1%, increase in Group revenue from FYE2018 to FYE2019 was principally a result of organic revenue growth and impact of trading days (which increased revenue by $859 million), acquisitions (which increased revenue by $760 million), partly offset by disposal of businesses (which reduced revenue by $187 million) and movements in foreign exchange rates (which reduced revenue by $174 million). On an organic revenue growth basis, growth was 4.4% for FYE2019, due to strong performance of the market in the United States. In Canada, organic revenue was 1.1% lower compared to the year ended July 31, 2018, partly because residential markets weakened throughout the year as a result of government measures to restrict mortgages in residential markets, the impact of foreign buyer taxes and rising interest rates. In the United Kingdom, like-for-like revenue growth was at 0.6%, largely as a result of repairs, maintenance and improvement markets staying flat. Substantial investment in acquisitions in the United States further consolidated our market leading positions.

Cost of sales Cost of sales for the financial years ended July 31, 2019 and 2018 was $15,552 million and $14,708 million, respectively. The $844 million, or 5.7%, increase in cost of sales from FYE2018 to FYE2019 was principally a result of the factors discussed above.

Gross profit Gross profit for the financial years ended July 31, 2019 and 2018 was $6,458 million and $6,044 million, respectively. The $414 million, or 6.9%, increase in gross profit from FYE2018 to FYE2019 was principally a result of the factors discussed above. Group gross margin of 29.3% improved by 20 basis points from 29.1% in 2018, in part because of disciplined pricing controls combined with the favorable impact of acquisitions.

74 Operating costs Operating costs for the financial years ended July 31, 2019 and 2018 was $5,056 million and $4,684 million, respectively. The $372 million, or 7.9%, increase in operating costs from FYE2018 to FYE2019 was principally a result of staff cost increases (which increased operating costs by $250 million) caused by a 5.5% increase in the average number of associates, wage inflation and an increase in commissions and bonuses from the good performance in the year. The amortization of acquired intangible assets increased by $45 million. Exceptional costs also increased by $29 million due to a $55 million increase in restructuring costs across each of the businesses, partially offset by $23 million gain on disposal of businesses. The remaining increase in operating costs was due to the organic increase in sales volume during the year ended July 31, 2018 discussed above.

Operating profit Operating profit for the financial years ended July 31, 2019 and 2018 was $1,402 million and $1,360 million, respectively. The $42 million, or 3.1%, increase in operating profit from FYE2019 to FYE2018 was principally a result of the factors discussed above.

Finance costs Finance costs for the financial years ended July 31, 2019 and 2018 was $74 million and $53 million, respectively. The $21 million, or 39.6%, increase in finance costs from FYE2019 to FYE2018 was principally due to increased average debt level, including the issuance of $750 million aggregate principal amount of 4.5% notes due 2028.

Share of result of associate Share of result of associate for the financial years ended July 31, 2019 and 2018 was $2 million profit for each year.

Gain on disposal of interests in associates Disposal of interests in associates for the financial years ended July 31, 2019 and 2018 was a gain of $3 million and nil respectively, due to the disposal of 10% of the Group’s interest in Meier Tobler AG. Following the disposal, the Group held its remaining interest as an equity investment.

Impairment of interests in associates Impairment of interests in associates for the financial years ended July 31, 2019 and 2018 was $9 million and $122 million, respectively. The $113 million, or 92.6%, decrease was due to the impairment of the interest held in Meier Tobler AG in 2018 due to difficult trading conditions for the Meier Tobler Group.

Profit before tax Profit before tax for the financial years ended July 31, 2019 and 2018 was $1,324 million and $1,187 million, respectively. The $137 million, or 11.5%, increase in profit before tax from FYE2018 to FYE2019 was principally a result of the factors discussed above.

Tax Tax for the financial years ended July 31, 2019 and 2018 was $263 million and $346 million, respectively. The $83 million, or 24.0%, decrease in tax from FYE2018 to FYE2019 was principally due to a reduction in the United States federal tax rate from 35% to 21%.

Profit from continuing operations Profit from continuing operations for the financial years ended July 31, 2019 and 2018 was $1,061 million and $841 million, respectively. The $220 million, or 26.2%, increase in profit from continuing operations from FYE2018 to FYE2019 was principally a result of the above factors.

Profit from discontinued operations Profit from discontinued operations for the financial years ended July 31, 2019 and 2018 was $47 million and $426 million, respectively. The $379 million, or 89.0%, decrease in profit from discontinued operations

75 from FYE2018 to FYE2019 was principally a result of the disposal of the Nordic business in 2018 which was classified as a discontinued operation.

Profit for the period Profit for the period for the financial years ended July 31, 2019 and 2018 was $1,108 million and $1,267 million, respectively. The $159 million, or 12.5%, decrease in profit for the period from FYE2018 to FYE2019 was principally a result of the above factors.

Segment Results of Operations for the financial years ended July 31, 2019 and 2018 The table below summarizes our revenue and underlying trading profit by operating segment for the financial years ended July 31, 2019 and 2018.

Year ended July 31, 2019 2018 $ million United States Segment Revenue ...... 18,358 16,670 Underlying trading profit(1)(2) ...... 1,508 1,406 United Kingdom Segment Revenue ...... 2,281 2,568 Underlying trading profit(1)(2) ...... 65 73 Canada and Central Europe Revenue ...... 1,371 1,514 Underlying trading profit(1)(2) ...... 76 83 Central and other costs Underlying trading loss(1)(2) ...... (43) (55) Total Revenue ...... 22,010 20,752 Underlying trading profit(1)(2) ...... 1,606 1,507

(1) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (2) The underlying trading profit measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

United States segment Revenue United States segment revenue accounted for 83.4% and 80.3% of total Group revenue for the financial years ended July 31, 2019 and 2018, respectively. United States segment revenue for FYE2019 and FYE2018 was $18,358 million and $16,670 million, respectively. The $1,688 million, or 10.1%, increase in United States segment revenue from FYE2018 to FYE2019 was principally a result of organic revenue growth of $1,041 million and acquisition revenues of $703 million. Organic revenue growth was 6.2% for the United States, due to strong performance of the market in the first half as well as inflation which accelerated in the second half of the year following the U.S. steel/commodity tariff announcements. The United States continued to outperform markets across the business units.

Underlying trading profit United States segment underlying trading profit for the financial years ended July 31, 2019 and 2018 was $1,508 million and $1,406 million, respectively. The $102 million, or 7.3%, increase in United States segment underlying trading profit from FYE2018 to FYE2019 was principally a result of organic revenue growth offset by the related increase in operating costs and the impact of trading days (which increased underlying trading profit by $62 million) with acquisitions contributing underlying trading profit of $40 million.

76 United Kingdom segment Revenue United Kingdom segment revenue accounted for 10.4% and 12.4% of total Group revenue for the financial years ended July 31, 2019 and 2018, respectively. United Kingdom segment revenue for FYE2019 and FYE2018 was $2,281 million and $2,568 million, respectively. The $287 million, or 11.2%, decrease in United Kingdom segment revenue from FYE2018 to FYE2019 was principally a result of the closure of branches and low margin wholesale distribution businesses as part of the restructuring program in 2018 (which decreased revenue by $159 million), unfavorable movements in foreign exchange rates (which decreased revenue by $113 million) and the disposal of soak.com (which decreased revenue by $37 million).

Underlying trading profit United Kingdom segment underlying trading profit for the financial years ended July 31, 2019 and 2018 was $65 million and $73 million, respectively. The $8 million, or 11.0%, decrease in United Kingdom segment underlying trading profit from FYE2018 to FYE2019 was principally a result of unfavorable movements in foreign exchange rates (which decreased underlying trading profit by $5 million) and the decrease in sales volumes less cost savings (which decreased underlying trading profit by $3 million).

Canada (previously disclosed as ‘‘Canada and Central Europe’’) Revenue Canada’s revenue accounted for 6.2% and 7.3% of total Group revenue for the financial years ended July 31, 2019 and 2018, respectively. Canada’s revenue for 2019 and 2018 was $1,371 million and $1,514 million, respectively. The $143 million, or 9.4%, decrease in Canada’s revenue from FYE2018 to FYE2019 was principally a result of the Wasco disposal (which reduced revenue by $150 million), unfavorable movements in foreign exchange rates (which reduced revenue by $61 million), partially offset by an increase in organic sales (which increased revenue by $11 million) and acquisitions (which increased revenue by $57 million).

Underlying trading profit Canada’s underlying trading profit for the financial years ended July 31, 2019 and 2018 was $76 million and $83 million, respectively. The $7 million, or 8.4%, decrease in Canada’s underlying trading profit from FYE2018 to FYE2019 was principally a result of disposals (which decreased underlying trading profit by $6 million), unfavorable movements in foreign exchange rates (which decreased underlying trading profit by $3 million), an increase in organic sales and related increase in operating costs (which decreased underlying trading profit by $3 million) and acquisitions (which increased underlying trading profit by $5 million).

Central and other costs segment Underlying trading loss Central and other costs segment trading loss for the financial years ended July 31, 2019 and 2018 was $43 million and $55 million, respectively. The $12 million, or 21.8%, decrease in Central and other costs segment trading loss from FYE2018 to FYE2019 was principally a result of cost savings from moving certain Group roles to the United States.

77 Group Results of Operations for FYE2018 and FYE2017 The table below summarizes our income statement and certain other measures for the periods indicated and should be read in conjunction with, and is qualified in its entirety by reference to, the 2018 Consolidated Financial Statements and notes thereto, which are included in this Offering Memorandum.

Year ended July 31, 2017 2018 (Restated)(1) $ million Revenue ...... 20,752 19,284 Cost of sales ...... (14,708) (13,701) Gross profit ...... 6,044 5,583 Operating costs: Amortization of acquired intangible assets ...... (65) (81) Other ...... (4,619) (4,024) Operating costs ...... (4,684) (4,105) Operating profit ...... 1,360 1,478 Net finance costs ...... (53) (54) Share of profit/(loss) after tax of associate ...... 2 (1) Impairment of interests in associates ...... (122) — Profit before tax ...... 1,187 1,423 Tax...... (346) (370) Profit from continuing operations ...... 841 1,053 Profit/(loss) from discontinued operations ...... 426 (133) Profit for the period ...... 1,267 920

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate.

Revenue Group revenue for FYE2018 and FYE2017 was $20,752 million and $19,284 million, respectively. The $1,468 million, or 7.6%, increase in Group revenue from FYE2017 to FYE2018 was principally a result of organic revenue growth in sales and the impact of trading days (which increased revenue by $1,439 million), movements in foreign exchange rates (which increased revenue by $229 million) and acquisitions (acquisitions completed in FYE2017 and FYE2018 resulted in incremental revenue of $239 million), partly offset by disposal of businesses (which reduced revenue by $439 million). On an organic revenue growth basis, growth was 7.5% for FYE2018, due to strong performance of the market in the United States as well as inflation which accelerated in the second half of the year following the U.S. steel/commodity tariff announcements. Canada growth was broadly in line with the markets, whereas United Kingdom revenue was reduced by closed branches.

Cost of sales Cost of sales for FYE2018 and FYE2017 was $14,708 million and $13,701 million, respectively. The $1,007 million, or 7.3%, increase in cost of sales from FYE2017 to FYE2018 was principally a result of the factors discussed above.

Gross profit Gross profit for FYE2018 and FYE2017 was $6,044 million and $5,583 million, respectively. The $461 million, or 8.3%, increase in gross profit from FYE2017 to FYE2018 was principally a result of the factors discussed above. Group gross margin of 29.1% improved by 10 basis points from 29.0% in 2017, in part because of the increase in supplier rebates.

Operating costs Operating costs for FYE2018 and FYE2017 was $4,684 million and $4,105 million, respectively. The $579 million, or 14.1%, increase in operating costs from FYE2017 to FYE2018 was principally a result of

78 an increase in exceptional costs of $300 million caused primarily by the gain on disposal of businesses of $265 million in the year ended July 31, 2017 and staff cost increases (which increased operating costs by $203 million) caused by a 8.0% increase in the number of associates, wage inflation and an increase in commissions and bonuses from the good performance in the year. The remaining increase in operating costs was due to the organic increase in sales during the year ended July 31, 2018 discussed above.

Operating profit Operating profit for FYE2018 and FYE2017 was $1,360 million and $1,478 million, respectively. The $118 million, or 8.0%, decrease in operating profit from FYE2017 to FYE2018 was principally a result of the factors discussed above.

Finance costs Finance costs for FYE2018 and FYE2017 was $53 million and $54 million, respectively. The $1 million, or 1.9%, decrease in finance costs from FYE2017 to FYE2018 was principally due to lower average net debt for the year, partly offset by an increase in United States interest rates.

Share of result of associate Share of result of associate for FYE2018 and FYE2017 was $2 million profit and $1 million loss, respectively. The $3 million increase in share of result of associate from FYE2017 to FYE2018 was principally a result of the integration costs incurred in 2017, the first year of trading for the combined Swiss-company Meier Tobler AG, which was the result of an investment we made into an associate during 2017.

Impairment of interests in associates Impairment of interests in associates for FYE2018 and FYE2017 was $122 million and nil, respectively. The $122 million increase was due to a one-off impairment of interests in associates’ Swiss-company Meier Tobler AG, for FYE2018.

Profit before tax Profit before tax for FYE2018 and FYE2017 was $1,187 million and $1,423 million, respectively. The $236 million, or 16.6%, decrease in profit before tax from FYE2017 to FYE2018 was principally a result of the factors discussed above.

Tax Tax for FYE2018 and FYE2017 was $346 million and $370 million, respectively. The $24 million, or 6.5%, decrease in tax from FYE2017 to FYE2018 was principally due to the reduction in the U.S. federal tax rate from 35% to 21% on January 1, 2018.

Profit from continuing operations Profit from continuing operations for FYE2018 and FYE2017 was $841 million and $1,053 million, respectively. The $212 million, or 20.1%, decrease in profit from continuing operations from FYE2017 to FYE2018 was principally a result of the above factors.

Profit/(loss) from discontinued operations Profit/(loss) from discontinued operations for FYE2018 and FYE2017 was $426 million profit and $133 million loss, respectively. The $559 million increase in profit from discontinued operations from FYE2017 to FYE2018 was principally a result of a gain recognized on the disposal of the Nordic business.

Profit for the period Profit for the period for FYE2018 and FYE2017 was $1,267 million and $920 million, respectively. The $347 million, or 37.7%, increase in profit for the period from FYE2017 to FYE2018 was principally a result of the above factors.

79 Segment Results of Operations for FYE2018 and FYE2017 The table below summarizes our revenue and underlying trading profit by operating segment for FYE2018 and FYE2017.

Year ended July 31, 2017 2018 (Restated)(1) $ million United States Segment Revenue ...... 16,670 15,193 Underlying trading profit(2)(3) ...... 1,406 1,224 United Kingdom Segment Revenue ...... 2,568 2,548 Underlying trading profit(2)(3) ...... 73 96 Canada and Central Segment Revenue ...... 1,514 1,543 Underlying trading profit(2)(3) ...... 83 71 Central and other costs Underlying trading loss(2)(3) ...... (55) (50) Total Revenue ...... 20,752 19,284 Underlying trading profit(2)(3) ...... 1,507 1,341

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) The underlying trading profit measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details.

United States segment Revenue United States segment revenue accounted for 80.3% and 78.8% of total Group revenue for FYE2018 and FYE2017, respectively. United States segment revenue for 2018 and 2017 was $16,670 million and $15,193 million, respectively. The $1,477 million, or 9.7%, increase in United States segment revenue from FYE2017 to FYE2018 was principally a result of an increase in organic sales (which increased revenue by $1,488 million) and acquisitions (acquisitions in the year ended July 31, 2018 resulted in revenues of $205 million), partly offset by disposals (which reduced revenue by $216 million). Organic revenue growth was 9.8% for the United States, due to strong performance of the market as well as inflation which accelerated in the second half of the year following the U.S. steel/commodity tariff announcements.

Underlying trading profit United States segment underlying trading profit for FYE2018 and FYE2017 was $1,406 million and $1,224 million, respectively. The $182 million, or 14.9%, increase in United States segment underlying trading profit from FYE2017 to FYE2018 was principally a result of an organic increase in sales offset by the related increase in operating costs (which increased underlying trading profit by $198 million), partly offset by disposals that occurred in 2017 (which decreased underlying trading profit by $20 million).

United Kingdom segment Revenue United Kingdom segment revenue accounted for 12.4% and 13.2% of total Group revenue for FYE2018 and FYE2017, respectively. United Kingdom segment revenue for 2018 and 2017 was $2,568 million and $2,548 million, respectively. The $20 million, or 0.8%, increase in United Kingdom segment revenue from

80 FYE2017 to FYE2018 was principally a result of favorable movements in foreign exchange rates (which increased revenue by $163 million), partly offset by an organic change in sales (which decreased revenue by $143 million).

Underlying trading profit United Kingdom segment underlying trading profit for FYE2018 and FYE2017 was $73 million and $96 million, respectively. The $23 million, or 24.0%, decrease in United Kingdom segment underlying trading profit from FYE2017 to FYE2018 was principally a result of the decrease in sales volumes (which decreased underlying trading profit by $29 million), partly offset by movements in foreign exchange rates of $6 million.

Canada (previously disclosed as ‘‘Canada and Central Europe’’) Revenue Canada’s revenue accounted for 7.3% and 8.0% of total Group revenue for FYE2018 and FYE2017, respectively. Canada’s revenue for 2018 and 2017 was $1,514 million and $1,543 million, respectively. The $29 million, or 1.9%, decrease in Canada’s revenue from FYE2017 to FYE2018 was principally a result of the disposal of Tobler Haustechnik AG in the prior year (which decreased revenue by $223 million), partly offset by movements in foreign exchange rates (which increased revenue by $66 million), an increase in organic sales (which increased revenue by $94 million) and acquisitions (which increased revenue by $34 million).

Underlying trading profit Canada’s underlying trading profit for FYE2018 and FYE2017 was $83 million and $71 million, respectively. The $12 million, or 16.9%, increase in Canada’s underlying trading profit from FYE2017 to FYE2018 was principally a result of an organic increase in underlying trading profit of $19 million, partly offset by the prior year Tobler Haustechnik AG profit of $14 million.

Central and other costs segment Underlying trading loss Central and other costs segment trading loss for FYE2018 and FYE2017 was $55 million and $50 million, respectively. The $5 million, or 10.0%, increase in Central and other costs segment trading loss from FYE2017 to FYE2018 was principally a result of a one-off insurance credit in 2017, partly offset by cost savings from moving certain Group roles to the United States.

Liquidity and Capital Resources Overview The Group needs continued access to funding in order to meet its trading obligations, to support investment in the organic growth of the business and to make acquisitions when opportunities arise. Its sources of funding include cash flows generated by operations and borrowings from banks and other financial institutions. The Group carefully manages and monitors its liquidity and capital resources and this has been a particular focus area since the start of the COVID-19 virus outbreak. In response to the COVID-19 crisis the Group continues to conduct ongoing risk assessments of the potential further impacts of this pandemic on its business and its future cash flow requirements. As described in more detail in ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’, we have taken certain measures designed to protect and enhance the Group’s liquidity, including suspending our $500 million share buy-back program, pausing M&A activity, withdrawing the interim dividend and reducing capital expenditure. On this basis, Ferguson remains in a strong financial position with long-term committed facilities. Since January 31, 2020, we have borrowed £450 million under the ECP Programme and $250 million under the Trade Receivables Securitization Arrangements which has increased our cash and cash equivalents balance. As of April 30, 2020, the Company’s net debt was $1.8 billion and the Group had $3.1 billion of available liquidity (comprising readily available cash of $1.3 billion and $1.8 billion of undrawn facilities). For contracted cash outflows of the Group’s borrowings as at January 31, 2020, see ‘‘—Facilities’’.

81 Capital resources The Group seeks a balance between certainty of funding and a flexible, cost-effective borrowings structure. The Group maintains a policy of ensuring sufficient borrowing headroom to finance all investment and anticipated bolt-on acquisitions for the following financial year with an additional contingent safety margin. The Group’s net debt includes both short-term and long-term borrowings less cash and cash equivalents together with the fair value of certain derivative financial instruments. Net debt was $1,944 million as at January 31, 2020 and $1,195 million, $1,080 million and $706 million as at July 31, 2019, 2018 and 2017, respectively, and is shown in the balance sheet under the following headings:

As at July 31, As at January 31, 2017 2020 2019 2018 (Restated)(1) $ million Cash and cash equivalents ...... 775 1,133 833 2,525 Bank overdrafts ..... (287) (47) (375) (1,982) Borrowings less cash .. 488 1,086 458 543 Derivative financial instruments ...... 22 22 (2) 26 Bank and other loans . (2,454) (2,297) (1,530) (1,266) Obligations under finance leases ..... — (6) (6) (9) Net debt(2) ...... (1,944) (1,195) (1,080) (706)

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. (2) Net debt is a measure of liabilities from financing activities, including bank overdrafts, bank loans, derivative financial instruments and obligations under finance leases, offset by cash and cash equivalents. Net debt is used as a performance measure because it is a good indicator of the strength of the Group’s balance sheet position and is widely used by credit rating agencies. (3) This measure shows the impact of IFRS 16 on net debt. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’. For FYE2019, FYE2018 and FYE2017, there were no lease liabilities recognized under IFRS 16. The following table sets forth the breakdown of the Group’s net debt by currency as at January 31, 2020 and July 31, 2019, 2018 and 2017, respectively:

As at July 31, As at January 31, 2017 2020 2019 2018 (Restated)(1) $ million U.S. dollars ...... (1,734) (1,450) (1,299) (768) Pounds sterling ...... (134) 85 97 69 Euro, Danish kroner and Swedish kroner . (8) 29 23 8 Other currencies ..... (68) 141 99 (15) Total ...... (1,944) (1,195) (1,080) (706)

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. To assess the appropriateness of its capital structure based on current and forecast trading, the Group’s principal measure of financial gearing is the ratio of net debt to Adjusted EBITDA (such metrics to be calculated in accordance with the relevant agreement). The Group aims to operate with investment grade credit metrics and ensure this ratio remains within 1 to 2 times. The Group’s Private Placement Notes (as defined below) contain a financial covenant that are, based on the definitions included therein, limiting the ratio of net debt to Adjusted EBITDA to 3.5:1.

82 For the purpose of these covenants, Adjusted EBITDA is calculated as the total consolidated underlying trading profit of the Group for the preceding 12-month period, before interest, tax and exceptional items, after adding back all amounts provided for depreciation, amortization and impairment of property, plant and equipment and software excluding exceptional items in operating profit in such period and excluding the impact of IFRS 16. Exceptional items are those which are considered significant by virtue of their nature, size or incidence. These items are presented as exceptional within their relevant income statement category to assist in the understanding of the trading and financial results of the Group as these types of cost/credit distort understanding of the Group’s financial performance for the financial year and the comparability between periods. Examples of items that are considered by the Directors for designation as exceptional items include, but are not limited to: • Material restructuring costs within a segment incurred as part of a significant change in strategy or due to the closure of a large part of a business and are not expected to be repeated on a regular basis. • Significant costs incurred as part of the integration of an acquired business and which are considered to be material. • Gains or losses on disposals of businesses are considered to be exceptional in nature as they do not reflect the performance of the trading business. • Costs or credits arising as a result of material regulatory and litigation matters. • Gains or losses arising on significant changes to or closures of defined benefit pension plans. • Other items which are material and considered to be non-recurring in nature and/or not as a result of the underlying trading activities of the business. If provisions have been made for exceptional items in previous years, then any reversal of these provisions is treated as exceptional. Compliance with this covenant is required as at measurement dates which are set at July 31 and January 31 of each year.

Facilities The following section summarizes certain material provisions of our material debt (other than the notes offered hereby). The following description is only a summary of the material provisions of the Multicurrency Revolving Credit Facility, the Sumitomo Bilateral Loan Agreement, the Trade Receivables Securitization Arrangements, the Private Placements Notes, the 144A Notes and the ECP Programme and does not purport to be complete and is qualified in its entirety by reference to the documents governing such indebtedness.

Multicurrency Revolving Credit Facility Our Multicurrency Revolving Credit Facility is governed by the Multicurrency Revolving Credit Facility Agreement, dated as of March 10, 2020 among the Company and the Subsidiary Guarantor, as original borrowers and original guarantors, the lenders and arrangers party thereto, and the agent. The Multicurrency Revolving Credit Facility consists of a $1,100 million unsecured, multicurrency revolving loan facility, which terminates in March 2025. The Multicurrency Revolving Credit Facility contains the ability for the original borrowers and original guarantors to apply to the lenders requesting they grant a further one-year extension to the then maturity date on both the first and second anniversary of the facility being signed. Borrowings are available to each of the borrowers under the Multicurrency Revolving Credit Facility, including future subsidiaries that accede as borrowers under the Multicurrency Revolving Credit Facility, and bear interest at a rate equal to the sum of LIBOR, or in relation to any loan in Canadian dollars, CDOR, plus an applicable margin determined based on our public credit ratings. We are required to pay a quarterly commitment fee and utilization fee in certain circumstances. The borrowers under the Multicurrency Revolving Credit Facility are permitted to prepay and re-borrow amounts outstanding under the Multicurrency Revolving Credit Facility, in whole or in part, at any time. All obligations under our Multicurrency Revolving Credit Facility are unconditionally guaranteed by the Company and the Subsidiary Guarantor, to the extent each entity is not the borrower. In certain

83 circumstances, the Multicurrency Revolving Credit Facility provides that outstanding amounts drawn must be prepaid by the borrowers. The Multicurrency Revolving Credit Facility contains certain customary affirmative covenants, as well as certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to incur indebtedness, grant liens on present or future assets and revenues, sell assets, or engage in acquisitions, mergers or consolidations. The Multicurrency Revolving Credit Facility also contains certain events of default and cross-default provisions. As of the date of this Offering Memorandum, nil has been drawn down under the Multicurrency Revolving Credit Facility.

Bilateral Loan In March 2020, we entered into a $500 million bilateral loan agreement with Sumitomo Mitsui Banking Corporation (‘‘SMBC’’) which expires on March 31, 2021 (the ‘‘Sumitomo Bilateral Loan Agreement’’). The Sumitomo Bilateral Loan Agreement contains commercial terms that are in line with those of the Multicurrency Revolving Credit Facility and we have the ability to request that SMBC, at their option, extend this agreement for a further 364 days. As of the date of this Offering Memorandum, nil has been drawn down under the Sumitomo Bilateral Loan Agreement.

Trade Receivables Securitization Arrangements Our Trade Receivables Securitization Arrangements are governed by the Receivables Purchase Agreement, dated as of July 31, 2013, as further amended, supplemented and restated, among the Company, Ferguson Receivables, LLC as seller, Ferguson Enterprises, LLC as servicer, the originators, the lenders as conduit purchasers and committed purchasers, letters of credit banks, facility agents, administrative agent and co-administrative agent party each thereto, and the Purchase and Contribution Agreement, dated as of July 31, 2013, as further amended, supplemented and restated, among Ferguson Enterprises, LLC and its various subsidiaries party thereto as originators and Ferguson Receivables, LLC as purchaser. The Trade Receivables Securitization Arrangements consist of trade receivables funding for up to $600 million, terminating in December 2021. It provides for purchases of undivided ownership interests in a revolving pool of certain of the Group’s trade receivables and related security generated by the originators, transferred to the seller which are then in turn securitized against lending advances made by the conduit purchasers and committed purchasers. At all times all borrowings under the Trade Receivables Securitization Arrangements are recorded on the balance sheet of the Group. Fees are payable under the Trade Receivables Securitization Arrangements at a rate equal to LIBOR plus an applicable margin, determined based on our leverage ratio, which is defined as the ratio of net debt to Adjusted EBITDA (each as defined therein). The Trade Receivables Securitization Arrangements contain certain customary affirmative covenants, as well as certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries party thereto from incurring indebtedness, granting additional liens on the receivables and selling assets or engaging in acquisitions, mergers or consolidations. In addition, subject to certain exceptions, the Trade Receivables Securitization Arrangements require us to maintain a leverage ratio and the level of the leverage ratio determines the value we receive for our pledged collateral and the extent of our financial reporting obligations. The Trade Receivables Securitization Arrangements also contain certain customary events of default and cross-default provisions. The Trade Receivables Securitization Arrangements also require that our performance in relation to trade receivables remains at set levels (specifically relating to timely payments being received from debtors and in relation to the amount of debt written off as bad debt) and that a required level of trade receivables be generated and available to support the borrowings under the arrangements. As at the date of this Offering Memorandum $400 million has been advanced under the Trade Receivables Securitization Arrangements. The COVID-19 pandemic has resulted in significant economic uncertainty and disruption of global financial markets, resulting in decreased customer demand and increased impairments of receivables. Our failure to successfully collect our accounts receivables might negatively impact our Trade Receivables Securitization Arrangements. For further information on the impact of COVID-19, see ‘‘Risk Factors— Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is

84 prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Private Placement Notes In November 2017, Wolseley Capital, Inc. (‘‘Wolseley Capital’’) privately placed $450 million aggregate principal private placement notes (collectively, the ‘‘2017 Private Placement Notes’’) guaranteed by the Company pursuant to a note and guarantee agreement dated as of November 30, 2017. The 2017 Private Placement Notes consist of $55 million of 3.30% Series L Guaranteed Senior Notes due November 30, 2023 (the ‘‘3.30% Series L Notes’’), $150 million of 3.44% Series M Guaranteed Senior Notes due November 30, 2024 (the ‘‘3.44% Series M Notes’’), $150 million of 3.51% Series N Guaranteed Senior Notes due November 30, 2026 (the ‘‘3.51% Series N Notes’’, and together with the 3.30% Series L Notes and 3.44% Series M Notes, the ‘‘Fixed Rate 2017 Private Placement Notes’’) and $95 million of Floating Rate Series O Guaranteed Senior Notes due November 30, 2023 (the ‘‘Floating Rate 2017 Private Placement Notes’’). In June 2015, Wolseley Capital privately placed $800 million aggregate principal private placement notes (collectively, the ‘‘2015 Private Placement Notes’’) guaranteed by the Company pursuant to a note and guarantee agreement dated as of June 25, 2015. The 2015 Private Placement Notes consist of $250 million of 3.43% Series I Guaranteed Senior Notes due September 1, 2022, $400 million of 3.73% Series J Guaranteed Senior Notes due September 1, 2025 and $150 million of 3.83% Series K Guaranteed Senior Notes due September 1, 2027. In November 2005, Wolseley Capital, privately placed $281 million of 5.32% Series F Guaranteed Senior Notes due November 2020 (the ‘‘2005 Private Placement Notes’’ and together with the 2017 Private Placement Notes and the 2015 Private Placement Notes, the ‘‘Private Placement Notes’’) guaranteed by the Company pursuant to a note and guarantee agreement dated as of November 16, 2005. Interest on the Fixed Rate 2017 Private Placement Notes is payable semi-annually on May and November 30 of each year. Interest on the Floating Rate 2017 Private Placement Notes is payable quarterly on February 28, May 30, August 30 and November 30 of each year. Interest on the 2015 Private Placement Notes is payable semi-annually on March and September 1 of each year. Interest on the 2005 Private Placement Notes is payable semi-annually on May and November 15 of each year. Wolseley Capital’s obligations under the note and guarantee agreements are unconditionally guaranteed by the Company and the Subsidiary Guarantor. Wolseley Capital may repay the Private Placement Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid plus a ‘‘make-whole’’ prepayment premium. Wolseley Capital is also required to consult with noteholders upon a change of control and any consequent proposed amendments to the terms of the Private Placement Notes and if no agreement is reached regarding any proposed changes offer to repurchase the notes at a price equal to 100% of their principal amount plus accrued interest. The note purchase agreements contain certain customary affirmative covenants, as well as certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s non-guarantor subsidiaries’ ability to incur indebtedness and the Group’s ability to enter into affiliate transactions, grant liens on its assets, sell assets, or engage in acquisitions, mergers or consolidations. In addition, subject to certain exceptions, the note purchase agreements require us to maintain a ratio of net debt to Adjusted EBITDA, as described under ‘‘—Liquidity and Capital Resources— Capital Resources’’ above. The Private Placement Notes contain customary events of default. Upon an event of default and an acceleration of the Private Placement Notes, the Company must repay the Private Placement Notes plus a make-whole premium and accrued and unpaid interest. As at the date of this Offering Memorandum, the Group’s private placement bonds have a par value of $1,531 million.

144A Notes On October 24, 2018, the Issuer issued $750 million aggregate principal amount of 4.500% Notes due 2028 (the ‘‘144A Notes’’) guaranteed by the Guarantors. The 144A Notes bear interest at 4.500% per annum, payable semi-annually in arrears in U.S. dollars on each April 24 and October 24 and will mature on October 24, 2028.

85 ECP Programme On March 27, 2020, the Issuer entered into a £1,500 million Euro-Commercial Paper Programme (the ‘‘ECP Programme’’). Any commercial paper issued under the ECP Programme is guaranteed by the Guarantors. Currently, there are £450 million of euro-commercial paper notes issued by the Issuer under the ECP Programme that mature on October 2, 2020. The ECP Programme contains certain customary events of default and cross-default provisions. The maturity profile of the Group’s borrowings and undrawn facilities as at January 31, 2020 was as follows:

As at January 31, 2020 Current(1) Non-current Total $ million Bank overdrafts(2) ...... 287 — 287 Bank loans ...... 150 — 150 Debt securities(3) ...... 285 2,019 2,304 Total loans ...... 435 2,019 2,454 Total borrowings ...... 722 2,019 2,741

(1) Due within one year. (2) Included in bank overdrafts at January 31, 2020 is an amount of $219 million which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within cash and cash equivalents. These amounts are subject to a master netting arrangement. (3) Includes the Private Placement Notes and the 144A Notes. Non-current loans at January 31, 2020 are repayable as follows:

As at January 31, 2020 $ million Due in one to two years ...... — Due in two to three years ...... 250 Due in three to four years ...... 150 Due in four to five years ...... 150 Due in over five years ...... 1,469 Total ...... 2,019

There have been no significant changes during the year to the Group’s policies on accounting for, valuing and managing the risk of financial instruments.

Capital expenditure Our strategy of investing in the development of the Group’s business models is supported by capital expenditure. Capital expenditure (defined as the sum of cash used for purchases of property, plant and equipment and purchases of non-acquired intangible assets) totaled $164 million and $244 million in HYE2020 and HYE2019, respectively, and $418 million, $299 million and $224 million in FYE2019, FYE2018 and FYE2017, respectively. This investment was primarily for strategic projects to support future growth such as new distribution centers, distribution hubs, technology, processes and network infrastructure. Capital expenditure is principally financed through external borrowings and operating cash flows.

Leases Lease payments mainly represent rents payable for properties. Some of the Group’s lease arrangements have renewal options and rental escalation clauses. No arrangements have been entered into for contingent rental payments. The total minimum sublease income expected to be received under non-cancellable subleases at January 31, 2020 was $1 million. The Group had total lease liabilities determined under IFRS 16 of $1,445 million as at January 31, 2020 and operating lease commitments determined under IAS 17 of $1,126 million, $1,081 million,

86 $1,129 million as at July 31, 2019, July 31, 2018 and July 31, 2017, respectively. Additional information can be found in Note 10 of the 2020 Interim Consolidated Financial Statements and Note 31 of the 2019 Consolidated Financial Statements. There are material differences between IFRS 16 and IAS 17. Please see Note 1 of the 2020 Interim Consolidated Financial Statements, Note 1 of the 2019 Consolidated Financial Statements and ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

Lease liabilities under IFRS 16 The table below summarizes the Group’s lease liabilities under IFRS 16 for HYE2020. Additional information can be found in Note 1 of the 2020 Interim Consolidated Financial Statements and ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

As at January 31, 2020 $ million Within one year ...... 310 Later than one year and less than five years ...... 1,045 After five years ...... 276 Total undiscounted lease payments ...... 1,631 Effect of discounting ...... (186) Total lease liabilities ...... 1,445

Lease commitments under IAS 17 The table below summarizes the Group’s lease commitments under IAS 17 for FYE2019, FYE2018 and FYE2017. Additional information can be found in Note 31 of the 2019 Consolidated Financial Statements and Note 32 of the 2018 Consolidated Financial Statements.

As at July 31, 2017 2019 2018 (Restated)(1) $ million Within one year ...... 342 328 344 Later than one year and less than five years ...... 631 591 609 After five years ...... 153 162 176 Total operating lease commitments ...... 1,126 1,081 1,129

At July 31, 2019, 2018 and 2017, provisions include an amount of $29 million, $32 million and $36 million in respect of minimum lease payments for such onerous leases net of sublease income expected to be received, respectively. The total minimum sublease income expected to be received under non-cancellable subleases at July 31, 2019, 2018 and 2017 was $3 million, $6 million and $10 million, respectively. The commitments above include nil, nil and $120 million operating lease commitments for FYE2019, FYE2018 and FYE2017, respectively, for discontinued operations.

87 Contractual obligations The table below sets forth the Group’s anticipated contractual cash outflows (excluding interest income and income from derivatives), including interest payable in respect of its trade and other payables and bank borrowings on an undiscounted basis as at the year ended July 31, 2019.

As at July 31, 2019 Trade and Other Interest on Payables Debt Debt Total $ million Due in less than one year ...... 3,133 2 85 3,220 Due in one to two years ...... 53 282 97 432 Due in two to three years ...... 26 1 86 113 Due in three to four years ...... 15 250 78 343 Due in four to five years ...... 14 150 74 238 Due in over five years ...... 184 1,601 295 2,080 Total ...... 3,425 2,286 715 6,426

Cash Flow The table below summarizes the Group’s cash flow for HYE2020 and HYE2019 and for FYE2019, FYE2018 and FYE2017.

Six months ended January 31, Year ended July 31, 2017 2020(2) 2019 2019 2018 (Restated)(1) $ million Net cash generated from operating activities ...... 394 121 1,290 1,036 950 Net cash generated from / (used in) investing activities ...... (300) (587) (783) 700 (209) Net cash (used)/generated by financing activities ...... (691) 414 131 (1,857) (472) Net cash (used)/generated ...... (597) (52) 638 (121) 269 Effects of exchange rate changes .... (1) (3) (10) (7) (13) Net (decrease)/increase in cash, cash equivalents and bank overdrafts . . . (598) (55) 628 (128) 256 Cash, cash equivalents and bank overdrafts at the beginning of the period ...... 1,086 458 458 586 330 Cash, cash equivalents and bank overdrafts at the end of the period . 488 403 1,086 458 586

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. (2) The Group has adopted IFRS 16 since August 1, 2019 (i.e., from the start of the year ending July 31, 2020 and accordingly for the financial information for HYE2020). Under the transition methods chosen, financial information for HYE2019 and FYE2019, FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 17. As such, the financial information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

Cash flows from operating activities Net cash generated from operating activities for HYE2020 and HYE2019 was $394 million and $121 million, respectively. The $273 million, or 225.6%, increase in cash flow from operating activities from HYE2019 to HYE2020 was principally a result of the impact of IFRS 16 on the cash flow to increase cash generated from operating activities by $144 million. Net cash generated from operating activities for FYE2019 and FYE2018 was $1,290 million and $1,036 million, respectively. The $254 million, or 24.5%, increase in cash flow from operating activities

88 from FYE2018 to FYE2019 was principally a result of strong performance in the United States segment for FYE2019 and a one off payment to pension plans in FYE2018. Net cash generated from operating activities for FYE2018 and FYE2017 was $1,036 million and $950 million, respectively. The $86 million, or 9.1%, increase in cash flow from operating activities from FYE2017 to FYE2018 was principally a result of a reduction in tax paid due to the United States tax rate changes in FYE2018. Net cash generated from operating activities could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic. For further information on the impact of COVID-19, please see ‘‘Risk Factors—Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ and ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Cash flows from investing activities Net cash used in investing activities for HYE2020 and HYE2019 was $300 million and $587 million, respectively. The $287 million, or 48.9% decrease in cash outflow from investing activities from HYE2019 to HYE2020 was principally a result of a higher number of acquisitions in 2019 and purchases of property, plant and equipment. Net cash (used)/generated in investing activities for FYE2019 and FYE2018 was $(783) million and $700 million, respectively. The $1,483 million, or 211.8%, decrease in cash flow from investing activities from FYE2018 to FYE2019 was principally a result of the disposal proceeds from the Nordic business in the year ended July 31, 2018 and higher acquisitions in the year ended July 31, 2019. Net cash generated/(used) in investing activities for FYE2018 and FYE2017 was $700 million and $(209) million, respectively. The $909 million, or 434.9%, increase in cash flow from investing activities from FYE2017 to FYE2018 was principally a result of the disposal proceeds from the Nordic business in the year ended July 31, 2018.

Financial Risk Management Policies and Hedging Activities The Group is exposed to market risks arising from its international operations and the financial instruments which fund them. The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk and liquidity risk. These risks are also described in the ‘‘Risk Factors’’ section of this Offering Memorandum. See, in particular, ‘‘Risk Factors—Fluctuations in foreign currency and inflation may have an effect on reported results of operations’’ and ‘‘Risk Factors—Weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, particularly the United States, may adversely affect the profitability and financial stability of our customers, could negatively impact our sales growth and results of operations.’’ The Group has well-defined policies for the management of interest rate, liquidity, foreign exchange and counterparty exposures, which have been consistently applied during HYE2020 and HYE2019 and FYE2019, FYE2018 and FYE2017. By the nature of its business, the Group also has trade credit and commodity price exposures, the management of which is delegated to the operating businesses. There has been no change since the previous year in the major financial risks faced by the Group. For a discussion of each of these risks and for further information on our policies for managing these risks, please see Note 15 to the 2020 Interim Consolidated Financial Statements and Note 22 to the 2019 Consolidated Financial Statements.

Hedge Accounting The Group has elected to apply hedge accounting to some of its financial instruments. Derivative financial instruments, in particular interest rate swaps and foreign exchange swaps, are used to manage the financial risks arising from the business activities of the Group and the financing of those activities. There is no trading activity in derivative financial instruments. At the inception of a hedging transaction involving the use of derivative financial instruments, the Group documents the relationship between the hedged item and the hedging instrument together with its risk management objective and the strategy underlying the proposed transaction. The Group also documents

89 its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the hedge in offsetting movements in the fair values or cash flows of the hedged items. Derivative financial instruments are recognized as assets and liabilities measured at their fair values at the balance sheet date. Where derivative financial instruments do not fulfil the criteria for hedge accounting contained in International Accounting Standard 39 (‘‘IAS 39’’), changes in their fair values are recognized in the income statement. When hedge accounting is used, the relevant hedging relationships are classified as fair value hedges, cash flow hedges or net investment hedges. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the increase or decrease in its fair value attributable to the hedged risk and the resulting gain or loss is recognized in the income statement where, to the extent that the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity. Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recognized directly in equity. When the hedged item is recognized in the financial statements, the accumulated gains and losses recognized in equity are either recycled to the income statement or, if the hedged item results in a non-financial asset, are recognized as adjustments to its initial carrying amount. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Accounting Policies and Critical Estimates and Judgements For information on the Group’s accounting policies and critical estimation and judgements, see Note 1 of the 2020 Interim Consolidated Financial Statements and Note 1 of the 2019 Consolidated Financial Statements.

90 DESCRIPTION OF THE GROUP AND ITS BUSINESS Overview of Our Business We are a leading specialist distributor of plumbing and heating products. Our business serves customers throughout North America and the United Kingdom, predominantly serving the RMI markets. We operate in fragmented markets that offer growth opportunities and seek to provide a differentiated service offering and strong, consistent returns for shareholders. We are a specialist distributor that creates value through the expertise of our people, our scale, bespoke logistics network, technology and the support and service we give our customers. We partner with them to improve their construction, renovation and maintenance projects. Our ongoing business has a diverse supplier base of approximately 42,000 suppliers providing us with a wide range of over one million products worldwide. We serve over one million customers, offering products, support and advice through a network of 11 distribution centers and 1,708 branches, as well as through showrooms, e-commerce and central accounts. We operate in three geographic regions, the United States, the United Kingdom and Canada, each of which is an operating segment for financial reporting purposes.

United States The United States is our largest market and we believe it offers the greatest growth opportunities. It is highly fragmented with no market dominated by any single distributor. We have progressively focused more resources on our business in the United States. The United States generated 93.9% of our underlying trading profit for FYE2019. We operate nine strategic business units in the United States providing a broad range of plumbing and heating products and solutions delivered through specialist sales associates, counter service, showroom consultants and e-commerce. Our U.S. business operates primarily under the Ferguson brand and is a market leading distributor of plumbing and heating products in the United States. It operates nationally, serving the residential, commercial, civil and industrial markets. The largest end markets for Ferguson in FYE2019 were residential which represented 53% of sales and commercial which represented 33% of sales (the remainder was split between civil/infrastructure and industrial). Ferguson predominantly serves the RMI markets, with relatively low exposure to the new construction market. As at July 31, 2019, our U.S. business had approximately 27,000 employees (who we call associates) and 1,491 branches, which cover all 50 U.S. states. These are served by 10 distribution centers enabling effective availability of stock for customers. For HYE2020 and HYE2019, the United States segment’s revenue was $9,318 million and $8,874 million, respectively. This represented 85.0% and 81.8% of the Group’s total revenue for HYE2020 and HYE2019, respectively. The United States segment’s underlying trading profit was $740 million and $700 million for HYE2020 and HYE2019, respectively. This represented 95.2% and 93.0% of the Group’s total underlying trading profit. The United States segment’s revenue was $18,358 million, $16,670 million and $15,193 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 83.4%, 80.3% and 78.8% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. The United States segment’s underlying trading profit was $1,508 million, $1,406 million, and $1,224 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 93.9%, 93.3% and 91.3% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

91 separation will further simplify the Group and will enable Wolseley U.K. to pursue its independent strategy. Following the U.K. Demerger, Ferguson will be wholly focused on serving customers in North America. We continue to progress the U.K. Demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’. As at July 31, 2019, our U.K. business had over 5,000 associates operating through 551 branches covering the entire country, which were in turn served by four distribution centers. For HYE2020 and HYE2019, the United Kingdom segment’s revenue was $1,073 million and $1,177 million, respectively. This represented 9.8% and 10.9% of the Group’s total revenue for HYE2020 and HYE2019, respectively. The United Kingdom segment’s underlying trading profit was $30 million for HYE2020 and $30 million for HYE2019. The United Kingdom segment’s revenues were $2,281 million, $2,568 million and $2,548 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 10.4%, 12.4% and 13.2% of the Group’s total revenues for FYE2019, FYE2018 and FYE2017, respectively. The United Kingdom segment’s underlying trading profit was $65 million, $73 million and $96 million for FYE2019, FYE2018 and FYE2017, respectively. This represented 4.0%, 4.8% and 7.2% of the Group’s total underlying trading profit for FYE2019, FYE2018 and FYE2017, respectively.

92 in summary form, in the section titled ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’ in this Offering Memorandum.

As at or for the six months ended January 31, As at or for year ended July 31, 2017 2020(4) 2019 2019 2018 (Restated)(1) ($ million, except as otherwise indicated) Revenue ...... 10,966 10,847 22,010 20,752 19,284 Ongoing revenue(2) ...... 9,893 9,489 21,771 20,334 18,845 Organic revenue growth(2) ...... 2.0% 9.1% 4.4% 7.5% NA Profit for the period ...... 467 586 1,108 1,267 920 Operating profit ...... 733 709 1,402 1,360 1,478 Underlying trading profit(2)(3) Underlying trading profit from ongoing operations(2)(3) ...... 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341 Underlying ongoing trading margin(2)(3) ...... 7.6% 7.5% 7.4% 7.3% 6.9% Adjusted EBITDA(2) ...... 876 844 1,788 1,687 1,519 Net debt(2) ...... (1,944) (1,885) (1,195) (1,080) (706)

(1) Restated to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details. (4) The Group has adopted IFRS 16 since August 1, 2019 (i.e., from the start of the year ending July 31, 2020 and accordingly for the financial information for HYE2020). Under the transition methods chosen, financial information for HYE2019 and FYE2019, FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 17. As such, the financial information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’.

Our History The Group was founded in 1887, when Frederick York Wolseley launched the Wolseley Sheep Shearing Machine Company. We soon expanded into manufacturing and twelve years later, in 1899, the first Wolseley horseless carriage went on sale in the United Kingdom. In 1901, the Company’s predecessor sold its car and machine tool business, which became a part of Morris Motors, BMC, British Leyland and Rover Group. In 1958, we merged with Geo H Hughes and, in the 1960s, acquired a number of heating and oil burning companies in rapid succession in the United Kingdom. A move into merchanting followed, and in 1979 we sold our manufacturing companies to focus solely on distribution. From 1980, we expanded our businesses through organic growth and acquisitions in the United States, Canada and Europe. On April 14, 1986, the Company was listed on the London Stock Exchange and changed its name to Wolseley plc. From the 1990s to the mid-2000s, we continued to expand across Europe, including into the Netherlands, Switzerland, Ireland, Belgium and the Nordic region, the United States and Canada. In 2009, as a result of the financial crisis, we implemented a comprehensive restructuring program across its businesses to reduce fixed costs and close underperforming branches. During this period, we focused our resources on those

93 businesses capable of generating the highest returns for shareholders and in particular, on the core plumbing and heating markets. This strategy resulted in the disposal of a number of our businesses. On July 31, 2017, we changed the name of the Group to Ferguson plc to better align our name with our largest subsidiary in the United States. In 2018, we exited our Nordic business, a building materials distributor, as a result of a lack of synergies with the rest of the Group’s plumbing and heating activities. Due to our strong funding position, the majority of the proceeds from the sale were subsequently distributed to shareholders. On January 30, 2019, we disposed of Wasco (our Netherlands B2B business), our last remaining Central European business. On September 3, 2019, we announced our intention to demerge our U.K. operations subject to shareholder approval. The decision marked the conclusion of a detailed review of the Group’s assets over several years. On completion of the transaction, Wolseley U.K. will become an independent listed company serving residential and commercial tradespeople and customers. The separation will further simplify the Group and will enable Wolseley U.K. to pursue its independent strategy. Following the U.K. Demerger, Ferguson will be wholly-focused on serving customers in North America. We continue to progress the U.K. Demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Markets and Opportunities Fragmented markets We focus on 14 businesses across three countries where we believe we are well-equipped to win and make attractive returns. In the United States, we operate nine strategic business units with a number one or two market position in the majority of them. We believe there is a significant opportunity for strong growth and continued consolidation within each of these large, fragmented markets. Many customer projects require a range of products and services from across our business units and we leverage our scale and expertise across the organization for the benefit of our customers, which provides the opportunity to make attractive returns for our shareholders.

Growth opportunities Our principal markets have good demographics which support continued long-term growth potential. Population growth and expansion of household formation provide underlying demand for new homes and consumers demand more comfortable and better equipped homes and buildings. There are also opportunities for bolt-on acquisitions. We are primarily focused on the RMI market, which typically involves smaller, non-discretionary projects with short lead times. The RMI market has traditionally been less volatile than the new construction market and over the last 11 years we have focused our resources on it as part of a realignment of our market focus.

Market characteristics The key market characteristics and opportunities are as follows: • Our customers often require a basket of goods—We serve approximately one million customers. In the United States, the average basket size is four products valued at a total of approximately $500. • Customers’ needs are local—Our customer base is fragmented. Professional contractors typically operate within 20 miles of their home base and may visit their local branch several times per week. In addition, they continue to increase their usage of digital channels which complement their working patterns. • Large supplier base—In our ongoing business, we distribute over one million products from approximately 42,000 suppliers across the world. • Clear need for distributors in the supply chain—Distributors, including Ferguson, bridge the gap between a fragmented supplier base and the large and geographically dispersed professional customer base. • Highly fragmented industry—Our markets are typically highly fragmented, with few large players in the industry.

94 • Benefits of scale—Due to scale benefits, market leaders are better positioned to perform through the economic cycle and customers have quicker access to products. • Strong organic growth opportunities—Market characteristics support long-term organic growth opportunities. • Bolt-on acquisition opportunities—We have a large database of acquisition targets to support continued growth.

Fundamentals of Our Business Model As of January 31, 2020, the fundamentals of our ongoing business model are to: (i) source, (ii) distribute and (iii) sell.

Sell Source Distribute How our customers buy

How we fulfil Central account orders management and call centers 42,000 16% 2% Suppliers Delivered e-commerce from vendor 20%

11 Distribution 8% centres Delivered from distribution Showrooms 11% center +1 million customers 52% Delivered 1,708 from branch Branches 24% Pick up Branches 29MAY20201348078167%

The Group’s Strengths Creating value through service We are a specialist distributor that creates value through the expertise of our people, our scale, bespoke logistics network and technology, and the support and service we give our customers. We partner with them to improve their construction, renovation and maintenance projects.

Differentiated service offering We believe we have a valued and differentiated service offering, providing support for our customers’ projects and delivered by our knowledgeable associates. Our customers are not completing a transaction, they are building, renovating, developing or installing projects in challenging environments to tight timescales, and their wants are complex. Basic building blocks of our service include availability, quick and reliable delivery, account-based credit and a large and convenient branch network. However, to keep our sustainable competitive advantage we must fulfil our customers’ ‘‘wants’’. We believe we provide unique value-added services, combined with industry leading service levels from our associates, to take market share and continue our sustainable, profitable growth. For example: • We offer leading delivery and pick-up options for our customers, some of whom want to come into the branch and get advice from our knowledgeable associates. • ‘‘Pro Pick-up’’ is a one-hour pick-up service available in approximately 600 branches across the United States for those customers who are particularly time sensitive. • Other deliveries can be set at later dates, for specific locations and times on different job sites and we offer specialist vehicles for products that require them.

95 • Approximately 50% of our U.S. revenue comes through working with our customers when they are bidding or tendering for work. Our approximately 2,000 sales associates work hard to understand our customers’ needs, identify the most appropriate products, source and price them. We help our customers win work and when they are successful, we are too. • We operate a 24/7 water heater emergency support service across more than 150 branches focused on commercial properties. We deliver the water heaters with all the required fittings and arrange for the removal of the broken-down equipment.

Our key resources and relationships Our people Our dedicated associates are key to the success of our business. They demonstrate our values every day by providing superior customer service, working with integrity, delivering results, thinking innovatively, keeping themselves and others safe and limiting the impact on the environment. They foster our culture by maintaining lasting relationships with customers whilst delivering excellence at all levels.

Our customers Customers rely on us for high levels of availability on a broad range of products, ready for collection or delivery when and where they need it. Our customers value high quality and efficient service from local relationships, competitive pricing, account-based credit and billing and order accuracy. They also want flexibility in choosing the most convenient way to do business with us, whether in a branch, by phone or online. These are the basic transactional aspects of our business which need to be executed consistently. Additionally, customers rely on Ferguson for a range of additional services and advice that we offer. For example, outside sales associates often visit customers at their job sites and support them when they are bidding for work. We consult with key customers each year to understand their business needs and their sustainability priorities so that we can continually evolve our business to meet their expectations. Where the market demand exists, we seek to promote sustainable products and provide training and advice to customers to support growth in these new product categories. Customers of Build.com in the United States can filter their product search to view products with recognized national environmental labels. Our customer base is highly diversified with no individually significant customer. Professional contractors typically operate within 20 miles of their home base and may visit their local branch several times per week. In addition, they continue to increase the usage of digital channels which complement their working patterns.

Our suppliers Our ongoing business has approximately 42,000 suppliers that give us access to a diverse and broad range of quality products. While the product is important, the expert knowledge that we bring is equally important. We are frequently asked by our customers to help them find a suitable product to meet a specific need. The expert guidance that we offer is based on a broad knowledge of the supplier landscape. Our logistics network, which connects these suppliers to our customers, is another key differentiator. Our leading market positions enable our central sourcing teams in each region to leverage our scale and negotiate competitive prices in return for access to over one million customers.

Channels to market Our customers interact with us through multiple sales channels on a 24/7 basis which is often a combination of branches, showrooms, transactional websites, call centers and inside/outside sales teams. We conduct the majority of our business through our sales associates or showroom consultants. A large proportion of the business is still conducted through our branches and our extensive branch network means customers minimize the distance they travel to buy from us and visit several times a week. The branch network is also an important delivery channel, particularly when customers need immediate availability. This multi-channel approach allows our customers to access products and advice whenever it is required.

96 Through our omni-channel approach, we intend to provide a seamless experience for our customers no matter what sales order channel they use. Our associates will spend less time processing orders and more time guiding our customers, thus enhancing productivity, customer service and relationships. We have added many pieces of functionality, such as geo location services which can empower our customers through the Ferguson app to receive real time notification of deliveries via voice, text or email alerts. We aim to continue increasing our customers’ online adoption.

Technology We invest in technology to improve the customer experience, retain existing customers and win new ones. Technology investments are aimed at improving execution and efficiency in all areas of our business from warehousing, fleet, inventory and customer relationship management to back-office human resources and financial management and reporting systems. We have a technology strategy and roadmap. This provides a clear route forward for the development of our order and transaction management systems. We continue to implement strategic investments which will mean we have many order capture channels that feed into one fulfilment and transaction platform connected through cloud-based systems. Our aim is to provide a seamless experience for our customers no matter what sales order channel they use. Our associates will spend less time processing orders and more time interacting with our customers, enhancing productivity, customer service and relationships.

Distribution network To ensure the availability of a wide range of products to our customers we continue to invest in our extensive distribution network and large vehicle fleet. Our customers rely upon us for prompt and flexible delivery options to meet their own needs, such as specialist vehicles and same-day delivery. Suppliers deliver to our distribution centers, our branches or directly to our customers. We predominantly distribute from branches to customers, though in large metropolitan areas we aim to use more specialist market distribution centers to centralize final mile logistics and reduce fleet and distribution costs. More than half our carbon footprint is generated by transport. Within the distribution network we have reduced our carbon emissions through improved fleet operations. Each of our businesses has performance targets to reduce carbon and the associated costs for transport and fuel, relative to revenue. These emission reduction projects ensure that we are able to meet our goals for environmental performance in addition to our financial goals. Our branches continue to utilize our distribution networks to send recyclable waste back to distribution centers for sorting, baling and weighing. When returned products are unable to be resold, they are also transported back to our distribution centers where we aim to reduce or re-use these products to avoid landfill.

Strong cash flow generation Our business model reflects a value-add service proposition leading to a strong through-cycle cash flow profile. Trade working capital (defined as stock (or inventory) and trade receivables minus trade payables) represented 12.1% of revenue for FYE2019 (12.2% in FYE2018). Our cash conversion rate, the ratio of Adjusted EBITDA from continuing and discontinued operations to cash generated from operating

97 activities over the last three years as shown in the table below. See ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’.

Six months ended January 31, Year ended July 31, 2017 2020 2019 2019 2018 (restated)(1) $ million, except as otherwise stated Adjusted EBITDA from continuing operations(3) ...... 872 842 1,788 1,687 1,519 Adjusted EBITDA from discontinued operations(3) ...... 42559113 Adjusted EBITDA from continuing and discontinued operations(3) ...... 876 844 1,793 1,746 1,632 Cash generated from operations ...... 636 287 1,609 1,323 1,410 Cash conversion(2)(3) ...... 72.6% 34.0% 89.7% 75.8% 86.4% Profit for the period ...... 467 586 1,108 1,267 920 EU IFRS Cash conversion(4) ...... 136.2% 49.0% 145.2% 104.4% 153.3%

(1) Restated in the Group’s 2018 Consolidated Financial Statements to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. (2) Cash generated from operations divided by Adjusted EBITDA from continuing and discontinued operations. (3) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (4) This is calculated as cash generated from operations divided by profit for the period.

