Q1 2021 Ferguson PLC Trading Statement Call

Good day and welcome to the Ferguson plc to touch and then 21 first quarter results conference call.

Today's conference is being recorded.

This time I would like to turn the conference over to Mr., Kevin Murphy. Please go ahead Sir.

Thank you Molly good morning, good afternoon, everyone and welcome to Ferguson his first quarter results conference call.

You got bill and I presenting today.

And on today's call, we'll give you an update on trading through the first quarter and how we're thinking about end markets and the outlook for the rest of the financial year.

So if I turn to the highlights we continue to address the challenges of guiding the business too cold and 19 pandemic.

First and foremost we continued to about safety and the fundamental principle and now more than ever we're committed to creating a safe work environment for our associates, while supporting our customers at this critical time.

Just continues to be the primary driver and all that we do and we'd like to thank our associates for all their efforts and delivering a strong Q1 performance.

And as a result.

We demonstrated another resilient performance in Q1 with good revenue growth.

And disciplined control of margins and cost leading to strong profit delivery.

Cash generation was excellent and the balance sheet remains strong and.

Her peers, our strategy as we continue to invest and profitable growth.

Organic investment remains our first capital priorities and technology investments.

Continued to be our primary focus.

More than ever we want to provide a seamless experience for our customers no matter, how they want to do business with us.

At the same time, well look to on line.

Pivoting and efficiency benefits for our business.

We're providing digital tools for our customers to save them on.

And money, which in turn allows our associates to spend more time guiding our customers enhancing productivity.

Customer service and overall relationships.

We see this as an area of strong differentiation.

We're pleased to have resumed the payment of ordinary dividends following shareholder approval, unless we say Jim and the final dividend is due to be paid next week.

This includes a full catch up for the withdrawn interim dividends and April.

Additionally, we're also pleased to have resumed bolt on M&A in recent weeks. This is an important part of our strategy and I'll give you some more color on the recent deals. We've completed later in the presentation.

So overall.

Good progress and Q1 on many fronts, we still have a long way to go to close out the financial year. So let me pass you over to Bill will take you through the numbers.

Thank you, Kevin and good morning, or afternoon, everyone. It hasn't been long since we last spoke to you about our full year results at the end of September and since then we've been meeting with shareholders as expected, we've seen broadly flat U.S. and markets. During the first quarter and we're really pleased with the performance of our business against this backdrop.

Total revenue growth for the ongoing group was 3.1% in the quarter.

Organic revenue growth was up 3.3% and acquisitions added a further 1.4%.

Well, that's offset by one fewer trading debt.

Gross margins were slightly lower due to mix, but operating expenses were well controlled down 60 basis points, and total and generating 80 basis points to operating leverage on sales.

As expected the cost base and Q1 benefited from the restructuring actions, we announced that you're at.

In addition, we've also had savings and area such as travel customer and gauge on it and health care we.

We expect to catch and you to benefit from these savings and the near term with these costs normalizing over time.

So overall underlying operating profit came in at $486 million, 12.2% ahead of last year, representing growth of 53 million in the quarter with underlying operating margins 70 basis points ahead at 9.0%.

[laughter].

Moving to the regional results first our largest region, the U.S., which reference because that's over 95% ongoing underlying trading profit delivered a strong for Hornets organic revenue was up 3.3%.

And as I covered on the overview operating expenses were well controlled benefiting from the restructuring actions announced last year we.

We continued to invest and the organic growth for the business through technology and improvements in our supply chain.

Collectively this allowed us to deliver an 11.3% increase and underlying trading profit but.

We are really pleased with this performance continues to highlight the agility of our business model.

[music].

The Canadian business performed well and Q1 revenues were up 2.2% for three and a half percentage on an organic basis with growth and residential markets, including strong h., we see growth outweighing, the drag of more challenging conditions and western Canada.

Similar to the U.S. gross margins were slightly lower than last year, but tight cost control and benefits from restructuring led to a $4 million increase and underlying trading profit.

We continue to be well positioned to capitalize on growth opportunities as the markets recover.

So now that we've gone through the performance of our ongoing businesses, let me cover the non ongoing operations of the UK.

