Full Year 2020 Ferguson PLC Earnings Call

All of his support and all this hard work has been critical in the company's transformation over the last several years to focus the business on its north American markets.

[music].

If I turn to today's agenda I'll kick things off and give you. The highlights and also say a few words about how we're adjusting to the operating environment as covered 19 started to impact our business during our fiscal third quarter.

Mike will give you an overview of the numbers and then I'll come back and give you a quick update on our strategy and some of the areas the teams focusing on.

And then Mike Bill and I will be happy to answer all of your questions.

I want to start by recognizing our 34000 extraordinary associates, who steadfastly supported our customers during the pandemic.

And often very difficult circumstances.

Cobot 19 has undoubtedly had a dramatic impact and can continue to affect almost every aspect of their personal and their professional lives.

From our fabricators technicians and drivers to our showroom consultants and sales representatives to those working on our counters and in our warehouses not to mention the many thousands of associates now asked to perform their jobs remotely they have all risen to the challenge.

During these extraordinary times, we're incredibly thankful and proud of what they continue to accomplish each and every day.

So turning to the highlights.

Service and delivered a strong and resilient performance in 2022.

Despite the unprecedented challenges in the second half overall ongoing revenue of $19.9 billion was still 2%, 2% ahead of last year and broadly flat on an organic basis.

It was another good year for gross margins. Despite the adverse mix effect in the second half from the temporary closure of our bricks and mortar counters in our showroom sites.

The group's operating expenses were well controlled particularly in the second half as we took decisive action to protect profit on lower revenues.

Trading profit was 4.1% ahead of last year at $1.6 billion.

With headline EPS down slightly mainly due to the previously announced impact of Swiss tax reform.

We also delivered another excellent cash performance by tightly controlling our capex and working capital alongside the strong profit delivery.

The business continues to be underpinned by a healthy balance sheet, which remains a source of strength.

The board is recommending an ordinary dividend for 2020 of 208.2 cents, which is.

Includes a catch up from the withdrawn interim dividends.

We're also restarting normal M&A activity and we have several bolt on transactions in the pipeline.

The current share buyback program, however remains pause.

Ferguson is successful because of our associates and our baseline commitment is to create a safe work environment for all.

We continue to embed safety as a core value driver in everything that we do.

We're pleased that our recordable injuries continues to improve with our group total injury rate and our lost time rate showing strong improvements.

We're making progress in this journey to become first can safety, but we will not be complacent here.

Moving to our Cobot 19 response overall during a highly challenging period. Our response has demonstrated the resilience of our diversified business model.

It is clear this is a very different business to the one that face the recession in 2008.

Our approach to managing the business has been to focus on three key areas first to safeguard the well being of our associates and our customers. We immediately move to operating our business inherence with CDC guidelines.

Cleaning protocols all sites were put into operation alongside social distancing measures.

In the early weeks of the pandemic, we decided to act immediately to protect our associates and customers and we moved our branches to pickup and delivery only with customers encouraged to order ahead and the pickup.

And the pickup in store at the curb side.

Our showrooms also move to virtual appointments only.

We provide a critical function in the supply of essential products and services in more.

In March we took immediate steps to ensure our services were authorized as essential.

Our associates continue to serve end customers, including supermarkets hospitals schools utilities food producers and other manufacturers.

Ferguson has an agile business model are.

Our key priority at the start of the pandemic was to ensure we maintained our strong liquidity position even in the most pessimistic of downside trading scenarios.

At the same time it was important to preserve the ongoing cash flow of the business and we therefore identified significant cost and cash savings.

These measures some of which were temporary have enabled us to remain highly cash generative in the second half of the year.

We also continue to stay disciplined on working capital, which remains a key strength of the business.

As local lockdown restrictions were lifted we reopened all of our customer facing locations. This has included allowing customers to transact inside our trade counters in specified locations with additional protective measures in place.

Reopening our showroom network with enhanced social distancing requirements.

New signage reconfigured workspace is an altar schedules to encourage social distancing.

Health assessments and temperature checks in hotspot locations in particular across our supply chain network.

Maintaining hygiene Sanitization program protocols at all sites, including disinfecting customer high touch surface areas regularly.

Overall in the US we've seen fairly sequential recovery in revenue since April and we returned to organic growth in Q1.

Residential markets have remained fairly resilient with good single family activity levels.

Commercial markets have weakened overall, most notably in areas like retail office and hospitality, though this has been partially offset by strong activity in distribution in datacenters.

Civil markets were resilient and initial lockdown as customer work sites are typically both large and outside.

Industrial markets remain challenging through the year due in part to depressed oil prices and overall tough operating environments.

For manufacturing during the pandemic.

We grew faster than the markets, we serve in 2020 and continue to gain share in each sector with our outperformance estimated at about 3%.

You can see that our market sharply contracted in the second half.

Since late spring, we've seen a good recovery overall is locked down measure started these.

We think our markets today have recovered to about flat with residential leading the recovery.

New residential is strongest so ROI, where the majority of our revenue is generated is also growing well.

Nonresidential markets remain much more challenging with commercial markets down about mid single digits and civils a bit weaker still.

We track data points from numerous economic industry and research sources as well as surveying our own customers and measuring order books.

Looking at this data and applying it to our business mix, our best view of markets in 2021 is flat overall.

While we've made a positive start to the year in the us from a revenue standpoint, we're still pretty cautious on the outlook for this year.

Naturally theres a great deal of uncertainty out there at the moment not least caused by the pandemic and the trajectory of the us economy from here.

Looking forward the strength of our business model and balance sheet positions the group well in these more uncertain markets.

Assuming there is no significant cobot 19 second wave leading to the major market shutdowns, we expect to make good progress this year continuing to strengthen our market position and we are looking to the medium term with confidence.

Let me pass you over to Mike is going to take you through the numbers Mike.

Mike.

Thanks, Kevin and good morning, good afternoon to everybody.

Pleased to present, the group's full year results, which clearly show we had a good finish to our financial year.

Before we get into them, it's worth reminding ourselves that the ongoing operations. The TTI refer to throughout includes the U.S, Canada and group costs, while the UK operating business is within normal ongoing operations and will.

I will refer in the mine to numbers, excluding IRS 16, GST right understanding.

Ongoing revenues in the UK were up 2% and we held gross margins, reflecting the value we deliver to our customers.

Alongside which we tightly managed our cost base, which all together means trading profit growth continues to outpace revenue growth.

Ongoing underlying trading profit of nearly 1.6 billion was up $63 million with trading margins progressing 20 basis points to 8%.

Headline EPS declined 1.1% principally due to the higher effective tax rate from previously advised tax reform.

And taking into account the group's prospects and financial position. We're pleased to propose a final dividend of 2.2 cents in line with last year.