Expertise at Board, executive and segmental levels We have an experienced management team across the Group, including those at both Board and segmental levels, focused on the implementation of our strategy. Our Board and broader management team includes broad international experience. Our CEO, Kevin Murphy, was appointed to his current role in 2019. Mr. Murphy has been Chief Executive Officer of the Group’s U.S. operations since 2017 when he was also appointed to the Board. From 2007 to his appointment, Mr. Murphy was Chief Operating Officer of the U.S. operations having joined the business in 1999. Mike Powell, the Group’s Chief Financial Officer, joined the Company in June 2017. Mr. Powell’s previous roles include Group Finance Director of BBA Aviation plc, CFO of AZ Electronic Materials plc and CFO of Nippon Glass, based in Tokyo. We recently announced that Mr. Powell has resigned from his position as Group CFO (see ‘‘Overview—Recent Developments—Change in Group Chief Financial Officer.’’) Geoff Drabble was appointed as Chairman in 2019. Mr. Drabble joined Ferguson following a 12-year period as Chief Executive of Ashtead Group, the FTSE 100 industrial equipment rental company. He was previously an executive director of The Laird Group and held a number of senior management positions at Black & Decker. In addition, at the non-executive Board level, we have a broad range of international corporate experience.

The Group’s Strategic Priorities We focus on a number of strategic priorities to drive sustainable profitable growth. These set out how we aim to win in our local markets, outperform our competitors and drive financial results. Our businesses are not homogeneous and they require specific strategies which depend on local market conditions, specific customer needs and the competitive environment. We are particularly focused on the following key drivers that we believe will enable this growth: • Engaged associates—we aim to develop well-trained and highly engaged associates to deliver excellent customer service. We believe focus in this area drives customer loyalty. • Service ethic—our aim is to provide the best customer service in the industry, consistently across branches and regions. • Sales culture—we intend to continue to drive a sales culture. When our associates are proud and confident about our services, and have the best tools, knowledge and data to support them, we believe

98 we will achieve the strongest results. They engage with existing and new customers to make sure we are front of mind when it comes to bids for work which generate a significant proportion of our revenue. • Organic expansion—we aim to accelerate profitable growth through above market revenue growth and targeted branch expansion. • Bolt-on acquisitions—we aim to complement our organic growth strategy with bolt-on acquisitions to expand our leadership positions and capabilities to extend the value of our brand. These are rapidly integrated into our network to deliver attractive returns. • Adjacent opportunities—we intend to utilize our existing knowledge, skills and infrastructure to capitalize on new adjacent market opportunities. This includes our Facilities Supply and our B2C e-commerce businesses. • Operating model and e-commerce development—we aim to ensure that our operating model is agile and flexible so it can adapt to changing customer needs and that we are able to flex our cost base when required. Increasingly, our customers want to deal with us online and we must ensure that we have the leading e-commerce platform in each market in our industry. • Pricing discipline—we work constantly to understand our customers’ wants more accurately and structure our pricing to be fair, consistent and competitive. • Own brand penetration—we systematically build upon and extend our portfolio of own brand products which provide additional choice and great value for our customers. We have an opportunity to offer a wider range of own brand products to our customers, some of which attract higher gross margins. • Accelerate innovation across the Group—We work to identify new technologies and business models which customers will value in the future. We will also invest or partner with innovative businesses and people to stay at the forefront of our industry.

Capital Allocation Strategy The Group is cash generative and the Board has established clear priorities for the utilization of cash. In order of priority these are: • to re-invest in organic growth opportunities; • to fund the ordinary dividend to grow in line with our expectations of long-term earnings growth; • to fund selective bolt-on acquisitions to improve our market leadership positions or expand the capabilities of our existing business model; and • if there is excess cash after these priorities, to return it to shareholders reasonably promptly. The Group maintains a capital structure appropriate for current and prospective trading and aims to operate with investment grade credit metrics and within a through-cycle range of net debt of one to two times Adjusted EBITDA.

Our Business Segments The following table sets forth a breakdown of revenue, revenue from ongoing operations, organic revenue growth, like-for-like revenue growth, operating profit, underlying trading profit from ongoing operations,

99 underlying ongoing trading margin for the Group’s operating segments for HYE2020 and HYE2019 and for FYE2019, FYE2018 and FYE2017.

Six months ended January 31, Year ended July 31, 2017 2020(4) 2019 2019 2018 (Restated)(1) $ million, except as otherwise indicated United States Segment Revenue ...... 9,318 8,874 18,358 16,670 15,193 Ongoing revenue(2) ...... 9,318 8,874 18,358 16,670 14,977 Organic revenue growth(2) ...... 2.6% 9.7% 6.2% 9.9% NA Underlying trading profit from ongoing operations(2)(3) ...... 740 700 1,508 1,406 1,204 Underlying ongoing trading margin(2)(3) ...... 7.9% 7.9% 8.2% 8.4% 8.0% United Kingdom Segment Revenue ...... 1,073 1,177 2,281 2,568 2,548 Ongoing revenue(2) ...... NA NA 2,222 2,568 2,548 Like-for-like revenue growth(2)(7) ...... NA 0.3% 0.6% 0.7% NA Organic revenue growth(2)(7) ...... (5.2)% NA NA NA NA Underlying trading profit from ongoing/non-ongoing operations(2)(3)(6) ...... 30 30 65 73 96 Underlying ongoing trading margin(2)(3) ...... NA NA 3.1% 2.8% 3.8% Canada and Central Europe(5) Revenue ...... 575 796 1,371 1,514 1,543 Ongoing revenue(2) ...... 575 615 1,191 1,514 1,320 Organic revenue growth(2) ...... (6.6)% 2.1% (1.1)% 6.9% NA Underlying trading profit from ongoing operations(2)(3) ...... 29 39 76 83 57 Underlying ongoing trading margin(2)(3) ...... 5.0% 6.3% 5.6% 5.5% 4.3% Total Revenue ...... 10,966 10,847 22,010 20,752 19,284 Ongoing revenue(2) ...... 9,843 9,489 21,771 20,752 18,845 Organic revenue growth(2) ...... 2.0% 9.1% 4.4% 7.5% NA Underlying trading profit from ongoing operations(3) 747 714 1,601 1,507 1,307 Underlying trading profit from non-ongoing operations(2)(3) ...... 30 39 5 — 34 Underlying trading profit from continuing operations(2)(3) ...... 777 753 1,606 1,507 1,341 Underlying trading margin from ongoing operations(2)(3) ...... 7.6% 7.5% 7.4% 7.3% 6.9%

(1) Restated in the Group’s 2018 Consolidated Financial Statements to present the results of the non-U.S. dollar denominated subsidiaries in U.S. dollars at the average exchange rate for the period or at the relevant period end rate. (2) This is a non-EU IFRS financial measure. See definition of this non-EU IFRS performance measure within ‘‘Presentation of Financial, Market and Other Information—Non-EU IFRS Financial Measures/Alternative Performance Measures’’ and see reconciliation in ‘‘Selected Financial Information—Reconciliations to Reported Financial Data’’. (3) The underlying trading profit and underlying ongoing trading margin measures exclude the impact of IFRS 16 in respect of HYE2020, which was first applied by the Group in respect of this period. Prior to the Group’s adoption of IFRS 16, such measures were called ‘‘trading profit’’ and ‘‘ongoing trading margin’’ and calculated in the same manner as the equivalent ‘‘underlying’’ measure for FYE2019, FYE2018 and FYE2017 and HYE2019. See ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’ for further details. (4) The Group has adopted IFRS 16 since August 1, 2019 (i.e., from the start of the year ending July 31, 2020 and accordingly for the financial information for HYE2020). Under the transition methods chosen, financial information for HYE2019 and FYE2019, FYE2018 and FYE2017 was not restated and accordingly was prepared using IAS 17. As such, the financial information for HYE2020 is not comparable with the financial information for HYE2019 and FYE2019, FYE2018 and FYE2017, respectively. For further information regarding IFRS 16 and its impact on the Group, please see ‘‘Presentation of Financial, Market and Other Information—Adoption of IFRS 16’’. (5) Until January 30, 2019, when the Group disposed of Wasco (its Netherlands B2B business), which was the last of its Central European business, the ‘‘Canada’’ operating segment was combined with the ‘‘Central Europe’’ operating segment and was

100 disclosed as ‘‘Canada and Central Europe’’ as individually they did not meet the reportable segments quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’. See ‘‘Presentation of Financial, Market and Other Information’’ and ‘‘Overview—Overview of our Business’’. (6) For the six months ended January 31, 2020, due to the U.K. Demerger, the Group’s U.K. business is classified as non-ongoing, in FYE2019 the Group’s U.K. business was presented as ongoing, and as a result, the comparative financial information for HYE2019 has been reclassified for consistency and comparability purposes. Prior to this and for the consolidated financial information for FYE2019, FYE2018 and FYE2017, the Group’s U.K. business is classified as ongoing. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details. (7) The Group reported organic revenue growth for its U.K. segment for HYE2020. Prior to this, the Group reported like-for-like revenue growth for its U.K. segment for HYE2019 and for FYE2019, FYE2018 and FYE2017 to aid comparability. Like-for-like revenue growth is determined as current year revenue excluding non-ongoing revenue, revenue attributable to current year acquisitions, revenue attributable to prior year acquisitions from the beginning of the current period to the corresponding acquisition date in the current year, trading days and net closed branches, divided by the preceding financial year’s ongoing revenue shown on a constant exchange rates basis. See ‘‘Presentation of Financial, Market and Other Information—Ongoing and Non-ongoing Financial Measures’’ above for further details.

United States We have progressively focused more resources on our business in the United States, which is our largest and most attractive market. Our U.S. business operates primarily under the Ferguson brand and is the market leading distributor of plumbing and heating products in the United States. It operates nationally, serving the residential, commercial, civil and industrial markets. The largest end markets for Ferguson for FYE2019 were residential which represented 53% of sales and commercial 33% of sales (the remainder was split between civil/infrastructure and industrial). Ferguson predominantly serves the RMI markets, with relatively low exposure to the new construction market. For FYE2019, FYE2018 and FYE2017, the ratio of revenue generated in the United States in each market sector was as follows:

Year ended July 31, 2019 2018 2017 % of segment revenue Residential RMI ...... 35 34 34 Non-residential RMI ...... 24 24 25 Residential new construction ...... 17 18 18 Non-residential new construction ...... 15 17 16 Civil/infrastructure ...... 8 7 7 Ferguson operates 1,491 branches serving all 50 states with approximately 27,000 associates. The branches are served by 10 distribution centers, providing same-day and next-day product availability, a key competitive advantage and an important requirement for customers. We operate nine strategic business units in the United States providing a broad range of plumbing and heating products and solutions. These are delivered through specialist sales associates, counter service, showroom consultants and e-commerce. Our nine strategic business units are organized by customer requirements for strategic planning purposes. Each strategic business unit provides a different customer offering, with the majority predominantly serving trade customers. Each business unit supports differentiated customer types and therefore provides bespoke services and requirements. Each has its own set of competitors that range from large national companies, including trade sales by large home improvement chains, to small, privately owned distributors. In line with the Group’s strategy, the business aims to strengthen its position in existing and adjacent markets through bolt-on acquisitions.

101 For FYE2019, FYE2018 and FYE2017, the ratio of revenue generated in the United States from each business unit (as described in further detail below) was as follows:

Year ended July 31, 2019 2018 2017 % of segment revenue Blended Branches ...... 57 58 59 Waterworks standalone ...... 16 16 16 eBusiness ...... 8 9 9 HVAC standalone ...... 7 7 7 Other (Industrial standalone, Fire and Fabrication and Facilities Supply) ..... 12 10 9 The business units in the United States are as follows: • Blended Branches—The Blended Branches business is our largest business unit in the segment. Blended Branches mainly comprises three principal strategic business units—Residential Trade, Residential Showroom, and Commercial—serving customers across the residential and commercial sectors for RMI and new construction. In certain markets where it is more efficient to do so, we serve our customers through a Blended Branches location rather than a standalone business unit. Organic revenue growth for the Blended Branches business for FYE2019 was 5.9% (6.0% in the western region of the United States, 5.8% in the central region of the United States and 6.0% in the eastern region of the United States). • Residential Trade serves the residential RMI and new construction sectors with a large proportion of sales through the branch counters. It provides plumbing and sanitary supplies, tools, repair parts and bathroom fixtures to plumbing contractors. For FYE2019, the Residential Trade business was the number two in the United States with an estimated market share by revenue of 17% and the estimated combined market share of the top three companies was 54% with the remainder of the market fragmented between mid-size regional distributors and small, local distributors. • Residential Showroom operates a national network of 277 showrooms, serving consumers and trade customers, which showcase bathroom, kitchen and lighting products and assist customers by providing advice and project management services for their home improvement projects. For FYE2019, the Residential Showroom business was the market leader with an estimated 11% market share by revenue, the next largest competitor is about half of the size. • Commercial provides commercial plumbing and mechanical contractors with products and services including bidding and tendering support and timeline planning to assist with their construction projects. For FYE2019, the Commercial business was the market leader in the United States with an estimated market share by revenue of 20%, roughly twice the size of their nearest competitor. • Waterworks—The Waterworks business is the largest waterworks distributor in the United States. It distributes PVF, hydrants, meters and related water management products alongside related services including water line tapping and pipe fusion. Waterworks sales tend to be part of large planned projects to public and private water and sewer authorities, utility contractors, public works/line contractors and heavy highway contractors on residential, commercial and municipal projects across the water, sanitary sewer and storm water management markets. For FYE2019, the Waterworks business was the largest operator in the United States, with an estimated market share of 23%, slightly higher than the second largest competitor. No other company holds greater than 5% market share. Organic revenue growth for the Waterworks business for FYE2019, was 6.7%. • eBusiness—eBusiness sells directly to consumers and trade customers online predominantly using our product range and distribution network. The majority of our eBusiness is conducted through the brand, Build.com, which is supported by a call center of sales consultants who provide advice and customer support. For FYE2019, the market was predominantly comprised of large competitors with the top four businesses holding an estimated 68% of the market. Organic revenue growth for eBusiness for FYE2019 was a decline of 2.4%. • HVAC—The HVAC business supplies heating, ventilation, air conditioning and refrigeration equipment, parts and supplies to specialist contractors. The business predominantly serves the

102 residential and commercial markets for repair and replacement. For FYE2019, our HVAC business was the third largest distributor , with a 4% market share, in a highly fragmented market. The market leader is about twice the size of Ferguson with an estimated 9% market share. Organic revenue growth for the HVAC business for FYE2019 was 8.6%. • Industrial—The Industrial business is a supplier of PVF and industrial maintenance, repair and operations specializing in delivering automation, instrumentation, engineered products and turn-key solutions. We also provide supply chain management solutions for a full range of PVF supplies focusing on providing cost savings across the entire supply chain. The Industrial business distributes products to industrial customers across all sectors including oil and gas, mining, chemical and power. For FYE2019, as the industrial market is fragmented, we estimate our market share to be 5%, with the market leader about three times larger. • Fire and Fabrication—The Fire and Fabrication business caters to fire protection contractors and engineers offering fire protection products, fire protection systems and bespoke fabrication services to commercial contractors for new construction projects. For FYE2019, we estimate our market share to be 22% and the three next largest competitors hold an estimated 37% market share between them. • Facilities Supply—The Facilities Supply business provides products, services and solutions to enable reliable maintenance of facilities across multiple RMI markets including multi-family properties, government agencies, hospitality, education and healthcare. For FYE2019, the facilities supply market is highly fragmented with no competitors holding more than 3% market share. Combined organic revenue growth for the Industrial, Fire and Fabrication and Facilities Supply business units for FYE2019 was 14.1%.

United Kingdom In the United Kingdom, we principally operate under the Wolseley brand predominantly in the trade market through 551 branches covering the whole country. These branches were served by four distribution centers providing same and next day product availability, a key service offering to our customers. At July 31, 2019, our United Kingdom segment had over 5,000 associates. The United Kingdom business mainly serves RMI markets, and has relatively low exposure to the new residential construction market. For FYE2019, revenue generated from the residential RMI and non-residential RMI sectors was 53% and 13% of segment revenue, respectively, while revenue generated from the residential new construction sector was 14% of segment revenue. Revenue generated from each of the non-residential new construction and the civil infrastructure sectors was 10%. The business units in the United Kingdom are as follows: • Blended Branches—Blended is the largest business within the United Kingdom, generating 82% of revenue. This business provides plumbing and heating products, air conditioning and refrigeration products, and the associated pipes, valves and fittings to trade customers in the residential and commercial sectors. It also provides specialist above ground drainage products. Wolseley is the second largest merchant distributor in the U.K. by revenue in a consolidated market with the top four holding about 53% market share. • Infrastructure—Our Infrastructure business is a specialist in below ground drainage it serves the civil infrastructure and utilities markets. The business is estimated to have a market share of about 20%. On September 3, 2019, we announced our intention to demerge our U.K. operations subject to shareholder approval. The decision marked the conclusion of a detailed review of the Group’s assets over several years. On completion of the transaction, Wolseley U.K. will become an independent listed company serving residential and commercial tradespeople and customers. The separation will further simplify the Group and will enable Wolseley U.K. to pursue its independent strategy. Following the U.K. Demerger, Ferguson will be wholly-focused on serving customers in North America. We continue to progress the U.K. Demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

Canada (previously disclosed as ‘‘Canada and Central Europe’’) In FYE2019, the segment operated across two countries, Canada and the Netherlands. We disposed of Wasco, which was the last of our Central European businesses, on January 30, 2019.

103 Wolseley Canada predominantly serves trade customers across the residential, commercial and industrial sectors in both RMI and new construction. As at 31 July 2019, this segment had over 3,000 associates and 217 branches serviced by one distribution center across Canada. For FYE2019, FYE2018 and FYE2017, the ratio of revenue generated in Canada in each market sector was as follows:

Year ended July 31, 2019 2018 2017 % of segment revenue Residential RMI ...... 41 43 44 Non-residential RMI ...... 19 17 17 Residential new construction ...... 19 19 21 Non-residential new construction ...... 19 19 16 Civil infrastructure ...... 2 2 2 Canada operates primarily under the Wolseley brand and supplies plumbing, heating, ventilation, air conditioning and refrigeration products to residential and commercial contractors. It also supplies specialist water and waste water treatment products to residential, commercial and municipal contractors, and supplies PVF solutions to industrial customers. The business is the second largest by revenue in the market. Wasco generated 13% of the segment’s revenue for FYE2019 and is a distributor of heating, plumbing and related spare parts across the Netherlands. We disposed of Wasco on January 30, 2019.

Market Background The markets in which we operate are typically fragmented. Our competition varies by product line, type of customer and geographic market. We compete with many local, regional, and, in several markets and product categories, other national distributors including specialist subsidiaries of large home center chains and product manufacturers. To a more limited extent, it also competes with large home center chains for business from professional contractors as well as with product manufacturers. Demographic changes affect the markets in which we operate. Generally, the populations in each of our geographic segments have been aging while experiencing increased levels of immigration, which support demand for new housing over the long term. However, short-term weaknesses as a result of general economic downturn can have a significant impact. Although conditions in the Group’s relevant markets were supportive during the periods covered by the Consolidated Financial Statements, the COVID-19 virus outbreak has had a significant impact on the Group’s markets and on global economic conditions. As a result, the COVID-19 virus outbreak and related counter-measures have had and will continue to have an adverse effect on the Group’s results of operations. For further information on the impact of COVID-19 on the Group, see ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’ and ‘‘Risk Factors— Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’. In each market, we operate with significant scale.

United States The United States is our largest market with the greatest opportunities for growth. The market for plumbing and heating distribution has strong growth characteristics and is highly fragmented with no market dominated by any single distributor. GDP growth in the United States slowed slightly over FYE2019 but remained positive, indicating continued expansion in the economy. In the first quarter of 2020, GDP in the United States decreased by 4.8%, compared to growth of 3.1% in the first quarter of 2019, providing the first glimpse of the deep impact the COVID-19 virus outbreak has had on the U.S. economy. Consumer confidence levels have declined during the first quarter of 2020 and the unemployment rate is rising to historically high levels. The four end markets that Ferguson serves in the United States have different characteristics and as such certain market data is more relevant to specific end markets. The following macroeconomic trends have an impact on all of our business units in the United States.

104 • Residential markets—The LIRA provides a short-term outlook of national home improvement and repair spending. It is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters. The LIRA projections have weakened but still remain positive in the year ended July 31, 2019. In addition, existing single-family home sales is an indicator of the strength of the market. For FYE2019, the seasonally adjusted annual rate of sales has remained high at 5.0 to 5.5 million throughout the last 12 months. • Commercial market—The AIA Billings Index is used as a leading economic indicator of construction. Any score below 50 indicates a decline in business activity across the architecture profession, whereas an index score above 50 indicates growth. While the AIA Billings Index averaged above 50 throughout FYE2019, dipping below 50 in only two months during that year, the index score has dipped below 50 for three out of the last nine months since July 2019 with the most recent reading of 29.5 in April 2020. • Civil/Infrastructure market—The AIA Billings Index is also an indicator for the Civil/Infrastructure market. The non-residential construction Put In Place measure is also an indicator of recent growth in the market, reflecting the value spent each month on construction. During the year ended July 31, 2019, the value of spend rose year-on-year in all four quarters throughout the financial year. • Industrial market—An indicator of the strength of the industrial market is the ISCM Purchase Managers Index. Any reading above 50 indicates that the manufacturing economy is generally expanding, where a reading below 50 indicates that it is generally declining. While the ISM Purchase Managers’ Index reading was above 50 throughout FYE2019, indicating strong growth in the market, it has averaged 48.0 in the months since with a reading of 41.5 in April 2020.

United Kingdom In the United Kingdom, the markets remain challenging as GDP growth decreased by 1.6% in the first quarter of 2020 when compared with the first quarter of 2019 due to the impact of the COVID-19 virus outbreak. Consumer confidence has also been negative over the past few years and recently reached historic lows indicating adverse sentiment towards current and future economic conditions.

Canada (previously disclosed as ‘‘Canada and Central Europe’’) In Canada, GDP growth decreased from a high level of 2% in the first quarter of 2019 to (2.6)% in the first quarter of 2020, with consumer confidence also decreasing as a result of the COVID-19 virus outbreak and tumbling oil prices.

Our Associates Our associates are key to the success of our business. They demonstrate our values every day by providing superior customer service, working with the utmost integrity, delivering exceptional results, thinking innovatively, keeping themselves and others safe and limiting the impact on the environment. They foster our culture by maintaining lasting relationships with customers whilst delivering excellence at all levels. The table below sets forth the average number of full time equivalent (‘‘FTE’’) associates by business segment from continuing operations for the periods presented.

Six months ended January 31, As at July 31, FTE associates by Business Segment 2020 2019 2019 2018 2017 United States ...... 27,286 27,363 27,447 25,129 24,086 United Kingdom ...... 5,130 5,616 5,439 5,871 6,064 Canada and Central Europe ...... 2,577 3,211 2,974 2,962 3,257 Other ...... 77 80 79 94 104 Total Group ...... 35,070 36,270 35,939 34,056 33,511

At July 31, 2019, we employed approximately 35,000 associates across all geographic locations. Remuneration arrangements differ to reflect local markets. Incentive programs have been developed in each business for branch and sales associates to ensure that high performance is well rewarded. We adjust measures to the type of role or team, but typically incentivize based on combinations of underlying trading

105 profit, gross margin, gross profit, average cash-to-cash days and net promoter score. Our total staff costs were $3,163 million for FYE2019.

Regulatory Landscape Our operations are affected by various statutes, regulations and standards in the countries and markets in which it operates, including, but not limited to, the United States, the United Kingdom and Canada. The amount of such regulation and the penalties for any breaches can vary. While the Group is not engaged in a highly regulated industry, it is subject to the laws governing businesses generally, including laws relating to competition, product safety, timber sourcing, data protection, labor and employment practices, accounting and tax standards, international trade, fraud, bribery and corruption, land usage, the environment, health and safety, transportation, payment terms and other matters.

Intellectual Property The Group relies on a combination of intellectual property laws, confidentiality procedures and contractual provisions to protect its proprietary assets and its brand. We have registered or applied for registration of trademarks, service marks, copyrights and internet domain names, both domestically and internationally.

Litigation Group companies are, from time to time, subject to certain claims and litigation arising in the normal course of business in relation to, among other things, the products that they supply, contractual and commercial disputes and disputes with customers, suppliers, other business partners and associates. Provision is made if, on the basis of current information and professional advice, liabilities are considered likely to arise. In the case of unfavorable outcomes, the Group may benefit from applicable insurance protection. The outcome of claims and litigation to which our businesses are party to during the ordinary course of business cannot readily be foreseen as, in some cases, the facts are unclear, further time is needed to assess properly the merits of the case, or they are part of continuing legal proceedings. However, based on information currently available, we consider that the cost to the Group of an unfavorable outcome arising from such litigation is not expected to have a material adverse effect on the financial position of the Group.

Property, Plant and Equipment Our headquarters are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham RG41 5TS, United Kingdom. For FYE2019, we operated from 1,491 branches and 10 distribution centers in the United States, from 551 branches and four distribution centers in the United Kingdom and from 217 branches and one distribution center in Canada. The majority of these properties are leased. There is no existing or planned property, plant or equipment which is individually material to us.

106 Key Subsidiaries The Group comprises a large number of companies. This table below lists the our principal subsidiaries as determined for the Group’s 2019 Consolidated Financial Statements.

Company Name Principal Activity Country of Incorporation Ferguson Enterprises, LLC(5) ...... Operating company United States Ferguson Finance (Switzerland) AG ...... Financing company Switzerland Ferguson Finance plc ...... Financing company England and Wales Ferguson Global AG(4) ...... Operating company Switzerland Ferguson Group Services Limited ...... Service company England and Wales Ferguson Holdings (Switzerland) AG ...... Investment company Switzerland Ferguson US Holding, Inc...... Investment company United States Wolseley Canada Inc...... Operating company Canada Wolseley Capital, Inc...... Financing company United States Wolseley Insurance Limited ...... Operating company Isle of Man Wolseley Limited ...... Investment company England and Wales Wolseley UK Limited(6) ...... Operating company England and Wales

(1) Shareholding in Wolseley Limited is held 100% directly by Ferguson plc. The proportion of the voting rights in the subsidiary undertaking held directly by Ferguson plc do not differ from the proportion of the ordinary shares held. All other shareholdings in the above-mentioned companies are held by intermediate subsidiary undertakings. (2) All shareholdings in the above subsidiary undertakings are of ordinary shares or equity capital. (3) All subsidiary undertakings have been included in the 2019 Consolidated Financial Statements. (4) Capstone Global Solutions AG changed its name to Ferguson Global AG on October 16, 2018. (5) Ferguson Enterprises, Inc. was converted to a limited liability company under the laws of the state of Virginia with effect from March 31, 2019 and is, as of the date of this Offering Memorandum, known as Ferguson Enterprises, LLC. (6) Our strategic intent to complete the U.K. Demerger is unchanged and we continue to progress the demerger process, although timing will depend upon the stabilization of market conditions. See ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’.

107 DIRECTORS AND SENIOR MANAGEMENT The following table shows the Board of Directors (the ‘‘Board’’) and senior management of the Company as at the date hereof.

Date of Board of Directors Title Appointment Geoff Drabble(1) ...... Chairman 2019 Kevin Murphy(2) ...... Group Chief Executive 2017 Mike Powell(3) ...... Group Chief Financial Officer 2017 Alan Murray ...... Senior Independent Non-Executive Director 2013 Tessa Bamford ...... Independent Non-Executive Director 2011 Cathy Halligan ...... Independent Non-Executive Director 2019 Tom Schmitt ...... Independent Non-Executive Director 2019 Nadia Shouraboura ...... Independent Non-Executive Director 2017 Jacky Simmonds ...... Independent Non-Executive Director 2014 Graham Middlemiss ...... Company Secretary 2015

(1) Appointed to the Board as Chairman in November 2019. (2) Appointed as Group Chief Executive in 2019. (3) On May 26, 2020, we announced that Mr. Powell has resigned from his position as Group CFO. The Company will confirm Mr. Powell’s leaving date in due course. For further information, see ‘‘Overview—Recent Developments—Change in Group Chief Financial Officer.’’

Date of Board Executive Team Title Appointment Kevin Murphy(1) ...... Group Chief Executive 2017 Mike Powell(2) ...... Group Chief Financial Officer 2017

(1) Appointed as Group Chief Executive in 2019. (2) On May 26, 2020, we announced that Mr. Powell has resigned from his position as Group CFO. The Company will confirm Mr. Powell’s leaving date in due course. For further information, see ‘‘Overview—Recent Developments—Change in Group Chief Financial Officer.’’ The business address of each of the directors is 1020 Eskdale Road, Winnersh Triangle, Wokingham RG41 5TS, United Kingdom.

Board of Directors Geoff Drabble. Mr. Drabble was appointed as Chairman in 2019. Mr. Drabble joined Ferguson following a 12-year period as Chief Executive of Ashtead Group, the FTSE 100 industrial equipment rental company. He was previously an executive director of The Laird Group and held a number of senior management positions at Black & Decker. Kevin Murphy. Our CEO, Mr. Murphy, was appointed to his current role in 2019. Mr. Murphy has been Chief Executive Officer of the Group’s U.S. operations since 2017. Mr. Murphy joined the business in 1999 following the acquisition of his family’s business, Midwest Pipe and Supply. He held a number of leadership positions in the Company’s Waterworks division and was Chief Operating Officer of Ferguson Enterprises from 2007 to 2017. He was Chief Executive Officer, USA from 2017 until his appointment as Group Chief Executive in 2019. Mike Powell. Mr. Powell has considerable financial management and operational experience as well as experience of running multi-national businesses with significant U.S. operations. Mr. Powell, a chartered management accountant, joined the Company on June 1, 2017 as Group Chief Financial Officer and Executive Director. From July 2014 until his appointment at Ferguson Mr. Powell was Group Finance Director of BBA Aviation plc, one of the world’s leading providers of aviation support services. Before joining BBA he served as CFO of AZ Electronic Materials plc and CFO of Nippon Sheet Glass, based in Tokyo. Prior to that he spent 15 years at Pilkington plc in a variety of operational and finance roles. We recently announced that Mr. Powell has resigned from his position as Group CFO (see ‘‘Overview—Recent Developments—Change in Group Chief Financial Officer.’’)

108 Alan Murray. Mr. Murray has considerable international operational experience and extensive executive management experience within global businesses. He was, from 2010 until August 2017, a member of the Supervisory Board of HeidelbergCement AG and was previously a Non-Executive Director of International Power plc (2007 to 2011). Prior to that, he spent 19 years at Hanson plc and was Group Chief Executive between 2002 and 2007. From 2007 until 2008, he was a member of the Management Board of HeidelbergCement AG. Mr. Murray is a qualified chartered management accountant. He also serves as a Non-Executive Director of Owens-Illinois, Inc. Tessa Bamford. Ms. Bamford has extensive boardroom and city experience. She has broad business experience having held senior advisory roles in both the United Kingdom and the United States across a range of sectors. She was formerly a founder and Director of Cantos Communications, an online corporate communications service provider (2001 to 2011) and until June 30, 2018, a Non-Executive Director of Barratt Developments plc. Previously, she was a Director of J Henry Schroder & Co, where she worked for 12 years in a number of roles and, prior to that, worked in corporate finance for Barclays de Zoete Wedd. She also serves as a consultant at Spencer Stuart. Cathy Halligan. Ms. Halligan has a strong track record in the retail, e-commerce and multi-channel arenas. Ms. Halligan has served as the Chief Marketing Officer at Walmart.com, the SVP Sales and Marketing at PowerReviews and held senior marketing and internet roles at retailer Williams-Sonoma Inc., where she was responsible for leading efforts to launch its brands, such as Pottery Barn, on the web. Ms. Halligan was an independent board director at Wilton Brands from 2016 to 2018. Tom Schmitt. Mr. Schmitt is an experienced CEO with significant first-hand leadership experience of the markets in which the Group operates and a track record of driving accelerated profitable growth and promoting integrity, transparency and values-based leadership. Mr. Schmitt’s career started at BP and McKinsey and has encompassed leadership roles at FedEx, AquaTerra Corporation and Schenker AG. Mr. Schmitt served as a Non-Executive Director of Zooplus AG from 2013 to 2016. Nadia Shouraboura. Ms. Shouraboura has considerable expertise in running complex logistics and supply chain activities, with insight in cutting edge technology and deep knowledge of e-commerce. She was a Vice President at Amazon.com, Inc. where she served on the senior leadership team. After eight years at Amazon, she founded Hointer Inc., a consultancy that helps retailers create innovative in-store experiences. Prior to her time at Amazon Ms. Shouraboura was Head of System Development for Trading at Exelon Power Team, Senior Principal at Diamond Management and Technology and Co-founder and Vice President, IT at Starlight Multimedia Inc. in addition to other technology and multimedia roles. She is also the founder and Chief Executive Officer of Hointer Inc., a Non-Executive Director of Cimpress NV, and a member of the Supervisory Board of X5 Retail Group N.V. Jacky Simmonds. Ms. Simmonds has extensive executive remuneration and human resources experience within large international businesses. She was Group People Director of easyJet plc from 2015 to 2017. Before joining easyJet plc, she was Group HR Director of TUI Travel plc from 2010 until 2015, HR Director for TUI U.K. from 2007 to 2010 and a divisional Director of First Choice Holidays PLC until the business was merged with TUI AG in 2007 to form TUI Travel PLC. She was also a member of the Supervisory Board of TUI Deutschland, GmbH and a Director of PEAK Adventure Travel Group Limited. She also serves as the Group Chief People Officer of VEON Ltd.

Company Secretary Graham Middlemiss. Mr. Middlemiss was appointed Company Secretary of Ferguson plc on 1 August 2015. He is Secretary to the Board and all of the Committees of the Board. Mr. Middlemiss, a solicitor, joined the Group in August 2004 as the General Counsel of its United Kingdom business and was Group Deputy Company Secretary from November 2012 to July 2015.

Executive Leadership Team The biographies for Mr. Powell and Mr. Murphy are set out above.

Board Practices Board and committee meetings The Company is registered in Jersey and is tax resident in the United Kingdom.

109 Each Director is required to attend all meetings of the Board and Committees of which they are a member. In addition, senior management from across the Group and advisers attend some of the meetings for the discussion of specific items in greater depth. The Board meets regularly during the year, with Board and Committee meetings scheduled over one or two-day periods. In order to provide the Board with greater visibility of the Group’s operations, to provide further opportunities to meet senior management and to gain a deeper understanding of local market dynamics, the Board aims to visit at least one of the Group’s business unit locations each year.

Committees of the Board of Directors The committees of the Board support the Board in the fulfilment of its duties. These take strategic decisions of a substantive nature.

Audit Committee The Audit Committee oversees, monitors and makes recommendations as appropriate in relation to the Company’s financial statements, accounting processes, audit (internal and external), risk management and internal controls and matters relating to fraud and whistleblowing.

Remuneration Committee The Remuneration Committee reviews and recommends to the Board the framework and policy for the remuneration of the Chairman, the Executive Directors and the Executive Committee. It also takes into account the business strategy of the Group and how the remuneration policy reflects and supports that strategy.

Nominations Committee The Nominations Committee regularly reviews the structure, size and composition of the Board and its Committees. It also identifies and nominates suitable candidates to be appointed to the Board (subject to Board approval) and considers succession generally.

Major Announcements Committee Meets as required in exceptional circumstances to consider disclosure obligations in relation to material information where the matter is unexpected and non-routine.

Other Committees Executive Committee The Executive Committee ensures that the corporate culture and values set by the Board are implemented across the Group, that the behaviors expected from associates are clearly communicated and that actual behaviors are in line with culture and values, and develops and recommends to the Board the strategy for the Group. It is also responsible for monitoring progress against the strategy, and develops and recommends to the Board Group policies and standards and ensures that they are implemented, communicated and maintained.

Treasury Committee The Treasury Committee considers treasury policy including financial structures and investments, tax and treasury strategy, policies and certain transactions of the Group. It also reviews performance and compliance of the tax and treasury function and makes recommendations to the Board in matters such as overall financing and strategy, and currency exposure.

Disclosure Committee The Disclosure Committee meets as required to deal with all matters relating to public announcements of the Company and the Company’s obligations under the Listing and Disclosure and Transparency Rules of the United Kingdom Listing Authority and EU Market Abuse Regulation. It also assists in the design, implementation and periodic evaluation of the Company’s disclosure controls and procedures.

110 RELATED-PARTY TRANSACTIONS In the period ended January 31, 2020, the Group purchased goods and services on an arm’s length basis totaling $9 million from, and owed nil in respect of these goods and services to, a company that is controlled by another company in respect of which one of the Group’s non-executive directors is the chief executive officer. There are no other material related party transactions requiring disclosure under IAS 24 ‘‘Related Party Disclosures’’ other than the compensation of key management personnel which is set out in in the table below. The Company is exempt under the terms of Financial Reporting Standard 101 from disclosing related party transactions with entities that are 100% owned by Ferguson plc. The table below shows the aggregate emoluments for all key management for FYE2019, FYE2018 and FYE2017. For HYE2020, the Company continued to pay emoluments to key management.

Year ended July 31, Key management personnel compensation (including Directors) 2019 2018 2017 $ million Salaries, bonuses and other short-term employee benefits ...... 13 14 14 Termination and post-employment benefits ...... 1 5 — Share-based payments ...... 11 9 5 Total compensation ...... 25 28 19

Related Party Transactions with Key Management At January 31, 2020, the directors of the Group and their immediate relatives controlled approximately 0.03% of the voting shares of the Company.

111 DESCRIPTION OF THE NOTES AND THE GUARANTEES The following is a summary of the material provisions of the Indenture, the Notes and the Guarantees. Copies of the Indenture, the Notes and the Guarantees will be available for inspection during normal business hours at any time after the closing date of the offering of the Notes at the offices of the Trustee, which are currently located at One Canada Square, London E14 5AL, United Kingdom. Any capitalized term used herein but not defined shall have the meaning assigned to such term in the Indenture.

General The $600,000,000 3.250% Notes due 2030 (the ‘‘Notes’’) will be issued on or about June 2, 2020 (the ‘‘Issue Date’’) under an Indenture dated as of the same date (the ‘‘Indenture’’), among Ferguson Finance plc (the ‘‘Issuer’’), Ferguson plc (the ‘‘Parent Guarantor’’), Wolseley Limited (the ‘‘Subsidiary Guarantor’’ and, together with the Parent Guarantor, the ‘‘Guarantors’’) and BNY Mellon Corporate Trustee Services Limited, as trustee (the ‘‘Trustee’’), The Bank of New York Mellon SA/NV, Luxembourg Branch, as registrar (the ‘‘Registrar’’) and as transfer agent (the ‘‘Transfer Agent’’) and The Bank of New York Mellon, London Branch, as principal paying agent (the ‘‘Paying Agent’’). The Indenture is not required to be, nor will it be, qualified under the U.S. Trust Indenture Act of 1939, as amended (the ‘‘Trust Indenture Act’’), and will not incorporate by reference any of the provisions of the Trust Indenture Act. Consequently, the Holders of Notes generally will not be entitled to the protections provided under the Trust Indenture Act to holders of debt securities issued under a qualified indenture, including those requiring the Trustee to resign in the event of certain conflicts of interest and to inform the Holders of Notes of certain relationships between it and the Issuer or the Guarantors. In this ‘‘Description of the Notes and the Guarantees’’, the terms ‘‘Holder’’, ‘‘Noteholder’’ and other similar terms refer to a ‘‘registered holder’’ of Notes, and not to a beneficial owner of a book-entry interest in any Notes, unless the context otherwise clearly requires. Barclays Capital Inc., BofA Securities, Inc., BNP Paribas Securities Corp., J.P. Morgan Securities LLC, RBC Capital Markets, LLC and SMBC Nikko Securities America, Inc. (together, the ‘‘Initial Purchasers’’) propose to resell Notes represented by the Rule 144A Global Notes in registered form to certain institutions in the United States in reliance upon Rule 144A under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’). The Rule 144A Global Notes may not be sold or otherwise transferred except pursuant to registration under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act. Notes represented by the Regulation S Global Notes will be resold by the Initial Purchasers only to non-U.S. persons located outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.

Principal, Maturity and Interest The Notes will be direct, unsubordinated and unsecured senior obligations of the Issuer and will be fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis by each Guarantor pursuant to the Indenture. The Notes are initially being issued in an aggregate principal amount of $600 million and will mature on June 2, 2030 (the ‘‘Maturity Date’’). The Notes will bear interest at 3.250% per annum from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or provided for. The Notes are payable semi-annually in arrears in U.S. dollars on each December 2 and June 2, commencing December 2, 2020 to the person in whose name any Note is registered at the close of business in Luxembourg on the November 17 or May 18 (whether or not a business day in Luxembourg) immediately preceding such Interest Payment Date (each, a ‘‘record date’’), notwithstanding any transfer or exchange of the Notes subsequent to the record date and prior to such Interest Payment Date. If and to the extent the Issuer shall default in the payment of the interest due on such Interest Payment Date and the applicable grace period shall have expired, such defaulted interest may, at the option of the Issuer, be paid to the persons in whose names Notes are registered at the close of business on a subsequent record date (which shall not be less than five days which are business days in London prior to the date of payment of such defaulted interest) established by notice given, in the case of Notes that are in the form of Global Notes, in accordance with the applicable procedure of DTC, otherwise by mail by or on behalf of the Issuer to the Holders (which term means registered holders) of the Notes not less than fifteen calendar days preceding such subsequent record date.

112 Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. If the date on which any interest payment or principal payment is to be made is not a business day, such payment will be made on the next day which is a business day without any further interest or other amounts being paid or payable in connection therewith.

Form and Denomination The Notes will be issued in fully registered form and only in denominations of $200,000 and integral multiples of $1,000 in excess thereof. The Notes will be issued initially as Global Notes registered in the name of the nominee of DTC. If at any time payments are made other than to DTC or if the Issuer so directs, a paying agent with offices in the Borough of Manhattan in the City of New York or London, United Kingdom shall be appointed.

Further Issues The Issuer may, from time to time, without notice to or the consent of the Holders of the Notes, ‘‘reopen’’ the Notes and issue additional notes having identical terms and conditions as the Notes, except for the issue date, issue price, payment of interest accruing prior to the Issue Date of such additional notes and/or except for the first payment of interest following the issue date of such additional notes, so that the additional notes may be consolidated and form a single series of notes with the Notes (a ‘‘Further Issue’’); provided that any additional notes that are not fungible with the outstanding Notes for U.S. federal income tax purposes will not have the same CUSIP, ISIN or other identifying number as the outstanding Notes.

Status of the Notes and the Guarantees The Notes will constitute direct, unsubordinated and unsecured senior obligations of the Issuer and rank pari passu and ratably without any preference or priority among themselves and equally with all other existing and future unsecured and unsubordinated obligations of the Issuer from time to time outstanding (subject to certain obligations required to be preferred by law). Upon issue, each Guarantor will fully and unconditionally guarantee on a direct, unsubordinated and unsecured senior basis, the due and punctual payment (and not collectability) of the principal of and interest on the Notes (and the payment of additional amounts described under ‘‘—Payment of Additional Amounts’’) when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise. The obligations of the Guarantors under the Guarantees are direct, unsubordinated and unsecured senior obligations of each Guarantor and rank equally with all other existing and future unsecured and unsubordinated obligations of the Guarantors from time to time outstanding (subject to certain obligations required to be preferred by law).

Payment of Additional Amounts The Issuer or, if applicable, the Guarantors (pursuant to the terms of the Guarantees), will make payments of principal, any premium and interest on the Notes or any payment pursuant to the Guarantees, as the case may be, to the Holder without withholding or deduction for or on account of any and all present or future tax, levy, impost or similar governmental charge imposed, assessed, levied or collected (‘‘Taxes’’) by or for the account of a Relevant Jurisdiction (as defined below) or any jurisdiction through which payments are made by or at the direction of the Issuer, the Guarantors or any successors thereto (together with any Relevant Jurisdiction, each a ‘‘Tax Jurisdiction’’), unless such withholding or deduction is required by law. If the Issuer or, if applicable, a Guarantor is required by a Tax Jurisdiction to deduct or withhold Taxes, the Issuer or, if applicable, such Guarantor will pay to a Holder of a Note such additional amounts (‘‘Additional Amounts’’) as may be necessary so that the net amount received by such Holder will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that the Issuer or, if applicable, such Guarantor shall not be required to pay any Additional Amounts for or on account of: (i) any Taxes that (A) would not have been so imposed, assessed, levied or collected but for the fact that the Holder or beneficial owner of the Note or Guarantee (or a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, trust, partnership or corporation) is or has been a domiciliary, national or resident of, or engaging or having been engaged in a trade or business or maintaining or having maintained a permanent establishment or being or having been physically present in the jurisdiction in which such Taxes

113 have been imposed, assessed, levied or collected or otherwise having or having had some connection with such jurisdiction, other than the mere holding or ownership of, or the collection of principal of, and interest on, a Note or the enforcement of a Guarantee, as the case may be, or (B) would have been avoided by the Holder or beneficial owner making a declaration of non-residence to the Issuer or the relevant Tax authority or complying with any certificate, identification or other reporting requirements concerning the nationality, residence or identity of such Holder or beneficial owner or its connection with a Tax Jurisdiction or making any other claim for exemption or any filing to the relevant Tax authority, but such Holder or beneficial owner fails to do so; (ii) any Taxes that would not have been so imposed, assessed, levied or collected but for the fact that, where presentation is required in order to receive payment, the Note or Guarantee was presented more than 30 days after the date on which such payment became due and payable or was provided for, whichever is later, except to the extent that the Holder thereof would have been entitled to Additional Amounts had the Note or Guarantee been presented for payment on any day during such 30-day period; (iii) any estate, inheritance, gift, sales, transfer, excise, personal property or similar Taxes; (iv) any Taxes that are payable otherwise than by deduction or withholding from payments on or in respect of the Note or Guarantee; (v) any withholding or deduction that is imposed where the Note or Guarantee is presented for payment to a paying agent in the EU by or on behalf of a Holder who would have been able to avoid such withholding or deduction by presenting such Note or Guarantee to another paying agent in a member state of the EU; or (vi) any combination of the Taxes described in (i) through (v) above. Notwithstanding any other provision contained herein, any amounts to be paid on the Notes by or on behalf of the Issuer, will be paid net of any deduction or withholding imposed or required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’), or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement) (any such withholding or deduction, a ‘‘FATCA Withholding’’). Neither the Issuer nor any other person will be required to pay any Additional Amounts in respect of FATCA Withholding. In addition, Additional Amounts will not be paid in respect of any payment in respect of the applicable Notes or Guarantees to any Holder that is a fiduciary, a partnership, a limited liability company or any person other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of a Tax Jurisdiction to be included in the income for tax purposes of a beneficiary or settlor with respect to such fiduciary, a member of such partnership, an interest holder in such limited liability company or a beneficial owner that would not have been entitled to such amounts had such beneficiary, settlor, member, interest holder or beneficial owner been the Holder of such Notes or Guarantees. Whenever this Offering Memorandum refers to the payment of the principal of, any premium, any interest or other amounts to which a Holder is entitled, if any, on or in respect of the Notes or the Guarantees, unless the context otherwise requires, it shall include the payment of Additional Amounts to the extent that Additional Amounts are, were or would be payable.

Redemption Optional redemption The Issuer may redeem the Notes in whole or in part, at the Issuer’s option: (1) at any time and from time to time prior to March 2, 2030 (three months prior to the Maturity Date of the Notes) (the ‘‘Par Call Date’’) at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed, and (ii) as determined by the Independent Investment Banker, the sum of the present values of the applicable Remaining Scheduled Payments (not including any portion of payments of interest accrued to the date of redemption) discounted to the date fixed for redemption (the ‘‘Redemption Date’’) on a semi-annual basis

114 (assuming a 360 day year consisting of twelve 30 day months and a redemption on the Par Call Date) at the Treasury Rate plus 40 basis points; and (2) at any time and from time to time on or after the Par Call Date, at a redemption price equal to 100% of the principal amount of the Notes being redeemed; plus, in each case, accrued and unpaid interest (including any Additional Amounts) on the principal amount being redeemed to (but excluding) the date of redemption. In connection with such optional redemption, the following defined terms apply: ‘‘Comparable Treasury Issue’’ means the United States Treasury security or securities selected by the Independent Investment Banker as having an actual or interpolated maturity comparable to the Par Call Date that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the Par Call Date. ‘‘Comparable Treasury Price’’ means, with respect to any Redemption Date, (A) the average of the Reference Treasury Dealer Quotations for that Redemption Date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if the Independent Investment Banker for the Notes obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations. ‘‘Independent Investment Banker’’ means one of the Reference Treasury Dealers appointed by the Issuer to act as the ‘‘Independent Investment Banker’’. ‘‘Reference Treasury Dealer’’ means each of Barclays Capital Inc., BofA Securities, Inc., BNP Paribas Securities Corp., J.P. Morgan Securities LLC, RBC Capital Markets, LLC and a Primary Treasury Dealer (as defined below) selected by SMBC Nikko Securities America, Inc., or their affiliates, which are primary U.S. Government securities dealers, and their respective successors and one other nationally recognized investment banking firm that is a Primary Treasury Dealer specified by the Issuer; provided, however, that if any of the foregoing or their affiliates shall cease to be a primary U.S. Government securities dealer in The City of New York (a ‘‘Primary Treasury Dealer’’), the Issuer shall substitute therefor another Primary Treasury Dealer. ‘‘Reference Treasury Dealer Quotation’’ means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third business day in New York City preceding that Redemption Date. ‘‘Remaining Scheduled Payments’’ means, with respect to each Note to be redeemed, the remaining scheduled payments of the principal thereof and interest thereon that would be due after the relevant Redemption Date but for such redemption as if the Notes were redeemed on the Par Call Date; provided, however, that if the Redemption Date is not an Interest Payment Date with respect to the Notes, the amount of the next succeeding scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to that Redemption Date. ‘‘Treasury Rate’’ means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity (computed as at the third business day immediately preceding that Redemption Date or interpolated on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that Redemption Date. Notice of any optional redemption will be given in accordance with the provisions set forth in ‘‘—Notices’’ below at least 10 days but not more than 60 days before the Redemption Date to each Holder of the Notes to be redeemed. Unless the Issuer defaults in payment of the redemption price, on and after any Redemption Date, interest will cease to accrue on the Notes or any portion thereof called for redemption. Upon presentation of any Note redeemed in part only, the Issuer will execute and instruct the Trustee to authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Note or Notes, of authorized denominations, in principal amount equal to the unredeemed portion of the Note so presented. On or before the business day prior to any Redemption Date, the Issuer must irrevocably deposit with the Trustee or one or more paying agents money sufficient to pay the redemption price of and accrued interest

115 (including Additional Amounts, if any) on the Notes to be redeemed on such date. If less than all the Notes are to be redeemed, the Notes to be redeemed shall be selected by the Trustee or the Registrar in compliance with the requirements, if any, of the principal Securities exchange on which the Notes are listed, or, if not so listed, by such manner as the Trustee or Registrar shall deem fair and appropriate, which may include selection pro rata or by lot. The redemption price shall be calculated by the Independent Investment Banker and the Issuer, and the Trustee or Registrar and any paying agent for the Notes shall be entitled to rely conclusively on such calculation.

Repurchase upon Change of Control Repurchase Event Upon the occurrence of a Change of Control Repurchase Event, unless the Issuer has exercised its right to redeem all of the Notes as described under ‘‘—Optional redemption,’’ the Issuer will make an offer to purchase all the Notes as described below (the ‘‘Change of Control Offer’’), at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the date of purchase. Within 30 days following the date upon which the Change of Control Repurchase Event occurred or, at the Issuer’s option, prior to the date upon which such Change of Control occurs but after the public announcement of the pending Change of Control, the Issuer will be required to provide a notice to each holder of Notes, with a copy to the Trustee, which notice will govern the terms of the Change of Control Offer. Such notice will state, among other things, the purchase date, which must be no earlier than 10 days nor later than 60 days from the date such notice is sent, other than as may be required by law (the ‘‘Change of Control Payment Date’’). The notice, if sent prior to the date of consummation of the Change of Control, will state that the Change of Control Offer is conditioned on the Change of Control being consummated on or prior to the Change of Control Payment Date. Holders of Notes electing to have Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled ‘‘Option of Holder to Elect Purchase’’ on the reverse of such Notes completed, to DTC at the address specified in the notice, or transfer such Notes to the paying agent by book-entry transfer pursuant to the applicable procedures of the paying agent, prior to the close of business on the third Business Day prior to the Change of Control Payment Date. If the Change of Control Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest to the Change of Control Payment Date will be paid on the relevant interest payment date to the Person in whose name a Note is registered at the close of business on such record date. The Issuer will not be required to make a Change of Control Offer if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for such an offer made by us and such third party purchases all Notes validly tendered and not withdrawn under its offer. The Issuer will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of the Indenture, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue of the conflict. Provisions under the Indenture relative to the Issuer’s obligation to make an offer to repurchase Notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the Notes. The Change of Control Repurchase Event feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the Parent Guarantor and, thus, the removal of incumbent management. Subject to the limitations discussed below, the Issuer or the Guarantors could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Notes, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Issuer’s or the Guarantors’ capital structure or credit ratings on the Notes. The Issuer may not have sufficient funds to repurchase all the Notes, or any other outstanding debt securities that the Issuer or the Guarantors would be required to repurchase, upon a Change of Control Repurchase Event.

116 Final Maturity Unless previously purchased or redeemed by the Issuer or the Guarantors or any of their respective Subsidiaries (as defined below), and cancelled, the principal amount of the Notes will mature and become due and payable on June 2, 2030 in an amount equal to their principal amount, with accrued and unpaid interest (including Additional Amounts, if any) to such date.

Reacquisition There is no restriction on the ability of the Issuer or the Guarantors or any of their respective Subsidiaries, or any holding company of the Guarantors or any Subsidiary to purchase or repurchase Notes, provided that the Notes which are from time to time held by or on behalf of the Issuer, the Guarantors, or any of their respective Subsidiaries thereof, or any holding company of the Guarantors or any Subsidiary shall (unless and until ceasing to be so held) be disregarded and deemed not to remain outstanding for purposes of voting.

Redemption for Tax Reasons The Notes are redeemable by the Issuer, in whole but not in part, at 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to the applicable Redemption Date and any Additional Amounts payable with respect thereto at the Issuer’s option at any time prior to their maturity if due to a Change in Tax Law (as defined below) (i) the Issuer or, if applicable, either of the Guarantors, respectively, has, or would, become obligated to pay any Additional Amounts with respect to the Notes; (ii) in the case of each Guarantor, (A) such Guarantor would be unable to procure payment by the Issuer or (B) the procuring of such payment by the Issuer would be subject to withholding taxes imposed by a Relevant Jurisdiction; and (iii) the obligation to pay such Additional Amounts described in (i) cannot otherwise be avoided by the Issuer or, if applicable, such Guarantor taking reasonable measures available to it. In such case, the Issuer may redeem the Notes in whole, but not in part, upon not less than 10 nor more than 60 days’ notice as provided in ‘‘—Notices’’ below; provided that (a) no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, if applicable, the Guarantors would be obligated to pay any such Additional Amounts were a payment in respect of the Notes or the Guarantees, as applicable, then due and (b) at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. The Issuer’s right to redeem the Notes shall continue as long as the Issuer or the Guarantors, as the case may be, is obligated to pay such Additional Amounts, notwithstanding that the Issuer or the Guarantors shall have made payments of Additional Amounts. Prior to the giving of any such notice of redemption, the Issuer must deliver to the Trustee (1) an officer’s certificate stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred and (2) an opinion of independent counsel of recognized standing with respect to tax matters of the Relevant Jurisdiction to the effect that the Issuer or the Guarantors has, or would, become obligated to pay such Additional Amounts as a result of such Change in Tax Law. For purposes hereof, ‘‘Change in Tax Law’’ shall mean (i) any changes in, or amendment to, any law of a Relevant Jurisdiction (including any regulations or rulings promulgated thereunder) or any amendment to or change in the application or official interpretation (including judicial or administrative interpretation) of such law, which change or amendment becomes effective or in the case of a change in the application or official interpretation is announced, on or after the Issue Date or (ii) if the Issuer or either Guarantor consolidates or merges with, or transfers or leases its assets substantially as an entirety to, any person that is incorporated or tax resident under the laws of any jurisdiction other than a Relevant Jurisdiction, as defined immediately prior to such consolidation, merger or other transaction, and as a consequence thereof such person becomes the successor obligor to the Issuer or a Guarantor in respect of Additional Amounts that may become payable (in which case, for purposes of this redemption provision, all references to the Issuer, or the Guarantors hereunder, as applicable, shall be deemed to be and include references to such person), any change in, or amendment to, any law of the jurisdiction of incorporation or residence for tax purposes of such successor obligor, or any political subdivision or taxing authority thereof or therein for purposes of taxation (including any regulations or rulings promulgated thereunder) or any amendment to or change in the application or official interpretation (including judicial or administrative interpretation) of such law, which change or amendment is announced on or after the date of such consolidation, merger or other transaction.

117 Covenants of the Issuer and the Guarantors Negative pledge The Issuer and each of the Guarantors will covenant under the Indenture that for so long as any of the Notes are outstanding under the Indenture, and subject to the provisions of the Indenture, the Issuer will not, and each of the Guarantors will not, create or permit to subsist, and the Parent Guarantor shall procure that no other member of the Group shall create or permit to subsist, any Lien (as defined below) upon, or with respect to, any of its present or future revenues or assets to secure any of the Issuer’s or a Guarantor’s Relevant Indebtedness or any Relevant Indebtedness of any other member of the Group, unless the Issuer, the relevant Guarantor or such other member of the Group, as the case may be, shall simultaneously with, or prior to, the creation of any such Lien, take any and all action necessary to procure that all amounts payable by the Issuer in respect of the Notes and by the Guarantors under the Guarantees are secured equally and ratably for so long as any such Lien securing Relevant Indebtedness subsists; provided, however, such negative pledge will not apply to or operate to prevent or restrict the creation or permitting to subsist of the following permitted encumbrances with respect to the Issuer, the Guarantors or any other member of the Group: (i) any Lien arising by operation of law or any right of set-off; (ii) a Lien which secures any of the Issuer’s or a Guarantor’s indebtedness for borrowed money or any indebtedness for borrowed money of any other member of the Group existing as at the Issue Date, or any replacement or substitute of such Lien where the principal amount of indebtedness secured thereby does not exceed the principal amount of indebtedness secured by the Lien which it replaces or substitutes (at the time of such replacement or substitution); (iii) (x) any Lien which exists on any asset or group of assets which secures any indebtedness for borrowed money where such asset or group of assets is acquired after the Issue Date provided such Lien only secures the indebtedness secured thereby at the date of acquisition, or any replacement or substitute of such Lien where the principal amount of indebtedness secured thereby does not exceed the principal amount of indebtedness secured by the Lien on the date of such acquisition; (y) any Lien created with respect to an asset or group of assets solely for the purpose of financing the costs of acquiring such asset or group of assets, or any replacement or substitute of such Lien where the principal amount of indebtedness secured thereby does not exceed such costs of acquisition; and (z) any Lien created by any member of the Group prior to its becoming a member of the Group and securing only indebtedness incurred by such member of the Group prior to its becoming a member of the Group and not incurred in contemplation of its so becoming a member of the Group and which secures only indebtedness secured thereby at the date on which such member becomes a member of the Group, or any replacement or substitute of such Lien where the principal amount of indebtedness secured thereby does not exceed the principal amount of indebtedness secured by the Lien which it substitutes or replaces (at the time of such replacement or substitution); and (iv) any Lien securing any indebtedness for borrowed money or any guarantee of any indebtedness for borrowed money if the liability for the repayment of the principal of and interest on such indebtedness for borrowed money is restricted to, or by reference to, funds available from a particular source or sources (including, in particular, any project, projects or assets) for the undertaking or acquisition or development, as the case may be, of which the indebtedness for borrowed money has been incurred.