Revenue in the UK increased approximately 5% with organic revenue up 1.2% on a constant currency basis.

Gross margins were slightly lower but we're really pleased to see the benefits of our clear customer focus and.

If it's a restructuring actions coming through the piano.

Underlying trading profit up $10 million in the quarter.

Also worth remembering that we took no government for money last year and have not taken any and the current quarter.

As we've discussed.

We are progressing with the UK exit and we're currently prioritizing a sale process, which is moving along well.

And finally, we continue to generate strong cash flow and the balance sheet is in good shape.

After adjusting for the full year dividend payments to be paid in December to pro forma net debt to adjusted EBITDA is 0.7 times for capital allocation priorities and leverage targets have not changed.

We're continuing to invest in the organic growth for the business and we are pleased to resume the payment of ordinary dividends.

Acquisitions for an important part of our growth strategy, we've reengaged, our pipeline and have completed two deals since year end, which Kevin will discuss further.

Overall, we are seeing a normal forward pipeline a bolt on acquisitions.

Finally, while we remain committed to returning surplus capital to shareholders at this time, given the uncertainty the share buyback program remains pause.

So let me wrap up we're pleased with the start we've made a 2021 good earnings while continuing to invest.

And in a business and a strong balance sheet put us in a great position going into the balance of the year.

Thank you for your time now, let me hand, you back to Kevin for and operational update.

Thanks Bill.

So let me turn to current price and give you a little bit more color about what we're seeing on the ground.

I'm pleased to say that pretty few exceptions, the group's counter location Superman and open and active despite the recent increases and Kelvin infection rates.

And you can imagine it's just become more challenging where it's actually rates are high but we're flexing our local branch networks to ensure that we stay open and keep our associates sales.

The other area, we're monitoring very carefully our product fill rates and some vendors struggled to meet higher demand, particularly in categories like appliances, while balancing the challenges of operating and cobot environment.

We are ensuring we can meet the needs of our customers and we're using the balance sheet appropriately.

To support them by having the right levels of inventories so our customers can depend on us.

Well.

Aren't going to get on a monthly cadence on the top line, we have been trading relatively consistently through the first quarter.

We've seen particularly strong growth and H.B.A.C. and he business.

And with our residential trade and residential showroom businesses.

We capitalized on good growth in both new residential and residential on line markets.

Commercial and industrial and say, it's much more challenging markets and Q1, but there are pockets, so gross and areas like warehousing and distribution where projects are very attractive.

Waterworks has held up well and a mixed environment.

This is split pretty evenly serving public and private markets with good growth in residential <unk> municipal remaining fairly challenging.

Overall, the order pipeline remains healthy, which leads us to expect a continuation of low single digit revenue growth rates in the coming months.

Turning to look specifically at the performance of our end markets. Our best estimate is that overall they've remained broadly flat in the first quarter.

Residential our largest end market by revenue continues to lead the recovery.

New residential markets have been quite strong and residential on line, where we generate about two thirds of our residential sales and is also growing well.

We think currently our total residential end market is up high single digits.

Overall non residential markets remain much more challenging with commercial markets down mid single digits, what contraction and retail.

Office, and hospitality, partially offset like data and distribution centers.

Civils markets are down low single digits, and industrial down high teens with depressed oil prices and manufacturers hit hard by October.

As you know we track numerous data points from various economic industry and restart sources as well as serving our customers and measuring our order books.

Looking at this data and applying it to our business mix, our best view of markets. Overall for 2021 remains roughly flat and no change to our outlook from September at the time of our fiscal 20 results presentation.

We remain pretty cautious about the trajectory of the U.S. economy, given the current search until the cases, but we are in good shape to adapt to any future market disruption.

In September we announced that we would resume our M&A program.

The acquisition of high quality businesses that either broaden our capabilities to better serve our customers or expand our geographic reach remains a central part of our strategy.

Acquisition of old Dominion continues our expansion within the ex <unk> see market, giving us greater vendor and product synergies and the Washington, DC Metro area, Maryland, and Northern Virginia.

Atlanta construction fabric ads.

I just you touched on it.