Effectively reinstates the previously withdrawn interim dividend and reflects our confidence in the business going forward.

As you will also see lighter cash generation has again been excellent. This year on the balance sheet remains very strong with leverage of 3.6 times.

So moving to revenue and trading profit growth are the expanded on this chart the revenue growth of 2% on the profit growth of 4.1% for the group that I've, just talked about and I broke it down into its component parts.

Organically you can see the both the profit growth of 2% exceeded the flattish revenue and this is the part for the results. The Unready. Most pleased about as we made quick decisions and have clearly demonstrate.

Demonstrated.

The agility of the business model.

The significant acquisition contribution we have delivered reflects the effort put in by the teams to bring these businesses into the folks and family.

As always we've integrated those businesses rapidly so that we can deliver value to the customers and also extract the synergies.

Moving on to the business results.

First and most importantly, our largest region the USA.

Which represents 97% of ongoing trading profit on this clearly delivered a strong performance and continued to outgrow the wind market.

We've got good momentum at the end of the first half as we told you back in March going into the second half.

And then of course Cobot 19, Lockdowns started to impact all markets.

Since March the lowest revenue months will enable that was down approximately 9% and revenue has steadily recovered. Since then and we're now back to generating growth year on year growth rates across the us continues to be heavily dependent on local infection rates and state by state and controls.

Gross margins were well controlled and as you know we use this as a gauge of the value that we deliver to our customers.

Now given the environment, we faced we took a number of prudent cost saving measures. So much costs the volumes and to protect short term profitability and these included a hiring freeze a reduction in associate hours overtime and.

Temporary staff, along with temporary layoffs being implemented in the worst hit regions.

Due to those actions dissatisfactions on costs underlying trading profit you can see came in at 158 $7 million approximately 80 million ahead of last year with trading margins, increasing 20, bips to 8.4% clip.

Clearly a very pleasing performance and again just reflects the agility the business model and the ability of management to flex the cost spacing tougher market conditions, while also being able to grow where opportunities present themselves.

On the next slide you can see there was some small variations in revenue growth in the U.S. across blended branches, which is our largest business with the strongest performance in central slight declines in the west.

And during the pandemic the blended branches revenue declines were strongly correlated of course to local lockdowns.

Though as Kevin has said growth rates have recovered steadily since.

In water works, we generated strong growth throughout with fewer operating restrictions because of course the majority of the work there is actually outside.

And they continue to grow well generating strong performance during the year and that has benefited from strong residential equipment sales through the summer months.

We have homeowners improving the houses which has kept our trade customers busy and we've also seen this trend in E business, particularly in build dot com, which has generated strong double digit sales growth in recent months.

Adoption and use of our mobile apps and E. Commerce platforms has increased significantly during the pandemic and Kevin will touch more on this later in his presentation.

Canada, representing 3% of ongoing trading profit.

Faced some pretty challenging markets pre coated.

Revenues declined 7.5% overall for the year reflected the economic impact of some pretty tough national look dancing.

Challenging conditions in Western Canada, with with the industrial markets and also some subdued residential markets gross.

Gross margins slightly lower than last year, and despite cutting costs that trading profit came in at 58 million Canadian dollars. However.

However, we are well placed to capitalize on growth opportunities in Canada as the markets recover.

And we are starting to see early signs of that happening already.

So now I've taken you through the performance of the ongoing business of the US and Canada, Let me move on to the normal ongoing operations of the UK, where we saw revenues down approximately 14% in twentytwenty.

Again pretty tough national Upturns in the UK revenues were down very sharply at the start of the pandemic through a low in April of minus 66 zero percent at they have also.

They have also steadily recovered and the business has now moved back to modest growth.

Gross margins a touch lower in the year. However, we have continued to work hard to restructure the UK business around a clear customer proposition and to drive efficiencies.

Towards the end of the year, we refocused the business by separating out building services from the core plumbing and heating business.

The align on market proposition to our customer needs. We also closed the booster distribution center to reduce supply chain capacity and create operational efficiencies, while improving customer service.

We also took no government further money during the year.

Trading profit came in at 6 million Sterling and the good news is that efficiency measures that I've just talked about online clearly coming through in the PML as we start the new financial year.

So moving on to exceptional for.

Which we charged $120 million in the year, which you can see on the left hand side of the slide.

You can see the top two items on the left that up to $93 million.

Those are the restructuring of the us and Canada and UK businesses.

So after we stabilize these businesses with the short term measures are described during March and April we worked through in May what we wanted and believed we needed to do with our permanent labor cost structure.

To ensure productivity on an appropriate response to the new environment, we decided to roughly take out 5% for the head count in the USA and 10% in both Canada and the UK.

We've gone through the correct processes with the respective Workforces and this is concluded with net permanent head count reduction in the USA of 1400.

300 in Canada, and 400 in the UK.

Most of those had slightly less towards the end of Q4 and these actions in show we will continue to drive efficiency into the new financial year and have the appropriate flexibility and skill set as we pass the business forward.

In the U.S., we also announced the closure of approximately 70 branches about half of which will close by the year end and the remaining will work through the system through the next year.

Important to remember that a lot of these is actually where we will consolidate in competitive premises at to improve the customer experience.

Really to keep the mass real simple for everybody you can assume there's a payback of about a year on these restructuring costs.

Of course, not all cash flowed in for 20.

I'd expect about $70 million of the cash to flow in F 121.

Moving to the right hand side on tax and interest firstly interest costs pre offer a 16, they increased slightly due to the higher level of average gross debt compared to last year that we carried and our expectation for interest in for 21 is approximately 85 to 90 million.

Dollars, plus say about 50 of hire for us taking the total for the year to warm 35 to 140 for Fourtwenty one.

And on tax the effective tax rate for the year totally in line with guidance that we gave of 25% to 26% and I'd expect that same tax rate for EFT slide 21.

I've said that the cash flows on the next slide on a pre after a 16 basis. Those are set to really just eight understanding is a full reconciliation to the statutory notes in the appendix, but again very clear evidence of good cash generation and the disciplines that we keep around cash.

And these continue to be an important priority and a real quality of this business cash flow from operations, one minus $4 million nearly 300 million ahead of last year, we saw.

We sort of working capital inflow, principally from lower receivables and we remain very well invested in inventory for our customers.

As ever spoke cash flows on working capital always a little misleading and anticipate about a $100 million of the strong working capital performance to unwind in quarter one.

Capital investment that was at the lower end of guidance that I gave last year.

I would expect for acquired 21 is to be somewhere between $300 million and $350 million.

But clearly we can flex that depending on the environment that presents itself.

Dividends paid slightly lower due to the withdrawal of that interim 2020 dividend, but as I've said, we now proposed to pay the two 8.2 cents per share.

