Good day, and welcome to the Ferguson Plc 2021 First Quarter Results Conference Call. Today's conference is being recorded. At 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's first quarter results conference call. You've 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 the outlook for of guiding the business through COVID-nineteen pandemic. 1st and foremost, we continue to embed safety as a 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.
This continues to be the Turning to the results. We demonstrated another resilient performance in Q1 with good revenue growth, and disciplined control of margins and costs, leading to strong profit delivery. Cash generation was excellent and the balance sheet remains strong, which underpins our strategy as we continue to invest in profitable growth. Organic investment remains our 1st capital priority and technology investments will continue to be our primary focus. More than ever, We wanna provide a seamless experience for our customers no matter how they want to do business with us.
At the same time, we'll look to unlock productivity and efficiency benefits for our business. We're providing digital tools for our customers to save them time and money. Which in turn allows our associates to spend more time and overall relationships. Following shareholder approval at last week's AGM, and the final dividend is due to be paid next week. This includes a full catch for the withdrawn interim dividend in April.
Additionally, we're also pleased to have resumed bolt on M and 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. To overall, good progress in Q1 on many fronts, but we still have a long way to go to close out the financial year. So let me pass you over to Bill, who'll 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.
End 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 Organic revenue growth was up 3.3% and acquisitions added a further 1.4% with the balance offset by 1 fewer trading day. Gross margins were slightly 60 basis
points
in
we announced at year end. In addition, we've also had savings in areas such as travel, customer engagement and healthcare. Continue to benefit from these savings in the near term with these costs normalizing over time. So overall, underlying trading profit came in at $486,000,000, 12.2 percent ahead of last year, representing growth of $53,000,000 in the quarter with underlying trading margins, 70 basis points ahead at 9.0%. Moving to the regional results.
First, our largest region, the U. S, which represents over 95% of ongoing underlying trading profit, delivered a strong performance. Organic revenue was up structuring actions announced last year. We continued to invest in the organic growth of the business through technology and improvements in our supply chain. Collectively, this allowed us to deliver an 11.3% increase in underlying trading profit.
We are really pleased as this performance continues to highlight the agility of our business model. The Canadian business performed well in Q1 Revenues were up 2.2% or 3.5% on an organic basis, with growth in residential markets, including strong HVAC growth, outweighing the drag punching conditions in Western Canada. Similar to the U. S, gross margins were slightly lower than last year We continue to be 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 point clear customer focus and benefits of restructuring actions coming through the P and L, with underlying trading profit up $10,000,000 in the quarter.
It's also worth remembering that we took no government for a low money last year and have not taken any in the current quarter. As we've discussed, We are progressing with the UK exit and we are 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 payment to be paid in December, the pro form a net debt to adjusted EBITDA is 0.7 times. Our capital allocation priorities and leverage targets have not changed.
We are continuing to invest in the organic growth of the business and we are pleased to resume the payment of ordinary dividends. Acquisitions are an important part of our growth strategy. We've re engaged our pipeline and have completed 2 deals since year end, which Kevin will discuss further. Overall, we're seeing a normal at this time, given the uncertainty, the share buyback program remains paused. So let me wrap up.
We're pleased with the start we have made to 2021. Good earnings, while continuing to invest in the 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 an operational update.
Thanks, Bill. So let me turn to current trading. And give you a little bit more color about what we're seeing on the ground. I'm pleased to say that with pretty few exceptions, the group's counter locations have remained open and active despite the recent increases in COVID infection rates. As you can imagine, this has become more challenging where infection rates are high but reflecting our local branch networks to ensure that we stay open and keep our associates safe.
The other area we're monitoring very carefully our product fill rate as some vendors struggle to meet higher demand, particularly in categories like appliances, while balancing the challenges of operating in a COVID 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 inventory so our customers can depend on us. While we aren't going to give a monthly cadence on the top line, we have been trading relatively consistently through the first quarter. We've seen particularly strong growth in HVAC And E Business together with our residential trade and residential showroom businesses, We've capitalized on good growth in both new residential and residential RMI markets. Commercial And Industrial have faced much more challenging markets in Q1, but there are pockets of growth in areas like warehousing and distribution where projects are very attractive.
