Ferguson plc Annual Report and Accounts 2018 Ferguson plc Annual Report Accounts and 2018 More to Ferguson 01_FERG_AR18_Front_Cover_v29.indd 3 15.10.18 17:30 Welcome to Ferguson plc The world’s leading specialist distributor of plumbing and heating products Financial highlights Statutory financial results $20,752m $1,267m 515.7c Revenue Profit for the year Basic earnings per share +7.6% (2016/17: $19,284m) attributable to shareholders +40.9% (2016/17: 366.1c) +37.7% (2016/17: $920m) Alternative performance measures $1,507m 444.4c Ongoing trading profit1 Headline earnings per share1 +15.3% (2016/17: $1,307m) +21.4% (2016/17: 366.1c) IFC 2–49 50–96 97–149 150–158 Strategic report Governance Financials Other information IFC Contents 51 Governance overview 98 Group income statement 150 Five-year summary 01 There’s more to Ferguson 52 Board of Directors 99 Group statement of 152 Group companies comprehensive income 12 Highlights 54 Ferguson’s governance structure 154 Shareholder information 99 Group statement of 13 Chairman’s statement 55 What the Board has done 157 Group information changes in equity during the year 14 Ferguson at a glance 158 PwC limited assurance statement 100 Group balance sheet 56 How the Board operates for sustainability data 16 Group Chief Executive’s review 101 Group cash flow statement 58 Evaluating the performance 158 Forward-looking statements 21 Marketplace overview of the Board of Directors 102 Notes to the consolidated 22 Our business model financial statements 59 Relations with shareholders 24 Key resources and relationships and other stakeholders 140 Independent auditor’s report to the members of Ferguson plc 28 Key performance indicators 60 Nominations Committee (“KPIs”) 146 Company profit and loss account 62 Audit Committee 30 Financial and operating review 146 Company statement 67 Directors’ Report – of changes in equity 34 Regional performance other disclosures 147 Company balance sheet 40 Sustainability 70 Directors’ Remuneration Report 148 Notes to the Company 44 Principal risks and financial statements their management 1. This is reported on an ongoing basis and is an Alternative Performance Measure (“APM”), Gareth Davis John Martin Mike Powell see note 2 on pages 107 to 109 Chairman Group Chief Executive Group Chief Financial Officer for further information. (see page 13) (see page 16) (see page 30) 2. IFC – Inside front cover. Ferguson plc Annual Report and Accounts 2018 There’s more to Ferguson Strategic report Our business model is simple. We source, distribute and sell specialist plumbing and heating products. We provide customers with the right range of products at competitive prices with great availability and multiple order and delivery options. These are the basics of our business. We also do a lot more. Our customers return to us day after day for our expertise and relentless focus on service. Governance We listen to our customers’ challenges and help them deliver a wide variety of projects from small residential repair jobs to major new construction work. We support them when they are bidding for work and help them manage their projects. Customers trust in our people, processes, advice and commitment to help make their businesses thrive. Ferguson’s enduring commitment to service is the foundation for long-term partnerships with our customers. Read more over the following pages. Financials Examples of how we support our customers: After sales Pick-up Delivery Product Branch support options options information services Credit 24/7 secure access Call off options Technical data Product advice No hassle returns to branches (order book) and rich content Emergency out Warranty support Scheduled forward Multiple delivery of hours support delivery dates locations Project-based billing One hour call/check Same day delivery and collect service Specialist delivery e.g. crane trucks Other information Bidding and Customised Showroom Sales tendering solutions consultancy channels Sourcing Project-specific Valve actuation Bespoke catalogue/ Inside sales Own brand choices tendering Fabrication order service E-commerce Exclusive distribution Take-off software Commercial Appliance Electronic Data Sourcing of Value engineering water heaters installation services Interchange non-stock items (using expert Pre-assembled kits Project management Outside field product knowledge Design services sales support to enhance customer bids) Call centres Ferguson plc Annual Report and Accounts 2018 01 More time Residential trade: Using technology to help Kevin Cohen Plumbing deliver better customer service Residential and commercial plumber Kevin Cohen was in search of a more efficient way of replenishing his fleet of trucks with the products his technicians needed. Sara Ferschweiler, e-commerce