Last year and that cash flow will clearly slow past the balance sheet date.

We also invested $351 million in acquisitions largest of which was Columbia pipe and supply in the Midwest and we have a normal pipeline of bolt on M&A opportunities that we are currently considering.

So the profits and cash delivery clearly leaves us with a strong balance sheet at 0.6 times net debt to EBITDA, that's below our targeted range of one to two times.

I'm showing our first 16 lease liabilities on the slide. So you can also CDR for a 16 inclusive ratios.

The pension asset has become a net liability as in line with a lots of other companies a combination of people living longer unfolding corporate bond yields means that the liability has increased but clearly still remains in reasonable shape.

On our capital allocation and capital policy there is no change.

As I think forward to the half year, we will have paid the final dividend of about $470 million.

The reversal of the spot working capital as I mentioned earlier of about 100 million likely to flow out we have the normal working capital cycle increase through to the half year on a little bit of M&A is looking like click on of course, we have the trading cash that we generate.

You put all that together I would expect us to be a touch under the lower end of the leverage target at the half year.

By the time Bill comes on talk to you next.

We do not propose to start the balance of the buyback at this point.

We will revisit that when there is a little more visibility in the business environment of keeping the balance sheet Super strong for a little while longer in the current environment seems sensible.

So let me wrap up.

We're pleased with the Twentytwenty results that the team delivered in coins exceptional circumstances.

Non-GAAP operating results with continued market share gains and excellent cash generation all of which prove the agile business model and leave us with a strong balance sheet, which puts us in a great position going into financial year 2021.

It's great I can hand over to Bill I've worked alongside Bill now for the last three and a half years, he and Kevin will be great together and I'm sure. We'll continue to drive 30, some forward with your continued support.

Kevin back to you.

Thank you very much Mike.

Much appreciated lets move onto strategy.

Our strategy is consistent with the direction of travel in recent years.

We will constantly evolve our approach overtime in our strategic framework is our roadmap for developing our business.

Overall, we want to ensure that we drive initiatives to improve our relationship with our customers our suppliers and most importantly, our associates.

We will operate with a short term and long term focus not sacrificing the short for the long or the long for the short we can and will do both.

We will continue to focus on driving all our resources and knowledge to make our customers projects better because they dealt with our company.

This is the essence of Ferguson and we will provide the best service in our industry based on our foundation of attracting developing and retaining the best associates.

We'll be our customer first trusted supplier, giving them unrivaled choice of products sourcing the leading brands in all our categories, including our growing portfolio of high quality owned brands.

We will drive scale in our business. So we can make our customers more successful by ensuring they have access to product and advice, where and when they need offering a true omni channel experience to doing business with us is as frictionless as possible.

We use technology to make our business more productive and equip our assa shoots with tools to drive efficiency, while saving time for the customer all the while never being afraid to experiment or to innovate.

As we proceed this morning, hopefully give you a sense of some of the areas. We're driving as we continue to execute this strategy.

We see ourselves as partners to our customers to make their projects more successful does.

Distribution remains a core competency and we bring the deepest and why it just inventory in our product categories with a world class supply chain.

To our customers this means putting together a bundle products and getting it to them when and where they need it.

That is our core.

We have to be more than that.

We will make sure that through a consultative approach with our associates, we're guiding a customer project to make sure that it's more successful because they did business with us.

Personal relationships are critical we also believe this is not enough.

We need to build the capabilities that drive the best digitally enabled customer relationships.

It's clear from covered 19 technology must support our customers to make them and us more productive.

We will focus on driving the Ferguson brands to ensure customers recognize and value what we do as a consultation of experience.

We'll drive a focused product strategy that includes both branded and unbranded offerings.

We will be part of a customer's decision, making process evolving from order taker.

The trusted advisor.

Other important areas of focus our value added services inside our supply chain and the evolution of what our Salesforce should and will be.

We will continue to be mindful and invest in innovation and disruption is coming from outside of our organization that is addressing overall construction productivity.

We see four dimensions to growth, which emanate from our core strengths.

It all begins with the customer and we will never abandon the trade professional as our core relationship.

But what we will do is address stakeholder relationships more than ever before.

We'll make sure we're engaged with owners engineers architects to drive project specifications and to ensure that we are uniquely positioned to secure a project.

This will also serve to expand our overall gross margin profile.

Secondly, while we have no intention to own manufacturing assets, we're going to get as close to the point of manufacturing as we possibly can.

We're going to continue to expand our diverse global sourcing organization to make sure that we're driving design product development and owned brand execution.

We'll source from inside and outside the U.S for own brand applications and drive sales through specification to that end user.

We'll use product expansion to grow the bundle, providing a comprehensive range of products. So that we're more relevant for not only the trade professional but also the ultimate end user and owner.

Now I know you've seen this chart many times before but it's a great reminder of the opportunities we have in the us and how we focus our teams on the very specific needs of these individual customer types.

The chart shows our nine customer groups with our estimated market share in each bar. The important area. The chart is the grey portion, which shows how fragmented our markets are and how large our market opportunity is.

In terms of business expansion, we will stay focused on our customer groups.

There is a significant opportunity for strong growth and continued consolidation within each of these large and very fragmented markets.

Many customer projects require a range of products and services from across the business and we leverage our scale and expertise across the entirety of the organization.

We benefit from significant synergies across our customer groups to help lower our costs and to improve our margins.

We've chosen to operate in these markets because we can generate strong growth.

Attractive gross and net margins and good returns on capital.

We first focus on organic expansion and then selective bolt on acquisitions across all of our business groups.

We generate benefits of scale in areas like distribution and technology RG strengthening customer relationships that are uniquely local.

We're always focused on ensuring the best human relationship exists together with the best digital relationship.

We've become a much more balanced business in the us were more.

We're more focused on repair and remodel today than at any time in our history.

This makes us a much more resilient business going forward.

As an example, our waterworks business pre 2008 was heavily focused on new single family residential construction work.

There were 2.2 million new housing starts at the time.

But today, we have a much more balanced business and we compete in a number of areas. In addition to new residential construction, including commercial.

Public works municipal water and wastewater treatment plant construction.

Meters and metering technology and tools.

And soil stabilization.

This type of diversification is represented in all our traditional business groups today.

A differentiated service offering happens at multiple levels and the customer journey.

Our people will work to offer error free take off services and the industry's best quotations, helping our customers to build their jobs.

From a sourcing standpoint, we will represent a balanced product strategy to ensure the best gross margin profile for products that are also the most appropriate for the customers design.

We offer customized solutions that help customers in the construction process saving them time and money.

We offer same day next day delivery of the broadest and deepest range of products in the industry bolted together with technology solutions that will deliver true project management.

