And welcome to Ferguson's full year results presentation for 2019. As you know, it's rare for me to be accorded as speaking part on these occasions, but the, the executive management have decided to risk it on this occasion. Firstly, I'd like to extend a very warm welcome to Jeff Drabble, who's in the audience today. Jeff will take over the reins from me in November as Chairman. I'm sure Jeff needs no introduction and he joins Ferguson following 12 years as the Chief Executive of Ashstead.
He's been one of the most successful CEOs in the Foot Sea in recent years and his record of value creation has been simply outstanding. He brings a wealth of experience in the distribution technology and manufacturing sectors, particularly in the United States. And I'm no doubt he'll be a wise council for our executive team and will lead the board with great skill and personality. For those who don't know, Jeff's and Newcastle's supporter, but despite that is well known for his cheery disposition, Secondly, as we announced in September, this will also be John Martin's final set of results. At Ferguson.
John joined the board as Chief Financial Officer in 2010. Before being appointed group chief executive in 2016. Now during his time with us, The group has been significantly simplified, exiting less attractive markets and focusing resources on those markets where the company is best equipped to win. John has brought great strategic clarity to Ferguson and he leaves the business in very good shape. John's numbers for his tenure at the company are particularly impressive.
He's turned in 37 quarters of revenue growth and 9 consecutive years of trading profit growth for the group. Total shareholder return during his time at Ferguson has been a very impressive 4 36%. And we have returned 1,000,000,000 to shareholders in the last 10 years. Now that's not bad for a Stoke City fan. Away from the numbers, John's been a great ambassador for the company.
And John, thank you for your service and on behalf of the board. We will wish you the very best for the future, which I'm sure will be exciting. I'm also delighted to say that Kevin Murphy will succeed John as Chief Executive in November. Kevin is a very experienced executive operating in the plumbing and heating industry in the United States. He was appointed CEO of Ferguson Enterprises and he joined the board 2 years ago.
He's got a strong track record of delivery having previously served as Ferguson's chief operating officer for 10 years. Under Kevin's leadership, Ferguson has continued to gain market share and generate profitable growth, and we continue to execute our highly effective strategy. Now Kevin will be joining John and Mike Powell on the roadshow over the next couple of weeks. And I know many of you have met Kevin at previous investor days and road shows. Mike Powell, of course, will be particularly delighted both today and on the roadshow to talk to any Australians who might be foolish enough to get into his presence.
And finally, they always say end on a high and I'm delighted to sign office chairman with another strong set of results. I just wanted to say that it's been a huge privilege for me to have served this great company And I'm very confident that you're in safe hands with Kevin, Jeff, and Mike at the helm. Thanks very much.
Gareth, thank you very much indeed for those very kind words. And good morning, everybody. Welcome to the presentation. Of our results for the 31st July. You've got Mike and I presenting this morning.
We're also joined as Garath mentioned. By, Jeff, who's taken over from Gareth at the AGM as Chairman. Now as you know, I'm handing over to Kevin Murphy in November. Kevin is joining Mike and I for the roadshow. He couldn't be here today because of prior commitments, but he is joining us on the whole of the roadshow.
So shareholders will have plenty of opportunity to hear from the whole of our team about why we're so, enthusiastic about the is for Ferguson in the years ahead. 2019 has been an extraordinary year for the company. I'd like to share some of the highlights Firstly, as you can see on the chart, it is our 9th consecutive year of growth with sales up nearly 8%. And it's also the 9th consecutive year of gross margin expansion, up another 10 basis points. It's worth reflecting that if our gross margin today were at the same level that they were back 10 years ago.
Our profits would be $500,000,000 less than they are. It's also the 9th year of trading profit growth, perhaps surprising when you think of all the businesses that we sold over that period up another 7.5% and also the 9th year of EPS growth. Up 16%. The markets weakened over this year But I'm very proud that we continued to take market share. We took prompt and decisive action to control our costs and I'm very proud about how Kevin and the team got about this.
The cost base today is in very good shape as we go into the new year. We invested over $600,000,000 of the cash that we generated on some great acquisition helping to improve further our market positions. Owned brand, which we'll come to a little bit later, has also been a strategic focus. That now represents 8.6% of group sales in the second half, but the economics are about twice as important due to stronger gross margins. And we've also concluded on the future of Woolsey UK, which will be demerged as an independent company listed in London.
It was another great year of cash generation with a record $1,600,000,000 of cash from operations contributing to further expansion, as you can see from the chart in our return on capital employed. We returned another $600,000,000 to shareholders via dividends in buybacks and that strong cash position has enabled us to increase the dividend by a further 10% this year. So those are the highlights and now over to Mike for the financials.
Morning. I'm pleased obviously to present the group's full year results, which show we've had a strong finish to the financial year. Revenue growth for the group, clearly driven by our U. S. Organic business, but a good decent contribution from bolt on acquisitions through the year.
Ongoing trading profit, 1,000,000,000 over 1000000 or 7.5% in constant currency, with headline EPS up 16.4%. As you'll see later, cash generation has been excellent again this year and the balance sheet's in great shape at 0 point 7 times levered at the end of the year. And we've recommended a final dividend to be increased by 10%, which reflects our ongoing confidence in the business. Moving on to the revenue and trading profit growth, what I've done here for the overall group is I've expanded the first chart to expand the revenue growth of of 5.3 percent exceeding the top line revenue growth and that's due to good gross margin performance and tight cost control. There was also a significant contribution from acquisitions, and it's pleasing to see the effort put in by the teams to bring these businesses into the Ferguson family.
Profit for the acquisitions shown here is after 1,000,000 of integration costs. Organic revenue growth in the US did moderate in the second half, albeit against some tough comparators. We continue to take market share, something John will come back to later. Inflation has been running about 2% to 3% across all of our businesses through the year. In the UK on a like for like basis, broadly flat, and Canada showed some declines into the second half of the year.
And foremost our largest region, the U S, delivered a strong performance, and we continue to outgrow the wider market and deliver good revenue growth. Gross margins well controlled through good pricing discipline, particularly in light of the market environment. Around the half year, we took decisive action on costs, to control our cost growth, particularly around labor, which, as you know, compromises around 60 percent of the operating cost base, and this has ensured we had a good finish to the financial year. In July, we've also initiated a voluntary early retirement program and made some selective closures of underperforming branches, These actions allow us to ensure we have the correct cost base going into this new financial year whilst also allowing us to invest where appropriate in the growth elements of the business whilst protecting the income statement. Trading profit therefore for the year are 1 1000000 over 1000000 ahead, with trading margins at 8.2%.
Not only am I very pleased with the incremental absolute dollars, of course, but also by the manner in which the team got after this result and the shape of the result in the latter half particularly pleasing as it shows our ability to deliver You can see that that revenue growth in the U. S. Was pretty broadly based. We've shown our blended branches on the map roughly 6% across all of the geographies. Elsewhere waterworks continued to grow well and the HVAC and industrial businesses both generated strong performance during the year.
