Ladies and gentlemen, welcome to the Ferguson Full Year Results Call for 2020. My name is Adam, and I'll be the operator for the call today. I have the pleasure of handing the call over Mr. Kevin Murphy, the group Chief Executive of Ferguson. If you'd like to go ahead, please, Kevin.
Thank you, and good morning. And welcome to this 2020 full year results conference call. You've got Mike and I presenting this morning, and I'm also very pleased that Bill Brundage is with us. I'm sure you will have seen from our press release this morning that Bill will be taking over from Mike as our CFO in early November. I am really delighted to introduce Bill, and I am very pleased that we have been able to orchestrate such a smooth handover between Mike and Bill.
Bill is a hugely talented executive that I have had the privilege to work with for many years at Ferguson, including the last 3 years when he was the CFO of Ferguson Enterprise. He is a safe pair of hands. He knows this business inside now. He has been shadowing Mike through our year end process in anticipation of the handover. Bill will be joining us for the investor roadshows over the next couple of weeks, and I look forward to introducing him to as many of you as possible.
It is, of course, also Mike Powell's final results is Ferguson's CFO. And I'd like to thank Mike for his significant contribution to Ferguson over the last three and a half years. We wish him every success in his new role as he takes over as Mondi's CFO later this year. I'm personally grateful to on its North American markets. If I turn to today's agenda, I'll kick things off and give you the highlights and also say a few words about how we're adjusting to the operating environment as COVID-nineteen started to impact our business during our fiscal third quarter.
Mike will give you an overview of the numbers, and then I'll come back and give you a quick update on our strategy and some of the areas the team is focusing on. Then Mike, Bill and I will be happy to answer all of your questions. I want to start and often very difficult circumstances. COVID-nineteen has undoubtedly had a dramatic impact continues to affect almost every aspect of their personal and their professional lives. From our fabricators, technicians and drivers, to our showroom consultants and sales representatives to those working on our counters and in our warehouses, not to mention the many thousands of associates now asked to perform their jobs remotely.
They have all risen to the challenge. During these extraordinary times, we're incredibly thankful and proud of what they continue Ferguson delivered a strong and resilient performance in 2020. Despite the unprecedented challenges in the second half, overall ongoing revenue of $19,900,000,000 was still 2% ahead of last year and broadly flat on an organic basis. It was another good year for gross margins, despite the adverse mix effect in the second half from the temporary closure of our bricks and mortar counters, in our showroom sites. The group's operating expenses were well controlled, particularly in the second half as we took decisive action to protect profit on lower revenues.
Trading profit was 4.1 percent ahead of last year at $1,600,000,000, with headline EPS down slightly, mainly due to the previously announced impact of Swiss tax reform. By tightly controlling our CapEx and working capital alongside the strong profit delivery. The business continues to be underpinned by a healthy balance sheet which remains a source of strength. The board is recommending an ordinary dividend for 2020 of $208..2 includes a catch up from the withdrawn interim dividend. We're also restarting normal M and A activity and we have several bolt on transactions in the pipeline.
The current share buyback program, however, remains paused. Ferguson is successful because of our associates and our baseline commitment is to create a safe work environment for all. We continue to embed safety as a core value driver in everything that we do and we're pleased that our recordable injuries continue to improve with our but we will not be complacent During a highly challenging period, our responses demonstrated the resilience of our diversified business model. It is clear This is a very different business to First, to safeguard the well-being of our associates and our customers, we immediately move to operating our business in adherence with CDC guidelines. Cleaning protocols at all sites were put into operation alongside social distancing measures.
In the early weeks of the pandemic, we decided to act immediately to protect our associates and customers and we moved our branches to pick up and delivery only with customers encouraged to order ahead and to pick up in store at the curb side. Our showrooms also moved to virtual appointments only. We provide a critical function our services were authorized as essential. Our associates continue to serve end customers, including supermarkets, hospitals, schools, utilities, food producers and other manufacturers. Ferguson has an agile business model.
Our key priority at the start of the pandemic was to ensure we maintained our strong liquidity position, even in the most pessimistic of downside trading scenarios. At the same time, it was important These measures, some of which were temporary, have enabled us to remain highly cash generative in the second half of the year. We also continued to stay disciplined on working capital, which remains a key strength As local lockdown restrictions were lifted, we reopened all of our customer facing locations. This is included allowing customers to transact inside our trade counters in specified locations with additional protective measures in place. Reopening our showroom network with enhanced social distancing requirements.
New signage, reconfigured workspaces and alter schedules to encourage social distancing. Health assessments and temporary checks in hotspot locations in particular across our supply chain network. Maintaining hygiene and sanitization protocols at all sites, including disinfecting customer high touch surface areas regularly. Overall, In the U. S, we've seen fairly sequential recovery in revenue since April and we returned to organic growth in Q1.
Residential markets have remained fairly resilient with good single family activity levels. Commercial markets have weakened overall, most notably in areas like retail office and hospitality, though this has been partially offset by strong activity in distribution and data centers. Civil markets were resilient in the initial lockdown as customer worksites are typically both large and outside. Industrial markets have remained challenging through the year due in part to depressed oil prices and overall tough operating environments, for manufacturing during the pandemic. We grew faster than the markets we serve estimated of about 3%.
You can see that our market sharply contracted in the second half. Since late spring, we've seen a good recovery overall as lockdown measures started these. We think our markets today have recovered to about flat with residential leading the recovery. New residentially strongest, though RMI, where the majority of our revenue is generated, is also growing well. Non residential markets remain much more challenging with commercial markets down about mid single digits in civils a bit weaker still.
We track data points from numerous economic industry and research sources as well as surveying our own customers and measuring our order books. Looking at this data and applying it to our business mix, our best view of markets in 2021 is flat overall. While we've made a positive start to the year in the U. S. From a revenue standpoint, we're still pretty cautious on the outlook for this year.
Naturally, there's a great deal of uncertainty out there at the moment, not least caused by the pandemic and the trajectory of the US economy from here. Looking forward, the strength of our business model and balance sheet positions Assuming there is no significant COVID-nineteen second wave leading to the major market shutdowns, we expect to make good progress this year continuing to strengthen our market position we're looking to the medium term with confidence. Let me pass you over to Mike who is going to take you through the numbers. Mike?
Thanks, Kevin, and good morning, good afternoon to everybody. I'm pleased to present the group's full year results, which clearly show we had a good finish to our financial year. Just before we get into them, it's worth reminding ourselves that the ongoing operations that I refer to throughout includes the U. S, Canada, and group costs, whilst the UK operating business is within non ongoing operations. I also refer in the main two numbers excluding IFRS 16 just to aid understanding.