Limitation on mergers and consolidations The Issuer and each of the Guarantors will covenant under the Indenture that for so long as any of the Notes are outstanding under the Indenture, the Issuer and each of the Guarantors will not consolidate or amalgamate with or merge (including by way of a scheme of arrangement) into or with any other Person or, directly or indirectly, sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any Person (other than a Person satisfying the condition set forth in clause (i), below, that is directly or indirectly wholly owned by the Parent Guarantor), unless: (i) the Person formed by or continuing from such consolidation or amalgamation or into which the Issuer or the relevant Guarantor is merged or the Person which acquires or leases the Issuer’s or Guarantor’s properties and assets as an entirety or substantially as an entirety is organized and existing under the laws of the United States, the United Kingdom, the Channel Islands (including

118 Jersey and Guernsey) or any other country that is a member of the Organization for Economic Cooperation and Development; (ii) if the Issuer or the relevant Guarantor, as applicable, is not the continuing entity, the successor Person expressly assumes by a supplemental indenture all of the Issuer’s or such Guarantor’s obligations under the Notes, the Guarantees and the Indenture, including to pay Additional Amounts; (iii) immediately before and after giving effect to such transaction, no Event of Default (as defined below) and no event which, after notice or lapse of time or both, would become an Event of Default, will have happened and be continuing which has not otherwise been waived or remedied in compliance with the terms of the Indenture; and (iv) certain other conditions are met (as set out in the Indenture). If, as a result of any such transaction, any of the Issuer’s or a Guarantor’s present or future revenues or assets become subject to a Lien to secure the Issuer’s or such Guarantor’s Relevant Indebtedness or any Relevant Indebtedness of any other member of the Group, then, unless such Lien could be created pursuant to the Indenture provisions described above under ‘‘—Negative pledge’’ without equally and ratably securing the Notes, the Issuer or such Guarantor, simultaneously with or prior to such transaction, will cause the Notes to be secured equally and ratably with or prior to the Relevant Indebtedness secured by such Lien. The Notes will not contain covenants or other provisions to afford protection to Holders in the event of a highly leveraged transaction or a change in control of the Issuer or the Guarantors except as provided herein. Upon any amalgamations, mergers or consolidations between the Issuer or a Guarantor, as the case may be, and any Person or upon certain sales, conveyances, transfers or leases of the respective properties and assets of the Issuer or a Guarantor as an entirety or substantially as an entirety to any Person (other than in the case of an acquisition of such property, for any Person satisfying the condition set forth in clause (i) above, that is directly or indirectly wholly owned of such Guarantor), the obligations of the Issuer or such Guarantor, as the case may be, under the Indenture and the Notes or the Guarantees, as the case may be, will be assumed by the Person formed by such amalgamation or consolidation, or surviving such merger, or which will have acquired such property or assets, as the case may be, and upon such assumptions such Person will succeed to and be substituted for the Issuer or such Guarantor, as the case may be, and then the Issuer or such Guarantor, as the case may be, will be relieved and released from all obligations under the Indenture and the Notes or the Guarantees, as the case may be. Notwithstanding the covenant described above, if the Parent Guarantor becomes a direct or indirect wholly owned subsidiary of a holding company through whatever means and the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Parent Guarantor’s Voting Stock immediately prior to that transaction, provided the conditions set forth in clauses (i), (ii) and (iv) in the first paragraph of this section are satisfied (where the holding company is the continuing entity), the obligations of the Parent Guarantor shall be assumed by such holding company and upon such assumption such holding company shall succeed to and be substituted for the Parent Guarantor and then the Parent Guarantor will be relieved and released from all obligations under the Indenture and the Guarantees provided that the Parent Guarantor may elect, by notice to the Trustee, to provide a Guarantee. The terms ‘‘Issuer’’, ‘‘Parent Guarantor’’, ‘‘Subsidiary Guarantor’’, ‘‘Guarantor’’ and ‘‘Guarantors’’, as used in the Notes, the Guarantees and the Indenture, shall refer to any such successors or assigns so substituted or any such additional Guarantor.

Events of Default The following will be Events of Default (each an ‘‘Event of Default’’) with respect to the Notes: (i) default in the payment of any installment of interest (excluding Additional Amounts) upon any Note as and when the same shall become due and payable, and continuance of such default for 30 days; or (ii) default in the payment of the Additional Amounts as and when the same shall become due and payable, and continuance of such default for 30 days; or

119 (iii) default in the payment of all or any part of the principal of or premium on any Note as and when the same shall become due and payable either at maturity, upon any redemption, by declaration or otherwise, and continuance of such default for a period of one business day; or (iv) default in the performance or breach of any covenant of the Issuer or the Guarantors in respect of the Notes or the Indenture (other than those described in paragraphs (i), (ii) and (iii) above), and continuance of such default or breach for a period of 60 days after there has been given a written notice, by registered or certified mail, to the Issuer and the Guarantors by the Trustee or to the Issuer, the Guarantors and the Trustee by the Holders of at least 25% in principal amount of the outstanding Notes affected thereby, specifying such default or breach and requiring it to be remedied and stating that such notice is a ‘‘Notice of Default’’ under the Indenture; or (v) if any other indebtedness for borrowed moneys (as defined below) of the Issuer or either Guarantor, other than indebtedness for borrowed moneys which is of a limited recourse nature (being indebtedness for borrowed moneys of the Issuer or a Guarantor the liability for repayment of which is restricted to a particular source as referred to in clause (iv) above under ‘‘—Covenants of the Issuer and the Guarantors—Negative pledge’’), is not paid when due or within any applicable grace period relating thereto, or any indebtedness for borrowed moneys of the Issuer or either Guarantor is declared to be or otherwise becomes due and payable prior to its specified maturity by reason of default; provided that any such event shall only be capable of being an Event of Default if the aggregate amount of all such indebtedness for borrowed moneys exceeds $75 million (or its equivalent in other currencies); or (vi) if: (a) any order shall be made by any competent court or resolution passed for the winding up or dissolution of the Issuer or either Guarantor or a Principal Subsidiary, or an administration order is made in relation to the Issuer or either Guarantor or a Principal Subsidiary other than (i) (in each such case) for the purpose of a reconstruction or amalgamation that is either not prohibited under the covenants described above in ‘‘—Limitation on mergers and consolidations’’ or the terms of which have previously been approved in writing by a resolution of Noteholders representing not less than 75% in aggregate principal amount of the Notes at the time outstanding, or (ii) in the case of a Principal Subsidiary, whereby all or the majority of the undertaking and assets of the Principal Subsidiary are transferred to or otherwise vested in a Guarantor or the Issuer or another of the Parent Guarantor’s direct or indirect Subsidiaries; or (b) an encumbrancer takes possession or an administrator or other receiver is appointed of the Issuer or either Guarantor or a Principal Subsidiary or of the whole or any material part of the assets of the Issuer or either Guarantor or a Principal Subsidiary, or if a distress or execution is levied or enforced upon or sued out against any material part of the assets of the Issuer or either Guarantor or a Principal Subsidiary and, in each case, is not removed, discharged or paid out within 90 days; or (c) the Issuer or either Guarantor or a Principal Subsidiary is unable to pay its debts or if the Issuer or either Guarantor or a Principal Subsidiary makes a general assignment for the benefit of or enters into a composition with its creditors; or (vii) the Guarantees cease to be valid and legally binding for any reason other than a termination in accordance with their terms or the Indenture, or either Guarantor denies or disaffirms its obligations under the Guarantees in writing. The Issuer and/or the Guarantors shall promptly notify the Trustee in writing upon becoming aware of the occurrence of an Event of Default. The Indenture provides that if an Event of Default with respect to the Notes occurs and is continuing, then and in each and every such case (other than certain Events of Default specified in paragraph (vi) above with respect to the Issuer or the Guarantors or a Principal Subsidiary), unless the principal of the Notes shall have already become due and payable, either the Trustee (at the direction of the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding) or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Issuer and the Guarantors (and to the Trustee if given by the Holders), may declare the entire principal amount of all outstanding Notes issued pursuant to the Indenture and interest accrued and unpaid thereon, if any, to be

120 due and payable immediately, and upon any such declaration the same shall become immediately due and payable, without any further declaration or other act on the part of the Trustee or any Holder. If certain Events of Default described in paragraph (vi) above occur with respect to the Issuer or a Guarantor and are continuing, the entire principal amount of and accrued and unpaid interest on all outstanding Notes issued pursuant to the Indenture shall become immediately due and payable, without any declaration or other act on the part of the Trustee or any Holder. Under certain circumstances, the Holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer, the Guarantors and the Trustee, may waive defaults and rescind and annul declarations of acceleration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. The Indenture provides that no Holder of any Note may institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to the Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy under the Indenture (except suits for the enforcement of payment of overdue principal or interest) unless such Holder previously shall have given to the Trustee written notice of an Event of Default and continuance thereof and unless the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as Trustee and shall have offered the Trustee indemnity satisfactory to it, the Trustee shall not have instituted any such action or proceeding within 90 days of its receipt of such notice, request and offer of indemnity and the Trustee shall not have received direction inconsistent with such written request by the Holders of a majority in aggregate principal amount of the applicable Notes at the time outstanding. The Holders of a majority in aggregate principal amount of the Notes then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, subject to certain limitations to be specified in the Indenture. The Indenture provides that the Parent Guarantor will furnish to the Trustee on or before November 30 in each year (commencing on November 30, 2020), if any Notes are then outstanding, a certificate from an officer as to his or her knowledge of the Parent Guarantor’s compliance with all conditions and covenants under the Indenture.

Defeasance The Indenture provides that the Issuer will have the option either (a) to be deemed (together with the Guarantors) to have paid and discharged the entire indebtedness represented by, and obligations under, the Notes and the Guarantees and to have satisfied all the obligations under the Indenture relating to the Notes and the Guarantees (except for certain obligations, including those relating to the defeasance trust and obligations to register the transfer or exchange of Notes, to replace mutilated, destroyed, lost or stolen Notes, to pay Additional Amounts and to maintain paying agencies) on the day after the applicable conditions described below have been satisfied or (b) to cease (together with the Guarantors) to be under any obligation to comply with the covenants described under ‘‘—Covenants of the Issuer and the Guarantors—Negative pledge’’, and ‘‘—Covenants of the Issuer and the Guarantors—Provision of financial information’’ and the condition relating to the absence of any events of default under ‘‘—Covenants of the Issuer and the Guarantors—Limitation on mergers and consolidations’’ under the Notes, and noncompliance with such covenants and the occurrence of certain events described above under ‘‘—Events of Default’’ will not give rise to any Event of Default under the Notes, in each case at any time after the applicable conditions described below have been satisfied. In order to exercise either defeasance option set out in (a) and (b) above, (i) the Issuer must deposit with the Trustee (or another entity designated by the Trustee for such purpose), irrevocably in trust, money and/or Government Obligations sufficient in the opinion of an independent accounting firm without reinvestment for the payment of principal of and interest on the outstanding Notes when and as due to and including the Redemption Date or Maturity Date, as the case may be, irrevocably designated by the Issuer on or prior to the date of deposit of such money and/or Government Obligations (ii) the Issuer must comply with certain other conditions, including delivering to the Trustee an opinion of U.S. counsel, or a ruling received from or published by the United States Internal Revenue Service, to the effect that beneficial owners of the Notes will not recognize income, gain or loss for United States federal income tax purposes as a result of the exercise of such option and will be subject to United States federal income tax

121 on the same amount and in the same manner and at the same time as would have been the case if such option had not been exercised and, in the case of (a) above, such opinion must state that it is based on a change of law or ruling received from or published by the United States Internal Revenue Service after the Issue Date (iii) no Event of Default or event which with notice or lapse of time would become an Event of Default shall have occurred and be continuing on the date of such deposit after having given effect thereto and (iv) the Issuer shall have paid in full all other amounts due and owing under the Indenture.

Modification and Waiver Without consent of Noteholders The Indenture includes provisions permitting the Issuer, the Guarantors and the Trustee, without the consent of the Holders of any of the Notes at any time outstanding, from time to time and at any time, to enter into an indenture or indentures supplemental to the Indenture or to otherwise amend the Indenture: • to convey, transfer, assign, mortgage or pledge to the Trustee or a security agent on behalf of the Noteholders as security for the Notes any property or assets; • to evidence the succession of another Person to the Issuer or a Guarantor, as the case may be, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Issuer or a Guarantor, as the case may be, and the release of the Issuer and the Guarantors from their obligations under the Indenture and Notes or Guarantees, in each case, pursuant to the Indenture; • to evidence and provide for the acceptance of appointment of a successor trustee, paying agent, registrar or transfer agent, as the case may be; • to add to the covenants of the Issuer and the Guarantors, as the case may be, such further covenants, restrictions, conditions or provisions as the Issuer and the Guarantors, as the case may be, shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default under the Indenture permitting the enforcement of all or any of the several remedies provided in the Indenture, Notes or Guarantees; provided that, in respect of any such additional covenant, restriction, condition or provision, such supplemental indenture or amendments to the indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the applicable Notes to waive such an Event of Default; • to modify the restrictions on, and procedures for, resale and other transfers of the Notes pursuant to law, regulation or practice relating to the resale or transfer of restricted securities generally; • to cure any ambiguity or to correct or supplement any provision contained in the Indenture which may be defective or inconsistent with any other provision contained therein or to make such other provision in regard to matters or questions arising under the Indenture as the Issuer or a Guarantor may deem necessary or desirable and which will not adversely affect the interests of the Holders of the Notes in any material respect (provided that any modification or amendment to conform language in the Indenture to that appearing in this description shall be deemed not to adversely affect the interests of the Holders of the Notes in any material respect), or to confirm the text of the Indenture, Notes or Guarantees to any provision of this ‘‘Description of the Notes and the Guarantees’’ to the extent that such provision in this ‘‘Description of the Notes and the Guarantees’’ was intended to be a verbatim or substantially verbatim recitation of a provision of the Indenture, Notes or Guarantees; or • to ‘‘reopen’’ the Notes and create and issue additional notes having identical terms and conditions as the existing Notes (or in all respects except for the issue date, issue price, payment of interest accruing prior to the issue date of such additional notes and/or except for the first payment of interest following the issue date of such additional notes) so that the additional notes are consolidated and form a single series with the Notes.

With consent of Noteholders The Indenture includes provisions permitting the Issuer, the Guarantors and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding (including consents obtained in connection with a tender offer or exchange offer for the

122 Notes), from time to time and at any time, to enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or any indenture supplemental to the Indenture or of modifying in any manner the rights of the Holders of the Notes or the Guarantees; provided that no such indenture may, without the consent of the Holder of the Notes so affected: • change the stated maturity of the principal of or the date for payment of any installment of interest on any Note; • reduce the principal amount of or interest on any Note or Additional Amounts payable with respect thereto or reduce the amount payable thereon in the event of redemption or default; • change the currency of payment of principal of or interest on any Note or Additional Amounts payable with respect thereto; • change the required place at which payment with respect to principal of or interest on any Note or Additional Amounts is payable to a place other than as contemplated by the Indenture on the Issue Date; • change the obligation of the Issuer or the Guarantors, as the case may be, to pay Additional Amounts; • impair the right to institute suit for the enforcement of any such payment on or with respect to any Note; • reduce the percentage in principal amount of the outstanding Notes, the consent of whose Holders is required for any such supplemental indenture; or • reduce the aggregate principal amount of any Note outstanding necessary to modify or amend the Indenture or any such Notes or to waive any future compliance or past default or reduce the percentage of aggregate principal amount of any Notes outstanding required for any written consent or reduce the percentage of the aggregate principal amount of such Notes outstanding necessary to rescind or annul any declaration of the principal of and all accrued and unpaid interest on any Notes to be due and payable; provided that no consent of any Holder of any Note shall be necessary to permit the Trustee, the Issuer and the Guarantors to execute supplemental indentures described under ‘‘—Without consent of Noteholders’’ above. Any modifications, amendments or waivers to the Indenture or to the conditions of any Note will be conclusive and binding on all Holders of Notes, whether or not they have consented to such action or were present at the meeting at which such action was taken, and on all future holders of such Notes, whether or not notation of such modifications, amendments or waivers is made upon such Notes. Any instrument given by or on behalf of any Holder of such a Note in connection with any consent to any such modification, amendment or waiver will be irrevocable once given and will be conclusive and binding on all subsequent registered holders of such Note.

Prescription Under New York’s statute of limitations, any legal action upon the Notes in respect of interest or principal must be commenced within six years after the payment thereof is due. Thereafter the Notes and the Guarantees will become generally unenforceable.

Listing The Issuer has made an application to Euronext Dublin for admission of the Notes to the Official List and to trading on the Global Exchange Market thereof. The Issuer and the Guarantors will use their reasonable best efforts to have such (i) admission of the Notes to trading on the Global Exchange Market of Euronext Dublin and (ii) admission of listing of such Notes on the Official List of Euronext Dublin thereof become effective and then maintain such listing for so long as any of the Notes remain outstanding, provided, however, that if in the opinion of the Issuer or either of the Guarantors, the continuation of such listing shall become unduly onerous, then the Issuer may delist the Notes from Euronext Dublin; provided, further, that the Issuer and the Guarantors will use their best efforts to obtain the admission to listing, trading and/or quotation of the Notes by another substantially

123 equivalent listing authority, securities exchange and/or quotation system prior to the delisting of the Notes from Euronext Dublin.

Notices Notices to Holders of Notes will be mailed by first-class mail (or equivalent) postage or internationally recognized courier service prepaid to Holders of Notes at their last registered addresses as they appear in the Notes register. The Issuer and the Guarantors will consider any mailed notice to have been given two business days in New York City after it has been sent. In addition, for so long as the Notes are listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market thereof and insofar as required, the Issuer and the Guarantors will publish notices to the Holders of the Notes on the Euronext Dublin’s announcement platform. The Issuer and the Guarantors will consider any published notice to be given on the date of its first publication. For so long as the Notes are represented by Global Note and the Global Note are held on behalf of any one or more of DTC, Euroclear, Clearstream or any alternative clearing system, notices required to be given to Holders of the Notes shall be given by their being delivered to the relevant clearing system for communication by it to entitled accountholders in substitution for notification as required by the foregoing.

Consent to Service, Submission to Jurisdiction; Enforceability of Judgments Each of the Issuer and the Guarantors will appoint Corporate Creations Network Inc. at 15 North Mill Street, Nyack, New York, 10960, United States, as its authorized agent for service of process for any action brought by the Trustee or by a Holder based on the Indenture or the Notes or Guarantees, as applicable, instituted in the federal courts of the United States of America on the courts of the State of New York, in each case, located in the City and County of New York. Each of the Issuer and the Guarantors will irrevocably submit to the non-exclusive jurisdiction of the federal courts of the United States of America or the courts of the State of New York, in each case, located in the City and County of New York, in respect of any action brought by the Trustee or by a Holder based on the Notes, the Guarantees or the Indenture. Each of the Issuer and the Guarantors will also irrevocably waive, to the extent permitted by applicable law, any objection to the venue of any of these courts in an action of that type. Holders of the Notes may, however, be precluded from initiating actions based on the Notes, the Guarantees or the Indenture in courts other than those mentioned above. Each of the Issuer and the Guarantors will, to the fullest extent permitted by law, irrevocably waive and agree not to plead any immunity from the jurisdiction of any of the above courts in any action based upon the Notes, the Guarantees or the Indenture. Since all or substantially all of the Issuer’s assets and a portion of the assets of each of the Guarantors is outside the United States, any judgment obtained in the United States against the Issuer or the Guarantors, including judgments with respect to the payment of principal, premium, interest and any redemption price and any purchase price with respect to the Notes or payments due under the Guarantees, may not be collectable within the United States.

Governing Law The Indenture, the Notes and the Guarantees shall be governed by and construed in accordance with the laws of the State of New York.

Book-Entry System; Delivery and Form Upon issuance, the Notes will be represented by beneficial interests in Global Notes. Each Global Note will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC. Except under the circumstances described below, Global Notes will not be exchangeable at the option of the Holder for certificated notes and Global Notes will not otherwise be issuable in definitive form. Upon issuance of the Global Notes, DTC will credit the respective principal amounts of the Notes represented by the Global Notes to the accounts of institutions that have accounts with DTC or its nominee (called participants of DTC), including Euroclear and Clearstream. The accounts to be credited shall be designated by the Initial Purchasers. Ownership of beneficial interests in the Global Notes will be limited to participants or persons that may hold interests through participants. Ownership of beneficial

124 interest in the Global Notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to participants’ interests) or by participants or persons that hold through participants. Such beneficial interest shall be in denominations of $200,000 and in multiples of $1,000 in excess thereof. So long as DTC, or its nominee, is the registered owner or holder of the Global Notes, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the Global Notes for all purposes under the Indenture. Except as set forth below, owners of beneficial interests in the Global Notes: • will not be entitled to have the Notes represented by the Global Notes registered in their names, and • will not receive or be entitled to receive physical delivery of Notes in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in the Global Notes must rely on the procedures of DTC, and indirectly Euroclear and Clearstream, and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a Holder under the Indenture. Principal and interest payments on Global Notes registered in the name of or held by DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner or Holder of the Global Note. None of the Issuer, the Guarantors, the Trustee or any of their respective agents, including any paying agent for such Global Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Issuer expects that DTC, upon receipt of any payments of principal or interest in respect of the Global Notes, will credit the accounts of the related participants (including Euroclear and Clearstream), with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Notes as shown on the records of DTC. Payments by participants to owners of beneficial interest in the Global Notes held through such participants will be the responsibility of the participants, as is now the case with securities held for the accounts of customers in bearer form or registered in ‘‘street name’’. Unless and until it is exchanged in whole or in part for Notes in definitive form in accordance with the terms of the Indenture, a Global Note may not be transferred except as a whole by the depositary to a nominee of the depositary or by a nominee of DTC to DTC or another nominee of DTC. If any note, including a Global Note, is mutilated, defaced, stolen, destroyed or lost, such note may be replaced with a replacement note at the office of the registrar or any successor registrar or transfer agent, on payment by the Noteholder of such costs and expenses as may be incurred in connection with the replacement, and on such terms, including the provision of such indemnity or security, as the Issuer, the Guarantors, the Trustee (or any of their agents) may require. Mutilated or defaced Notes must be surrendered before replacement Notes will be issued.

Exchanges of Global Notes for Definitive Notes Global Notes shall be exchangeable for definitive notes registered in the names of persons other than DTC or its nominee for such Global Notes only if: • DTC has notified the Issuer that it is unwilling or unable to continue as depositary or has ceased to be a clearing agency registered under the Exchange Act, and in either case, the Issuer has failed to appoint a successor depositary within 90 days of such notice; • the Trustee has instituted or has been directed to institute any judicial proceeding in a court to enforce the rights of the Noteholders under the Notes or the Guarantees and has been advised by counsel that in connection with such proceedings it is necessary for the Trustee to obtain possession of the Notes; or • the Issuer shall have determined in its sole discretion that the Notes shall no longer be represented by the applicable Global Notes. Any Global Note that is exchangeable for definitive notes pursuant to the preceding sentence shall be exchangeable for Notes issuable in denominations of $200,000 and in multiples of $1,000 in excess thereof and registered in such names as DTC shall direct. Subject to the foregoing, a Global Note shall not be

125 exchangeable, except for a Global Note of like denomination to be registered in the name of DTC or its nominee. Bearer notes will not be issued.

Exchanges Between and Among Global Notes The ‘‘distribution compliance period’’, as defined in Regulation S under the Securities Act, will begin on the closing date and end 40 days after the closing date of the offering. Beneficial interests in one Global Note may generally be exchanged for interests in another Global Note. Depending on whether the transfer is being made during or after the distribution compliance period, and to which Global Note the transfer is being made, the Trustee may require the seller to provide certain written certifications in the form provided in the Indenture. A beneficial interest in a Global Note that is transferred to a person who takes delivery through another Global Note will, upon transfer, become subject to any transfer restrictions and other procedures applicable to beneficial interests in the other Global Note.

Certain Definitions Set forth below are certain of the defined terms used in the Notes and the Indenture. You should refer to the Notes and the Indenture for the full set of definitions. ‘‘Below Investment Grade Ratings Event’’ means the Notes cease to be rated Investment Grade by both Rating Agencies on any date during the period commencing on, and ending 60 days after (which 60-day period will be extended so long as the rating of the notes is under publicly announced consideration for a possible downgrade by any Rating Agency), the earlier of (1) the occurrence of a Change of Control; or (2) public notice of the occurrence of a Change of Control or the intention of the Parent Guarantor to effect a Change of Control. Notwithstanding the foregoing, a Below Investment Grade Ratings Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Ratings Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the ratings event). ‘‘business day’’ means, unless stated otherwise, any day which is not, in London, New York City, Luxembourg or a place of payment of interest or principal, a Saturday, Sunday or a day on which banking institutions in any such location are authorized or obligated by law, regulation or executive order to close. ‘‘Change of Control’’ means the occurrence of one or more of the following: 1. the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of consolidation, amalgamation or merger), in one or a series of related transactions, of all or substantially all of the assets of the Parent Guarantor and its respective Subsidiaries taken as a whole to any ‘‘person’’ (as that term is used in Section 13(d)(3) of the Exchange Act), other than to the Parent Guarantor or one of its Subsidiaries; or 2. the consummation of any transaction (including, without limitation, any consolidation, amalgamation, or merger or other combination (including by way of a scheme of arrangement)) the result of which is that any ‘‘person’’ (as that term is used in Section 13(d)(3) of the Exchange Act) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the total outstanding Voting Stock of the Parent Guarantor. A transaction shall not constitute a change of control for the purposes of this definition if (1) the Parent Guarantor becomes a direct or indirect wholly owned subsidiary of a holding company and (2) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Parent Guarantor’s Voting Stock immediately prior to that transaction. ‘‘Change of Control Repurchase Event’’ means the occurrence of both a Change of Control and a Below Investment Grade Ratings Event.

126 ‘‘Exchange Act’’ means the United States Securities Exchange Act of 1934, as amended. ‘‘Government Obligations’’ means any security which is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is directly and fully guaranteed or insured as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof. ‘‘Group’’ means, at any time, the Parent Guarantor and its Subsidiaries including the Issuer and ‘‘member of the Group’’ shall be construed accordingly. ‘‘Guarantor Jurisdiction’’ means any of the jurisdictions of incorporation or residence for tax purposes of a Guarantor or any successor entity, or any political subdivision or taxing authority thereof or therein. ‘‘indebtedness for borrowed moneys’’ means any present or future indebtedness (whether being principal, premium, interest or other amounts and whether actual or contingent) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any guarantee, indemnity, acceptance or acceptance credit or any notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash. ‘‘Investment Grade’’ means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s) or a rating of BBB- or better by S&P (or its equivalent under any successor rating categories of S&P); or the equivalent Investment Grade credit rating from any additional Rating Agency or Rating Agencies selected by the Issuer or the Parent Guarantor. ‘‘Issuer Jurisdiction’’ means any of the jurisdictions of incorporation or residence for tax purposes of the Issuer or any successor entity, or any political subdivision or taxing authority thereof or therein. ‘‘Lien’’ means any mortgage, lien, pledge or other security interest. ‘‘Moody’s’’ means Moody’s Investor Services Ltd. ‘‘Person’’ means any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. ‘‘Principal Subsidiary’’ means any Subsidiary of the Parent Guarantor from time to time whose turnover, as shown in its latest audited income statement, exceeds 25% of the consolidated turnover of the Group as shown by the latest published audited consolidated income statement of the Group and either (i) whose profits or (in the case of a Subsidiary which has Subsidiaries) consolidated profits, before taxation and extraordinary items, as shown by its latest audited income statement, exceed 25% of the consolidated profits, before taxation and extraordinary items, of the Group as shown by the latest published audited consolidated income statement of the Group or (ii) whose total assets or (in the case of a Subsidiary of the Parent Guarantor which has Subsidiaries) total consolidated assets, as shown by its latest audited balance sheet, are at least 25% of the total consolidated assets of the Group as shown by the latest published audited consolidated balance sheet of the Group. For the purpose of calculating the profits or (in the case of a Subsidiary which has Subsidiaries) consolidated profits or (in the case of a Subsidiary which has Subsidiaries) total consolidated assets of any Subsidiary which is not a wholly- owned Subsidiary pursuant to (i) or (ii) above, only such proportion of the above-mentioned profits or total assets shall be taken into account as the relevant holding, either direct or indirect, of issued equity share capital in such Subsidiary bears to that Subsidiary’s total issued equity share capital. A certificate, signed in good faith by the Parent Guarantor’s chief financial officer, that in his or her opinion a Subsidiary is or is not or was or was not at a specified date a Principal Subsidiary shall, in the absence of manifest error, be conclusive and binding. References herein to the audited income statement and balance sheet and audited accounts of a Subsidiary which has Subsidiaries shall be construed as references to the audited consolidated income statement, consolidated balance sheet and consolidated accounts of such Subsidiary and its Subsidiaries, if such are required to be produced and audited, or, if no such accounts or balance sheet are produced, to unaudited pro forma accounts and balance sheet, prepared for the purpose of such reports. If the latest published audited consolidated income statement of the Group shows a loss before taxation and extraordinary items, then every Subsidiary whose turnover exceeds 25% of the consolidated turnover of the Group as aforesaid and whose latest audited income statement (consolidated if appropriate) shows a profit before taxation and extraordinary items shall be a Principal Subsidiary.

127 ‘‘Rating Agency’’ means (1) each of Moody’s and S&P and (2) if either of S&P and Moody’s ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the control of the Issuer, the Issuer may appoint a replacement for such Rating Agency that is a nationally recognized statistical rating organization. ‘‘Relevant Indebtedness’’ means any indebtedness for borrowed money which is in the form of or represented by any bonds, notes or other securities which have a final maturity of more than one year from the date of their creation and which are for the time being quoted, listed or dealt in, at the request of the Issuer or either Guarantor, as the case may be, on any stock exchange or recognized securities market. ‘‘Relevant Jurisdiction’’ means an Issuer Jurisdiction, a Guarantor Jurisdiction or, if applicable, the United States. ‘‘S&P’’ means S&P Global Ratings Europe Limited. ‘‘Subsidiary’’ means, at any relevant time, any person of which the voting shares or other interests carrying more than 50% of the outstanding voting rights attached to all outstanding voting shares or other interests are owned, directly or indirectly, by or for the Parent Guarantor and/or one or more subsidiaries of the Parent Guarantor. ‘‘Voting Stock’’ of any specified ‘‘person’’ (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date means the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.

128 BOOK-ENTRY SETTLEMENT AND CLEARANCE The Global Notes The Notes will be issued in the form of several registered notes in global form, without interest coupons, which are referred to as the Global Notes, as follows: • Notes sold to QIBs under Rule 144A will be represented by one or more Rule 144A Global Notes; and • Notes sold in offshore transactions to non-U.S. persons in reliance on Regulation S will be represented by one or more Regulation S Global Notes. Upon issuance, each of the Global Notes will be deposited with The Bank of New York Mellon, London Branch, as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC. Ownership of beneficial interests in each Global Note will be limited to persons who have accounts with DTC, or DTC participants, or persons who hold interests through DTC participants. Under procedures established by DTC it is expected that: • upon deposit of each Global Note with DTC’s custodian, DTC will credit portions of the principal amount of the Global Note to the accounts of the DTC participants designated by the Initial Purchasers; and • ownership of beneficial interests in each Global Note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the Global Note). Each Global Note and beneficial interests in each Global Note will be subject to restrictions on transfer as described under ‘‘Transfer Restrictions’’. See ‘‘Description of the Notes and the Guarantees—Book-Entry System; Delivery and Form’’.

Book-Entry Procedures for the Global Notes All interests in the Global Notes will be subject to the operations and procedures of DTC, Euroclear and Clearstream. The following summaries of those operations and procedures are provided solely for the convenience of investors. The information in this section concerning DTC, Euroclear and Clearstream and their book-entry systems has been obtained from sources that the Issuer and the Guarantors believe to be reliable, but neither we nor the Initial Purchasers take any responsibility for or make any representation or warranty with respect to the accuracy of this information. DTC, Euroclear and Clearstream are under no obligation to follow the procedures described herein to facilitate the transfer of interest in Global Notes among participants and account holders of DTC, Euroclear and Clearstream, and such procedures may be discontinued or modified at any time. Neither the Issuer, the Company, the Trustee nor any of their respective agents, including any paying agent, will have any responsibility for the performance of DTC, Euroclear and Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. DTC has advised the Issuer and the Guarantors that it is: • a limited purpose trust company organized under the laws of the State of New York; • a ‘‘banking organization’’ within the meaning of the New York State Banking Law; • a member of the Federal Reserve System; • a ‘‘clearing corporation’’ within the meaning of the Uniform Commercial Code; and • a ‘‘clearing agency’’ registered under Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTC’s participants include securities brokers and dealers, including the Initial Purchasers, banks and trust companies, clearing corporations, and other organizations. Indirect access to DTC’s system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.

129 Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC. So long as DTC’s nominee is the registered owner of a Global Note, that nominee will be considered the sole owner or holder of the Notes represented by that Global Note for all purposes under the Indenture. As a result, each investor who owns a beneficial interest in a Global Note must rely on the procedures of DTC to exercise any rights of a holder of Notes under the Indenture (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest). Payments of principal, premium (if any) and interest with respect to the Notes represented by a Global Note will be made by the Trustee to DTC’s nominee as the registered holder of the Global Note. Neither the Issuer, the Guarantors nor the Trustee, nor any of their respective agents, including any paying agent, will have any responsibility or liability for the payment of amounts to owners of beneficial interests in a Global Note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests. Payments by participants and indirect participants in DTC to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC. Transfers between participants in DTC will be effected under DTC’s procedures and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way under the rules and operating procedures of those systems. Cross-market transfers between DTC participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected within DTC through the DTC participants that are acting as depositaries for Euroclear and Clearstream. To deliver or receive an interest in a Global Note held in a Euroclear or Clearstream account, an investor must send transfer instructions to Euroclear or Clearstream, as the case may be, under the rules and procedures of that system and within the established deadlines of that system. If the transaction meets its settlement requirements, Euroclear or Clearstream, as the case may be, will send instructions to its DTC depositary to take action to effect final settlement by delivering or receiving interests in the relevant Global Notes in DTC and making or receiving payment under normal procedures for same-day funds settlement applicable to DTC. Euroclear and Clearstream participants may not deliver instructions directly to the DTC depositaries that are acting for Euroclear or Clearstream. Because of time-zone differences, the securities account of a Euroclear or Clearstream participant that purchases an interest in a Global Note from a DTC participant will be credited on the business day for Euroclear or Clearstream immediately following the DTC settlement date. Cash received in Euroclear or Clearstream from the sale of an interest in a Global Note to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account as of the business day for Euroclear or Clearstream following the DTC settlement date. DTC, Euroclear and Clearstream have agreed to the above procedures to facilitate transfers of interests in the Global Notes among participants in those settlement systems. However, the settlement systems are not obligated to perform these procedures and may discontinue or change these procedures at any time. Neither the Issuer, the Guarantors nor the Trustee nor any of their respective agents, including any paying agent, will have any responsibility for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their obligations under the rules and procedures governing their operations.

130 CERTAIN UNITED KINGDOM TAX CONSIDERATIONS The comments below are of a general nature and are based on current United Kingdom tax law as applied in England and Wales and HM Revenue & Customs (‘‘HMRC’’) generally published practice (which may not be binding on HMRC) in each case, as at the latest practicable date before the date of this Offering Memorandum. They are not exhaustive. Such law and practice is subject to change, possibly with retrospective effect. The following paragraphs only apply to persons who hold the Notes as absolute beneficial owners and do not address the tax consequences which may be relevant to certain categories of holders, for example, dealers in securities, financial institutions, banks, insurance companies, collective investment schemes or persons connected with us or clearance services, intermediaries or persons who benefit from special exemptions or rules. The comments below are not intended to be, nor should they be considered as, legal or tax advice. In particular, Noteholders should be aware that the tax legislation of any jurisdiction where a Noteholder is resident or otherwise subject to taxation may have an impact on the tax consequences of an investment in the Notes including in respect of any income received from the Notes. Noteholders and prospective investors who are in any doubt as to their tax position, should consult their own independent professional adviser immediately.

Interest Payments Payments of interest on the Notes may be made without withholding or deduction for or on account of United Kingdom tax provided that the Notes are and continue to be ‘‘listed on a recognized stock exchange’’ within the meaning of section 1005 of the Income Tax Act 2007. Section 1005 of the Income Tax Act 2007 provides that securities will be treated as ‘‘listed on a recognized stock exchange’’ if they are admitted to trading on that exchange, and either they are included in the United Kingdom Official List (within the meaning of Part 6 of the Financial Services and Markets Act 2000) or they are officially listed, in accordance with provisions corresponding to those generally applicable in European Economic Area states, in a country outside the United Kingdom in which there is a ‘‘recognized stock exchange.’’ The Irish Stock Exchange (referred to herein as ‘‘Euronext Dublin’’) is a ‘‘recognized stock exchange’’ for these purposes. Provided, therefore, that the Notes are and remain listed and admitted to trading on the Global Exchange Market of Euronext Dublin, interest on the Notes will be payable without withholding or deduction for or on account of United Kingdom income tax. In other cases, an amount must generally be withheld from payments of interest on the Notes with a United Kingdom source on account of United Kingdom income tax at the basic rate (currently 20%) subject (i) to any direction to the contrary from HMRC in respect of such relief as may be available pursuant to the provisions of an applicable double taxation treaty or (ii) to the interest being paid to the persons (including companies within the charge to United Kingdom corporation tax) and in the circumstances specified in Section 930 to 937 of the Income Tax Act 2007. The United Kingdom withholding tax treatment of payments with a United Kingdom source that are made by the Guarantors under the terms of the guarantees in respect of interest on the Notes (or other amounts due under the Notes other than the repayment of amounts subscribed for the Notes) is uncertain. Accordingly, if the Guarantors are required to make a payment under the guarantees and that payment has a United Kingdom source then, depending on the correct legal analysis of such a payment, it may have to be paid under deduction of United Kingdom income tax (currently at the rate of 20%), subject to the availability of exemptions including a direction to the payor from HMRC pursuant to the provisions of an applicable double taxation treaty. Such payments by the Guarantors may not be eligible for the exemption from withholding on account of United Kingdom tax in respect of securities listed on a recognized stock exchange described above in relation to payments of interest by the Issuer. The interest on Notes issued by the Issuer is expected to have a United Kingdom source for United Kingdom tax purposes and, as such, may be subject to United Kingdom tax by direct assessment (including self-assessment) even where paid without withholding or deduction for or on account of United Kingdom income tax. However, interest with a United Kingdom source received without withholding or deduction for or on account of United Kingdom income tax will not be chargeable to United Kingdom tax in the hands of a person (other than certain trustees) who is not resident for tax purposes in the United Kingdom unless that person carries on a trade, profession or vocation in the United Kingdom through a branch or agency (or, for holders who are companies, carries on a trade through a permanent establishment) in the United Kingdom in connection with which the interest is received or to which the Notes are attributable, in which case (subject to exemptions for interest received by certain categories of agent) tax may be levied on the United Kingdom branch, agency or permanent establishment.

131 The references to ‘‘interest’’ above are to ‘‘interest’’ as understood for the purposes of United Kingdom tax law. They do not take into account any different definition of ‘‘interest’’ that may prevail under any other law or that may apply under the terms and conditions of the Notes or any related document.

United Kingdom Corporation Taxpayers In general, holders within the charge to United Kingdom corporation tax will be treated for United Kingdom tax purposes as realizing profits, gains or losses in respect of the Notes on a basis which is broadly in accordance with their accounting treatment, so long as that accounting treatment is in accordance with generally accepted accounting practice (as that term is defined for United Kingdom tax purposes). Such profits, gains and losses (including those attributable to currency fluctuations) will be taken into account in computing taxable income for United Kingdom corporation tax purposes.

Other United Kingdom Taxpayers An individual holder of Notes who is resident in the United Kingdom, or who carries on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Notes are attributable, may have to account for capital gains tax in respect of any gains arising on a disposal of the Notes. Any capital gains would be calculated by comparing the pound sterling values at the time of acquisition and disposal.

Non-United Kingdom Taxpayers Noteholders who are resident in a jurisdiction outside the United Kingdom and who are neither resident in the United Kingdom nor carrying on a trade, profession or vocation in the United Kingdom through a branch or agency (or, for holders who are companies, through a permanent establishment in the United Kingdom) to which the Notes are attributable should not generally be liable to United Kingdom taxation in respect of a disposal (including redemption) of a Note. Special rules may apply to individual holders who have ceased to be resident for United Kingdom tax purposes in the United Kingdom and once again become resident for United Kingdom tax purposes in the United Kingdom after a period of non-residence. Such holders should consult their own tax advisers.

Stamp Duty and Stamp Duty Reserve Tax No United Kingdom stamp duty or stamp duty reserve tax should be payable on the issue or transfer of the Notes through the facilities of the DTC clearance service.

Provision of Information HMRC has powers to obtain information and documents relating to the Notes, including in relation to issues of and other transactions in the Notes, interest, payments treated as interest, and other payments derived from the Notes. This may include details of the beneficial owners of the Notes, of the persons for whom the Notes are held and of the persons to whom payments derived from the Notes are or may be paid. Information may be obtained from a range of persons including persons who effect or are a party to such transactions on behalf of others, registrars and administrators of such transactions, the registered holders of the Notes, persons who make, receive or are entitled to receive payments derived from the Notes and persons by or through whom interest and payments treated as interest are paid or credited.

132 CERTAIN U.S. FEDERAL TAX CONSIDERATIONS The following is a description of certain U.S. federal income tax consequences to the U.S. Holders described below of owning and disposing of Notes, but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to acquire the Notes. This discussion applies only to U.S. Holders that (i) purchase Notes in this offering at the ‘‘issue price’’, which will equal the first price to the public (not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) at which a substantial amount of the Notes is sold for money and (ii) hold the Notes as capital assets for U.S. federal income tax purposes. This discussion does not describe all of the tax consequences that may be relevant in light of a U.S. Holder’s particular circumstances, including any special tax accounting rules under section 451 of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’) or any alternative minimum tax or Medicare contribution tax consequences. This discussion also does not describe all of the tax consequences applicable to U.S. Holders subject to special rules, such as: • certain financial institutions; • regulated investment companies or insurance companies; • dealers or traders in securities that use a mark-to-market method of tax accounting; • persons holding Notes as part of a straddle, a conversion or other integrated transaction; • persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; • entities or arrangements classified as partnerships for U.S. federal income tax purposes; • tax-exempt entities, ‘‘individual retirement accounts,’’ ‘‘Roth IRAs’’ or other tax-deferred accounts; or • persons holding Notes in connection with a trade or business conducted outside of the United States. If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes owns Notes, the U.S. federal income tax treatment of a partner in such a partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships owning Notes and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of the Notes. This discussion is based on the Code, administrative pronouncements, judicial decisions, Treasury Regulations and the income tax treaty between the United States and the United Kingdom (the ‘‘Treaty’’), all as of the date hereof, any of which is subject to change, possibly with retroactive effect. This discussion does not address any aspect of state, local or non-U.S. taxation, or any taxes other than income taxes. U.S. Holders should consult their tax advisers with regard to the application of the U.S. federal tax laws to their particular situation, as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. As used herein, a ‘‘U.S. Holder’’ is a person that for U.S. federal income tax purposes is a beneficial owner of a Note and is: • an individual who is a citizen or resident of the United States; • a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or • an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. Payments of Interest. It is expected, and therefore this discussion assumes, that the Notes will be issued with less than a de minimis amount (prescribed under applicable U.S. Treasury regulations) of original issue discount for U.S. federal income tax purposes. Interest payable in respect of the Notes (including amounts withheld in respect of U.K. taxes, if any, and, without duplication, any Additional Amounts paid with respect thereto) will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes. The interest income will constitute foreign-source income, which may be relevant to a U.S. Holder in calculating the U.S. Holder’s foreign tax credit limitation. Because under the Treaty payments of interest and on guarantees are generally exempt from U.K. taxation, U.S. holders entitled to Treaty benefits will

133 generally not be able to credit U.K. taxes (if any) on such payments against their U.S. federal income tax liability. The rules governing foreign tax credits are complex, and U.S. Holders should consult their tax advisers regarding the creditability of U.K. taxes, if any, in their particular circumstances. Sale, Retirement or Other Taxable Disposition of the Notes. Upon the sale, retirement or other taxable disposition of a Note, a U.S. Holder will recognize taxable gain or loss in an amount equal to the difference between the amount realized on the sale, retirement or other taxable disposition and the U.S. Holder’s tax basis in the Note. For these purposes, the amount realized does not include any amount attributable to accrued interest, which will be taxable as interest income, as described under ‘‘—Payments of Interest’’ above. A U.S. Holder’s tax basis in a Note will generally equal the cost of such Note to the U.S. Holder. Any gain or loss realized on the sale, retirement or other taxable disposition of a Note will be U.S.-source capital gain or loss and will be long-term capital gain or loss if at the time of the sale, retirement or disposition the U.S. Holder has owned the Note for more than one year. Long-term capital gains recognized by non-corporate U.S. Holders are subject to reduced tax rates. The deductibility of capital losses is subject to limitations. Information Reporting and Backup Withholding. Payments of interest and proceeds from the sale of a Note that are made within the United States or through one of certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding, unless (i) the U.S. Holder is an exempt recipient and, if required, establishes its status as such, or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the Internal Revenue Service. U.S. Holders should consult their tax advisers regarding any reporting or filing obligations they may have as a result of owning or disposing of a Note. Certain U.S. Holders who are individuals (and certain specified entities) may be required to report information relating to non-U.S. accounts through which such persons hold their Notes. U.S. Holders should consult their own tax advisers regarding their reporting obligations with respect to the Notes.

134 PLAN OF DISTRIBUTION Subject to the terms and conditions set forth in a purchase agreement among the Issuer, the Guarantors and the Initial Purchasers, the Issuer has agreed to sell to the Initial Purchasers, and each of the Initial Purchasers has agreed, severally and not jointly, to purchase from the Issuer, the principal amount of Notes set forth opposite its name in the table below.

Principal Amount Initial Purchaser of the Notes Barclays Capital Inc...... $133,333,000 BofA Securities, Inc...... $133,333,000 J.P. Morgan Securities LLC ...... $111,111,000 SMBC Nikko Securities America, Inc...... $111,111,000 BNP Paribas Securities Corp...... $ 55,556,000 RBC Capital Markets, LLC ...... $ 55,556,000 Total ...... $600,000,000

The Initial Purchasers may offer and sell Notes through certain of their affiliates. Subject to the terms and conditions set forth in the purchase agreement, the Initial Purchasers have agreed, severally and not jointly, to purchase all of the Notes sold under the purchase agreement if any of these Notes are purchased. If an Initial Purchaser defaults, the purchase agreement provides that the purchase commitments of the non-defaulting Initial Purchasers may be increased or, in certain cases, the purchase agreement may be terminated. The Issuer and the Guarantors have agreed to indemnify the several Initial Purchasers against certain liabilities in connection with this offering, including liabilities under the Securities Act, or to contribute to payments the Initial Purchasers may be required to make in respect of those liabilities. The Initial Purchasers are offering the Notes, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the Notes, and other conditions contained in the purchase agreement, such as the receipt by the Initial Purchasers of officer’s certificates and legal opinions. The Initial Purchasers reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commissions and Discounts The representatives have advised the Issuer and the Guarantors that the Initial Purchasers propose initially to offer the Notes at the offering prices set forth on the cover page of this Offering Memorandum. After the initial offering, the offering price or any other term of the offering may be changed.

Notes Are Not Being Registered The Notes have not been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States. The Initial Purchasers propose to offer the Notes for resale in transactions not requiring registration under the Securities Act or applicable state securities laws, including sales pursuant to Rule 144A and Regulation S under the Securities Act. The Initial Purchasers will not offer or sell the Notes except to persons they reasonably believe to be QIBs or pursuant to offers and sales to non-U.S. persons that occur outside of the United States within the meaning of Regulation S. In addition, until the end of the 40th day following the commencement of this offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act unless the dealer makes the offer or sale in compliance with Rule 144A or another exemption from registration under the Securities Act. Each purchaser of the Notes will be deemed to have made acknowledgments, representations and agreements as described under ‘‘Notice to Investors’’.

New Issue of Notes The Notes are a new issue of securities with no established trading market. The Issuer has made an application to Euronext Dublin for the Notes to be admitted to its Official List and to be admitted to trading on its Global Exchange Market. However, there is no assurance that a liquid trading market in the Notes will develop. The Issuer has been advised by the Initial Purchasers that they presently intend to make a market in the Notes after completion of the offering.

135 However, they are under no obligation to do so and may discontinue any market-making activities at any time without any notice. The Issuer cannot assure the liquidity of the trading market for the Notes. If an active trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected. If the Notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the operating performance and financial condition of the Group, general economic conditions and other factors. See ‘‘Risk Factors—Risks Relating to the Notes—There is no established trading market for the Notes and one may not develop.’’

Settlement The Issuer expects that delivery of the Notes will be made to investors on or about June 2, 2020, which will be the third business day following the date of this Offering Memorandum (such settlement being referred to as ‘‘T+3’’). Under Rule 15c6-1 under the Exchange Act, trades in the secondary market are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes prior to the delivery of the Notes hereunder may be required, by virtue of the fact that the Notes initially settle in T+3, to specify an alternate settlement arrangement at the time of any such trade to prevent a failed settlement. Purchasers of the Notes who wish to trade the Notes prior to their date of delivery hereunder should consult their advisors.

Price Stabilization, Short Positions In connection with the offering, the Initial Purchasers may purchase and sell the Notes in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the Initial Purchasers of a greater principal amount of Notes than they are required to purchase in the offering. The Initial Purchasers must close out any short position by purchasing Notes in the open market. See also ‘‘Stabilization’’. Similar to other purchase transactions, the Initial Purchasers’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of the Notes or preventing or retarding a decline in the market price of the Notes. As a result, the price of the Notes may be higher than the price that might otherwise exist in the open market. None of the Issuer, the Guarantors or any of the Initial Purchasers makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, none of the Issuer, the Guarantors or any of the Initial Purchasers makes any representation that the Initial Purchasers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Other Relationships The Initial Purchasers and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with the Issuer, the Guarantors or their respective affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. The Initial Purchasers and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. In the ordinary course of their business activities, the Initial Purchasers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer, the Guarantors or their respective affiliates. Certain of the Initial Purchasers or their affiliates that have a lending relationship with the Issuer or the Guarantors routinely hedge their credit exposure to the Issuer or the Guarantors consistent with their customary risk management policies. Typically, such Initial Purchasers and their affiliates may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Issuer’s or the Guarantors’ securities, including potentially the Notes offered hereby. Any such short positions could adversely affect the future trading prices of the Notes offered hereby.

136 The Initial Purchasers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions Notice to prospective investors in the United States The Notes and the Guarantees have not been registered, and we do not intend to register the Notes or the Guarantees, under the Securities Act, or any securities laws of any other jurisdiction. Accordingly, the Notes are being offered and sold (1) in the United States only to QIBs in accordance with Rule 144A and (2) outside the United States to certain non-U.S. persons in accordance with Regulation S. The Notes have not been offered or sold, and will not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act, including (A) those persons reasonably believed to be ‘‘qualified institutional buyers’’ (‘‘QIBs’’) (as defined in Rule 144A under the Securities Act) or (B) to non-U.S. persons outside the United States to whom the offer or seller reasonably believes offers and sales of the Notes may be made in reliance upon Regulation S. Each Initial Purchaser has agreed that, except as permitted by the Purchase Agreement, it will not offer or sell the Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notes (other than a sale pursuant to Rule 144A) during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S. The Notes are being offered and sold outside of the United States to non-U.S. persons in reliance on Regulation S. The Purchase Agreement provides that Initial Purchaser may directly or through their respective U.S. broker-dealer affiliates arrange for the offer and resale of Notes within the United States only to qualified institutional buyers in reliance on Rule 144A. In addition, until the end of the 40th day after the commencement of the offering of the Notes, an offer or sale of Securities within the United States by any dealer (whether or not participating in the offering of the Notes) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A.

European Economic Area or United Kingdom Each Initial Purchaser has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the EEA or the U.K. For the purposes of this provision: (a) the expression ‘‘retail investor’’ means a person who is one (or more) of the following: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, ‘‘MiFID II’’); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the ‘‘Insurance Distribution Directive’’), where the customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the ‘‘Prospectus Regulation’’); and (b) the expression ‘‘offer’’ includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes.

Notice to prospective investors in the United Kingdom Each Initial Purchaser has: (a) only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of

137 the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of FSMA does not apply to the Issuer or the Guarantors; and (b) complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Notice to prospective investors in Canada The Notes may be sold only to purchasers in the provinces of Canada, purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this Offering Memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (‘‘NI 33-105’’), the Initial Purchasers are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Notice to prospective investors in Hong Kong The Notes have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the Notes has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Notice to prospective investors in Japan The Notes have not been and will not be registered under the Securities and Exchange Law of Japan, and have not been offered or sold, directly or indirectly, in Japan or for the account of any resident thereof except pursuant to any exemption from the registration requirements of the Securities and Exchange Law of Japan and otherwise in compliance with applicable provisions of Japanese law.

Notice to prospective investors in Singapore This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

138 Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: (a) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; (b) where no consideration is or will be given for the transfer; (c) where the transfer is by operation of law; (d) as specified in Section 276(7) of the SFA; or (e) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. In connection with Section 309B of the SFA and the CMP Regulations 2018, the Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309(A)(1) of the SFA), that the Notes are ‘prescribed capital markets products’ (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Notice to prospective investors in Switzerland This Offering Memorandum is not intended to constitute an offer or solicitation to purchase or invest in the Notes. The Notes may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act (‘‘FinSA’’) and no application has or will be made to admit the Notes to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this Offering Memorandum nor any other offering or marketing material relating to the Notes constitute a prospectus pursuant to the FinSA, and neither this Offering Memorandum nor any other offering or marketing material relating to the Notes may be publicly distributed or otherwise made publicly available in Switzerland.

Notice to prospective investors in other jurisdictions All persons offering, selling or delivering the Notes shall comply with all relevant laws, regulations and directives in each jurisdiction in which the Notes are purchased, offered, sold or delivered or, insofar as such laws, regulations and directives relate to the purchase, offer, sale or delivery of the Notes.

139 TRANSFER RESTRICTIONS The Notes and the Guarantees have not been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and, unless so registered, may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with applicable state securities laws. Accordingly, the Notes offered hereby are being offered and sold only (i) within the United States to QIBs in reliance on Rule 144A under the Securities Act and (ii) outside of the United States in reliance on Regulation S under the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act (‘‘Regulation S’’).Each purchaser of Notes, by its acceptance thereof, will be deemed to have acknowledged, represented to and agreed with the Issuer and the Initial Purchasers as follows: 1. It understands and acknowledges that the Notes and the Guarantees; (i) have not been, and will not be, registered under the Securities Act or any other applicable securities law; (ii) are being offered for resale in transactions not requiring registration under the Securities Act or any other securities law, including sales pursuant to Rule 144A under the Securities Act, and (iii) that, prior to the expiration of the distribution compliance period, the Notes and the Guarantees may not be offered, sold, pledged or otherwise transferred within the United States except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB, (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), in each case in accordance with any applicable securities laws of any State of the United States. 2. It is either: • a QIB and is aware, and each beneficial owner of such Notes has been advised, that any sale of Notes to it will be made in reliance on Rule 144A under the Securities Act, of which the purchase will be for its own account or for the account of another QIB; or • a non-U.S. person purchasing the Notes outside of the United States in accordance with Regulation S under the Securities Act. 3. It acknowledges that none of the Issuer, the Guarantors, or the Initial Purchasers, nor any person representing the Issuer, the Guarantors, their respective subsidiaries or the Initial Purchasers, has made any representation to it with respect to the Offering or sale of any Notes and related Guarantees, other than the information contained in this Offering Memorandum, which has been delivered to it and upon which it is relying in making its investment decision with respect to the Notes or related Guarantees. It has had access to such financial and other information concerning the Issuer, the Guarantors and the Notes and related Guarantees as it has deemed necessary in connection with its decision to purchase any of the Notes. 4. It is purchasing the Notes for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States, subject to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Notes and related Guarantees pursuant to Rule 144A, Regulation S or any other exemption from registration available under the Securities Act. 5. If such a purchaser is a purchaser of Notes issued in reliance on Rule 144A, it agrees on its own behalf and on behalf of any investor account for which it is purchasing the Notes, and each subsequent holder of the Notes by its acceptance thereof will be deemed to agree not to offer, sell or otherwise transfer such Notes and related Guarantees except (i) to the Issuer, the Guarantors and any subsidiary or affiliate thereof, (ii) pursuant to a registration statement that has been declared effective under the Securities Act, (iii) for so long as the Notes and related Guarantees are eligible for resale pursuant to Rule 144A under the Securities Act, to a person it reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the transfer is being made in reliance on Rule 144A under the Securities Act, (iv) pursuant to offers and sales that occur outside the United States in compliance with Regulation S under the Securities Act or (v) pursuant to any

140 other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and in compliance with any applicable state securities laws, and any applicable local laws and regulations, and further subject to the Issuer’s, the Trustee’s and the Transfer Agent’s rights prior to any such offer, sale or transfer (A) pursuant to clause (v) to require the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them and (B) in each of the foregoing cases, to require that a transfer notice in the form attached as a schedule to the Indenture is completed and delivered by the transferor to the Transfer Agent. 6. It understands that the Notes and related Guarantees, unless otherwise agreed between the Issuer and the Trustee in accordance with applicable law, are being sold pursuant to Rule 144A and will bear a legend to the following effect: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF OR A SUCCESSOR DEPOSITARY. NEITHER THIS NOTE, THE RELATED GUARANTEE, NOR ANY BENEFICIAL INTEREST HEREIN OR THEREIN HAS BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. NEITHER THIS NOTE, THE RELATED GUARANTEE NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE UNITED STATES EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THIS NOTE. 7. It understands that the Notes and related Guarantees being sold in reliance on Regulation S will bear a legend to the following effect: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF OR A SUCCESSOR DEPOSITARY. NEITHER THIS NOTE, THE RELATED GUARANTEE, NOR ANY BENEFICIAL INTEREST HEREIN OR THEREIN HAS BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS SUCH NOTES AND RELATED GUARANTEE ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF FORTY DAYS FROM THE LATER OF (i) THE DATE ON WHICH THESE NOTES ARE FIRST OFFERED AND (ii) THE DATE OF ISSUE OF THESE NOTES. 8. It agrees that it will give to each person to whom it transfers the Notes notice of any restrictions on transfer of such Notes and related Guarantees. 9. It acknowledges that until 40 days after the commencement of the Offering, any offer or sale of the Notes and related Guarantees within the United States by a dealer (whether or not participating in the Offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A under the Securities Act.

141 10. Either (i) it is not an employee benefit plan subject to Title I of ERISA, a plan, account or other arrangement subject to Section 4975 of the Code or provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, ‘‘Similar Laws’’) or any entity whose underlying assets include ‘‘plan assets’’ of any such employee benefit plan, plan, account or arrangement (each of the foregoing, a ‘‘Plan’’) and it is not purchasing or holding the Notes and related Guarantees on behalf of or with the assets of any Plan; or (ii) its purchase, holding and subsequent disposition of such Notes and related Guarantees shall not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law. 11. It acknowledges that the Trustee and/or Transfer Agent will not be required to accept for registration of transfer any Notes and related Guarantees except upon presentation of evidence satisfactory to the Issuer and the Guarantors, the Trustee and/or the Transfer Agent that the restrictions set forth therein have been complied with. 12. It acknowledges that the Issuer, the Company, the Initial Purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements and agrees that if any of the acknowledgements, representations, warranties and agreements deemed to have been made by its purchase of the Notes and related Guarantees are no longer accurate, it shall promptly notify the Initial Purchasers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts or for the account of one or more QIBs, it represents that it has sole investment discretion with respect to each such investor account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such investor account. 13. It understands that the Notes offered in reliance on Rule 144A will be represented by the DTC Restricted Global Note. Before any interest in the DTC Restricted Global Note may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the DTC Unrestricted Global Note, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Indenture) as to compliance with applicable securities laws. 14. It understands that the Notes offered in reliance on Regulation S will be represented by the DTC Unrestricted Global Note. Prior to the expiration of the distribution compliance period, before any interest in the DTC Unrestricted Global Note may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the DTC Restricted Global Note, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Indenture) as to compliance with applicable securities laws. 15. Prospective purchasers are hereby notified that sellers of the Notes and the Guarantees may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

142 GENERAL INFORMATION Listing The Issuer has made an application to Euronext Dublin for the Notes to be admitted to the Official List and to trading on the Global Exchange Market thereof.

