Key resources and relationships

What we rely on to provide our value added services

Our key resources and relationships are crucial to ensuring we are able to offer our customers industry leading, value added services that ultimately drive profitable growth. Our associates are the driving force of the business and a key differentiator in how we create value. They are guided by our purpose, vision, mission and values that are a reminder of the goals we are working towards and how we expect to get there.

For information on how we engage with and consider our key stakeholders, please see pages 24, 25 and 66.

Our Vision:

To be a trusted partner and deliver the best service to customers in our industry.

Our Mission:

Our associates provide expert advice and a range of products and services our customers want to improve their construction, renovation and maintenance projects.

Our Values:

Our values recognize the behaviors that guide our actions and those of our Company (as shown below).

Safety

We are accountable for our own safety and the safety of others.

Service

We source great products, provide unrivaled service and build enduring relationships to deliver value to our customers.

Results

We have high expectations and drive performance to deliver excellent results.

People

We recruit passionate people and provide excellent development opportunities.

Integrity

We act fairly, honestly and with integrity.

Innovation

We encourage innovation to improve our customers’ solutions.

Our people 34,000

associates

Our associates are at the heart of everything we do. By living our values through the work they perform and the customer service they provide, they are the key to our success. They strengthen our culture by forming and maintaining relationships that build on loyalty and trust while delivering excellence in all areas.

Leadership

The growth of our business relies on success of our leaders and how they motivate and inspire our associates every day. As with prior years, we continue to see a blend of external hires and internal succession appointments within the USA, Canada and the UK to leadership positions, enabling us to broaden the experience, knowledge and diversity of our leaders. How we develop all our associates, including our leaders, is discussed in the “Talent management and development” section below.

Talent management and development

Last year, we updated and launched the Group’s Mission, Vision and Values. These reinforce our commitment to our customers and associates; they guide what we stand for and how we act. Our values encourage the right behaviors for all associates to provide the best customer service, work with the utmost integrity and look for new, innovative approaches to lead both our customers and our business into the future.

In the USA, we continued to invest in our talent management model, developing our leaders through the completion of specific development activities including participating in Strategic Project Teams on business development opportunities. This was to enhance their knowledge and broaden their leadership experience. Additional focus allowed us to execute on succession planning and role movement across the leadership ranks to produce well rounded and seasoned leadership talent.

Having set out our inclusion and diversity (I&D) framework last year we are now delivering our key actions. We have commenced training and learning activities for all people managers and are rolling out our all associate program. We have launched our first Business Resource Groups for Women and African American associates; our third Group for LGBTQ will be set up before the end of calendar year 2020. The I&D Council was created with a diverse group of leaders from across the organization, the team has been engaged with driving I&D initiatives and is providing great insights to the work we have underway. At the start of the COVID-19 pandemic we quickly adjusted all our training offerings and programs to virtual, including facilitation where required. As a result, over 700 members of our salesforce strengthened their virtual selling skills. We continue to evaluate and evolve our curriculum and strategically align our offerings to the skills our associates need to grow, develop and drive best-in-class business results.

In Canada, we have continued to drive the talent strategy and enhance our capabilities while improving the HR infrastructure to gain efficiencies. Building upon the principles of employee self-service and maintaining a single system-of-record, we launched five technology-enabled capabilities: performance management, compensation planning, talent development, employee recognition, and a new intranet. We refined our organization structure across all levels, and implemented new function-specific operating models, both to ensure more efficient delivery of products and services to our customers and further align to the Ferguson US model. This was enhanced by the launch of a multiyear Leadership Development Program for 300+ leaders, spanning all functional areas of the business.

In the UK, we have focused on development plans that align to customer groups, satisfying specific customer needs and increasing colleague engagement. Customer service training was completed by all branch colleagues ensuring a consistent approach to serving our customers across the estate. Talent management processes are established, and several high potential associates have been promoted.