Waterworks has held up well in a mixed environment. The business is split pretty evenly, serving public and private markets with good growth in residential, but municipal remaining fairly challenging. Overall, the order pipeline remains healthy 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 RMI, where we generate about 2 thirds of our residential sales, is also growing well. We think currently our total residential end market is up high single digits. Overall, nonresidential markets remain much more challenging with commercial markets down mid single digits with contraction in retail, office and hospitality, partially offset by data and distribution centers. Civil's markets are down low single digit and industrial down high teens with depressed oil prices and manufacturers hit hard by COVID.
As you know, we track numerous data points from various economic industry and research sources as well as surveying our best view of markets overall for 2021 remains roughly flat to no change to our outlook from September at the time of our fiscal 'twenty results presentation. We remain pretty cautious about the trajectory of the U. S. Economy given the current surge in COVID cases, but we are in good shape to adapt to any future market disruption. In September, we announced that we would resume our M and A program, the acquisition of high quality businesses that either broaden our capabilities to better serve our customers, continues our expansion within the HVAC market, giving us greater vendor and product synergies in the Washington DC Metro Area, Maryland and Northern Virginia.
Atlantic Construction fabric adds geotextel, erosion control and stormwater 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 ons. So finally, turning to the outlook. Since the start of the second quarter, We've continued to generate low single digit revenue growth in broadly flat markets. We remain cautious on the outlook for the year as a whole, considering current pandemic trends.
Despite potential headwinds, 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, the business is trading well. We're extremely proud of how our associates continued to rise to the challenge of COVID every day. We're pleased with the operational delivery in Q1, and we remain focused on executing our strategy.
This means investing in technology and digital capabilities, building out our world class supply chain, and delivering a consultative approach to our customers. So thank you for your time today. Now Bill and I will be very happy to clarify anything that's unclear and take any questions or comments you may have. Thank
session. Our first question today will come from the line of Keith Hughes
Thank you. Just stepping back on your views of your market, you gave us the kind of the growth rates of residential and the non resi markets. Are those are those numbers that, are those numbers deteriorated at all from the, from what you saw in the last quarter? I mean, I guess, maybe more on the negative markets. Are you seeing any kind of signs of life or future quotations or something that could show some improvement in the medium term.
Yes, Keith, thank you. And I think it's it's a bit of a mix. And so if I look at residential, we feel as if residential has gotten a touch stronger as we've gone through Q1 and into Q2, as you can imagine with starts and permit activity that we've seen new res 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 residential markets are are are getting a bit more solid.
On the commercial side, yeah, it's a it's a bit more challenging. 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 project as they shift more towards those available pieces of work, call it, big box distribution centers and distribution in general data centers, and then some different manufacturing opportunities that are out there. And then, candidly, some health care opportunities that have started to bounce back as we've gone 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 we're seeing, 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, thank you.
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 Civil's market is just a bit more uncertain given what municipal funding might look like, as COVID funding pressures continue.
And second question, your margins were absolutely outstanding in the quarter, particularly a contribution margin in the United States. 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 margin back? It's some point when demand is greater?
Yes Keith, good morning. Thanks for the question. Certainly very pleased with the performance in Q1, as you just highlighted. The majority of those benefits are really coming from the actions, the restructuring costs and actions that we put in play at the end of our Q4, really targeted around the labor costs and the infrastructure costs, which collectively make up about 75% of our cost base. We're 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 in the future. But we're going to be pretty cautious over the next several months. As I highlighted in the prepared comments, are getting some benefits just based on the operating environment that we find ourselves in. So areas like travel and customer engagement, and even healthcare costs, Well, that's not the majority of that cost savings. Those costs, I do expect to normalize over time once, once quite honestly, the world gets back to a more normal operating environment.
So you'll see some of that costs come back over time.
Okay. So just one final quick one. The California and the outside 7 the, I guess, the biggest shutdown push right now. Are your branches in California still open, however?
Yeah. 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 in nature of that business. Now what I will say is we've been appropriately conservative and cautious in the way that we've approached customer interaction inside of our facilities.