Clearing The Notes have been accepted for clearance through DTC’s book-entry settlement system. The CUSIP and ISIN numbers for the Notes are as follows: Notes distributed pursuant to Rule 144A: CUSIP 314890 AB0, ISIN US314890AB05 Notes distributed pursuant to Regulation S: CUSIP G33760 AD4, ISIN USG33760AD40

Interests of Natural and Legal Persons Involved in the Issuance of the Notes Save as discussed in the section of this Offering Memorandum entitled ‘‘Plan of Distribution,’’ so far as the Issuer and the Guarantors are aware, no person involved in the offer of the Notes has an interest material to such offer.

Incorporation of the Issuer Ferguson Finance plc is a limited liability company organized under the laws of England and Wales, registration number 11581816, and is wholly owned by the Company. The Issuer is a wholly owned direct subsidiary of Wolseley Limited which in turn is, a wholly owned direct subsidiary of Ferguson plc, and its principal function is to operate as a finance company which provides funding for Ferguson plc subsidiaries. Ferguson Finance plc’s authorized share capital is £50,000. All of Ferguson Finance plc’s issued shares are wholly owned by Wolseley Limited. The Issuer has measures in place to ensure that control is not abused. The following table shows the Board of Directors of the Issuer as at the date hereof:

Principal directorships outside Ferguson Finance plc and Ferguson Group Board of Directors Title companies Mike Powell(1) ...... Director None Philip Andrew Scott ...... Director None Katherine Mary McCormick ...... Company Secretary None Julia Amanda Mattison ...... Director None Graham Middlemiss ...... Director None Jacqueline Ann Staig ...... Director None

Incorporation of the Parent Guarantor Ferguson plc is a public limited company organized under the laws of Jersey, Channel Islands, registration number 128484. The registered offices of Ferguson plc are located at 26 New Street, St Helier, Jersey, JE2 3RA, Channel Islands and its headquarters are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham RG41 5TS, United Kingdom. The Parent Guarantor is the Issuer’s indirect parent company and is the ultimate holding company for the Group. The duties owed by the directors do not give rise to any potential conflicts of interests with such directors’ private interests and other duties.

143 Incorporation of the Subsidiary Guarantor Wolseley Limited is a private limited company organized under the laws of England and Wales on April 14, 1986, with registration number 00029846 and is wholly owned by the Company. The principal offices of Wolseley Limited are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, RG41 5TS, United Kingdom. The Subsidiary Guarantor is the Issuer’s direct parent company and a wholly-owned subsidiary of the Parent Guarantor. The duties owed by the directors do not give rise to any potential conflicts of interests with such directors’ private interests and other duties. The following table shows the Board of Directors of the Subsidiary Guarantor as at the date hereof:

Principal directorships outside Wolseley Limited and Board of Directors Title Ferguson Group companies Mike Powell(1) ...... Director None Ian Thomas Graham ...... Director None Julia Amanda Mattison ...... Director None Graham Middlemiss ...... Director None Philip Andrew Scott ...... Director None Jacqueline Ann Staig ...... Director None Katherine Mary McCormick ...... Company Secretary None

(1) On May 26, 2020, we announced that Mr. Powell has resigned from his position as Group CFO. The Company will confirm Mr. Powell’s leaving date in due course. For further information, see ‘‘Overview—Recent Developments—Change in Group Chief Financial Officer.’’ The principal offices of Wolseley Limited are located at 1020 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire RG41 5TS, England and the telephone number is +44 (0) 118 929 8700. There are no existing or potential conflicts of interest between any duties to the Issuer of the directors and/or their private interests and other duties. The Subsidiary Guarantor and the Parent Guarantor will, pursuant to the Indenture, fully and unconditionally guarantee, on a joint and several basis, the due and punctual payment of all sums from time to time payable by the Issuer in respect of the Notes. Based on the Guarantors’ financial information for and as of the year ended July 31, 2019: (a) the Guarantors collectively recorded negative Adjusted EBITDA of $0 million and net assets of $336 million representing 0.0% and 7.7%, respectively, of the Group’s Adjusted EBITDA and net consolidated assets; (b) the members of the Group (excluding the Guarantors and the Issuer) collectively recorded Adjusted EBITDA of $1,788 million and net assets of $4,772 million, representing 100.0% and 109.7%, respectively, of the Group’s Adjusted EBITDA and net consolidated assets; and (c) the Issuer recorded Adjusted EBITDA of $0 million and net liabilities of $758 million, representing 0.0% and (17.4)%, respectively, of the Group’s Adjusted EBITDA and net consolidated assets.

Corporate Authority We have obtained all necessary consents, approvals and authorizations in connection with the issuance and performance of the Notes. Resolutions of the Issuer’s board of directors, dated May 14, 2020, authorized the issuance of the Notes. The guarantee of the Notes has been authorized by resolutions of the Parent Guarantor’s board of directors, dated May 12, 2020. The guarantee of the Notes has been authorized by resolutions of the Subsidiary Guarantor’s board of directors, dated May 14, 2020.

Persons Responsible The Issuer and the Guarantors accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Issuer and the Guarantors (having taken all reasonable care to

144 ensure that such is the case), the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information.

Absence of Significant Change Save as disclosed in ‘‘Overview—Recent Developments—Results of operations for the three month period ended April 30, 2020’’ and ‘‘Risk Factors—Risks Relating to Our Business—The COVID-19 virus outbreak has had an adverse impact, and if it is prolonged or intensifies could have a material and adverse impact, on our business and results of operations’’ there has been no significant change in the financial or trading position of the Group taken as a whole since January 31, 2020, nor has there been any material adverse change in the prospects of the Group taken as a whole since July 31, 2019.

Absence of Litigation Except as set forth in the section entitled ‘‘Description of the Group and its Business—Litigation’’ and ‘‘Risk Factors—The nature of our operations may expose our associates, contractors, customers, suppliers and other individuals to health and safety risks and we may incur property, casualty or other losses not covered by our insurance policies’’ and as disclosed in our Consolidated Financial Statements included elsewhere in this Offering Memorandum, neither the Issuer, nor the Guarantors, nor any of their respective subsidiaries is (or has been in the 12 months preceding the date of this Offering Memorandum) involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer, the Guarantors or any of their respective subsidiaries is aware) which may have, or have had in the recent past, significant effects on the financial position or profitability of the Issuer, the Guarantors or any of their respective subsidiaries taken as a whole. Since many of the pending cases seek unspecified damages, it is not possible to quantify the total amount being claimed.

Third Party Information The information contained in this document which has been sourced from third parties has been correctly reproduced, and, as far as the Issuer and the Guarantors are aware and able to ascertain from information published by that third party, no facts have been omitted which could render the reproduced information inaccurate or misleading. See ‘‘Market and Industry Data.’’

Periodic Reporting Under the Exchange Act We are not currently subject to the periodic reporting and other information requirements of the U.S. Securities Exchange Act of 1934.

Documents Available for Inspection Copies of the following documents will be available for inspection in physical form/electronic form during normal office hours (local time) on any weekday (Saturdays, Sundays and public holidays excluded) at the registered office of the Company and the Issuer: (a) this Offering Memorandum; (b) the Memorandum and Articles of Association of the Issuer, Parent Guarantor and Subsidiary Guarantor; (c) the 2020 Interim Consolidated Financial Statements, the 2019 Consolidated Financial Statements and the 2018 Consolidated Financial Statements; and (d) the Indenture

145 LEGAL MATTERS Certain legal matters in connection with this offering will be passed upon for the Issuer, the Guarantor and the Subsidiary Guarantor by Davis Polk & Wardwell London LLP, as to matters of United States federal law, New York State law and English law and by Carey Olsen Jersey LLP as to Jersey law. Certain legal matters in connection with this offering will be passed upon for the Initial Purchasers by Linklaters LLP, as to matters of United States federal law, New York State law and English law.

146 INDEPENDENT AUDITORS The 2020 Interim Consolidated Financial Statements have been prepared in accordance with IAS 34 as adopted by the EU. The 2020 Interim Consolidated Financial Statements included in this Offering Memorandum have been reviewed by Deloitte LLP, as stated in their Independent review report appearing therein. Deloitte LLP is registered to carry out audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Its business address is 1 New Street Square, London, EC4A 3HQ, United Kingdom. The Annual Consolidated Financial Statements have been prepared in accordance with EU IFRS. The Annual Consolidated Financial Statements included in this Offering Memorandum have been audited by Deloitte LLP, as stated in the Independent auditor’s reports appearing therein. In accordance with International Auditing Standard (United Kingdom and Ireland) 700, the audit reports on the Group Financial Statements include a description of the risks of material misstatement that had the greatest effect on the audit, the key audit procedures to address those risks and the findings from those procedures in order that the Company’s members as a body may better understand the process by which the auditor arrived at its audit opinion. The risks of material misstatement detailed in the sections of the reports titled ‘‘Key audit matters’’ are those risks that, in the auditor’s professional judgment, had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. The audit procedures relating to these risks were designed in the context and solely for the purposes of the audit of the financial statements in accordance with the requirements of the Companies (Jersey) Law, 1991. The ‘‘Key observations’’ with respect to these risks are therefore limited by the scope of the audit and are addressed in the context of forming the opinion on the financial statements as a whole. The auditor does not express separate opinions on individual risks or the separate elements of the financial statements to which these individual risks relate. The opinion on the financial statements is not modified with respect to any of these risks. The audit reports included in the Offering Memorandum were given in the context of the annual reports referred to above and contain language limiting the scope of the Auditors’ duty of care in relation to such reports and the financial statements to which they relate. In particular, the Auditors’ reports, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, includes the following wording with respect to the 2020 Interim Consolidated Financial Statements: ‘‘This report is made solely to the Company in accordance with International Standard on Review Engagements (U.K. and Ireland) 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.’’ and respect to the Group Annual Consolidated Financial Statements: ‘‘This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and/or those further any further matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for our report, or for the opinions we have formed.’’ The SEC would not permit such limiting language to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act, or in a report filed under the Exchange Act. If a U.S. court (or any other court) were to give effect to this limiting language, the recourse that investors in the Notes may have against the Auditors based on their reports or the financial statements to which they relate could be limited.

147 INDEX TO FINANCIAL STATEMENTS Investors should refer to the explanations provided under ‘‘Presentation of Financial, Market and Other Information—General’’ and ‘‘Independent Auditors’’ for an explanation of the financial information and related reports included in this Offering Memorandum. The audited consolidated financial statements as of and for the years ended July 31, 2019 and 2018 have been extracted from our annual reports for such years. Certain page references in the financial statements are to the annual reports of that year and not to this Offering Memorandum. Copies of Ferguson Plc’s annual reports, the contents of which are not part of this Offering Memorandum, may be obtained through the website maintained by Ferguson plc at http://www.fergusonplc.com. Information on Ferguson Plc’s website is not incorporated by reference into this Offering Memorandum.

2020 Interim Consolidated Financial Statements of Ferguson plc Consolidated Income Statement for the six months ended January 31, 2020 ...... F-2 Consolidated Statement of Comprehensive Income for the six months ended January 31, 2020 ...... F-3 Consolidated Statement of Changes in Equity for the six months ended January 31, 2020 ...... F-4 Consolidated Balance Sheet for the six months ended January 31, 2020 ...... F-5 Consolidated Cash Flow Statement for the six months ended January 31, 2020 ...... F-7 Notes to the Consolidated Financial Statements for the six months ended January 31, 2020 ...... F-8 Independent auditor’s review report for the six months ended January 31, 2020 ...... F-24 Consolidated Financial Statements 2019 of Ferguson plc Consolidated Income Statement for the financial year ended July 31, 2019 ...... F-25 Consolidated Statement of Comprehensive Income for the financial year ended July 31, 2019 ...... F-26 Consolidated Statement of Changes in Equity for the financial year ended July 31, 2019 ...... F-27 Consolidated Balance Sheet as at July 31, 2019 ...... F-28 Consolidated Cash Flow Statement for the financial year ended July 31, 2019 ...... F-29 Notes to the Consolidated Financial Statements as at and for the financial year ended July 31, 2019 . F-30 Independent auditor’s report for the financial year ended July 31, 2019 ...... F-79 Consolidated Financial Statements 2018 of Ferguson plc Consolidated Income Statement for the financial year ended July 31, 2018 ...... F-89 Consolidated Statement of Comprehensive Income for the financial year ended July 31, 2018 ...... F-90 Consolidated Statement of Changes in Equity for the financial year ended July 31, 2018 ...... F-91 Consolidated Balance Sheet as at July 31, 2018 ...... F-92 Consolidated Cash Flow Statement for the financial year ended July 31, 2018 ...... F-93 Notes to the Consolidated Financial Statements as at and for the financial year ended July 31, 2018 . F-94 Independent auditor’s report for the financial year ended July 31, 2018 ...... F-146

F-1 Condensed consolidated income statement (unaudited) Half year to 31 January 2020

Half year to 31 January 2020 2019 Before Exceptional Before Exceptional exceptional items exceptional items Notes items (note 4) Total items (note 4) Total $m $m $m $m $m $m Continuing operations Revenue ...... 3 10,966 — 10,966 10,847 — 10,847 Cost of sales ...... (7,722) (2) (7,724) (7,653) (1) (7,654) Gross profit ...... 3,244 (2) 3,242 3,194 (1) 3,193 Operating costs: amortisation of acquired intangible assets ...... 9 (60) — (60) (44) — (44) other ...... (2,432) (17) (2,449) (2,441) 1 (2,440) Operating costs ...... (2,492) (17) (2,509) (2,485) 1 (2,484) Operating profit ...... 3 752 (19) 733 709 — 709 Net finance costs ...... 5 (70) — (70) (35) — (35) Share of (loss)/profit after tax of associates ...... (1) — (1) 2— 2 Impairment of interests in associates . . . (22) — (22) —— — Gain on disposal of interests in associates ...... —— ——3 3 Profit before tax ...... 659 (19) 640 676 3 679 Tax ...... 6 (175) 2 (173) (143) 4 (139) Profit from continuing operations ..... 484 (17) 467 533 7 540 Profit from discontinued operations .... (1) 1 — 14546 Profit for the period ...... 483 (16) 467 534 52 586 Earnings per share ...... 8 Continuing operations and discontinued operations Basic earnings per share ...... 206.7c 254.5c Diluted earnings per share ...... 205.5c 252.8c Continuing operations only Basic earnings per share ...... 206.7c 234.5c Diluted earnings per share ...... 205.5c 233.0c Alternative performance measures Underlying trading profit from ongoing operations ...... 2 747 714 Underlying trading profit from non-ongoing operations ...... 2 30 39 Underlying trading profit from continuing operations ...... 2, 3 777 753 Adjusted EBITDA from continuing operations ...... 2 872 842 Headline earnings per share ...... 2, 8 245.7c 241.9c

The Group adopted IFRS 16 ‘‘Leases’’ on 1 August 2019 applying the modified retrospective transition method. As a result, comparatives have not been restated and are shown on an IAS 17 ‘‘Leases’’ basis. See note 1 for further details.

F-2 Condensed consolidated statement of comprehensive income (unaudited) Half year to 31 January 2020

Half year to 31 January 2020 2019 $m $m Profit for the period ...... 467 586 Other comprehensive income/(expense): Items that may be reclassified subsequently to profit or loss: Exchange gain/(loss) on translation of international operations(1) ...... 74 (9) Exchange (loss)/gain on translation of borrowings and derivatives designated as hedges of international operations(1) ...... (32) 4 Cumulative currency translation differences on disposal of interests in associates(1) ..... — 7 Items that will not be reclassified subsequently to profit or loss: Actuarial loss on retirement benefit plans(2) ...... (52) (32) Income tax credit/(charge) on retirement benefit plans(2) ...... 9 (1) Other comprehensive expense for the period ...... (1) (31) Total comprehensive income for the period ...... 466 555

(1) Impacting the translation reserve. (2) Impacting retained earnings.

F-3 Condensed consolidated statement of changes in equity (unaudited) Half year to 31 January 2020

Reserves Non- Share Share Translation Treasury Own Retained controlling Total Notes capital premium reserve shares shares earnings interest equity $m $m $m $m $m $m $m $m Profit for the period ...... — — — — — 467 — 467 Other comprehensive income/ (expense) ...... — — 42 — — (43) — (1) Total comprehensive income . . . — — 42 — — 424 — 466 Purchase of own shares by Employee Benefit Trusts .... — — — — (26) — — (26) Issue of own shares by Employee Benefit Trusts .... — — — — 39 (39) — — Credit to equity for share-based payments ...... —— — ——21— 21 Tax relating to share-based payments ...... — — — — — (3) — (3) Purchase of Treasury shares .... — — — (191) — — — (191) Disposal of Treasury shares .... — — — 13 — (11) — 2 Dividends paid ...... 7 — — — — — (327) — (327) Net change to equity ...... — — 42 (178) 13 65 — (58) At 31 July 2019 ...... 30 9 (598) (305) (102) 5,316 — 4,350 Adjustment on adoption of IFRS 16 ...... 1 — — — — — (187) — (187) At 1 August 2019 ...... 30 9 (598) (305) (102) 5,129 — 4,163 At 31 January 2020 ...... 30 9 (556) (483) (89) 5,194 — 4,105

Reserves Non- Share Share Translation Treasury Own Retained controlling Total Notes capital premium reserve shares shares earnings interest equity $m $m $m $m $m $m $m $m Profit for the period ...... — — — — — 586 — 586 Other comprehensive income/ (expense) ...... — — 2 — — (33) — (31) Total comprehensive income . . . — — 2 — — 553 — 555 Purchase of own shares by Employee Benefit Trusts .... — — — — (38) — — (38) Issue of own shares by Employee Benefit Trusts .... — — — — 25 (25) — — Credit to equity for share-based payments ...... — — — — — 21 — 21 Tax relating to share-based payments ...... — — — — — (3) — (3) Disposal of Treasury shares .... — — — 9 — (8) — 1 Dividends paid ...... 7 — — — — — (303) — (303) Net change to equity ...... — — 2 9 (13) 235 — 233 At 1 August 2018 ...... 45 67 (556) (1,380) (90) 5,972 (1) 4,057 At 31 January 2019 ...... 45 67 (554) (1,371) (103) 6,207 (1) 4,290

F-4 Condensed consolidated balance sheet (unaudited) Half year to 31 January 2020

As at 31 July As at 31 January 2019 Notes 2020 2019 $m $m $m Assets Non-current assets 1,656 Intangible assets: goodwill ...... 9 1,691 1,632 423 Intangible assets: other ...... 9 451 440 — Right of use assets ...... 10 1,197 — 1,349 Property, plant and equipment ...... 9 1,417 1,316 29 Interests in associates ...... 5 41 42 Financial assets ...... 51 38 178 Retirement benefit assets ...... 137 171 164 Deferred tax assets ...... 509 124 340 Trade and other receivables ...... 363 332 10 Derivative financial assets ...... — 7 4,191 5,821 4,101 Current assets 2,821 Inventories ...... 2,970 2,915 3,213 Trade and other receivables ...... 2,968 2,970 6 Current tax receivable ...... 16 12 9 Financial assets ...... 9 — 12 Derivative financial assets ...... 22 3 1,133 Cash and cash equivalents ...... 12 775 699 7,194 6,760 6,599 1 Assets held for sale ...... 2 51 11,386 Total assets ...... 12,583 10,751

F-5 Condensed consolidated balance sheet (unaudited) (Continued) Half year to 31 January 2020

As at 31 July As at 31 January 2019 Notes 2020 2019 $m $m $m Liabilities Current liabilities 3,797 Trade and other payables ...... 3,120 3,034 251 Current tax payable ...... 240 189 52 Borrowings ...... 15 722 302 — Lease liabilities ...... 10 265 — 2 Obligations under finance leases ...... — 2 79 Provisions ...... 82 89 — Retirement benefit obligations ...... 6 6 4,181 4,435 3,622 Non-current liabilities 292 Trade and other payables ...... 276 295 — Derivative financial liabilities ...... — 7 2,292 Borrowings ...... 15 2,019 2,280 — Lease liabilities ...... 10 1,180 — 4 Obligations under finance leases ...... — 3 56 Deferred tax liabilities ...... 369 75 186 Provisions ...... 181 168 25 Retirement benefit obligations ...... 18 11 2,855 4,043 2,839 7,036 Total liabilities ...... 8,478 6,461 4,350 Net assets ...... 4,105 4,290 Equity 30 Share capital ...... 30 45 9 Share premium ...... 9 67 4,311 Reserves ...... 4,066 4,179 4,350 Equity attributable to shareholders of the Company ...... 4,105 4,291 — Non-controlling interest ...... — (1) 4,350 Total equity ...... 4,105 4,290

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

F-6 Condensed consolidated cash flow statement (unaudited) Half year to 31 January 2020

Half year to 31 January Notes 2020 2019 $m $m Cash flows from operating activities Cash generated from operations ...... 11 636 287 Net interest paid ...... (72) (38) Tax paid ...... (170) (128) Net cash generated from operating activities ...... 394 121 Cash flows from investing activities Acquisitions of businesses (net of cash acquired) ...... 13 (141) (589) Disposals of businesses (net of cash disposed of) ...... — 199 Purchases of property, plant and equipment ...... (145) (230) Proceeds from sale of property, plant and equipment and assets held for sale . . . 8 38 Purchases of intangible assets ...... (19) (14) Acquisition of associates and other investments ...... (3) (9) Disposal of interests in associates ...... — 18 Net cash used in investing activities ...... (300) (587) Cash flows from financing activities Purchase of own shares by Employee Benefit Trusts ...... (26) (38) Purchase of Treasury shares(1) ...... (350) — Proceeds from the sale of Treasury shares ...... 2 1 Proceeds from borrowings and derivatives ...... 154 754 Repayments of borrowings ...... — (2) Lease liability capital payments ...... (144) — Finance lease capital payments ...... — (1) Dividends paid to shareholders ...... (327) (300) Net cash (used in)/generated from financing activities ...... (691) 414 Net cash used ...... (597) (52) Effects of exchange rate changes ...... (1) (3) Net decrease in cash, cash equivalents and bank overdrafts ...... (598) (55) Cash, cash equivalents and bank overdrafts at the beginning of the period ...... 1,086 458 Cash, cash equivalents and bank overdrafts at the end of the period ...... 12 488 403

(1) Purchase of Treasury shares includes a cash outflow of $159 million which was irrevocably committed to at 31 July 2019 relating to the share buy back programme announced on 10 June 2019.

F-7 Notes to the condensed consolidated interim financial statements (unaudited) Half year to 31 January 2020

1—Basis of preparation The Company is incorporated in Jersey under the Companies (Jersey) Law 1991 and is headquartered in the UK. The condensed consolidated interim financial statements for the six months ended 31 January 2020 were approved by the Board of Directors on 16 March 2020. The condensed consolidated interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and International Accounting Standard 34 ‘‘Interim Financial Reporting’’ as adopted by the European Union. The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those set out in the Group’s Annual Report and Accounts for the year ended 31 July 2019, except for the adoption of IFRS 16 ‘‘Leases’’ on 1 August 2019. The condensed consolidated interim financial statements are unaudited. The financial information for the year ended 31 July 2019 does not constitute the Group’s statutory financial statements. The Group’s statutory financial statements for that year have been filed with the Jersey Registrar of Companies and received an unqualified auditor’s report.

Going concern The condensed consolidated interim financial statements have been prepared on a going concern basis. Given the current dynamic situation unfolding with Covid-19, the Group has assessed the impact of a number of alternate scenarios including a severe short term revenue reduction and taking into account reasonable mitigating actions. The Directors of the Company are confident, on the basis of current financial projections and facilities available and after considering these downside scenarios and sensitivities, that the Group has sufficient resources for its operational needs and will remain in compliance with the financial covenants in its bank facilities for at least the next 12 months.

Accounting developments and changes On 1 August 2019, the Group adopted IFRS 16 ‘‘Leases’’. The standard makes changes to the treatment of leases in the financial statements, requiring the use of a single model to recognise a lease liability and a right of use asset for all leases, including those classified as operating leases under IAS 17 ‘‘Leases’’, unless the underlying asset has a low value or the lease term is 12 months or less. Rental charges in the income statement previously recorded under IAS 17 are replaced with depreciation and interest charges under IFRS 16 and right of use assets will be subject to impairment reviews in accordance with IAS 36 ‘‘Impairment of Assets’’ replacing the previous requirement to recognise a provision for onerous lease contracts. The Group has applied the modified retrospective transition method and has not restated comparatives for the six months ended 31 January 2019 or the year ended 31 July 2019. For the majority of leases, the right of use asset on transition has been measured as if IFRS 16 had been applied since the commencement of the lease, discounted using the Group’s incremental borrowing rate as at 1 August 2019, with the difference between the right of use asset and the lease liability taken to retained earnings. For the remaining leases which relate to the Group’s US fleet, where sufficient historic information has not been available, the right of use asset has been measured as equal to the lease liability on transition. The Group has elected to apply the following practical expedients on transition: • To not reassess whether contracts are, or contain, a lease at the date of initial application; • Application of a single discount rate to a portfolio of leases with reasonably similar characteristics; • Reliance on previous assessment of whether leases are onerous in accordance with IAS 37 ‘‘Provisions, Contingent Liabilities and Contingent Assets’’ immediately before the date of initial application as an alternative to performing an impairment review;

F-8 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

1—Basis of preparation (Continued) • Election to not apply the measurement requirements of the standard to leases where the term ends within 12 months of the date of initial application; • Exclusion of initial direct costs from the measurement of the right of use asset at the date of initial application; and • Use of hindsight, such as in determining the lease term. The impact of the adoption of IFRS 16 on the income statement in the six months ended 31 January 2020 was to decrease rental costs by $166 million, increase depreciation by $131 million and increase finance costs by $27 million. The impact on the cash flow statement was to increase cash generated from operations by $171 million, increase interest paid by $27 million and increase lease liability capital payments by $144 million. There was no impact on the net decrease in cash, cash equivalents and bank overdrafts. The impact of the adoption of IFRS 16 on the opening balance sheet at 1 August 2019 was as follows:

$m Right of use assets ...... 1,220 Property, plant and equipment ...... (6) Net deferred tax assets ...... 69 Lease liabilities ...... (1,481) Obligations under finance leases ...... 6 Other ...... 5 Net retained earnings adjustment ...... (187)

A reconciliation of the operating lease commitments previously reported under IAS 17 in the Group’s Annual Report and Accounts for the year ended 31 July 2019 to the lease liability at 1 August 2019 under IFRS 16 is as follows:

$m Operating lease commitments at 31 July 2019 ...... 1,126 Leases of low value assets ...... (20) Long-term leases that expire before 31 July 2020 ...... (12) Reasonably certain extension or termination options ...... 564 Effect from discounting(1) ...... (183) Lease liabilities due to initial application of IFRS 16 at 1 August 2019 ...... 1,475 Lease liabilities from finance leases under IAS 17 at 31 July 2019 ...... 6 Total lease liabilities at 1 August 2019 ...... 1,481

(1) The weighted average incremental borrowing rate applied by the Group upon transition was 3.5 per cent.

Leases accounting policy applied from 1 August 2019 The Group enters into leases in the normal course of its business, these principally relate to property for the Group’s branches, distribution centres and offices which have varying terms including extension and termination options and periodic rent reviews. The Group recognises a right of use asset and a lease liability at the lease commencement date. Non-lease components of a contract are not separated from lease components and instead are accounted for as a single lease component. Lease liabilities are initially measured at the present value of lease payments using the interest rate implicit in the lease, or if this is not readily available, at the Group’s incremental borrowing rate. Lease payments comprise fixed payments, variable payments that depend on an index or rate, payments expected under

F-9 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

1—Basis of preparation (Continued) residual value guarantees, and payments under purchase and termination options which are reasonably certain to be exercised. Lease terms are determined as the non-cancellable period of a lease adjusted for options to extend or terminate a lease that are reasonably certain to be exercised, management judgement is required in making this determination. Lease liabilities are subsequently measured at amortised cost using the effective interest method. Lease liabilities are remeasured when there is a change in future lease payments as a result of a rent review or a change in an index or rate, or if there is a change in the assessment of whether it is reasonably certain that extension or termination options will be exercised. Right of use assets are carried at cost less accumulated depreciation and impairment losses and any subsequent remeasurement of the lease liability. Initial cost comprises the lease liability adjusted for lease payments at or before the commencement date, lease incentives received, initial direct costs and an estimate of restoration costs. Right of use assets are depreciated on a straight-line basis to the earlier of the end of the useful life of the asset or the end of the lease term and tested for impairment if an indicator exists. Leases that have a term of 12 months or less and leases for which the underlying asset is of low value are recognised as an expense on a straight-line basis over the lease term.

Critical accounting judgements—Leases Property leases entered into by the Group typically include extension and termination options to provide operational flexibility to the Group. Management exercises significant judgement in determining whether these options are reasonably certain to be exercised when determining the lease term. In making these judgements management considers the remaining lease term, future business plans and other relevant economic factors.

2—Alternative performance measures The Group uses alternative performance measures (‘‘APMs’’), which are not defined or specified under IFRS. These APMs, which are not considered to be a substitute for IFRS measures, provide additional helpful information. APMs are consistent with how business performance is planned, reported and assessed internally by management and the Board and provide comparable information across the Group.

Ongoing and non-ongoing The Group reports some financial measures net of businesses that have been or may be disposed of, closed or classified as held for sale and uses the following terminology: Non-ongoing operations are businesses which do not meet the criteria to be classified as discontinued operations under IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, which may be disposed of, closed or classified as held for sale. In 2020, the Group’s UK business has been classified as non-ongoing. All comparatives have been restated for consistency and comparability. Ongoing operations are continuing operations excluding non-ongoing operations.

Organic revenue growth Management uses organic revenue growth as it provides a consistent measure of the percentage increase/ decrease in revenue year-on-year, excluding the effect of currency exchange rate fluctuations, trading days, acquisitions and disposals.

F-10 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

2—Alternative performance measures (Continued) A reconciliation of revenue using the above APMs to statutory revenue is provided below:

Ongoing Non-ongoing Continuing $m (% growth) $m $m Revenue Reported 2019 restated ...... 9,489 1,358 10,847 Impact of exchange rate movements ...... (1) (20) (21) Reported 2019 to 2020 exchange rates ...... 9,488 1,338 10,826 Organic growth ...... 194 2.0 (58) 136 Acquisitions ...... 211 2.3 23 234 Disposals ...... — — (230) (230) Reported 2020 ...... 9,893 4.3 1,073 10,966

Exceptional items Exceptional items are those which are considered significant by virtue of their nature, size or incidence. These items are presented as exceptional within their relevant income statement category to assist in the understanding of the trading and financial results of the Group as these types of cost/credit do not form part of the trading business. Examples of items that are considered by the Directors for designation as exceptional items include, but are not limited to: • restructuring costs within a segment which are both material and incurred as part of a significant change in strategy or due to the closure of a large part of a business and are not expected to be repeated on a regular basis; • significant costs incurred as part of the integration of an acquired business and which are considered to be material; • gains or losses on disposals of businesses are considered to be exceptional in nature as they do not reflect the performance of the trading business; • material costs or credits arising as a result of regulatory and litigation matters; • gains or losses arising on significant changes to, or closures of, defined benefit pension plans are considered to be exceptional in nature as they do not reflect the performance of the trading business; and • other items which are material and considered to be non-recurring in nature and/or are not as a result of the trading activities of the business. If provisions have been made for exceptional items in previous years, any reversal of these provisions is treated as exceptional. Exceptional items for the current and prior period are disclosed in note 4.

F-11 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

2—Alternative performance measures (Continued) Ongoing gross margin The ratio of ongoing gross profit, excluding exceptional items, to ongoing revenue. Ongoing gross margin is used by management for assessing business unit performance and it is a key performance indicator for the Group. A reconciliation of ongoing gross margin is provided below:

2020 Restated 2019 Gross Ongoing gross Gross Ongoing gross profit Revenue margin profit Revenue margin $m $m (%) $m $m (%) Continuing ...... 3,242 10,966 3,193 10,847 Non-ongoing ...... (257) (1,073) (324) (1,358) Exceptional items ...... 2— 1— Ongoing excluding exceptional items . . . 2,987 9,893 30.2 2,870 9,489 30.2

Trading profit/underlying trading profit and ongoing trading margin/underlying ongoing trading margin Trading profit is defined as operating profit before exceptional items and amortisation of acquired intangible assets. Trading profit is used as a performance measure because it excludes costs and other items that do not form part of the trading business. Underlying trading profit is defined as trading profit excluding the impact of IFRS 16. Ongoing trading margin is the ratio of ongoing trading profit to ongoing revenue and is used to assess profitability and is a key performance indicator for the Group. Underlying ongoing trading margin is the ratio of underlying ongoing trading profit to ongoing revenue. Underlying trading profit and underlying ongoing trading margin are presented to allow better comparison between the six months ended 31 January 2020 prepared under IFRS 16 and the six months ended 31 January 2019 prepared under IAS 17. The expectation is that these APMs will only be presented in the year ending 31 July 2020. A reconciliation of underlying trading profit and trading profit to statutory operating profit is provided below:

2020 Restated 2019 Non- Non- Ongoing ongoing Continuing Ongoing ongoing Continuing $m $m $m $m $m $m Trading profit 2019 restated ...... 714 39 753 Growth ...... 33 (9) 24 Underlying trading profit ...... 747 30 777 714 39 753 Impact of IFRS 16 ...... 35 — 35 —— — Trading profit ...... 782 30 812 714 39 753 Amortisation of acquired intangible assets . (51) (9) (60) (43) (1) (44) Exceptional items ...... (10) (9) (19) (8) 8 — Operating profit ...... 721 12 733 663 46 709

F-12 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

2—Alternative performance measures (Continued) Revenue, trading profit/underlying trading profit and trading margin/underlying trading margin by reportable segment and the calculation of ongoing trading margin and underlying ongoing trading margin are shown below. For information on our reportable segments see note 3.

Restated Restated Restated 2020 2019 2020 2019 2020 2019 Underlying Trading Impact trading Trading Underlying profit/ of profit/ profit/ Trading trading Trading Revenue (loss) IFRS 16 (loss) (loss) margin margin margin $m $m $m $m $m (%) (%) (%) USA...... 9,318 8,874 774 (34) 740 700 8.3 7.9 7.9 Canada and Central Europe 575 615 30 (1) 29 39 5.2 5.0 6.3 Central costs ...... — — (22) — (22) (25) —— — Total ongoing operations. . . 9,893 9,489 782 (35) 747 714 7.9 7.6 7.5 Canada and Central Europe — 181 —— — 9 UK...... 1,073 1,177 30 — 30 30 2.8 2.8 2.5 Total non-ongoing operations ...... 1,073 1,358 30 — 30 39 Continuing operations .... 10,966 10,847 812 (35) 777 753

Adjusted EBITDA Adjusted EBITDA is operating profit before charges/credits relating to depreciation, amortisation, impairment, exceptional items and the impact of IFRS 16. Adjusted EBITDA is used in the net debt to adjusted EBITDA ratio to assess the appropriateness of the Group’s financial gearing and excludes IFRS 16 in line with the requirements of the Group’s debt covenants. A reconciliation of statutory profit for the period to adjusted EBITDA is provided below:

2020 2019 Continuing Discontinued Group Continuing Discontinued Group $m $m $m $m $m $m Profit for the period ...... 467 — 467 540 46 586 Exceptional items (net of tax) ...... 17 (1) 16 (7) (45) (52) Tax...... 175 6 181 143 1 144 Share of loss/(profit) after tax of associates ...... 1—1(2) — (2) Impairment of interests in associates . 22 — 22 ——— Net finance costs ...... 70 (1) 69 35 — 35 Amortisation of acquired intangible assets ...... 60 — 60 44 — 44 Trading profit ...... 812 4 816 753 2 755 Impact of IFRS 16 ...... (35) — (35) ——— Underlying trading profit ...... 777 4 781 753 2 755 Depreciation and impairment of property, plant and equipment .... 78 — 78 73 — 73 Amortisation of non-acquired intangible assets ...... 17 — 17 16 — 16 Adjusted EBITDA ...... 872 4 876 842 2 844

F-13 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

2—Alternative performance measures (Continued) Ongoing effective tax rate The ongoing effective tax rate is the ratio of the ongoing tax charge to ongoing profit before tax and is used as a measure of the tax rate of the ongoing business.

Half year to 31 January Restated 2020 2019 $m $m Tax charge in relation to continuing operations ...... (173) (139) Deduct: tax credit on the amortisation of acquired intangible assets ...... (15) (11) Deduct: tax credit on exceptional items ...... (2) (4) Add back: tax charge on profits from non-ongoing operations ...... 5 8 Add back/(deduct): non-recurring tax charges ...... 4 (9) Ongoing tax charge ...... (181) (155) Profit before tax and exceptional items from continuing operations ...... 659 676 Add back: amortisation of acquired intangible assets ...... 60 44 Add back/(deduct): share of loss/(profit) after tax and impairment of associates ..... 23 (2) Deduct: other profits before tax from non-ongoing operations ...... (30) (39) Ongoing profit before tax ...... 712 679 Ongoing effective tax rate ...... 25.4% 22.8% Ongoing profit before tax means profit before tax, exceptional items, amortisation of acquired intangible assets, impairments of interests in associates and share of loss/profit after tax of associates for ongoing operations. Ongoing tax is the tax expense arising on ongoing profit before tax.

Headline profit after tax and headline earnings per share Headline profit after tax is calculated as the profit from continuing operations after tax, before charges for amortisation of acquired intangible assets and impairments of interests in associates net of tax, exceptional items net of tax and non-recurring tax relating to changes in tax rates and other adjustments. The Group excludes amortisation and impairment of acquired intangible assets to improve the comparability between acquired and organically grown operations, as the latter cannot recognise internally generated intangible assets. Headline earnings per share is the ratio of headline profit after tax to the weighted average number of ordinary shares in issue during the period, excluding those held by the Employee Benefit Trusts and those held by the Company as Treasury shares. Headline earnings per share is used for the purpose of setting remuneration targets for executive directors and other senior executives. See reconciliation in note 8.

Net debt Net debt comprises cash and cash equivalents, bank overdrafts, bank and other loans, derivative financial instruments and obligations under finance leases under IAS 17. Net debt is a good indicator of the strength of the Group’s balance sheet position and is used by the Group’s debt providers. See reconciliation in note 12.

F-14 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

3—Segmental analysis The Group’s reportable segments have been determined on the same basis as, and are consistent with, those disclosed in the Annual Report and Accounts for the financial year ended 31 July 2019. The Group’s business is not highly seasonal and the Group’s customer base is highly diversified, with no individually significant customer. The changes in revenue and underlying trading profit for continuing operations between the period ended 31 January 2019 and 31 January 2020 include changes in exchange rates, disposals, acquisitions and organic change. An analysis of the change in revenue by reportable segment for continuing operations is as follows:

Organic 2019 Exchange Disposals Acquisitions change 2020 $m $m $m $m $m $m USA...... 8,874 — — 210 234 9,318 UK...... 1,177 (20) (49) 23 (58) 1,073 Canada and Central Europe ...... 796 (1) (181) 1 (40) 575 Group ...... 10,847 (21) (230) 234 136 10,966

An analysis of the change in underlying trading profit/(loss) by reportable segment for continuing operations is as follows:

Organic 2019 Exchange Disposals Acquisitions change 2020 $m $m $m $m $m $m USA...... 700 — — 8 32 740 UK...... 30 (1) 2 4 (5) 30 Canada and Central Europe ...... 48 (1) (9) 1 (10) 29 Central costs ...... (25) 1 — — 2 (22) Group ...... 753 (1) (7) 13 19 777

The reconciliation between underlying trading profit/(loss), trading profit/(loss) and operating profit/(loss) by reportable segment for continuing operations is as follows:

Half year to 31 January 2020 2019 Amortisation Amortisation Underlying of acquired of acquired trading Impact of Trading Exceptional intangible Operating Trading Exceptional intangible Operating profit/(loss) IFRS 16 profit/(loss) items assets profit/(loss) profit/(loss) items assets profit/(loss) $m $m $m $m $m $m $m $m $m $m USA...... 740 34 774 — (50) 724 700 — (43) 657 UK...... 30 — 30 (9) (9) 12 30 (35) — (5) Canada and Central Europe . . . 29 1 30 — (1) 29 48 38 (1) 85 Central costs ...... (22) — (22) (10) — (32) (25) (3) — (28) Group ...... 777 35 812 (19) (60) 733 753 — (44) 709 Net finance costs ...... (70) (35) Share of (loss)/profit after tax of associates ...... (1) 2 Impairment of interests in associates ...... (22) — Gain on disposal of interests in associates ...... — 3 Profit before tax ...... 640 679

F-15 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

3—Segmental analysis (Continued) Other information on assets and liabilities by segment is set out in the table below:

31 January 2020 31 January 2019 Segment net Segment net Segment Segment assets/ Segment Segment assets/ assets liabilities (liabilities) assets liabilities (liabilities) $m $m $m $m $m $m Segment assets and liabilities(1) USA...... 9,257 (3,985) 5,272 7,928 (2,570) 5,358 UK...... 1,332 (738) 594 1,327 (670) 657 Canada and Central Europe ...... 594 (252) 342 534 (178) 356 Central costs ...... 76 (126) (50) 94 (144) (50) Discontinued ...... 2 (27) (25) 23 (41) (18) Total ...... 11,261 (5,128) 6,133 9,906 (3,603) 6,303 Tax assets and liabilities ...... 525 (609) (84) 136 (264) (128) Net cash/(debt) ...... 797 (2,741) (1,944) 709 (2,594) (1,885) Group assets/(liabilities) ...... 12,583 (8,478) 4,105 10,751 (6,461) 4,290

(1) As at 31 January 2020, segment assets includes right of use assets and segment liabilities includes lease liabilities.

4—Exceptional items Exceptional items included in profit before tax from continuing operations are analysed by purpose as follows:

Half year to 31 January 2020 2019 $m $m (Loss)/gain on disposal of businesses ...... (1) 38 Business restructuring ...... (8) (31) Other exceptional items ...... (10) (7) Total included in operating profit ...... (19) — Gain on disposal of interests in associates ...... — 3 Total included in profit before tax ...... (19) 3

For the half year to 31 January 2020, business restructuring comprises costs incurred in the UK and includes $2 million charged to cost of sales for inventory write downs. Other exceptional items predominantly relate to the demerger of the UK business.

F-16 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

5—Net finance costs

Half year to 31 January 2020 2019 $m $m Interest income ...... 5 5 Interest expense Lease liability expense ...... (27) — Other ...... (50) (43) (77) (43) Net interest income on retirement benefit asset ...... 2 3 Total net finance costs ...... (70) (35)

6—Tax The tax charge on continuing operations for the half year has been calculated by applying the expected full year rate to the half year results with specific adjustments for items that distort the rate (amortisation and impairment of acquired intangible assets, share of loss/profit and impairment of interests in associates, exceptional items and non-recurring tax items). The tax charge for the period comprises:

Half year to 31 January 2020 2019 $m $m Current tax charge ...... (145) (134) Deferred tax charge: origination and reversal of temporary differences ...... (28) (5) Total tax charge ...... (173) (139)

The total tax charge includes an ongoing tax charge of $181 million (restated 2019: $155 million). This equates to an ongoing effective tax rate of 25.4 per cent (restated 2019: 22.8 per cent) on the ongoing profit of $712 million (restated 2019: $679 million). See note 2 for reconciliation.

7—Dividends

Half year to 31 January 2020 2019 $m $m Amounts recognised as distributions to equity shareholders: Final dividend for the year ended 31 July 2018: 131.9 cents per share ...... — 303 Final dividend for the year ended 31 July 2019: 145.1 cents per share ...... 327 — Dividends paid ...... 327 303

Since 31 January 2020, the Directors proposed an interim dividend of 67.5 cents per share (2019: interim dividend 63.1 cents per share). This is not included as a liability in the balance sheet at 31 January 2020. Dividends were declared in US dollars and paid in both pounds sterling and US dollars. For those shareholders paid in pounds sterling, the exchange rate used to translate the declared value was set in advance of the payment date. As a result of foreign exchange rate movements between these dates, the total amount paid (shown in the Group cash flow statement) may be different to that stated above.

F-17 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

8—Earnings per share

Half year to 31 January 2020 2019 Basic Diluted Basic Diluted earnings earnings earnings earnings Earnings per share per share Earnings per share per share $m cents cents $m cents cents Profit for the period ...... 467 206.7 205.5 586 254.5 252.8 Profit from discontinued operations ..... ———(46) (20.0) (19.8) Profit from continuing operations ...... 467 206.7 205.5 540 234.5 233.0 Non-recurring tax charge/(credit) relating to changes in tax rates and other adjustments (note 2) ...... 4 1.8 (9) (3.9) Amortisation of acquired intangible assets and impairment of interests in associates ...... 82 36.3 44 19.1 Tax on amortisation of acquired intangible assets and impairment of interests in associates (note 2) ...... (15) (6.6) (11) (4.8) Exceptional items (net of tax) ...... 17 7.5 (7) (3.0) Headline profit from continuing operations ...... 555 245.7 557 241.9

The weighted average number of ordinary shares in issue during the period, excluding those held by Employee Benefit Trusts and those held by the Company as Treasury shares, was 225.9 million (2019: 230.3 million). The impact of all potentially dilutive share options on earnings per share would be to increase the weighted average number of shares in issue to 227.3 million (2019: 231.8 million).

9—Intangible assets and property, plant and equipment

Other intangible assets Total Other tangible acquired Property, and intangible plant and intangible Goodwill assets Software Total equipment assets $m $m $m $m $m Net book value at 31 July 2019 ...... 1,656 356 67 423 1,349 3,428 Adjustment on adoption of IFRS 16 ...... — — — — (6) (6) Net book value at 1 August 2019 ...... 1,656 356 67 423 1,343 3,422 Acquisition of businesses ...... 46 66 — 66 2 114 Adjustment to fair value on prior year acquisitions ...... (14) 16 — 16 — 2 Additions ...... — — 19 19 146 165 Disposals ...... — — — — (4) (4) Amortisation and depreciation ...... — (60) (17) (77) (77) (154) Impairment ...... — — — — (1) (1) Reclassified to held for sale ...... — — — — (5) (5) Exchange rate adjustment ...... 3 2 2 4 13 20 Net book value at 31 January 2020 ...... 1,691 380 71 451 1,417 3,559

F-18 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

10—Leases Movements in right of use assets for the period ended 31 January 2020 were as follows:

Total right Land and Plant and of use buildings machinery assets $m $m $m Net book value at 31 July 2019 ...... — — — Adjustment on adoption of IFRS 16 ...... 940 280 1,220 Net book value at 1 August 2019 ...... 940 280 1,220 Acquisition of businesses ...... 17 — 17 Additions ...... 29 32 61 Disposals ...... (1) (1) (2) Adjustment as a result of remeasurement of lease liability ...... 21 — 21 Depreciation ...... (94) (37) (131) Exchange rate adjustments ...... 9 2 11 Net book value at 31 January 2020 ...... 921 276 1,197

The maturity of lease liabilities at 31 January 2020 was as follows:

2020 $m Due in less than one year ...... 310 Due in one to two years ...... 326 Due in two to three years ...... 300 Due in three to four years ...... 244 Due in four to five years ...... 175 Due in over five years ...... 276 Total undiscounted lease payments ...... 1,631 Effect of discounting ...... (186) Total lease liabilities ...... 1,445 Current lease liabilities ...... 265 Non-current lease liabilities ...... 1,180 Total lease liabilities ...... 1,445

Amounts charged/(credited) to the Group income statement during the period were as follows:

2020 $m Depreciation of right of use assets ...... 131 Short-term lease expense ...... 8 Low-value lease expense ...... 8 Sublease income ...... (1) Charged to operating costs ...... 146 Charged to finance costs ...... 27 Total amount charged to the Group income statement ...... 173

F-19 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

11—Reconciliation of profit to cash generated from operations Profit for the period is reconciled to cash generated from operations as follows:

Half year to 31 January 2020 2019 $m $m Profit for the period ...... 467 586 Net finance costs ...... 70 33 Share of loss/(profit) after tax of associates ...... 1 (2) Gain on disposal of interests in associates ...... — (3) Impairment of interests in associates ...... 22 — Tax charge ...... 179 134 Profit on disposal and closure of businesses and revaluation of assets held for sale ...... — (67) Amortisation of acquired intangible assets ...... 60 44 Amortisation of non-acquired intangible assets ...... 17 16 Depreciation and impairment of property, plant and equipment ...... 78 73 Depreciation of right of use assets ...... 131 — Profit on disposal of property, plant and equipment and assets held for sale ...... — (7) Increase in inventories ...... (106) (250) Decrease in trade and other receivables ...... 281 179 Decrease in trade and other payables ...... (556) (432) Decrease in provisions and other liabilities ...... (29) (38) Share-based payments ...... 21 21 Cash generated from operations ...... 636 287

12—Reconciliation of opening to closing net debt including lease liabilities

Total cash, cash Obligations Net debt Cash and equivalents Derivative under including cash Bank and bank financial finance Lease lease equivalents overdrafts overdrafts instruments(1) Loans(1) leases(1) Net debt liabilities(1) liabilities $m $m $m $m $m $m $m $m $m At 31 July 2019 ...... 1,133 (47) 1,086 22 (2,297) (6) (1,195) — (1,195) Adjustment on adoption of IFRS 16 — — — — — 6 6 (1,481) (1,475) At 1 August 2019 ...... 1,133 (47) 1,086 22 (2,297) — (1,189) (1,481) (2,670) Cash movements Proceeds from borrowings and derivatives ...... — (4) (150) — (154) — (154) Lease liability capital payments . . — — — — — 144 144 Interest paid on lease liabilities . . — — — — — 27 27 Changes in net debt including lease liabilities due to acquisition of businesses .... 5 — — — 5 (17) (12) Other cash flows ...... (602) — — — (602) — (602) Non-cash movements Lease liability additions ...... — — — — — (61) (61) Discount unwinding on lease liabilities ...... — — — — — (27) (27) Fair value and other adjustments . — 10 (7) — 3 (20) (17) Exchange movements ...... (1) (6) — — (7) (10) (17) At 31 January 2020 ...... 775 (287) 488 22 (2,454) — (1,944) (1,445) (3,389)

(1) Liabilities from financing activities.

F-20 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

13—Acquisitions The Group acquired the following businesses in the period ended 31 January 2020. All of these businesses are engaged in the distribution of plumbing and heating products. These transactions have been accounted for by the purchase method of accounting.

Country of Shares/asset Name Date incorporation deal % acquired Continental Product Engineering Ltd ...... August 2019 UK Shares 100 Process Instruments & Controls, LLC ...... September 2019 USA Assets 100 S W Anderson ...... November 2019 USA Shares 100 The assets and liabilities acquired and the consideration for all acquisitions in the period are as follows:

2020 Provisional fair values acquired $m Intangible assets —Customer relationships ...... 53 —Trade names and brands ...... 12 —Other ...... 1 Right of use assets ...... 17 Property, plant and equipment ...... 2 Inventories ...... 19 Receivables ...... 29 Cash, cash equivalents and bank overdrafts ...... 5 Payables ...... (14) Current tax ...... 3 Lease liabilities ...... (17) Provisions ...... (2) Deferred tax ...... (18) Total ...... 90 Goodwill arising ...... 46 Consideration ...... 136 Satisfied by: Cash ...... 127 Deferred consideration ...... 9 Total consideration ...... 136

The fair value adjustments for the period ended 31 January 2020 are provisional figures, being the best estimates currently available. Amendments may be made to these figures in the 12 months following the date of acquisition when additional information is available for some of the judgemental areas. The goodwill arising on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Group has gained access and to additional profitability and operating efficiencies in respect of existing markets. The acquired businesses contributed $44 million to revenue and $5 million to trading profit for the period between the date of acquisition and the balance sheet date. If each acquisition had been completed on the first day of the financial year, continuing revenue would have been $11,001 million and continuing trading profit would have been $815 million. It is not practicable to disclose the impact of acquisitions on profit before or after tax, as the Group manages its borrowings as a portfolio and cannot attribute an effective borrowing rate to an individual acquisition.

F-21 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

13—Acquisitions (Continued) It is also not practicable to disclose the impact of acquisitions on operating profit as the Group cannot estimate the amount of intangible assets that would have been acquired at a date other than the acquisition date. The net outflow of cash in the period to 31 January 2020 with respect to the purchase of businesses is as follows:

2020 $m Purchase consideration ...... 127 Deferred and contingent consideration in respect of prior year acquisitions ...... 19 Cash consideration ...... 146 Cash, cash equivalents and bank overdrafts acquired ...... (5) Net cash outflow in respect of the purchase of businesses ...... 141

14—Related party transactions In the period ended 31 January 2020, the Group purchased goods and services on an arm’s length basis totalling $9 million from and owed $nil in respect of these goods and services to a company that is controlled by another company in respect of which one of the Group’s Non Executive Directors is the chief executive officer. There are no other material related party transactions requiring disclosure under IAS 24 ‘‘Related Party Disclosures’’ other than compensation of key management personnel which will be disclosed in the Group’s Annual Report and Accounts for the year ending 31 July 2020.

15—Borrowings, financial instruments and financial risk management

31 January 2020 31 January 2019 Current Non-current Total Current Non-current Total $m $m $m $m $m $m Bank overdrafts ...... 287 — 287 296 — 296 Bank loans ...... 150 — 150 ——— Senior unsecured loan notes ...... 285 2,019 2,304 6 2,280 2,286 Total loans ...... 435 2,019 2,454 6 2,280 2,286 Total borrowings ...... 722 2,019 2,741 302 2,280 2,582

At 31 January 2020, the Group has total available facilities, excluding bank overdrafts, of $3,916 million (2019: $3,935 million), of which $2,431 million is drawn and $1,485 million is undrawn (2019: $2,286 million and $1,649 million respectively). The Group does not have any debt factoring or supply chain financing arrangements. The senior unsecured loan notes have an estimated fair value of $2,495 million (2019: $2,312 million). Included in bank overdrafts at 31 January 2020 is an amount of $219 million (2019: $219 million) which is part of the Group’s cash pooling arrangement where there is an equal and opposite balance included within cash and cash equivalents. The amounts are subject to a master netting arrangement. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The fair value of financial instruments that are not traded in an active market (such as over-the-counter derivatives) is determined by using valuation techniques including net present value calculations. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of foreign exchange swaps has been calculated as the present value of the estimated future cash flows based on observable future foreign exchange rates.

F-22 Notes to the condensed consolidated interim financial statements (unaudited) (Continued) Half year to 31 January 2020

15—Borrowings, financial instruments and financial risk management (Continued) The Group’s other financial instruments are measured on bases other than fair value. Other receivables include an amount of $73 million (2019: $70 million) which has been discounted at a rate of 1.6 per cent (2019: 2.7 per cent) due to the long-term nature of the receivable. Other current assets and liabilities are either of short maturity or bear floating rate interest and so their fair values approximate to book values. The Group is exposed to risks arising from the international nature of its operations and the financial instruments which fund them, in particular to foreign currency risk, interest rate risk and liquidity risk. Full details of the Group’s policies for managing these risks are disclosed in the Group’s Annual Report and Accounts for the financial year ended 31 July 2019. Since the date of that report, there have been no significant changes in: • the nature of the financial risks to which the Group is exposed; • the nature of the financial instruments which the Group uses; or • its contractual cash outflows.

16—Subsequent events Since 31 January 2020, the Group has acquired Columbia Pipe & Supply, a business in the US with annual revenue of $220 million. On 5 February 2020, the Group entered into an irrevocable and non-discretionary arrangement with its broker Barclays Capital Securities Limited to purchase shares until 31 March 2020 as part of the recently announced share buy back programme. On 10 March 2020, the Group entered into a new $1.1 billion revolving credit facility, provided by a syndicate of eleven banks, with an initial maturity of five years and the option for the Group to apply for two further one year maturity extensions. This facility will replace the existing £800 million revolving credit facility which has now been cancelled.

17—Exchange rates

Exchange rates (equivalent to $1) 2020 2019 Pounds sterling Income statement (average rate for the six months to 31 January) ...... 0.79 0.78 Balance sheet (rate at 31 January) ...... 0.76 0.76 Balance sheet (rate at 31 July) ...... 0.82 Canadian dollars Income statement (average rate for the six months to 31 January) ...... 1.32 1.32 Balance sheet (rate at 31 January) ...... 1.32 1.31 Balance sheet (rate at 31 July) ...... 1.32

F-23 Independent review report to Ferguson plc We have been engaged by Ferguson plc (the ‘‘Company’’) to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2020 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors’ responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 ‘‘Interim Financial Reporting’’ as adopted by the European Union.

Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Deloitte LLP Statutory Auditor London, UK 16 March 2020

F-24 Group income statement Year ended 31 July 2019

2019 2018 Before Exceptional Before Exceptional exceptional items exceptional items Notes items (note 5) Total items (note 5) Total $m $m $m $m $m $m Revenue ...... 3 22,010 — 22,010 20,752 — 20,752 Cost of sales ...... (15,550) (2) (15,552) (14,689) (19) (14,708) Gross profit ...... 6,460 (2) 6,458 6,063 (19) 6,044 Operating costs: amortisation of acquired intangible assets ...... (110) — (110) (65) — (65) other ...... (4,854) (92) (4,946) (4,556) (63) (4,619) Operating costs ...... (4,964) (92) (5,056) (4,621) (63) (4,684) Operating profit ...... 3, 4 1,496 (94) 1,402 1,442 (82) 1,360 Net finance costs ...... 6 (74) — (74) (53) — (53) Share of profit after tax of associates . 2— 2 2— 2 Gain on disposal of interests in associates ...... —3 3—— — Impairment of interests in associates . . (9) — (9) (122) — (122) Profit before tax ...... 1,415 (91) 1,324 1,269 (82) 1,187 Tax...... 7 (282) 19 (263) (361) 15 (346) Profit from continuing operations .... 1,133 (72) 1,061 908 (67) 841 Profit from discontinued operations .. 8 64147 22 404 426 Profit for the year attributable to shareholders of the Company ..... 1,139 (31) 1,108 930 337 1,267 Earnings per share ...... 10 Continuing operations and discontinued operations Basic earnings per share ...... 481.3c 515.7c Diluted earnings per share ...... 477.8c 511.9c Continuing operations only Basic earnings per share ...... 460.9c 342.3c Diluted earnings per share ...... 457.5c 339.8c Alternative performance measures Trading profit from ongoing operations ...... 2 1,601 1,493 Trading profit from non-ongoing operations ...... 2 5 14 Trading profit from continuing operations ...... 2, 3 1,606 1,507 Adjusted EBITDA from continuing operations ...... 2 1,788 1,687 Headline earnings per share ...... 2, 10 517.4c 444.4c

F-25 Group statement of comprehensive income Year ended 31 July 2019

Notes 2019 2018 $m $m Profit for the year ...... 1,108 1,267 Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Exchange (loss)/gain on translation of overseas operations(1) ...... (86) 7 Exchange gain/(loss) on translation of borrowings and derivatives designated as hedges of overseas operations(1) ...... 36 (11) Cumulative currency translation differences on disposals(1) ...... 28 1 194 Cumulative currency translation differences on disposal of interests in associates(1) ...... 7 — Items that will not be reclassified subsequently to profit or loss: Actuarial (loss)/gain on retirement benefit plans(2) ...... 24 (36) 104 Tax credit/(charge) on items that will not be reclassified to profit or loss(2) . . . 7, 24 6 (17) Other comprehensive (expense)/income for the year ...... (72) 277 Total comprehensive income for the year ...... 1,036 1,544 Total comprehensive income attributable to: Continuing operations ...... 993 926 Discontinued operations ...... 43 618 Total comprehensive income for the year attributable to shareholders of the Company ...... 1,036 1,544

(1) Impacting the translation reserve. (2) Impacting retained earnings.