Inclusion and diversity

We want to attract and retain the best talent irrespective of race, color, religion, gender, age, sexual orientation, marital status, disability, or any other characteristic that make people unique. Females represent 44 per cent of the Board, while our percentage of women in senior management positions across the Group was 20 per cent. Detail on the Board’s approach to diversity, including the Board Diversity Policy and performance against its specified objectives, can be found on pages 72 and 73. Last year, we launched our Group Inclusion and Diversity framework which reinforces our commitment to identify and remove any potential for unconscious bias in our employment, promotion and succession practices.

Ferguson is committed to developing a diverse workforce and an inclusive working environment in the communities where we operate. By recognizing and celebrating our differences, we are learning so much more from each other and we remain committed to listening and learning and doing more to advocate for inclusion, diversity, equality and acceptance at Ferguson and in our communities. We continue to review our progress as we make strides in delivering improvements in workforce diversity. To achieve our objectives, all people decisions at Ferguson are based on merit, where the best candidates are hired and promoted within the organization and associates are encouraged, supported and developed to reach their full potential. To ensure success and to continue to support an environment that is free from discrimination and harassment, where all associates are treated with dignity, fairness and respect, we have launched I&D Diversity Councils in the US and UK.

We rolled out training to our leadership teams to recognize unconscious and unintentional bias that we each carry. In June, the Executive Committee participated in a highly interactive inclusion and diversity experience. In the US, unconscious bias training was conducted with senior and mid-level managers during July and August. We will complete this training with all our associates over the next year. We also provided unconscious bias training for leaders in Canada and the UK. Additionally, we established an African American and a Women’s Business Resource Group (BRG) to provide support, connection and affiliation across all regions. Our recruitment practices factor in underrepresented groups and we insist on diverse candidate slates when using executive search firms.

All material issues relating to our people directly affect our strategy, set out on pages 10 and 11. The effectiveness and level of engagement of our people is critical in delivering on our strategy and maintaining the success of the business.

Inclusion and diversity gender breakdown

Unspecified Total men

Total women % women

Directors (Board) Senior leadership1 5 4 44%

81 20 20%

Total associates2 47 26,416 7,889 23%

1. The senior leadership group consists of those members of the Executive Committee, who are not

Board Directors, and their direct reports. This is consistent with the data we supply to the annual

Hampton-Alexander review. 2. The total average individual associate number of 34,352 is reported above (total men plus total women plus total unspecified) including all continuing businesses.

Competitive pay and reward

Our reward programs are an important tool to help us celebrate success and reinforce the way we do business. We review our incentive programs across the Group every year to ensure they continue to support our values, reward the right behaviors as well as high performance and as a result drive business performance. Associates are typically incentivized through a combination of improvements in growth in trading profit, average cash-to-cash days and, for some roles, personal objectives. We have a number of well-established recognition programs in the US, which were unchanged for this financial year, including the President’s Club recognizing our top performing outside sales associates; the President’s Circle, recognizing top performing sales associates and sales managers; and the President’s Gallery, honoring showroom sales associates. All these programs recognize our values and reward outstanding contributions as well as exceptional performance and support profitable growth in the field. In addition, we also have the Bob Wells Leadership Award, which is presented to a Ferguson sales associate who consistently demonstrates exceptional performance and sales leadership. In Canada, we rolled out Bravo!, our associate recognition program to reward associates for demonstrating our values. We digitized and centralized our performance review, merit increase and bonus calculation processes to align with our ongoing focus on enhancing the pay-forperformance culture at Wolseley Canada. We also launched an associate health and wellness program to encourage associates to live a healthy and active lifestyle. In the UK we held our associates recognition awards, “The Wolseleys” in November, where associates from sales, operations and business support were commended at a special event to mark their hard work and dedication in ensuring a safe workplace, serving customers, and growing the business. During the pandemic, we shared thanks and recognition from customers regularly among associates and to external audiences, as we continued to trade in support of essential services across the UK. Informal local recognition continues to be developed to support our performance culture. Our Group-wide long term incentive program continues to reward our leaders and senior managers for improved trading profit performance in their business. Our investment in this program is overseen by the Remuneration Committee.