The best way to illustrate this approach is a simple example.

Especially U.S. pharmaceutical company recently needed to a largest manufacturing operation.

Unfortunately, the room for the manufacturing facility couldn't support the weight of traditional steel pipe or the air handling units that were needed for the job.

The cost to reinforce the structure as well as the operational disruption that it would cause was not an option for the owner.

Together with our customer we work to create a prefabricated system polypropylene pipe.

It could be evenly distributed reducing the load to the existing roof structure without extensive reinforcing.

The results of the end user significantly indirect costs as well as the costs associated with any downtime that would have been required.

We supplied prefabricated kits with all the required components. So it could be easily assembled on site, which also reduced construction hours that was completed with no recorded injuries.

Today, the second phase of that contract is currently being fabricated and shipped.

We seek a balanced growth strategy with same store sales growth organic expansion and bolt on M&A.

In March as Mike said, we acquired Columbia pipe and supply a market leader in commercial and PBF distribution in the Midwest.

The Chicago Chicago Metropolitan areas, the third most populous in the United States and you can see from the slide we got a huge opportunity to build our commercial business in the region with Columbia, adding about $220 million in revenue.

While we have 40 existing locations in the region. We were significantly under represented in commercial in Colombia is a great fit building out our position in some attractive cities across the Midwest.

Most importantly, we welcome 375 dedicated associates, who develop deep.

Trusted relationships in the market over many years.

Going forward, we have a number of attractive attractive traditional bolt on acquisitions in the pipeline several of which we expect to conclude later this year.

But in addition to bolt ons, we'll also use acquisitions to grow capabilities that will make our branches and our digital channels more relevant.

Many of these opportunities allow us to get closer to the consumer and owner, while adding to our own brand product offerings.

In 2018, we acquired safe step.

Shells owned brand bathtubs, and showering systems for the limited mobility behaving market.

Since the acquisition, we've grown revenue by over 30%.

The business has great returns with gross margins two times, our core gross margins and is solidly accretive to trading margins.

Manufacturing is contracted out but completed within the U.S. and the business has a direct sales model utilizing a network of over 100 independent sales reps.

Since we acquired this business, we've expanded our growth within our showroom network are.

Our residential and commercial channels with great success.

We must provide a seamless experience for our customers no matter, what order channel they choose to use.

Our associates will spend less time processing orders and more time guiding our customers, thus enhancing productivity customer service and most importantly relationships.

We've added many pieces of functionality and we've recently launched a real game changer for US which is a great example of how technology can enhance our service while improving productivity.

Offering geolocation services for our customers means that we can empower them through the Ferguson app.

Receive real time notification of deliveries by voice text or email alerts.

Customers are now getting notifications of the truck because making stops along the way updating timing. So they can better plan their day, but it's all.

But its also tied to enabling them to understand pretty sizably, what is on that truck and what is about to be delivered.

If you can imagine we have over 2000 outside sales associates in nearly 4000 working inside sales, who are receiving calls multiple times, a day checking delivery times and inventory.

Freeing up these associates to spend more time on sales and consultation will be a significant productivity improvement.

We're incredibly excited about linking that geo positioning to the Ferguson mobile experience, which we think will drive rapid adoption by our customers unlocking so many additional capabilities through their mobile devices.

We're in the early innings of rolling out new releases, so if our customers want additional functionality like geo positioning they can access it easily.

This gives them enhance functionality on the go including buy online pickup in store downloading proof of deliveries searching the widest and deepest breadth of product inventory in the industry accessing rich product content scheduling delivery and installs much more.

Unsurprisingly Weve seen significant customer uptake in these tools during the pandemic app.

App activity.

Doubled since March we launched additional services to help customers operate in the cobot environment. For example, our pro Tiet tool can be used at our counter so our trade pros to easily test orders for contact was pickup.

Our overall user activity is up almost 50% on our digital platform since March.

Hopefully that gives you an idea of how we're executing our strategy.

Now onto a couple of corporate matters.

The exit of the UK business remains an important priority but.

The timing of this remains uncertain and consequently, the board is assessing other separation options in parallel with the demerger process.

Our objective remains to exit the UK from the portfolio as a standalone business.

We continued to make good progress on the transition of the business to a full use primary listing.

Post the exit of the UK the executive team will be entirely based in the us and all of the company's revenue will be generated in North America. We.

We continue to believe that to US is the natural long term listing location for Ferguson.

In July following shareholder consultation the board such shareholder approval for an additional listing of ordinary shares in the U.S.

Shareholders voted in favor of the resolution and we received over 99% support.

We expect this new listing to be effective in the first half of calendar 2021 and then.

And in due course, we'll put forth a further resolution to Ferguson shareholders to relocate to primary listening to the U.S.

In summary sat here today, our business is in good shape.

We're extremely proud of how our associates have risen to the challenge.

We're pleased with the operational delivery given challenging market and we will continue to focus on execution.

Most importantly, we will manage the business very carefully as the trajectory of our markets remain uncertain.

Our business is diversified and resilient and we have a clear air strategic direction. This income.

This includes investing in the strong foundation of a world class supply chain delay.

Delivering a consultation of approach to our customers and investing in technology.

Thank you for your attention.

Mike Bill and I will be very happy to clarify anything is unclear and.

And take any questions or comments you may have.

Adam I'll hand.

Ill hand, the call back over to you.

Thank you gentlemen, ladies and gentlemen, if you would like to submit a question you may do so by pressing star followed by one on your telephone keypad now when preparing to ask your question. Please ensure that your line is on mute locally and if you do change your mind to put your question every time. It is star followed by two.

We have our first question comes from where returns of Redburn partners will if you'd like to go ahead with your question. Please.

Thank you.

I've got three if I could please the first was to actually two part question just around the cost saving measures for the year ahead, but just the roughly 5%.

Count cuts in the us would still be well with.

Yes, well, we're having trouble hearing you could you could you speak up just a touch.

Yes.

Yes.

You bet, yes.

Yes, sorry, I will let sorry, I'll speak up that allowed apologies yes.

First was just around the the cost savings and checking that the the 5% headcount cuts in the UK is compatible with small revenue growth, which is what you I guess you might see for the current year or would you have to kind of bring back on some of those assets.

Your mind as they are linked.

Linked to that as well the branch closures I think Mike's comment okay.

You will relocate Reconsolidating dispenser locations come we've seen from that you don't expect much if any revenue loss from the branch closures just to check that because the.

Yes, we think number.

Second question is just around gross margins.

Perhaps just for the year as you could give us a feel for what you see potentially some coal on the business I guess things like mix I would label cost to serve.

Just how it how it might shape up in in insight.

In totality.