F-26 Group statement of changes in equity Year ended 31 July 2019

Reserves Share Share Translation Treasury Own Retained Non-controlling Total Notes capital premium reserve shares shares earnings interest equity $m $m $m $m $m $m $m $m At 31 July 2017 ...... 45 67 (746) (743) (76) 5,996 (3) 4,540 Profit for the year ...... — — — — — 1,267 — 1,267 Other comprehensive income . . . — — 190 — — 87 — 277 Total comprehensive income .... — — 190 — — 1,354 — 1,544 Purchase of own shares by Employee Benefit Trusts ..... 25 — — — — (41) — — (41) Issue of own shares by Employee Benefit Trusts ...... 25 — — — — 27 (27) — — Credit to equity for share-based payments ...... — — — — — 35 — 35 Tax relating to share-based payments ...... 7 — — — — — 8 — 8 Adjustment arising from change in non-controlling interest ...... — — — — — (16) 2 (14) Purchase of Treasury shares .... 25 — — — (675) — — — (675) Disposal of Treasury shares ..... 25 — — — 38 — (14) — 24 Dividends paid ...... 9 — — — — — (1,364) — (1,364) At 31 July 2018 ...... 45 67 (556) (1,380) (90) 5,972 (1) 4,057 Profit for the year ...... — — — — — 1,108 — 1,108 Other comprehensive expense . . . — — (42) — — (30) — (72) Total comprehensive income .... — — (42) — — 1,078 — 1,036 Cancellation of Treasury shares . . 25 (4) — — 1,369 — (1,365) — — Group reconstruction ...... (11) 16,083 — — — (16,072) — — Capital reduction ...... — (16,150) — — — 16,150 — — Issue of share capital ...... —9————— 9 Purchase of own shares by Employee Benefit Trusts ..... 25 — — — — (38) — — (38) Issue of own shares by Employee Benefit Trusts ...... 25 — — — — 26 (26) — — Credit to equity for share-based payments ...... —————34— 34 Tax relating to share-based payments ...... 7 —————6 — 6 Adjustment arising from change in non-controlling interest ...... —————— 1 1 Purchase of Treasury shares .... 25 — — — (309) — — — (309) Disposal of Treasury shares ..... 25 — — — 15 — (12) — 3 Dividends paid ...... 9 — — — — — (449) — (449) At 31 July 2019 ...... 30 9 (598) (305) (102) 5,316 — 4,350

On 10 May 2019 a new Jersey incorporated, UK headquartered, company became the holding company of the Ferguson Group. Shareholders received one 10 pence ordinary share in this new company for each 11227⁄563 pence ordinary share in the old Ferguson holding company (note 25). The introduction of a new parent company constitutes a group reconstruction with the new holding company recording the cost of its investment in the old Ferguson holding company at the fair value on 10 May 2019 resulting in an increase in share premium to $16,150 million. On 10 May 2019 the new holding company undertook a reduction of capital under which the entire amount of the share premium account as at 10 May 2019 was cancelled and transferred to retained earnings.

F-27 Group balance sheet Year ended 31 July 2019

Notes 2019 2018 $m $m Assets Non-current assets Intangible assets: goodwill ...... 12 1,656 1,408 Intangible assets: other ...... 13 423 308 Property, plant and equipment ...... 14 1,349 1,086 Interests in associates ...... 29 64 Financial assets ...... 42 11 Retirement benefit assets ...... 24 178 193 Deferred tax assets ...... 15 164 130 Trade and other receivables ...... 17 340 328 Derivative financial assets ...... 22 10 17 4,191 3,545 Current assets Inventories ...... 16 2,821 2,516 Trade and other receivables ...... 17 3,213 3,094 Current tax receivable ...... 6 10 Financial assets ...... 9 — Derivative financial assets ...... 22 12 — Cash and cash equivalents ...... 18 1,133 833 7,194 6,453 Assets held for sale ...... 19 1 151 Total assets ...... 11,386 10,149 Liabilities Current liabilities Trade and other payables ...... 20 3,797 3,341 Current tax payable ...... 251 188 Derivative financial liabilities ...... 22 — 2 Borrowings ...... 21 52 383 Obligations under finance leases ...... 2 3 Provisions ...... 23 79 95 Retirement benefit obligations ...... 24 — 4 4,181 4,016 Non-current liabilities Trade and other payables ...... 20 292 298 Derivative financial liabilities ...... 22 — 17 Borrowings ...... 21 2,292 1,522 Obligations under finance leases ...... 4 3 Deferred tax liabilities ...... 15 56 42 Provisions ...... 23 186 179 Retirement benefit obligations ...... 24 25 15 2,855 2,076 Total liabilities ...... 7,036 6,092 Net assets ...... 4,350 4,057 Equity Share capital ...... 25 30 45 Share premium ...... 9 67 Reserves ...... 4,311 3,946 Equity attributable to shareholders of the Company ...... 4,350 4,058 Non-controlling interest ...... — (1) Total equity ...... 4,350 4,057

The accompanying notes are an integral part of these consolidated financial statements. The consolidated financial statements on pages 108 to 149 were approved and authorised for issue by the Board of Directors on 30 September 2019 and were signed on its behalf by:

/s/ JOHN MARTIN /s/ MIKE POWELL John Martin Mike Powell Group Chief Executive Group Chief Financial Officer

F-28 Group cash flow statement Year ended 31 July 2019

Notes 2019 2018 $m $m Cash flows from operating activities Cash generated from operations ...... 26 1,609 1,323 Interest received ...... 13 9 Interest paid ...... (90) (62) Tax paid ...... (242) (234) Net cash generated from operating activities ...... 1,290 1,036 Cash flows from investing activities Acquisition of businesses (net of cash acquired) ...... 27 (657) (416) Disposals of businesses (net of cash disposed of) ...... 28 201 1,320 Purchases of property, plant and equipment ...... (382) (265) Proceeds from sale of property, plant and equipment and assets held for sale . . 84 120 Purchases of intangible assets ...... (36) (34) Acquisition of associates and other investments ...... (11) (35) Disposal of interests in associates ...... 18 — Dividends received from associates ...... — 10 Net cash (used in)/generated from investing activities ...... (783) 700 Cash flows from financing activities Proceeds from the issue of shares ...... 25 9 — Purchase of own shares by Employee Benefit Trusts ...... 25 (38) (41) Purchase of Treasury shares ...... 25 (150) (675) Proceeds from the sale of Treasury shares ...... 25 3 24 Proceeds from loans and derivatives ...... 29 757 459 Repayments of loans ...... 29 (2) (261) Finance lease capital payments ...... 29 (3) (4) Dividends paid to shareholders ...... (445) (1,359) Net cash generated from/(used in) financing activities ...... 131 (1,857) Net cash generated/(used) ...... 638 (121) Effects of exchange rate changes ...... (10) (7) Net increase/(decrease) in cash, cash equivalents and bank overdrafts ...... 628 (128) Cash, cash equivalents and bank overdrafts at the beginning of the year ...... 29 458 586 Cash, cash equivalents and bank overdrafts at the end of the year ...... 29 1,086 458

F-29 Notes to the consolidated financial statements Year ended 31 July 2019

1—Accounting policies Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) as adopted by the European Union, including interpretations issued by the International Accounting Standards Board (‘‘IASB’’) and its committees. On 10 May 2019, pursuant to a Scheme of Arrangement under Article 125 of the Companies (Jersey) Law 1991, a new parent company was introduced which is now called Ferguson plc (the ‘‘Company’’). The previous parent company has been renamed as Ferguson Holdings Limited (‘‘Old Ferguson’’). Immediately after the Scheme of Arrangement became effective the Company had the same management and corporate governance arrangements as Old Ferguson had immediately before. The consolidated assets and liabilities of the Company immediately after the effective date of the Scheme of Arrangement were the same as the consolidated assets and liabilities of Old Ferguson immediately before. The introduction of a new parent company constitutes a group reconstruction and has been accounted for as a reverse acquisition in accordance with IFRS 3 ‘‘Business Combinations’’ and using merger accounting principles. Therefore, although the group reconstruction did not become effective until 10 May 2019, the consolidated financial statements of the Group are presented as if the Company and Old Ferguson had always been part of the same Group. Accordingly, the results of the Group for the entire year ended 31 July 2019 are shown in the Group income statement, and the comparative figures for the year ended 31 July 2018 are also prepared on this basis. Earnings per share are unaffected by the group reconstruction. The Group’s subsidiary undertakings are set out on pages 162 and 163. Ferguson plc is a public company limited by shares incorporated in Jersey under the Companies (Jersey) Law 1991 and is headquartered in the UK. It operates as the ultimate parent company of the Ferguson Group. Its registered office is 26 New Street, St Helier, Jersey, JE2 3RA, Channel Islands. The consolidated financial statements have been prepared on a going concern basis (see page 77) and under the historical cost convention as modified by the revaluation of financial assets and liabilities held for trading.

Accounting developments and changes On 1 August 2018 the Group adopted IFRS 9 ‘‘Financial Instruments’’. The standard makes changes to the classification and measurement of financial assets and liabilities, revises the requirements of hedge accounting and introduces a new impairment model for financial assets. The adoption of IFRS 9 has not had a material impact on the Group’s consolidated financial statements, comparatives have not been restated and there is no adjustment required to opening retained earnings. On 1 August 2018 the Group adopted IFRS 15 ‘‘Revenue from Contracts with Customers’’ applying the modified retrospective approach which does not require the restatement of comparatives. The standard introduces revised principles for the recognition of revenue with a new five-step model that focuses on the transfer of control instead of a risks and rewards approach. The adoption of IFRS 15 has not had a material impact on the Group’s consolidated financial statements and there is no adjustment required to opening retained earnings. The presentation of the provision for sales returns has changed from a net basis to a gross basis on the balance sheet, with a liability for expected refunds to customers included within trade and other payables and an associated asset for the value of returned goods included within inventory. The following other standards and amendments to existing standards became effective for the year ending 31 July 2019 and have not had a material impact on the Group’s consolidated financial statements: • IFRIC 22 ‘‘Foreign Currency Transactions and Advance Consideration’’; • Annual Improvements to IFRSs 2014-2016 Cycle; • Amendments to IFRS 2—Classification and Measurement of Share-based Payment Transactions;

F-30 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) • Amendments to IAS 40—Transfers of Investment Property; and • Amendments to IFRS 4—Applying IFRS 9 ‘‘Financial Instruments’’ with IFRS 4 ‘‘Insurance Contracts’’. IFRS 16 ‘‘Leases’’ is effective for the Group for the year ending 31 July 2020 and represents a change to the treatment of leases in the financial statements. The Group will be required to apply a single model to recognise a lease liability and a right of use asset for all leases, including those classified as operating leases under current accounting standards, unless the underlying asset has a low value or the lease term is 12 months or less. The Group is using the modified retrospective approach to transition. The impact on the opening balance sheet at the date of initial application of 1 August 2019 will be the creation of a right of use asset of $1.2 billion and a lease liability of $1.5 billion. The lease liability on transition is greater than the operating lease commitments (note 31) due to the inclusion of options to extend which the Group is reasonably certain to exercise, partially offset by the effect of discounting. The net impact on profit for the year in the first year of adoption (year ending 31 July 2020) is not expected to be material to the Group, however, adjusted EBITDA will improve due to the reduction in rental charges which will be broadly offset in the income statement by an increase in depreciation and interest charges.

Choices permitted by IFRS The Group has elected to apply hedge accounting to some of its financial instruments.

Critical accounting judgements Exceptional Items Note 2 provides a definition of exceptional items. The classification of exceptional items requires significant management judgement to determine the nature and intentions of a transaction. Note 5 provides further details on exceptional items.

Pensions and other post-retirement benefits The Group operates defined benefit pension plans in the UK and in a number of overseas locations that are accounted for using methods that rely on actuarial assumptions to estimate costs and liabilities for inclusion in the consolidated financial statements. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. The cost of providing benefits is determined annually using the Projected Unit Credit Method, which includes actuarial assumptions for discount rates, expected salary and pension increases, inflation and life expectancy, as disclosed in note 24. The discount rate used is the yield at the valuation date on high quality corporate bonds that have a maturity approximating to the terms of the pension obligations. Significant judgement is required when setting the criteria from which the yield curve is derived.

Sources of estimation uncertainty In applying the Group’s accounting policies, various transactions and balances are valued using estimates or assumptions. Should these estimates or assumptions prove incorrect there may be an impact on the following year’s financial statements. The Group believes that the estimates and assumptions that have been applied would not give rise to a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

F-31 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) Accounting policies A summary of the principal accounting policies applied by the Group in the preparation of the consolidated financial statements is set out below. The accounting policies have been applied consistently throughout the current and preceding year.

Basis of consolidation The consolidated financial information includes the results of the parent company and entities controlled by the Company (its subsidiary undertakings and controlling interests) and its share of profit/(loss) after tax of its associates. The financial performance of business operations are included in profit from continuing operations from the date of acquisition and up to the date of classification as a discontinued operation or sale. Intra-group transactions and balances and any unrealised gains and losses arising from intra-group transactions are eliminated on consolidation, with the exception of gains or losses required under relevant IFRS accounting standards.

Discontinued operations When the Group has disposed of, or classified as held for sale, a business component that represents a separate major line of business or geographical area of operations, it classifies such operations as discontinued in accordance with IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’. The post-tax profit or loss of the discontinued operations are shown as a single line on the face of the income statement separate from the other results of the Group.

Foreign currencies Items included in the financial statements of the parent and of each of the Group’s subsidiary undertakings are measured using the currency of the primary economic environment in which the subsidiary undertaking operates (the ‘‘functional currency’’). The consolidated financial statements are presented in US dollars, which is the presentational currency of the Group and the functional currency of the Company. The trading results of overseas subsidiary undertakings are translated into US dollars using the average rates of exchange ruling during the relevant financial period. The balance sheets of overseas subsidiary undertakings are translated into US dollars at the rates of exchange ruling at the year-end. Exchange differences arising on the translation into US dollars of the net assets of these subsidiary undertakings are recognised in other comprehensive income and accumulated in the translation reserve. At 31 July 2019, the translation reserve comprised $384 million in relation to pound sterling entities, $181 million in relation to US dollar entities and $33 million in relation to entities denominated in other currencies. In the event that a subsidiary undertaking which has a non-US dollar functional currency is disposed of, the gain or loss on disposal recognised in the income statement is determined after taking into account the cumulative currency translation differences that are attributable to the subsidiary undertaking concerned. Foreign currency transactions entered into during the year are translated into the functional currency of the entity at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All currency translation differences are taken to the income statement. Except as noted above, changes in the fair value of derivative financial instruments, entered into to hedge foreign currency net assets and that satisfy the hedging conditions of IFRS 9 are recognised in other comprehensive income and the translation reserve (see the separate accounting policy on derivative financial instruments).

F-32 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. Costs related to acquisitions are expensed as incurred. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Interests in associates Investments in companies where significant influence is exercised are accounted for as interests in associates using the equity method of accounting from the date the investee becomes an associate. The investment is initially recognised at cost and adjusted thereafter for changes in the Group’s share in the net assets of the investee. The Group’s share of profit or loss after tax is recognised in the Group income statement and share of other comprehensive income or expense is recognised in the Group statement of other comprehensive income. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group’s share of the net assets of the investee is recognised as goodwill, which is included within the carrying amount of the investment. The requirements of IAS 36 ‘‘Impairment of Assets’’, are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. Impairment losses recognised are charged to the income statement.

Revenue Revenue is the amount receivable for the provision of goods falling within the Group’s ordinary activities, excluding intra-group sales, estimated and actual sales returns, trade and early settlement discounts, Value Added Tax and similar sales taxes. The Group acts as principal for direct sales which are delivered directly to the customer by the supplier. Revenue from the provision of goods is recognised when the customer obtains control of the goods. The customer is deemed to have obtained control of the goods when the goods have been received by the customer. Revenue from the provision of goods is only recognised when the transaction price is determinable and it is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods to be transferred to the customer. The Group offers a right of return to its customers for most of its goods sold. Revenue is reduced by the amount of expected returns, estimated based on historical data. The Group also provides customers with assurance-type warranties for some own brand goods. Obligations under these warranties are accounted for as provisions. The Group has no contracts with an expected duration of more than one year and has taken advantage of the practical expedient afforded by section 121 of IFRS 15, and as such is not required to disclose information about its remaining performance obligations.

Cost of sales Cost of sales includes purchased goods, the cost of bringing inventory to its present location and condition and labour and overheads attributable to assembly and construction services.

F-33 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) goods for resale are accrued as earned and are recorded initially as a deduction in inventory with a subsequent reduction in cost of sales when the related product is sold.

Volume-based rebates The majority of volume-based rebates are determined by reference to guaranteed rates of rebate. These are calculated through a mechanical process with minimal judgement required to determine the amount recorded in the income statement. A small proportion of volume-based rebates are subject to tiered targets where the rebate percentage increases as volumes purchased reach agreed targets within a set period of time. The majority of rebate agreements apply to purchases in a calendar year and therefore, for tiered rebates, judgement is required to estimate the rebate amount recorded in the income statement at the end of the period. The Group assesses the probability that targeted volumes will be achieved in the year based on forecasts which are informed by historical trading patterns, current performance and trends. This judgement is exercised consistently with historically insignificant true ups at the end of the period. An amount due in respect of supplier rebates is not recognised within the income statement until all the relevant performance criteria, where applicable, have been met and the goods have been sold to a third party.

Other rebates The Group has also entered into other rebate agreements which represent a smaller element of the Group’s overall supplier rebates, which are recognised in the income statement when all performance conditions have been fulfilled.

Supplier rebates receivable Supplier rebates are offset with amounts owing to each supplier at the balance sheet date and are included within trade payables where the Group has the legal right to offset and net settles balances. Where the supplier rebates are not offset against amounts owing to a supplier, the outstanding amount is included within prepayments.

Operating leases Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. The cost of operating leases (net of any incentives received from the lessor) is charged to the income statement on a straight-line basis over the period of the leases.

Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary undertaking at the date of acquisition. Goodwill on acquisitions of subsidiary undertakings is included within intangible assets. Goodwill is allocated to cash generating units or aggregations of cash generating units (together ‘‘CGUs’’) where synergy benefits are expected. CGUs are independent sources of income streams and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes. The Group considers that a CGU is a business unit because independent cash flows cannot be identified below this level. Goodwill is not amortised but is tested annually for impairment and carried at cost less accumulated impairment losses. For goodwill impairment testing purposes, no CGU is larger than the operating segments determined in accordance with IFRS 8 ‘‘Operating Segments’’. The recoverable amount of goodwill and acquired intangible assets are assessed on the basis of the value in use estimate for CGUs to which they are attributed. Where carrying value exceeds the recoverable amount a provision for the impairment is established with a charge included in the income statement.

F-34 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Other intangible assets An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights. Intangible assets, primarily brands, trade names and customer relationships, acquired as part of a business combination are capitalised separately from goodwill and are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the reducing balance method for customer relationships and the straight-line method for other intangible assets. The cost of the intangible assets is amortised and charged to operating costs in the income statement over their estimated useful lives as follows:

Customer relationships ...... 4–25 years Trade names and brands ...... 1–15 years Other ...... 1–4 years Computer software that is not integral to an item of property, plant and equipment is recognised separately as an intangible asset and is carried at cost less accumulated amortisation and accumulated impairment losses. Costs include software licences and external and internal costs directly attributable to the development, design and implementation of the computer software. Costs in respect of training and data conversion are expensed as incurred. Amortisation is calculated using the straight-line method so as to charge the cost of the computer software to operating costs in the income statement over its estimated useful life of between three and five years.

Property, plant and equipment (‘‘PPE’’) PPE is carried at cost less accumulated depreciation and accumulated impairment losses, except for land and assets in the course of construction, which are not depreciated and are carried at cost less accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. In addition, subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Assets are depreciated to their estimated residual value using the straight-line method over their useful lives as follows:

Freehold buildings and long leaseholds ...... 20–50 years Operating leasehold improvements ...... over the period of the lease Plant and machinery ...... 7–10 years Computer hardware ...... 3–5 years Fixtures and fittings ...... 5–7 years Motor vehicles ...... 4 years The residual values and useful lives of PPE are reviewed and adjusted if appropriate at each balance sheet date. Borrowing costs directly attributable to the long-term construction or production of an asset are capitalised as part of the cost of the asset.

F-35 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) Assets and disposal groups held for sale Assets are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. Where a group of assets and their directly associated liabilities are to be disposed of in a single transaction, such disposal groups are also classified as held for sale. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition and management must be committed to and have initiated a plan to sell the asset or disposal group which, when initiated, was expected to result in a completed sale within 12 months. Assets that are classified as held for sale are not depreciated. Assets or disposal groups that are classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Inventories Inventories, which comprise goods purchased for resale, are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (‘‘FIFO’’) method or the average cost method as appropriate to the nature of the transactions in those items of inventory. The cost of goods purchased for resale includes import and custom duties, transport and handling costs, freight and packing costs and other attributable costs less trade discounts, rebates and other subsidies. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Provisions are made against slow-moving, obsolete and damaged inventories for which the net realisable value is estimated to be less than the cost. The risk of obsolescence of slow-moving inventory is assessed by comparing the level of inventory held to estimated future sales on the basis of historical experience.

Trade receivables Trade receivables are recognised initially at fair value and measured subsequently at amortised cost using the effective interest method, less the loss allowance. The loss allowance for trade receivables is measured at an amount equal to lifetime expected credit losses, estimated based on historical write-offs adjusted for forward-looking information where appropriate. A loss allowance of 100 per cent is recognised against all trade receivables more than 180 days past due because historical experience indicates that these are generally not recoverable. The loss is recognised in the income statement. Trade receivables are written off when recoverability is assessed as being remote. Subsequent recoveries of amounts previously written off are credited to the income statement.

Provisions Provisions for self-insured risks, legal claims, environmental restoration and onerous leases are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Such provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money. Provisions are not recognised for future operating losses.

Retirement benefit obligations Contributions to defined contribution pension plans and other post-retirement benefits are recorded within operating profit. For defined benefit pension plans and other post-retirement benefits, the cost of providing benefits is determined annually using the Projected Unit Credit Method by independent qualified actuaries. The current and past service cost of defined benefit pension plans is recorded within operating profit.

F-36 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) The net interest amount is calculated by applying the discount rate to the defined benefit net asset or liability at the beginning of the period. The pension plan net interest is presented as finance income or expense. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. The liability or asset recognised in the balance sheet in respect of defined benefit pension plans is the fair value of plan assets less the present value of the defined benefit obligation at the end of the reporting period. Where a plan is in a net asset position the asset is recognised where trustees do not have unilateral power to augment benefits prior to a wind-up.

Tax Current tax represents the expected tax payable (or recoverable) on the taxable income (or losses) for the year using tax rates enacted or substantively enacted at the balance sheet date and taking into account any adjustments arising from prior years. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Tax provisions The Group is subject to income taxes in numerous jurisdictions. Judgement is sometimes required in determining the worldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and may be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based on estimates of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable and the Group can make a reliable estimate of the outcome of the dispute, management calculates the provision using the single best estimate of likely outcome approach. In assessing its uncertain tax provisions, management takes into account the specific facts of each dispute, the likelihood of settlement and professional advice where required. Where the ultimate liability in a dispute varies from the amounts provided, such differences could impact the current and deferred income tax assets and liabilities in the period in which the dispute is concluded.

Share capital Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax. Where any Group company purchases the Company’s equity share capital (Treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax), is deducted from equity attributable to shareholders of the Company until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly

F-37 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) attributable incremental transaction costs and the related tax effects, is included in equity attributable to shareholders of the Company.

Share-based payments Share-based incentives are provided to employees under the Group’s long-term incentive plans and all-employee sharesave plans. The Group recognises a compensation cost in respect of these plans that is based on the fair value of the awards, measured using Binomial and Monte Carlo valuation methodologies. For equity-settled plans, the fair value is determined at the date of grant (including the impact of any non-vesting conditions such as a requirement for employees to save) and is not subsequently remeasured unless the conditions on which the award was granted are modified. For cash-settled plans, the fair value is determined at the date of grant and is remeasured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognised on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.

Dividends payable Dividends on ordinary shares are recognised in the Group’s consolidated financial statements in the period in which the dividends are approved by the shareholders of the Company or paid.

Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks with original maturities of three months or less and bank overdrafts to the extent there is a legal right of offset or practice of net settlement with cash balances. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet to the extent that there is no legal right of offset or no practice of net settlement with cash balances. Cash which is not freely available to the Group is disclosed as restricted cash.

Derivative financial instruments Derivative financial instruments, in particular interest rate swaps and foreign exchange swaps, are used to manage the financial risks arising from the business activities of the Group and the financing of those activities. There is no trading activity in derivative financial instruments. At the inception of a hedging transaction involving the use of derivative financial instruments, the Group documents the relationship between the hedged item and the hedging instrument together with its risk management objective and the strategy underlying the proposed transaction. The Group also documents its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the hedge in offsetting movements in the fair values or cash flows of the hedged items. Derivative financial instruments are recognised as assets and liabilities measured at their fair values at the balance sheet date. Where derivative financial instruments do not fulfil the criteria for hedge accounting contained in IFRS 9, changes in their fair values are recognised in the income statement. When hedge accounting is used, the relevant hedging relationships are classified as fair value hedges, cash flow hedges or net investment hedges. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the increase or decrease in its fair value attributable to the hedged risk and the resulting gain or loss is recognised in the income statement where, to the extent that the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to maturity. Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recognised directly in other comprehensive income.

F-38 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

1—Accounting policies (Continued) When the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in equity are either recycled to the income statement or, if the hedged item results in a non-financial asset, are recognised as adjustments to its initial carrying amount. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Borrowings Borrowings are recognised initially at the fair value of the consideration received net of transaction costs incurred. Borrowings are subsequently measured at amortised cost with any difference between the initial amount and the maturity amount being recognised in the income statement using the effective interest method.

Ongoing and non-ongoing The Group reports some financial measures net of businesses that have been disposed of, closed or classified as held for sale and uses the following terminology: Non-ongoing operations are businesses, which do not meet the criteria to be classified as discontinued operations under IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, which have been disposed of, closed or classified as held for sale. In 2019, the Group’s Dutch business, Wasco, and a small non-core UK business have been sold and classified as non-ongoing and all comparatives have been restated for consistency and comparability. Ongoing operations are continuing operations excluding non-ongoing operations.

Constant exchange rates The Group measures some financial metrics on both a reported basis and at constant exchange rates. The constant exchange rate basis re-translates the prior year at the current year exchange rates to eliminate the effect of exchange rate fluctuations when comparing information year-on-year.

F-39 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

2—Alternative performance measures (Continued) A reconciliation of revenue using the above APMs to statutory revenue is provided below:

Revenue Ongoing Non-ongoing Continuing $m % growth $m $m Reported 2018 restated ...... 20,334 418 20,752 Impact of exchange rate movements ...... (155) (19) (174) Reported 2018 at 2019 exchange rates ...... 20,179 399 20,578 Organic growth ...... 884 4.4 27 911 Trading days ...... (52) (0.3) — (52) Acquisitions ...... 760 3.8 — 760 Disposals ...... — — (187) (187) Growth at constant exchange rates ...... 1,592 7.9 (160) 1,432 Reported 2019 ...... 21,771 239 22,010

Like-for-like revenue growth To aid understanding of the UK business management reports like-for-like revenue growth, which is organic revenue growth excluding the effect of branch openings and closures and the exit of low margin business.

Exceptional items Exceptional items are those which are considered significant by virtue of their nature, size or incidence. These items are presented as exceptional within their relevant income statement category to assist in the understanding of the trading and financial results of the Group as these types of cost/credit do not form part of the underlying business. Examples of items that are considered by the Directors for designation as exceptional items include, but are not limited to: • restructuring costs within a segment which are both material and incurred as part of a significant change in strategy or due to the closure of a large part of a business and are not expected to be repeated on a regular basis; • significant costs incurred as part of the integration of an acquired business and which are considered to be material; • gains or losses on disposals of businesses are considered to be exceptional in nature as they do not reflect the performance of the trading business; • material costs or credits arising as a result of regulatory and litigation matters; • gains or losses arising on significant changes to, or closures of, defined benefit pension plans are considered to be exceptional in nature as they do not reflect the performance of the trading business; and • other items which are material and considered to be non-recurring in nature and/or are not as a result of the underlying trading activities of the business. If provisions have been made for exceptional items in previous years, any reversal of these provisions is treated as exceptional. Exceptional items for the current and prior year are disclosed in note 5.

F-40 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

2—Alternative performance measures (Continued) Ongoing gross margin The ratio of ongoing gross profit, excluding exceptional items, to ongoing revenue. Ongoing gross margin is used by management for assessing business unit performance and it is a key performance indicator for the Group (see page 20). A reconciliation of ongoing gross margin is provided below:

2019 Restated 2018 Ongoing Ongoing gross gross Gross profit Revenue margin Gross profit Revenue margin $m $m % $m $m % Continuing ...... 6,458 22,010 6,044 20,752 Non-ongoing ...... (64) (239) (115) (418) Exceptional items ...... 2— 19 — Ongoing ...... 6,396 21,771 29.4 5,948 20,334 29.3

Trading profit and ongoing trading margin Trading profit is defined as operating profit before exceptional items and the amortisation and impairment of acquired intangible assets. Trading profit is used as a performance measure because it excludes costs and other items that do not form part of the underlying trading business. The ongoing trading margin is the ratio of ongoing trading profit to ongoing revenue and is used to assess business unit profitability and is a key performance indicator for the Group (see page 20). A reconciliation of trading profit to statutory operating profit and the calculation of ongoing trading margin are provided below:

2019 Restated 2018 Non- Non- Ongoing ongoing Continuing Ongoing ongoing Continuing $m growth % $m $m $m $m $m Trading profit 2018 ...... 1,493 14 1,507 Impact of exchange rate movements ...... (4) (2) (6) Trading profit 2018 at 2019 exchange rates . . 1,489 12 1,501 Growth at constant exchange rates ...... 112 7.5 (7) 105 Trading profit ...... 1,601 5 1,606 1,493 14 1,507 Amortisation of acquired intangible assets . . (109) (1) (110) (60) (5) (65) Exceptional items ...... (117) 23 (94) (82) — (82) Operating profit ...... 1,375 27 1,402 1,351 9 1,360

F-41 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

2—Alternative performance measures (Continued) Revenue, trading profit and trading margin by reportable segment are shown below. For information on our reportable segments see note 3.

Trading margin Revenue Trading profit Restated Restated Restated 2019 2018 2019 2018 2019 2018 % % $m $m $m $m USA...... 18,358 16,670 1,508 1,406 8.2 8.4 UK...... 2,222 2,472 69 72 3.1 2.9 Canada and Central Europe ...... 1,191 1,192 67 70 5.6 5.9 Central and other costs ...... — — (43) (55) — — Total ongoing operations ...... 21,771 20,334 1,601 1,493 7.4 7.3 UK...... 59 96 (4) 1 Canada and Central Europe ...... 180 322 9 13 Total non-ongoing operations ...... 239 418 5 14 Continuing operations ...... 22,010 20,752 1,606 1,507

Adjusted EBITDA Adjusted EBITDA is operating profit before charges/credits relating to depreciation, amortisation, impairment and exceptional items. Adjusted EBITDA is used in the net debt to adjusted EBITDA ratio to assess the appropriateness of the Group’s financial gearing. A reconciliation of statutory operating profit to adjusted EBITDA is provided below:

2019 2018 Continuing Discontinued Group Continuing Discontinued Group $m $m $m $m $m $m Operating profit ...... 1,402 47 1,449 1,360 461 1,821 Exceptional items ...... 94 (42) 52 82 (402) (320) Amortisation and impairment of goodwill and acquired intangible assets ...... 110 — 110 65 — 65 Trading profit ...... 1,606 5 1,611 1,507 59 1,566 Depreciation and impairment of property, plant and equipment .... 147 — 147 152 — 152 Amortisation and impairment of non-acquired intangible assets ..... 31 — 31 28 — 28 Impairment of assets held for sale . . . 4— 4——— Adjusted EBITDA ...... 1,788 5 1,793 1,687 59 1,746

Ongoing effective tax rate The ongoing effective tax rate is the ratio of the ongoing tax charge to ongoing profit before tax and is used as a measure of the tax rate of the ongoing business. See reconciliation in note 7.

F-42 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

2—Alternative performance measures (Continued) the comparability between acquired and organically grown operations, as the latter cannot recognise internally generated intangible assets. Headline earnings per share is the ratio of headline profit after tax to the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Benefit Trusts and those held by the Company as Treasury shares. Headline earnings per share is used for the purpose of setting remuneration targets for the Executive Directors and other senior executives. See reconciliation in note 10.

Net debt Net debt comprises cash and cash equivalents and liabilities from financing activities, including borrowings, derivative financial instruments and obligations under finance leases. Net debt is a good indicator of the strength of the Group’s balance sheet position and is widely used by credit rating agencies. See note 29 for a reconciliation.

Return on gross capital employed Return on gross capital employed is the ratio of the Group’s trading profit to the average year-end shareholders’ equity, net debt and accumulated amortisation and impairment of goodwill and acquired intangible assets. Return on gross capital employed is a key performance indicator (see page 21). The calculation of return on gross capital employed is shown below:

2019 2018 $m $m Net debt (note 29) ...... 1,195 1,080 Accumulated impairment losses of goodwill (note 12) ...... 133 197 Accumulated amortisation and impairment losses of acquired intangible assets (note 13)(1) ...... 677 586 Shareholders’ equity ...... 4,350 4,058 Gross capital employed ...... 6,355 5,921 Average gross capital employed(2) ...... 6,138 6,897 Group trading profit(3) ...... 1,611 1,566 Return on gross capital employed % ...... 26.2 22.7

(1) Excludes software. (2) Gross capital employed in 2017 was $7,872 million. (3) Reconciliation provided above under adjusted EBITDA.

F-43 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

3—Segmental analysis The Group’s operating segments are established on the basis of the operating businesses overseen by distinct divisional management teams responsible for their performance. These operating businesses are managed on a geographical basis and are regularly reviewed by the chief operating decision maker in deciding how to allocate resources and assess the performance of the businesses. All operating segments derive their revenue from a single business activity, the distribution of plumbing and heating products. Revenue is attributed to a country based on the location of the Group company reporting the revenue. The Group has combined the Canada and Central Europe operating segments into one reportable segment as individually they do not meet the quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’ to be separately disclosed. The Group’s business is not highly seasonal and the Group’s customer base is highly diversified, with no individually significant customer. The changes in revenue and trading profit for continuing operations between the years ended 31 July 2018 and 31 July 2019 include changes in exchange rates, disposals, acquisitions, trading days and organic change. Where businesses are disposed in the year, the difference between the revenue and trading profit in the current year up to the date of disposal and the revenue and trading profit in the equivalent portion of the prior year is included in organic change. An analysis of the change in revenue by reportable segment for continuing operations is as follows:

Trading Organic 2018 Exchange Disposals Acquisitions days change 2019 $m $m $m $m $m $m $m USA...... 16,670 — — 703 (56) 1,041 18,358 UK...... 2,568 (113) (37) — 4 (141) 2,281 Canada and Central Europe ...... 1,514 (61) (150) 57 — 11 1,371 Continuing operations ...... 20,752 (174) (187) 760 (52) 911 22,010

An analysis of the change in trading profit/(loss) (note 2) by reportable segment for continuing operations is as follows:

Trading Organic 2018 Exchange Disposals Acquisitions days change 2019 $m $m $m $m $m $m $m USA...... 1,406 — — 40 (12) 74 1,508 UK(1) ...... 73 (5) — — — (3) 65 Canada and Central Europe(2) ...... 83 (3) (6) 5 — (3) 76 Central and other costs ...... (55) 2 — — — 10 (43) Continuing operations ...... 1,507 (6) (6) 45 (12) 78 1,606

(1) Includes $1 million adverse variance in exchange and $4 million adverse variance in organic change relating to non-ongoing operations. (2) Includes $1 million adverse variance in exchange and $3 million favourable variance in organic change relating to non-ongoing operations.

F-44 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

3—Segmental analysis (Continued) The reconciliation between trading profit/(loss) (note 2) and operating profit/(loss) by reportable segment for continuing operations is as follows:

2019 2018 Amortisation Amortisation of acquired of acquired Trading Exceptional intangible Operating Trading Exceptional intangible Operating profit/(loss) items assets profit/(loss) profit/(loss) items assets profit/(loss) $m $m $m $m $m $m $m $m USA...... 1,508 (63) (102) 1,343 1,406 (5) (58) 1,343 UK...... 65 (54) — 11 73 (70) — 3 Canada and Central Europe 76 34 (8) 102 83 — (7) 76 Central and other costs . . . (43) (11) — (54) (55) (7) — (62) Group ...... 1,606 (94) (110) 1,402 1,507 (82) (65) 1,360 Net finance costs ...... (74) (53) Share of profit after tax of associates ...... 2 2 Gain on disposal of interests in associates . . . 3 — Impairment of interests in associates ...... (9) (122) Profit before tax ...... 1,324 1,187

Other information on assets and liabilities by segment is set out in the tables below:

2019 2018 Segment Segment Segment Segment net assets/ Segment Segment net assets/ assets liabilities (liabilities) assets liabilities (liabilities) $m $m $m $m $m $m USA(1) ...... 8,252 (3,243) 5,009 6,964 (2,772) 4,192 UK...... 1,144 (553) 591 1,301 (656) 645 Canada and Central Europe ...... 564 (267) 297 690 (297) 393 Central and other costs(1) ...... 97 (282) (185) 88 (141) (53) Discontinued ...... 4 (34) (30) 116 (66) 50 Total ...... 10,061 (4,379) 5,682 9,159 (3,932) 5,227 Tax assets/(liabilities) ...... 170 (307) (137) 140 (230) (90) Net cash/(debt) ...... 1,155 (2,350) (1,195) 850 (1,930) (1,080) Group assets/(liabilities) ...... 11,386 (7,036) 4,350 10,149 (6,092) 4,057

(1) Segmental assets include $8 million (2018: $nil) in the USA and $21 million (2018: $64 million) in Central and other costs relating to interests in associates. Geographical information on non-current assets is set out in the table below. Non-current assets includes goodwill, other intangible assets, property, plant and equipment and interests in associates.

2019 2018 $m $m USA...... 3,036 2,343 UK...... 225 258 Canada and Central Europe ...... 196 265 Group ...... 3,457 2,866

F-45 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

3—Segmental analysis (Continued)

2019 2018 Additions to Additions to other other acquired acquired intangible Additions to Additions to intangible Additions to Additions to assets and non-acquired property, assets and non-acquired property, Additions to interests in intangible plant and Additions to interests in intangible plant and goodwill associates assets equipment goodwill associates assets equipment $m $m $m $m $m $m $m $m USA...... 258 224 26 327 208 120 8 182 UK...... —— 8 33— — 16 32 Canada and Central Europe ...... 1— 2 1133 10 5 13 Central and other costs . ——— 3—351 1 Group ...... 259 224 36 374 241 165 30 228

2019 2018 Impairment Impairment of of goodwill, Amortisation goodwill, Amortisation other and Depreciation other and Depreciation acquired Amortisation impairment and acquired Amortisation impairment and intangible of other of impairment intangible of other of impairment assets and acquired non-acquired of property, assets and acquired non-acquired of property, interests in intangible intangible plant and interests in intangible intangible plant and associates assets assets equipment associates assets assets equipment $m $m $m $m $m $m $m $m USA...... — 102 20 118 — 58 15 113 UK...... —— 8 21 — — 10 30 Canada and Central Europe —828—72 8 Central and other costs . . . 9— 1 —122 — 1 1 Group ...... 9 110 31 147 122 65 28 152

4—Operating profit Amounts charged/(credited) in arriving at operating profit from continuing operations include:

Notes 2019 2018 $m $m Amortisation of acquired intangible assets ...... 13 110 65 Amortisation of non-acquired intangible assets ...... 13 31 26 Impairment of non-acquired intangible assets ...... 13 — 2 Depreciation of property, plant and equipment ...... 14 147 145 Impairment of property, plant and equipment ...... 14 — 7 Impairment of assets held for sale ...... 4 — Gain on disposal of businesses ...... 28 (23) — Amounts included in cost of sales with respect to inventory ...... 15,427 14,618 Staff costs ...... 11 3,163 2,913 Operating lease rentals: land and buildings ...... 252 240 Operating lease rentals: plant and machinery ...... 88 85 Trade receivables impairment ...... 11 13

F-46 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

4—Operating profit (Continued) During the year, the Group obtained the following services from the Company’s auditor and its associates:

2019 2018 $m $m Fees for the audit of the Company and consolidated financial statements ...... 1.6 1.4 Fees for the audit of the Company’s subsidiaries pursuant to legislation ...... 2.2 2.6 Total audit fees ...... 3.8 4.0 Audit related assurance services ...... 0.3 0.3 Other assurance services ...... 1.3 — Other services ...... — 0.2 Total non-audit fees ...... 1.6 0.5 Total fees payable to the auditor ...... 5.4 4.5

Details of the Company’s policy on the use of the auditor for non-audit services, the reasons why the auditor was used and how the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee report on pages 66 to 71. No services were provided pursuant to contingent fee arrangements.

5—Exceptional items Exceptional items credited/(charged) to operating profit from continuing operations are analysed by purpose as follows:

2019 2018 $m $m Gain on disposal of businesses ...... 23 — Business restructuring ...... (108) (72) Other exceptional items ...... (9) (10) Total included in operating profit ...... (94) (82)

For the year ended 31 July 2019, business restructuring comprises costs incurred in the USA, UK and Canada in respect of their business transformation strategies and costs relating to the change in the Group corporate headquarters. Other exceptional items of $9 million relate to changes in the defined benefit pension plan in the UK. During the year, the cash flows relating to exceptional items were $53 million (2018: $59 million) used in respect of operating activities and $169 million (2018: $nil) generated in respect of investing activities. Exceptional items relating to discontinued operations are disclosed in note 8.

F-47 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

6—Net finance costs

2019 2018 $m $m Interest income ...... 12 8 Interest expense Borrowings ...... (97) (65) Unwind of fair value adjustment to senior unsecured loan notes ...... 6 7 Finance lease charges ...... — (1) (91) (59) Net interest income/(expense) on defined benefit obligation (note 24) ...... 5 (1) Valuation losses on financial instruments ...... — (1) Total net finance costs ...... (74) (53)

Finance costs relating to discontinued operations are disclosed in note 8.

7—Tax The tax charge for the year comprises:

2019 2018 $m $m Current year tax charge ...... 306 297 Adjustments to tax charge in respect of prior years ...... 4 7 Total current tax charge ...... 310 304 Deferred tax (credit)/charge: origination and reversal of temporary differences ...... (47) 42 Total tax charge ...... 263 346

An exceptional tax credit of $19 million was recorded against exceptional items (2018: $15 million). The deferred tax credit of $47 million (2018: charge $42 million) includes a charge of $3 million (2018: credit $8 million) resulting from changes in tax rates. Tax on items credited/(charged) to the Group statement of comprehensive income:

2019 2018 $m $m Deferred tax credit/(charge) on actuarial loss on retirement benefits ...... 6 (17) Total tax on items credited/(charged) to the Group statement of comprehensive income . . . 6 (17)

Tax on items credited to equity:

2019 2018 $m $m Current tax credit on share-based payments ...... 5 7 Deferred tax credit on share-based payments ...... 1 1 Total tax on items credited to equity ...... 6 8

There is no tax charge in the statement of changes in equity which relates to changes in tax rates (2018: $3 million). The Group has made provisions for the liabilities likely to arise from open audits and assessments. At 31 July 2019, the Group has recognised provisions of $254 million in respect of its uncertain tax positions (2018: $237 million). The total provision has increased by $17 million in the year due primarily to increases related to certain cross border transfer pricing risks. Although there is uncertainty regarding the timing of the resolution of these matters, management do not believe that the Group’s uncertain tax provisions

F-48 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

7—Tax (Continued) constitute a major source of estimation uncertainty as they consider that there is no significant risk of a material change to its estimate of these provisions within the next 12 months.

2019 Total profit/tax Non-ongoing from Ongoing and other continuing profit/tax(7) profit/tax(8) operations Tax reconciliation: $m % $m % $m % Profit before tax ...... 1,529 (205) 1,324 Expected tax at weighted average tax rate(1) ...... (303) 19.8 83 (40.5) (220) 16.6 Adjusted for the effects of: over provisions in respect of prior periods(2) ...... — — 2 (1.0) 2 (0.1) exceptional items which are non-tax deductible(3) ...... — — (7) 3.4 (7) 0.6 current year charge in relation to uncertain tax provisions(4) ...... (35) 2.3 — — (35) 2.6 tax credits and incentives ...... 4 (0.3) — — 4 (0.3) non-taxable income ...... 3 (0.2) — — 3 (0.2) other non-tax deductible expenditure(5) ...... (15) 1.0 (1) 0.5 (16) 1.2 recognition of previously unrecognised deferred tax asset . — — 11 (5.4) 11 (0.8) other ...... 2 (0.1) (4) 2.0 (2) 0.1 effect of tax rate changes(6) ...... — — (3) 1.5 (3) 0.2 Tax (charge)/credit / effective tax rate ...... (344) 22.5 81 (39.5) (263) 19.9

Restated 2018 Total profit/tax Non-ongoing from Ongoing and other continuing profit/tax(7) profit/tax(8) operations Tax reconciliation: $m % $m % $m % Profit before tax ...... 1,445 (258) 1,187 Expected tax at weighted average tax rate(1) ...... (325) 22.5 57 (22.1) (268) 22.6 Adjusted for the effects of: over/(under) provisions in respect of prior periods(2) .... 11 (0.7) (14) 5.4 (3) 0.3 exceptional items which are non-tax deductible(3) ...... — — (1) 0.4 (1) 0.1 current year (charge)/credit in relation to uncertain tax provisions(4) ...... (44) 3.0 1 (0.4) (43) 3.6 tax credits and incentives ...... 5 (0.3) — — 5 (0.4) non-tax deductible amortisation/impairment of acquired intangible assets ...... — — (24) 9.3 (24) 2.0 non-taxable income ...... 7 (0.5) — — 7 (0.6) other non-tax deductible expenditure(5) ...... (28) 1.9 — — (28) 2.3 other ...... 1 (0.1) — — 1 (0.1) effect of tax rate changes ...... 10 (0.7) (2) 0.8 8 (0.7) Tax (charge)/credit / effective tax rate ...... (363) 25.1 17 (6.6) (346) 29.1

F-49 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

7—Tax (Continued) (2) This includes adjustments arising out of movements in uncertain tax provisions regarding prior periods and differences between the final tax liabilities in the tax computations and the tax liabilities provided in the consolidated financial statements. (3) This primarily relates to non-taxable disposal of businesses. (4) This reflects management’s assessment of the potential tax liability for the current year in relation to open tax issues and audits. (5) This relates to certain expenditure for which no tax relief is available such as disallowable business entertaining costs and legal/ professional fees. (6) This relates to the difference between the current tax rate of 19 per cent and deferred tax rate of 17 per cent in the UK. (7) Ongoing profit means profit before tax, exceptional items, the amortisation and impairment of acquired intangible assets and impairment of interests in associates for ongoing operations as defined in note 2. Ongoing tax is the tax expense arising on ongoing profit. (8) Non-ongoing and other profit or loss is profit or loss from non-ongoing operations as defined in note 2 and from the amortisation and impairment of acquired intangible assets, impairment of interests in associates and exceptional items. Non-ongoing and other tax is the tax expense or credit arising on the non-ongoing and other profit or loss and includes other non-recurring tax items. In 2019, the non-ongoing and other credit of $81 million relates primarily to exceptional UK and US restructuring costs, a decrease in uncertain tax provisions in respect of prior periods, tax deductible amortisation in relation to intangible assets, non-taxable disposal of businesses and recognition of deferred tax assets in relation to corporation interest restriction and the amortisation of loan premium.

8—Discontinued operations The Group disposed of Stark Group on 29 March 2018 and during the year sold its remaining property assets in the Nordic region (together the ‘‘disposal group’’). In accordance with IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, the disposal group had been classified as discontinued. The results from discontinued operations, which have been included in the Group income statement, are set out below:

2019 2018 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total $m $m $m $m $m $m Revenue ...... ———1,705 — 1,705 Cost of sales ...... ———(1,280) (5) (1,285) Gross profit ...... ———425 (5) 420 Operating costs: gain on disposal of businesses ...... —3434— 439 439 other ...... 5813(366) (32) (398) Operating income ...... 54247(366) 407 41 Operating profit ...... 5424759 402 461 Net finance income/(costs) ...... 134(6) 2 (4) Profit before tax ...... 6455153 404 457 Tax...... — (4) (4) (31) — (31) Profit from discontinued operations ... 6414722 404 426 Basic earnings per share ...... 20.4c 173.4c Diluted earnings per share ...... 20.3c 172.1c The discontinued exceptional items in 2019 relate predominantly to gains from the sale of Nordic property assets. The discontinued exceptional items in 2018 relate predominantly to the disposal of Stark Group, gains from the sale of Nordic property assets and an impairment charge for the remaining Nordic properties. During the year, discontinued operations used cash of $16 million (2018: $120 million) in respect of operating activities, generated $121 million (2018: $1,368 million) in respect of investing activities and used $nil (2018: $99 million) in respect of financing activities.

F-50 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

9—Dividends Amounts recognised as distributions to equity shareholders:

2019 2018 $m $m Final dividend for the year ended 31 July 2017: 73.33 pence per share ...... — 248 Interim dividend for the year ended 31 July 2018: 57.4 cents per share ...... — 142 Special dividend: $4 per share ...... — 974 Final dividend for the year ended 31 July 2018: 131.9 cents per share ...... 303 — Interim dividend for the year ended 31 July 2019: 63.1 cents per share ...... 146 — Dividends paid ...... 449 1,364

Since the end of the financial year, the Directors have proposed a final ordinary dividend of $332 million (145.1 cents per share). The dividend is subject to approval by shareholders at the Annual General Meeting and is therefore not included in the balance sheet as a liability at 31 July 2019. The interim, special and final dividends for the year ended 31 July 2018 and the interim dividend for the year ended 31 July 2019 were declared in US dollars and paid in both pounds sterling and US dollars. For those shareholders paid in pounds sterling, the exchange rate used to translate the declared value was set in advance of the payment date. As a result of foreign exchange rate movements between these dates, the total amount paid (shown in the Group cash flow statement) will be different to that stated above.

10—Earnings per share

2019 2018 Basic Diluted Basic Diluted earnings earnings earnings earnings Earnings per share per share Earnings per share per share $m cents cents $m cents cents Profit from continuing and discontinued operations attributable to shareholders of the Company ...... 1,108 481.3 477.8 1,267 515.7 511.9 Profit from discontinued operations ..... (47) (20.4) (20.3) (426) (173.4) (172.1) Profit from continuing operations ...... 1,061 460.9 457.5 841 342.3 339.8 Non-recurring tax (credit)/charge relating to changes in tax rates and other adjustments ...... (33) (14.3) 16 6.4 Amortisation and impairment of acquired intangible assets and impairment of interests in associates (net of tax) ..... 91 39.5 168 68.4 Exceptional items (net of tax) ...... 72 31.3 67 27.3 Headline profit after tax from continuing operations ...... 1,191 517.4 1,092 444.4

The weighted average number of ordinary shares in issue during the year, excluding those held by Employee Benefit Trusts and those held by the Company as Treasury shares, was 230.2 million (2018: 245.7 million). The impact of all potentially dilutive share options on earnings per share would be to increase the weighted average number of shares in issue to 231.9 million (2018: 247.5 million).

F-51 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

11—Employee and key management information

2019 2018 $m $m Wages and salaries ...... 2,833 2,608 Social security costs ...... 194 183 Pension costs—defined contribution plans ...... 91 78 Pension costs—defined benefit plans (note 24) ...... 11 9 Share-based payments ...... 34 35 Total staff costs ...... 3,163 2,913

The total staff costs, including discontinued operations, was $3,163 million (2018: $3,155 million).

Average number of employees 2019 2018 USA...... 27,447 25,129 UK...... 5,439 5,871 Canada and Central Europe ...... 2,974 2,962 Central and other ...... 79 94 Continuing operations ...... 35,939 34,056

The average number of employees including discontinued operations was 35,939 (2018: 37,877). Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any Director of the Company. The aggregate emoluments for all key management are set out in the following table:

Key management personnel compensation (including Directors) 2019 2018 $m $m Salaries, bonuses and other short-term employee benefits ...... 13 14 Post-employment benefits ...... 1 1 Termination benefits ...... — 4 Share-based payments ...... 11 9 Total compensation ...... 25 28

Further details of Directors’ remuneration and share options are set out in the Remuneration Report on pages 80 to 106.

F-52 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

12—Intangible assets—goodwill

2019 2018 $m $m Cost At 1 August ...... 1,605 1,372 Exchange rate adjustment ...... (14) (8) Acquisitions ...... 259 241 Adjustment to fair value on prior year acquisitions ...... (6) — Disposal of businesses ...... (55) — At 31 July ...... 1,789 1,605

Accumulated impairment losses At 1 August ...... 197 199 Exchange rate adjustment ...... (9) (2) Disposal of businesses ...... (55) — At 31 July ...... 133 197 Net book value at 31 July ...... 1,656 1,408

Goodwill and intangible assets acquired during the year have been allocated to the individual cash generating units or aggregated cash generating units (together ‘‘CGUs’’) which are deemed to be the smallest identifiable group of assets generating independent cash inflows. CGUs have been aggregated in the disclosure below at a segmental level except for certain CGUs in the USA which are considered to be significant (more than 10 per cent of the current year goodwill balance). Impairment reviews were performed for each individual CGU during the year ended 31 July 2019.

2019 2018(1) Post-tax Pre-tax Long-term Post-tax Pre-tax Long-term discount discount growth discount discount growth rate rate rate Goodwill rate rate rate Goodwill %%%$m%%%$m Blended Branches ...... 830 623 eBusiness ...... 294 294 Waterworks ...... 188 169 Rest of USA ...... 163 131 USA...... 2.2 9.3 12.6 1,475 2.1 9.0 12.0 1,217 UK...... 2.0 8.0 9.8 39 2.0 7.6 9.3 43 Canada ...... 2.0 8.5 11.6 142 2.0 8.4 11.5 148 Total ...... 1,656 1,408

(1) On conclusion of the acquisition accounting for several own brand businesses acquired in 2018 it has been determined that they are part of the Blended Branches CGU. These were included in rest of USA in the prior year and as such the comparative has been reclassified for comparability. The relevant inputs, including key assumptions, to the value in use calculations of each CGU are set out below. Cash flow forecasts for years one to three are derived from the most recent Board approved strategic plan. The forecast for year five represents an estimate of ‘‘mid-cycle’’ trading performance for the CGU based on historic analysis. Year four is calculated as the average of the final year of the strategic plan and year five’s mid-cycle estimate. The other inputs include a risk-adjusted, pre-tax discount rate, calculated by reference to the weighted average cost of capital (‘‘WACC’’) of each country and the 30-year long-term growth rate by country, as published by the IMF in April 2019.

F-53 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

12—Intangible assets—goodwill (Continued) The strategic plan is developed based on analyses of sales, markets and costs at a regional level. Consideration is given to past events, knowledge of future contracts and the wider economy. It takes into account both current business and future initiatives. Management has performed a sensitivity analysis across all CGUs which have goodwill and acquired intangible assets using reasonably possible changes in the following key impairment review assumptions: compound average revenue growth rate, post-tax discount rate and long-term growth rate, keeping all other assumptions constant. The sensitivity testing identified no reasonably possible changes in key assumptions that would cause the carrying amount of any CGU to exceed its recoverable amount.

13—Intangible assets—other

Acquired intangible assets Trade names and Customer Software brands relationships Other Total $m $m $m $m $m Cost At 1 August 2017 ...... 195 122 462 110 889 Exchange rate adjustment ...... (1) — (1) — (2) Acquisitions ...... — 54 21 55 130 Additions ...... 30 — — — 30 At 31 July 2018 ...... 224 176 482 165 1,047 Exchange rate adjustment ...... (5) (1) (3) — (9) Acquisitions ...... — 19 202 3 224 Adjustment to fair value on prior year acquisitions . . . —— 7—7 Additions ...... 36 — — — 36 Disposal of businesses ...... (12) (2) (15) — (29) Disposals ...... (40) — — — (40) At 31 July 2019 ...... 203 192 673 168 1,236 Accumulated amortisation and impairment losses At 1 August 2017 ...... 126 57 382 84 649 Exchange rate adjustment ...... (1) (1) (1) — (3) Amortisation charge for the year ...... 26 16 39 10 91 Impairment charge for the year ...... 2 — — — 2 At 31 July 2018 ...... 153 72 420 94 739 Exchange rate adjustment ...... (3) (1) (3) — (7) Amortisation charge for the year ...... 31 26 65 19 141 Disposal of businesses ...... (7) (2) (13) — (22) Disposals ...... (38) — — — (38) At 31 July 2019 ...... 136 95 469 113 813 Net book value at 31 July 2019 ...... 67 97 204 55 423 Net book value at 31 July 2018 ...... 71 104 62 71 308

F-54 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

14—Property, plant and equipment

Land and buildings Operating Finance leasehold Plant and Other Freehold leases improvements machinery equipment Total $m $m $m $m $m $m Cost At 1 August 2017 ...... 933 3 425 663 232 2,256 Exchange rate adjustment ...... — — (2) (2) (1) (5) Acquisitions ...... 9 — — 3 — 12 Additions ...... 83 — 49 70 26 228 Disposals ...... (7) — (24) (33) (22) (86) Reclassification as held for sale ...... (69) — — (21) (3) (93) At 31 July 2018 ...... 949 3 448 680 232 2,312 Exchange rate adjustment ...... (7) — (6) (9) (5) (27) Acquisitions ...... 82 — — 10 3 95 Additions ...... 193 — 76 73 32 374 Disposal of businesses ...... (35) — — (19) (5) (59) Disposals and transfers ...... 2 (2) (20) (56) (38) (114) At 31 July 2019 ...... 1,184 1 498 679 219 2,581 Accumulated depreciation and impairment losses At 1 August 2017 ...... 250 — 308 469 161 1,188 Exchange rate adjustment ...... — — (1) (1) — (2) Depreciation charge for the year ...... 28 — 31 60 26 145 Impairment charge for the year ...... 6 — — — 1 7 Disposals ...... (3) — (16) (27) (21) (67) Reclassification as held for sale ...... (22) — — (20) (3) (45) At 31 July 2018 ...... 259 — 322 481 164 1,226 Exchange rate adjustment ...... (2) — (3) (7) (4) (16) Depreciation charge for the year ...... 31 — 31 61 24 147 Disposal of businesses ...... (8) — — (9) (3) (20) Disposals and transfers ...... (2) — (12) (51) (40) (105) At 31 July 2019 ...... 278 — 338 475 141 1,232 Owned assets ...... 906 — 160 203 74 1,343 Assets under finance leases ...... —1 — 1 4 6 Net book value at 31 July 2019 ...... 906 1 160 204 78 1,349 Owned assets ...... 690 — 126 197 65 1,078 Assets under finance leases ...... — 3 — 2 3 8 Net book value at 31 July 2018 ...... 690 3 126 199 68 1,086

At 31 July 2019, the book value of property, plant and equipment that had been pledged as security for liabilities was $6 million (2018: $8 million).