Ongoing revenues in the year were up 2% and we held gross margins reflecting the value we deliver to our customers. Alongside which we tightly managed our cost base, which altogether means trading profit growth continues to outpace revenue growth. Ongoing underlying trading profit of nearly 1,600,000,000 was up 63,000,000 with trading margins progressing 20 basis points to 8%. Headline EPS declined 1.1%, principally due to the higher effective tax rate from previously advised tax reform. And taking into account the group's prospects and financial position, we're pleased to propose a final dividend of 208 point $2 in line with the last year.
And this effectively reinstates the previously withdrawn interim dividend and reflects our confidence in the business going forward. As you'll also see later, cash generation has again been excellent this year, and the balance sheet remains very strong with leverage of 0.6 times. So moving to revenue and trading profit growth, I've expanded on, this chart the revenue growth of 2% and the profit growth of 4.1% for the group that I have just talked about. And I've broken it down into its component parts. Organically, you can see the profit growth of 2% exceeded the flattish revenue.
And this is the part of the results that I'm really most pleased about as we made quick decisions and have clearly demonstrated the agility of the business model. The significant acquisition contribution we've delivered reflects the effort put in by the teams to bring these businesses into the Ferguson family. As always, we've integrated those businesses rapidly so that we can, deliver value to the customers and also extract the synergies. Moving on to the business results. 1st and most importantly, our largest region, the USA.
Which represents 97% of ongoing trading profit. And this clearly delivered a strong performance and continued to outgrow the wider market. We've got good momentum at the end of the first half, as we told you, back in March, going into the second half. And then of course, COVID 19 lockdowns started to impact our markets. Since March, the lowest revenue month was April, That was down approximately 9% and revenue has steadily recovered since then, and we're now back to generating growth year on year.
Growth rates across the US continue to be heavily dependent on local infection rates and state by state lockdown controls. Gross margins were well controlled, and as you know, we use this as a gauge of the value that we deliver to our customers. Now given the environment we faced, we took a number of proven cost saving measures to match costs to volumes and to protect short term profitability. And these included a hiring freeze, a reduction in associate hours, over time, and temporary staff, along with temporary layoff being implemented in the worst hit regions. Due to those quick actions, decisive actions on costs, underlying trading profit, you can see came in at $1587,000,000, approximately $80,000,000 ahead of last year, trading margins increasing 20 bps to 8.4%.
Clearly, a very pleasing performance, and again, just reflects the agility, the business model, and the ability of the management to flex the cost base in tougher market conditions, whilst also being able to grow where opportunities present themselves. On the next slide, you can see there were some small variations in revenue growth in the U. S. Across blended branches, which is our largest business, with the strongest performance in Central, slight declines in the West. During the pandemic, the blended branches revenue declines were strongly correlated, of course, to local lockdowns.
Though, as Gavin has said, growth rates have recovered steadily since. In Waterworks, we generated strong growth throughout, with fewer operating restrictions because, of course, the majority of the work there is actually outside. And HVAC continued to grow well, generating a strong performance during the year, and that has benefited from strong residential equipment sales through the summer months. We have homeowners, improving their houses, which has kept our trade customer busy, and we've also seen this trend in e business particularly in build.com, which has generated strong double digit sales growth in recent months. Adoption and use of our mobile apps and e commerce platforms has increased significantly during the pandemic, and and Kevin will touch more on this later in his presentation.
Canada representing 3% of ongoing trading profit, that's based some pretty challenging markets, pre COVID. Revenues declined 7.5% overall for the year. That reflected the, economic impact of some pretty tough national lockdowns in Canada, challenging conditions in Western Canada with weaker industrial markets and also some subdued residential markets. Gross margin is slightly lower than last year, and despite cutting costs there, trading profit came in at CAD 58,000,000. However, we are well placed to capitalize on growth opportunities in Canada as the markets recover, and we are starting to see early signs of that happening already.
So now I've taken you through the performance of the ongoing business of the US and Canada. Let me move on to the non ongoing operations of the UK. Where we saw revenues down approximately 14% in 2020. Again, pretty tough national lockdowns in the UK. Revenues were down very sharply at the start of the pandemic to a low in April of minus 60, 60% They have also steadily recovered, and the business has now moved back to modest growth.
Gross margins are a touch lower in the year, However, we have continued to work hard to restructure the UK business around a clear customer proposition and to drive efficiencies. Towards the end of the year, we refocused the business by separating out building services from the core plumbing and heating business to better align our market proposition to our customer needs. We also closed the Worcester distribution center to reduce supply chain capacity and create operational efficiencies whilst improving customer service. We also took no government furlough money during the year. Trading profit came in at 6,000,000 sterling, and the good news is that efficiency measures that I've just talked about are now clearly coming through in the P and L as we start the new financial year.
So moving on to exceptionals. For which we charged 120,000,000 in the year, which you can see on the left hand side of this slide. You can see the top two items on the left, 3rd up to $93,000,000. Those are the restructuring of the USA Canada, and UK businesses. So after we stabilize these businesses with the short term measures I described during March April, We worked through in May what we wanted and believed we needed to do with our permanent labor cost structure.
To ensure productivity, and an appropriate response to the new environment, we decided to roughly take out 5% of the headcount in the USA and 10% in both Canada. And the UK. We've gone through the correct processes with the respective workforces, and this is concluded with net permanent headcount reduction in the USA of 1400, 300 in Canada, and 400 in the UK. Most of those heads actually left towards the end of Q4. And these actions ensure we will continue to drive efficiency into the new financial year and have the appropriate flexibility and skill set as we pass the business forward.
In the US, we also announced the closure of approximately 70 branches, about half of which were closed by the year end, and the remaining will work through the system. Through the next year. It's important to remember that a lot of these is actually where we will consolidate into better premises, to improve the customer experience. And really to keep the maths real simple for everybody, you can assume there's a payback of about a year on these restructuring costs. Of course, not all the cash flowed in FY20, and I'd expect about $70,000,000 of the cash to flow in FY21.
Moving to the right hand side on tax and interest. Firstly, interest costs pre IFRS 16, They increased slightly due to the higher level of average, gross debt compared to last year that we carried, and, our expectation for interest in FY 2021 is approximately $85,000,000 to $90,000,000 plus say about 50 of IFRS, taking the total for the year. To 135 to 140 for FY21. And on tax, the effective tax rate for the year, totally in line with guidance that we gave of 25 to 26%, and I'd expect that same tax rate for FY21. I've set out the cash flows on the next slide on a pre IFRS 16 basis, as I said, to really just aid understanding, there's a full reconciliation to the steps notes in the appendix.