Revenue growth in E Business was lower as we continued to consolidate our pay per click advertising spend across fewer websites. Onto the UK, and as you know, during early September, we announced the demerger the intention to demerge the UK operations. John will come back to that one as well, in a little while. Like for like revenue in the UK broadly flat difficult repairs, maintenance improvement market. Gross margins though were slightly ahead due to the improved product mix and trading profit was ahead of last year in local currency and the teams worked very hard to get this business back onto a much firmer footing and it's pleasing for us to see the turn of the tide here and deliver a modest increase in profit.
In which is a pretty in a pretty lackluster market environment. Canada faced into a pretty challenging market environment this year, saw markets go ex growth in the second half and you can see therefore overall organic growth 1.1% lower for the year. Acquisitions contributing 5% to revenue growth. Residential markets, which represent about 60% of our mix of business in Canada weakened through the year as a result of the government measures to restrict mortgage credit, the impact of foreign buyer taxes and rising interest rates. But despite those tougher market conditions through the year, we worked hard defending gross margins, which were ahead of last year, And we also implemented here, again, decisive cost control measures, as the markets weakened particularly into the second half and therefore pleasing to see underlying profit growth in the year overall.
Moving on to exceptional items. These were 1,000,000 in the year. As I've already commented on, we offered a voluntary retirement program in the U. S, and did some small, branch based restructuring that totaled GBP 60,000,000. That's the top line.
The UK restructuring costs remain in line with what we booked at the half year, so no change there. And whilst I've described the impact on the income statement, Please do remember that the cash effect is very different as we worked on disposals of both the Dutch business and the sale of a UK distribution center those combined generated about 1,000,000 of cash. And therefore, the cash position during the year on these exceptional is nearer GBP 100,000,000 inflow. Finance and tax charges as expected, the increase in finance charges were principally due to the, prior year debt levels being artificially low as we have the proceeds of the Nordics in the prior year debt numbers And the effective tax On to cash, strong cash generation and the disciplines around it continue to be an important priority and quality of our business. Cash flow from operations, 1000000 after slightly better working capital performance than I expected.
As we guided, capital investment was a little higher in 2019, mainly due to additional investment in the new Perris distribution center, which is now up and running in Southern California. We completed a number of attractive bolt on acquisitions, mainly in the USA, and you can see that cash outflow of 1,000,000. We also worked hard on disposing of noncore assets the 303,000,000 cash inflow represents that. That's our Dutch Plumbing and Heating business, some surplus Nordic properties and the disposal of the distribution center in the UK. And then towards the bottom, repatriation to shareholders of nearly 1,000,000 in the year.
The profit and cash that I've just described, that delivery means that we finished the period with a strong balance sheet net debt to EBITDA 0.7 times. At the balance sheet date, we'd completed 1,000,000 of the million share buyback that we announced in June, Since then, as I stand here today, we've done another 1,000,000 and I'd expect to complete that buyback in the next couple of months. And with that in mind, as I think about the pro form a debt that we ended the year, if you add the buyback in fully, that 0.7 times. On a pro form a basis I tend to think of as ending the year at around 0.9 times if you add or buyback back in. And as is normal, I'd clearly expect, as we go into our peak months for working capital, which is generally around the Christmas time for us to leverage a little bit more 0.3 or 0.4 times, which is our normal seasonal working capital.
So moving on to technical guidance, We have 1 additional trading day this year. That's about GBP 12,000,000 of profit have included the impact of the completed acquisitions that we have done for the full year effect into FY2020, and as previously guided, we'd expect the tax rate to move up to 25% to 26% for FY 2020 and onwards after the change in the Swiss tax reform that was announced earlier this year. CapEx will be at more normal levels in the year. I'd expect those to be around the 300 to 350 mark and that still has some ability for us to expand capacity within that number. Finally, we wanted to remind you the capital allocation priorities.
You can see on the top half of the slide, and I've certainly covered in previous sessions, these have not changed. The strong cash characteristics of the business allow us to invest organically and be self sufficient. The board remains committed to a progressive dividend policy and we expect to grow dividends through the cycle and in line with long term earnings. We'll continue to invest in selective bolt on M and A opportunities and return any surplus capital to shareholders in a reasonably prompt manner. So let me wrap up I'm pleased with 2019.
We've delivered a good set of numbers, good earnings. We've got continued excellent cash generation. We've got a strong balance sheet and therefore, we're in a great position as we head into the new financial year. 2020. With that, I'll hand back to John for the last
Thank you very much, Mike. I'll start today with a couple of comments about how the markets have developed during the year. The growth of the market is most clear from the supplier data that we've referred to in our press releases this year which show that overall U. S. Growth slowed from about 6% in the first half, as you can see there on the chart, through to about 1% in the second half.
As we've done for several years, we grew faster than the markets and continue to gain market share. Again, as you can see on the chart in each sector, outperforming the markets by just over 3%. This chart from Zelman shows how the market for all building products, that's building products going into New Resi, inter home improvement and also commercial construction. Has moved over time. Our markets, of course, represent a subset of that market But this data also suggests that the market for overall building materials has been growing over the last 6 months by about 1% or 2%.
And that's the backdrop of the markets that we've been operating in. I think as Mike said, the results that we've produced in this environment really confirm the strengths both of the operational management in our business and also the attractions of our service driven business model. Now one of the key strategies of the group is to ensure that we constantly maintain and improve the efficiency of our operating model. That's important for 2 fundamental reasons. Firstly, we need to make sure that both the services and the product availability that we provide to our customers is the very best in the industry and that we provide our associates with the tools to fulfill that promise to our customers.
And secondly, we want to maintain and improve the financial returns in the business. On the chart here, the dark blue columns to the left represent the organic revenue growth that we achieved in each quarter of the year and the pale blue lines represent growth in headcount at the end of each of those quarters. You can see during the year how we balanced and brought down headcount in line with the lower growth rates in each quarter. And that strong control over cost has enabled us to continue to invest in our strategic initiatives and also to protect the P and L. In the fourth quarter, just before the end of the year, as Mike mentioned, we also offered a voluntary early retirement program to selective associates in the U.
S. That's an efficient and associate friendly way of both reducing headcount and also freeing positions to be filled by I mentioned own brand, our product portfolio includes 22 brands. Some of them you see up there on the screen apply to thousands of products in categories such as rough and finished plumbing, appliances, vanities, lighting, these products offer greater choice and value to our customers with excellent quality and excellent reliability, but also with nationwide availability supported by the strength and post sales support of Ferguson. They also drive profitability accounting for more than 17% of our U. S.