Erosion control and storm water management capabilities to our existing waterworks presence through a large geographic footprint, along the east coast, giving us a more meaningful offering to new and existing customers.

We're rapidly integrating these businesses into our network and we have a healthy future pipeline of potential bolt on deals.

So finally, turning to the outlook.

Since the start of the second quarter.

We've continued to generate low single digit revenue growth and broadly flat markets.

Remain cautious on the outlook for the year as a whole considering current pandemic trends.

Despite potential headwinds for the business is in very good shape.

And we're well prepared should there be any further market related disruption.

Overall.

Management's expectations for fiscal year 2021 are unchanged.

So to summarize the first quarter.

Business is trading well.

We're extremely proud of how our associates continue to rise to the challenge of Cobot and three day.

We're pleased with the operational delivery and Q1, and we remain focused on executing our strategy.

This means investing in technology and digital capabilities.

Building out a world class supply chain.

And delivering a consultation of approach to our customers.

So thank you for your time today that bill and I'll be very happy to clarify anything that's unclear.

And take any questions or comments you may have.

Operator, I'll hand, the call back over to you.

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Our first question today will come from the line of Keith Hughes Truest Securities. Please go ahead. Your line is open.

Thank you just stepping back on your views of your market and you gave us the.

Well the growth rates for residential and the Nonresi market.

Are those are those numbers that or those numbers deteriorated at all from the a and what you saw the last quarter and then I guess, maybe more on the debt markets are you seeing any kind of signs of life for a future quotations for or something that could show some improvements and the medium term.

Yeah, Keith Thank you and I think it's it's a bit of a mix and so if I look at residential we.

We feel as if residential has gotten to touch stronger as Weve gone through Q1 and into Q2 as you as you can imagine with star.

It starts and permit activity that we've seen recently new Raz is is in pretty good shape. We continue to see good activity inside of our showroom business inside of our E commerce businesses that focus on that decorative pro and that project minded consumer so there's red.

Potential markets are getting a bit more solid on the commercial side, yeah. It's it's a bit more challenging and interestingly enough. We're still seeing very good activity around bidding and quotations with our commercial mechanical contractors with our underground utility contractors on commercial projects as they shift.

More towards those available pieces of work call. It a big box distribution centers and distribution and general data centers.

And then some different.

Different manufacturing opportunities that are out there and then candidly some health care opportunities that have started to bounce back as we go through the quarter in terms of bidding activity and capital spend but generally speaking.

Overall, the commercial market has gotten a bit more challenging in terms of what output where C, which is why we point towards that mid single digit decline, which is very much in line with some of the numbers that we've seen.

In terms of the industrial markets, we think that's a high teens decline and we're probably getting to a place where we're bottoming out and troughing.

And we'll start to see some degree of improvement there we are not saying, we're not engaged as much.

In the oil and gas business.

As some of the marketplace, but we're seeing some degree of improvement, albeit minimal and then that civils market is just a bit more on certain given what municipal funding might look like as cobot funding pressures continue.

And second question. Your your margins were absolutely outstanding and the core, particularly on a contribution margin the on site.

Are we going to be facing a period, where some of these costs are going to come back and you have to give some of this march and back at some.

Some point when demand is greater.

Yeah, Keith and good morning. Thanks for the question certainly very pleased with the performance in Q1 and as you just highlighted the majority of those benefits are really coming from the actions the restructuring costs and actions that we put in place at the end of our Q for really targeted around.

The labor cost and the infrastructure cost, which collectively make up about 75% of our cost base.

For remaining pretty cautious when it comes to those types of costs as we go throughout the next several months.

If markets are more supportive we will flex that cost base, we will invest for growth and the future.

But we're going to be pretty cautious over the next several months as I highlighted in the prepared comments, we are getting some benefits just based on the operating environment that we find ourselves and so areas like travel and customer engagement.

And even health care costs, well, that's not the majority of that cost savings those costs I do expect to normalize over time once a day once quite honestly the world gets back to a more normal operating environment. So you'll see some of that cost come back over time.

Okay. Just one final quick one from California, So seven day.

For the biggest shutdown push right now or your branches on California is still open however.