But again, very clear evidence of good cash generation and the disciplines that we keep around cash and these continue to be an important priority and a real quality of this business. Cash flow from operations $1904,000,000, nearly $300,000,000 ahead of last year. We saw a working capital inflow principally from lower receivables and we remain very well invested in inventory for our customers. As ever, spot cash flows on working capital, always a little misleading, and I'd anticipate about a $100,000,000 of the strong working capital performance to unwind in quarter 1 Capital investment. That was at the lower end of guidance that I gave last year, I'd expect for FY21 this to be somewhere between $300,000,000 $350,000,000, but clearly we can flex that depending on the environment that presents itself.
Dividends paid slightly lower due to the withdrawal of that interim 2020 dividend, but as I've said, we now propose to pay the 208 point 2¢ per share. That's flat for last year, and that cash flow, will clearly flow past the balance sheet to date. We also invested $351,000,000 in acquisitions, largest of which was Columbia Pipe And Supply in the Midwest, and we have a normal pipeline of bolt on M And A opportunities that we are currently considering. So the profit and cash delivery clearly leaves us with a strong balance sheet at 0.6 times net debt to EBITDA. That's below our targeted range of 1 to 2 times.
I've shown the IFRS 16 lease liabilities on this slide, so you can also see the seen inclusive ratios. The pension net asset has become a net liability as in line with a lot of other companies A combination of people living longer and falling corporate bond yields means that the liability has increased, but clearly still remains in reasonable shape. On our capital allocation and capital policy, there is no change. As I think forward to the half year, we will have paid the final dividend of about $470,000,000, the reversal of the spot working capital that I mentioned earlier about 100,000,000 likely to flow out. We have the normal working capital cycle increase through to the half year, and a little bit of M and A is looking likely.
And of course, we have the trading cash that we generate. If you put all that together, I would expect us to be a touch under the lower end of the leverage target at the half year, by the time Bill comes and talks to you next. We do not propose to start the balance of the buyback at this point. We will revisit that when there is a little more visibility in the business environment of keeping the balance sheet super strong for a little while longer in the current environment seems sensible. So let me wrap up.
We're pleased with the 2020 results that the team's delivered in quite exceptional circumstances. Strong operating results with continued market share gains and excellent cash generation, all of which prove the agile business model and leave us with a strong balance sheet, which puts us in a great position going into financial year 2021. It's great. I can hand over to Bill. I've worked alongside Bill now for the last three and a half years.
He and Kevin will be great together, and I am sure we'll continue to drive focusing forward with your continued support. Kevin, back to you.
Much appreciated. Let's move on to strategy. Our strategy is consistent. With the direction of travel in recent years. We will constantly evolve our approach over time and our strategic framework is our roadmap for developing our business.
Overall, we want to ensure that we drive initiatives to improve our relationship with our customers, our suppliers and most importantly, our associates. We will operate with or the long for the short, we can and will do both. We will continue to focus on driving all our resources and knowledge to make our customers based on our foundation customers trusted supplier, giving them unrivaled choice of products sourcing the leading brands in all our categories, including our growing portfolio of high quality owned brands. We will drive scale in our business so we can make our customers more successful by ensuring they have access to products and advice where and when they need offering a true omnichannel experience. So doing business with us is as frictionless as possible.
We'll use technology to make our business more productive and equip our associates with tools to drive efficiency while saving time for the customer. All the while never being afraid to experiment or to innovate. As we proceed this morning, I'll hopefully give you a sense of some of the areas we're driving as we continue to execute this strategy. More successful. Distribution remains a core competency and we bring the deepest and widest inventory in our product categories with a world class supply chain.
To our customers, this means putting together a bundled product and getting it to them when and where they need it. That is our core. But we have to be more than that. We will make sure that through a consultative approach with our associates, we are guiding a customer project to make sure that it's more successful because they did business with us. Personal relationships are critical.
We also believe this is not enough. We need to build the capabilities that drive the best digitally enabled customer relationships. It's clear from COVID-nineteen, technology must support our customers to make them and us more productive We will focus on driving the Ferguson brand to ensure customers recognize and value what we do as a consultative experience. We will drive a focused product strategy that includes both branded and owned brand offerings. We will be part of a customer's decision making process evolving from order taker to trusted advisor.
Other important areas of focus are value added services inside our supply chain and the evolution of what is coming from outside of our organization that's addressing overall construction productivity. We see 4 dimensions to growth, which emanate from our core strengths. It all begins with a customer, and we will never abandon the trade professional as our core relationship. But what we will do is address stakeholder relationships more than ever before. We'll make sure we're engaged with owners, engineers, architects to drive project specifications and to ensure that we're uniquely positioned to secure a project.
This will also serve to expand our overall gross margin profile. Secondly, while we have no intention to own manufacturing assets we are going to get as close to the point of manufacturing as we possibly can. We are going to continue to expand our diverse global sourcing organization to make sure that were driving design, product development, and own brand execution. We will source from inside and outside the U. S.
For own brand applications and drive sales through specification were more relevant for not only the trade professional, but also the ultimate end user and owner. Now, I know you have seen this chart many times before, but it's a great reminder of the opportunities we have in the U. S. And how we focus our teams on the very specific needs of these individual customer types. The chart shows as our 9 customer groups with our estimated market share in each bar The important area of the chart is the gray portion, which shows how fragmented our markets are and how large our market opportunity is.
In terms of business expansion, we within each of these large and very fragmented markets. Many customer projects require a range of products and services from across the business and we leverage our scale and expertise across the entirety of the organization. We benefit from significant synergies across our customer groups to help lower our costs and to improve our margins. We have chosen to operate in these markets because we can generate strong growth, attractive gross and net margins, and good returns on capital. We first focus on organic expansion.
And then selected bolt on acquisitions across all of our business groups. We generate benefits of scale in areas like distribution and technology, strengthening customer relationships that are uniquely local. We are always focused on ensuring the best human relationship exists together with the best digital relationship. Any time in our history. This makes us a much more resilient business going forward.
