Commenting on the results Kevin Murphy, Group Chief Executive, said:
“Our strong revenue momentum in February and March was adversely impacted in April as federal, state and local COVID-19 restrictions and safety measures brought about a reduction in demand. We have rapidly implemented responsible working practices to protect the health and wellbeing of our associates and with few exceptions our traditional branch network remains open. During these challenging times we remain immensely thankful and very proud of the dedication of our 35,000 associates as they continue to support our customers in serving our critical industries.
“We have taken steps to manage our cost base and protect cash flow given the uncertain outlook both in the short-term during the crisis phase but also to ensure the business is appropriately sized for the post COVID-19 environment. We are confident these actions coupled with the strength of our balance sheet will serve us well in the coming months and years. As a value-added distributor Ferguson remains well positioned to support our customers, vendors and communities during this challenging time while continuing to build our capabilities for the long-term.”
Current trading
In recent weeks the Group has remained focused on three key areas:
1. Protecting the health and wellbeing of our associates
2. Continuing to serve our customers during the crisis phase of the virus - a critical time of need
3. Protecting and preserving the strength of our businesses for the long-term
To safeguard the wellbeing of our associates and support our customers we are operating our business in adherence with the recommended Center for Disease Control (CDC) guidelines. Cleaning protocols at all sites are in operation alongside appropriate social distancing measures. Our branches are operating pick-up and delivery only with customers encouraged to order ahead with pick up in store at the curbside and touchless signature at the point of delivery or pick-up location. Associates who can work remotely continue to do so.
Our showroom networks have remained closed through April and we have served customers using virtual consultations. In select markets we are starting to book face-to-face consultations with the necessary social distancing measures in place in line with local governmental guidance.
Trading volumes were lower in April as a result of the impact of the COVID-19 virus pandemic. In the US the revenue decline in April was 9.3%. The major impact on volume continues to be highly correlated to the degree of disruption locally which has been variable across US states and localities. Blended Branches revenue was down 15.3% in April and in the major hotspots, where infection rates have been highest, such as New England, New York, Michigan, the Pacific North West and Northern California revenue was down significantly. However, Waterworks grew revenue by 8.5% in April benefiting from fewer restrictions. Standalone eBusiness also grew well with revenue 14.6% ahead in the month as a result of strong consumer demand for home improvement products.
In Canada revenue was down 33.6% in April with widespread lockdowns in place although we expect some improvement in sales per day as some markets including Quebec reopen to construction activity in May. The UK remained very challenging due to the national lockdown severely impacting activity levels with revenue down 60.2% during the month.
Cost actions, cash optimization and liquidity
Ferguson has an agile business model and as we have started to see short-term revenue pressure our approach has been to protect our skilled workforce which is critical to the long-term success of the business. We have already taken a number of prudent cost saving measures to minimize impact on short-term profitability. This has included a hiring freeze, reduced overtime and restricting the use of temporary labor. Currently in markets where there has been a decline in revenue we are implementing a combination of reduced associate hours and temporary lay-offs based on business and market needs. That said, we are in the process of taking action across the Group to ensure the business is appropriately sized for the post COVID-19 operating environment.
The Company has also introduced a number of measures to protect its cash position including suspending the $500 million share buy back, pausing current M&A activity, withdrawing the interim dividend and reducing capital expenditure in 2019/20 to around $280-300 million. Ferguson remains in a strong financial position with long-term committed facilities. The Company’s net debt, which excluded lease liabilities, at 30 April 2020 was $1.8 billion and the ratio of net debt to the last 12 months adjusted EBITDA was 1.0 times. As at 30 April 2020 the Group had $3.1 billion of available liquidity comprising readily available cash of $1.3 billion and $1.8 billion of undrawn facilities.
Q3 Trading summary