And then the law firm was just on on strategy, just referring back to your slide a couple of some early on in the presentation around the market share as the market sizes. I guess Hvdc is an interesting one where you've got around 4% share. It's one of your biggest total market size and possibly could benefit.

I just want the decline is a market where.

You see incremental opportunities I appreciated quite dependent on manufacturer relationships that but is that one of your kind of verticals you could you could put on maybe in the next couple of years. Thank you.

Perfect. Thank you will we did have some trouble hearing you, but I think I got the gist of it this is Kevin and I'll, maybe take a first crack at the three questions and then Mike and Bill please fill in.

From a cost head count versus growth as Mike indicated we feel like we took a much better approach to what cost control and disciplines looked like versus 2008 2009, so depending on the market and it was very local we approach this with a variety of different actions from.

Furlough lay off hours reduction temporary workforce, and then reduction in force to position ourselves, yes for what we were going through during locked down but much more importantly for what was going to face us as we went into Q1 and beyond.

And so weve already seen as markets have begun to recover in certain markets have gotten better that cost continue to put back into the system.

Obviously through things like an increase in hours worked what overtime looks like in that system. The thing I'm. Most pleased with is the flexible nature of.

Of which we've been able to preserve the intellectual capital of this business to make sure that we can continue to outpace growth.

As markets are supportive and that agility to make sure that we can address the cost base if markets are more challenging and from a branch closure perspective indicated that many of these were small branches, yes small.

Very few associates in branch and so from a revenue perspective, we expect to capture and retain.

100% of the revenue of those locations as we utilize other locations in those specific market areas from a gross margin perspective.

We look at a good balance to the year ahead last year, we saw good growth in areas like waterworks, which do have a lower gross margin, even though the operating margin is consistent with the rest of our business, but again focusing on owned brand and an overall balanced product strategy that will.

That allows us to.

Achieved the value or we realize the value that we provide in the marketplace. We still believe that we can grow margins roughly 10 basis points a year.

Over the long haul.

And then from an Hvdc standpoint.

It is absolutely one of our attractive growth markets, you highlighted the size of that market and our relative share position, but additionally, when you look at the needs of the consumer in the residential market and certainly from a commercial perspective.

Heating and cooling.

We think we're uniquely positions. Additionally from a cobot perspective, as we look at indoor air quality as being a potential huge driver for us as we go forward. It has a direct link to that HIV assay business. The reason I say I think we're uniquely positioned.

As many of the customers in the HIV assay business do both plumbing and Hps you work and we have a very successful plumbing business across all 50 states in the US and then into Canada, and so the ability to offer a very unique customer experience.

For the H.D.A.C.

Business group, while at the same time offering a very unique experience for the plumbing side of the business allows them to shop at one location to leverage the infrastructure and the relation chips of our organization and should allow us to grow significantly faster you highlighted the manufacturer input we have great.

Relationships across a variety of Oems and making sure that we have access to product lines to take care of that opportunity is hugely important with that wont drawn on any additional from micro bill.

Yes, Kevin listen Thank you well given your question really relates to good sort of good cost in Q4, and what about the future for TV, a little Richard made a comment about the future and given that bill is on the line. So no one I handover to you and in Q2 will undertake.

Yeah, great. Thanks, Mike.

First of all let me just say how honored and excited I understand into the role.

Forward to meeting many of you virtually over the next couple of weeks and then hopefully soon in person when when appropriate.

Just look to Kevin's point from a cost perspective, as we were going through the Lockdown. We did first flex really hard on the Tempur, great items and actions at one point, we had about 2500 people that were on temporary furloughs or temporary layoffs recall the revenues were down about 9% in April.

Clearly, we then shifted focus towards the future setting up the cost base for.

Certainly an uncertain environment, but the revenue base that we expected to be operating in coming out of the initial lockdown base, that's where we took the action on the 5% of heads in the U.S.

Kevins point revenue was a bit better than we expected coming through Q4. Most of those temporary actions are now brought back from a cost perspective.

Because of those actions and because of slightly better revenue, we certainly had a good solid Q4 so.

Certainly from a slip perspective, and a profit flow through perspective as weve.

As we manage into Q1 and into this fiscal year.

As we look forward you could expect some of that cost base to come back if revenue exceed those expectations, but these are things that we manage day in day out month in month out very closely across the organization, maybe just to put it in perspective, the 1400 people that we read.

News from the organization remember, we've got about 1400 locations. So thats about an average of one per location. So these are very tactical decisions that we make day in day out and will be.

Be very cautious as we move forward into the new fiscal year.

Based on.

Thanks, a lot.

Our next question comes from pre our Wolff of Jefferies. If you'd like to go ahead with your question. Please.

Okay.

Hello, and thank you for taking my question can you hear me okay.

We can't Freehand, Thank you can't finance.

I've got three questions. The first one is just on current trading so obviously in the Iraqi said youre back to organic growth since okay can I, just double check that Doesnt mean, youre back to organic growth in your core lending franchise activation as well or is this more just a function of.

We see strong growth from smaller units like E business.

Second question is just on M&A I know you said you could see decent pipeline that has this pipeline improved three UK. They said that more sort of distressed assets out that UK pickup and then the last one is it's just when you said that you will get back to shareholders in key core intensive approval for that.

Finally, you asked listing Cogs, especially when Tom give you more tightly tied to timeframe in terms if that thank you very much.

Thank you for your.

And in terms of current trading.

As we indicated we're really pleased with the way in which we've had sequential recovery from the springtime through the close of the fiscal year and into Q1, I'll, let bill comment on where we sit in terms of blended versus the rest of the businesses, but generally speaking we're pretty pleased if you look at the different pressure.

Once that we have on the business.

From an order channel perspective, you are residential trade business our.

Builder business in showroom business, performing quite well commercial a bit more challenged and so that gives us a pretty nice balance actually for what we had expectations.

In terms of the pipeline for M&A.

We don't see just trust assets out there I think we've said before Mike said, it very well on past calls that our local competition runs their business quite well from a cash perspective and and can really.

Use the words hunker down.

To take and see themselves through a challenging period I do believe though as we go through co bid and beyond that the investments necessary for foundational technology for.

For what an omni channel experience looks like for the tools that are necessary to drive this business I do think we'll create opportunities.

For us to acquire businesses that have great local relationships that we can plug together.

With that technology with that supply chain with that breadth and depth of product offering to.

To make them more successful so that's what I'm most bullish about in terms of bolt on M&A as we look forward and.

And then from.

A second listing onto a primary we've got a lot of work that we need to do right now and so when we use language like in due course, it really is to reflect the fact that we got work to do around FCC Sarbanes Oxley. Nick you. Most importantly, we've got work to do to run this business appropriately.

Through a challenging environment and so we're not going to get ahead of ourselves we have that.