F-55 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

15—Deferred tax assets and liabilities Deferred tax assets and liabilities, which are offset where the Group has a legally enforceable right to do so, are shown in the balance sheet after offset as follows:

2019 2018 $m $m Deferred tax assets ...... 164 130 Deferred tax liabilities ...... (56) (42) 108 88

The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year:

Goodwill and Share- Property, Retirement Trade and intangible based plant and benefit Tax other assets payments equipment obligations Inventories losses payables Other Total $m $m $m $m $m $m $m $m $m At 31 July 2017 ...... (65) 23 62 99 (111) 79 46 15 148 Credit/(charge) to income ...... 17 (2) (24) (44) 16 6 (24) 13 (42) Charge to other comprehensive income ...... — — — (17) — — — — (17) Credit to equity ...... — 1 — — — — — — 1 Acquisitions ...... (1) — — — — — — — (1) Transferred to held for sale ..... — — (2) — — — — — (2) Exchange rate adjustment ...... 2 1 (2) (2) — 2 — — 1 At 31 July 2018 ...... (47) 23 34 36 (95) 87 22 28 88 Credit/(charge) to income ...... 4 1 5 (4) (21) 1 18 43 47 Credit to other comprehensive income ...... ——— 6 ————6 Credit to equity ...... —1—— ————1 Acquisitions ...... (31) — (4) — 2 — — — (33) Disposal of businesses ...... ——— — ———11 Exchange rate adjustment ...... — — (4) 2 — — — — (2) At 31 July 2019 ...... (74) 25 31 40 (114) 88 40 72 108

Legislation has been enacted in the UK to reduce the standard rate of UK corporation tax from 19 per cent to 17 per cent with effect from 1 April 2020. Accordingly, the UK deferred tax assets and liabilities have predominantly been calculated based on a 17 per cent tax rate which materially reflects the rate for the period in which the deferred tax assets and liabilities are expected to reverse. Net deferred tax assets have been recognised on the basis that sufficient taxable profits are forecast to be available in the future to enable them to be utilised. An additional analysis of the deferred tax assets and liabilities has been provided by separating out ‘‘Trade and other payables’’ from ‘‘Other’’ to provide further details. In addition, the Group has unrecognised gross tax losses totalling $367 million (2018: $469 million) that have not been recognised on the basis that their future economic benefit is uncertain. These losses have no expiry date and relate predominantly to capital losses. No deferred tax liability has been recognised in respect of taxable temporary differences associated with unremitted earnings from the Group’s subsidiary undertakings. However, tax may arise on $436 million (2018: $408 million) of temporary differences but the Group is in a position to control the timing of their reversal and it is probable that such differences will not reverse in the foreseeable future.

F-56 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

16—Inventories

2019 2018 $m $m Goods purchased for resale ...... 2,997 2,680 Inventory provisions ...... (176) (164) Net inventories ...... 2,821 2,516

17—Trade and other receivables

Current 2019 2018 $m $m Trade receivables ...... 2,747 2,642 Less: provision for expected credit losses ...... (28) (32) Net trade receivables ...... 2,719 2,610 Other receivables ...... 143 135 Prepayments ...... 351 349 3,213 3,094 Non-current Other receivables ...... 340 328

Included in prepayments is $277 million (2018: $266 million) due in relation to supplier rebates where there is no right of offset against trade payable balances. Trade receivables have been aged with respect to the payment terms specified in the terms and conditions established with customers. The loss allowance for trade receivables by ageing category is as follows:

Less than More than Amounts six months six months At 31 July 2019 not yet due past due past due Total $m $m $m $m Expected credit loss rate ...... 0% 1% 100% Gross trade receivables ...... 1,934 799 14 2,747 Lifetime expected credit losses ...... (7) (7) (14) (28) Net trade receivables ...... 1,927 792 — 2,719

Less than More than Amounts six months six months At 31 July 2018 not yet due past due past due Total $m $m $m $m Expected credit loss rate ...... 1% 1% 100% Gross trade receivables ...... 1,795 834 13 2,642 Lifetime expected credit losses ...... (12) (7) (13) (32) Net trade receivables ...... 1,783 827 — 2,610

No contracts contain a significant financing component and payment from customers is typically due within 30 to 60 days. The contractual amount outstanding on trade receivables that were written off during the year and that are subject to enforcement activity was $12 million (2018: $9 million).

F-57 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

18—Cash and cash equivalents

2019 2018 $m $m Cash and cash equivalents ...... 1,133 833

Included in the balance at 31 July 2019 is an amount of $18 million (2018: $255 million) which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within bank overdrafts (note 21). These amounts are subject to a master netting arrangement. At 31 July 2019, cash and cash equivalents included $87 million (2018: $86 million) which is used to collateralise letters of credit on behalf of Wolseley Insurance Limited.

19—Assets held for sale

2019 2018 $m $m Properties awaiting disposal ...... 1 151 Assets held for sale ...... 1 151

At 31 July 2018 properties awaiting disposal principally comprised the Nordic property assets, which were retained following the disposal of the Nordic business, and properties in the UK which were in the process of being sold as a result of the business restructuring.

20—Trade and other payables

2019 2018 $m $m Current Trade payables ...... 2,885 2,597 Tax and social security ...... 112 108 Other payables ...... 116 97 Accruals and deferred income ...... 684 539 3,797 3,341 Non-current Other payables ...... 292 298

Trade payables are stated net of $44 million (2018: $32 million) due from suppliers with respect to supplier rebates where an agreement exists that allows these to be net settled. Accruals and deferred income includes $159 million (2018: $nil) payable in relation to the irrevocable and non-discretionary share buy back programme announced in July 2019.

21—Borrowings

2019 2018 Non- Non- Current current Total Current current Total $m $m $m $m $m $m Bank overdrafts ...... 47 — 47 375 — 375 Bank and other loans ...... ———2—2 Senior unsecured loan notes ...... 5 2,292 2,297 6 1,522 1,528 Total loans ...... 5 2,292 2,297 8 1,522 1,530 Total borrowings ...... 52 2,292 2,344 383 1,522 1,905

F-58 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

21—Borrowings (Continued) In October 2018, the Group successfully issued $750 million of 10 year 4.5% notes maturing in October 2028 in the USA 144a public debt market. The carrying value of the USPP senior unsecured loan notes of $1,547 million comprises a par value of $1,530 million and a fair value adjustment of $17 million (2018: $1,528 million, $1,530 million and $2 million respectively). Included in bank overdrafts at 31 July 2019 is an amount of $18 million (2018: $255 million) which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within cash and cash equivalents (note 18). These amounts are subject to a master netting arrangement. No bank loans were secured against trade receivables at 31 July 2019 (2018: $nil) as the trade receivables facility of $600 million was undrawn as at 31 July 2019 and 31 July 2018. Non-current loans are repayable as follows:

2019 2018 $m $m Due in one to two years ...... 282 5 Due in two to three years ...... — 283 Due in three to four years ...... 250 — Due in four to five years ...... 150 250 Due in over five years ...... 1,610 984 Total ...... 2,292 1,522

The Group applies fair value hedge accounting to debt of $355 million (2018: $355 million), swapping fixed interest rates into floating interest rates using a series of interest rate swaps. There have been no significant changes during the year to the Group’s policies on accounting for, valuing and managing the risk of financial instruments. These policies are summarised in note 1.

22—Financial instruments and financial risk management Financial instruments by measurement basis The carrying value of financial instruments by category as defined by IFRS 9 ‘‘Financial Instruments’’ is as follows:

2019 2018 $m $m Financial assets Financial assets at fair value through profit and loss ...... 22 17 Financial assets at fair value through other comprehensive income ...... 27 — Financial assets at amortised cost ...... 3,503 3,350 Financial liabilities Financial liabilities at fair value through profit and loss ...... — 19 Financial liabilities at amortised cost ...... 5,809 5,063

Financial instruments in the category ‘‘fair value through profit and loss’’ and ‘‘fair value through other comprehensive income’’ are measured in the balance sheet at fair value. Fair value measurements can be classified in the following hierarchy: • quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); • inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and

F-59 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

22—Financial instruments and financial risk management (Continued) • inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The Group’s derivatives are measured at fair value through profit and loss at 31 July 2019 and 31 July 2018 using level 2 inputs. The Group uses interest rate swaps to manage its exposure to interest rate movements on its borrowings and foreign exchange swaps to hedge cash flows in respect of committed transactions or to hedge its investment in overseas operations. The current element of derivative financial assets is $12 million (2018: $nil) and the non-current element is $10 million (2018: $17 million). The current element of derivative financial liabilities is $nil (2018: $2 million) and the non-current element is $nil (2018: $17 million). Total net derivative financial instruments is an asset of $22 million (2018: liability $2 million). No transfers between levels occurred during the current or prior year. The Group has made the irrevocable election to designate its investments in equity instruments as financial assets at fair value through other comprehensive income as this presentation is more representative of the nature of the Group’s investments. The fair value of the investments as at 31 July 2019 are measured using level 2 inputs. The investments are classified as non-current financial assets in the balance sheet. No dividends were received from these investments in the year. The Group’s other financial instruments are measured at amortised cost. Other receivables include an amount of $70 million (2018: $67 million) which has been discounted at a rate of 2.0 per cent (2018: 3.0 per cent) due to the long-term nature of the receivable. Other current assets and liabilities are either of short maturity or bear floating rate interest and their fair values approximate to book values. The only non-current financial assets or liabilities for which fair value does not approximate to book value are the USPP senior unsecured loan notes, which had a book value of $1,547 million (2018: $1,528 million) and a fair value (level 2) of $1,621 million (2018: $1,621 million).

F-60 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

22—Financial instruments and financial risk management (Continued) Disclosure of offsetting arrangements The financial instruments which have been offset in the financial statements are disclosed below:

Cash Gross Offset Financial pooling Net At 31 July 2019 Notes balances(1) amounts(2) statements(3) amounts(4) total(5) $m $m $m $m $m Financial assets Non-current assets Derivative financial assets ...... 10 — 10 — 10 Current assets Derivative financial assets ...... 23 (11) 12 — 12 Cash and cash equivalents ...... 18 1,133 — 1,133 (18) 1,115 1,166 (11) 1,155 (18) 1,137 Financial liabilities Current liabilities Derivative financial liabilities ...... 11 (11) — — — Borrowings ...... 21 52 — 52 (18) 34 Finance leases ...... 2— 2 — 2 Non-current liabilities Borrowings ...... 21 2,292 — 2,292 — 2,292 Finance leases ...... 4— 4 — 4 2,361 (11) 2,350 (18) 2,332 Closing net debt ...... 29 (1,195) — (1,195) — (1,195) At 31 July 2018 Financial assets Non-current assets Derivative financial assets ...... 31 (14) 17 — 17 Current assets Derivative financial assets ...... 23 (23) — — — Cash and cash equivalents ...... 18 833 — 833 (255) 578 887 (37) 850 (255) 595 Financial liabilities Current liabilities Derivative financial liabilities ...... 25 (23) 2 — 2 Borrowings ...... 21 383 — 383 (255) 128 Finance leases ...... 3 — 3 — 3 Non-current liabilities Derivative financial liabilities ...... 31 (14) 17 — 17 Borrowings ...... 21 1,522 — 1,522 — 1,522 Finance leases ...... 3 — 3 — 3 1,967 (37) 1,930 (255) 1,675 Closing net debt ...... 29 (1,080) — (1,080) — (1,080)

(1) The gross amounts of the recognised financial assets and liabilities under a master netting agreement, or similar arrangement. (2) The amounts offset in accordance with the criteria in IAS 32. (3) The net amounts presented in the Group balance sheet. (4) The amounts subject to a master netting arrangement, or similar arrangement, not included in (3).

F-61 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

22—Financial instruments and financial risk management (Continued) (5) The net amount after deducting the amounts in (4) from the amounts in (3).

Risk management policies The Group is exposed to market risks arising from its international operations and the financial instruments which fund them. The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk and liquidity risk. The Group has well-defined policies for the management of interest rate, liquidity, foreign exchange and counterparty exposures, which have been consistently applied during the financial years ended 31 July 2019 and 31 July 2018. By the nature of its business, the Group also has trade credit and commodity price exposures, the management of which is delegated to the operating businesses. There has been no change since the previous year in the major financial risks faced by the Group. Policies for managing each of these risks are regularly reviewed and are summarised below. When the Group enters into derivative transactions (principally interest rate swaps and foreign exchange contracts), the purpose of such transactions is to hedge certain interest rate and currency risks arising from the Group’s operations and its sources of finance. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments or speculative transactions be undertaken.

Capital structure and risk management To assess the appropriateness of its capital structure based on current and forecast trading, the Group’s principal measure of financial gearing is the ratio of net debt to adjusted EBITDA. The Group aims to operate with investment grade credit metrics and ensure this ratio remains within 1 to 2 times. The Group’s main borrowing facilities, with the exception of the $750 million USA 144a public debt issued in the year which is covenant free, contain a financial covenant limiting the ratio of net debt to adjusted EBITDA to 3.5:1. The reconciliation of opening to closing net debt is detailed in note 29. The Group’s sources of funding currently comprise cash flows generated from operations, equity contributed by shareholders and borrowings from banks and other financial institutions. In order to maintain or adjust the capital structure, the Group may pay a special dividend, return capital to shareholders, repurchase its own shares, issue new shares or sell assets to reduce debt.

Credit risk The Group provides sales on credit terms to most of its customers. There is an associated risk that customers may not be able to pay outstanding balances. At 31 July 2019, the maximum exposure to credit risk was $3,117 million (2018: $3,005 million). Each of the Group’s businesses have established procedures in place to review and collect outstanding receivables. Significant outstanding and overdue balances are reviewed on a regular basis and resulting actions are put in place on a timely basis. In some cases, protection is provided through credit insurance arrangements. All of the major businesses use professional and dedicated credit teams, in some cases field- based. Appropriate provisions are made for debts that may be impaired on a timely basis. Concentration of credit risk in trade receivables is limited as the Group’s customer base is large and unrelated. Accordingly, the Group considers that there is no further credit risk provision required above the current provision for impairment. The ageing of trade receivables is detailed in note 17. The Group has cash balances deposited for short periods with financial institutions and enters into certain contracts (such as interest rate swaps) which entitle the Group to receive future cash flows from financial institutions. These transactions give rise to credit risk on amounts due from counterparties with a maximum exposure of $1,089 million (2018: $429 million). This risk is managed by setting credit and settlement limits for a panel of approved counterparties. The limits are approved by the Treasury Committee and ratings are monitored regularly.

F-62 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

22—Financial instruments and financial risk management (Continued) Liquidity risk The Group maintains a policy of ensuring sufficient borrowing headroom to finance all investment and capital expenditure included in its strategic plan, with an additional contingent safety margin. The Group has estimated its anticipated contractual cash outflows (excluding interest income and income from derivatives), including interest payable in respect of its trade and other payables and bank borrowings, on an undiscounted basis. The principal assumptions are that floating rate interest is calculated using the prevailing interest rate at the balance sheet date and cash flows in foreign currency are translated using spot rates at the balance sheet date. These cash flows can be analysed by maturity as follows:

2019 2018 Trade Trade and Interest and Interest other on other on payables Debt debt Total payables Debt debt Total $m $m $m $m $m $m $m $m Due in less than one year ...... 3,133 2 85 3,220 2,829 5 68 2,902 Due in one to two years ...... 53 282 97 432 44 1 63 108 Due in two to three years ...... 26 1 86 113 59 281 52 392 Due in three to four years ...... 15 250 78 343 19 — 44 63 Due in four to five years ...... 14 150 74 238 16 250 40 306 Due in over five years ...... 184 1,601 295 2,080 160 1,001 92 1,253 Total ...... 3,425 2,286 715 6,426 3,127 1,538 359 5,024

The Group holds an £800 million (2018: £800 million) revolving credit facility that matures in September 2022, and a $600 million (2018: $600 million) securitisation facility that matures in December 2021. This facility is secured against the trade receivables of Ferguson Enterprises, LLC. In 2018 the Group held a bi-lateral facility of $290 million that matured in November 2018. All facilities were undrawn at 31 July 2019 and 31 July 2018. The maturity profile of the Group’s undrawn facilities is as follows:

2019 2018 $m $m Less than one year ...... — 290 Between one and two years ...... — — Between two and three years ...... 600 600 Between three and four years ...... 973 1,050 Between four and five years ...... — — After five years ...... — — Total ...... 1,573 1,940

At 31 July 2019 the Group has total available facilities, excluding bank overdrafts, of $3,870 million (2018: $3,470 million), of which $2,297 million is drawn (note 21) and $1,573 million is undrawn (2018: $1,530 million and $1,940 million respectively). The Group does not have any debt factoring or supply chain financing arrangements.

Foreign currency risk The Group has significant overseas businesses whose revenues are mainly denominated in the currencies of the countries in which the operations are located. Approximately 83 per cent of the Group’s revenue is in US dollars. Within each country it operates, the Group does not have significant transactional foreign currency cash flow exposures. However, those that do arise may be hedged with either forward contracts or currency options. The Group does not normally hedge profit translation exposure since such hedges have only a temporary effect.

F-63 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

22—Financial instruments and financial risk management (Continued) The Group’s policy is to adjust the currencies in which its net debt is denominated materially to match the currencies in which its trading profit is generated. Details of average exchange rates used in the translation of overseas earnings and of year-end exchange rates used in the translation of overseas balance sheets for the principal currencies used by the Group are shown in the five-year summary on page 160. The net effect of currency translation was to decrease revenue by $174 million (2018: increase by $229 million) and to decrease trading profit by $6 million (2018: increase by $7 million). These currency effects primarily reflect a movement of the average US dollar exchange rate against pounds sterling, euro and Canadian dollars as follows:

2019 2018 Strengthening Weakening of USD of USD Pounds sterling ...... 4.4% (6.4)% Euro ...... 4.8% (9.2)% Canadian dollars ...... 3.8% (4.0)%

The Group has net financial liabilities denominated in foreign currencies which have been designated as hedges of the net investment in its overseas subsidiaries. The principal value of those financial liabilities designated as hedges at the balance sheet date was $327 million (2018: $431 million). The gain on translation of these financial instruments into US dollars of $36 million (2018: $11 million loss) has been taken to the translation reserve. Net debt by currency was as follows:

Interest Finance Currency rate lease Cash and bought As at 31 July 2019 swaps obligations borrowings forward Total $m $m $m $m $m US dollars ...... 18 (3) (1,465) — (1,450) Pounds sterling ...... — (3) 85 3 85 Euro, Danish kroner and Swedish kronor ...... — — 29 — 29 Other currencies ...... — — 140 1 141 Total ...... 18 (6) (1,211) 4 (1,195)

Finance Currency Interest lease Cash and sold As at 31 July 2018 rate swaps obligations borrowings forward Total $m $m $m $m $m US dollars ...... — (2) (1,297) — (1,299) Pounds sterling ...... — (4) 101 — 97 Euro, Danish kroner and Swedish kronor ...... — — 23 — 23 Other currencies ...... — — 101 (2) 99 Total ...... — (6) (1,072) (2) (1,080)

Currency bought/(sold) forward comprises short-term foreign exchange contracts which were designated and effective as hedges of overseas operations.

Net investment hedging Exchange differences arising from the translation of the net investment in foreign operations are recognised in the translation reserve. Gains and losses on those hedging instruments designated as hedges of the net investments in foreign operations are recognised in equity to the extent that the hedging relationship is effective. These amounts are included in exchange differences on translation of foreign operations as stated in the Group statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised immediately in the income statement for the period. Gains and losses

F-64 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

22—Financial instruments and financial risk management (Continued) accumulated in the translation reserve are included in the income statement when the foreign operation is disposed of.

Interest rate risk At 31 July 2019, 80 per cent of loans were at fixed rates. The Group borrows in the desired currencies principally at rates determined by reference to short-term benchmark rates applicable to the relevant currency or market, such as LIBOR. Rates which reset at least every 12 months are regarded as floating rates and the Group then, if appropriate, considers interest rate swaps to generate the desired interest rate profile. The Group reviews deposits and borrowings by currency at Treasury Committee and Board meetings. The Treasury Committee gives prior approval to any variations from floating rate arrangements. The interest rate profile of the Group’s net debt including the effect of interest rate swaps is set out below:

2019 2018 Floating Fixed Total Floating Fixed Total $m $m $m $m $m $m US dollars ...... 384 (1,834) (1,450) (217) (1,082) (1,299) Pounds sterling ...... 88 (3) 85 101 (4) 97 Euro, Danish kroner and Swedish kronor ...... 29 — 29 23 — 23 Other currencies ...... 141 — 141 99 — 99 Total ...... 642 (1,837) (1,195) 6 (1,086) (1,080)

The Group’s weighted average cost of debt is 4.5 per cent. Fixed rate borrowings at 31 July 2019 carried a weighted average interest rate of 3.9 per cent fixed for a weighted average duration of 7.8 years (31 July 2018: 3.4 per cent for 6.3 years). Floating rate borrowings, excluding overdrafts, at 31 July 2019 had a weighted average interest rate of 3.7 per cent (31 July 2018: 3.5 per cent). The Group holds interest rate swap contracts comprising fixed interest receivable on $355 million of notional principal. These contracts expire between November 2023 and November 2026 and the fixed interest rates range between 3.3 per cent and 3.5 per cent. These swaps were designated as a fair value hedge against a portion of the Group’s outstanding debt. The table below shows the income statement movement on interest rate swaps at fair value through profit and loss:

2019 2018 $m $m At 1 August ...... — 26 Settled ...... (7) (9) Valuation gain credited/(loss charged) to the income statement ...... 25 (17) At 31 July ...... 18 —

Monitoring interest rate and foreign currency risk The Group monitors its interest rate and foreign currency risk by reviewing the effect on financial instruments over various periods of a range of possible changes in interest rates and exchange rates. The financial impact for reasonable approximation of possible changes in interest rates and exchange rates are as follows. The Group has estimated that an increase of one per cent in the principal floating interest rates to which it is exposed would result in a credit to the income statement of $6 million (2018: $nil). The Group has estimated that a weakening of the US dollar by 10 per cent against gross borrowings denominated in a foreign currency in which the Group does business would result in a charge to the translation reserve of $nil (2018: $4 million). The Group does not consider that there is a useful way of quantifying the Group’s exposure to any of the macroeconomic variables that might affect the collectability of receivables or the prices of commodities.

F-65 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

23—Provisions

Environmental Wolseley Other and legal Insurance Restructuring provisions Total $m $m $m $m $m At 31 July 2017 ...... 78 72 59 57 266 Utilised in the year ...... (3) (23) (38) (7) (71) Changes in discount rate ...... (4) — — — (4) Charge for the year ...... 12 24 31 12 79 Acquisition of businesses ...... — — — 4 4 Exchange rate adjustment ...... (1) 1 (1) 1 — At 31 July 2018 ...... 82 74 51 67 274 Utilised in the year ...... (5) (18) (22) (5) (50) Changes in discount rate ...... 5———5 (Credit)/charge for the year ...... (1) 22 13 7 41 Acquisition of businesses ...... 2———2 Exchange rate adjustment ...... (1) (1) (2) (3) (7) At 31 July 2019 ...... 82 77 40 66 265

Provisions have been analysed between current and non-current as follows:

Environmental Wolseley Other At 31 July 2019 and legal Insurance Restructuring provisions Total $m $m $m $m $m Current ...... 12 6 25 36 79 Non-current ...... 70 71 15 30 186 Total provisions ...... 82 77 40 66 265

Environmental Wolseley Other At 31 July 2018 and legal Insurance Restructuring provisions Total $m $m $m $m $m Current ...... 16 11 32 36 95 Non-current ...... 66 63 19 31 179 Total provisions ...... 82 74 51 67 274

The environmental and legal provision includes $70 million (2018: $69 million) for the estimated liability for asbestos litigation on a discounted basis using a long-term discount rate of 2.0 per cent (2018: 3.0 per cent). This amount has been actuarially determined as at 31 July 2019 based on advice from independent professional advisers. The Group has insurance that it currently believes significantly covers the estimated liability and accordingly an insurance receivable has been recorded in other receivables. Based on current estimates, the amount of performing insurance cover significantly exceeds the expected level of future claims and no material profit or cash flow impact is therefore expected to arise in the foreseeable future. Due to the nature of these provisions, the timing of any settlements is uncertain. Wolseley Insurance provisions represent an estimate, based on historical experience, of the ultimate cost of settling outstanding claims and claims incurred but not reported on certain risks retained by the Group (principally USA casualty and global property damage). Due to the nature of these provisions, the timing of any settlements is uncertain. Restructuring provisions include provisions for staff redundancy costs and future lease rentals on closed branches. The weighted average maturity of these obligations is approximately two years. Other provisions include warranty costs relating to businesses disposed of, rental commitments on vacant properties and dilapidations on leased properties. The weighted average maturity of these obligations is approximately two years.

F-66 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

24—Retirement benefit obligations (i) Long-term benefit plans provided by the Group The principal UK defined benefit plan is the Wolseley Group Retirement Benefits Plan which provides benefits based on final pensionable salaries. The assets are held in separate trustee administered funds. The Group contribution rate is calculated on the Projected Unit Credit Method and agreed with an independent consulting actuary. The plan was closed to new entrants in 2009, it was closed to future service accrual in December 2013, when it was replaced by a defined contribution plan, and during October 2016, it was closed for future non-inflationary salary accrual. In 2017, the Group secured a buy-in insurance policy with Pension Insurance Corporation for the UK defined benefit plan. This policy covered all of the benefits provided by the plan to pensioner members at the time. The insurance asset is valued as exactly equal to the insured liabilities. The deferred members of the plan at the time were not covered by this policy. In 2019, the Group offered some deferred members of the UK defined benefit plan an enhanced transfer value to settle their benefits accrued under the plan. The principal plans operated for USA employees are defined contribution plans, which are established in accordance with USA 401k rules. Companies contribute to both employee compensation deferral and profit sharing plans. The Group completed a buy out of its primary defined benefit plan in the USA in 2018. In Canada, defined benefit plans and a defined contribution plan are operated. Most of the Canadian defined benefit plans are funded. The contribution rate is calculated on the Projected Unit Credit Method as agreed with independent consulting actuaries. The Group operates a number of smaller defined benefit and defined contribution plans providing pensions or other long-term benefits such as long service or termination awards.

Investment policy The Group’s investment strategy for its funded post-employment plans is decided locally and, if relevant, by the trustees of the plan and takes account of the relevant statutory requirements. The Group’s objective for the investment strategy is to achieve a target rate of return in excess of the increase in the liabilities, while taking an acceptable amount of investment risk relative to the liabilities. This objective is implemented by using specific allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return. Most investment strategies have significant allocations to equities, with the intention that this will result in the ongoing cost to the Group of the post-employment plans being lower over the long term and within acceptable boundaries of risk. For the UK plan, the buy-in insurance policy represents approximately 32 per cent of the plan assets. For the remaining assets, the strategy is to invest in a balanced portfolio of equities, government bonds, corporate bonds and securitised fixed income. The investment strategy is subject to regular review by the trustees of the plan in consultation with the Company. For the non-UK plans, the investment strategy involves the investment in defined levels, predominantly equities and bonds.

Investment risk The present value of the UK defined benefit plan liability is calculated using a discount rate determined by reference to high quality corporate bond yields; if the actual return on plan assets is below this rate, it will decrease a net surplus or increase a net pension liability. Currently, the plan has a relatively balanced investment in equity securities, growth assets and debt instruments. Due to the long-term nature of the plan liabilities, the trustees of the pension plan consider the investment allocation an appropriate balance between higher return growth assets and lower risk assets which provide protection against the inflation and interest risk inherent in the plan’s underlying liabilities.

F-67 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

24—Retirement benefit obligations (Continued) Interest risk A decrease in the bond interest rate will increase the UK plan liability and this will be partially offset by an increase in the value of the plan’s debt investments.

Longevity risk The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of the UK plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

(ii) Financial impact of plans

As disclosed in the Group balance sheet 2019 2018 $m $m Non-current asset ...... 178 193 Current liability ...... — (4) Non-current liability ...... (25) (15) Total liability ...... (25) (19) Net asset ...... 153 174

2019 2018 Analysis of Group balance sheet net asset UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m Fair value of plan assets ...... 1,788 116 1,904 1,824 121 1,945 Present value of defined benefit obligations ..... (1,610) (141) (1,751) (1,631) (140) (1,771) Net asset/(liability) ...... 178 (25) 153 193 (19) 174

Analysis of total expense recognised in the Group income statement 2019 2018 $m $m Current service cost ...... — 1 Administration costs ...... 2 3 Exceptional settlement losses, past service costs and administrative costs (note 5) ...... 9 5 Charged to operating costs (note 11) ...... 11 9 (Credited)/charged to finance costs (note 6) ...... (5) 1 Total expense recognised in the Group income statement ...... 6 10

Expected employer contributions to the defined benefit plans for the year ending 31 July 2020 are $2 million. The triennial funding valuation of the UK defined benefit plan is currently in progress, which, once agreed between the trustees and the Group, is expected to lead to further special funding contributions.

F-68 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

24—Retirement benefit obligations (Continued) The remeasurement of the defined benefit net asset is included in the Group statement of comprehensive income.

Analysis of amount recognised in the Group statement of comprehensive income 2019 2018 $m $m The return on plan assets (excluding amounts included in net interest expense) ...... 134 22 Actuarial gain arising from changes in demographic assumptions ...... 38 12 Actuarial (loss)/gain arising from changes in financial assumptions ...... (210) 74 Actuarial gain/(loss) arising from experience adjustments ...... 2 (4) Tax...... 6 (17) Total amount recognised in the Group statement of comprehensive income ...... (30) 87

The cumulative amount of actuarial losses recognised in the Group statement of comprehensive income is $524 million (2018: $488 million). The fair value of plan assets is as follows:

2019 2018 UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m At 1 August ...... 1,824 121 1,945 1,766 217 1,983 Interest income ...... 48 4 52 46 5 51 Employer’s contributions ...... 34 1 35 97 13 110 Benefit payments ...... (110) (10) (120) (89) (8) (97) Settlement payments ...... —— —— (105) (105) Remeasurement gain: Return on plan assets (excluding amounts included in net interest expense) ...... 132 2 134 17 5 22 Currency translation ...... (140) (2) (142) (13) (6) (19) At 31 July ...... 1,788 116 1,904 1,824 121 1,945 Actual return on plan assets ...... 180 6 186 63 10 73

Employer’s contributions included special funding contributions of $32 million (2018: $99 million). The plan assets were invested in a diversified portfolio comprised of:

2019 2018 UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m Equity type assets quoted ...... 241 69 310 284 72 356 Government bonds quoted ...... 495 25 520 464 20 484 Corporate bonds quoted ...... 142 12 154 253 22 275 Real estate ...... 15 — 15 25 — 25 Cash ...... 85 — 85 61 — 61 Insurance policies ...... 580 — 580 626 — 626 Securitised fixed income ...... 154 — 154 —— — Other ...... 76 10 86 111 7 118 Total fair value of assets ...... 1,788 116 1,904 1,824 121 1,945

F-69 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

24—Retirement benefit obligations (Continued) The present value of defined benefit obligations is as follows:

2019 2018 UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m At 1 August ...... 1,631 140 1,771 1,762 249 2,011 Current service cost (including administrative costs) . 4— 4 31 4 Past service costs ...... 7— 7—— — Interest cost ...... 42 5 47 46 6 52 Benefit payments ...... (110) (10) (120) (89) (8) (97) Settlement and curtailment payments ...... —— —— (100) (100) Remeasurement (gain)/loss: Actuarial gain arising from changes in demographic assumptions ...... (38) — (38) (12) — (12) Actuarial loss/(gain) arising from changes in financial assumptions ...... 199 11 210 (74) — (74) Actuarial loss/(gain) arising from experience adjustments ...... 1 (3) (2) 4— 4 Currency translation ...... (126) (2) (128) (9) (8) (17) At 31 July ...... 1,610 141 1,751 1,631 140 1,771

An analysis of the present value of defined benefit obligations by funding status is shown below:

2019 2018 $m $m Amounts arising from wholly unfunded plans ...... 3 3 Amounts arising from plans that are wholly or partly funded ...... 1,748 1,768 Total present value of defined benefit obligations ...... 1,751 1,771

(iii) Valuation assumptions The financial assumptions used to estimate defined benefit obligations are:

2019 2018 UK Non-UK UK Non-UK %%%% Discount rate ...... 2.2 2.9 2.7 3.5 Inflation rate ...... 3.2 2.0 3.2 2.5 Increase to deferred benefits during deferment ...... 2.1 n/a 2.1 n/a Increases to pensions in payment ...... 2.8 2.0 2.8 2.0 Salary increases ...... 2.1 2.5 2.1 2.5 The life expectancy assumptions used to estimate defined benefit obligations are:

2019 2018 UK Non-UK UK Non-UK Years Years Years Years Current pensioners (at age 65)—male ...... 21 22 22 22 Current pensioners (at age 65)—female ...... 23 24 23 24 Future pensioners (at age 65)—male ...... 23 23 24 23 Future pensioners (at age 65)—female ...... 25 25 26 25 The weighted average duration of the defined benefit obligation is 22.0 years (2018: 21.5 years).

F-70 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

24—Retirement benefit obligations (Continued) (iv) Sensitivity analysis The Group considers that the most sensitive assumptions are the discount rate, inflation rate and life expectancy. The sensitivity analyses below shows the impact on the Group’s defined benefit plan net asset of reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

2019 2018 Change UK Non-UK Change UK Non-UK $m $m $m $m Discount rate ...... +0.25% 71 5 +0.25% 70 5 (0.25)% (77) (4) (0.25)% (76) (4) Inflation rate ...... +0.25% (64) — +0.25% (64) — (0.25)% 64 3 (0.25)% 66 — Life expectancy ...... +1 year (34) (3) +1 year (33) (4) The UK defined benefit plan holds a buy-in policy asset which exactly equals the insured liability. The above sensitivities are in respect of the Group’s remaining defined benefit plan net asset.

25—Share capital (i) Ordinary shares in issue 2019 2018 Number of Number of Allotted and issued shares shares Cost shares Cost $m $m 227 Number/cost of ordinary 11 /563 pence shares in Old Ferguson (million) ...... ——253 45 Number/cost of ordinary 10 pence shares in the Company (million) . 232 30 —— As at 31 July ...... 232 30 253 45

The authorised share capital of the Company is 500 million ordinary 10 pence shares (2018: the authorised 227 share capital of Old Ferguson is 439 million ordinary 11 /563 pence shares). All the allotted and issued shares, including those held by Employee Benefit Trusts and in Treasury, are fully paid or credited as fully paid. On 10 May 2019 pursuant to the Scheme of Arrangement under Article 125 of the Companies (Jersey) Law 1991 between Old Ferguson (the former holding company of the Group) and the Old Ferguson 227 shareholders, and as sanctioned by the Royal Court of Jersey, all the issued 11 /563 pence ordinary shares in Old Ferguson were cancelled and the same number of new shares were issued to the Company in consideration for the allotment to shareholders of one ordinary 10 pence share in the Company for each 227 ordinary 11 /563 pence share in Old Ferguson held at the scheme record time of 6.00pm on 9 May 2019.

F-71 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

25—Share capital (Continued) A summary of the movements in the year is detailed in the following table:

2019 2018 227 Number of ordinary 11 /563 pence shares in Old Ferguson in issue at 1 August ...... 252,602,622 266,636,106 Cancellation of Treasury shares ...... (20,611,650) (5) Effect of share consolidation ...... — (14,033,479) Group reconstruction ...... (231,990,972) — 227 Number of ordinary 11 /563 pence shares in Old Ferguson in issue at 31 July ...... — 252,602,622 Number of ordinary 10 pence shares in the Company in issue at 1 August . — Initial subscriber shares issued on 8 March 2019 ...... 2 Group reconstruction ...... 231,990,972 Redemption of initial subscriber shares ...... (2) New shares issued to settle options ...... 180,210 Number of ordinary 10 pence shares in the Company in issue at 31 July . . 232,171,182

During the year, the Company issued 180,210 (2018: nil) ordinary shares with a nominal value of 10 pence per share to participants in the long-term incentive plans and all-employee sharesave plans. The terms of issue were fixed on the respective dates of grant. The relevant dates of grants were between December 2010 and April 2018 and the market price on those dates was between £20.99 and £58.90. Consideration received, net of transaction costs, amounted to $9 million (2018: $nil).

(ii) Treasury shares The shares purchased under the Group’s buy back programmes have been retained in issue as Treasury shares and represent a deduction from equity attributable to shareholders of the Company. On 9 May 2019, prior to the Scheme of Arrangement, all Treasury shares held by Old Ferguson were cancelled. On 10 June 2019, the Group announced a $500 million share buy back programme. As at 31 July 2019, ordinary shares had been purchased for a consideration of $150 million and a further purchase of $159 million was irrevocably committed to.

F-72 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

25—Share capital (Continued) A summary of the movements in Treasury shares in the year is detailed in the following table:

2019 2018 Number of Number of shares Cost shares Cost $m $m Treasury shares held by Old Ferguson at 1 August ...... 20,777,872 1,380 13,382,580 743 Treasury shares purchased ...... ——9,178,209 675 Disposal of Treasury shares to settle share options ...... (166,222) (11) (646,988) (38) Cancellation of Treasury shares ...... (20,611,650) (1,369) (5) — Effect of share consolidation ...... ——(1,135,924) — Treasury shares held by Old Ferguson at 31 July ...... ——20,777,872 1,380 Treasury shares held by the Company at 1 August ...... —— Treasury shares purchased ...... 2,090,371 150 Disposal of Treasury shares to settle share options ...... (53,426) (4) Treasury shares held by the Company at 31 July ...... 2,036,945 146 Treasury shares purchase irrevocably committed to at 31 July ...... 159 Treasury shares total cost at 31 July ...... 305 Consideration received in respect of shares transferred to participants in certain long-term incentive plans and all-employee plans amounted to $3 million (2018: $24 million).

(iii) Own shares Two Employee Benefit Trusts have been established in connection with the Company’s discretionary share option plans and long-term incentive plans. A summary of the movements in own shares held in Employee Benefit Trusts is detailed in the following table:

2019 2018 Number of Number of shares Cost shares Cost $m $m Own shares in Old Ferguson at 1 August ...... 1,426,605 90 1,435,155 76 New shares purchased ...... 540,000 38 564,476 41 Exercise of share options ...... (396,192) (26) (492,870) (27) Effect of share consolidation ...... ——(80,156) — Group reconstruction ...... (1,570,413) (102) —— Own shares in Old Ferguson at 31 July ...... ——1,426,605 90 Own shares in the Company at 1 August ...... —— Group reconstruction ...... 1,570,413 102 Exercise of share options ...... (6,635) — Own shares in the Company at 31 July ...... 1,563,778 102

Consideration received in respect of shares transferred to participants in the discretionary share option plans and long-term incentive plans amounted to $nil (2018: $nil). At 31 July 2019, the shares held in the trusts had a market value of $117 million (2018: $113 million). Dividends due on shares held by the Employee Benefit Trusts are waived in accordance with the provisions of the trust deeds.

F-73 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

26—Reconciliation of profit to cash generated from operations Profit for the year is reconciled to cash generated from continuing and discontinued operations as follows:

2019 2018 $m $m Profit for the year attributable to shareholders ...... 1,108 1,267 Net finance costs ...... 70 57 Share of profit after tax of associates ...... (2) (2) Gain on disposal of interests in associates ...... (3) — Impairment of interests in associates ...... 9 122 Tax charge ...... 267 377 Profit on disposal and closure of businesses and revaluation of assets held for sale .... (53) (407) Amortisation and impairment of goodwill and acquired intangible assets ...... 110 65 Amortisation and impairment of non-acquired intangible assets ...... 31 28 Depreciation and impairment of property, plant and equipment ...... 147 152 Profit on disposal of property, plant and equipment and assets held for sale ...... (7) (6) Increase in inventories ...... (172) (102) Increase in trade and other receivables ...... (132) (351) Increase in trade and other payables ...... 227 208 Decrease in provisions and other liabilities ...... (25) (120) Share-based payments ...... 34 35 Cash generated from operations ...... 1,609 1,323

27—Acquisitions The Group acquired the following businesses during the year ended 31 July 2019. All these businesses are engaged in the distribution of plumbing and heating products and were acquired to support growth in the USA and Canada. All transactions have been accounted for by the acquisition method of accounting.

Date of Country of Shares/asset Name acquisition incorporation deal % acquired Jones Stephens ...... August 2018 USA Shares 100 Action Automation, Inc...... August 2018 USA Assets 100 Millennium Lighting, Inc...... August 2018 USA Shares 100 Grand Junction Pipe & Supply ...... September 2018 USA Assets 100 James Electric Motor Services Ltd...... September 2018 Canada Shares 100 Dogwood Building Supply ...... October 2018 USA Assets 100 Capital Distributing(1) ...... October 2018 USA Assets 100 Robertson Supply, Inc...... November 2018 USA Assets 100 Wallwork Bros., Inc...... December 2018 USA Assets 100 Blackman Plumbing Supply(2) ...... December 2018 USA Shares 100 James Martin Signature Vanities(3) ...... January 2019 USA Shares 100 Kitchen Art of South Florida, LLC ...... February 2019 USA Assets 100 Mission Valley Pipe & Supply, Inc...... June 2019 USA Assets 100 Action Plumbing Supply Co...... July 2019 USA Assets 100 Innovative Soil Solutions LLC ...... July 2019 USA Assets 100

(1) The acquisition comprised of 2 legal entities. (2) The acquisition comprised of 6 legal entities. (3) The acquisition comprised of 2 legal entities.

F-74 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

27—Acquisitions (Continued) The assets and liabilities acquired and the consideration for all acquisitions in the year are as follows:

Provisional fair values acquired $m Intangible assets Customer relationships ...... 202 Trade names and brands ...... 19 Other ...... 3 Property, plant and equipment ...... 95 Inventories ...... 122 Trade and other receivables ...... 93 Cash, cash equivalents and bank overdrafts ...... 11 Obligations under finance leases ...... (3) Trade and other payables ...... (71) Deferred tax ...... (33) Provisions ...... (2) Total ...... 436 Goodwill arising ...... 259 Consideration ...... 695 Satisfied by: Cash ...... 656 Deferred consideration ...... 39 Total consideration ...... 695

The fair values acquired are provisional figures, being the best estimates currently available. Further adjustments may be necessary when additional information is available for some of the judgemental areas. The goodwill arising on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Group has gained access and additional profitability and operating efficiencies available in respect of existing markets. The acquisitions contributed $456 million to revenue, $22 million to trading profit and $19 million loss to the Group’s operating profit for the period between the date of acquisition and the balance sheet date. It is not practicable to disclose profit before and after tax, as the Group manages its borrowings as a portfolio and cannot attribute an effective borrowing rate to an individual acquisition. If each acquisition had been completed on the first day of the financial year, continuing revenue would have been $22,241 million and continuing trading profit would have been $1,625 million. It is not practicable to disclose profit before tax or profit attributable to shareholders of the Company, as stated above. It is also not practicable to disclose operating profit as the Group cannot estimate the amount of intangible assets that would have been acquired at a date other than the acquisition date. The net outflow of cash in respect of the purchase of businesses is as follows:

2019 2018 $m $m Purchase consideration ...... 656 376 Deferred and contingent consideration in respect of prior year acquisitions ...... 12 47 Cash consideration ...... 668 423 Cash, cash equivalents and bank overdrafts acquired ...... (11) (7) Net cash outflow in respect of the purchase of businesses ...... 657 416

F-75 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

28—Disposals During the year ended 31 July 2019, the Group disposed of the following businesses:

Name Country Date of disposal Shares/asset deal Ferguson Property Rover A/S ...... Denmark November 2018 Shares Brokvarteret Komplementar ApS ...... Denmark November 2018 Shares Brokvarteret P/S ...... Denmark November 2018 Shares Wasco Holding B.V...... Netherlands January 2019 Shares Luxury For Less Limited (t/a Soak.com) ...... United Kingdom March 2019 Shares Soborg Property Denmark A/S ...... Denmark March 2019 Shares The Group recognised a total gain on disposals of $57 million as follows:

2019 Continuing Discontinued operations operations Group $m $m $m Consideration received ...... 109 110 219 Net assets disposed of ...... (76) (72) (148) Non-controlling interest disposed of ...... (1) — (1) Disposal costs and provisions ...... (10) (2) (12) Recycling of deferred foreign exchange losses ...... 1 (2) (1) Gain on disposal ...... 23 34 57

The net inflow of cash in respect of the disposal of businesses is as follows:

2019 Continuing Discontinued operations operations Group $m $m $m Cash consideration received for current year disposals (net of cash disposed of) ...... 108 110 218 Cash paid in respect of prior year disposals ...... — (1) (1) Disposal costs paid ...... (5) (11) (16) Net cash inflow ...... 103 98 201

F-76 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

29—Reconciliation of opening to closing net debt

Liabilities from financing activities Cash and Total cash, cash Derivative Obligations cash Bank equivalents financial under equivalents overdrafts and bank instruments Loans finance (note 18) (note 21) overdrafts (note 22) (note 21) leases Net debt $m $m $m $m $m $m $m At 1 August 2017 ...... 2,525 (1,982) 543 26 (1,266) (9) (706) Cash movements Proceeds from loans and derivatives ...... — (9) (450) — (459) Repayments of loans ...... — — 261 — 261 Finance lease capital payments ...... — — — 4 4 Changes in net debt due to disposal of businesses .... (42) — 7 — (35) Changes in net debt due to acquisition of businesses . . 7 — — — 7 Held for sale movements . . . 43 — (105) — (62) Other cash flows ...... (86) — — — (86) Non-cash movements New finance leases ...... — — — (1) (1) Fair value and other adjustments ...... — (17) 16 — (1) Exchange movements ...... (7) (2) 7 — (2) At 31 July 2018 ...... 833 (375) 458 (2) (1,530) (6) (1,080) Cash movements Proceeds from loans and derivatives ...... — (7) (750) — (757) Repayments of loans ...... —— 2—2 Finance lease capital payments ...... ———33 Changes in net debt due to disposal of businesses .... (1) — — — (1) Changes in net debt due to acquisition of businesses . . 11 — — (3) 8 Other cash flows ...... 628 — — — 628 Non-cash movements Fair value and other adjustments ...... — 25 (26) — (1) Exchange movements ...... (10) 6 7 — 3 At 31 July 2019 ...... 1,133 (47) 1,086 22 (2,297) (6) (1,195)

30—Related party transactions In the year ended 31 July 2019, the Group purchased goods and services on an arms length basis totalling $7 million from and owed $nil in respect of these goods and services to a company that is controlled by another company in respect of which one of the Group’s Non Executive Directors is the chief executive officer. There are no other related party transactions requiring disclosure under IAS 24 ‘‘Related Party Disclosures’’ in the years ended 31 July 2019 and 31 July 2018 other than the compensation of key management personnel which is set out in note 11.

F-77 Notes to the consolidated financial statements (Continued) Year ended 31 July 2019

31—Operating lease commitments Future minimum lease payments under non-cancellable operating leases for the following periods are:

2019 2018 $m $m Less than one year ...... 342 328 After one year and less than five years ...... 631 591 After five years ...... 153 162 Total operating lease commitments ...... 1,126 1,081

Operating lease payments mainly represent rents payable for properties. Some of the Group’s operating lease arrangements have renewal options and rental escalation clauses. No arrangements have been entered into for contingent rental payments. The commitments shown above include commitments for onerous leases which have already been provided for. At 31 July 2019, provisions include an amount of $29 million (2018: $32 million) in respect of minimum lease payments for such onerous leases net of sublease income expected to be received. The total minimum sublease income expected to be received under non-cancellable subleases at 31 July 2019 is $3 million (2018: $6 million).

32—Contingent liabilities Group companies are, from time to time, subject to certain claims and litigation arising in the normal course of business in relation to, among other things, the products that they supply, contractual and commercial disputes and disputes with employees. Provision is made if, on the basis of current information and professional advice, liabilities are considered likely to arise. In the case of unfavourable outcomes, the Group may benefit from applicable insurance protection.

Warranties and indemnities in relation to business disposals Over the past few years, the Group has disposed of a number of non-core businesses and various Group companies have provided certain standard warranties and indemnities to acquirers and other third parties. Provision is made where the Group considers that a liability is likely to crystallise, though it is possible that claims in respect of which no provision has been made could crystallise in the future. Group companies have also made contractual commitments for certain property and other obligations which could be called upon in an event of default. As at the date of this report, there are no significant outstanding claims in relation to business disposals.

Environmental liabilities The operations of certain Group companies are subject to specific environmental regulations. From time to time, the Group conducts preliminary investigations through third parties to assess potential risks including potential soil or groundwater contamination of sites. Where an obligation to remediate contamination arises, this is provided for, though future liabilities could arise from sites for which no provision is made.

Outcome of claims and litigation The outcome of claims and litigation to which Group companies are party cannot readily be foreseen as, in some cases, the facts are unclear, further time is needed to assess properly the merits of the case, or they are part of continuing legal proceedings. However, based on information currently available, the Directors consider that the cost to the Group of an unfavourable outcome arising from such litigation is not expected to have a material adverse effect on the financial position of the Group.

33—Post-balance sheet events Since the year-end, the Group has announced its intention to demerge its UK operations, subject to shareholder approval. On completion of the transaction Wolseley UK will become an independent listed company.

F-78 Independent auditor’s report to the members of Ferguson plc Report on the audit of the financial statements Opinion In our opinion: • the financial statements of Ferguson plc (the ‘‘Company’’) and its subsidiaries (the ‘‘Group’’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 July 2019 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘‘IFRSs’’) as adopted by the European Union; • the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 ‘‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’’; and • the financial statements have been properly prepared in accordance with the requirements of Companies (Jersey) Law, 1991. We have audited the financial statements which comprise: • the Group and Company income statements; • the Group statement of comprehensive income; • the Group and Company statements of changes in equity; • the Group and Company balance sheets; • the Group cash flow statement; • the notes to the consolidated financial statements 1 to 33; and • the notes to the Company’s financial statements 1 to 13. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 102 ‘‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’’ (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘‘FRC’s’’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company. While the Company is not a public interest entity subject to European Regulation 537/2014, the Directors have decided that the Company should follow the same requirements as if that Regulation applied to the Company.

F-79 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Summary of our audit approach Key audit matters ...... The key audit matters that we identified in the current year were: • appropriateness of supplier rebates; and • inventory provision for slow-moving and obsolete inventory. Materiality ...... The materiality that we used for the Group financial statements was $70 million (2018: $65 million) which was determined on the basis of approximately 5% of profit before tax excluding exceptional items and impairment of interests in associates. Scoping ...... We have performed full scope audits of two components, being the USA and UK, as well as on Head Office entities and the consolidation process. We have performed an audit of certain specified account balances on one component, Canada. Full scope audits represent 99% of the Group’s revenue and 93% of the Group’s net assets. Significant changes in our approach ...... Our approach is consistent with the previous year with the exception of: • a change in the scope of our audit work in Canada from a full-scope audit to an audit of certain specified account balances (being revenue, cost of goods sold and inventory); and • the exclusion of the key audit matter relating to the accounting for the disposal of the Nordic businesses which was completed in the prior year. In addition, the Group has introduced a new parent company now called Ferguson plc; this introduction constitutes a group reconstruction and has been accounted for as a reverse acquisition in accordance with IFRS 3 ‘‘Business Combinations’’ and using merger accounting principles. See notes 1 and 25 for further information in relation to this. We have therefore included comparative information in relation to our scoping and materiality, which relates to the old parent company.

Conclusions relating to going concern, principal risks and viability statement Going concern We have reviewed the Directors’ statement in note 1 to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements. We considered as part of our risk assessment the nature of the Group, its business model and related risks including where relevant the impact of Brexit, the requirements of the applicable financial reporting framework and the system of internal control. We evaluated the Directors’ assessment of the Group’s ability to continue as a going concern, including challenging the underlying data and key assumptions used to make the assessment, and evaluated the Directors’ plans for future actions in relation to their going concern assessment. We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.

F-80 Principal risks and viability statement Based solely on reading the Directors’ statements and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to: • the disclosures on pages 47 to 53 that describe the principal risks and explain how they are being managed or mitigated; • the Directors’ confirmation on page 79 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or • the Directors’ explanation on page 48 as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to report whether the Directors’ statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Appropriateness of supplier rebates Key audit matter description As described in the Audit Committee report on page 69 as a significant judgement and the accounting policies in note 1 to the 7MAY202019104392 financial statements, the Group recognises a reduction in cost of sales as a result of amounts receivable from suppliers in the form of rebate arrangements. Where the rebate arrangements are non-tiered arrangements (flat rate), there is limited judgement. However, a proportion of the rebate arrangements comprise annual tiered volume rebates, for which the end of the period is often non-coterminous with the Group’s year-end. Notes 17 and 20 to the financial statements disclose the quantum of accrued supplier rebates at year-end. There is complexity in supplier rebates which give rise to management judgement and scope for potential fraud or error in accounting for this income. Judgement is required in estimating the expected level of rebates for the rebate year, driven by the forecast purchase volumes. This requires a detailed understanding of the specific contractual arrangements themselves as well as complete and accurate source data to apply the arrangements to. The risk relates to the US business given the accrued tiered arrangements in UK and Canada are not material.

F-81 Appropriateness of supplier rebates How the scope of our audit Our procedures on supplier rebates included: responded to the key audit • evaluating the design and implementation of the controls matter relating to supplier rebates; 7MAY202019104896 • making inquiries of members of management responsible either for buying decisions or managing vendor relationships to supplement our understanding of the key contractual rebate arrangements; • testing the accuracy of the amounts recognised by agreeing a sample to individual supplier agreements; • circularising a sample of suppliers to test whether the arrangements recorded were complete; • testing the completeness and accuracy of the inputs to the calculations for recording supplier rebates by agreement to supporting evidence, including historical volume data; • challenging the assumptions underlying management’s estimates of purchase volumes including looking at the historical accuracy of previous estimates and historical purchase trends; • recalculating the rebate recognised for a sample of suppliers; • considering the adequacy of rebate related disclosure within the Group’s financial statements; • holding discussions with management to understand if there has been any whistleblowing; and • testing a sample of rebate receivables to cash receipts, where relevant, to test the recoverability of amounts recorded. Key observations The Group has improved its estimation methodology during the year to reflect recent experience of achieving tiered rebates. We consider 7MAY202019104776 the Group’s estimation methodology to be prudent based on a number of factors, including a look back at historical cash receipts. However, the methodology is consistently applied year-on-year and the understatement of rebate income is not material to the financial position or the reported financial result as at 31 July 2019.

Inventory provision for slow-moving and obsolete inventory Key audit matter description The Group had inventories of $2,821 million at 31 July 2019, held in distribution centres, warehouses and numerous branches, and across 7MAY202019104392 multiple product lines. Details of its valuation are included in the Audit Committee report on page 69 and the accounting policies in note 1 to the consolidated financial statements. Inventories are carried at the lower of cost and net realisable value. As a result, the Directors apply judgement in determining the appropriate values for slow-moving or obsolete items. As outlined in note 16 to the consolidated financial statements, inventories are net of a provision of $176 million which is primarily driven by comparing the level of inventory held to future projected sales. We consider the assessment of inventory provisions to require judgement based on the size of the inventories balance held at year-end and the manual intervention required in the calculation. There is risk that the provision may be overstated.

F-82 Inventory provision for slow-moving and obsolete inventory How the scope of our audit We challenged the appropriateness of management’s assumptions responded to the key audit applied in calculating the value of the inventory provisions through a matter range of procedures performed across the US and UK businesses, as relevant. This included: 7MAY202019104896 • evaluating the design and implementation of relevant inventory provision controls operating across the Group, including those at a sample of distribution centres, warehouses and branches; • performing analytics to determine whether there is any significant change in the product lines requiring provision and whether there is any indication the provision may be overstated as a result; • forming an expectation of the inventory obsolescence reserve at year-end based on prior year ratios; • testing the completeness and accuracy of data included in the provision models by attending a sample of stock counts and by agreeing a sample of historic demand to supporting evidence of the sale; • extending management’s model to include older historic data and extrapolating the demand trend-lines to assess whether management’s assumptions do not result in a material difference in the level of provision required; and • comparing the net realisable value, obtained through a detailed review of sales subsequent to the year-end, to the cost price of a sample of inventories and comparison to the associated provision to assess whether inventory provisions are complete. Key observations We consider the Group’s provisioning methodology to be prudent when compared with historical levels of inventory write-offs. 7MAY202019104776 However, the methodology is consistently applied year-on-year and our estimate of the potential overstatement of the provision is not material to the financial position or the reported financial result as at 31 July 2019.

Our application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

F-83 Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements Company financial statements Materiality ...... $70 million (2018: $65 million) $28 million (2018: $26 million) Basis for determining materiality ...... Approximately 5% of profit Materiality was determined on before tax excluding exceptional the basis of the Company’s net items and impairment of assets. This was then capped at interests in associates. 40% of Group materiality. The profit before tax excluding exceptional items and impairment of interests in associates was $1,424 million, which was $100 million higher than statutory profit. The exceptional items we excluded from our determination are explained further in note 5. We have also excluded impairment of interests in associates. These amounts were excluded to normalise for items which are considered significant by virtue of their nature, size or incidence. Rationale for the benchmark applied ...... Profit before tax is a key metric The entity is non-trading and for users of the financial contains investments in all of the statements and adjusting for Group’s trading components and exceptional items and as a result, we have determined impairment of interests in net assets for the current year to associates is to reflect the be the appropriate basis. manner in which business performance is reported and assessed by external users of the financial statements.

Group materiality $65m

$1,391m $65m Component materiality range $24m to $48m Audit Committee reporting threshold $3m

PHT excluding exceptionals and impairment of interests in associates Group 7MAY202019104128materiality We agreed with the Audit Committee that we would report to them all audit differences in excess of $3.5 million (2018: $3.3 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

F-84 Based on that assessment we focused our Group audit scope primarily on the audit work performed at the two key components in the USA and the UK. Full scope audits were performed in these two components by local component auditors under the direction and supervision of the Group audit team, as was the case in the prior year. The scope of work performed on one component, Canada, which is performed by a local component team under the direction and supervision of the Group audit team, has reduced this year to an audit of specified account balances (being revenue, cost of goods sold and inventory) based on its contribution to the Group’s results. Our audit work on the three components was executed at levels of materiality applicable to each individual entity which were lower than Group materiality and ranged from $28.0 million to $59.5 million (2018: $26.0 million to $55.3 million). Of continuing results, the full scope procedures provided coverage of 99% of revenue (2018: 99%), 96% (2018: 99%) of the profit before tax and 93% (2018: 98%) of the net assets. At the Company level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified account balances. The Company is located in the UK and is audited directly by the Group audit team. The Group audit team continued to follow a programme of planned visits designed to enhance our oversight of the component teams. The Lead Audit Partner, and other senior members of the Group team visited the USA and UK locations. A senior member of the Group audit team visited Canada. During our visits, we attended key meetings with component management and auditors, and reviewed detailed component audit work papers. In addition to the planned program of visits, planning meetings were also held with key component audit teams. The purpose of these planning meetings was to ensure a good level of understanding of the Group’s businesses, its core strategy and a discussion of the significant risks. As part of our oversight of the component teams we sent detailed instructions, included them in our team briefings and discussed their risk assessment. We also provided direction on enquiries made by the component auditors through online and telephone conversations. All the findings noted were discussed with the component auditors in detail and further procedures to be performed were issued where relevant.

Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that: • Fair, balanced and understandable—the statement given by the Directors that they consider the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or • Audit Committee reporting—the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or • Directors’ statement of compliance with the UK Corporate Governance Code—the parts of the Directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in

F-85 accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. We have nothing to report in respect of these matters.