As an example, our Waterworks business pre 2008 was heavily focused on new single family residential construction work. There were 2,200,000 new housing starts at the time, But today, we have a much more balanced business and we compete in a number of areas in addition to new residential construction, including commercial, public works, municipal, water and wastewater treatment plant construction, meters and metering technology, and soil stabilization. This type of diversification A differentiated service offering happens at multiple levels in the customer journey. Our people will work to offer error free takeoff services and the industry's best quotations helping our customers to build their the best gross margin profile for products that are also the most appropriate for the customer's design. We offer customized solutions that help customers in the construction process saving them time and money.
We offer same day, next day delivery of the broadest and deepest range of products in the industry voted together with technology solutions that will deliver true project management. Best way to illustrate this approach is a simple example. A specialty U. S. Pharmaceutical company recently needed to enlarge its manufacturing operation.
Unfortunately, the roof of the manufacturing facility couldn't support the weight of traditional steel pipe or the air handling units that were needed for the job. The cost to reinforce the structure as well as the operational disruption that it would cause was not an option for the owner. Together with our customer, we work to create a prefabricated system of polypropylene pipe that could be evenly distributed reducing the load to the existing roof structure without extensive reinforcing. The results save the end user significantly in direct costs, as well as the costs associated with any downtime that would have been required. We supplied pre fabricated kits with all the required components so it could be easily assembled on-site, which also reduced construction hours, and it was completed with no recorded injuries.
Today, the 2nd phase of that contract is currently being fabricated and shipped. We seek a balanced growth strategy with same store sales growth, organic expansion, and bolt on M And A. In March, as Mike said, we acquired Columbia Pipe And Supply, a market leader in commercial and PVF distribution in the Midwest. The Chicago Metropolitanary is the 3rd most populous in the United States, and you can see from the slide, we've got a huge opportunity to build our commercial business in the region. With Columbia adding about $220,000,000 in revenue.
While we have 40 existing locations in the region, we were significantly underrepresented in commercial. And Columbia is a great fit, building out our position in some attractive cities Across the Midwest. Most importantly, we welcomed 375 dedicated associates who have developed deep, trusted relationships in the market over many years. Going forward, we have a number of the track attractive traditional bolt on acquisitions in the pipeline, several of which we expect to conclude later this year. But in addition to bolt ons, we will also use acquisitions to grow capabilities that will make our branches, and our digital channels more relevant.
Many of these opportunities allow us to get closer to the consumer and owner while adding to our own brand product offering. In 2018, we acquired Safestep, which sells owned brand bathtubs and showering systems for the limited mobility bathing market. Since the acquisition, we grown revenue by over 30%. The business has great returns with gross margins 2 times our core gross margins and is solidly accretive to trading margins. Manufacturing is contracted out, but completed within the U.
S, and the business has a direct sales model, utilizing a network of over 100 independent sales reps. Since we acquired this business, we have expanded our growth within our showroom network, our residential and commercial channels with great success. We must no matter what order channels they choose to use. Our associates will spend less time processing orders and more time guiding our customers, thus enhancing productivity customer service and most importantly relationships. We have added many pieces of functionality and we have recently launched a real game changer for us is a great example of how technology can enhance our means that we can empower them through the Ferguson app to receive real time notification of deliveries via voice, text or email alerts Customers are now getting notifications as the truck is making stops along the way, updating timing so they can better plan their day, but it's also tied to enabling them to understand precisely what is on that truck and what is about to be delivered.
If you can imagine, have over 2000 outside sales associates and nearly 4000 working inside sales, who are receiving calls multiple times a day, checking delivery times and inventory. Freeing up these associates to spend more time on sales and consultation will be a significant productivity improvement. We are incredibly excited which we think will drive rapid adoption we're in the early innings of rolling out new releases. So if our customers want additional functionality like geo positioning, they can access it easily. This gives them enhanced functionality on the go, including buy online, pick up and store, downloading proof of deliveries, searching the widest and deepest breadth of product inventory in the industry, accessing rich product content, scheduling delivery and installs much more.
Unsurprisingly, we have seen significant customer uptake in these tools during the pandemic. App activity has doubled since March. We've launched additional services to help customers operate in the COVID environment. For example, our keep tool can be used in our counter, so our trade pros could easily test orders for contactless pickup. Our overall user activity is up almost percent on our digital platform since March.
Hopefully that gives you an idea of how we are executing our strategy. Now on to a couple of corporate matters. The exit of the UK business remains an important priority. The timing of this remains uncertain and consequently, the Board is assessing other separation options in parallel with the demerger process. Our objective remains to exit the We've continued to make good progress on the transition of the business to a full U.
S. Primary listing. Post the exit of the UK, the executive team will be entirely based in the U. S. And all of the company's revenues will be generated in North America.
We continue to believe that the U S. Is the natural long term listing location for Ferguson. In July, following shareholder consultation, the board sought shareholder approval for an additional listing of ordinary shares in the U. S. Shareholders voted in favor of the resolution and we received over 99% support.
We expect this new listing to be effective in the first half of calendar 2021. And in due course, we'll put forth a further resolution to Ferguson shareholders to relocate the primary listing to the U S. In summary, sat here today, our business is in good shape. We are extremely proud of how our associates have risen to the challenge. We are pleased with the operational delivery given challenging markets and we will continue to focus on execution.
Most importantly, we will manage the business very carefully and we have a clear strategic direction. This includes investing in the strong foundation of a world class supply chain, delivering a consultative approach to our customers and in investing in technology. Thank you for your attention. Now, Mike, Bill and I will be very happy to clarify anything that's unclear. Take any questions or comments you may have.
Adam, I'll hand the call back over to
unmuted locally. We have our first question. It comes from Will Jones of Redburn Partners. Will, if you'd like to go ahead with your question, please.
I've got 3 if I could please. The first was, I was actually a 2 part question just around the cost saving measures for the year ahead. Can I just check the roughly 5% headcount cuts in the U? S. Would still be compatible with?
Well, we're having trouble hearing you. Could you speak up just a touch? Yes. Is that better? I'll speak a bit.
Yes.
Yes. Sorry. I'll speak a bit loud. Apologies. Yes.
The first was just around the cost savings and checking that the 5% headcount cuts in the U S is compatible with small revenue growth, which is what I guess you might see for the current year or would you have to kind of bring back on some of those heads if trends remain as they are And linked to that as well, the branch closures, I think, Mike's comments suggested that you're re consolidating to better locate Can we assume from that you don't expect much if any revenue loss from the branch closures, but just to check that because 78 is a reasonably big number. Second question was just around gross margins. Perhaps just for the year ahead, you could give us a feel for what you see as the pushes and pulls on the business, I guess things like mix, own label, cost to serve, just how it might shape up in in totality. And then actually the last one was just on strategy, just referring back to your slide, a couple of earlier on in the presentation around the market shares and the market sizes. I guess HVAC is an interesting one where you've got around a 4% share.