Gross profit in the final quarter. And for our associates selling these brands represents the best way for them to maximize their commissions. Now our organic growth of owned brands during the year was more than double the organic revenue growth rate of the business as a whole and that was boosted by acquisitions of Safestep, James Martin and Joan Stevens during the year. We've talked before about the reconfiguration of our distribution centers. Now just to touch on Southern California.
Southern California and the adjoining southwestern States, this is a fantastic market for us. It's a 6 $1,000,000,000 market in which we have a 21% market share. That's grown at double digit rates now for several years. Perris that you see on the screen, this is the size of our newest distribution center serving 130 branches across California, Arizona, Nevada and Utah across all business units. It's also going to house a consolidation center that imports into the West Coast of the U.
S. At over 1,000,000 square feet, it's replaced the leasehold facility at nearby Mirai Loma, which was half this size but beyond full capacity. So we're having to lease out short term capacity in the area. In the first full year of operation, throughput at the site will be more than and the investment will enable further throughput over time of another $400,000,000 of product cash operating costs at the site are 1,300,000 a year lower than the cost of renewing the lease at the previous site. This side has been brought into operation during the year with no disruption whatsoever to customer service.
One final thing on Paris to improve the efficiency, safety and sustainability, we're incorporating fully reusable totes and we're installing the solar power system, which will generate more than 3,500,000 kilowatt hours of electricity per year. As Mike mentioned, it's been a very busy year on the acquisition front. That means the market leader for residential and commercial plumbing in Long Island. Long Island is a great market. It's got a population of 8,000,000 people, many of whom are quite affluent, but they all need water and wastewater supplies.
We did have a number of branches on Long Island, but we were significantly underrepresented. We've been trying to acquire Blackman now for several years. Gareth has been brought to the board about 5 years ago, first time around, didn't quite get there. The transaction was the culmination of huge amount of hard work and patience on behalf of the acquisitions team. But for our technology and supply chain teams, course, the hard work only really began when we concluded the deal.
A combination of former Blackman Associates and Ferguson Ferguson associates have worked tirelessly to integrate Blackman into the Ferguson family, including switching the operational systems to Trilogy, combining the supply chain networks to ensure access to our distribution centers in Kokusaki and Sikorkas. We had up to 100 Ferguson associates working full time on the integration during the year and we invested $8,000,000 in the integration project. Now historically, Blackman didn't generate the net margins that we come to expect of ourselves in Ferguson. But given Blackman's market position in Long Island, we knew we could generate very significant synergies leverage our scale to provide the best product availability and service so that over the long term we do expect this to generate very good returns for shareholders. Now our vision for Ferguson is to be the trusted business partner and to provide the very best service to our customers by focusing relentlessly on customers, they come back to us day after day, year after year, we then put ourselves in pole position to make great returns for shareholders.
1 of our values is innovation that you see over there on the right. We are an innovative business.
So give you an example,
our innovation team has invested in a number of exciting opportunities this year, bringing new technology and process to the built environment. One of our investments is in a field service management company called PASA. This has developed an innovative package of solutions helping residential plumbing and HVAC contractors with scheduling, with workflow management and payment processing. Now increasingly our shareholders and stakeholders are interested quite rightly, not just in the financial results that we produce, but in how our businesses run, how we achieve those results. And I wanted to share with you today just a couple of examples of our own values in action.
The safety of our associates is our prime responsibility. It's the first item on the agenda of management meetings and the first item in management injury rate by 22% with a range of initiatives, supporting our associates to focus on the right safety equipment and the right way to handle Materials. And Ferguson has also been included just been included in the Dow Jones Sustainability Index. Achieving a perfect score in the Environmental Reporting category and a 35% improvement on our score last year. Now I thought it'd be a good idea today to reflect on the excellent market positions that we have in the U S.
You might remember this chart, It's the chart of our key customer groups and the estimated market share that we have in servicing each of them. The first three of those groups on the left hand side have very strong market positions serving both residential and commercial tradespeople and contractors in RMI And New Build Markets. The infrastructure is principally the Blended Branch's network and showrooms, which service both contractors and unconnected customers. Now Waterworks HVAC and industrial customers are served both by blended branches and also where appropriate by standalone branches. And then facility supply and the standalone E business at the end.
Those businesses do leverage the asset base of the group to serve new customer groups, but with significant product overlap in the maintenance and decorative plumbing projects markets. It's worth reflecting each of these groups has excellent growth characteristics and generate similarly attractive net margins and returns on capital. Now this chart shows the degree to which those custom groups are served by leveraging our core infrastructure. Along the bottom there, Along the bottom of the chart is an indication of the customer strategies adopted by the largest competitors. That's win wholesale FWW Webb, Hadoka and Morrison.
They are very similar in their strategic breadth to Ferguson. Though of course far smaller. Now moving on to the UK, we announced last month we are going to demerge the UK business that will become a standalone, independent listed company in London. We'll see how the largest network of branches in the UK serving the plumbing and heating needs of both residential, commercial and infrastructure tradespeople and contractors. We have a good market position in each of those segments.
Particularly focused on repair and maintenance markets. The focus of the business under new management over the last 18 months has been on industry leading availability, in Knight branch fulfillment and driving customer service. And the team are now applying operational excellence in our supply chain and are driving demonstrable improvements in the business. There are some good opportunities for the UK to leverage its assets, including own brand, which accounts for over 8% of sales and very effective e commerce functionality. In addition to the high availability enables a further thirty thousand products to be available in store at 7 am the next day.
There's a good opportunity in the business to drive better pricing discipline, including central guidance over contract pricing and consistent great value pricing for spot sales to local trades people. The closure of the Lemington distribution center, as Mike mentioned, during the year, That released more than 1,000,000 of cash without disrupting service and there are further opportunities to improve the capital efficiency of the business. It's also worth a reminder of the underlying financials of the business. You can see last year whilst market growth here was low, On an underlying basis, trading profits were slightly ahead. We've made a small acquisition after the end of the year adding to some of the momentum of that us that Mike talked about.
Listing, the board has kept listing structure of the group under review over several years. Following the demerger of the UK business, 100% of our profits will come from North America, and about 40% of the company's shareholders are based in the U. S. A number of shareholders have asked us to assess the listing structure again and we announced last month, as you know, that we've started to do that. As we've talked to shareholders over summer, we've heard a number of messages very clearly.
Shareholders wants to hear from the company. They want the company to set out our analysis of the benefits and cost of each option and they've encouraged us to do the right thing for the company for the long term. That's great guidance for the company to follow, and that's what we're going to do. A number of you have asked about the factors that we need to take into account during that assessment Some of those are shown on the chart, some of these are complex, right? We have an absolute duty to shareholders to address them diligently and in detail We'll work promptly on this, but we will work properly and thoroughly and we'll continue to consult with shareholders along the way.
So in terms of outlook, look, the markets are broadly flat right now. We have continued to grow our order books, which stands a little over $2,000,000,000, suggesting continued modest growth, in the months ahead. We do expect to continue to outperform the market and to make further progress this year. Thank you. Look, just before we open the floor to questions, this is my last set of Ferguson numbers.