Responsibilities of the Directors As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Details of the extent to which the audit was considered capable of detecting irregularities, including fraud, are set out below. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Extent to which the audit was considered capable of detecting irregularities, including fraud We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following: • enquiring of management, Internal Audit, and the Audit Committee, including obtaining and reviewing supporting documentation, concerning the Group’s policies and procedures relating to: • identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; • detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and • the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations. • discussing among the engagement team including the USA, UK and Canadian component audit teams and involving relevant internal specialists, including tax, treasury, valuations and IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in relation to supplier rebates given the complexity of the annual tiered volume rebates and manual adjustments to revenue; and • obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations of the Group. The key laws and regulations we considered in

F-86 this context included the UK Companies Act, Jersey Law, Listing Rules, pensions legislation and tax legislation.

Audit response to risks identified As a result of performing the above, we identified the appropriateness of supplier rebates as a key audit matter. The key audit matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that key audit matter. Our procedures to respond to risks identified included the following: • reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations discussed above; • enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims; • profiling the manual revenue postings made and tested the appropriateness of a sample that met certain risk criteria; • performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • reading minutes of meetings of those charged with governance, reviewing Internal Audit reports and reviewing correspondence with tax authorities; and • in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Report on other legal and regulatory requirements Opinions on other matters prescribed by our engagement letter In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006 as if that Act applied to the Company. In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic report and the Directors’ Report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and of the Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ Report.

Matters on which we are required to report by exception Adequacy of explanations received and accounting records • Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • proper accounting records have not been kept by the Company, or proper returns adequate for our audit have not been received from branches not visited by us; or • the Company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters.

F-87 Directors’ remuneration We are also required to report if in our opinion certain disclosures of Directors’ remuneration that would be required under the UK Companies Act 2006 have not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns. We have nothing to report arising from these matters.

Other matters Auditor tenure Following the recommendation of the Audit Committee, we were appointed by the Company on 12 November 2015 to audit the financial statements for the year ending 31 July 2016 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 4 years, covering the years ending 31 July 2016 to 31 July 2019.

Consistency of the audit report with the additional report to the Audit Committee Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).

Use of our report This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and/or those further matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

/s/ IAN WALLER Ian Waller (Senior statutory auditor) For and on behalf of Deloitte LLP Recognised Auditor London, UK 30 September 2019

F-88 Group income statement Year ended 31 July 2018

2018 Restated(1) 2017 Before Exceptional Before Exceptional exceptional items exceptional items Notes items (note 5) Total items (note 5) Total $m $m $m $m $m $m Revenue ...... 3 20,752 — 20,752 19,284 — 19,284 Cost of sales ...... (14,689) (19) (14,708) (13,698) (3) (13,701) Gross profit ...... 6,063 (19) 6,044 5,586 (3) 5,583 Operating costs: amortisation of acquired intangible assets ...... (65) — (65) (81) — (81) other ...... (4,556) (63) (4,619) (4,245) 221 (4,024) Operating costs ...... (4,621) (63) (4,684) (4,326) 221 (4,105) Operating profit ...... 3, 4 1,442 (82) 1,360 1,260 218 1,478 Net finance costs ...... 6 (53) — (53) (54) — (54) Share of profit/(loss) after tax of associates ...... 15 2— 2 (1) — (1) Impairment of interests in associates . . 15 (122) — (122) —— — Profit before tax ...... 1,269 (82) 1,187 1,205 218 1,423 Tax...... 7 (361) 15 (346) (342) (28) (370) Profit from continuing operations .... 908 (67) 841 863 190 1,053 Profit/(loss) from discontinued operations ...... 8 22 404 426 (60) (73) (133) Profit for the year attributable to shareholders of the Company ..... 930 337 1,267 803 117 920 Earnings per share ...... 10 Continuing operations and discontinued operations Basic earnings per share ...... 515.7c 366.1c Diluted earnings per share ...... 511.9c 363.5c Continuing operations only Basic earnings per share ...... 342.3c 419.0c Diluted earnings per share ...... 339.8c 416.0c Alternative performance measures Trading profit from ongoing operations ...... 2 1,507 1,307 Trading profit from non-ongoing operations ...... 2 — 34 Trading profit from continuing operations ...... 2, 3 1,507 1,341 Adjusted EBITDA ...... 2 1,687 1,519 Headline earnings per share ...... 2, 10 444.4c 366.1c

(1) All comparative information has been restated to be presented in US dollars, see note 1.

F-89 Group statement of comprehensive income Year ended 31 July 2018

Restated Notes 2018 2017 $m $m Profit for the year ...... 1,267 920 Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Exchange gain on translation of overseas operations(1) ...... 7 58 Exchange loss on translation of borrowings and derivatives designated as hedges of overseas operations(1) ...... (11) (8) Cumulative currency translation differences on disposals(1) ...... 194 11 Tax credit on items that may be reclassified to profit or loss(2) ...... 7 — 1 Items that will not be reclassified subsequently to profit or loss: Actuarial gain/(loss) on retirement benefit plans(2) ...... 25 104 (2) Tax charge on items that will not be reclassified to profit or loss(2) ...... 7, 25 (17) (1) Other comprehensive income for the year ...... 277 59 Total comprehensive income for the year ...... 1,544 979 Total comprehensive income/(expense) attributable to: Continuing operations ...... 926 1,106 Discontinued operations ...... 618 (127) Total comprehensive income for the year attributable to shareholders of the Company ...... 1,544 979

(1) Impacting the translation reserve. (2) Impacting retained earnings.

F-90 Group statement of changes in equity

Reserves Share Share Translation Treasury Own Retained Non-controlling Total Notes capital premium reserve shares shares earnings interest equity $m $m $m $m $m $m $m $m At 1 August 2016 restated .... 45 67 (807) (792) (92) 5,419 (3) 3,837 Profit for the year ...... — — — — — 920 — 920 Other comprehensive income/ (expense) ...... — — 61 — — (2) — 59 Total comprehensive income . . — — 61 — — 918 — 979 Purchase of own shares by Employee Benefit Trusts . . . 26 — — — — (8) — — (8) Issue of own shares by Employee Benefit Trusts . . . 26 — — — — 24 (24) — — Credit to equity for share- based payments ...... — — — — — 28 — 28 Tax relating to share-based payments ...... 7 — — — — — 5 — 5 Disposal of Treasury shares . . . 26 — — — 49 — (22) — 27 Dividends paid ...... 9 — — — — — (328) — (328) At 31 July 2017 restated ..... 45 67 (746) (743) (76) 5,996 (3) 4,540 Profit for the year ...... — — — — — 1,267 — 1,267 Other comprehensive income . . — — 190 — — 87 — 277 Total comprehensive income . . — — 190 — — 1,354 — 1,544 Purchase of own shares by Employee Benefit Trusts . . . 26 — — — — (41) — — (41) Issue of own shares by Employee Benefit Trusts . . . 26 — — — — 27 (27) — — Credit to equity for share- based payments ...... —— — ——35— 35 Tax relating to share-based payments ...... 7 —— — —— 8 — 8 Adjustment arising from change in non-controlling interest ...... — — — — — (16) 2 (14) Purchase of Treasury shares . . . 26 — — — (675) — — — (675) Disposal of Treasury shares . . . 26 — — — 38 — (14) — 24 Dividends paid ...... 9 — — — — — (1,364) — (1,364) At 31 July 2018 ...... 45 67 (556) (1,380) (90) 5,972 (1) 4,057

F-91 Group balance sheet As at 31 July 2018

Restated Restated Notes 2018 2017 2016 $m $m $m Assets Non-current assets Intangible assets: goodwill ...... 12 1,408 1,173 1,193 Intangible assets: other ...... 13 308 240 267 Property, plant and equipment ...... 14 1,086 1,068 1,897 Interests in associates ...... 15 64 164 — Financial assets ...... 11 15 30 Retirement benefit assets ...... 25 193 4— Deferred tax assets ...... 16 130 160 168 Trade and other receivables ...... 18 328 299 280 Derivative financial assets ...... 23 17 19 26 3,545 3,142 3,861 Current assets Inventories ...... 17 2,516 2,399 2,668 Trade and other receivables ...... 18 3,094 2,766 2,920 Current tax receivable ...... 10 3— Derivative financial assets ...... 23 — 715 Cash and cash equivalents ...... 19 833 2,525 1,243 6,453 7,700 6,846 Assets held for sale ...... 20 151 1,715 74 Total assets ...... 10,149 12,557 10,781 Liabilities Current liabilities Trade and other payables ...... 21 3,341 3,011 3,483 Current tax payable ...... 188 116 134 Derivative financial liabilities ...... 23 2 —— Bank loans and overdrafts ...... 22 383 2,150 927 Obligations under finance leases ...... 3 45 Provisions ...... 24 95 107 116 Retirement benefit obligations ...... 25 4 11 12 4,016 5,399 4,677 Non-current liabilities Trade and other payables ...... 21 298 238 216 Derivative financial liabilities ...... 23 17 —— Bank loans ...... 22 1,522 1,098 1,554 Obligations under finance leases ...... 3 536 Deferred tax liabilities ...... 16 42 12 86 Provisions ...... 24 179 159 176 Retirement benefit obligations ...... 25 15 21 183 2,076 1,533 2,251 Liabilities held for sale ...... 20 — 1,085 16 Total liabilities ...... 6,092 8,017 6,944 Net assets ...... 4,057 4,540 3,837 Equity Share capital ...... 26 45 45 45 Share premium ...... 67 67 67 Reserves ...... 3,946 4,431 3,728 Equity attributable to shareholders of the Company ...... 4,058 4,543 3,840 Non-controlling interest ...... (1) (3) (3) Total equity ...... 4,057 4,540 3,837

The accompanying notes are an integral part of these consolidated financial statements. The consolidated financial statements on pages 98 to 139 were approved and authorised for issue by the Board of Directors on 1 October 2018 and were signed on its behalf by:

/s/ JOHN MARTIN /s/ MIKE POWELL John Martin Mike Powell Group Chief Executive Group Chief Financial Officer

F-92 Group cash flow statement Year ended 31 July 2018

Restated Notes 2018 2017 $m $m Cash flows from operating activities Cash generated from operations ...... 27 1,323 1,410 Interest received ...... 9 4 Interest paid ...... (62) (71) Tax paid ...... (234) (393) Net cash generated from operating activities ...... 1,036 950 Cash flows from investing activities Acquisition of businesses (net of cash acquired) ...... 28 (416) (331) Disposals of businesses (net of cash disposed of) ...... 29 1,320 300 Purchases of property, plant and equipment ...... (265) (192) Proceeds from sale of property, plant and equipment and assets held for sale . 120 24 Purchases of intangible assets ...... (34) (32) Disposals of financial assets ...... — 22 Acquisition of associates ...... (35) — Dividends received from associates ...... 10 — Net cash generated from/(used in) investing activities ...... 700 (209) Cash flows from financing activities Purchase of own shares by Employee Benefit Trusts ...... 26 (41) (8) Purchase of Treasury shares ...... 26 (675) — Proceeds from the sale of Treasury shares ...... 26 24 27 Proceeds from borrowings and derivatives ...... 30 459 430 Repayments of borrowings ...... 30 (261) (587) Finance lease capital payments ...... 30 (4) (6) Dividends paid to shareholders ...... (1,359) (328) Net cash used by financing activities ...... (1,857) (472) Net cash (used)/generated ...... (121) 269 Effects of exchange rate changes ...... (7) (13) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... (128) 256 Cash, cash equivalents and bank overdrafts at the beginning of the year ..... 586 330 Cash, cash equivalents and bank overdrafts at the end of the year ...... 458 586

Restated Notes 2018 2017 $m $m Cash, cash equivalents and bank overdrafts at the end of the year in the Group balance sheet ...... 30 458 543 Cash, cash equivalents and bank overdrafts at the end of the year in assets held for sale ...... 20 — 43 Cash, cash equivalents and bank overdrafts at the end of the year ...... 458 586

F-93 Notes to the consolidated financial statements Year ended 31 July 2018

Functional and presentational currency The functional currency of the Company changed from pounds sterling to US dollars, as this is now the primary currency in which the Company’s financing activities and investment returns are denominated. The change was effective from 1 August 2017 and in line with IAS 21 ‘‘The Effects of Changes in Foreign Exchange Rates’’ has been accounted for prospectively from this date. The Group changed its presentational currency to US dollars, to better align with the Group’s operations, which generate the majority of revenue and profit in US dollars, and is expected to reduce the impact of foreign exchange rate movements. The change in presentational currency was effective from 1 August 2017 and, in line with IAS 21, is accounted for retrospectively. Financial information included in the consolidated financial statements for the years ended 31 July 2017 and 31 July 2016 previously reported in pounds sterling have been restated into US dollars using the procedures outlined below: • Assets and liabilities denominated in non-US dollar currencies were translated into US dollars at the closing rates of exchange on the relevant balance sheet date; • Non-US dollar income and expenditure were translated at the average rates of exchange prevailing for the relevant period; and • Share capital, share premium and the other reserves were translated at the historic rates of exchange prevailing on the date of each transaction. The cumulative translation reserve was set to nil at 1 August 2004, the date of transition to IFRS, and has been restated on the basis that the Group has reported in US dollars since that date. The exchange rates of US dollar to pounds sterling over the periods presented in this report are as follows:

2018 2017 2016 US dollar/pounds sterling translation rate Income statement ...... 0.74 0.79 0.68 Balance sheet ...... 0.76 0.76 0.76

Accounting developments and changes At the time of this report a number of accounting standards have been published and endorsed, but not yet applied. IFRS 9 ‘‘Financial Instruments’’ will be adopted by the Group on 1 August 2018. The standard makes changes to the classification and measurement of financial assets and liabilities, revises the requirements of hedge accounting and introduces a new impairment model for financial assets.

F-94 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) The Group has completed an assessment of the impact of IFRS 9 and has concluded there will be no material impact on the Group’s consolidated financial statements. IFRS 15 ‘‘Revenue from Contracts with Customers’’ will be adopted by the Group on 1 August 2018. The standard introduces revised principles for the recognition of revenue with a new five-step model that focuses on the transfer of control instead of a risks and rewards approach. The Group has completed an assessment of the impact of IFRS 15 and as the Group’s current revenue recognition is consistent with the passing of control under IFRS 15 it has been concluded that there will be no material impact on the Group’s consolidated financial statements. IFRS 16 ‘‘Leases’’ is effective for the Group for the year ending 31 July 2020. IFRS 16 represents a significant change to the treatment of leases in the lessee’s financial results. Lessees will be required to apply a single model to recognise a lease liability and asset for all leases, including those classified as operating leases under current accounting standards (note 32), unless the underlying asset has a low value or the lease term is 12 months or less. On adoption of IFRS 16 there will be a significant change to the consolidated financial statements, as each lease will give rise to a right of use asset, which will be depreciated on a straight-line basis, and a lease liability, with the related interest charge. This will replace existing lease balances on the balance sheet and charges to the income statement. The Group continues to assess the full impact of IFRS 16, however the impact will depend on the transition approach and the contracts in effect at the time of adoption. It is therefore not yet practicable to provide a reliable estimate of the financial impact on the Group’s consolidated financial statements.

Choices permitted by IFRS The Group has elected to apply hedge accounting to some of its financial instruments.

Pensions and other post-retirement benefits The Group operates defined benefit pension plans in the UK and in a number of overseas locations that are accounted for using methods that rely on actuarial assumptions to estimate costs and liabilities for inclusion in the consolidated financial statements. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. The cost of providing benefits is determined annually using the Projected Unit Credit Method, which includes actuarial assumptions for discount rates, expected salary and pension increases, inflation and life expectancy and are disclosed in note 25. The discount rate used is the yield at the valuation date on high quality corporate bonds that have a maturity approximating to the terms of the pension obligations. Significant judgement is required when setting the criteria from which the yield curve is derived.

F-95 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

Discontinued operations When the Group has disposed of or intends to dispose of a business component that represents a separate major line of business or geographical area of operations, it classifies such operations as discontinued. The post-tax profit or loss of the discontinued operations is shown as a single line on the face of the income statement, separate from the other results of the Group.

Foreign currencies Items included in the financial statements of the parent and of each of the Group’s subsidiary undertakings are measured using the currency of the primary economic environment in which the subsidiary undertaking operates (the ‘‘functional currency’’). The consolidated financial statements are presented in US dollars, which is the presentational currency of the Group and the functional currency of the parent company. The trading results of overseas subsidiary undertakings are translated into US dollars using the average rates of exchange ruling during the relevant financial period. The balance sheets of overseas subsidiary undertakings are translated into US dollars at the rates of exchange ruling at the period end. Exchange differences arising on the translation into US dollars of the net assets of these subsidiary undertakings are recognised in the currency translation reserve. In the event that a subsidiary undertaking which has a non-US dollar functional currency is disposed of, the gain or loss on disposal recognised in the income statement is determined after taking into account the cumulative currency translation differences that are attributable to the subsidiary undertaking concerned. Foreign currency transactions entered into during the year are translated into the functional currency of the entity at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All currency translation differences are taken to the income statement. Except as noted above, changes in the fair value of derivative financial instruments, entered into to hedge foreign currency net assets and that satisfy the hedging conditions of IAS 39 ‘‘Financial Instruments: Recognition and Measurement’’, are recognised in the currency translation reserve (see the separate accounting policy on derivative financial instruments).

Business combinations The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the

F-96 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) acquisition date, irrespective of the extent of any non-controlling interest. Acquisition-related costs are expensed as incurred. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Revenue Revenue is the amount receivable for the provision of goods and services falling within the Group’s ordinary activities, excluding intra-group sales, estimated and actual sales returns, trade and early settlement discounts, value added tax and similar sales taxes. The Group acts as principal for direct sales which are delivered directly to the customer by the supplier. Revenue from the provision of goods is recognised when the risks and rewards of ownership of goods have been transferred to the customer. The risks and rewards of ownership of goods are deemed to have been transferred when the goods are delivered to, or picked up by, the customer and title has passed to them. Revenue from services is recognised by reference to the stage of completion of the contract. Revenue from the provision of goods and services is only recognised when the amounts to be recognised are fixed or determinable and collectability is reasonably assured.

Cost of sales Cost of sales includes purchased goods, the cost of bringing inventory to its present location and condition and labour and overheads attributable to assembly and construction services.

Supplier rebates In line with industry practice, the Group has agreements (‘‘supplier rebates’’) with a number of its suppliers whereby volume-based rebates, marketing support and other discounts are received in connection with the purchase of goods for resale from those suppliers. Rebates relating to the purchase of goods for resale are accrued as earned and are recorded initially as a deduction in inventory with a subsequent reduction in cost of sales when the related product is sold.

F-97 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) A small proportion of volume-based rebates are subject to tiered targets where the rebate percentage increases as volumes purchased reach agreed targets within a set period of time. The majority of rebate agreements apply to purchases in a calendar year and therefore, for tiered rebates, judgement is required to estimate the rebate amount recorded in the income statement at the end of the period. The Group assesses the probability that targeted volumes will be achieved in the year based on forecasts which are informed by historical trading patterns, current performance and trends. This judgement is exercised consistently with historically insignificant true ups at the end of the period. An amount due in respect of supplier rebates is not recognised within the income statement until all the relevant performance criteria, where applicable, have been met and the goods have been sold to a third party.

Other rebates The Group has also entered into other rebate agreements which represent a smaller element of the Group’s overall supplier rebates and which are recognised in the income statement when all performance conditions have been fulfilled.

Supplier rebates receivable Supplier rebates are offset with amounts owing to each supplier at the balance sheet date and are included within trade payables, where the Group has the legal right to offset and net settles balances. Where the supplier rebates are not offset against amounts owing to a supplier, the outstanding amount is included within prepayments.

Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary undertaking at the date of acquisition. Goodwill on acquisitions of subsidiary undertakings is included within intangible assets. Goodwill is allocated to cash generating units or aggregations of cash generating units (together ‘‘CGUs’’) where synergy benefits are expected. CGUs are independent sources of income streams and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes. The Group considers that a CGU is a business unit because independent cash flows cannot be identified below this level. Goodwill is not amortised but is tested annually for impairment and carried at cost less accumulated impairment losses. For goodwill impairment testing purposes, no CGU is larger than the operating segments determined in accordance with IFRS 8 ‘‘Operating Segments’’. The recoverable amount of goodwill and acquired intangible assets is assessed on the basis of the value in use estimate for CGUs to which they are attributed. Where carrying value exceeds the recoverable amount a provision for the impairment is established with a charge included in the income statement. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

F-98 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) Intangible assets, primarily brands, trade names and customer relationships, acquired as part of a business combination are capitalised separately from goodwill and are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the reducing balance method for customer relationships and the straight-line method for other intangible assets. The cost of the intangible assets is amortised and charged to operating costs in the income statement over their estimated useful lives as follows:

Assets and disposal groups held for sale Assets are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. Where a group of assets and their directly associated liabilities are to be disposed of in a single transaction, such disposal groups are also classified as held for sale. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition and management must be committed to and have initiated a plan to sell the asset or disposal group which, when initiated, was expected to result in a completed sale within 12 months. Assets that are classified as held for sale are not depreciated. Assets or disposal groups that are classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

F-99 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) Inventories Inventories, which comprise goods purchased for resale, are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (‘‘FIFO’’) method or the average cost method as appropriate to the nature of the transactions in those items of inventory. The cost of goods purchased for resale includes import and custom duties, transport and handling costs, freight and packing costs and other attributable costs less trade discounts, rebates and other subsidies. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Provisions are made against slow-moving, obsolete and damaged inventories for which the net realisable value is estimated to be less than the cost. The risk of obsolescence of slow-moving inventory is assessed by comparing the level of inventory held to estimated future sales on the basis of historical experience.

Trade receivables Trade receivables are recognised initially at fair value and measured subsequently at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the loss is recognised in the income statement. Trade receivables are written off against the provision when recoverability is assessed as being remote. Subsequent recoveries of amounts previously written off are credited to the income statement.

Retirement benefit obligations Contributions to defined contribution pension plans and other post-retirement benefits are charged to the income statement as incurred. For defined benefit pension plans and other retirement benefits, the cost of providing benefits is determined annually using the Projected Unit Credit Method by independent qualified actuaries. The current and past service cost of defined benefit plans is recorded within operating profit. The net interest amount is calculated by applying the discount rate to the defined benefit net asset or liability at the beginning of the period. The pension plan net interest is presented as finance income or expense. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. The liability/asset recognised in the balance sheet in respect of defined benefit pension plans is the fair value of plan assets less the present value of the defined benefit obligation at the end of the reporting period. Where a plan is in a net asset position the asset is recognised where trustees do not have unilateral power to augment benefits prior to a wind-up.

F-100 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) Tax Current tax represents the expected tax payable (or recoverable) on the taxable income (or losses) for the year using tax rates enacted or substantively enacted at the balance sheet date and taking into account any adjustments arising from prior years. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Share-based payments Share-based incentives are provided to employees under the Group’s long-term incentive plans and all-employee sharesave plans. The Group recognises a compensation cost in respect of these plans that is based on the fair value of the awards, measured using Binomial and Monte Carlo valuation methodologies. For equity-settled plans, the fair value is determined at the date of grant (including the impact of any non-vesting conditions such as a requirement for employees to save) and is not subsequently remeasured unless the conditions on which the award were granted are modified. For cash-settled plans, the fair value is determined at the date of grant and is remeasured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognised on a straight-line basis over the vesting period.

F-101 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

1—Accounting policies (Continued) Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.

Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet to the extent that there is no legal right of offset or no practice of net settlement with cash balances. Cash which is not freely available to the Group is disclosed as restricted cash.

Derivative financial instruments Derivative financial instruments, in particular interest rate swaps and foreign exchange swaps, are used to manage the financial risks arising from the business activities of the Group and the financing of those activities. There is no trading activity in derivative financial instruments. At the inception of a hedging transaction involving the use of derivative financial instruments, the Group documents the relationship between the hedged item and the hedging instrument together with its risk management objective and the strategy underlying the proposed transaction. The Group also documents its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the hedge in offsetting movements in the fair values or cash flows of the hedged items. Derivative financial instruments are recognised as assets and liabilities measured at their fair values at the balance sheet date. Where derivative financial instruments do not fulfil the criteria for hedge accounting contained in IAS 39, changes in their fair values are recognised in the income statement. When hedge accounting is used, the relevant hedging relationships are classified as fair value hedges, cash flow hedges or net investment hedges. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the increase or decrease in its fair value attributable to the hedged risk and the resulting gain or loss is recognised in the income statement where, to the extent that the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to maturity. Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recognised directly in other comprehensive income. When the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in equity are either recycled to the income statement or, if the hedged item results in a non-financial asset, are recognised as adjustments to its initial carrying amount. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Borrowings Borrowings are recognised initially at the fair value of the consideration received net of transaction costs incurred. Borrowings are subsequently stated at amortised cost with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

F-102 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

Ongoing and non-ongoing The Group reports some financial measures net of businesses that have been disposed of, closed or classified as held for sale and uses the following terminology: Non-ongoing operations are businesses, which do not meet the criteria to be classified as discontinued operations under IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, which have been disposed of, closed or classified as held for sale. In 2017, the Group’s Swiss business, Tobler, and a small Industrial business in the USA, Endries, were classified as non-ongoing and subsequently sold during 2017. There are no businesses classified as non-ongoing in 2018. Ongoing operations are continuing operations excluding non-ongoing operations.

Non- Ongoing ongoing Continuing Revenue $m % growth $m $m Reported 2017 restated ...... 18,845 439 19,284 Impact of exchange rate movements ...... 229 — 229 Reported 2017 at 2018 exchange rates ...... 19,074 439 19,513 Organic growth ...... 1,439 7.5 — 1,439 Acquisitions ...... 239 1.3 — 239 Disposals ...... — — (439) (439) Growth at constant exchange rates ...... 1,678 8.8 (439) 1,239 Reported 2018 ...... 20,752 — 20,752

F-103 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

2—Alternative performance measures (Continued) Examples of items that are considered by the Directors for designation as exceptional items include, but are not limited to: • restructuring costs within a segment which are both material and incurred as part of a significant change in strategy or due to the closure of a large part of a business and are not expected to be repeated on a regular basis; • significant costs incurred as part of the integration of an acquired business and which are considered to be material; • gains or losses on disposals of businesses are considered to be exceptional in nature as they do not reflect the performance of the trading business; • material costs or credits arising as a result of regulatory and litigation matters; • gains or losses arising on significant changes to or closures of defined benefit pension plans are considered to be exceptional in nature as they do not reflect the performance of the trading business; and • other items which are material and considered to be non-recurring in nature and/or are not as a result of the underlying trading activities of the business. If provisions have been made for exceptional items in previous years, any reversal of these provisions is treated as exceptional. Exceptional items for the current and prior year are disclosed in note 5.

Ongoing gross margin The ratio of ongoing gross profit, excluding exceptional items, to ongoing revenue. Ongoing gross margin is used by management for assessing business unit performance and it is a key performance indicator for the Group (see page 28). A reconciliation of ongoing gross margin is provided below:

2018 Restated 2017 Gross Ongoing gross Gross Ongoing gross profit Revenue margin profit Revenue margin $m $m % $m $m % Continuing ...... 6,044 20,752 5,583 19,284 Non-ongoing ...... —— (138) (439) Exceptional items ...... 19 — 3— Ongoing ...... 6,063 20,752 29.2 5,448 18,845 28.9

F-104 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

2—Alternative performance measures (Continued) A reconciliation of trading profit to statutory operating profit and the calculation of ongoing trading margin are provided below:

2018 Restated 2017 Non- Non- Ongoing ongoing Continuing Ongoing ongoing Continuing $m growth % $m $m $m $m $m Trading profit 2017 ...... 1,307 34 1,341 Impact of exchange rate movements ...... 7—7 Trading profit 2017 at 2018 exchange rates . . 1,314 34 1,348 Growth at constant exchange rates ...... 193 14.7 (34) 159 Trading profit ...... 1,507 — 1,507 1,307 34 1,341 Amortisation of acquired intangible assets . . (65) — (65) (81) — (81) Exceptional items ...... (82) — (82) (47) 265 218 Operating profit ...... 1,360 — 1,360 1,179 299 1,478

Revenue, trading profit and trading margin by reportable segment are shown below. For information on our reportable segments see note 3.

Revenue Trading profit Trading margin Restated Restated Restated 2018 2017 2018 2017 2018 2017 $m $m $m $m % % USA...... 16,670 14,977 1,406 1,204 8.4 8.0 UK...... 2,568 2,548 73 96 2.8 3.8 Canada and Central Europe ...... 1,514 1,320 83 57 5.5 4.3 Central and other costs ...... — — (55) (50) — — Total ongoing operations ...... 20,752 18,845 1,507 1,307 7.3 6.9 USA...... — 216 — 20 Canada and Central Europe ...... — 223 — 14 Total non-ongoing operations ...... — 439 — 34 Continuing operations ...... 20,752 19,284 1,507 1,341

F-105 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

2—Alternative performance measures (Continued) assess the appropriateness of the Group’s financial gearing. A reconciliation of statutory operating profit to adjusted EBITDA is provided below:

2018 Restated 2017 Continuing Discontinued Group Continuing Discontinued Group $m $m $m $m $m $m Operating profit ...... 1,360 461 1,821 1,478 (141) 1,337 Exceptional items ...... 82 (402) (320) (218) 86 (132) Amortisation and impairment of goodwill and acquired intangible assets ...... 65 — 65 81 135 216 Trading profit ...... 1,507 59 1,566 1,341 80 1,421 Depreciation and impairment of property, plant and equipment .... 152 — 152 151 29 180 Amortisation and impairment of non-acquired intangible assets ..... 28 — 28 27 4 31 Adjusted EBITDA ...... 1,687 59 1,746 1,519 113 1,632

Headline profit after tax and headline earnings per share Headline profit after tax is calculated as the profit from continuing operations after tax, before charges for amortisation and impairment of acquired intangible assets and impairment of interests in associates net of tax, exceptional items net of tax and non-recurring tax relating to changes in tax rates and other adjustments. The Group excludes amortisation and impairment of acquired intangible assets to improve the comparability between acquired and organically grown operations, as the latter cannot recognise internally generated intangible assets. Headline earnings per share is the ratio of headline profit after tax to the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Benefit Trusts and those held by the Company as Treasury shares. Headline earnings per share is used for the purpose of setting remuneration targets for executive directors and other senior executives. See reconciliation in note 10.

Net debt Net debt comprises cash and cash equivalents and liabilities from financing activities, including bank overdrafts, bank loans, derivative financial instruments and obligations under finance leases. Net debt is a good indicator of the strength of the Group’s balance sheet position and is widely used by credit rating agencies. See note 30 for a reconciliation.

F-106 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

2—Alternative performance measures (Continued) Return on gross capital employed Return on gross capital employed is the ratio of the Group’s trading profit to the average year-end shareholders’ equity, adjusted net debt and accumulated amortisation and impairment of goodwill and acquired intangible assets. Return on gross capital employed is a key performance indicator (see page 29). The calculation of return on gross capital employed is shown below:

Restated 2018 2017 $m $m Net debt (note 30) ...... 1,080 706 Cash and cash equivalents in assets held for sale (note 20) ...... — (43) Bank loans in assets held for sale (note 20) ...... — 105 Adjusted net debt ...... 1,080 768 Accumulated impairment losses of goodwill (note 12)(1) ...... 197 1,330 Accumulated amortisation and impairment losses of acquired intangible assets (note 13)(2) ...... 586 1,231 Shareholders’ equity ...... 4,058 4,543 Gross capital employed ...... 5,921 7,872 Average gross capital employed(3) ...... 6,897 7,643 Group trading profit(4) ...... 1,566 1,421 Return on gross capital employed % ...... 22.7 18.6

(1) In 2017 includes $1,131 million reclassified as held for sale. (2) Excludes software and in 2017 includes $708 million reclassified as held for sale. (3) Gross capital employed in 2016 was $7,414 million. (4) Reconciliation provided above under adjusted EBITDA.

3—Segmental analysis The Group’s operating segments are established on the basis of the operating businesses overseen by distinct divisional management teams responsible for their performance. These operating businesses are managed on a geographical basis and are regularly reviewed by the chief operating decision maker in deciding how to allocate resources and assess the performance of the businesses. All operating segments derive their revenue from a single business activity, the distribution of plumbing and heating products. Revenue is attributed to a country based on the location of the Group company reporting the revenue. The Group has combined the Canada and Central Europe operating segments into one reportable segment as individually they do not meet the quantitative thresholds set out in IFRS 8 ‘‘Operating Segments’’ to be separately disclosed. The Group’s business is not highly seasonal and the Group’s customer base is highly diversified, with no individually significant customer. The changes in revenue and trading profit for continuing operations between the years ended 31 July 2017 and 31 July 2018 include changes in exchange rates, disposals, acquisitions and organic change. Where businesses are disposed in the year, the difference between the revenue and trading profit in the current year up to the date of disposal and the revenue and trading profit in the equivalent portion of the prior year is included in organic change.

F-107 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

3—Segmental analysis (Continued) An analysis of the change in revenue by reportable segment for continuing operations is as follows:

Restated Organic 2017 Exchange Disposals Acquisitions change 2018 $m $m $m $m $m $m USA...... 15,193 — (216) 205 1,488 16,670 UK...... 2,548 163 — — (143) 2,568 Canada and Central Europe ...... 1,543 66 (223) 34 94 1,514 Continuing operations ...... 19,284 229 (439) 239 1,439 20,752

An analysis of the change in trading profit/(loss) (note 2) by reportable segment for continuing operations is as follows:

Restated Organic 2017 Exchange Disposals Acquisitions change 2018 $m $m $m $m $m $m USA...... 1,224 — (20) 4 198 1,406 UK...... 96 6 — — (29) 73 Canada and Central Europe ...... 71 3 (14) 4 19 83 Central and other costs ...... (50) (2) — — (3) (55) Continuing operations ...... 1,341 7 (34) 8 185 1,507

The reconciliation between trading profit/(loss) (note 2) and operating profit/(loss) by reportable segment for continuing operations is as follows:

2018 Restated 2017 Amortisation Amortisation of acquired of acquired Trading Exceptional intangible Operating Trading Exceptional intangible Operating profit/(loss) items assets profit/(loss) profit/(loss) items assets profit/(loss) $m $m $m $m $m $m $m $m USA...... 1,406 (5) (58) 1,343 1,224 86 (79) 1,231 UK...... 73 (70) — 3 96 (35) — 61 Canada and Central Europe ...... 83 — (7) 76 71 176 (2) 245 Central and other costs ...... (55) (7) — (62) (50) (9) — (59) Group ...... 1,507 (82) (65) 1,360 1,341 218 (81) 1,478 Net finance costs . . (53) (54) Share of profit/ (loss) after tax of associates ..... 2 (1) Impairment of interests in associates ..... (122) — Profit before tax . . 1,187 1,423

F-108 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

3—Segmental analysis (Continued) Other information on assets and liabilities by segment is set out in the tables below:

2018 Restated 2017 Segment Segment Segment Segment net assets/ Segment Segment net assets/ assets liabilities (liabilities) assets liabilities (liabilities) $m $m $m $m $m $m USA...... 6,964 (2,772) 4,192 6,187 (2,475) 3,712 UK...... 1,301 (656) 645 1,122 (650) 472 Canada and Central Europe ...... 690 (297) 393 626 (258) 368 Central and other costs(1) ...... 88 (141) (53) 185 (125) 60 Discontinued ...... 116 (66) 50 1,723 (1,124) 599 Total ...... 9,159 (3,932) 5,227 9,843 (4,632) 5,211 Tax assets/(liabilities) ...... 140 (230) (90) 163 (128) 35 Net cash/(debt) ...... 850 (1,930) (1,080) 2,551 (3,257) (706) Group assets/(liabilities) ...... 10,149 (6,092) 4,057 12,557 (8,017) 4,540

(1) Segmental assets include $64 million (2017: $164 million) relating to interests in associates. Geographical information of non-current assets is set out in the table below. Non-current assets includes goodwill, other intangible assets, property, plant and equipment and interests in associates.

Restated 2018 2017 $m $m USA...... 2,343 2,012 UK...... 258 272 Canada and Central Europe ...... 265 361 Group ...... 2,866 2,645

F-109 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

3—Segmental analysis (Continued)

2018 Restated 2017 Additions Additions to other to other acquired acquired intangible Additions to Additions to intangible Additions to Additions to assets and non-acquired property, assets and non-acquired property, Additions to interests in intangible plant and Additions to interests in intangible plant and goodwill associates assets equipment goodwill associates assets equipment $m $m $m $m $m $m $m $m USA...... 208 120 8 182 178 102 15 102 UK...... — — 16 32 — — 10 27 Canada and Central Europe 33 10 5 13 —— 4 11 Central and other costs ...... —351 1 — 162 1 — Discontinued . . . —— — — 32 258 Group ...... 241 165 30 228 181 266 32 198

2018 Restated 2017 Impairment Impairment of goodwill, of goodwill, other Depreciation other Depreciation acquired Amortisation Amortisation and and acquired Amortisation Amortisation and and intangible of other impairment of impairment intangible of other impairment of impairment assets and acquired non-acquired of property, assets and acquired non-acquired of property, interests in intangible intangible plant and interests in intangible intangible plant and associates assets assets equipment associates assets assets equipment $m $m $m $m $m $m $m $m USA...... — 58 15 113 — 79 15 117 UK...... — — 10 30 —— 6 22 Canada and Central Europe ...... —7 2 8—2 2 10 Central and other costs ...... 122 — 1 1 —— 4 2 Discontinued ...... —— — —129 6 4 29 Group ...... 122 65 28 152 129 87 31 180

4—Operating profit Amounts charged/(credited) in arriving at operating profit from continuing operations include:

Restated Notes 2018 2017 $m $m Amortisation of acquired intangible assets ...... 13 65 81 Amortisation of non-acquired intangible assets ...... 13 26 24 Impairment of non-acquired intangible assets ...... 13 2 3 Depreciation of property, plant and equipment ...... 14 145 150 Impairment of property, plant and equipment ...... 14 7 1 Gain on disposal of businesses ...... — (265) Amounts included in costs of sales with respect to inventory ...... 14,618 13,627 Staff costs ...... 11 2,913 2,710 Operating lease rentals: land and buildings ...... 240 236 Operating lease rentals: plant and machinery ...... 85 75 Trade receivables impairment ...... 13 12

F-110 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

4—Operating profit (Continued) During the year, the Group obtained the following services from the Company’s auditor and its associates:

Restated 2018 2017 $m $m Fees for the audit of the Company and consolidated financial statements ...... 1.4 1.2 Fees for the audit of the Company’s subsidiaries pursuant to legislation ...... 2.6 3.1 Total audit fees ...... 4.0 4.3 Audit related assurance services ...... 0.3 0.6 Other assurance services ...... — 0.1 Other services ...... 0.2 0.3 Total non-audit fees ...... 0.5 1.0 Total fees payable to the auditor ...... 4.5 5.3

During the year fees of $1 million were paid to the auditor in relation to the purchase of Stark Group by Lone Star Funds. These fees were paid by the Group and recharged to Lone Star Funds so are not included in the above analysis. Details of the Company’s policy on the use of the auditor for non-audit services, the reasons why the auditor was used and how the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report on pages 62 to 66. No services were provided pursuant to contingent fee arrangements.

5—Exceptional items Exceptional items (charged)/credited to operating profit from continuing operations are analysed by purpose as follows:

Restated 2018 2017 $m $m Gain on disposal of businesses ...... — 265 Business restructuring ...... (72) (51) Other exceptional items ...... (10) 4 Total included in operating profit ...... (82) 218

For the year ended 31 July 2018, business restructuring comprises costs incurred in the UK in respect of its business transformation strategy and includes $19 million (2017: $3 million) charged to cost of sales for inventory write downs. Other exceptional items include a $5 million settlement cost on the closure of a defined benefit pension plan in the USA. The net cash outflow from exceptional items, excluding the gain on disposal of businesses, was $59 million (2017: $25 million). Exceptional items relating to discontinued operations are disclosed in note 8.

F-111 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

6—Net finance costs

Restated 2018 2017 $m $m Interest receivable ...... 8 — Interest payable: Bank loans and overdrafts ...... (65) (60) Unwind of fair value adjustment to senior unsecured loan notes ...... 7 10 Finance lease charges ...... (1) (1) (59) (51) Net interest expense on defined benefit obligation (note 25) ...... (1) (3) Valuation losses on financial instruments ...... (1) — Total net finance costs ...... (53) (54)

Finance costs relating to discontinued operations are detailed in note 8.

7—Tax The tax charge for the year comprises:

Restated 2018 2017 $m $m Current year tax charge ...... 297 373 Adjustments to tax charge in respect of prior years ...... 7 1 Total current tax charge ...... 304 374 Deferred tax charge/(credit): origination and reversal of temporary differences ...... 42 (4) Total tax charge ...... 346 370

An exceptional tax credit of $15 million was recorded against exceptional items (2017: charge $28 million). The deferred tax charge of $42 million (2017: credit $4 million) includes a credit of $8 million (2017: charge $13 million) resulting from changes in tax rates. Tax on items (charged)/credited to the Group statement of comprehensive income:

Restated 2018 2017 $m $m Deferred tax charge on actuarial loss on retirement benefits ...... (17) (4) Current tax credit on actuarial loss on retirement benefits ...... — 3 Deferred tax credit on losses ...... — 1 Total tax on items charged to the Group statement of comprehensive income ...... (17) —

Tax on items credited to equity:

Restated 2018 2017 $m $m Current tax credit on share-based payments ...... 7 4 Deferred tax credit on share-based payments ...... 1 1 Total tax on items credited to equity ...... 8 5

The tax charge in the statement of changes in equity relating to tax rate changes is $3 million (2017: $nil).

F-112 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

7—Tax (Continued) The Group has made provisions for the liabilities likely to arise from open audits and assessments. At 31 July 2018, the Group has recognised provisions of $237 million in respect of its uncertain tax positions (2017: $214 million). The total provision has increased by $23 million in the year due primarily to increases related to certain cross border transfer pricing risks, partly offset by the settlement of a transfer pricing enquiry through a Mutual Agreement Procedure between the US Internal Revenue Service and HM Revenue & Customs. The remaining open significant tax issues relate predominantly to cross border transfer pricing risks. Although there is uncertainty regarding the timing of the resolution of these matters, management do not believe that the Group’s uncertain tax provisions constitute a major source of estimation uncertainty as they consider that there is no significant risk of a material change to its estimate of these provisions within the next 12 months.

2018 Total profit/ Non-ongoing tax from Ongoing and other continuing Tax reconciliation: profit/tax(7) profit/tax(8) operations $m % $m % $m % Profit before tax ...... 1,456 (269) 1,187 Expected tax at weighted average tax rate(1) ...... (327) 22.5 59 (22.0) (268) 22.6 Adjusted for the effects of: over/(under) provisions in respect of prior periods(2) .... 11 (0.7) (14) 5.1 (3) 0.3 exceptional items which are (non-tax deductible)/ non-taxable ...... — — (1) 0.5 (1) 0.1 current year charge in relation to uncertain tax provisions(4) ...... (43) 2.9 — — (43) 3.6 tax credits and incentives ...... 5 (0.3) — — 5 (0.4) non-tax deductible amortisation/impairment of acquired intangible assets ...... — — (24) 9.0 (24) 2.0 non-taxable income ...... 7 (0.5) — — 7 (0.6) other non-tax deductible expenditure(5) ...... (28) 1.9 — — (28) 2.3 other ...... 1 (0.1) — — 1 (0.1) effect of tax rate changes(6) ...... 10 (0.7) (2) 0.7 8 (0.7) Tax (charge)/credit / effective tax rate ...... (364) 25.0 18 (6.7) (346) 29.1

F-113 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

7—Tax (Continued)

Restated 2017 Total profit/ Non-ongoing tax from Ongoing and other continuing Tax reconciliation: profit/tax(7) profit/tax(8) operations $m % $m % $m % Profit before tax ...... 1,253 170 1,423 Expected tax at weighted average tax rate(1) ...... (306) 24.4 (52) 30.6 (358) 25.2 Adjusted for the effects of: (under)/over provisions in respect of prior periods(2) ..... (6) 0.5 14 (8.2) 8 (0.6) exceptional items which are non-taxable/(non-tax deductible)(3) ...... — — 19 (11.2) 19 (1.3) current year charge in relation to uncertain tax provisions(4) ...... (32) 2.5 — — (32) 2.2 tax credits and incentives ...... 4 (0.3) — — 4 (0.3) non-taxable income ...... 10 (0.8) — — 10 (0.7) other non-tax deductible expenditure(5) ...... (11) 0.9 — — (11) 0.8 other ...... 3 (0.2) — — 3 (0.2) effect of tax rate changes ...... (13) 1.0 — — (13) 0.9 Tax charge/effective tax rate ...... (351) 28.0 (19) 11.2 (370) 26.0

(1) This expected weighted average tax rate reflects the applicable statutory corporate tax rates on the accounting profits/losses in the countries in which the Group operates after intra-group financing. The intra-group financing reduces taxable profits in many of the countries and therefore reduces the tax rate. The pre intra-group financing ongoing expected weighted average tax rate is 31.6 per cent (2017: 37.2 per cent) and this is reduced to a post intra-group financing ongoing expected weighted average tax rate of 22.5 per cent (2017: 24.4 per cent). The decrease in the expected weighted average tax rates is primarily due to the reduction in US statutory rate and a change in profit mix. (2) This includes adjustments arising out of movements in uncertain tax provisions regarding prior periods and differences between the final tax liabilities in the tax computations and the tax liabilities provided in the consolidated financial statements. (3) In 2017, this related primarily to non-taxable disposals of businesses. (4) This reflects management’s assessment of the potential tax liability for the current year in relation to open tax issues and audits. (5) This relates to certain expenditure for which no tax relief is available such as disallowable business entertaining costs and restrictions on interest deductions. (6) In 2018, this relates to the reduction in the US federal rate of tax from 35 per cent to 21 per cent from 1 January 2018. (7) Ongoing profit means profit before tax, exceptional items, the amortisation and impairment of acquired intangible assets and impairment of interests in associates for ongoing operations as defined in note 2. Ongoing tax is the tax expense arising on ongoing profit. (8) Non-ongoing and other profit or loss is profit or loss from non-ongoing operations as defined in note 2 and from the amortisation and impairment of acquired intangible assets, impairment of interests in associates and exceptional items. Non-ongoing and other tax is the tax expense or credit arising on the non-ongoing and other profit or loss and includes other non-recurring tax items. In 2018, the non-ongoing and other credit of $18 million relates primarily to exceptional UK restructuring costs, an increase in uncertain tax provisions in respect of prior periods and the settlement of a transfer pricing enquiry.

F-114 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

8—Discontinued operations The Group disposed of Silvan on 31 August 2017, Stark Group on 29 March 2018 and is in the process of selling its remaining property assets in the Nordic region (together the ‘‘disposal group’’). In accordance with IFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, the disposal group has been classified as discontinued and prior periods have been restated to reflect this. The results from discontinued operations, which have been included in the Group income statement, are set out below:

2018 Restated 2017 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total $m $m $m $m $m $m Revenue ...... 1,705 — 1,705 2,660 — 2,660 Cost of sales ...... (1,280) (5) (1,285) (1,982) (10) (1,992) Gross profit ...... 425 (5) 420 678 (10) 668 Operating costs: gain on disposal of businesses ..... — 439 439 — — — amortisation of acquired intangible assets ...... —— — (6) — (6) impairment of goodwill and acquired intangible assets ...... —— — (129) — (129) other ...... (366) (32) (398) (598) (76) (674) Operating income/(costs) ...... (366) 407 41 (733) (76) (809) Operating profit/(loss) ...... 59 402 461 (55) (86) (141) Net finance (costs)/income ...... (6) 2 (4) (5) 10 5 Profit/(loss) before tax ...... 53 404 457 (60) (76) (136) Tax...... (31) — (31) — 3 3 Profit/(loss) from discontinued operations ...... 22 404 426 (60) (73) (133) Basic earnings/(loss) per share ...... 173.4c (52.9)c Diluted earnings/(loss) per share ..... 172.1c (52.5)c

8—Discontinued operations The discontinued exceptional items in 2018 relate predominantly to the disposal of Stark Group (see note 29), gains from the sale of Nordic property assets and an impairment charge for the remaining Nordic properties. The discontinued exceptional items in 2017 relate predominantly to restructuring activities in the Nordic region. During the year, discontinued operations used cash of $120 million (2017: generated $66 million) in respect of operating activities, generated $1,368 million (2017: used $36 million) in respect of investing activities and used $99 million (2017: used $68 million) in respect of financing activities.

F-115 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

9—Dividends Amounts recognised as distributions to equity shareholders:

Restated 2018 2017 $m $m Final dividend for the year ended 31 July 2016: 66.72 pence per share ...... — 209 Interim dividend for the year ended 31 July 2017: 36.67 pence per share ...... — 119 Final dividend for the year ended 31 July 2017: 73.33 pence per share ...... 248 — Interim dividend for the year ended 31 July 2018: 57.4 cents per share ...... 142 — Special dividend: $4 per share ...... 974 — Dividends paid ...... 1,364 328

Since the end of the financial year, the Directors have proposed a final ordinary dividend of $304 million (131.9 cents per share). The dividend is subject to approval by shareholders at the Annual General Meeting and is therefore not included in the balance sheet as a liability at 31 July 2018. The interim dividend for the year ended 31 July 2018 and the special dividend were declared in US dollars and paid in both pounds sterling and US dollars. For those shareholders paid in pounds sterling, the exchange rate used to translate the declared value was set in advance of the payment date. As a result of foreign exchange rate movements between these dates, the total amount paid (shown in the Group cash flow statement) will be different to that stated above.

10—Earnings per share

2018 Restated 2017 Basic Diluted Basic Diluted earnings earnings earnings earnings Earnings per share per share Earnings per share per share $m cents cents $m cents cents Profit from continuing and discontinued operations attributable to shareholders of the Company ...... 1,267 515.7 511.9 920 366.1 363.5 (Profit)/loss from discontinued operations . (426) (173.4) (172.1) 133 52.9 52.5 Profit from continuing operations ...... 841 342.3 339.8 1,053 419.0 416.0 Non-recurring tax charge relating to changes in tax rates and other adjustments ...... 16 6.4 —— Amortisation and impairment of acquired intangible assets and impairment of interests in associates (net of tax) ..... 168 68.4 57 22.7 Exceptional items (net of tax) ...... 67 27.3 (190) (75.6) Headline profit after tax from continuing operations ...... 1,092 444.4 920 366.1

The weighted average number of ordinary shares in issue during the year, excluding those held by Employee Benefit Trusts and those held by the Company as Treasury shares, was 245.7 million (2017: 251.3 million). The impact of all potentially dilutive share options on earnings per share would be to increase the weighted average number of shares in issue to 247.5 million (2017: 253.1 million). On 11 June 2018, the shares of Ferguson plc were consolidated on an 18 for 19 basis. The impact of the share consolidation on the weighted average number of shares used to calculate basic and diluted earnings per share is 1.9 million. Further details in respect of the share consolidation are given in note 26.

F-116 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

11—Employee and key management information

Restated 2018 2017 $m $m Wages and salaries ...... 2,608 2,449 Social security costs ...... 183 170 Pension costs—defined contribution plans ...... 78 72 Pension costs/(credit)—defined benefit plans (note 25) ...... 9 (9) Share-based payments ...... 35 28 Total staff costs ...... 2,913 2,710

The total staff costs, including discontinued operations, was $3,155 million (2017: $3,105 million).

Average number of employees 2018 2017 USA...... 25,129 24,086 UK...... 5,871 6,064 Canada and Central Europe ...... 2,962 3,257 Central and other ...... 94 104 Continuing operations ...... 34,056 33,511

The average number of employees including discontinued operations was 37,877 (2017: 39,205). Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any Director of the Company. The aggregate emoluments for all key management are set out in the following table:

Restated Key management personnel compensation (including Directors) 2018 2017 $m $m Salaries, bonuses and other short-term employee benefits ...... 14 14 Post-employment benefits ...... 1 — Termination benefits ...... 4 — Share-based payments ...... 9 5 Total compensation ...... 28 19

Further details of Directors’ remuneration and share options are set out in the Remuneration Report on pages 70 to 96.

F-117 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

12—Intangible assets—goodwill

Restated 2018 2017 $m $m Cost At 1 August ...... 1,372 2,356 Exchange rate adjustment ...... (8) 71 Acquisitions ...... 241 181 Disposal of businesses ...... — (85) Reclassification as held for sale ...... — (1,151) At 31 July ...... 1,605 1,372 Accumulated impairment losses At 1 August ...... 199 1,163 Exchange rate adjustment ...... (2) 68 Impairment charge for the year ...... — 103 Disposal of businesses ...... — (4) Reclassification as held for sale ...... — (1,131) At 31 July ...... 197 199 Net book value at 31 July ...... 1,408 1,173

The impairment charge in 2017 comprises $103 million in respect of discontinued operations. Goodwill and intangible assets acquired during the year have been allocated to the individual cash generating units or aggregated cash generating units (together ‘‘CGUs’’) which are deemed to be the smallest identifiable group of assets generating independent cash inflows. CGUs have been aggregated in the disclosure below at a segmental level except for certain CGUs in the USA which are considered to be significant (more than 10 per cent of the current year goodwill balance). Impairment reviews were performed for each individual CGU during the year ended 31 July 2018.

2018 Restated 2017 Long-term Post-tax Pre-tax Long-term Post-tax Pre-tax growth discount discount growth discount discount rate rate rate Goodwill rate rate rate Goodwill %%%$m%%%$m Blended Branches ...... 442 432 B2C...... 316 263 Waterworks ...... 169 169 Rest of USA ...... 290 145 USA...... 2.1 9.0 12.0 1,217 2.3 9.3 15.2 1,009 UK...... 2.0 7.6 9.3 43 2.0 8.1 10.0 43 Canada ...... 2.0 8.4 11.5 148 2.0 8.7 11.9 121 Total ...... 1,408 1,173

The relevant inputs, including key assumptions, to the value in use calculations of each CGU are set out below. Cash flow forecasts for years one to three are derived from the most recent Board approved strategic plan. The forecast for year five represents an estimate of ‘‘mid-cycle’’ trading performance for the CGU based on historic analysis. Year four is calculated as the average of the final year of the strategic plan and year five’s mid-cycle estimate. The other inputs include a risk-adjusted, pre-tax discount rate, calculated by reference to the weighted average cost of capital (‘‘WACC’’) of each country and the 30-year long-term growth rate by country, as published by the IMF in April 2018.

F-118 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

13—Intangible assets—other

Acquired intangible assets Trade names and Customer Software brands relationships Other Total $m $m $m $m $m Cost At 1 August 2016 restated ...... 201 425 768 102 1,496 Exchange rate adjustment ...... 2 21 20 — 43 Acquisitions ...... — 60 31 13 104 Additions ...... 32 — — — 32 Disposals ...... (9) — — — (9) Disposal of businesses ...... (16) (2) (26) (5) (49) Reclassification as held for sale ...... (15) (382) (331) — (728) At 31 July 2017 restated ...... 195 122 462 110 889 Exchange rate adjustment ...... (1) — (1) — (2) Acquisitions ...... — 54 21 55 130 Additions ...... 30 — — — 30 At 31 July 2018 ...... 224 176 482 165 1,047 Accumulated amortisation and impairment losses At 1 August 2016 restated ...... 123 381 661 64 1,229 Exchange rate adjustment ...... 1 22 20 — 43 Amortisation charge for the year ...... 28 17 45 25 115 Impairment charge for the year ...... 3 17 9 — 29 Disposals ...... (9) — — — (9) Disposal of businesses ...... (13) (2) (23) (5) (43) Reclassification as held for sale ...... (7) (378) (330) — (715) At 31 July 2017 restated ...... 126 57 382 84 649 Exchange rate adjustment ...... (1) (1) (1) — (3) Amortisation charge for the year ...... 26 16 39 10 91 Impairment charge for the year ...... 2— ——2 At 31 July 2018 ...... 153 72 420 94 739 Net book value at 31 July 2018 ...... 71 104 62 71 308 Net book value at 31 July 2017 restated ...... 69 65 80 26 240

The amortisation charge includes $nil (2017: $10 million) in respect of discontinued operations of which $nil (2017: $4 million) relates to software. The impairment charge includes $nil (2017: $26 million) in respect of discontinued operations of which $nil (2017: $nil) relates to software.

F-119 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

14—Property, plant and equipment

Land and buildings Operating Finance leasehold Plant and Other Freehold leases improvements machinery equipment Total $m $m $m $m $m $m Cost At 1 August 2016 restated ...... 1,798 42 431 768 268 3,307 Exchange rate adjustment ...... 57 (1) 3 6 2 67 Acquisitions ...... 16 — — 17 — 33 Additions ...... 70 — 31 66 31 198 Disposal of businesses ...... (15) (31) (2) (39) (16) (103) Disposals and transfers ...... (9) (7) (29) (56) (26) (127) Reclassification as held for sale ...... (984) — (9) (99) (27) (1,119) At 31 July 2017 restated ...... 933 3 425 663 232 2,256 Exchange rate adjustment ...... — — (2) (2) (1) (5) Acquisitions ...... 9— — 3 — 12 Additions ...... 83 — 49 70 26 228 Disposals ...... (7) — (24) (33) (22) (86) Reclassification as held for sale ...... (69) — — (21) (3) (93) At 31 July 2018 ...... 949 3 448 680 232 2,312 Accumulated depreciation and impairment losses At 1 August 2016 restated ...... 386 10 295 533 186 1,410 Exchange rate adjustment ...... 11 — 1 3 2 17 Depreciation charge for the year ...... 44 — 31 70 34 179 Impairment charge for the year ...... 1 — — — — 1 Disposal of businesses ...... (2) (4) (2) (31) (13) (52) Disposals and transfers ...... (2) (6) (9) (50) (28) (95) Reclassification as held for sale ...... (188) — (8) (56) (20) (272) At 31 July 2017 restated ...... 250 — 308 469 161 1,188 Exchange rate adjustment ...... — — (1) (1) — (2) Depreciation charge for the year ...... 28 — 31 60 26 145 Impairment charge for the year ...... 6— — — 1 7 Disposals ...... (3) — (16) (27) (21) (67) Reclassification as held for sale ...... (22) — — (20) (3) (45) At 31 July 2018 ...... 259 — 322 481 164 1,226 Owned assets ...... 690 — 126 197 65 1,078 Assets under finance leases ...... —3 — 2 3 8 Net book value at 31 July 2018 ...... 690 3 126 199 68 1,086 Owned assets ...... 683 — 117 194 63 1,057 Assets under finance leases ...... — 3 — — 8 11 Net book value at 31 July 2017 restated 683 3 117 194 71 1,068

At 31 July 2018, the book value of property, plant and equipment that had been pledged as security for liabilities was $8 million (2017: $16 million). In addition, $nil (2017: $237 million) of property, plant and equipment included in assets held for sale (note 20) had been pledged as security for liabilities at 31 July 2018. The depreciation charge for the year includes $nil (2017: $29 million) relating to discontinued operations.

F-120 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

15—Associates

Restated 2018 2017 $m $m Meier Tobler Group AG ...... 31 164 Other associates(1) ...... 33 — Total interests in associates ...... 64 164

(1) Other associates comprise individually immaterial associates which contributed $nil (2017: $nil) to the Group’s share of profit/ (loss) from continuing operations and $nil (2017: $nil) to the Group’s share of total comprehensive income. The Group holds a 39.21 per cent share in Meier Tobler Group AG (previously Walter Meier AG), a trading company whose principal place of business is Switzerland and which is engaged in the distribution and maintenance of heating and air conditioning systems.

Meier Tobler Group AG The investment in Meier Tobler Group AG is accounted for as an associate using the equity method. Meier Tobler Group AG prepares accounts under Swiss GAAP FER with a year-end of 31 December. The Group’s accounts have been prepared based on Meier Tobler Group AG’s half-year accounts ended 30 June 2018. There were no significant transactions between that date and 31 July 2018. Summarised financial information from Meier Tobler Group AG’s half-year accounts ended 30 June 2018 is set out below. Trading results are for the 12 months ending 30 June 2018 (2017: from date of acquisition) and have been adjusted for IFRS.