specialist for Oregon, was able to identify his needs during a sales call and discussed a solution utilising a customised product book with a barcode scanner for each of his 16 trucks. Sara created a book for each truck which contained about 950 products, images and technical details, including barcodes, to make it as efficient as possible for the team to replenish their inventory. Today, each technician scans the material required throughout the day which goes through an approval process before being sent to Ferguson where the order is fulfilled. Since implementing the new solution in May 2018, Kevin Cohen Plumbing has submitted half of all its product orders through Ferguson.com. $560m US revenue from Will-Call, one hour reserve and collect service. 23% Percentage of US revenue generated from e-commerce. 02 Ferguson plc Annual Report and Accounts 2018 Image: Strategic report Kevin Cohen, owner of Kevin Cohen Plumbing, using a scannable inventory book. Location: Eugene, Oregon Governance Financials This book gives us the ability to order quality“ parts and supplies Other information much more quickly, allowing us to provide the highest level of service our customers expect. We’re proud to have you as partners with Kevin Cohen Plumbing.” Kevin Cohen Owner, Kevin Cohen Plumbing Ferguson plc Annual Report and Accounts 2018 03 Image: Candace White, owner of the White House Collection and Jacob Wilson, Ferguson showroom consultant, discuss a current customer project. Location: Portland, Oregon The service they provide is world class and“ I have a fantastic relationship with them that I really value. They continually go out of their way to make my life easier.” Candace White Owner, The White House Collection 04 Ferguson plc Annual Report and Accounts 2018 Strategic report 870 showroom consultants who work closely with the client and their architect/contractor providing advice and project management support. Governance More advice Residential showroom: Providing a total solution for The White House Collection remodelling projects Candace White, who owns The White House Collection, a custom home design company, relies on Ferguson showroom consultant Jacob Wilson Financials to advise her customers on product specifications for all their remodelling requirements. Often working from architectural drawings, Jacob discusses available options with Candace and her customers, keeping in mind style, product design and customer budget. Candace brings the majority of her customers to Ferguson’s large Portland showroom and has been working with us for over five years. Here, customers can see and touch a wide range of alternatives in-situ from our kitchen, bathroom and lighting range so they can better visualise their projects. Jacob produces a customised colour catalogue for each customer with photographs, prices and product specifications to help finalise the designs. Once product selection is agreed Jacob then ensures all aspects of the project are delivered, staying in touch with the various tradespeople to co-ordinate deliveries, ensuring specialist installation is done properly and resolving problems quickly if they arise. Other information $1.9bn US revenue generated through showrooms including: consultation, design, project management, sizing, sourcing, stock holding, two person white-glove delivery and installation. Ferguson plc Annual Report and Accounts 2018 05 Image: The Whittle School & Studios More wins Commercial: Supporting Shapiro & Duncan and Superior Mechanical to win a vital bid Shapiro & Duncan and Superior Mechanical came to Ferguson for help on a high-end plumbing fixtures project for a large commercial school. The Whittle School & Studios in Washington DC is a large and ambitious project which will eventually provide educational, recreational and residential space for over 2,500 students on a 14 acre site. The school wanted to create a campus reflecting their belief that “everything in a school is a lesson”. The joint bid therefore required more than standard, “builder grade” plumbing fixtures and the contractors needed help choosing high specification products and devising a delivery schedule based on the demanding construction timeline. Originally over budget, the Ferguson team came up with various solutions to achieve the look the school required. To achieve this, and to stay within the budget, the team changed the product mix adding in our own brand products from the “Mirabelle” range which were chosen as they are visually striking, highly durable and cost effective. Our support enabled Shapiro & Duncan and Superior Mechanical to win the bid in a highly competitive process. $8.0bn 48% of US revenue is generated from bidding and tendering work. 2,000 US outside sales associates support customers in bidding