I'd love to make a couple of closing remarks and get my own back on the Chairman, which has never happened before. It has been a huge honor to serve Ferguson Gareth and Woolsey for nearly 10 years. I've enjoyed every minute of it well, nearly every minute of it. The Ferguson story, I think, is a great example of the value of strategic clarity and simplicity. Combined with great operational execution and a relentless focus on serving customers.
They're all brought about by the best associates. The best associates, the best colleagues and the best board that I've had the privilege to work with. Our shareholders have been patient And the board has been very supported. In particular, we have been supremely well served by our chairman by Gareth to whom I owe a huge debt of gratitude and Thank you, Gareth, for your guidance in Wise Council. I'm absolutely delighted that the company is going to continue to be managed by strong and capable leaders such as Kevin Murphy, such as Mike Powell, and that they will be supported in the next stage of our development by Jeff Drabble and Garrett mentioned, Jess, track record and the generation of shareholder value is absolutely fantastic.
I am quite confident that this company faces a very bright future under this leadership team. And thank you all too for your unbiased coverage. I've enjoyed nearly every buy note and I've ignored nearly every sale note. Thank you very much Have we got a mic, Mark? Mike with a mic?
Hi, good morning. Eludy Roll from JPMorgan. Thank you for this. I have a couple of questions, if I may. First of all, can you come back on the Slide 25 on the cost flexibility and give us a bit of color of how much additional cost flexibility you see in the business, should we see a little bit more pressure on the top line in the U.
S. In particular? Second, how is the acquisition pipeline shaping up? Is it still as strong as usual? Or are we seeing any headwinds from I don't know, higher valuation or anything.
And lastly, I know you touched a bit on that, but if you could give us a bit more color about the feedback that you got from shareholders on the listing options?
Okay. Thank you. Well, given it's the cost is a forward statement, I'm not letting John commit us to
but there's lots more to do. No, I
think you've seen from what we have done, let me just roll back. I'm very pleased with what we've delivered in the second half. It is very easy to sit here when the business has been growing at 10% a year, and say when tough times come, you're going to reduce your cost base. That's what this guy used to do. Okay.
And I'm very pleased that actually we've at least shown that we've got after that in a quarter, okay? Is only a quarter and we need to keep on that case. That's why we've just launched the voluntary early retirement program to keep making sure that we get the cost base right for the top line but also provide succession for our future management. So we can get the real growth characteristics of the business locked in for the future. So I think we will always stay cognizant of it.
I'm very pleased we've actually shown we can do it. Because actually it's the 1st test of the business in truth in a low low growth environment for years, okay? So we thought we could do it. We've actually just shown we can do it. We need to keep on doing it.
Labor is 60% of our cost base. So it is actually about labor, but it's also about protecting the opportunity for the upside when the upside comes. So I come from a manufacturing background with all of our costs. The great strength of Ferguson is taking those growth opportunities when they come. It is a balancing act, okay?
So we will get after the cost base. There are clearly opportunities, but it is in labor and it is labor that gets you the growth when the growth comes. So Kevin and the team are very close to that as I am, and there's always a bit of yin and yang around cost out versus future growth that will continue. And I think that's a health tension for us to continue, but we'll keep absolutely on top of the cost base. Now we've got to a good place.
We'll keep on top of that cost base. Okay. In terms of acquisition pipeline, absolutely normal, that means nothing because of course acquisitions come and go. We look at a number of acquisitions. I'd say most of the acquisitions we're looking at would fall into a normal pipeline.
That guidance will over the years, John, that's normally averaged around 1,000,000 to 1,000,000, but if you wanted a number, it's not a bad number, but it's likely to be wrong because of course I'll either look It'll likely not a lot or it'll be more, but there's it's mostly normal at the moment. There's nothing abnormal about our pipeline. We continue to work it hard.
Yeah. And, Alan, look, on the shareholders discussion we've had. We talked to about 2 thirds of the shareholders representing about 2 thirds of the shares of the company, which is about 35 shareholders, I would say there's been a wide range of view. So far we've posted sort of 3 or 4 questions. Carefully scripted questions, same questions to that group of shareholders and heard back from them.
And I think now we need to reflect on that but all and be informed in that in our in our work because I think next time that we go and do a sort of a more a more sort of structured consultation with shareholders have said they would like the company to set out the costs and benefits. One thing that is clear is not all shareholders have got a very clear view of actually what the options are, what they would mean, what they mean for the company vis a vis what they mean to shareholders. And then the other point that I would say, there isn't a single, there isn't going to be a single shareholder view of what the right of what the right way forward is for the company. There's a wide range of views some of them are not going to be reconcilable, but the board need to and I think the encouragement, Mike, when we've spoken to shareholders, is pretty much everybody has said, do the right thing. I think that's great guidance for the company and for the board.
Hello. I've got the mines for it. Arnaud Lehmann Bank of America. A couple of questions. Firstly, for you, John, I guess, we knew that the direction of travel for Ferguson would be to have a U.
S. Cities and as CEO in the medium term, but I guess everybody was slightly surprised that the move came probably faster than expected. So could you maybe give us a bit of color around what happened at board level or at shareholder level that, accelerated the change considering it was still through me, Young, and you've
done a as you highlighted, done a great job. I'm good looking. So thank you, Anna.
My second question is on the decision to demerge the UK. Again, can you give us a bit of color? Is it Was it a business that maybe you wanted to sell and you couldn't find the right buyer? And I guess related to that, do you believe it has critical size to be a standalone entity? And would you consider a combination with another UK player either in merchanting or hitting and plumbing in order to make it a more visible assets once it demerged.
Thank you.
Let me take the first one, let me take the second one first on the demerger on them, if I may. Look, the business hasn't we haven't had the business for sale. We said we're going to demerge it. That's what we intend to do is to follow through on the demerger. We absolutely think it's got critical size.
You know, it's a one 7,000,000,000 sterling business, made 54,000,000 trading profit last year. So clearly the EBITDA number is sort of north of that. And so yes, we do think it's got it's got critical size. It's a cash generative business, it's got a good I know it's got decent assets. There's no reason that the business shouldn't do well as a standalone business.
In our view. The combination, I've got to say we have looked over the years at almost every possible, every conceivable combination of the business, were they another and that hasn't worked so fine. It has a good future as an independent business. Slightly strange to you this summer, we did find 1 small acquisition. It's a nice little transaction, but it's small.
It isn't going to change the structure of the industry. It just strengthens our business. So, that's the background on the demerger. A lot with regards to me sort of moving on to Kevin, I don't see I see the timing as being illogical. I saw that, the board saw that.