Yeah, and obviously, that's a very recent development Keith and we remain open today and so we'll continue to work with state and local authorities.

As it relates to our business and the essential nature of that business and even the retail facing and nature of that business now what I will say is we've been appropriately conservative and cautious.

And the way that Weve approached customer interaction inside of our facilities. If you can remember as we go back into the spring summer time horizon.

Earlier in our fiscal 20, we shut down locations to customer activity and as we brought that back on we made sure that there was good P.P.E. good social distance and we've really limited the amount of associates that we've brought back and to the local branches in fact.

If you think about you know 27, 28000 associates and the U.S., we still have over 10000, a day a that are operating in a virtual environment utilizing technology and being very productive. So I'd just reiterate weve taken a conservative approach, we feel very good about the safety measures that we.

<unk> in place and we do remain open in California as for sat here.

Okay. Thank you.

Uh huh.

Thank you Nick.

Next question will come from the line will Jones and partners. Please go ahead.

Thank you three from me if I could please the first perhaps we could just explore the debt July segment in particular for.

So seeing the high single digit growth for the residential bucket, including new build I just wondered within it how are you seeing the difference between probably would retail and.

And he signed I guess.

And those two specific categories inside.

Residential dollar for dollar please check.

Second was just around pricing, we've had a few quarters wed for price inflation pitches being flat, but we have I think seems some commodity inflation and some areas recently do you think as you look for the second half the might be if it is in.

Inflation, returning to the top line and the loss from Goodies, perhaps you could six flow your comments around the acquisition pipeline and he said it was a it was normal at this point, obviously on a few quarters before this for with we've witnessed flow day spend and.

Well I guess what level of spend would you be comfortable with as you look out for the Oh for the current year picks up from 60 million and you don't say for thanks.

Yeah, No maybe we'll tag team. This one will just start with on the residential Aram I side, and whether or not we're experiencing what we view high single digit growth.

If you look at Lira, which is the Arbor Center for joint housing studies and what they look at it from a remodel perspective and that is.

A number that we tend to focus on I think that's up a little over 3% and so you think more to that mid to low single digits. We're seeing good activity again inside that showroom business, specifically and when you look at existing home sales, which we also look at.

In terms of a leading indicator for what remodel activity cash.

And be that that existing home turnover is fairly strong so which leads us to believe there's a good balance driving towards high single digit growth rates and the residential on line market. If I then take it down to based on your question the pro versus you know retail.

Our connected consumer business, our pro business.

On the remodel side is performing well.

Clearly the D on why portion of the market given the pandemic and what's happening with current cobot positivity rates.

Is performing slightly better and we're seeing that inside of our E business and.

Our E business.

Focus is principally on that project minded consumer and that decorative light probe and it's performing extremely well up 40% in the quarter. So very strong growth very good balance.

Balanced growth.

Across the different product segments for those customer types and terms inflation and then I'll turn it over to bill.

Q1, Didnt see inflation, but we are as we enter Q2 seeing those commodity upticks as.

As it relates to plastic copper carbon steel stainless steel and in fact, it's fairly a quick and the velocity is moving and at a pretty good pace. So we do expect that we will see commodity inflation remember commodities represent about 10% of our overall product portfolio, but we do expect that as we go into.

Who are.

The second quarter, and second half Bill, Yeah, and well on on the acquisition pipeline I would call. It a normal pipeline. So you should expect to see some additional bolt ons throughout the remainder of the fiscal year, nothing large, but but we're really pleased with the engagement that we've had with.

Potential sellers it is very difficult as you know to pinpoint or to pick a number.

Deals that were going to do it because for.

Most of these businesses. These are family run businesses and this is the biggest decision of their lives. So I'm trying to culminate those deals and and pinpoint the timing is always difficult, but you will see.

Several more deals as we move throughout the year.

Great. Thank you and sorry, just as a follow up to that would it be possible just to get we think the profit contribution as opposed to you've done broadly speaking.

Yes.

Won't pinpoint the exact profit contribution, but if you think about on balance generally.

On the acquisitions that we do have about half the trading margin that we deliver that will ebb.

Ebb and flow depending on the type of deals we do but you can think about them and that type of range.