If you can remember, as we go back into the spring summertime horizon earlier in our fiscal 'twenty, we shut down locations to customer activity. And as we and we've really limited the amount of associates that we've brought back into the local branches. In fact, if you think about 27, 28,000 associates in the US, we still have over 10,000 a day. That are operating in a virtual environment, utilizing technology, and being very productive. So, I just reiterate, we've taken a conservative approach we feel very good about the safety measures that we put in place and we do remain open in California as we're sat here.
Our next question will come from the line of Will Jones, Redburn Partners. Please go ahead.
Thank you. 3 from me, if I could, please. The first perhaps we could just explore the residential RII segment in particular, is that also seeing the high single digit growth of the overall residential bucket, including newbuild. I just wondered within it, how are you seeing the difference between pro and retail and any sign, I guess, changing momentum within those 2 specific categories inside, residential RMNI, please? Second was just around pricing.
We've had a few quarters where the broad price inflation picture has been flat, but we have, I think, seen some commodity inflation in some areas recently. Do you think as you look into the second half, there might be a bit of inflation returning to the top line and the last one really is perhaps you could just explore your earlier comments around the acquisition pipeline. I think you said it was it was normal at this point, obviously, got a few quarters before this one with with with little or no spend. What, I guess, what level of spend would you be comfortable with as you look over the over the current year compared to that $150,000,000 you've done so far? Thanks.
Yes. Maybe we'll tag team this 1, Will. To start with on the residential RMI side and whether or not we're experiencing or we view high single digit growth If you look at LIRA, which is the Harvard Center for joint housing studies and what they look at 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, can be 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 in the residential RMI market. If I then take it down to based on your question, the pro, versus retail. Our connected consumer business, our pro business, on the remodel side is performing well, but clearly, the DIY portion of the market given the pandemic and what's happening with current COVID positivity rates is performing slightly better. And we're seeing that inside of our e business. Our e business focuses principally on that project minded consumer and that decorative light Pro.
And it's performing extremely well, up 40% in the quarter. So very strong growth very good, balanced growth across the different product segments for those customer types. In terms of inflation, and then I'll turn it over to Bill. You're right. Q1 didn't see inflation, but we are as we enter Q2, seeing those commodity upticks, as it relates to plastic, copper, carbon steel, stainless steel.
And in fact, it's fairly quick and the velocity is moving at a pretty good pace. So we do expect that we'll see commodity inflation. Remember commodities represent about 10% of our overall product portfolio, but we do expect that as we go into, the second quarter and second half. Bill? Yes.
And, Will, 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 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 of deals that we're going to do because for most of these businesses, these are family run businesses, and this is the biggest decision of their lives. So, trying to culminate those deals and pinpoint the timing is always difficult.
But you will see several more deals as we move throughout the year.
Great. Thank you. And would
it sorry, just as a follow-up to that, would it be possible just to get what you think the profit contribution is of those 2 you've done? Broadly speaking.
Yes. So I won't pinpoint the exact profits contribution, but if you think about on balance, generally, the acquisitions that we do have about half the trading margin that we deliver, that will ebb and flow depending on the type of deal we do. But you can think about them in that type of range.
Right. Thanks a lot.
Thank you, Will.
Thank you. Our next question will come from Catherine Thompson, Thompson Research Group. Please go ahead.
Hi, thank you for taking my questions today. First, focusing on the HVAC segment, to get, tease out a little bit more of what you're seeing in terms of HVAC, is it more retrofitting, or are you starting to see more momentum with new construction given there's a little bit more comfort in understanding the airflow process given COVID And if you could give just any additional color in terms of cadence of where you're seeing, greater demand increases for HVAC throughout the North American parking. Thank you.
Thank you, Catherine. Maybe I'll start. In terms of retro or RMI versus repair placement versus new construction, And that HVAC business, HVAC performed well, both north and south of the border. Canadian HVAC was solid and in a very good growth rate. And our U.
S. Business also good growth rates.
In the U.
