Ferguson plc Annual Report and Accounts 2020
26
Financial review
Strong and resilient trading performance Ferguson delivered a strong and resilient trading result for the year, achieved despite the pandemic which started to emerge from March 2020 onwards. The business has demonstrated an agile cost base, a robust cash flow performance and retained a strong balance sheet and great liquidity.
Key highlights – Revenue 0.9 per cent lower reflecting the impact of COVID-19. – Ongoing gross margin unchanged at 30 per cent, ongoing underlying trading profit margin up 20 basis points. – Headline earnings per share of 511.6 cents 1.1 per cent lower than last year principally due to the increased tax rate. – Total basic earnings per share of 427.5 cents 11.2 per cent lower than last year due to increased exceptional and amortization charges in the year and exceptional discontinued disposal gains in the prior year. – Completed six acquisitions for total consideration of $351 million. – Returned $778 million to shareholders during the year including $451 million by way of share buy backs. – Return on gross capital employed decreased from 26.2 per cent to 23.9 per cent.
Statutory results The financial results have been prepared under IFRS and the Group’s accounting policies are set out on pages 119 to 124. On August 1, 2019, the Group adopted IFRS 16 “Leases” using the modified retrospective approach to transition. The impact on the opening balance sheet at the date of initial application was the creation of a right of use asset of $1,220 million and a lease liability of $1,481 million. See note 1 on page 119 for a reconciliation of the operating lease commitments previously reported under IAS 17 at July 31, 2019 to the opening lease liability. The impact on the income statement for the year was to decrease rental costs by $337 million, increase depreciation by $268 million and increase finance costs by $53 million, resulting in a net increase to profit before tax of $16 million. There was no impact on the net increase in cash, cash equivalents and bank overdrafts.
Revenue Operating profit Net finance costs Share of (loss)/profit after tax of associates Gain on disposal of interests in associates and other investments Impairment of interests in associates
2020 $m
2019 $m
21,819
22,010
1,422
1,402
(144)
(74)
(2)
2
7
3
(22)
(9)
Profit before tax
1,261
1,324
Tax
(307)
(263)
Profit from continuing operations
954
1,061
7
47
961
1,108
Profit from discontinued operations Profit for the year attributable to shareholders
Revenue of $21,819 million (2018/19: $22,010 million) was 0.9 per cent lower than last year as strong growth in the first half of the year was offset by the impact of COVID-19 on trading. Operating profit of $1,422 million (2018/19: $1,402 million) was 1.4 per cent higher than last year, with trading profit growth in the USA and the positive impact of IFRS 16 on operating profit ($69 million) partially offset by a fall in trading profit in the UK and Canada, an increase in the amortization of acquired intangible assets and higher exceptional costs.
Mike Powell Group Chief Financial Officer
Profit for the year attributable to shareholders decreased to $961 million (2018/19: $1,108 million) as a result of marginally higher operating profit as mentioned above, more than offset by a higher tax charge due to a higher effective tax rate due to previously announced tax reform, and exceptional disposal gains in the prior year.