It's one of your biggest co markets, though, in size and possibly a COVID beneficiary. I just wondered if that is a market where, you see good incremental opportunities. I appreciate it's quite dependent on manufacturer relationships there. But is that one of your kind of verticals you could push on maybe in the next couple of years? Thank you.
Perfect. Thank you, Will. We did have some trouble hearing you, but I think I got the gist of it. This is Kevin, and I'll maybe take the first crack at the three questions. And then, Mike and Bill, please fill in.
From a cost headcount versus growth, as Mike indicated, we feel like we took a much better approach to what cost control and disciplines looked actions from furlough, layoff, hours reduction, temporary workforce, and then reduction in force. To position ourselves, yes, for what we were going through during lockdown, but much more importantly, for what was going to face us as markets have begun to recover and certain markets have gotten better that costs continue to put back into the system. Obviously through things like an increase in hours of work, what over time looks like in that system. The thing I'm most pleased with is the flexible nature of which we've been able to preserve the intellectual capital of this business to make sure that we can continue to outpace as markets are supportive and that agility to make sure that we can address the cost base if markets are more challenging. And from a branch closure perspective, indicated that many of these were small branches, yes, small, very few associates in branch.
And so from a revenue perspective, we expect to capture and retain, 100 percent of the revenue of those locations as we utilize other locations in those specific market areas. From a gross margin perspective, Last year, we saw good growth in areas like Waterworks, which do have a lower gross margin, even though the operating margin is consistent with the rest of our business. But again focusing on own brand and an overall balanced product strategy that allows us to achieve the value or realize the value that we provide in the marketplace, we still believe that we can grow margins roughly 10 basis points a year over the long haul. And then from an HVAC standpoint, it is absolutely one of our attractive growth markets. You highlighted size of that market and our relative share position.
But additionally, when you look at the needs of the consumer in the residential market, certainly from a commercial perspective, heating and cooling, we think we're uniquely positioned. Additionally, from a COVID perspective, as we look at indoor air quality as being a potential huge driver for us as we go forward, it has a direct link to that HVAC business. The reason I say I think we're uniquely positioned, is many of the customers in the HVAC business do both plumbing and HVAC work. And we have a very successful plumbing business across all fifty states in the U. S.
And then into Canada. And so the ability to offer a very while at the same time, offering a very unique experience for the plumbing side of the business allows them to shop at one location to leverage You highlighted the manufacturer inputs. We have great relationships across a variety of OEMs and making sure that we have access to product lines to take care of that opportunity is hugely important. With that, I won't drone on any additional from Microville.
Kevin, listen, thank you. Will, given your question really, it relates to good sort of good cost in Q4 and what about the future? Probably be a little rich of me to comment about the future, given that, Bill is on the line. So, Bill, why don't I hand over to you and introduce you Will and the team.
Yeah, great. Thanks, Mike. First of all, let me just say how honored and excited I am to step into the role. Look forward to meeting many of you virtually over the next couple of weeks and then hopefully soon in person when appropriate. Look, to Kevin's point from a cost perspective, as we were going through the lockdowns, we did 1st flex really hard on the temporary items and actions.
You know, at one point, we had about 2500 people that were on temporary furloughs or temporary layoffs recall the revenues were down about 9% in April. Clearly, we then shifted focus towards the future, setting up the cost base for, certainly an uncertain environment, but the revenue base we expected to be operating in coming out of the initial lockdown phase. That's where we took the action on the 5% of heads in the U. S. To Kevin's point, revenue was a bit better than we expected coming through Q4.
Most of those temporary actions are now brought back from a cost perspective. Because of those actions and because of slightly better revenue, we certainly had a good solid Q4 certainly from a flip through perspective and a profit flip through perspective. As we manage into Q1 and into this fiscal year, as we look forward, you could expect some of that cost base to come back if revenue exceeds those expectations. But these are things that we manage day in, day out, month in, month out, very closely across the organization. Maybe just to put it in perspective that the 1400 people, that we've reduced from the organization.
Remember, we've got about 1400 locations. So that's about an average of one per location.
So these are very tactical decisions
that we make, day in, day out, and we'll be very cautious as we move forward into the new fiscal year.
Our next question comes from prial Wolf of Jefferies.
Hello. Thank you for taking my question. Can you hear me okay? So I've got three questions. The first one is just on current trading.
So obviously in the U S, you said you're back to organic growth since August. Can I just double check that this does mean your back to organic growth in your core blended branches division as well? Is this more just a function of really strong growth in some of the smaller units like e business? 2nd question is just on M And A? I know you said you've got a pretty decent pipeline, but has this pipeline improved through COVID?
Are there more sort of distressed assets out there? That you could pick up? And then the last one is just a quick one. You said that you will go back to shareholders in due course in terms of approval for that primary U. S.
Listing. Can I just push you in terms of, you know, tighter, tighter time frame in terms of that?
Thank you, Prial. In terms of, current trading, as we indicated, we're really pleased with the way in which we've had sequential recovery from the springtime through the close of the fiscal year and into Q1. I'll let Bill comment on where we sit in terms of blended versus the rest of the businesses, but generally speaking, we're pretty pleased. If you look at the different pressure points that we have on the business, from an order channel perspective, our residential trade business are builder business and showroom business performing quite well. Commercial, a bit more challenged, and so that gets us a pretty nice balance actually for what we had expectations.
In terms of the pipeline for M and A, We don't see distressed assets out there. I think we've said before, Mike said it very well on past calls. That our local competition runs their business quite well from a cash perspective and can really, I use the words hunker down to to take and see themselves through a challenging period. I do believe though as we go through COVID and beyond, that the investments necessary for foundational technology for what an omni channel experience looks like for the tools that are necessary to that we can plug together with that technology with that supply chain, with that breadth and depth of product offering to make them more successful. So that's what I'm most bullish about in terms of bolt on M and A as we look forward.
And then from a second listing onto a primary. We've got a lot of work that we need to do right now. And so when we use language like in due course, it really is to reflect the fact that We got work to do around SEC, Sarbanes Oxley, but most importantly, we've got work to do to run this business appropriately through a challenging environment. And so we're not going to get ahead of ourselves. We have that, that view of the future, and the board has stated that but we first need to set up that and stand up that secondary listing, run the business appropriately through really uncertain markets and continue to deliver.