This was the most mutual of mutual agreements. It was just to us the obvious thing and the obvious, you know, the obvious step when we are 100%, you know, when we're 100% North American So I'm delighted to be handing over truly delighted to be handing over to Kevin. I sponsored him and appointed him to years ago to the position that he's currently in, he's done a great job. He's a strong, smart energetic leader of the business that felt entirely, entirely appropriate. What wouldn't have felt appropriate is for me to have relocated to the U.
S. That would clearly have left sort of two people with CEO on their car, in fact, just wouldn't have felt right. So now it felt like a good time from my perspective And I think that was, that was something with which the board entirely agreed, all right?
We can be based in the UK or the land office moving to?
No, he's in Virginia.
Good morning. Sohasni from Goldman Sachs. Just a couple of questions, please. Can you please clarify how the trading has been post full year close August, September? Has it been consistent with the trends that you've seen second half of the year?
And second one, by when can we get an update on the potential new listing structure will it be by ye/ar end in a month's time? Thank you.
I think trading since year end, nothing unusual. So I think if you look, we haven't given specific monthly data. That doesn't really help. But if I said to you, it is bang in line with our budget. So, no dramatic trends there.
And look, on the listing, we just need you saw the things on those charts. One of the things that's been interesting, Mike, as we've dug into this there isn't whole heaps of precedents. There was Invesco in 2007 that's, delisted and relisted. Fine. We need to sort of work through that, but there's just a lot of detailed work to do.
And I think we've been surprised as we've dug in, there aren't there aren't thousands of professionals who know exactly how to do this assessment and what the options are and so it just needs to be worked through. So it is going to take us a number of months to work through, that work, okay?
Thanks. Ayesley Lamann from Canaccord. Just 3 please. First of all, just wonder if you could comment on the kind of market backdrop in the U. S?
Is it still not use of it? Is it still achievable for the market share gains with decent gross margins? Or is it a bit more competitive given flat markets? Secondly, just on the end markets, maybe a bit more color, if you break down the kind private non res side? Any change in trends within those categories?
And similarly, just comment on the resi? And then thirdly, just on the UK comments you just made on track with your budgets, but have you seen any further deterioration, a bit more fragility in the UK market given the kind of political back
Thanks. Let me take the U. K. First and then I'll let John pick up on the U. S.
No, I think Lissam, it's pretty early in the year still. So I don't think we've seen dramatic shift in the UK, it's clearly not getting any easier. But, Mark and the team there are doing a good job around making sure we've got the product set and the right offering to customer. And that right service capability, as John has touched on, making sure that we're absolutely attractive to the customer. But no, the market remains pretty challenging in the UK, but I don't think we've seen a significant shift in the last couple of months any different than we've seen in the last sort of 12 probably.
Yes, look, I mean, the end markets, the competition, I wouldn't say there's a step change or even a very clear trend in the compatibility of the markets. And it is interesting if you went back over several years, competitive intensity, it can become more intensive on a local basis at some point. It's usually it's usually sort of a pinpointed reason specific competitors in a specific local market. And as you know, we don't have any national competition in the core in the core, for example, residential builder market, we don't have national players, we're competing against local players. So no, I don't think we've seen anything sort of more intense on competition and it is essentially looking through the cycle even if you went all the way back to the last downturn, our strategy was to hold our gross margin.
And I think that's served us well because it's quite difficult to rebuild gross margin if you let it go, particularly when you've got distributed responsibility for pricing. So I think that's very important for culturally to maintain the to maintain the gross margins as we touched on in the presentation. In terms of end markets, If you look at new I'll go through new resi improvements existing and then sort of commercial just very quickly. The new resi market actually over the summer months has been a little bit more positive news there, permits and starts up a little bit over summer and completions and new home prices are up 2% new residential revenue if you go to the resettlement or something like that, that's also for about 2% over the last sort of 2 or 3 months. Home Improvement, again, revenues look flat to low growth.
I think the Zelman data is sort of between is about 1% over the last three and six months. JCHS LIRA has come off a little bit and they're forecasting a flattening of the market next year. If you look at the existing home sales, which of course might be an indicator, actually existing home sales have popped back up again. So they had come down from 5,500,000 to about 5 they're back up now at about 5,500,000. And Case Shiller, the August reading was 3.2%, actually plus or minus 3 depending on where you are in the 20 metropolitan areas.
There was only 1 negative when that was minus 0.6, which was Seattle, I think. And so, you know, the existing, you know, the sale of existing properties seems to be Okay. Inventories are still tight. Delinquency rate is still very low. Delinquency rate is the 90 day delinquency rate is dropped to 1.1% last year, which was historically at very low levels.
I think commercial, you saw, Dodge was down a little bit in August, 1.3%. But actually, if you look at the movement in Dodge, this calendar year, it's remained pretty, pretty stable. Billings index again was slightly lower in August, but you know, and that's been lower for a couple of months. So you'd say that resi is probably looking slightly more optimistic commercial, you know, perhaps slightly south of where it's been. But overall, you know, the overall market looks, looks to be reasonably stable.
Amit Mala from Citi. Just a couple of questions for me. The first one on trading in the U. S. Again, was wondering if you could give us some color.
What sort of visibility do you have from the order book? And is there any difference trend that you're seeing in large contract work over the last 6 months? My second question is on the own brand. And as you progress on this journey, was wondering if you could talk a bit about the sort of experience or the feedback that you've had from customers. Are there any product degrees where you would have an intention of significantly increasing your penetration of own brand.
Is that a possibility? And my third question really was on e commerce penetration. Just wondering if you could give us some color. So how has that progressed? And across your submarket subsegments to an extent?
Yes. Thank you. Look, the order book just over $2,000,000,000. So it's not that significant given. What did I say, Mike?
It's not that significant, but it does give us some sort of directional feel for for what's happening. And directional movements in it are they do correlate reasonably well to growth or slowing growth or or even we have contraction. There are no significant trends in large contract work particularly over, over recent months. With one exception in industrial, there is less large project work in industrial now, it's not that big for us. You know, it's sort of, in the 7% or 8% to 8% to 9% of the business, there's a bit less large and industrial tends to be, particularly if they're building new facilities, that can tend to be larger.
Scale work has been a bit less of that. And you saw, I think in our industrial growth rates, industrial grew in the first half at 30%. In the second half, it was down at single digits, low single digit growth. Yeah, that's fine. We make good margins in both of those places but that really strong growth back at the end of 2018 and into the first half of last year was boost by a couple of large contracts.
That's the only area it's made a difference. Owen Brown, look, I mean, now we are we've got a really good dedicated team on owned brands looking consistently at what are the next categories that we should be looking at. Firstly, customer feedback is excellence. It just gives more choice. We really care about going all the way back through the supply chain, which we own, we own the design, we own the procurement, so we've got QA people out in, and out in low cost countries, making sure that these products are properly manufactured in proper facilities and that the quality is there.