At view of the future and the board has has stated that publicly but we first need to set up that and stand up that secondary listing run the business appropriately really on certain markets in country.

And continued to deliver so that's where we are maybe bill you want to comment a little bit more on blended in.

Yes, a blended getting back about flattish I would say as we entered into into the first quarter and then the strength as Kevin mentioned from an Hvdc perspective from a waterworks perspectives, performing very well delivering on balance that low single digit growth.

Okay cool.

We have another question. This morning comes from Kathryn Thompson of Thompson Research Group, if you would like to go Hedrick. Your question. Please.

Hi, Thank you for taking my questions today and I just had a question sat individually after answering the first Jerry I want to focus on is on plumbing and.

And this is really feedback we've received over the past two to three months.

And it's from our US contact center point toward an increasingly pretty meaningful one.

For demand for commercial plumbing products.

So this would include local handwashing stations that water filtration water filtration systems and they.

And they did it this is a change in trend line for commercial demand versus more why demand and calendar Q2.

Could you clarify what you're seeing in the field commercial particularly against the backdrop of what could be higher.

Thats, great the biggest non discretionary non discretionary.

A model that part C and public spaces. Thank you.

Okay. Thank you.

Thank you Catherine very much appreciate it from a come.

From a commercial demand perspective, and you're right. There are different ways of working there are going to be different demands on what commercial space.

Should look like and what those retrofits could look like you mentioned a few of them. The other area that we are seeing is are are quite frankly, very simple retrofits small retrofits on indoor air quality filtration and the like.

And we are taking advantage of that today, although it's not material in terms of what the overall revenue impact is at this time I think more broadly from a commercial perspective.

What we're seeing is there's certainly an effect out there as we look at multi trade commercial development and the length of time for a project, making sure social distancing is in place, making sure that the spacing out of trades is done we will lengthen the time of a construction project to a certain degree.

But we were pleasantly surprised with the law.

The lack of cancellation of projects or pausing a projects that we're seeing across the bulk of our business. Although we remain cautious because we certainly know that theres going to be pressure on bidding activity and funding for projects that may have been previously in the pipeline around areas like hospitality office retail and the like.

But as we've discussed the.

Need for Datacenters, the need for distribution capacity.

Certain education, and health care assets, although not as much or really.

We're really bullish from that perspective, so we're more cautious on the commercial market.

But pleasantly surprised as to what we're seeing across the nation.

Thus far.

Tagging along that with HVAC.

We see a lot of opera.

A lot of opportunity to catch back based on our primary research as there is increased focused on airflow at public spaces.

I take it from your prepared commentary you are seeing more positive trends right now on the residential side what types of conversations are you having with commercial as a as as buildings are being reconstructed to face at Pacific World.

Yes, the bulk of our HIV assay business is in fact residential may.

Most of our commercial work is in the light commercial area, although from a Vrs perspective, we are engaged in the in the larger commercial market and then certainly we have a large mechanical commercial business on the plumbing side of our world that has.

Some impact from an efficacy perspective.

I think residentially, we're seeing some pent up demand as well as good impact of residential new construction. The biggest issue right now candid Lee from an HIV assay perfected it just making sure that we've got good access to product. If you think about a perfect storm for our business in HIV assay.

The the pandemic hit about the time that typically distribution builds up some inventory levels and manufacturers are ready for the upcoming summer season, and so there.

It was a bit of disruption and dislocation there and so making sure that proper access to product and in leveraging our supply chain and making sure that we can take care of customers on the residential side is very important.

And then as we've talked about from an indoor air quality perspective, we.

We think its.

Call It roughly a 10 billion dollar opportunity potential before us as we move forward across residential and commercial is a big it's a big market. We're just now starting to analyze what we what we think our role can be.

But that that business is growing rapidly for us right now off of a fairly low base.

And then following up on your US margins the way we looked at it for Q4, you are trading profit margins expanded over 100 basis points. Despite.

Pretty challenged top line as you are managing through quarantine and coming out of that.

He has made some comments on just with the flexibility to model, but well we'd like to that I understand is how much more is onetime in nature and how much structural cost we've been able to take out and.

And also clarify what if any mix impacted margins in the quarter.

Yeah, Catherine its bill So let me jump in on that so first off from a structural cost standpoint, I think you should think back to the exceptional charges that Mike outlined that's the real focus go forward take out of ongoing.

Hedged from a labor perspective, as well as the consolidation of those 70 branches again on that on those 70 branches about half of those were physically close by the end of the quarter. The other half are going to come through principally in Q1.

And that really get that the bulk of our cost base, you know, 60% roughly of our cost bases and labor another 15% as an infrastructure costs. If you go back to your comment though on the trading margins.

Youre correct certainly in the us at about a 10% trading margin in Q4.

Again back to my earlier comments very pleased with that result.

Most of those temper all reactions that we took again to 2500 people that were temporarily furloughed or laid off those 2500 are now back.

The overtime that we reduced significantly in Q4.

Part of that is back in Nashville, where we will remain very cautious as we move forward to manage that over time as well as the permanent ongoing head count up or down depending on the volumes that we see.

Okay final question goes into the bucket as it seems conservative.

First on the topline guidance for flattish.

Maybe some puts and takes based on that outlook and then second.

During the fiscal year with pretty incredibly low leverage at 2.6 times, what should we read into this and how should we think about growth initiatives going forward. Thank you again Pratt team my questions today.

Maybe I'll take a first cut bill Mike jump in.

On balance we see.

Some green shoots and all our positive around the residential side of the business.

As you think about new construction residential we are positive about single family new construction not the least of which is what you see in a global environment and the desire for people potentially to one single family.

Construction is expanding of the commutable distance given the nature of remote work in the acceptance of remote work low interest rates pent up demand and then obviously from a starts perspective C and 1.4.

And plus two.

On on that is very positive we also see some positive around.

Home improvement as you look at lira being plus two so even if you take a mid single digit positive from a residential perspective, I think that offset starts to look as you get to the commercial side of the world and looking at what Abby I looks like below 50 for six months and and what we're seeing from an overall project funding person.

Active and the uncertainty around the commercial markets and then industrial remains a bit challenging.

Plant shutdowns in our PVF business getting in there and doing maintenance repair and operations inside those plants still remains challenging oil natural gas and the like and then the civil markets. When you look at the funding levels for local and municipal government and what that might mean to the public works construction.

Of our civil markets. So when we take all of that together and balance it out in our fabrication business as part of that commercial market on balance what we get to is a roughly flat market.

That said those numbers are changing fairly quickly.

As you look at a co bid world and I think that Theres still enough uncertainty out there are we pleased with what we've been able to produce from a revenue standpoint, and outperformance absolutely will we continue to drive for that absolutely, but there's just a fair amount of uncertainty as we go into the latter part of our first quarter and and.