So that's where we are. Maybe, Bill, you want to comment a little bit more on blended and business?
Yes. So blended getting back about flattish, I would say, as we entered into the first quarter, and then the strength as Kevin mentioned, from an HVAC perspective, from a waterworks perspective, performing very well, delivering on balance that low single digit growth.
We have another question. This one comes from Catherine Thompson of Thompson Research Group. If you'd like to go ahead with your question, please.
Hi, thank you for taking my questions today. And I'll just have the questions out individually after answering them. First area I want to focus on is on plumbing. And this is really, feedback that we've received over the past 2 to 3 months. And it's from our US contacts that are pointing to an increase in a pretty meaningful one, for demand for commercial plumbing pro products.
So this would include mobile handwashing stations and water filtration water filtration systems. And they did this is a change in trend line for commercial demand versus more DIY demand in calendar q 2. Could you clarify what you're seeing in the field for commercial particularly against the backdrop of what could be perhaps one of the biggest non, non discretionary remodeled that we're seeing in public spaces. Thank you.
Okay. Thank you, Catherine. Very much appreciated. From a commercial demand perspective, and you're right, there are different ways of working. There are going to be different demands on what commercial space should look like and what those retrofits could look like.
You mentioned a few of them. The other area that we're seeing are, quite frankly, very simple retrofits, small retrofits on indoor air quality filtration and the like. And we are taking advantage of that today. Although it's not material in terms of what the overall revenue impact is at this time. I think more broadly from a commercial perspective, what we're seeing is there's certainly an effect out there as we look at multi trade commercial development and the length of time for a project making sure social distancing is in place, making sure that the spacing out of trades, is done.
It'll lengthen the time of a construction project to a certain degree But we're pleasantly surprised with the lack of cancellation of projects or pausing of projects that we're seeing across the bulk of our business. Although we remain cautious, because we certainly know that there's going to be pressure on bidding activity and funding for projects that may have been previously in the pipeline around areas like hospitality, office, retail, and the like. But as we've discussed, the need for data centers, the need for distribution capacity, certain education and healthcare assets, although not as much are really, we're really bullish from that perspective. So we're more cautious on the commercial market, but pleasantly surprised as just to what we're seeing across the nation thus far.
And tagging along that with HVAC, we see you know, a lot of opportunity with HVAC based on our primary research as there is increased focus on airflow at public spaces I take it from your prepared commentary. You're seeing more positive trends right now on the residential side. What types of conversations are you having with commercial as a, as, as buildings are being reconstructed to to face it post COVID world?
Yes. The bulk of our HVAC business is in fact residential. Most of our commercial work is in the light commercial area. Although from a VRF perspective, we are engaged in the larger commercial market. And then certainly, we have a large mechanical commercial business on the plumbing side of our world that has some impact from an HVAC perspective.
I think residentially, we're seeing some pent up demand as well as a good impact of residential new construction. The biggest issue right now, candid from an HVAC perspective, it's just making sure that we've got good access to product. If you think about a perfect storm for our business in HVAC, the pandemic hit about the time that typically distribution builds up some inventory levels and manufacturers are ready for the oncoming summer season. And so there was a bit of disruption and dislocation there. And so making sure that proper access to product and leveraging our supply chain and making sure that we can take care of customers on the residential side is very important.
And then as we talked about from an indoor air quality perspective, we think it's, call it roughly a $10,000,000,000 opportunity, potentially before us as we move forward across residential and commercial. It's a big, it's a big market. We're just now starting to analyze what we think our role can be. But that business is growing rapidly for us right now off of a fairly low base.
And then following up on your US margins, the way we looked at it for Q4, your trading profit margins expanded over 100 basis points despite, you know, pretty challenged top line as you were managing through quarantine and and coming out of that. You have made some comments on just the flexibility of the model. But what we'd like to better understand is how much more is one time in nature and how much structural cost you've been able to take out. And also, if you could clarify, what is any mix impacted margins in the quarter?
Yes, Catherine, it's Bill. So let me jump in on that. So first off, from a structural standpoint, I think you should think back to the exceptional charges that Mike outlined. That's the real go forward takeout of ongoing heads from a labor perspective as well as the consolidation of those 70 branches. Again, on those 70 branches, about half of those were physically closed by the end of the quarter, the other half are going to come through, principally in Q1.
And that really gets that the bulk of our cost base, you know, 60% roughly of our cost base is in labor, another 15% is in infrastructure cost. If you go back to your comment though on the trading margins, you are correct, certainly in the U. S. At about a 10% trading margin in Q4, Again, back to my earlier comments, very pleased with that result. Most of those temporary actions that we took, again, the 2500 people that were temporarily furloughed or laid off.
Those 2500 are now back. The overtime that we, reduced significantly in Q4, part of that is back. And that's where where we will remain very cautious as we move forward to manage that over time as well as the permanent ongoing headcount up or down depending on the volumes that we see.
Okay. Final question gets into the bucket of it seems conservative. First, on the top line guidance, for flattish, maybe some puts and takes based on that outlook. And then second, ending the fiscal year with pretty incredibly low leverage at 0.6 times, which should we read into this and how should we think about growth initiatives going forward? Thank you again for answering my questions today.
Yes, maybe I'll take a first cut, Bill, Mike, jump in. On balance, we see some green shoots and are positive around the residential side of the As you think about new construction residential, we are positive about single family new construction. Not the least of which is, what you see in a COVID environment and the desire for people potentially to want single family, construction, expanding of the commutable distance, given the nature of remote work and the acceptance of remote work, low interest rates, pent up demand. And then obviously from a starts perspective, seeing 1.4% and plus 2 on that is very positive. We also see some positive around home improvement as you look at Lira being plus 2.
So even if you take mid single digit positive from a residential perspective. I think that offset starts to look as you get to the commercial side of the world. And looking at what ABI looks like below 50 for 6 months and what we're seeing from an overall project funding perspective and the uncertainty around the commercial markets. And then industrial remains a bit challenging. Plant shutdowns in our PBF business getting in there and doing maintenance repair and operations inside those plants still remains challenging, oil and natural gas and the like.
And then the civil markets, when you look at the funding levels for local and municipal government and what that might mean to the public construction of our civil markets. So when we take all of that together and balance it out, our fire fabrication business as part of that commercial market, On balance, what we get to is a roughly flat market. That said, those numbers are changing fairly quickly as you look at a COVID world. And I think that there's still enough uncertainty out there. Are we pleased with what we've been able to produce from a revenue standpoint and outperformance, absolutely.