And you know, and we and we position them well, I think the most important thing is not just thinking, here's an own brand product we'll put it in our branches and it will sell. Because all of our vendors have got sales people out in our branches, we also have to go out to our branches and convince them that these are great products. They should stop them. They should sell them. This is where they fit in to the whole product architecture you know, which you'll be familiar with from retail, you know, sort of good, better, best or that type of pyramid architecture.
So we do have to put a lot of support behind our brands. Regarding where we go next, it is absolutely incremental on each category. So I wouldn't like to give, give anything away because to some extent you have to do a lot of work with the vendors that are currently there in the space to make sure that they're not threatened by our own brand offerings, during that time. And hence, if you looked at the at the early products to be adopted for own brand, it was things like decorative plumbing, whether there are already dozens and dozens of players and you're not going to be, displacing 1. And if you were to go into another category where there's 2 players with 90% of the market, then that might be a bit more a bit more challenging if that makes sense.
What I would say in terms of progression and the reason that I mentioned it, you know, we grew double the organic growth rate. That is broadly what we've been targeting. Can we grow at just good double digit growth rates in own brand by the addition of new lines, but also by the by additional penetration, in own brands. E Commerce, the important thing on E Commerce has not been just to grow a percentage. We've realized this over the last sort of a couple of years, but the important thing is that customers really use it and like the experience.
And so we spend a huge amount of time building functionality for the customers who are already using e commerce. Rather than this just be, oh, we want a percent that will continue to increase. I think the other thing to say is the most important functionality is things like search functionality is important, but also having really good product data. And we set out over the last 18 months to have the best product data in the industry, and we're on that program by integrating our systems to take vendor's product data, lock stock and barrel into our system and building that link so that we never have to update it again. As soon as the vendor makes a change of their product specification, it flows through to our product, files and we're putting more of those.
Those products were traditionally what we would call behind the wall. So you'd like to get the log on to see and buy those products. Now we're opening that wall up so that it's more publicly available. There's risk in that, because we're making our data available and our data is valuable. But we're pretty sure we want to be the leader in the management of vendor data because that's going to be that's going to be important over the next generation.
So those have been key themes in the movement on e commerce over the last over the last year or so. And then one other in B2C, we are using the B2C asset now more integrated with the showrooms so that there is Historically, if you look at the standalone E business, it was standalone E business. I think more and more that's going to be merged into our other customer facing, the other customer facing parts of the business, which is most obviously showrooms. So we are now using that functionality in the share reads far better. To give you a sense?
Thank you. John,
John Messenger from Redburn, and It's 2 to Mike and 2 to John, please. Mike, can I just ask on the UK, the to give us an idea of what we should think about in the shape going forward? The annual leasing cost that sits in the UK, if we could have a rough idea of what that is relative to the 54 of EBIT And your view on the cash or that you're going to move across are what will likely be required in terms of the firm's infrastructure for the UK business? Second one was just on, and this is playing a bit devil's overkill, but GBP 62,000,000 as a redundancy charge figure is like 4% of last year's EBIT. What is the justification for treating it as an exceptional in that I could argue that it's next year's operational gearing kind of being neutralized and you're taking it early.
So just to understand why that should be treated as exceptionally investors' eyes, third one was for John. You mentioned Blackman didn't happen 5 years ago, and it's sort of probably the only chance we'll have to ask yourself and Gareth. To understand what changed over that 5 year period? Was it your confidence about what you could get out of it? Was it the price Was it the change of ownership at Blackman?
Because it obviously went into that kind of trust structure. What was the kind of changing dynamic there? And final one, coming back to this whole shape of the UK like for like sorry, the U. S. Like for likes, obviously you flagged 13% was the industrial kind of boost first half of last year down to 0 in the second half.
Is that one of the biggest ingredients? So when we are thinking about the shape of 20 20. Yeah. Is it a 1st half? No industrial that annualizes in the second half?
I guess what I'm getting to is Is it 2% half 1, 4%, half 2%. You hope to get 3% for the year as a broad kind of feel as to what you'd be looking for this year in the U. S?
Excellent. Well, thank you for allocating the questions too.
It's our job somewhat easier.
Listen, on the UK, we'll I'm going to duck that question totally because we're working through all the details on the UK, with all the advisers. So we'll give all the details on the UK at the appropriate time, in terms of we need to obviously define the exact parameters of the demerger. It's easy for us to sit here and play the UK. This clearly, we need to make sure that we understand the parameter and give the right financial information out at the right time. So we'll do that in due course.
And I loved your accounting question on why is it exceptional? The very simple answer is, is we have accounting policies, which are stated and clear. It is by size and by nature defined in our accounting policy. That's, those are the rules we follow, those are the rules we set out. And under those rules, a 1,000,000 charge, by size and actually by nature falls into the exceptional category.
I think the good news is at least we've disclosed it very clearly. So, investors can quite rightly form their own view and they can put it where they like. That's not meant to sound rude The I was trying to think of a better phrase. But, but, listen, it's clearly disclosed. It is a big number, but I think it absolutely right.
I think you use the word operational leverage, John, absolutely. It is to get our cost base in the right space. And grow that young talent to come through the Ferguson organization. So it is absolutely in my view a great investment, with our holder funds, albeit separately disclosed. I can't give you that.
Yeah, just on that exception, or do you know it's an interesting thing. It's the first exceptional item in Ferguson Enterprises for 10 years. Every other exceptional that I had the misfortune to have prior to, prior to Mike when I did his job, every other one was somewhere else in the group. And I think, you know, to Mike's point, we absolutely encouraged the team and I think, you know, Kevin and the team's done a great job on this, to look at, is there anything that we should do now to position the business well? And I think to Mike's point, you know, where it goes quite often, it's cash all right?
We're all agreed. It's cash and it's and it goes through. It can't be distributed to shareholders. It's cash But it was an important thing for us because, yeah, I think the net headcount reduction as a result is 500 people. So it's absolutely worth doing.
Blackman, what changed the owner died? U. S. Like for likes, the the I wouldn't get carried away with the industrial. The industrial bit doesn't make that difference.
I think the shape of the year, it's easy to look back and think, well, last year, we had sort of 9% plus growth in the 1st half and 3% ish and second. And therefore, the comps will get easier the comps will mathematically get easier. But I saw there was going to happen to the growth rate. So I think our budgets are more balanced than than that. So yes, I mean, it would be lovely to think there is going to be better growth in the second half, but It is too early in the year for us to get visibility on that at the moment, sir.
Robert Eason from Goodbodies. It's kind of more follow-up questions. Just in terms of what you're thinking about the cost base in the U. S, just to help us, if you should see the chart, I forget the presentation where you benchmark it against like for like growth clearly all the work is coming through in Q4 that annualizes. So how should we think of the quantum of that annualization And is it just we're simple people on the sell side?