For the rest of the fiscal 21 in terms of that low leverage ratio.

We think it's a prudent place to be given that uncertainty in the market.

And the strength of our balance sheet.

Is a very positive thing for us, especially as we look to.

Get back into good solid bolt on M&A.

And again trading through challenging markets, where the heck from a UK thats perspective, we don't have concern.

Consistency in young people go back to school and so what are we going to see from a virus perspective, maintaining that conservative position is prudent at this time and we were pretty pleased with where we are.

Thank you.

Thanks Catherine.

We have our next question. This question comes from.

From Keith Hughes of tourist if you'd like to go ahead with your question. Please Keith.

Yes, Thank you Kevin and the prepared statement you had discussed.

Future initiatives getting closer still serving key sector Im sorry could you ask could you speak up just a touch were having trouble key.

Alright.

Is that better.

Yes. Thank you.

Yeah Okay.

My question is Kevin in your prepared statements you had discussed getting closer to the end use customer still sort of in the contractor again.

We're getting closer to the end use customer, which has always been part of the commercial world more than residential.

I guess my question is are you talking about.

Extending that further into the let's call it non residential world or is that and initiative in residential and how do you how do you get that goal accomplished.

Yes, thank you very much.

We see it across all of our different businesses and it can't be from enough in saying the trade professional is our customer and we.

And we work hard every day to make sure that we deliver that value.

Best breadth and depth of product supply chain consultation of experience being able to find search special items to make their jobs easier, making their business more successful, but where we really need to go especially from a product strategy perspective is working with designers engineers architects is it commercial yes is it infrastructure.

Sure, yes municipalities.

Is it designers in the builder showroom space, absolutely. So just making sure that we are up funnel occur.

Across all those different assets, helping our contractor to make sure that we have a smooth flow of product that meets the design criteria.

For that end user that stakeholder.

But at the same time, we're guiding what that product selection looks like to benefit Ferguson and our contractors and so that is not just on brand Thats also our partner vendor relationships on the branded side, where we've got great exclusives that are unique to Ferguson that.

Allow us to have a specification inside of a project, giving us a better chance to secure that overall job while at the same time.

Helping our margin profile in delivering a better product for the end user with good timeliness for the contractor so.

So really it's across all of our different business groups. It is in person through relationships, but it's also through technology, especially as we start to see building information modeling, becoming a bigger part of not only the commercial business, but beyond.

Okay second final question.

Follow up the catherines as.

As you look at the business the last sort of 60 days. Thank you.

And some caution on your non residential business. If you look at those three the commercial the infrastructure civil infrastructure industrial.

The last couple of months with those has been the weakest markets.

Thanks, Keith could you repeat that last part we lost you on the last part.

Yes, sorry on respectable louder.

Yeah, what's of the non residential businesses you define it as commercial civil infrastructure and industrial it seems as though they're weaker than residential in the last couple of months of business, which of those is the weakest which was causing but.

The lowest trend.

Industrial is and again, we don't have a tremendous amount of exposure to oil and natural gas, but it is is that the weaker of all those types of businesses really.

Commercial then.

Civil municipal and industrial.

Okay. Thank you.

Yes.

We have our next question. This question comes from events from head of Exane. If you like to go ahead with your question. Please.

Good afternoon, gentlemen, just a few questions on my end.

Could you maybe come back just on the end market developments and especially looking at the comments you've made on the municipal funding.

You kind of use a backward tours on the press release I wanted to understand if you've seen any improvements with regard to that sub segments.

Recent tweets.

And how you think going forward on that specific point Mike.

My second question is on your slide where you show your positions and your vertical exposure.

Try to figure out maybe with your new strategy with the U.S. listing looking ahead. The next five years, where do you see the largest fortunately she is in terms of.

Market growth, but also in terms of potential external growth opportunities through through M&A.

And maybe just.

Last question your outlook is essentially saying that with the southern protocol for your exposure you expect flat market conditions can we extrapolate the outperformance of 29 to 2020, which would suggest a low single digits environment for Ferguson. Thank you so much.

Great.

Thank you very much and from a municipal perspective I think this is more our caution around what might happen, we havent necessarily seen that today, but if you look at stress and strain put on local and state budgets, given the cobot response and the need for funding.

You do get concerned as to whether or not the general fund versus water and wastewater infrastructure, how that interplay happens.

The good part about that is that our waterworks business as indicated during the presentation is a very balanced business. So yes municipal yes public works construction water wastewater treatment plants, but also.

New residential and commercial and in fact, we've seen good new residential work.

Across the bulk of the us in terms of that new residential work inside of waterworks. So it is more a concern a caution about what could happen.

From a vertical exposure and largest opportunities both in.

Both in market and M&A. Thank you see a couple that were really working.

Working hard to to grow and expand he as we spoken about before is one of them.

Certainly the commercial maintenance repair and operations business, what we call Ferguson facility supplies, which is a huge very fragmented market with good trading margins and good returns on capital, where we are continuing to make good headway in conjunction with our blended branch infrastructure to make sure that we can offer.

Same day next day product availability to that customer set.

But I cant reinforce it up across all the different businesses that we operate in we do see good opportunities.

Both with M&A and.

And then depending on the market.

What does that organic investment look like depending on the market conditions that we operate in and then from a flat perspective, yes, we intend to outperform the market. We typically pushed for 200 to 300 basis points worth of market outperformance make.

Making sure that we do it in the right way achieving value for the services that we provide reflected in our gross margins.

And value for the relationships, both digital and human.

Thanks, a lot thanks.

Thanks, Thank you.

We have our next question. This question comes from Craig Our college of you'd be asked if you'd like to go ahead with your question. Please.

Hi can you hear me well.

Yes, Greg we can.

We can grayson. Thank you.

I've got a few questions as well, maybe one big picture one.

On the margin potential of the U.S.. So I think last year you were slightly style.

9%, that's including obviously I have Chris 60, you're flagging kind of technology investments some cost savings and.

And I don't expect you to sort of give me precise basis point number maybe for this year, but as you maybe take a five year view what do you think this business.

Is capable of doing I mean could we be talking about double digit or is that too aggressive.

That's question. One question two is relating to the M&A commentary again, so I want to understand if youre kind of approach to M&A has changed a little bit maybe maybe maybe it hasn't but I just want to explore.

Whether you are prepared to maybe go for slightly larger deals that historically, the last decade, or so you've kind of done one 2% annual sales contribution from acquisitions I want to understand your kind of flagging a step change in that or it's just going to be more of the same and then.

On E Commerce, if you could just give us some growth numbers in your introductory remarks, you can you just remind us.