Will we continue to drive for that? Absolutely, but there's just fair amount of uncertainty as we go into the latter part of our first quarter and really the rest of the fiscal 'twenty one. In terms of that low leverage ratio, We think it's a prudent place to be given that uncertainty in the market and the strength of our balance sheet is a very positive thing for us, especially as we look to get back into good solid bolt on M and A And again, trading through challenging markets where from a U. S. Perspective, we don't even have consistency in young people going back to school.
And so what are we going to see from a virus perspective, maintaining that conservative position is prudent at this time and we're pretty pleased with where we are.
Thanks, Catherine. We have our next question. This question comes from Keith Hughes of the Truist. If you'd like to go ahead with your question, please, Keith.
Yes, thank you. Kevin, in the prepared statement, you had discussed future initiatives of getting closer still serving your contractor.
I'm sorry. Could you speak up just a touch, we're having trouble, Keith? All right.
Is that better? So my question is, Kevin, in your prepared statements, you had discussed getting closer to the end use customer, still serving the contractor. Beginning closer to the end use customer, which has always been part of the commercial world more than residential. So I guess my question is, are you talking about, extending that further into the, let's call it, non residential world, or is that a initiative and residential and how do you get that goal accomplished?
We see it across all of our different businesses. And it can't be, firm enough in saying the trade professional is our customer. And we work hard every day to make sure that we deliver that value. Best breadth and depth of product supply chain consultative experience, being able to find search special items to make their jobs easier, making their business more successful. But where we really need to go, especially from a product strategy perspective, is working with designers, engineers, architects.
Is it commercial? Yes. Is it infrastructure, yes, municipalities, is it designers in the builder showroom space. Absolutely. So just making sure that we are up funnel across all those different aspects, helping our contractor to make sure that we But at the same time, we are guiding what that product selection looks like to benefit Ferguson and our contractors.
And so that is not just owned brand. That's also our partner vendor relationships on the branded side, where we've got great exclusives that are unique to Ferguson that allow us to have a specification inside of a project giving us a better chance to secure that overall job while at the same time helping our margin profile and delivering a better product for the end user with good timeliness for the contract. Year. So really, it's across all of our different business groups. It is in person through relationships, but it's also through technology.
Especially as we start to see building information modeling becoming a bigger part of not only the commercial business, but beyond.
Okay. 2nd final question, and a follow-up to Catherine's. As you looked at business the last sort of 60 days, I think you shown some caution on your nonresidential business. If you look at those 3, the commercial, the civil infrastructure and industrial last couple of months, which of those has been the weakest market?
Keith, could you repeat that last part? We lost you on the last part.
Which of the nonresidential businesses you define them as commercial Civil Infrastructure And Industrial. It seems as though they're weaker, in residential in the last couple of months of business, which of those is the weakest, which is causing the lowest trend?
Industrial is. And again, we don't have a tremendous amount of exposure to oil and natural gas, but it is is the weaker of all those types of businesses, really, commercial then, civil municipal and industrial.
We have our next question. This question comes from Vebs from Head of Exane.
Good afternoon, gentlemen. Just a few questions on my end. Could you maybe come back just on the end market and especially looking at the comments you've made on the municipal funding, you kind of use a backward tone on the press release, I wanted to understand if you've seen any improvements with regard to that sub segment in recent weeks? And how you think going forward on that specific point. My second question is on your slide where you show your positions and your call exposure.
I'm trying to figure out maybe with your new strategy with the U. S. Listing, looking ahead in next 5 years, where do you see the largest opportunities in terms of market growth, but also in terms of potential external growth opportunities through M and And maybe just last question, your outlook is essentially saying that with some product of your exposure, you expect flat market conditions, can we extrapolate the outperformance of 2019 into 2020? Which would suggest a low single digit environment for Ferguson? Thank you so much.
Great. Thank you very much. And from a municipal perspective, I think this is more our caution around what might happen. We haven't necessarily seen that today, but if you look at stress and strain put on local and state budgets, given the COVID response and the need for funding, you do get concerned as to whether or not the general fund versus wastewater infrastructure, how that interplay happens. The good part about that is that our waterworks business, as indicated during the presentation, is a very balanced business.
So yes, municipal, yes, public works construction, water wastewater treatment plants, but also new residential and commercial. And in fact, we've seen good new residential work across the bulk of the U. S. In terms of that new residential work inside of waterworks. So it is more a concern, a caution about what could happen.
From a vertical exposure and largest opportunities, both in market and M and A, I think you see a couple that we're really working hard to grow and expand it. HVAC as we've spoken about before is one of them. Certainly the commercial maintenance repair and operations business, what we call Ferguson facility supply, which is a huge, very fragmented market with good trading margins and good returns on capital where we are, continuing to make good headway in conjunction with our blended branch infrastructure to make sure that we can offer same day, next day product availability to that customer set. But I can't reinforce enough across all the different businesses that we operate in, we do see good opportunities, both with M and A, And then depending on the market, what does that organic investment look like depending on the market conditions that we operate in? And then from a flat perspective, yes, we intend to outperform the market.
We typically pushed for, call it, 200 to 300 basis points worth of market outperformance. Making sure that we do it in the right way, achieving value for the services that we provide reflected in our gross margins, and value for the relationships, both digital and human.
We have our next question. This question comes from Gregard Kulklitsch of UBS. If you'd like to go ahead with your question, please.
Yes, Gregor.
We can, Greg. Excellent.
Thank you. Brilliant. I've got a few questions as well. Maybe one big picture one on the margin potential of the U. S.
So I think last year you were slightly shy of 9%. That's including obviously IFRS 16. You're flagging kind of technology investments, some cost savings. And I don't expect you to sort of give me a precise basis point number maybe for this year, but as you maybe take a 5 year view, what do you think this business is capable of doing?
I mean, could
we be talking about double digit or is that too aggressive? That's question 1. Question 2 is, relating to the M and A commentary again. So, I want to understand, if your kind of approach to M And A has changed a little bit. Maybe it hasn't, but I just want to explore whether you're prepared to maybe go for slightly larger deals.
So historically, the last decade or so, you've kind of done 1%, 2% annual sales contribution from acquisitions. I want to understand if you're kind of flagging a step change in that or it's just going to be more of the same. And then, on e commerce, if you could just give us some growth numbers in your introductory remarks, if you could just remind us kind of the absolute numbers. So, I think the B2C is relatively easy, but in terms of the B2B, how many of your customers are basically using online channel, how many subscribers have you got, just so we can understand the sort of absolute figures there, because I think you were mostly flagging, the rate of growth relative to March, but I want to understand where you are in absolute terms, please.
