1 The results are presented in accordance with U.S. GAAP on a continuing operations basis.
2 The Company uses certain non-GAAP measures, which are not defined or specified under U.S. GAAP. See the section titled “Non-GAAP Reconciliations and Supplementary Information.”
Summary of financial results
Second quarter
Net sales of $6,508 million were 31.8% ahead of last year, 28.5% higher on an organic basis with 1.4% from acquisitions, 1.8% from an additional trading day and a further 0.1% from the impact of foreign exchange rates. Inflation in the second quarter was in the high teens.
Gross margins of 30.6% were 20 basis points ahead of last year driven primarily by our ability to service customers while managing price inflation, offset in part by changes in business mix. Operating expenses continued to be well controlled as we focused on productivity and efficiencies while investing in our talented associates, supply chain capabilities and technology.
Reported operating profit was $555 million (adjusted operating profit: $588 million), 74.0% ahead of last year (adjusted operating profit growth: 68.0%) as strong revenue, gross margin expansion and good cost control led to strong operating leverage.
Reported earnings per share on a diluted basis was $1.97 (adjusted earnings per share – diluted: $1.93), an increase of 60.2% (adjusted earnings per share – diluted growth: 75.5%) with the increase due to the strength of the profit performance in the period and the lower share count arising from share buy back programs.
First half
Net sales of $13,311 million were 29.1% ahead of last year, 26.4% higher on an organic basis with 1.6% from acquisitions, 0.9% from an additional trading day and a further 0.2% from the impact of foreign exchange rates. Inflation in the first half was in the mid teens.
Reported operating profit was $1,294 million (adjusted operating profit: $1,355 million), 68.3% ahead of last year (adjusted operating profit growth: 62.5%) as strong revenue, gross margin expansion and good cost control led to strong operating leverage.
USA - second quarter
The US business grew net sales by 32.6% which comprised 29.4% organic growth with 1.4% from acquisitions and a further 1.8% from an additional trading day. Price inflation was in the high teens during the second quarter.
Residential end markets, which comprise just over half of our US revenue, remained robust during the quarter. New residential housing starts and permits continued to grow, as did residential repair, maintenance and improvement (“RMI”) which performed strongly. Overall, Ferguson’s residential revenue grew by approximately 29% in the second quarter.
Non-residential end markets experienced strong growth as demand continued to lap weaker comparators. Our non-residential revenue grew by approximately 37% in the second quarter and leading non-residential economic indicators continue to look strong.
Adjusted operating profit of $576 million was 64.6% or $226 million ahead of last year.
We completed four acquisitions during the quarter including, Safe Step California, an independent dealer licensed to sell and install our Safe Step products in California and Nevada, and RP Lighting & Fans, an own brand distributor based in Albuquerque, New Mexico. We also acquired Plumbers Supply Company of St. Louis, a distributor serving residential end markets in the Midwest, and Hot Water Products, Inc., a distributor of commercial water heaters and boilers in Wisconsin and Nebraska.
Canada - second quarter
Net sales grew by 18.7% with inflation in the high single digits. Organic revenue grew by 13.8% with 3.3% from two additional trading days and a further 1.6% due to the impact of foreign exchange rates. Both residential and non-residential end markets saw good growth and adjusted operating profit of $23 million grew by 76.9%, significantly outpacing revenue growth as a result of good operating leverage.
Segmental and year-to-date overview