See our KPIs

Pages 16 and 17

Beyond the Boardroom

In his role as Employee Engagement Director, Alan Murray, Senior Independent Director, conducted three in-person sessions with associates this year, two in the US and one in Canada. These sessions are intended to provide the Board with additional insights into the views and concerns of associates and to understand their thoughts and opinions. The sessions included representatives from all subsidiaries, functions and business groups in that region with discussion focused on several key topics including safety, customer service, culture, the use of technology, sustainability and the future of the Group.

Further sessions will resume but, due to COVID-19, may be conducted virtually.

Health and safety

For information on health and safety, our 2019/20 performance against the prior year and engagement with stakeholders in this area see pages 48 to 52 and 24 and 25 respectively.

Ethical behavior and human rights

We are committed to complying with the law and to operating under the highest ethical standards. This protects us from business risks; it also strengthens our reputation with customers, suppliers and other stakeholders. The standards that we expect of our associates and those who may work on behalf of us are set out in our updated Code of Conduct launched in August 2020. Our Code of Conduct is a resource dedicated to helping our associates live our values on a daily basis and provides guidance where there is doubt over how to proceed. You can read our Code of Conduct on www.Fergusonplc.com. All of our businesses provide training for relevant associates on anti-corruption, antitrust and modern slavery matters. This is typically provided through online training material and face-to-face training may also be provided. Training is also provided for new associates on induction.

For information on ethical behavior in our supply chain and a summary of the Group’s Modern Slavery Act statement please refer to page 52.

Our customers

+1 million

over one million customers

Customers rely on us for high levels of availability on a broad range of products, ready for collection or delivery when and where they need it. Our customers value high quality and efficient service from local relationships, competitive pricing, accountbased credit and billing and order accuracy. They also want flexibility in choosing the most convenient way to do business with us, whether in a branch, by phone, mobile or online. Since the COVID-19 pandemic customers also want reassurance that we are taking measures to protect them and our associates, which is why we rapidly implemented new ways of working in line with governmental guidance (read more on pages 7 to 14). These are the fundamental but transactional aspects of our business which need to be executed consistently. Additionally, Ferguson offers a broad range of services to help our customers with their projects. Some of these are summarized in figure 1 below.

Figure 1: Projects are better because you worked with Ferguson

Sourcing

– Own brand – Exclusive distribution – Non-stock items – Project information/ specification

Bidding

– Take off software – Value engineering – Project-specific tendering

Customized solutions

– Value and automation – Fabrication – Pre-assembled units and kits – 24/7 commercial water heater service

Sales channels

– Inside sales – Showroom consultancy – Field/outside sales – Call/e-commerce call centers – Online and EDI* – Credit and warranty services – No-hassle returns

Pick-up

– 24/7 secure access – One-hour Pro pick-up – Scheduled forward delivery – Advice – Emergency out of hours

Delivery

– Same-day – Specialist e.g. “white glove”/crane truck – Call-off options – Geo-positioning of truck fleet – Curbside delivery For example: same-day delivery, one-hour Pro pick-up, 24-hour emergency water heater replacement hotline or our outside sales associates visiting customer job sites to support them when they are bidding for work. These are just some of the services that add value to our customers and help us gain market share and continue to generate profitable growth. We operate our business responsibly so that our customers can feel confident that we look after our associates, provide safe and high-quality products, operate efficiently and actively contribute to the communities in which we operate. We consult with key customers each year to understand their business needs and their priorities so that we can continually evolve our business to meet their expectations. Where the market demand exists, we promote sustainable products and provide training and advice to customers to support growth in these new product categories. For example, customers of Build.com in the USA can filter their product search to view products with recognized national environmental labels, e.g. WaterSense (for more information see www.epa.gov/watersense). For information on how we engage with this stakeholder group see pages 24 and 25.