Is it simply that you're just trying to offset underlying cost inflation in this slower growth environment? How are you thinking about it? Or is it more than that you want to take out in terms of the cost base? So just a bit more thinking around that. And as the growth has slowed in the U.
S, and the challenging markets in the UK, are you seeing any change in behavior either by yourselves or your competitors in the use of working capital in terms of getting that volume in? And how more watchful or well, I'm sure you always are watchful, but how much his bad debts changing or materializing in the business is materializing in one area, large contractors versus small contractors, just a general kind of conversation, around bad debts?
Sure. So a little more on the cost base. The The cost base, as I say, it's easy to sit here to do the financial modeling. We will get the cost base. We've talked about the bottom line growth being at least as good as the top line growth, okay?
Do need to be careful because we're getting into small numbers. So that mass starts to work against you and therefore don't come at me in any quarter. As I've always said, we don't run the business by quarter or by year end periods. But what is important philosophically is in a very low growth environment, you can deliver a better bottom line growth in your top line. That is really, really important.
There are actually, you know, only back to our simple folk like me and you said yourself, there's only a couple of ways of doing that. One's gross margin and the other one's okay? So we must get our cost base aligned for the market environment that we exist okay. But you've seen most of the, coverage this morning has got growth, you know, 2.5%, 3% for our top line, and therefore, we need to make sure our cost base is managed accordingly. That's what we've set out to do.
Clearly, back to your earlier question, if the markets continue to come off, as they did in the rather large recession, we will act accordingly. Are we planning to do that today? We've got a plan but we're not executing that plan. We expect our markets to grow as we've set out today and therefore we've set out our path to grow in that. I think the other thing to grow as I'll always balance is, if you know, I generally, as the F, you never get beaten up when we miss out on growth opportunities, because you don't know we've missed them.
But internally, it's really, really important to us and our customers to make sure we service our customers when that upturn and that growth comes, okay? So it is always a balance and it is definitely important to invest in the future of the organisation. So you heard us talk about some of the investment in technology. We will invest in technology still. We will continue to invest in training we'll continue to invest in health and safety.
Those are fundamentals of our business. So again, back into our mind on costs, those are investment costs are really important for the longevity of this business, and those are just as important to us to continue to invest in. In terms of the UK market, again, John can comment as well, we have seen a little bit more bad debts. It's quite unpredictable. I would say the last couple of months has been a bit slower.
So slightly odd, back to your earlier question, you might have expected it to pick up, but it is quite unpredictable. We are seeing businesses that particularly the sort of small, medium sized businesses that have been around for years years years with little times actually going quite quickly. Don't get me onto pre packed deals. But there are a number that go quite quickly and a number of going into pre packed deals. So it's one for us to certainly watch, as the economy certainly is difficult in the UK.
Yes. And then with regard to the U. S, in working capital position, there's no change at all in our vigilance or the customers behavior or competitors' behavior in the market. I mean, just to give a sense of, and we are very good managing credit. Very good.
If you think about the million customers that we have to manage for trade credit, our total charge in the US last year was $10,000,000 on 18 1,000,000,000. So our total credit losses were 1,000,000 on 1,000,000,000. In the U S, with no change from the year before when it was also 1,000,000,000. On a slightly lower top line number.
Morning. It's Paul Checketts from Barclays Capital. Two questions, please. The first, you've got that slide on reconfiguration of distribution centers. And in the past, you've talked about ship hubs, market, DCs.
What's the latest with that, please. And then the second is you've also got a new slide on shared infrastructure. Conceptually, how significant would the dis synergies be if you were to separate out any of your verticals? Thanks.
Yeah, distribution centers, we set out a few years ago that we've got sort of 11 distribution centers, which are therefore replenishment of branches across the U S, we have no plans for more distribution centers The market distribution centers are there for final mile fulfillments as and then they also be used for replenishment of local branches. That's the area where we'll see investment over time. The strategy is to move to those. Most of those will be consolidation and facilities in, in specific markets. I think last year, we talked about Denver, for example, which is the consolidation of four sites, there's another one at the moment, which is Phoenix is the consolidation of 3 sites, but they are more in the normal they will be in the normal course of business.
If we've got growth, then we'll, we'll absolutely be adding capacity, but it will be proportionate to that growth pool. So it doesn't and all the numbers are within Mike's CapEx guidance. So that's and that will just happen now, I think, over quite frankly many years on an incremental basis. The shared infrastructure look, I think with regard to blended branches, I think the phrase blended branches it sort of it does what it says in the tin. If you are an HVAC customer, you can come into a planted branch and get a range of products.
And so to me, the issue isn't a question of separation. The issue is really this. If you have a contract who does some plumbing and some HVAC and you want to go into a branch and get all your products, can you come to Ferguson? So we're never going to stop. Never doesn't matter any management change, any board change, we're never going to stop selling HVAC products in America.
You have to get that about Ferguson. We sell plumbing. We sell heating. It's in the name, heating, heating ventilation, the air conditioning. We will never stop selling those products.
Because if a customer comes in, you want to sell them what they what they have. So should you separate out out of those 8 or 9 customer groups you separate out HVAC customers? No. Because it would be bonkers. You will never stop doing it.
Does that that makes sense. So we're not going to separate out HVAC. We're going to carry on selling HVAC because where would you stop? Oh, we'll stop selling taps. Faucets, all right?
You're not in plumbing supplies if you stop selling faucets. Oh, well, we don't like pipe because you know, MRC or somebody sell pipe and we don't like pipe, no, we're going to sell pipe because we're at plumbing, heating, ventilation, air conditioning, we're there to service those customers and those and those contractors. So I think that's how I see our business Now then you could say, well, actually why would you have a standalone branch? The reason for a standalone branch is because there is sufficient scale in that area. Let's say you're in Houston.
And you've just got a massive industrial and not much residential in this particular area of Houston, which if you know Houston well is a whole chunk of it. Then actually having a stand alone industrial branch makes a lot of sense. Why would you put a whole load of residential faucets into a branch which is in an industrial area selling to industrial customers, but isn't much important. Do you see do you see what I mean? But But whether or not we put those industrial products or whether we let industrial customers into our blended branches or into a stand alone branch, we're always going to be selling.
We are always going to be selling plumbing, heating fixtures to industrial customers, valves, fittings, fixings, that the whole works, gaskets, pumps, we're always going to be selling those to industrial customers. We're always going to sell them to commercial customers, we're always going to sell them to residential customers because that's what Ferguson is and that's what we that's what we do. So we're not going to separate those customers out if that makes sense. I think we might have misled people on the chart. That's how we look at the customer needs, the strategic customer needs.
They're not really separate businesses. Although some of them do have standalone branches. Does that make sense?
Thank you, Gregor Kuglitsch from UBS. I'm three questions and there's been many things to answer already. But just on the on the headcount reduction on the U. S, can just be clear, all of that happened in the fourth quarter? There's nothing kind of still coming into the first because I see on the slide that, I think your headcount on a sort of year over year basis organic was down 250 or something like that.