Kind of the absolute numbers, so I think.

I think the ptcs relatively easy, but in terms of the b to b, how many of your customers the basic eating online channel how many.

How many subscribers have you got this just so we can understand the sort of absolute figures now because I think you have multi flagging.

The rate of growth relative to March, but I understand where you are in absolute terms. Please thank you.

Great. Thank you, Greg I'm going to take a quick turn on all three of those questions and then turn it over to bill for a little bit more depth.

From a big picture view.

In terms of double digit being too aggressive on margins.

We do not put a ceiling on that and we have historically looked at gross margin expansion as a good reflection of the value we provide and that's been the driver of trading margin expansion, we really need to look at both and I think that you are seeing that hearing that in some of our comments for today, how do we get 10 basis points with the gross margin improvement.

Annually that is sustainable built on value and then how do we make sure that we invest in technology, which are already embedded.

That constant movement from a technology perspective in both Opex and Capex.

She is embedded in side of the financials in and what we are talking about today, but we need to have that in order to drive the productivity of our salesforce the productivity of our associates things like distributed order management technology that sort of activity that makes our people more efficient, but also gets good.

Great value for our customer and makes us relevant for the long haul secondly.

Secondly on the M&A side, there is no step change to what you're seeing we will look at all opportunities big and small that is our responsibility, but when it comes to our ability to take.

Small to medium sized bolt on with local relationships right into our organization.

Take out some overhead costs add technology supply chain to local relationships. It's a good solid effective way of growing our company that also protects and enhances shareholder value.

We also want to do Kate.

Capability acquisitions, what does that mean, yes valve and automation and what our capabilities in a local market that we can spread across a larger book of business, but also.

Owned brand and bringing product brands.

Into our organization, we can use across our digital and brick and mortar channels to make us more effective and make the business that exists more relevant.

From an E Commerce perspective, I think you you will have seen good growth in B to C. E commerce, good adoption of digital tools in our BTB customers. We look at it more than just revenue. It really is that stickiness of how we bring value to the trade professional so that they can check order.

Her status look at the truck coming down the road and understand when they need to come off the 14th floor of a mid rise to get their materials things like rich product content sourcing.

All of those things are equally as.

Equally as important to us and what you'll see is our b to C operations.

Really coming together with our bricks and mortar operations in Ferguson.

So the best digital platform that exist for build Dot Com for example, so.

Starts to really enhance what that show room offering looks like.

And really starts to build an omni channel operation Thats very durable so that bill any comments from you on March.

Margin, maybe just on that first piece given on margins build that out a little bit more to your point, we don't put a ceiling on it we do well on incrementally improve year in year out in supportive markets.

Not only the gross margin side, but Kevin talked about the technology investments technology spend for US today is about 6% of our cost base and that continues to grow.

We absorbed that in the ongoing cost base of the overall organization because not only does it improve the customer service aspect and the capabilities, we bring to the customer, but Kevin you also mentioned the productivity side. So.

So in addition to that Opex investment from a technology standpoint, we also invested about $100 million of Capex. This year again embedded in our overall capex guidance, but in technology, because that's what's because better not only for those customers, but from a productivity standpoint, so we could get better operating leverage overtime.

Okay. Thanks, Thats really helpful. Thank you good luck.

Thank you Gregory.

We have our final question. This one comes from Stephen Golden of Deutsche Bank, if you'd like to go ahead with your question. Please Steven.

Good morning.

I just wanted to ask you on.

Obviously, you talked about the MCU and I about M&A in both forms et cetera.

You said earlier on that you are not really seeing any kind of.

Our sale assets or particularly desperate sellers right now, but can you give us a little bit of a feel for.

The typical multiple that you'd be paying kind of on an EBITDA basis, if possible just because obviously that kind of links year over year trading profit focus.

And then we quickly what would you what.

What kind of margin that you'd be buying a business like that on and how quickly could you sort of get it up to <unk>.

Great levels of.

Tradition.

Additional group margin basically.

Through synergies and I guess just to sort of put that into context. You guys. Obviously you have your buyback is currently on Poles.

Yeah.

If you were able to pick up these businesses that hedge for example.

910 times annual starts on say 14, 15 times does that have any implication for a your willingness to do.

Do more M&A than to do buyback can be obviously to the potential mix of.

Actually you guys hit that you may use in a.

In any particular potential acquisition.

Yeah, So maybe I'll take very quickly the last portion and then hand, it back to bill from a buyback perspective M&A versus buyback.

I really focus on what our capital priorities are.

When you look at.

Organic investment dividend goes through cycle and M&A, followed by return of capital to shareholders and we are really from a buyback perspective, just wanting to better understand how we continue to sell the environment. The uncertainty that's in all of our markets today and really need to evaluate that as we move through our fiscal year.

From a decision, making standpoint, but maybe I'll hand, it back to bill to get after returns and multiples in whatever yes, I would tell you typically we're seeing I'll give you somewhat of a wide range of multiples because every deal is different and unique and clearly brings different synergies to the table, but in general I'd say, we're in that seven to 10.

Times is what we're seeing in the marketplace over the last couple of years.

From a margin standpoint overall clearly the vast majority of those acquisitions that we do have a lower margin lower.

Lower trading margin than what we have and.

We look to bring those synergies and quickly.

And get them up to large trading multiple over a couple of years.

If you think about the traditional bolt on M&A deal that we do.

We go in quickly we put them on our system.

For our supply chain, we get the distribution in the fleet.

We get sourcing synergies and that.

And then we could take a little bit of back office cost out well in those acquisitions.

So those are typically.

Kind of how we approach the M&A front.

Great. Thanks, Dave its Mike Ashley.

The only thing I would add is just remember when we bought businesses.

It is so important for us so theres a lot of sort of corporate finance their rate.

But the most important thing for us as you know.

We're buying people and they often don't end up on our balance sheet a lot of goodwill does and I've always said, we need to buy good quality business is good relationships that fit with Ferguson.

That is that is really really important for us as well as the financial statement, because Steve Moore capital.

And then you're left with a whole lot of goodwill to Russell. So it's the people in the relationships, which comes back to the core values of target. So that we can just about in M&A as well as planning.

Platinum therapy, which also goes on site.

Great. Thanks, so much very helpful.

Well given that Thats the last question.

If I could echo my earlier statements that we began this call great to welcome Bill.

Into the new role really looking forward to what the future holds for us and I cant, let the call go without saying again, thank you to Mr., Mike Powell, which we were together on the same side of the ocean.

For for this call, but you've been an incredible helped to me.

And an incredible asset to the growth in and development of our company. So thank you very much and thank you for your time today on our call.

Ladies and gentlemen, this does conclude the call for today. Thank you for joining or do you may now disconnect your lines.