Right. Thanks, a lot.

Thank you well thank you.

Our next question will come from Kathryn Thompson Thompson Research Group. Please go ahead.

Hi, Thank you for taking my questions day at first focusing on the HVAC segment.

And tease out a little bit more what you're seeing and trying to h. package for retrofitting or are you strike and you see for him and then 10 with new construction get and there's a little bit more comfort and understanding the air flow process, given 'cause it and if you can just any additional color.

Color and trends that cadence and.

Where you're seeing a greater demand increases for h. back throughout the North American market. Thank you.

Thank you Catherine maybe I'll start to in terms of retro are on line versus repair replacement versus new construction and.

And that HIV assay business and she is.

She performed well, both north and south of the border Canadian H.B. I see was solid and and a very good growth rate and our U.S. business also good growth rates.

On the U.S., our HPC business grew 14% in Q1, so good growth rates inside that HIV assay business. It went along the lines of our typical HIV assay business, which is roughly about 85 fifth the team.

Residential.

<unk> light commercial and a balance with.

Repair replacement and new construction and in terms of air quality, we have taken a good keen interest and dedicated some resources towards indoor air quality, where the early days, it's still a relatively small part of our overall business, but a really solid growth rates across both the residential and commercial space with people.

Doing reps for a fit on that indoor air quality side. So we do see growth in that but really from our perspective its away.

To get add value and that consultation sales approach across all of our our markets and.

In terms of North America, and where we see that growth fairly well balance we've got a decent balance of.

He has he business across the U.S. and again, if I go back to some of the things that we talked about during our fiscal year 20, a year end results presentation, we really do look to maintain Stan.

Standalone dealer based H.B.A.C. and transactional capabilities from and OEM perspective inside of our blended branches and our plumbing mechanical branches offering good overall choice inside the market for our customers across the U.S.

Okay. That's helpful.

Back to the residential side and you.

You know one of the themes that we're seeing come and get to 20, but and when we speak to why Friday EPS our industry contacts is.

Just increasing homeowner ship ripple effect and particularly the more people are in there and get bigger the projects. This year for instance, last year, which makes some sense but.

When you look at your business, there's different types of bar and my business.

And if you could flesh out a little bit more at least based on past experience for what you're seeing right now in terms of how they are on my type of work has changed.

For the past several months.

What you expect going forward and is there any margin profile difference and that type of a profit yourself into that thank you.

Yeah, maybe I'll start from your last question and then work work our way back in terms of margin profile differences, we don't see any real margin profile difference across what we're seeing with our on life.

Residential markets right, now and and the different product sets that were selling through <unk>.

Bill highlighted from a margin perspective inside of our business really.

Pressure points that we saw were on overall business mix and then channel mix as we saw our counter locations from an order perspective or be a bit more challenged which I guess is to be expected versus delivered product and traditional order channels.

E Commerce and interaction with our our sales associates over the phone and.

In terms of what that residential RMR and mix looks like is there any good or when we'll ask the question. We do have a good solid light decorative pro and project minded consumer growth inside of our E commerce channels as D. on why has been fairly strong.

And I think that we'll see some better improvement even than we have experienced on the show from side of the business as we start to have a as we start to emerge from Covance I still think there's there's some pieces of trade professionals and in home and and some unlocking that we have to do there, but clearly we're bullish on.

On the residential or am I saw it, especially as the home really becomes much more than what it has been and you look at home gym, you look at outdoor living you look at office as well as a normal and normal do Oh, we see good growth in terms of that on my markets.

And could you also speak to it kind of taking on the show then I speak to how E Commerce, a house and credit philosophy sales and what do you see that business play and going forward given that fundamental changes we've seen with cash.

[noise] yeah. So it is really been part of well our evolution.

It has been in terms of bringing together a true omni channel experience for that show room customer and if you think about the heart of our showroom business. It really is with that connected consumer who is connected to a trade professional and connected to a build or remodel or does signer architect coming in and to make sure that we take care and the holistic project.

From appliances lighting plumbing H.P.A.C., a wide variety of different parts of that renovation project and making sure that that consultation of approaches core, but we're also growing that children business for that walk and customer that on attached consumer and so as we think about that.