Great. Thank you, Gregor. I'm going to take a quick turn on all three of those questions and then turn it over to Bill for a little bit more depth. From a big picture view, in terms of double digit being too aggressive on margins, we do not put a ceiling on that. And we have historically looked at gross margin expansion as a good reflection of the value we provide and that's been the driver of trading margin expansion.
We really need to look at both. And I think that you're seeing that, hearing that in some of our comments for today. How do we get 10 basis points worth of gross margin improvement annually that is sustainable, built on value. And then how do we make sure that we invest in technology, which are already embedded that constant movement from a technology perspective in both OpEx and CapEx is embedded inside of the financials and what we are talking about today, but we need to have that in order to drive the productivity of our sales force, the productivity of our associates, things like distributed order management technology, that sort of activity that makes our people more efficient, but also gets great value for our customer makes us relevant for the long haul. Secondly, on the M and A side, there is no step change to what you're seeing.
We will look at all opportunities, big and small, that is our responsibility, but when it comes to our ability to take small to medium sized bolt on with local relationships, bring it into our organization, take out some overhead costs add technology, supply chain to local relationships. It's a good, solid, effective way of growing our company. That also protects and enhances shareholder value. We also want to do capability acquisitions. What does that mean?
Yes, valve and automation and what are our capabilities in the local market that we can spread across a larger book of business, but also own brand. And bringing product brands into our organization that we can use across our digital and bricks and mortar channels to make us more effective and make the business that exists more relevant. From an e commerce perspective, I think that you will have seen good growth in B2C E Commerce, good adoption of digital tools in our B2B customers, but we look at it more than just revenue, it really is that stickiness of how we bring value to the trade professional so that they can check order status, look at the truck coming down the road and understand when they need to come off the 14th floor of a mid rise to get their materials. Things like rich product content, sourcing, all those things are equally as important to us. And what you'll see is our B2C operations, really coming together with our bricks and mortar operations in Ferguson, So that the best digital platform that exists for build.com, for example, starts to really enhance what that showroom offering looks like.
And really starts to build an omni channel operation that's very durable. So with that, Bill, any comments from you on, margin? Maybe just
on that first piece given on margins to fill that out a little bit more. To your point, we don't put a ceiling on it. We do want to incrementally improve year in, year out in supportive markets, not only the gross margin side, but Kevin talked about the technology investments. Technology spend for us today is about 6% of our cost base, and that continues to grow. We absorb that in the ongoing cost base of the overall organization because not only does it improve the customer service as effect and the capabilities we bring to the customer, but Kevin you also mentioned the productivity side.
So in addition to that OpEx investment from technology standpoint, we also invested about $100,000,000 of CapEx this year, again, embedded in our overall CapEx guidance but in technology, because that's what's going to make us better, not only for those customers, but from a productivity standpoint, so we could get better operating leverage over time.
Thanks. That's really helpful. Thank you. Good luck.
We have our final question. This one comes from Stephen Golden of Deutsche Bank.
Thanks. I just wanted to ask you on, obviously, you've talked quite a lot in the Q and A about M and A and bolt ons, etcetera. You said earlier on that you're not really seeing any kind of fire sale asset or particularly desperate sellers right now, but can you give us a little bit of a feel for the typical multiple that you'd be paying kind of on an EV EBITA basis as possible just because obviously that kind of links to your trading profit focus. And then typically what would you what kind of margin would you be buying a business like that on and how quickly could you sort of get it up to, group levels of traditional group margin basically through synergies. And I guess just to sort of put that into context, obviously your buyback is currently on pause.
Clearly, if you were able to pick up these businesses that let's say, for example, 9, 10 times and your stocks on say 14, 15 times, is does that have any implication for A, your willingness to do more M and As and do a buyback and be obviously the potential mix of accuracy versus debt that you may use in any particular potential acquisition?
So maybe I'll take it very quickly, the last portion and then hand it back to Bill. From a buyback perspective, M and A versus buyback, I really focus on what our capital priorities are and, when you look at organic investment dividend growth through cycle and M and A followed by return of capital to shareholders. And we're really, from a buyback perspective, just wanting to better understand how we come through this COVID environment the uncertainty that's in all of our markets today and really need to evaluate that as we move through our fiscal year, from a decision making standpoint. But maybe I'll hand it back to Bill to get after returns and multiples and what happens.
Yes, I would tell you, typically, we're seeing, and I'll give you somewhat of a wide range on multiple because every deal is different and unique, and, and clearly, brings different synergies to the table. But in general, I'd say we're in that 7 to 10 times. What we're seeing in the marketplace over the last couple of years. From a margin standpoint overall, clearly, the vast majority of those acquisitions that we do have a lower margin, lower trading margins, than what we have. And we look to bring those synergies in quickly and get them up to our trading multiple over a couple of years.
If you think about the traditional bolt on M and A deal that we do, We go in quickly. We put them on our systems. We hook them up to our supply chain. We get the distribution and the fleet synergies. We get sourcing synergies.
And then we can take a little bit of back office cost out as well in those acquisitions. So those are typically, kind of how we approach the M and A time.
Great. Thanks a lot.
Steve, it's Mike. The the only thing I would add is just remember, you know, when we buy businesses, the fit is so important for us. So there's a lot of sort of corporate finance theory. But the most important thing for us is, you know, we're buying people, and they often don't end up on our balance sheet. A lot of goodwill does, and I've always said, you know, need to buy good quality businesses, good relationships that fit with Ferguson.
And that is really, really important for us as well as the financial theory, because people can walk out the door. And
then you're left with a
whole load of goodwill to write off. So it's the people and the relationships which comes back to the core values of Ferguson that we care just about in M And A, as well as the corporate finance theory, which sort of goes alongside it. Great. Thanks a lot. That's very helpful.
Well, given that that's the last question, if I could echo my earlier statements that we began this call, great to welcome Bill into the new role really looking forward to what the future holds for us. And I can't let the call go without saying again, thank you to Mr. Mike Powell. Wish we were together on the same side of the ocean, for this call, but you've been an incredible help to me, and an incredible asset to the growth and development of our company. So thank you very much, and thank you for your time today, on our call.
Ladies and gentlemen, this does conclude the call for today. Thank you for joining and you may now disconnect your lines.