That's question number 1. Question 2 on the UK. And again, on the 4th quarter, it looks like you had a pretty I'm not radioactive or anything like that. There was a pretty significant kick up in in operating margin. So I want to understand what happened there and whether you think that's a sustainable performance And then maybe wrapping up your guidance, I think in your statement this morning, you were talking about good progress on, I guess, operating profit or trading profit, is your thinking that that is a similar, was last year good or was last year better than good, I guess.
And then finally, on the U. S. Listing, obviously, this has been something that you've considered and about this in this kind of forum, I think, for, for, certainly, a number of years. Historically, what has been the key area of that kind of box chart that you gave us in the presentation to help you back from doing what was kind of if you had, or maybe if you pick out sort of 1 to 3 items that you really thought were negative, and therefore, you stayed with the status quo, what were those? I'll go and give this back now.
Can I just get your first question again? But whilst I'm doing that, just so I'm clear on your headcount question. Okay. I think the question on the headcount was, was it all done in the 4th quarter? The actions that we took at the half year were completed.
The voluntary early retirement program that we've talked about was, initiated in July. That'll work through by the end of Q1. So no, for the second one, yes, for the first one. Your question on guidance was, did we think this year was a good year and further progress into this year? Just help me clarify your
question. So
the, that's fine now.
You changed.
The I think in your text, you're talking about another year of good progress. I think consensus is like 2%, in my mind, that's not particularly good. Last year you did 7. I guess the question is to get a little bit more sense what the level of growth you think you can I guess there's a few technical items and maybe you want to go through those that are a tailwind on operating profit?
Yes, well, look, I mean, I think if you look at consensus at the moment, there's 3% or 4% revenue growth in consensus. I think it's important for us if we get 3 or percent revenue growth and Mike touched on our ability to be able to generate profit growth in a lower growth environment. I think that's important, and that's what we should effect of ourselves. If we get top line growth, then we should and I know we're talking about smaller numbers, but we should still be making progress at the at the bottom line. And if the markets are relatively flat, we should be taking market share.
That's what we expect of ourselves done that for some time, we should currently do it. So that's, I think, our sort of view of making progress. If we've got a market at the moment, which is 1% or 2%, flat to 1 to 2 depending on whether it's resi, whether it's commercial or whatever. And we can take a little bit of share. We can do a little bit better than that.
And make sure that we get that down to the bottom line. That is what is reflected today in our budgets, in our plans.
On the UK, I think your question on the UK was does the core performance sort of, do you roll that forward? I've always said, we should look at the all businesses sort of over a period of time. I think we've said for the UK as you think next year versus this year, the markets are flat probably at best in the UK. I think some competitors would say they're getting worse today. Mark and the team clearly continuing take internal actions, but I wouldn't expect heroics out of the UK business.
We have got small acquisition. So I think we'll see some progress in the UK, but it wouldn't be a market, I would be too over excited about in terms of your numbers, getting ahead of themselves right now, we've been through 3 pretty tough years, pretty tough market, good management team, good progress, I'd say sort of more slow and steady rather than revolutionary in the UK.
Greg, your question on, listing and how we looked at this historically. I think there were a couple of things historically. And of course, we were we're busy back then as well. I think at the time we looked at listing, we were absolutely, we were pretty clear and it was certainly pretty strongly advised that but any change to the listing structure in any case was not achievable. That's the first thing.
Historically, Okay. And also, there have been changes to the technology that changed the question about, for example, dual list And now of course, over time, our the proportion of our income coming from North America has just in extra be risen. And actually as it happens, because marks worn out a lot of shoe leather in North America, we've become more US owned as well. So I think those are the things that that have sort of moved over time, Gregor.
Clyde Lewis at Peel Hunt. I've got 2, if I may. Maybe I've missed it, but have you mentioned anywhere how you performed in the MRO business in the U. S. I mean, obviously, it's tucked away in in various of those divisions, but it'd be interesting to get an update as to how Ferguson is performing in that end market.
And the second one I had was on share gains, which John, you referred to it just then, but in a Ferguson as very consistently for as long as I can remember, grown share. In virtually all of its markets very consistently. But the reasons for those share gains, I'm sure, have evolved and will continue to evolve. But as you're leaving now and as you're looking forward and obviously, Mike can and Kevin and Jeff's challenge going forward. How, I suppose do you think that share sort of story is going to, what are the big challenges there for the biggest group?
Is it, is it still service? Is it still product availability? Is it still, you know, the geographic doesn't feel that, you know, has completed the map. I mean, you're not there yet. There's still opportunities there.
But just to sort of hear your, I suppose, fuse as you sort of step out the door, what really is the challenges on that front in particular?
Look, MRO, so the facilities supply business actually pretty well last year, but pleased and growing certainly towards the in the second half of the year grew well. And I think the focus on that business, we decided sort of Kevin, Mike and I decided a year and a half ago, we weren't going to do any more acquisitions until we got the organic growth of that business going really well. We talked some time ago about the College of Ferguson, bringing our own associate through training them really well, getting them on the road. I think that's worked now very well and the business has performed has performed really well in particularly in the second half of last year. I would say it's still a relatively new business, by far, the smallest of the customer groups on there.
And by the way, just why does it make sense about between 40% 50% of the product that we want to sell to those customers are core Ferguson products. Yeah. So getting that right mix of products was absolutely fundamental to the profitability and the margin of that fertility supply business. Yeah. And that's been fundamental to us.
That's one of the reasons why we decided we were going to take a pause on M and A for facilities supply at that time. I think, you know, steady good steady progress, but it's still a we've been at it, what, for 5 years now, 2 little acquisitions, it's a nice little business, but I still want to see we would still want to see years on years on years of really good growth. To make that business, or to make that customer group really very profitable. A lot of the reasons for the share gains I'm afraid they are a little bit what you touched on. I think availability is absolutely fundamental.
And over many years having the distribution centers, that has been a competitive advantage. Distribution centers replenishing branches constantly, that's given a an advantage to our vendors as well, because it's just given better availability of our products throughout the network. And of course, having that service the combination of outside sales within side sales who can really source products as well as price up projects that's been important. I do think going forward now, technology will become more important. And in particular, the tools that we provide to our associates, particularly on that inside sales space because historically, inside sales have apps, they've had a fantastic work ethic and a fantastic service ethic, I think now if we can bring more technology to we can really get good productivity and drive up service levels in terms of the speed it takes us to respond to customers and the access to both our own product and to vendor's product.
I think that's there's definite gold in those hills on the on the technology side. But certainly, I don't think the business model is going to need comprehensive change, but I do see more evolution on the on the technology side. Right. You must be exhausting, Mike, and I'm alright, I can I can carry on, but thank you all very much indeed? Thanks very much for coming.