Project base.

Bringing build fill dot com together with Ferguson, and having that technology platform be able to eight eat the walk and customer aid the small project work together.

Together with our associates in the show from its really added efficiency for our associates and had a real convenient for that small project.

As the customer looks at a true omni channel experience. So it's been part of our evolution, but it certainly has been helpful. As we've navigated the kind of environment.

Okay, and finally, a question just on acquisitions and any change or update and trumps. That's types of businesses that you are focusing and has there been any change it given the credit experience and terms if you're focused on for all types of companies you are targeting goodbye. Thank you very much.

Yeah. Thanks, Catherine no no change in our focus is on acquisitions, we still look to bring in good bolt on M&A to expand our geographic footprint and our individual capabilities and certain geography.

As well as more enhanced capabilities to bring into our organizations and leverage across our geography, and our footprint. So think of areas like phone brand think of areas like fabrication and et cetera. So no real change to that and we're continuing to continue.

On that path.

Thank you.

Oh.

Our next question will come from the line of change for all these cookies Pease go ahead.

Hi, Good morning, two for me first one just touching back on a twice a day lock down sort of state by state and in the U.S. and have you seen any and impact from a business like from and it sounds like youre pretty well for pad.

And last time and he's talking about what risks you see they've looked on its way to intensify.

And then secondly, I mean, just touching on the UK and on Canada, and it really strong first quarter profit improvements that I, just think that sustainable throughout the remainder of the and is there anything you want on for nature, which you'd call out that thank you.

Thank you James Yeah on the locked down and have we seen any impact on it.

Generally speaking as we don't go through call. It the second surge and and I think maybe bill will touch on what's happened in the UK as well.

We haven't seen a discernible impact as we've gone through trading again I'll go back to we took a very appropriately conservative approach.

Two what that safety involved and it looked like distancing inside the counters and distancing and appointments and what we needed to do in terms of spacing inside of our showrooms. So not a tremendous amount of impact again based on what we've taken in terms of actions if I look to what this could bring.

And with additional restrictions again, I think it will happen and if we see if we see a ramp up it'll happen local it'll happen state and region.

And as we do that the tools that we've rolled out and that our customers have become used to will certainly play a great role as lockdowns or if lockdowns increase things like the Ferguson mobile experience things like pro keep in touch to branch and the ability for them to get.

Text messages and email alerts that their orders ready for pickup and to be able to drive up and the parking lot habit brought out curbside the use of lockers. The geo positioning of our truck fleet all of these things all of these tools will.

Help us should lock down it's become a bit more restrictive.

Yeah, James and on on the Canadian and UK performance and Canada residential markets that have returned and have been pretty supportive as Kevin highlighted the H.B. I see growth in Canada has been strong kind of mid mid double digit range.

Similar to the U.S. business. So we're pleased with the top line performance and Canada, and nothing really one off in nature, and but also pleased with the restructuring actions coming through and the discipline on the cost side. So what that's you know improved top line coming.

Coming through and then that flowing through to the bottom line really happy with the performance in Canada, and the UK and maybe just to touch on and build upon your first question on the Lockdown I'm also pleased with the performance day air and even through lock down 2.0 over the last month that business continues to hold up and performed well and the market has.

Gradually come back and I think what what we have done over the last year or so it was really reposition that business to have a clear customer focus aligning on individual customer types, and then aligning all of our resources against that.

So you couple that with the restructuring actions on the cost side.

And and the result is a very strong performance and Q1 and and in the UK.

Great. Thanks very much.

Our next question will come from and the team from JP Morgan. Please go ahead.

Good morning, Kevin and just maybe a day to put up line on the gross margin you mentioned, it's like and consideration I like you to today and you come back and you come back from that and whether you're seeing this is a temporary impact.

It's something that we need to to titanium EBIT Tam and my second question is on the U K, south and and the disposal costs and so you mentioned being and contemplating and south puts us at the moment.

That said EBIT mall, yeah and.

And you see on the time line you Ken Thanks for that.