S, our HVAC business grew, call it, 14% in Q1. So good growth rates inside that HVAC business. It went along the lines of our typical HVAC business, which is roughly about 85 15, residential, to like commercial and a balance with repair replacement and new construction. In terms of air quality, we have taken a a good keen interest in dedicated some resources towards indoor air quality, we're at the early days. It's still a relatively small part of our overall business, but really solid growth rates.
Across both the residential and commercial space with people doing retrofits, on that indoor air quality side. So, we do see growth in that, but really from our perspective, it's a way to again add value in that consultative sales approach across all of our markets. In terms of North America and where we see that growth, fairly well balanced. We've got a decent balance of HVAC 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 year end results presentation, we really do look to maintain standalone dealer based HVAC and transactional capabilities, from an OEM perspective inside of our blended branches, our plumbing mechanical branches, offering good overall choice inside the market for our customers across the U. S.
Okay. That's helpful. Going back to the residential side, you know, one of the themes that we're seeing going into 'twenty one when we speak to a wide variety of our industry contacts is, just increasing homeownership ripple effect And in particular, the more people are in their home, the bigger the projects this year versus last year, which makes some sense. When you look at your business, there's different types of RMI business. And if you could flesh out a little bit more, at least, based on past experience or what you're seeing right now, in terms of how the RMI type of work has changed over the past several months.
What you expect going forward. And is there any margin profile difference in the type of, product you sell into those? Thank you.
Yes, maybe I'll start from your last question and then 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 RMI residential markets right now in the different product sets that we're selling through. As 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, be a bit more challenged, which I guess is to be expected versus delivered product and traditional order channels of e Commerce and interaction with our sales associates over the phone. In terms of what that residential RMI mix looks like, as I indicated, when Will asked the question, we do have, good solid, light, decorative pro and project minded consumer growth inside of our e commerce channels as DIY has been fairly strong. And I think that we'll see some better improvement even than we have experienced on the showroom side of the business as we start to have, as we start to emerge from COVID.
I still think 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 the residential RMI side, 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 dwelling, we see good growth in terms of that RMI markets.
Could you also speak to kind of tagging of the showroom, to speak to how e commerce, has improved the velocity of sales and What do you see that business playing going forward given, the fundamental changes we've seen with COVID?
Yeah, so it has really been part of what our evolution, has been in terms of bringing together a true omnichannel experience for that showroom customer. And if you think about the heart of our showroom business, it really is with that connected consumer, who's connected to a trade professional, who's connected to a builder, a model or designer architect coming in to make sure that we take care of the holistic project from appliances, lighting, plumbing, HVAC, a wide variety of different parts of that renovation project and making sure that that consultative approach is core. But we're also growing that showroom business for that walk in customer that unattached consumer. And so as we think about that project base, bringing build build.com together with Ferguson and having that technology platform be able to aid the walk in customer aid the small project work together with our associates in the showroom has really added efficiency for our associates and had a real convenience for that small project as the customer looks at a true omnichannel experience. So it's been part of our evolution, but it certainly has been helpful as we've navigated the COVID environment.
Okay. And final clean up question, just on acquisitions, any change or update in terms of types of businesses that you are focusing? And has there been any change, given the COVID experience in terms of your focus overall types of companies? You are targeting to buy. Thank you very much.
Yes. Thanks, Catherine. No change in our focus. Based on acquisitions, we still look to bring in good bolt on M and A to expand our geographic footprint and our individual capabilities in certain geographies. As well as more enhanced capabilities to bring into our organization to then leverage across our geography and our footprint.
So think of areas like own brand, think of areas like, fabrication, etcetera. So no real change. To that and we're continuing to continue on that path.
Thank you.
Our next question will come from the line of James Rose, Barclays.
Hi. Good morning. 2 for me. First one, just touching back on, tighter lockdowns sort of state by stated in the U S. I mean, have you seen any impact on the business so far?
And it sounds like you're pretty well prepared for more versus last time. Can you just talk about what risks you see there if lockdowns were to identify? And then secondly, I mean, just touching on the UK and on Canada, a really strong first quarter profit improvements there. Do you think they're sustainable? Throughout the remainder of the year?