Restated 2018 2017 $m $m Non-current assets ...... 309 323 Current assets ...... 180 182 Current liabilities ...... (157) (127) Non-current liabilities ...... (174) (197) Net assets ...... 158 181 Revenue ...... 564 138 Profit/(loss) from continuing operations ...... 6 (4) Other comprehensive income attributable to the owners of the company ...... — — Total comprehensive income/(expense) ...... 6 (4)

The amount recognised in the Group’s consolidated financial statements is as follows:

Restated 2018 2017 $m $m Share of profit/(loss) after tax of associate ...... 2 (1)

Dividends received from the associate amount to $10 million (2017: $nil).

F-121 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

15—Associates (Continued) The reconciliation of associate net assets to the carrying amount recognised in the Group’s consolidated financial statements is as follows:

Restated % 2018 % 2017 $m $m Net assets of associate ...... 158 181 Proportion of the Group’s ownership interest in the associate ...... 39.21 62 39.21 71 Goodwill ...... 91 93 Impairment ...... (122) — Carrying amount of the Group’s interest in the associate ...... 31 164

During the period there were a number of public announcements made by Meier Tobler Group AG regarding difficult trading conditions and the temporary suspension of dividends until 2020. This generated a trigger event for management to reassess the recoverability of the carrying value recognised in the Group’s consolidated financial statements. Due to the size of the Group’s shareholding and the illiquid nature of the shares, it was not appropriate to use the quoted share price for assessing the fair value. This assessment resulted in an impairment charge, as follows:

Post-tax Pre-tax Carrying Remaining discount discount value Impairment balance rate rate $m $m $m % % Meier Tobler Group AG ...... 153 (122) 31 6.7 8.7

Any change in trading conditions or outlook could result in further impairment or a reversal of part of the recorded impairment. Management does not consider that there is a significant risk that this change could be material.

16—Deferred tax assets and liabilities Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so, which are shown in the balance sheet after offset as follows:

Restated 2018 2017 $m $m Deferred tax assets ...... 130 160 Deferred tax liabilities ...... (42) (12) 88 148

F-122 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

16—Deferred tax assets and liabilities (Continued) The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year:

Goodwill and Share- Property, Retirement intangible based plant and benefit Tax assets payments equipment obligations Inventories losses Other Total $m $m $m $m $m $m $m $m At 31 July 2016 restated ...... (69) 24 (9) 111 (103) 67 61 82 Credit/(charge) to income ...... 9 (1) (5) (4) (5) 26 (11) 9 (Charge)/credit to other comprehensive income ...... — — — (4) — 1 — (3) Credit to equity ...... — 1 — — — — — 1 Acquisitions ...... (7) — (4) — — — — (11) Disposal of businesses ...... — — 1 (1) 3 — — 3 Transferred to held for sale ...... 2 (1) 80 (4) (5) (8) 3 67 Transfers between categories ...... — — — — — (9) 9 — Exchange rate adjustment ...... — — (1) 1 (1) 2 (1) — At 31 July 2017 restated ...... (65) 23 62 99 (111) 79 61 148 Credit/(charge) to income ...... 17 (2) (24) (44) 16 6 (11) (42) Charge to other comprehensive income ...... — — — (17) — — — (17) Credit to equity ...... —1—————1 Acquisitions ...... (1) — — — — — — (1) Transferred to held for sale ...... — — (2) — — — — (2) Exchange rate adjustment ...... 2 1 (2) (2) — 2 — 1 At 31 July 2018 ...... (47) 23 34 36 (95) 87 50 88

Legislation has been enacted in the US to reduce the US federal corporate income tax rate, effective 1 January 2018. Accordingly, the US deferred tax assets and liabilities have predominately been calculated based on a 26 per cent tax rate (combined federal and state rates) which materially reflects the rate for the period in which the deferred tax assets and liabilities are expected to reverse. Legislation has been enacted in the UK to reduce the standard rate of UK corporation tax from 19 per cent to 17 per cent with effect from 1 April 2020. Accordingly, the UK deferred tax assets and liabilities have predominantly been calculated based on a 17 per cent tax rate which materially reflects the rate for the period in which the deferred tax assets and liabilities are expected to reverse. Net deferred tax assets have been recognised on the basis that sufficient taxable profits are forecast to be available in the future to enable them to be utilised. In addition, the Group has unrecognised gross tax losses totalling $469 million (2017: $433 million) that have not been recognised on the basis that their future economic benefit is uncertain. These losses have no expiry date and relate predominantly to capital losses. No deferred tax liability has been recognised in respect of temporary differences associated with unremitted earnings from its investments in subsidiaries. However, tax may arise on $408 million (2017: $375 million) of temporary differences but the Group is in a position to control the timing of their reversal and it is probable that such differences will not reverse in the foreseeable future.

F-123 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

17—Inventories

Restated 2018 2017 $m $m Goods purchased for resale ...... 2,680 2,548 Inventory provisions ...... (164) (149) Net inventories ...... 2,516 2,399

18—Trade and other receivables

Restated 2018 2017 $m $m Current Trade receivables ...... 2,642 2,372 Less: provision for impairment ...... (32) (32) Net trade receivables ...... 2,610 2,340 Other receivables ...... 135 122 Prepayments ...... 349 304 3,094 2,766 Non-current Other receivables ...... 328 299

Included in prepayments is $266 million (2017: $234 million) due in relation to supplier rebates where there is no right of offset against trade payable balances. Trade receivables have been aged with respect to the payment terms specified in the terms and conditions established with customers as follows:

Restated 2018 2017 $m $m Amounts not yet due ...... 1,790 1,576 Less than one month past due ...... 580 565 More than one month past due ...... 272 231 2,642 2,372

19—Cash and cash equivalents

Restated 2018 2017 $m $m Cash and cash equivalents ...... 833 2,525

Included in the balance at 31 July 2018 is an amount of $255 million (2017: $1,876 million) which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within bank overdrafts (note 22). These amounts are subject to a master netting arrangement. At 31 July 2018, cash and cash equivalents included $86 million (2017: $85 million) which is used to collateralise letters of credit on behalf of Wolseley Insurance Limited.

F-124 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

20—Assets and liabilities held for sale

Restated 2018 2017 $m $m Properties awaiting disposal ...... 151 87 Assets of disposal groups held for sale ...... — 1,628 Assets held for sale ...... 151 1,715 Liabilities of disposal groups held for sale ...... — 1,085

During the previous year, the Group announced its decision to sell its Nordic business and at 31 July 2017 the assets of the business were classified as a disposal group held for sale. Properties awaiting disposal principally comprises the Nordic property assets, which were retained following the disposal of the Nordic business, and properties in the UK which are in the process of being exited as a result of the business restructuring. The assets and liabilities of disposal groups held for sale consist of:

Restated 2018 2017 $m $m Intangible assets ...... — 33 Property, plant and equipment ...... — 812 Inventories ...... — 364 Trade and other receivables ...... — 337 Tax receivables ...... — 39 Cash and cash equivalents ...... — 43 Bank loans ...... — (105) Trade and other payables ...... — (790) Provisions and retirement benefit obligations ...... — (96) Tax payables ...... — (94) — 543

21—Trade and other payables

Restated 2018 2017 $m $m Current Trade payables ...... 2,597 2,335 Tax and social security ...... 108 88 Other payables ...... 97 117 Accruals and deferred income ...... 539 471 3,341 3,011 Non-current Other payables ...... 298 238

Trade payables are stated net of $32 million (2017: $nil) due from suppliers with respect to supplier rebates where an agreement exists that allows these to be net settled.

F-125 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

22—Bank loans and overdrafts

2018 Restated 2017 Current Non-current Total Current Non-current Total $m $m $m $m $m $m Bank overdrafts ...... 375 — 375 1,982 — 1,982 Bank and other loans ...... 2—2358 Senior unsecured loan notes ...... 6 1,522 1,528 165 1,093 1,258 Total bank loans ...... 8 1,522 1,530 168 1,098 1,266 Total bank loans and overdrafts ...... 383 1,522 1,905 2,150 1,098 3,248

Included in bank overdrafts at 31 July 2018 is an amount of $255 million (2017: $1,876 million) which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within cash and cash equivalents (note 19). These amounts are subject to a master netting arrangement. No bank loans are secured against the Group’s freehold property (2017: $2 million). In addition, no bank loans included in liabilities held for sale (note 20) are secured against freehold property included in assets held for sale (2017: $104 million). No bank loans were secured against trade receivables at 31 July 2018 (2017: $nil) as the trade receivables facility of $600 million was undrawn as at 31 July 2018 and 31 July 2017. Non-current loans are repayable as follows:

Restated 2018 2017 $m $m Due in one to two years ...... 5 8 Due in two to three years ...... 283 5 Due in three to four years ...... — 283 Due in four to five years ...... 250 1 Due in over five years ...... 984 801 Total ...... 1,522 1,098

The carrying value of the senior unsecured loan notes of $1,528 million comprises a par value of $1,530 million and a fair value adjustment of $2 million (2017: $1,258 million, $1,238 million and $20 million respectively). During the year the Group applied fair value hedge accounting to debt of $355 million, swapping fixed interest rates into floating interest rates using a series of interest rate swaps. There have been no significant changes during the year to the Group’s policies on accounting for, valuing and managing the risk of financial instruments. These policies are summarised in note 1.

F-126 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management Financial instruments by measurement basis The carrying value of financial instruments by category as defined by IAS 39 ‘‘Financial Instruments: Recognition and Measurement’’ is as follows:

Restated 2018 2017 $m $m Financial assets Financial assets at fair value through profit and loss ...... 17 26 Loans and receivables ...... 3,350 3,010 Financial liabilities Financial liabilities at fair value through profit and loss ...... 19 — Financial liabilities at amortised cost ...... 5,063 6,071

Financial instruments in the category ‘‘fair value through profit and loss’’ are measured in the balance sheet at fair value. Fair value measurements can be classified in the following hierarchy: • quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); • inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and • inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The Group’s derivatives are measured at fair value through profit and loss at 31 July 2018 and 31 July 2017 using level 2 inputs. The Group uses interest rate swaps to manage its exposure to interest rate movements on its borrowings and foreign exchange swaps to hedge cash flows in respect of committed transactions or to hedge its investment in overseas operations. The current element of derivative financial assets is $nil (2017: $7 million) and the non-current element is $17 million (2017: $19 million). The current element of derivative financial liabilities is $2 million (2017: $nil) and the non-current element is $17 million (2017: $nil). Total net derivative financial instruments is a liability of $2 million (2017: asset $26 million). No transfers between levels occurred during the current or prior year. The fair value of financial instruments that are not traded in an active market (such as over-the-counter derivatives) is determined by using valuation techniques. The Group’s other financial instruments are measured on bases other than fair value. Other receivables include an amount of $67 million (2017: $66 million) which has been discounted at a rate of 3.0 per cent (2017: 2.3 per cent) due to the long-term nature of the receivable. Other current assets and liabilities are either of short maturity or bear floating rate interest and their fair values approximate to book values. The only non-current financial assets or liabilities for which fair value does not approximate to book value are the senior unsecured loan notes, which had a book value of $1,528 million (2017: $1,258 million) and a fair value (level 2) of $1,621 million (2017: $1,309 million).

F-127 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management (Continued) Disclosure of offsetting arrangements The financial instruments which have been offset in the financial statements are disclosed below:

Cash Gross Offset Financial pooling Net At 31 July 2018 Notes balances(1) amounts(2) statements(3) amounts(4) total(5) $m $m $m $m $m Financial assets Non-current assets Derivative financial assets ...... 31 (14) 17 — 17 Current assets Derivative financial assets ...... 23 (23) — — — Cash and cash equivalents ...... 19 833 — 833 (255) 578 887 (37) 850 (255) 595 Financial liabilities Current liabilities Derivative financial liabilities ...... 25 (23) 2 — 2 Bank loans and overdrafts ...... 22 383 — 383 (255) 128 Finance leases ...... 3— 3 — 3 Non-current liabilities Derivative financial liabilities ...... 31 (14) 17 — 17 Bank loans ...... 22 1,522 — 1,522 — 1,522 Finance leases ...... 3— 3 — 3 1,967 (37) 1,930 (255) 1,675 Closing net debt ...... 30 (1,080) — (1,080) — (1,080)

Cash Gross Offset Financial pooling Net At 31 July 2017 restated Notes balances(1) amounts(2) statements(3) amounts(4) total(5) $m $m $m $m $m Financial assets Non-current assets Derivative financial assets ...... 51 (32) 19 — 19 Current assets Derivative financial assets ...... 23 (16) 7 — 7 Cash and cash equivalents ...... 19 2,525 — 2,525 (1,876) 649 2,599 (48) 2,551 (1,876) 675 Financial liabilities Current liabilities Derivative financial liabilities ...... 16 (16) — — — Bank loans and overdrafts ...... 22 2,150 — 2,150 (1,876) 274 Finance leases ...... 4 — 4 — 4 Non-current liabilities Derivative financial liabilities ...... 32 (32) — — — Bank loans ...... 22 1,098 — 1,098 — 1,098 Finance leases ...... 5 — 5 — 5 3,305 (48) 3,257 (1,876) 1,381 Closing net debt ...... 30 (706) — (706) — (706)

(1) The gross amounts of the recognised financial assets and liabilities under a master netting agreement, or similar arrangement.

F-128 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management (Continued) (2) The amounts offset in accordance with the criteria in IAS 32. (3) The net amounts presented in the Group balance sheet. (4) The amounts subject to a master netting arrangement, or similar arrangement, not included in (3). (5) The net amount after deducting the amounts in (4) from the amounts in (3).

Risk management policies The Group is exposed to market risks arising from its international operations and the financial instruments which fund them. The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk and liquidity risk. The Group has well-defined policies for the management of interest rate, liquidity, foreign exchange and counterparty exposures, which have been consistently applied during the financial years ended 31 July 2018 and 31 July 2017. By the nature of its business, the Group also has trade credit and commodity price exposures, the management of which is delegated to the operating businesses. There has been no change since the previous year in the major financial risks faced by the Group. Policies for managing each of these risks are regularly reviewed and are summarised below. When the Group enters into derivative transactions (principally interest rate swaps and foreign exchange contracts), the purpose of such transactions is to hedge certain interest rate and currency risks arising from the Group’s operations and its sources of finance. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments or speculative transactions be undertaken.

Capital structure and risk management To assess the appropriateness of its capital structure based on current and forecast trading, the Group’s principal measure of financial gearing is the ratio of net debt to adjusted EBITDA. The Group aims to operate with investment grade credit metrics and ensure this ratio remains within 1 to 2 times. The Group’s main borrowing facilities contain a financial covenant limiting the ratio of net debt to adjusted EBITDA to 3.5:1. The reconciliation of opening to closing net debt is detailed in note 30. The Group’s sources of funding currently comprise cash flows generated from operations, equity contributed by shareholders and borrowings from banks and other financial institutions. In order to maintain or adjust the capital structure, the Group may pay a special dividend, return capital to shareholders, repurchase its own shares, issue new shares or sell assets to reduce debt.

Credit risk The Group provides sales on credit terms to most of its customers. There is an associated risk that customers may not be able to pay outstanding balances. At 31 July 2018, the maximum exposure to credit risk was $3,005 million (2017: $2,673 million). Each of the Group’s businesses have established procedures in place to review and collect outstanding receivables. Significant outstanding and overdue balances are reviewed on a regular basis and resulting actions are put in place on a timely basis. In some cases, protection is provided through credit insurance arrangements. All of the major businesses use professional and dedicated credit teams, in some cases field- based. Appropriate provisions are made for debts that may be impaired on a timely basis. Concentration of credit risk in trade receivables is limited as the Group’s customer base is large and unrelated. Accordingly, the Group considers that there is no further credit risk provision required above the current provision for impairment. The ageing of trade receivables is detailed in note 18. The Group has cash balances deposited for short periods with financial institutions and enters into certain contracts (such as interest rate swaps) which entitle the Group to receive future cash flows from financial institutions. These transactions give rise to credit risk on amounts due from counterparties with a maximum exposure of $429 million (2017: $560 million). This risk is managed by setting credit and settlement limits for a panel of approved counterparties. The limits are approved by the Treasury Committee and ratings are monitored regularly.

F-129 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management (Continued) Liquidity risk The Group maintains a policy of ensuring sufficient borrowing headroom to finance all investment and capital expenditure included in its strategic plan, with an additional contingent safety margin. The Group has estimated its anticipated contractual cash outflows (excluding interest income and income from derivatives), including interest payable in respect of its trade and other payables and bank borrowings, on an undiscounted basis. The principal assumptions are that floating rate interest is calculated using the prevailing interest rate at the balance sheet date and cash flows in foreign currency are translated using spot rates at the balance sheet date. These cash flows can be analysed by maturity as follows:

2018 Restated 2017 Trade Trade and other Interest and other Interest payables Debt on debt Total payables Debt on debt Total $m $m $m $m $m $m $m $m Due in less than one year ...... 2,829 5 68 2,902 2,557 165 51 2,773 Due in one to two years ...... 44 1 63 108 26 5 47 78 Due in two to three years ...... 59 281 52 392 28 1 43 72 Due in three to four years ..... 19 — 44 63 13 281 43 337 Due in four to five years ...... 16 250 40 306 12 1 34 47 Due in over five years ...... 160 1,001 92 1,253 159 801 84 1,044 Total ...... 3,127 1,538 359 5,024 2,795 1,254 302 4,351

The Group holds three main bank facilities: an £800 million (2017: £800 million) revolving credit facility that matures in September 2021, a $290 million (2017: $190 million) bi-lateral facility that matures in November 2018 and a $600 million (2017: $600 million) securitisation facility that matures in December 2020. This facility is secured against the trade receivables of Ferguson Enterprises Inc. All facilities were undrawn at 31 July 2018 and 31 July 2017. The maturity profile of the Group’s undrawn facilities is as follows:

Restated 2018 2017 $m $m Less than one year ...... 290 190 Between one and two years ...... — — Between two and three years ...... 600 600 Between three and four years ...... 1,050 — Between four and five years ...... — 1,057 After five years ...... — — Total ...... 1,940 1,847

At 31 July 2018 the Group has total available facilities, excluding bank overdrafts, of $3,470 million (2017: $3,085 million), of which $1,530 million is drawn (note 22) and $1,940 million is undrawn (2017: $1,238 million and $1,847 million respectively). The Group does not have any debt factoring or supply chain financing arrangements.

Foreign currency risk The Group has significant overseas businesses whose revenues are mainly denominated in the currencies of the countries in which the operations are located. Approximately 80 per cent of the Group’s revenue is in US dollars. Within each country it operates, the Group does not have significant transactional foreign currency cash flow exposures. However, those that do arise may be hedged with either forward contracts or

F-130 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management (Continued) currency options. The Group does not normally hedge profit translation exposure since such hedges have only a temporary effect. The Group’s policy is to adjust the currencies in which its net debt is denominated materially to match the currencies in which its trading profit is generated. Details of average exchange rates used in the translation of overseas earnings and of year-end exchange rates used in the translation of overseas balance sheets for the principal currencies used by the Group are shown in the five-year summary on page 151. The net effect of currency translation was to increase revenue by $229 million (2017: decrease by $391 million) and to increase trading profit by $7 million (2017: decrease by $6 million). These currency effects primarily reflect a movement of the average US dollar exchange rate against pounds sterling, euro and Canadian dollars as follows:

2017 2018 Strengthening/ Weakening (weakening) of USD of USD Pounds sterling ...... (6.4)% 13.3% Euro ...... (9.2)% 1.6% Canadian dollars ...... (4.0)% (0.2)%

The Group has net financial liabilities denominated in foreign currencies which have been designated as hedges of the net investment in its overseas subsidiaries. The principal value of those financial liabilities designated as hedges at the balance sheet date was $431 million (2017: pounds sterling equivalent of $2,019 million). The loss on translation of these financial instruments into US dollars of $11 million (2017: pounds sterling equivalent of $8 million) has been taken to the translation reserve. Net debt by currency was as follows:

Cash, Interest rate Finance lease overdrafts and Currency sold As at 31 July 2018 swaps obligations bank loans forward Total $m $m $m $m $m US dollars ...... — (2) (1,297) — (1,299) Pounds sterling ...... — (4) 101 — 97 Euro, Danish kroner and Swedish kronor ...... — — 23 — 23 Other currencies ...... — — 101 (2) 99 Total ...... — (6) (1,072) (2) (1,080)

Cash, Currency Interest rate Finance lease overdrafts and bought/(sold) As at 31 July 2017 restated swaps obligations bank loans forward Total $m $m $m $m $m US dollars ...... 26 (5) (798) 9 (768) Pounds sterling ...... — (4) 82 (9) 69 Euro, Danish kroner and Swedish kronor . — — 8 — 8 Other currencies ...... — — (15) — (15) Total ...... 26 (9) (723) — (706)

Currency (sold)/bought forward comprises short-term foreign exchange contracts which were designated and effective as hedges of overseas operations.

F-131 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management (Continued) Net investment hedging Exchange differences arising from the translation of the net investment in foreign operations are recognised in the currency translation reserve. Gains and losses on those hedging instruments designated as hedges of the net investments in foreign operations are recognised in equity to the extent that the hedging relationship is effective. These amounts are included in exchange differences on translation of foreign operations as stated in the Group statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised immediately in the income statement for the period. Gains and losses accumulated in the translation reserve are included in the income statement when the foreign operation is disposed of.

Interest rate risk At 31 July 2018, 70 per cent of loans were at fixed rates. The Group borrows in the desired currencies principally at rates determined by reference to short-term benchmark rates applicable to the relevant currency or market, such as LIBOR. Rates which reset at least every 12 months are regarded as floating rates and the Group then, if appropriate, considers interest rate swaps to generate the desired interest rate profile. The Group reviews deposits and borrowings by currency at Treasury Committee and Board meetings. The Treasury Committee gives prior approval to any variations from floating rate arrangements. The interest rate profile of the Group’s net debt including the effect of interest rate swaps is set out below:

2018 Restated 2017 Floating Fixed Total Floating Fixed Total $m $m $m $m $m $m US dollars ...... (217) (1,082) (1,299) 475 (1,243) (768) Pounds sterling ...... 101 (4) 97 73 (4) 69 Euro, Danish kroner and Swedish kronor ...... 23 — 23 8—8 Other currencies ...... 99 — 99 (15) — (15) Total ...... 6 (1,086) (1,080) 541 (1,247) (706)

The Group’s weighted average cost of debt is 4.0 per cent. Fixed rate borrowings at 31 July 2018 carried a weighted average interest rate of 3.4 per cent fixed for a weighted average duration of 6.6 years (31 July 2017: 3.3 per cent for 6.5 years). Floating rate borrowings, excluding overdrafts, at 31 July 2018 had a weighted average interest rate of 2.6 per cent (31 July 2017: the Group had no floating rate borrowings, excluding overdrafts). In November 2017, the Group entered into interest rate swap contracts comprising fixed interest receivable on $355 million of notional principal. These contracts expire between November 2023 and November 2026 and the fixed interest rates range between 3.30 per cent and 3.51 per cent. These swaps were designated as a fair value hedge against a portion of the Group’s outstanding debt. The table below shows the income statement movement on interest rate swaps at fair value through profit and loss:

Restated 2018 2017 $m $m At 1 August ...... 26 38 Settled ...... (9) (12) Valuation loss debited to income statement ...... (17) — At 31 July ...... — 26

F-132 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

23—Financial instruments and financial risk management (Continued) Monitoring interest rate and foreign currency risk The Group monitors its interest rate and foreign currency risk by reviewing the effect on financial instruments over various periods of a range of possible changes in interest rates and exchange rates. The financial impact for reasonable approximation of possible changes in interest rates and exchange rates are as follows. The Group has estimated that an increase of one per cent in the principal floating interest rates to which it is exposed would result in a charge to the income statement of $nil (2017: $nil). The Group has estimated that a weakening of the US dollar by 10 per cent against gross borrowings denominated in a foreign currency in which the Group does business would result in a charge to the currency translation reserve of $4 million (2017: $146 million). The Group does not consider that there is a useful way of quantifying the Group’s exposure to any of the macroeconomic variables that might affect the collectability of receivables or the prices of commodities.

24—Provisions

Environmental Wolseley Other and legal Insurance Restructuring provisions Total $m $m $m $m $m At 31 July 2016 restated ...... 101 70 36 85 292 Utilised in the year ...... (14) (16) (29) (5) (64) Changes in discount rate ...... (13) — — — (13) Charge for the year ...... 9 18 63 6 96 Disposal of businesses and reclassified as held for sale ...... (5) — (12) (30) (47) Exchange rate adjustment ...... — — 1 1 2 At 31 July 2017 restated ...... 78 72 59 57 266 Utilised in the year ...... (3) (23) (38) (7) (71) Changes in discount rate ...... (4) — — — (4) Charge for the year ...... 12 24 31 12 79 Acquisition of businesses ...... ——— 44 Exchange rate adjustment ...... (1) 1 (1) 1 — At 31 July 2018 ...... 82 74 51 67 274

Provisions have been analysed between current and non-current as follows:

Environmental Wolseley Other At 31 July 2017 restated and legal Insurance Restructuring provisions Total $m $m $m $m $m Current ...... 13 24 37 33 107 Non-current ...... 65 48 22 24 159 Total provisions ...... 78 72 59 57 266

F-133 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

24—Provisions (Continued) The environmental and legal provision includes $69 million (2017: $69 million) for the estimated liability for asbestos litigation on a discounted basis using a long-term discount rate of 3.0 per cent (2017: 2.3 per cent). This amount has been actuarially determined as at 31 July 2018 based on advice from independent professional advisers. The Group has insurance that it currently believes significantly covers the estimated liability and accordingly an insurance receivable has been recorded in other receivables. Based on current estimates, the amount of performing insurance cover significantly exceeds the expected level of future claims and no material profit or cash flow impact is therefore expected to arise in the foreseeable future. Due to the nature of these provisions, the timing of any settlements is uncertain. Wolseley Insurance provisions represent an estimate, based on historical experience, of the ultimate cost of settling outstanding claims and claims incurred but not reported on certain risks retained by the Group (principally USA casualty and global property damage). Due to the nature of these provisions, the timing of any settlements is uncertain. Restructuring provisions include provisions for staff redundancy costs and future lease rentals on closed branches. The weighted average maturity of these obligations is approximately three years. Other provisions include warranty costs relating to businesses disposed of, rental commitments on vacant properties and dilapidations on leased properties. The weighted average maturity of these obligations is approximately three years.

25—Retirement benefit obligations (i) Long-term benefit plans provided by the Group The principal UK defined benefit plan is the Wolseley Group Retirement Benefits Plan which provides benefits based on final pensionable salaries. This plan was closed to new entrants in 2009. The assets are held in separate trustee administered funds. The Group contribution rate is calculated on the Projected Unit Credit Method and agreed with an independent consulting actuary. The Group Retirement Benefits Plan was closed to future service accrual in December 2013 and was replaced by a defined contribution plan. During October 2016, the plan was closed for future non-inflationary salary accrual. In 2017, the Group secured a buy-in insurance policy with Pension Insurance Corporation (PIC) for the UK pension plan. This policy covered all of the pensioner members of the plan at the time and exactly matches the benefits provided by the plan. The deferred members of the plan at the time were not covered by this policy. The insurance asset is valued as exactly equal to the insured liabilities. The principal plans operated for USA employees are defined contribution plans, which are established in accordance with USA 401k rules. Companies contribute to both employee compensation deferral and profit sharing plans. The Group completed a buy out of its primary defined benefit plan in the USA during the year. In Canada, defined benefit plans and a defined contribution plan are operated. Most of the Canadian defined benefit plans are funded. The contribution rate is calculated on the Projected Unit Credit Method as agreed with independent consulting actuaries. The Group operates a number of smaller defined benefit and defined contribution plans providing pensions or other long-term benefits such as long service or termination awards.

F-134 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

25—Retirement benefit obligations (Continued) allocations to equities, with the intention that this will result in the ongoing cost to the Group of the post-employment plans being lower over the long term and within acceptable boundaries of risk. For the UK plan, the buy-in insurance policy represents approximately 30 per cent of the plan assets. For the remaining assets, the strategy is to invest in a balanced portfolio of equities, government bonds and corporate bonds. The investment strategy is subject to regular review by the plan trustees in consultation with the Company. For the overseas plans, the investment strategy involves the investment in defined levels, predominantly equities with the remainder of the assets being invested in cash and bonds.

Investment risk The present value of the UK defined benefit plan liability is calculated using a discount rate determined by reference to high quality corporate bond yields; if the actual return on plan assets is below this rate, it will decrease a net surplus or increase a net pension liability. Currently, the plan has a relatively balanced investment in equity securities, debt instruments and property. Due to the long-term nature of the plan liabilities, the trustees of the pension plan consider it appropriate that a reasonable portion of the plan assets should be invested in equity securities to leverage the return generated by the fund.

Interest risk A decrease in the bond interest rate will increase the UK plan liability and this will be partially offset by an increase in the value of the plan’s debt investments.

(ii) Financial impact of plans

Restated As disclosed in the Group balance sheet 2018 2017 $m $m Non-current asset ...... 193 4 Current liability ...... (4) (11) Non-current liability ...... (15) (21) Total liability ...... (19) (32) Net asset/(liability) ...... 174 (28)

2018 Restated 2017 Analysis of Group balance sheet net asset/(liability) UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m Fair value of plan assets ...... 1,824 121 1,945 1,766 217 1,983 Present value of defined benefit obligations ..... (1,631) (140) (1,771) (1,762) (249) (2,011) Net asset/(liability) ...... 193 (19) 174 4 (32) (28)

F-135 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

25—Retirement benefit obligations (Continued)

Restated Analysis of total expense/(income) recognised in the Group income statement 2018 2017 $m $m Current service cost ...... 1 6 Administration costs ...... 3 4 Exceptional settlement losses and past service gains (note 5) ...... 5 (14) Past service gain from settlements ...... — (3) Charged/(credited) to operating costs (note 11)(1) ...... 9 (7) Charged to finance costs (note 6)(2) ...... 1 4 Total expense/(income) recognised in the Group income statement ...... 10 (3)

(1) Includes a charge of $nil (2017: $2 million) relating to discontinued operations. (2) Includes a charge of $nil (2017: $1 million) relating to discontinued operations. Expected employer contributions to the defined benefit plans for the year ending 31 July 2019 are $39 million. The remeasurement of the defined benefit net asset is included in the Group statement of comprehensive income.

Restated Analysis of amount recognised in the Group statement of comprehensive income 2018 2017 $m $m The return on plan assets (excluding amounts included in net interest expense) ...... 22 6 Actuarial gain arising from changes in demographic assumptions ...... 12 40 Actuarial gain/(loss) arising from changes in financial assumptions ...... 74 (99) Actuarial (loss)/gain arising from experience adjustments ...... (4) 51 Tax...... (17) (1) Total amount recognised in the Group statement of comprehensive income ...... 87 (3)

The cumulative amount of actuarial losses recognised in the Group statement of comprehensive income is $488 million (2017: $592 million). The fair value of plan assets is as follows:

2018 Restated 2017 UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m At 1 August ...... 1,766 217 1,983 1,730 331 2,061 Interest income ...... 46 5 51 39 6 45 Employer’s contributions ...... 97 13 110 47 38 85 Participants’ contributions ...... —— ——3 3 Benefit payments ...... (89) (8) (97) (58) (18) (76) Settlement payments ...... — (105) (105) — (4) (4) Disposal of businesses ...... —— —— (129) (129) Reclassification as held for sale ...... —— —— (10) (10) Remeasurement gain/(loss): Return on plan assets (excluding amounts included in net interest expense) ...... 17 5 22 9(3)6 Currency translation ...... (13) (6) (19) (1) 3 2 At 31 July ...... 1,824 121 1,945 1,766 217 1,983 Actual return on plan assets ...... 63 10 73 48 3 51

F-136 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

25—Retirement benefit obligations (Continued) Employer’s contributions included special funding contributions of $99 million (2017: $70 million), including $94 million to the UK pension scheme. At 31 July 2018, the plan assets were invested in a diversified portfolio comprised of:

2018 Restated 2017 UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m Equity type assets quoted ...... 284 72 356 536 71 607 Government bonds quoted ...... 464 20 484 337 47 384 Corporate bonds quoted ...... 253 22 275 41 74 115 Real estate ...... 25 — 25 52 — 52 Cash ...... 61 — 61 47 10 57 Insurance policies ...... 626 — 626 667 — 667 Other ...... 111 7 118 86 15 101 Total market value of assets ...... 1,824 121 1,945 1,766 217 1,983

The present value of defined benefit obligations is as follows:

2018 Restated 2017 UK Non-UK Total UK Non-UK Total $m $m $m $m $m $m At 1 August ...... 1,762 249 2,011 1,768 488 2,256 Current service cost (including administrative costs) . 31 43710 Past service gain ...... —— —(14) (3) (17) Interest cost ...... 46 6 52 39 10 49 Benefit payments ...... (89) (8) (97) (58) (18) (76) Settlement and curtailment payments ...... — (100) (100) — (6) (6) Participants’ contributions ...... —— ——3 3 Remeasurement (gain)/loss: Actuarial gain arising from changes in demographic assumptions ...... (12) — (12) (39) (1) (40) Actuarial (gain)/loss arising from changes in financial assumptions ...... (74) — (74) 115 (16) 99 Actuarial loss/(gain) arising from experience adjustments ...... 4— 4(48) (3) (51) Disposal of businesses ...... —— —— (152) (152) Reclassified as held for sale ...... —— —— (69) (69) Currency translation ...... (9) (8) (17) (4) 9 5 At 31 July ...... 1,631 140 1,771 1,762 249 2,011

An analysis of the present value of defined benefit obligations by funding status is shown below:

Restated 2018 2017 $m $m Amounts arising from wholly unfunded plans ...... 3 3 Amounts arising from plans that are wholly or partly funded ...... 1,768 2,008 1,771 2,011

F-137 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

25—Retirement benefit obligations (Continued) (iii) Valuation assumptions The financial assumptions used to estimate defined benefit obligations are:

2018 2017 UK Non-UK UK Non-UK %%%% Discount rate ...... 2.7 3.5 2.6 3.6 Inflation rate ...... 3.2 2.5 3.2 2.5 Increase to deferred benefits during deferment ...... 2.1 n/a 2.1 n/a Increases to pensions in payment ...... 2.8 2.0 2.9 2.0 Salary increases ...... 2.1 2.5 2.1 2.5 The life expectancy assumptions used to estimate defined benefit obligations are:

2018 2017 UK Non-UK UK Non-UK %%%% Current pensioners (at age 65)—male ...... 22 22 22 21 Current pensioners (at age 65)—female ...... 23 24 24 24 Future pensioners (at age 65)—male ...... 24 23 24 23 Future pensioners (at age 65)—female ...... 26 25 26 25 The weighted average duration of the defined benefit obligation is 21.5 years (2017: 20.4 years).

(iv) Sensitivity analysis The Group considers that the most sensitive assumptions are the discount rate, inflation rate and life expectancy. The sensitivity analyses below shows the impact on the Group’s defined benefit plan net asset of reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

2018 Restated 2017 Change UK Non-UK Change UK Non-UK $m $m $m $m Discount rate ...... +0.25% 70 5 +0.25% 74 5 (0.25)% (76) (4) (0.25)% (81) (5) Inflation rate ...... +0.25% (64) — +0.25% (73) — (0.25)% 66 — (0.25)% 69 — Life expectancy ...... +1 year (33) (4) +1 year (36) (8) The UK defined benefit plan holds a buy-in policy asset which exactly equals the insured liability. The above sensitivities are in respect of the Group’s remaining defined benefit plan net asset.

F-138 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

26—Share capital (i) Ordinary shares in issue

2018 Restated 2017 Number of Number of Allotted and issued shares shares Cost shares Cost $m $m Number / cost of ordinary 1053⁄66 pence shares in the Company (million) ...... ——267 45 Number / cost of ordinary 11227⁄563 pence shares in the Company (million) ...... 253 45 —— As at 31 July ...... 253 45 267 45

The authorised share capital of the Company is 439 million ordinary 11227⁄563 pence shares (2017: 463 million ordinary 1053⁄66 pence shares). All the allotted and issued shares, including those held by Employee Benefit Trusts and in Treasury, are fully paid or credited as fully paid. Following approval at the General Meeting held on 23 May 2018 and in connection with the special dividend approved at that meeting, a share consolidation under which shareholders received 18 new ordinary shares of 11227⁄563 pence each for every 19 existing ordinary shares of 1053⁄66 pence each, became effective on 11 June 2018. A summary of the movements in the year is detailed in the following table:

2018 2017

Number of 1053⁄66 pence ordinary shares in the Company in issue at 1 August ...... 266,636,106 266,636,106 Cancellation of Treasury shares ...... (5) — Effect of share consolidation ...... (14,033,479) —

Number of 11227⁄563 pence (2017: 1053⁄66 pence) ordinary shares in the Company in issue at 31 July ...... 252,602,622 266,636,106

(ii) Treasury shares The shares purchased under the Group’s buyback programme have been retained in issue as Treasury shares and represent a deduction from equity attributable to shareholders of the Company. A summary of the movements in Treasury shares in the year is detailed in the following table:

2018 Restated 2017 Number of Number of shares Cost shares Cost $m $m As at 1 August ...... 13,382,580 743 14,259,276 792 Treasury shares purchased ...... 9,178,209 675 —— Disposal of Treasury shares to settle share options ...... (646,988) (38) (876,696) (49) Cancellation of Treasury shares ...... (5) — —— Effect of share consolidation ...... (1,135,924) — —— As at 31 July ...... 20,777,872 1,380 13,382,580 743

Consideration received in respect of shares transferred to participants in certain long-term incentive plans and all-employee plans amounted to $24 million (2017: $27 million).

F-139 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

26—Share capital (Continued) (iii) Own shares Two Employee Benefit Trusts have been established in connection with the Company’s discretionary share option plans and long-term incentive plans. A summary of the movements in own shares held in Employee Benefit Trusts is detailed in the following table below:

2018 Restated 2017 Number of Number of shares Cost shares Cost $m $m As at 1 August ...... 1,435,155 76 1,762,657 92 New shares purchased ...... 564,476 41 142,000 8 Exercise of share options ...... (492,870) (27) (469,502) (24) Effect of share consolidation ...... (80,156) — —— As at 31 July ...... 1,426,605 90 1,435,155 76

Consideration received in respect of shares transferred to participants in the discretionary share option plans and long-term incentive plans amounted to $nil (2017: $nil). At 31 July 2018, the shares held in the trusts had a market value of $113 million (2017: $86 million). Dividends due on shares held by the Employee Benefit Trusts are waived in accordance with the provisions of the trust deeds.

27—Reconciliation of profit to cash generated from operations Profit for the year is reconciled to cash generated from continuing and discontinued operations as follows:

Restated 2018 2017 $m $m Profit for the year attributable to shareholders ...... 1,267 920 Net finance costs ...... 57 49 Share of (profit)/loss after tax of associates ...... (2) 1 Impairment of interests in associates ...... 122 — Tax charge ...... 377 367 Profit on disposal and closure of businesses and revaluation of assets held for sale . . . (407) (255) Amortisation and impairment of goodwill and acquired intangible assets ...... 65 216 Amortisation and impairment of non-acquired intangible assets ...... 28 31 Depreciation and impairment of property, plant and equipment ...... 152 180 (Profit)/loss on disposal of property, plant and equipment and assets held for sale . . . (6) 11 Increase in inventories ...... (102) (121) Increase in trade and other receivables ...... (351) (267) Increase in trade and other payables ...... 208 293 Decrease in provisions and other liabilities ...... (120) (43) Share-based payments ...... 35 28 Cash generated from operations ...... 1,323 1,410

28—Acquisitions The Group acquired the following businesses in the year ended 31 July 2018. All these businesses are engaged in the distribution of plumbing and heating products and were acquired to support growth

F-140 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

28—Acquisitions (Continued) principally in the USA and Canada. All transactions have been accounted for by the purchase method of accounting.

Country of Shares/asset % Name Date of acquisition incorporation deal acquired Wholesale Group, Inc...... August 2017 USA Asset 100 Aircovent B.V...... August 2017 Netherlands Shares 100 HM Wallace, Inc...... September 2017 USA Shares 100 3097–3275 Quebec Inc...... September 2017 Canada Shares 100 Tackaberry Heating Supplies Limited ...... September 2017 Canada Shares 100 Duhig and Co., Inc...... January 2018 USA Shares 100 National Fire Products, L.L.C.(1) ...... May 2018 USA Asset 100 National Fire Protection of Albuquerque, LLC(1) ...... May 2018 USA Asset 100 National Fire Protection Manufacturing & Supply, Inc.(1) ...... May 2018 USA Asset 100 Cooper National Leasing, L.L.C.(1) ...... May 2018 USA Asset 100 AMRE Supply Inc.(2) ...... July 2018 Canada Shares 100 AMRE Supply Company Limited(2) ...... July 2018 Canada Asset 100 Wright Plumbing Supply, Inc...... July 2018 USA Asset 100 Lighting Design Enterprises, Inc...... July 2018 USA Asset 100 Appliance Distributors of Louisiana—Baton Rouge, LLC...... July 2018 USA Asset 100 Brock-McVey Company ...... July 2018 USA Asset 100 Safe Step Walk In Tub, LLC ...... July 2018 USA Shares 100

(1) These businesses trade as National Fire and were acquired together. (2) These businesses trade as AMRE Supply and were acquired together.

F-141 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

28—Acquisitions (Continued) The assets and liabilities acquired and the consideration for all acquisitions in the period are as follows:

Provisional fair values acquired $m Intangible assets —Customer relationships ...... 21 —Trade names and brands ...... 54 —Other ...... 55 Property, plant and equipment ...... 12 Inventories ...... 34 Receivables ...... 34 Cash, cash equivalents and bank overdrafts ...... 7 Payables ...... (38) Deferred tax ...... (1) Provisions ...... (4) Total ...... 174 Goodwill arising ...... 241 Consideration ...... 415 Satisfied by: Cash ...... 376 Deferred consideration ...... 39 Total consideration ...... 415

The fair values acquired are provisional figures, being the best estimates currently available. Further adjustments may be necessary when additional information is available for some of the judgemental areas. The goodwill arising on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Group has gained access and additional profitability and operating efficiencies available in respect of existing markets. The acquisitions contributed $187 million to revenue, $6 million to trading profit and $3 million loss to the Group’s operating profit for the period between the date of acquisition and the balance sheet date. It is not practicable to disclose profit before and after tax, as the Group manages its borrowings as a portfolio and cannot attribute an effective borrowing rate to an individual acquisition. If each acquisition had been completed on the first day of the financial year, continuing revenue would have been $21,000 million and continuing trading profit would have been $1,532 million. It is not practicable to disclose profit before tax or profit attributable to shareholders of the Company, as stated above. It is also not practicable to disclose operating profit as the Group cannot estimate the amount of intangible assets that would have been acquired at a date other than the acquisition date. The net outflow of cash in respect of the purchase of businesses is as follows:

Restated 2018 2017 $m $m Purchase consideration ...... 376 326 Deferred and contingent consideration in respect of prior year acquisitions ...... 47 15 Cash consideration ...... 423 341 Cash, cash equivalents and bank overdrafts acquired ...... (7) (10) Net cash outflow in respect of the purchase of businesses ...... 416 331

F-142 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

29—Disposals In the year ended 31 July 2018, the Group disposed of the following businesses:

Date of Shares/asset Name Country disposal deal Silvan A/S ...... Denmark August 2017 Shares Stark Group A/S ...... Denmark March 2018 Shares Ferguson Property (Norway) AS ...... Norway June 2018 Shares Arhus Property Denmark A/S ...... Denmark June 2018 Shares The Group recognised a total gain on current year disposals of $439 million, which is reported within discontinued operations.

2018 $m Consideration received ...... 1,411 Net assets disposed of ...... (697) Disposal costs and provisions ...... (81) Recycling of deferred foreign exchange losses(1) ...... (194) Gain on disposal ...... 439

(1) Includes recycling of remaining foreign exchange relating to France and other European assets following the abandonment of operations. Net assets disposed of were previously reported in assets and liabilities held for sale. The net inflow of cash in respect of the disposal of businesses is as follows:

2018 $m Cash consideration received for current year disposals (net of cash disposed of) ...... 1,367 Cash paid in respect of prior year disposals ...... (2) Disposal costs paid ...... (45) Net cash inflow ...... 1,320

F-143 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

30—Reconciliation of opening to closing net debt

Liabilities from financing activities Cash and Total cash, cash Derivative Obligations cash Bank equivalents financial Bank under equivalents overdrafts and bank Instruments loans finance (note 19) (note 22) overdrafts (note 23) (note 22) leases Net debt $m $m $m $m $m $m $m At 1 August 2017 restated .... 2,525 (1,982) 543 26 (1,266) (9) (706) Cash movements Proceeds from borrowings and derivatives ...... — (9) (450) — (459) Repayments of borrowings .... — — 261 — 261 Finance lease capital payments ———44 Changes in net debt due to disposal of businesses ...... (42) — 7 — (35) Changes in net debt due to acquisition of businesses .... 7———7 Held for sale movements ..... 43 — (105) — (62) Other cash flows ...... (86) — — — (86) Non-cash movements New finance leases ...... — — — (1) (1) Fair value and other adjustments ...... — (17) 16 — (1) Exchange movements ...... (7) (2) 7 — (2) At 31 July 2018 ...... 833 (375) 458 (2) (1,530) (6) (1,080)

31—Related party transactions There are no related party transactions requiring disclosure under IAS 24 ‘‘Related Party Disclosures’’ other than the compensation of key management personnel which is set out in note 11.

32—Operating lease commitments Future minimum lease payments under non-cancellable operating leases for the following periods are:

Restated 2018 2017 $m $m Less than one year ...... 328 344 After one year and less than five years ...... 591 609 After five years ...... 162 176 Total operating lease commitments ...... 1,081 1,129

Operating lease payments mainly represent rents payable for properties. Some of the Group’s operating lease arrangements have renewal options and rental escalation clauses. No arrangements have been entered into for contingent rental payments. The commitments shown above include commitments for onerous leases which have already been provided for. At 31 July 2018, provisions include an amount of $32 million (2017: $36 million) in respect of minimum lease payments for such onerous leases net of sublease income expected to be received. The total minimum sublease income expected to be received under non-cancellable subleases at 31 July 2018 is $6 million (2017: $10 million). The commitments above include $nil operating lease commitments (2017: $120 million) for discontinued operations.

F-144 Notes to the consolidated financial statements (Continued) Year ended 31 July 2018

33—Contingent liabilities Group companies are, from time to time, subject to certain claims and litigation arising in the normal course of business in relation to, among other things, the products that they supply, contractual and commercial disputes and disputes with employees. Provision is made if, on the basis of current information and professional advice, liabilities are considered likely to arise. In the case of unfavourable outcomes, the Group may benefit from applicable insurance protection.

34—Post-balance sheet events Since the year-end, the Group has acquired five businesses, four in the USA and one in Canada for total consideration of $240 million with a combined annual revenue of $171 million. These acquisitions include Plumbing Holdings Corporation (trading as Jones Stephens), a master distributor of own brand plumbing speciality products. 100% of this company was acquired to further develop our product strategy and expand our customer base in the USA. As at the date of this report, the accounting for these transactions has not been finalised. Since the year-end, the Group has initiated a process to dispose of Wasco Holding B.V., a Dutch plumbing and heating business.

F-145 Independent auditor’s report to the members of Ferguson plc Report on the audit of the financial statements Opinion In our opinion: • the financial statements of Ferguson plc (the ‘‘Company’’) and its subsidiaries (the ‘‘Group’’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 July 2018 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘‘IFRSs’’) as adopted by the European Union; • the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 101 ‘‘Reduced Disclosure Framework’’; and • the financial statements have been properly prepared in accordance with the requirements of Companies (Jersey) Law, 1991. We have audited the financial statements which comprise: • the Group income statement; • the Group statement of comprehensive income; • the Company profit and loss account; • the Group and Company balance sheets; • the Group cash flow statement; • the Group and Company statements of changes in equity; • the notes to the consolidated financial statements 1 to 34; and • the notes to the Company financial statements 1 to 15. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘‘Reduced Disclosure Framework’’ (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (‘‘ISAs (UK)’’) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘‘FRC’s’’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company.

F-146 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Summary of our audit approach Key audit matters ...... The key matters that we identified in the current year were: • appropriateness of supplier rebates; • inventory provision for slow-moving and obsolete inventory; and • accounting for the disposal of the Nordic businesses. Within this report, any new key audit matters are identified with 7MAY202019104649 and any key audit matters which are the same as the prior year identified7MAY202019104521 with . Materiality ...... The materiality that we used in the current year was $65 million (2017: £45 million) which was determined on the basis of approximately 5% of profit before tax excluding exceptional items and impairment of interests in associates. Scoping ...... We performed full audits on the three key regions of continuing businesses, Head Office entities and the consolidation process, representing 99% of revenue, 99% of profit before tax and 98% of net assets. Significant changes in our approach . Our approach is consistent with the previous year with the exception of: • the inclusion of an additional key audit matter relating to the accounting for the disposal of the Nordic businesses which were completed in the year; and • the exclusion of the key audit matter relating to restructuring costs. The Nordic related restructuring was completed during the prior year and in the context of our Group materiality level we have concluded that there is no longer a significant risk of material misstatement in the accounting for UK restructuring costs.

Principal risks and viability statement Based solely on reading the Directors’ statements and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to: • the disclosures on pages 44–49 that describe the principal risks and explain how they are being managed or mitigated;

F-147 • the Directors’ confirmation on page 69 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or • the Directors’ explanation on page 45 as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to report whether the Directors’ statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.

Appropriateness of supplier7MAY202019104521 rebates Key audit matter description7MAY202019104392 As described in the Audit Committee report on page 63 as a significant judgement and the accounting policies in note 1 to the financial statements, the Group recognises a reduction in cost of sales as a result of amounts receivable from suppliers in the form of rebate arrangements. Where the rebate arrangements are non-tiered arrangements (flat rate), there is limited judgement. However, a proportion of the rebate arrangements comprise annual tiered volume rebates, for which the end of the period is often non-coterminous with the Group’s year-end. Notes 18 and 21 to the financial statements disclose the quantum of accrued supplier rebates at year-end. There is complexity in supplier rebates which give rise to management judgement and scope for potential fraud or error in accounting for this income. Judgement is required in estimating the expected level of rebates for the rebate year, driven by the forecast purchase volumes. This requires a detailed understanding of the specific contractual arrangements themselves as well as complete and accurate source data to apply the arrangements to. How the scope of our audit responded We assessed the design and implementation of manual and to the key audit matter automated controls over the recording of supplier rebate 7MAY202019104896 income. Our procedures on supplier rebates included: • in certain components, testing the operating effectiveness of the controls relating to supplier rebates; • making inquiries of members of management responsible either for buying decisions or managing vendor relationships to supplement our understanding of the key contractual rebate arrangements;

F-148 Appropriateness of supplier7MAY202019104521 rebates • testing the accuracy of the amounts recognised by agreeing a sample to individual supplier agreements; • circularising a sample of suppliers to test whether the arrangements recorded were complete; • testing the completeness and accuracy of the inputs to the calculations for recording supplier rebates by agreement to supporting evidence, including historical volume data. We challenged the assumptions underlying management’s estimates of purchase volumes including looking at the historical accuracy of previous estimates and historical purchase trends; • recalculating the rebate recognised for a sample of suppliers; • considering the adequacy of rebate related disclosure within the Group’s financial statements; • holding discussions with management to understand if there has been any whistleblowing; and • testing a sample of rebate receivables to cash receipts, where relevant, to test the recoverability of amounts recorded. Key observations We consider the Group’s estimation methodology to be prudent 7MAY202019104776 based on a number of factors, including a look back at historical cash receipts. However, the methodology is consistently applied year-on-year and the understatement of rebate income is not material to the financial position or the reported financial result as at 31 July 2018.

Inventory provision for slow-moving and obsolete7MAY202019104521 inventory Key audit matter description The Group had inventories of $2,516 million at 31 July 2018, 7MAY202019104392 held in distribution centres, warehouses and numerous branches, and across multiple product lines. Details of its valuation are included in the Audit Committee report on page 63 and the accounting policies in note 1 to the consolidated financial statements. Inventories are carried at the lower of cost and net realisable value. As a result, the Directors apply judgement in determining the appropriate values for slow-moving or obsolete items. As outlined in note 17 to the consolidated financial statements, inventories are net of a provision of $164 million which is primarily driven by comparing the level of inventory held to future projected sales. The provision is calculated within the Group’s accounting systems using an automated process. We consider the assessment of inventory provisions to require judgement based on the size of the inventories balance held at year-end and the manual intervention required in the calculation. There is risk that inappropriate management override and/or error may occur.

F-149 Inventory provision for slow-moving and obsolete7MAY202019104521 inventory How the scope of our audit responded We challenged the appropriateness of management’s to the key audit matter assumptions applied in calculating the value of the inventory 7MAY202019104896 provisions by: • evaluating the design and implementation of key inventory provision controls operating across the Group, including those at a sample of distribution centres, warehouses and branches; • comparing the net realisable value, obtained through a detailed review of sales subsequent to the year-end, to the cost price of a sample of inventories and comparison to the associated provision to assess whether inventory provisions are complete; • reviewing the historical accuracy of inventory provisioning, and the level of inventory write-offs during the year; • recalculating for a sample of inventory items the required provision based on a look-back at historical demand over several years to predict forward future demand, to test the validity of the provisioning methodology; • evaluating the business rationale behind any significant change in product strategy that had a consequential impact on inventory provisions recognised; and • challenging the completeness of inventory provisions through assessing actual and forecast sales of inventory lines to assess whether provisions for slow-moving or obsolete inventories are valid and complete. Key observations We consider the Group’s provisioning methodology to be 7MAY202019104776 prudent when compared with historical levels of inventory write-offs. However, the methodology is consistently applied year-on-year and our estimate of the potential overstatement of the provision is not material to the financial position or the reported financial result as at 31 July 2018.

Accounting for the disposal of the Nordic 7MAY202019104649businesses Key audit matter description As described in the Audit Committee report on page 63 as a 7MAY202019104392 significant judgement and in notes 8 and 29 to the consolidated financial statements, the Group completed its disposal of the Nordic businesses in the period with a resultant gain of $439 million. The key judgements related to this key audit matter lie in the determination of the amount of foreign exchange balances to recycle from reserves and the balance sheet adjustments to net assets in respect of the completion accounts process for Stark Group. How the scope of our audit responded Our procedures on the disposal included: to the key audit matter • reviewing the completion account submissions and assessing 7MAY202019104896 the net asset values in light of the completion accounts process, including management’s estimation of any final payment or receipt;

F-150 Accounting for the disposal of the Nordic 7MAY202019104649businesses • challenging the nature of the amounts recycled from reserves to the income statement to determine whether they relate to the entities disposed of or abandoned in the year; • testing the quantum of the amount recycled from reserves back to underlying accounting records; and • performing a completeness check on amounts remaining in reserves with reference to the Group structure, historical transactions and a proof of the closing balance. Key observations We consider that the judgements taken by management in 7MAY202019104776 concluding on the total gain to be recognised in the financial statements are reasonable and materially consistent with the results of our audit work, reflecting the substance and nature of the businesses disposed of or abandoned.

Group financial statements Company financial statements Materiality ...... $65 million (2017: £45 million) $30 million (2017: £23 million) Basis for determining materiality ...... Approximately 5% of profit before Materiality was determined on the tax excluding exceptional items and basis of the Company’s net assets. impairment of interests in This was then capped at associates. approximately 50% of Group materiality. The profit before tax excluding exceptional items and impairment of interests in associates was $1,391 million which was $204 million higher than statutory profit. The exceptional items we excluded from our determination are explained further in note 5. We have also excluded impairment of interests in associates. These amounts were excluded to normalise for items which are considered significant by virtue of their nature, size or incidence. Rationale for the benchmark applied .... Profit before tax is a key metric for The entity is non-trading and users of the financial statements and contains investments in all of the adjusting for exceptional items and Group’s trading components and as impairment of interests in associates a result, we have determined net is to reflect the manner in which assets for the current year to be the business performance is reported appropriate basis. and assessed by external users of the financial statements.

F-151 Group materiality $65m

$1,391m $65m Component materiality range $24m to $48m Audit Committee reporting threshold $3m

PHT excluding exceptionals and impairment of interests in associates Group 7MAY202019104128materiality We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $3 million (2017: £2 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. Based on that assessment we focused our Group audit scope primarily on the audit work at the three key regions of continuing businesses (USA, UK and Canada). Full audits were performed in these locations, as was the case in the prior year. At the Group level we also tested Head Office entities and the consolidation process. Of continuing results, this provided coverage of 99% (2017: 97%) of revenue, 99% (2017: 99%) of the profit before tax and 98% (2017: 98%) of the net assets.

Revenue Profit before tax Net assets Full audit scope 99% 99% 98% Analytical procedures 1% 1%11MAY202016463864 2% The Group team is responsible for the Head Office entities and the consolidation. The Group team carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit. The component teams in the USA, UK and Canada perform audit work and report into the Group team. The Group audit team continued to follow a programme of planned visits that has been designed to enhance our oversight of the component teams. A senior member of the Group audit team visited each of the most significant locations where the Group audit scope was focused, being the USA, UK and Canada. We included the component audit partners in our team briefing, sent detailed instructions to our component audit teams, reviewed their planned audit work and challenged their risk assessment. We communicated regularly with all components to discuss the progress of their work and a senior member of the Group audit team performed a review of the work performed on significant risks and other areas of focus set out in our instructions. For all components we attended the local close meetings.

F-152 In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that: • Fair, balanced and understandable—the statement given by the Directors that they consider the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or • Audit Committee reporting—the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or • Directors’ statement of compliance with the UK Corporate Governance Code—the parts of the Directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. We have nothing to report in respect of these matters.

Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out below. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

F-153 • detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and • the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations. • discussing among the engagement team including the USA, UK and Canadian component audit teams and involving relevant internal specialists, including tax, treasury, valuations and IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in relation to supplier rebates given the complexity of the annual tiered volume rebates and manual adjustments to revenue; and • obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations of the Group. The key laws and regulations we considered in this context included the UK Companies Act, Jersey Law, Listing Rules, pensions legislation and tax legislation.

Audit response to risks identified As a result of performing the above, we identified the appropriateness of supplier rebates as a key audit matter. The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters. Our procedures to respond to risks identified included the following: • reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations discussed above; • enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims; • profiling the manual revenue postings made and tested the appropriateness of a sample that met certain risk criteria; • performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with tax authorities; • in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; • assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and • evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Report on other legal and regulatory requirements Opinions on other matters prescribed by our engagement letter In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the provisions of UK Companies Act 2006 as if that Act applied to the Company. In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

F-154 In the light of the knowledge and understanding of the Group and of the Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.

Matters on which we are required to report by exception Adequacy of explanations received and accounting records Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • proper accounting records have not been kept by the Company, or proper returns adequate for our audit have not been received from branches not visited by us; or • the Company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters.

Directors’ remuneration We are also required to report if in our opinion certain disclosures of Directors’ remuneration that would be required under the UK Companies Act 2006 have not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns. We have nothing to report arising from these matters.

Other matters Auditor tenure Following the recommendation of the Audit Committee, we were appointed by the Company on 12 November 2015 to audit the financial statements for the year ending 31 July 2016 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is three years, covering periods from our appointment to 31 July 2018.

/s/ IAN WALLER Ian Waller (Senior statutory auditor) For and on behalf of Deloitte LLP Recognised Auditor London, UK 1 October 2018

F-155 9OCT201809444170

Ferguson Finance plc

U.S.$600,000,000 3.250% Notes due 2030

Guaranteed by Ferguson plc and Wolseley Limited

Joint Bookrunners Barclays BofA Securities BNP PARIBAS J.P. Morgan RBC Capital Markets SMBC Nikko

June 2, 2020

OFFERING MEMORANDUM

Toppan Merrill, London 20ZCH75101