Our suppliers 39,000

suppliers

We have over 39,000 suppliers that give us access to a diverse and broad range of quality products. While the product is incredibly important, an essential part of what customers need is the expert knowledge that we bring. We aim to be our customers’ trusted adviser and influence their specifications from right at the start of their projects and we are frequently asked by our customers to help them find a suitable product to meet a specific need. The expert guidance that we offer is based on a broad knowledge of the supplier landscape. Our logistics network, which connects these suppliers to our customers, is another key differentiator. Our leading market positions enable our central sourcing teams in each region to leverage our scale and negotiate competitive prices in return for access to over one million customers. We work with our suppliers to ensure that they are reliable and ethical and that their products are fully compliant with the laws and regulations of the countries in which we operate. This provides protection to us and our customers in the event of a product failure or breach of regulation in the supply chain. On the rare occasion that a product is faulty, customers have the confidence of knowing that we will support them.

Channels to market

2,194

branches

Our customers interact with us through multiple sales channels on a 24/7 basis which is often a combination of branches, showrooms, mobile, transactional websites, call centers and inside/outside sales teams. We conduct the majority of our business through sales associates or consultants. A large proportion of the business is still conducted through our branches and our extensive branch network means customers minimize the distance they travel to buy from us and visit several times a week. The branch network is also an important delivery channel, particularly when customers need immediate availability. This multi-channel approach allows our customers to access products and advice whenever they need it. We manage our locations very carefully to ensure the health and safety of our associates, customers, suppliers and any other visitors. This has become even more important during the COVID-19 pandemic and we have continued to follow guidelines set out by the relevant authorities including the Center for Disease Control and Prevention (CDC) at all our branches and distribution centers. Health and safety risk assessments and branch audits are carried out regularly so that we maintain our adherence with our new ways of working. Our insurers also support these efforts, undertaking their own safety assessments at selected key sites each year. For information about our environmental efficiency efforts see pages 50 to 52. For information about our health and safety program see page 49. For information on how we engage with this stakeholder group see pages 24 and 25.

Technology 18%

proportion of revenue from e-commerce activities

We are continually investing in technology to improve the customer experience, retain existing customers and win new ones. Technology investments are aimed at improving execution and efficiency in all areas of our business from warehousing, fleet, inventory and customer relationship management to back-office human resources, financial management and reporting systems. We have a clearly defined technology strategy and roadmap. This provides a clear route forward for the development of our order and transaction management systems. We continue to implement strategic investments which will mean we have many order capture channels that feed into one fulfillment and transaction platform connected through cloud-based systems. We will connect all our systems and processes across the whole business and have one view of our customers, products, suppliers and inventory. Our aim is to provide a seamless experience for our customers no matter what sales order channel they use so that they can engage with us in the most convenient way for them. Our associates will spend less time processing orders and more time interacting with our customers, enhancing productivity, customer service and relationships. During the COVID-19 pandemic we have experienced high demand from customers for online channels as they seek to continue to run their business.

Distribution network

5,700

fleet vehicles

To ensure the availability of a wide range of products to our customers we continue to invest in our extensive distribution network and large vehicle fleet. Our customers rely upon us for prompt and flexible delivery options to meet their own needs, such as specialist vehicles and same-day delivery. Suppliers also deliver to our distribution centers, our branches or directly to our customers in a safe way. We predominantly distribute from branches to customers, though in large metropolitan areas we aim to use more specialist market distribution centers to centralize final mile logistics and reduce fleet and distribution costs.

More than half our carbon footprint is generated by transport. Within the distribution network we have reduced our carbon emissions through improved fleet operations. As in prior years, each of our businesses has performance targets to reduce carbon and the associated costs for transport and fuel, relative to revenue. These emission reduction projects ensure that we are able to meet our goals for environmental performance in addition to our financial goals. Our branches continue to utilize our distribution networks to send recyclable waste back to distribution centers for sorting, baling and weighing. When returned products are unable to be resold, they are also transported back to our distribution centers where we aim to reduce or re-use these products to avoid landfill. For information about our environmental efficiency efforts and health and safety, see pages 49 to 52.