Is there anything anything one off in nature, which you'd call out there?
Thank you, James. Yeah, on the lockdowns, have we seen any impact? I think generally speaking, as we've gone through, call it the second surge, and I think maybe Bill will touch on what's happening 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, to what that safety environment 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 with additional restrictions, again, I think it'll happen. If we see if we see a 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 and Text to Branch and the ability for them to get text messages and email alerts their orders ready for pickup and to be able to drive up in the parking lot, have it 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 lockdowns become a bit more restrictive.
Yes, James. And on the Canadian and UK performance, in Canada, residential markets have returned and have been pretty supportive as Kevin highlighted, the HVAC growth in Canada has been strong, kind of mid double digit range, similar to the U. S. Business. So We're pleased with the top line performance in Canada.
Nothing really one off in nature, but also pleased with the structuring actions coming through and the discipline on the cost side. So with that improved top line, coming through and then that flowing through to the bottom line, really happy with the performance in Canada. In the UK, maybe just to touch on and build upon your first question on the lockdowns, Also pleased with the performance there, even through lockdown 2.0 over the last month, that business continues to hold up and perform well. The market has gradually come back. I think what we have done over the last year or so is really repositioned 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 the result is a very strong performance in Q1 in the UK.
Great. Thanks very much.
Our next question will come from L. D. Raul of JP Morgan.
Good morning, Kevin and Bernard. Just maybe 2 follow ups. 1 on the gross margin. You mentioned a slight deceleration likely due to the mix impact. Could you come back on that and whether you think this is a temporary impact or something that we need to to factor in a bit more long term.
My second question is on the UK sales and the the disposals process. So you mentioned being, contemplating a sales process at the moment. Could you give us a little bit more detail especially on the timeline, if you can. Thanks a lot.
First off, on the gross margins, they were down just a touch. It actually rounds to that 10 basis points in the first quarter. And as Kevin highlighted, a bit driven by business mix. So if you go back to some of the earlier comments, HVAC
grew
at 14% in the first quarter, HVAC has a slightly lower gross margin profile, which drags down the overall Ferguson gross margin, but a very similar net margin 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 in today, slightly less walk in traffic we have an opportunity when people come into our branches and into our counters, to have good gross margin profile products on the counter for them to pick up, and, and, and, and purchase while they're, while they're coming through the door. So that, I, I assume that will be somewhat temporary. And as the world again normalizes and comes back to a more normal operating environment, that pressure will alleviate, but we'll probably continue in the near term. On the UK disposal, to your point, yes, we are prioritizing a sale process, really pleased with where we sit in that process today.
Very pleased, as I said, on the to that UK business, which is supportive of that process. And when we have something that's more concrete and definitive, from a timeline standpoint, we'll certainly come back to the market and let you know.
Annality, thank you for the question around gross margin. 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 makes sure that the individual SKUs, the individual products that are specified on a project are 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 months and quarters where different channel thing mix and business mix have an impact.
Sure. But we're committed and we still see a long term gross margin expansion that is sustainable and durable.
Thanks. And maybe you could add a little bit of comments as well on own brand, given that, like, I guess it has, slowed down lately, and that could have had a a negative mix as well margin.
Yes. So in the quarter grew roughly in line with overall Ferguson growth rates, which to your point is, is a bit slower than what it has been growing as we typically grow grow our own brand at about roughly twice the rate of Ferguson's overall growth rate. Again, I think partially that is driven by what has happened from the order placement channel in terms of that counter activity being slightly more challenging than, the the traditional order channels. And so we'll see that that smooth out as we return to a more normalized environment. Also got a little bit of business mix in there.
But that commitment to own brand is a part of an 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 will continue to be our long term focus.
Okay, great. Thanks very much.
Our next question will come from Gregor Kuglitsch of UBS. Please go ahead. Your line is open.
Hi, good morning. Thanks for taking my questions. Only a couple left please. The first one is just on buybacks, and we obviously said it continues to be, the program continues to be suspended. But if you could just give us a little bit of color at what point perhaps you would consider, either launching a new buyback or kind of unsubending suspended buyback, what what the criteria are, I guess, to to, to do that.