Yeah. Thanks equity first off on the gross margin and said they were down just a touch it actually rounds for that 10 basis points in the first quarter and and as Kevin highlighted.

Driven by business mix. So if you if you go back to some of the earlier comments H.B.A.C. for 14.

14% in the first quarter.

Hey, Tracy has a slightly lower gross margin profile, which drags down the overall Ferguson gross margin, but a very similar net margin and because the cost to serve is lower so there's a bit of business mix. There and then that channel mix piece that Kevin talked about on the counter with just the environment that we're operating into day slightly.

Let's walk in traffic you know, we have an opportunity and when people come into our branches and into our counters.

Good gross margin profile products on the counters for.

For them to pick up and and purchase while they're well they're coming through the door. So that I I assume that will be somewhat temporary and as the world again normalizes and and comes back to more normal operating environment that pressure will will allow.

Alleviate what will probably continue in the near term on.

On the UK disposal or to your point, yes, we are prioritizing the sales process really pleased with where we sit in that process today very pleased as I said on the performance of that UK business, which is supportive of that process and when we have something that is more concrete and definitive from a timeline standpoint, we'll certainly come on.

Back to the market and let you know.

And everybody and thank you for the question around gross margins just to build on what Bill said, we still remain firmly committed to gross margin being the best reflection of the value we provide in the marketplace and making sure that we're driving a product strategy that make sure that the individual less cash.

On the individual products that are specified on a project on.

Not only the best for that project to make it as successful as it can be but also that it represents the best gross margin profile for our company.

And as we drive that.

We're committed to growing gross margins 10 basis points, a year are there going to be individual times as we go through a months and quarters, where day different channel thing just mix and business mix have an impact sure but.

Were committed and we still see a long term gross margin expansion that is sustainable and durable.

Thanks, and and maybe you could add a little bit of commences on on the on brand and given that I guess it has and so.

They were down 18 and that how about it and they gave me says well nodding.

Yes, so in the quarter grew roughly in line with overall Ferguson growth rates.

Which to your point is a bit slower than what it has been growing as we typically grow grow our own brand and about roughly twice the rate of Ferguson said overall growth rate again, I think partially that is driven by what has happened from the order placement channel and in terms of that counter activity being a slightly more challenging than.

The traditional order channels and so we'll see that.

Smoothed out as we return to a more normalized environment, you've also got a little bit of business mix in there, but that commitment to own brand is a part of and.

Overall product strategy that works towards specifying those products of our vendors that are our partners that we go to market with that remain again, 90% of what we do.

We will continue to be our long term focus.

Okay, great. Thanks very much.

And my next question will come from Craig current quickly. Yes. Please go ahead. Your line is open.

Hi, good morning, Thanks for taking my questions only a couple of questions. Please on the first and its just some buybacks and the obvious he said it continues to be.

The program continues to be suspended and he can you just give us a little bit of color.

At what point, perhaps you would consider either launching a new buyback on kind of and suspending suspend the buyback what the criteria are I guess, two two and to do that.

Then secondly, I want to get your thoughts if any on home depots for re acquisition of HD supply whether that has any impact on you and your view or or not particularly like.

Yeah. Thanks for your I'll take the the buyback question and I'm sure Kevin will take the HD supply acquisition question. So yes to.

To your point, yes were slightly under our leverage range 0.5 at the end of Q1 0.7. If you. If you include the the dividend that's going to be paid and in the next several days.

Sitting sitting here today still quite comfortable being slightly under that range given the uncertain markets that we're operating in so I think we'll let that play out over the next few months I think we'll be in a position to come back and give you an update on our views at the half year, which will be back and front of you and the early to mid March timeframe.

And so I'm quite comfortable sitting here today.

Continuing to be a little bit prudent on the balance sheet and operating under that leverage range.

Yeah, It's just build on that obviously, given what we're seeing from a co bid a case rate and the questions that we were just addressing in terms of Lockdown Ah think that's that's prudent as it relates to home depot and HD supply.

I suppose that make sense as HD supply is now.

Now a pure play facility suppliers see on MRO business coming together with the interline business. The home depot acquired sometime ago and in terms of how we see that Ah that's a very large market and it's a very attractive market for us and.

And depending on how you segment that individual market, you're talking about somewhere between 55 billion and and 90 billion.

With the vote for all opportunity that is extremely fragmented we're very pleased with the business that we've set up we're very pleased with the structure that we put in place and the foundation with supply chain. Our branch network. What we have in terms of contact center and National call Center, what we put together with the ability to sell to that.

National customer and offer them a uniquely local service the focus that we've got on things like education.

Aging and place on health care, what we see in terms of multifamily and the building service contractors, so very attractive segments for us we have a good product portfolio to go after and there's there's plenty of room and those markets for us to compete and have good for profit pools for growth.

Thank you that's helpful. Thank you.

Our next question comes from our now and Lima and Bank of America. Please go ahead.

Thank you very much and it will come from and just a couple of questions from me firstly on the on the dual listing a U.K.U.S. could you give us a little bit on color on the timing and I think you've said for its hubs doesn't 21, but do you have a bit more visibility on that channel loans and related to that.

Based on the technical and <unk> are you planning if loans really to move to U.S. GAAP reporting all you will probably be wait for for the U.S. thing to do that.

And my second question and just on the trading day that you months for the one and gets it.

The trading day in Q1 do you expect until we called out and you talk you Couldnt give but give us a bit on.

I read tea on on the trading days for for the next three quarters. Thank you.

Yeah. So let me take the the for this question on dual listing. So we're really focused on getting on secondary listing set up a number of work streams and and processes that we have to deliver to bring that to fruition and not the least and which has gone to the FCC registration process.

Setting up Sarbanes Oxley selecting the exchange so nothing more definitive today on timing of when that secondary listing will go live but we are on track with those processes and and feel good that we will deliver that in the first half of the.

The calendar year in terms of U.S. GAAP reporting.

We will eventually convert to U.S. GAAP I think that makes sense, it's part of our path for it it will align us with our U.S. peers, we're focused first and foremost on that secondary listing.

And then we will turn our attention towards the right time to change the U.S. GAAP when we make that decision will certainly notify the market and we will.

Provide a reconciliation and give you enough advance warning to understand those differences between high for us and U.S. GAAP in terms of the trading day, we did lose one and Q1 will pick up one in Q3, and we'll lose one in Q4, so for the year, we will be down one trading day.

Thank you very much.

Our last question today will come from suicide uneven and I see of Goldman Sachs. Please go ahead.

Hi, good morning, everyone and perhaps not just one question for me please.

And finally give color on how what the works hedge wacky business have trended in the quarter can you also maybe give some color on blended brountas and supports an industry and wholly and compared to try and let's keep from thank you.

Yeah. So from a blended brands perspective, they are in fact truly blended in nature and so they will address or residential or am I <unk> residential new construction through our residential trade business group grew our showroom builder.

Business group, they'll also be and the commercial markets in many cases, they will be and H.B.A.C. and industrial or in terms of that industrial market. We think the market is down high teens.

And decline and we outperform that market, but just generally speaking as I indicated earlier, we tend to be less oil and natural gas focused and really the pressure points that were seeing inside that market is as manufacturers do not want.

Outside people and.

And associates in their buildings and as they continue to work to ramp up production and distressed cobot environment that what we've called PBF retrofit or shutdown work to.

To do refresh on manufacturing facilities has been put off a touch and so we expect that to recover but generally speaking we've outperformed in terms of our view of the market inside that industrial space and a lot of that business would be in fact inside that blended branch environment together with commercial rest trade resin builder.

And H.B. I see.

Okay. Thank you.

That will conclude our question and answer session today, I would like to and back to our speakers for any additional for closing remarks.

Yes. Thank you again for your time again, we're very pleased with what has happened from the Q1 perspective and as we enter Q2.

We'll deal with the uncertainty that results from a co vacates rate and and continue to focus our efforts on making sure that we operate in a very safe environment for our associates for our customers and make sure that we take care of the essential nature of their business. So thank you for your time today. Thank you Molly and if there any from.

Other question.

Please don't hesitate to contact Bill Maher, Peter or myself. So thank you very much.

This will conclude today's conference call. Thank you all for your participation you may now disconnect.

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