Then secondly, wanna get your thoughts, if any, on Home Depot's reacquisition of HD Supply, whether it has any impact on you and your view or not particularly? Thank you.
Yes, thanks, Gregor. I'll take the buyback question I'm sure Kevin will take the HD supply acquisition question. So to your point, yes, we're slightly under our leverage range, 0.5 at the end of Q1.7 if you include the, the dividend that's going to be paid in the next several days. 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 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 in front of you, in in early to mid March timeframe. 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.
Yes. To build on that, obviously, given what we're seeing from a COVID case rate and the questions that we were just addressing in terms of lockdown, I think that's that's prudent. As it relates to, Home Depot and HD Supply. I suppose that makes sense as HD Supply is, now a pure play facility supply or CMRO business coming together with, the interline business that the Home Depot acquired some time ago. In terms of how we see that.
That's a very large market, and it's a very attractive market for us, depending on how you segment that individual market, you're talking about somewhere between $55,000,000,000 $90,000,000,000 worth of overall 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've 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 in place, healthcare, what we see in terms of multi family and the building service contractor.
So very attractive segments for us. We have a good product portfolio to go after. And there's plenty of room in those markets for us to compete and have good profit pools to grow with.
Thank you. That's helpful. Thank you.
Our next question comes from Arnaud Lehmann of Bank of America. Please go ahead.
Thank you very much. Hello, gentlemen. Just a couple of questions for me. Firstly, on the on the dual listing, UK, US, could you give us a little bit of color on the timing? I mean, I think you've said first half twenty twenty one.
But do you have a bit more visibility on the actual months? And related to that, a bit on the technicality. Are you planning eventually to move to U. S. GAAP reporting, or or or you will probably wait for a full U.
S. Listing to do that. And my second question is just on the trading days. I think you mentioned one negative the trading day in Q1. Do you expect it to recover that in Q2?
Can you give us a bit of clarity on the trading days for the next three quarters? Thank you.
Yes. So let me take the, the first first question on dual listing. So we are really focused on getting that secondary listing set up a number of work streams and and processes that we have to deliver to bring that to fruition, not the least of which is going through the SEC 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 feel good that we will deliver that in the first half of of 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 forward. It will align us with our U. S. Peers.
We're focused 1st and foremost on that secondary listing, and then we will, turn our attention towards the right time to change we will provide a reconciliation and give you enough advanced warning to understand those differences between IFRS and U. S. GAAP. In terms of the trading day, we did lose 1 in Q1. We'll pick up 1 in Q3 and we'll lose 1 in Q4.
So for the year, we will be down 1 trading day.
Our last question today will come from supersoni Varanasi of Goldman Sachs. Please go ahead.
Hi. Good morning, everyone, and good afternoon. Left one question for me, please. You very helpfully gave, color on how waterworks HWAT E business have trended in the quarter. Can you also maybe give some color on blended branches as a whole and industrial as a whole so you can compare the trends versus Q4?
Thank you.
Yes. So, from a blended branch perspective, they are, in fact, truly blended in nature. And so they will address, residential RMI residential new construction, through our residential trade business group through our showroom builder business group. They'll also be in the commercial markets. In many cases, they will be in HVAC And Industrial.
In terms of that industrial market, we think the market is down high teens in decline. And, we outperform that market. But generally speaking, as I indicated earlier, we tend to be less oil and natural gas focused. And really, the pressure point that we're seeing inside that market is, as manufacturers do not want outside people and associates in their buildings. And as they continue to work to ramp up production in a stressed COVID environment, that what we call PBF retrofit or shutdown work, 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, res tray, res builder, and HVAC.
That will conclude our question and answer session today. I would like to hand back to our speakers for any additional or closing remarks.
Yes, thank you again for your time. Again, we're very pleased with what has happened from a Q1 perspective. And as we enter Q2, we'll deal with, on certainty that results from, COVID case 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 are any further questions, please don't hesitate to contact Bill, Mark, or myself. So thank you very much.
This will conclude today's conference call. Thank you all for your participation. You may now disconnect.