Good morning everybody and welcome to our Full-Year Results Presentation. You’ve got Mike and I presenting this morning. You’ve got our Chairman, Gareth Davis, he is not presenting, but he is here with us too, and Tessa is with us somewhere in the audience as well. So nice to have some of the non-execs along. Look, from a performance perspective, our strong organic growth of 7.5% last year, that arose from a combination of good market conditions and continued outperformance across North America, particularly in the U.S where we posted organic growth just shy of 10% and we continues to take market share across the business. We are very pleased with our gross margin performance, up 30 basis points over the year and ahead of our expectations. That really reflects two things. Firstly, it reflect our compelling value proposition, but it also reflects the ability of our sales associates to capture a fair share of the value that we add in the pricing to our customers. Costs were in line, so trading profit was up nearly 15% and our cash conversion was good, despite some headwinds from tariffs in the second half. Later on Mike is going to explain the rationale for the rebating of the dividend, which we grew 21%. This does reflect our confidence in the business going forward and our confidence in the long-term growth and profitable growth opportunities in the business. You already know about the substantial capital returns that we made during the year, continuing our policy of returning surplus cash to shareholders and rewarding them for their continuing support of our company. From a corporate perspective, we continue to focus both on management and our financial resources where we are best equipped to win over the long [technical difficulty]. During the year, we successfully completed the exit of the Nordics and we returned the proceeds to shareholders. We've also started to -- the process to sell Wasco in Holland. This is a really good business with excellent management, but we got no route through to market leadership. We can generate better returns in North America. During the year, we also got out of the wholesale business in the U.K. that just generated returns for shareholders which were below our threshold. The most significant progress, though, last year, it isn't in the P&L or the balance sheet, but it is in the continued strategic development of our business. It's that that we’re most proud of and that’s where we are going to spend a little bit of time talking about today. But first, Mike is going to take us through the operating and financial review.

Morning. So 2018 has been another good year for Ferguson, had revenue growth driven by the U.S and Canadian businesses. We delivered revenue of $20.8 billion. Gross margin 30 basis points ahead, as we continue to deliver incremental year-on-year improvement. Operating costs well-controlled and we achieved good flow through in the year. Trading profit just over $1.5 billion, $200 million ahead of the prior year with a trading margin of 7.3%. Headline EPS up 21.4%, net debt at the end of the year touch under $1.1 billion and we’ve increased the dividend by 21%. Getting into some of the detail of that and you can see on Slide 7, revenue growth in the U.S continue to improve through the year. Supported markets, we’ve some inflation in the U.S., but increased during the year. It is about 1% in Q1 growing to about 3.5% in Q4. We presented the U.K on a like-for-like basis on the slide to remove the impact of those branch closures, and the exit of the low margin business that John just touched on, that really helps to provide a better view of the underlying business and you can see on a like-for-like basis therefore in the U.K broadly flat for the year, pretty tough markets, inflation around 3% in the U.K. Canada and Central Europe revenue grew well, slightly lower level of growth in the second half as that laps tougher comps, inflation in Canada and Central Europe around 2%. And as John just mentioned, we initiate the process to sell Wasco, the remaining business in Central Europe just so we’re really clear, given that decision was made after the balance sheet date, those numbers are included in the numbers that I present today, clearly the next set of numbers, the next time I talk to…

Thanks very much, Mike. Now these are the strategic priorities that we’ve set out before we are going to focus on today, particularly, on those strategies which are -- which we are using to generate the best profitable growth in U.S. When I joined the company back in 2010, the Group had more than 50 businesses across 20 countries. Now we are focused on 15 businesses across 3 countries, where we're well-equipped to win and also to make most attractive returns. Upfront on this chart, just a reminder of the markets that we operate in the U.S. This chart shows our nine strategic business units with our estimated market share in each one. We are the market leader in a number of these. Where we aren't the market leader, we've helpfully named them on those charts. You can also see the other large competitors in the space. Those are in that mid blue color with a number of large competitors, that’s any competitor with broadly speaking more than 1% of market share. The message here, there is a lot of gray on this chart. And that’s because we generally operate in very fragmented markets. Why does each of these businesses make sense to us? Well firstly, from the circles on this chart, you can see the extent of the shared infrastructure between those nine business units, leveraging our assets across those business units generate very attractive financial returns. Secondly, just down at the bottom, if you see our other large independent competitors operate across the first six of these businesses. That’s because some of our customers also operate across some of those segments. And if we didn't operate in them, we would be at a competitive disadvantage. Thirdly, all of these markets are attractive to us. We generate strong growth.…

Hi. Howard Seymour from Numis. It's a couple really. I suppose one is partly on the tariffs, which you alluded to the fact that the industrial has been stronger and growing and also price inflation has been strong. [Indiscernible] some of this is a sort of lapping of what we’ve seen on the weakness over the past two years. As you look forward, when do the comps start getting tougher on that? Do you perceive that this is sort of the growth in the industrial, because you alluded the fact that it's actually accelerated, can continue i.e. its underlying growth and similarly on the tariffs with the tariff position, does the price inflation remain at similar levels to where it is at the moment?

Thanks, Howard. On the industrial side, we saw a tick up in the markets in the second half and also growth rates. So our overall industrial growth rate was 20%. If you look where that growth -- I’m sorry, that’s in the standalone industrial branches, which is three quarters of the industrial product that we sell. That growth came really from three areas. There were a couple of larger projects in there worth bottom line $5 million. There has been some decent growth in Texas, which I think we could say it was oil and gas related, that’s probably about a third of that growth, and the rest is more broadly across the industrial customer base. Does that answer your question? Does that? And I think it's not really until the second half this year that we will face, sort of those comps. Go on, sorry your second was on tariffs?

Pricing, because obviously what you’ve seen a price recovery oil related. There was an element of lapping [indiscernible], do you see the price inflation will remain at the sort of levels that you’re seeing at the moment?

More broadly or for industrial?

More broadly, sorry.

Yes, we’ve asked a lot of our suppliers what their intentions are with regarding tariffs. Now actually more modest than you expect, there's still a lot of our product which is manufactured domestically, the large majority of our product is manufactured domestically in the U.S. There are some suppliers that are looking to put up prices higher than usual, but if you look at the -- if you look across the larger vendors, they’re talking sort of 3%, 4%, 5% even when they have quite a lot of imported products. There are quite a few vendors who have no intention of doing anything unusual with pricing. So, Mike, in terms of the overall, do you want to just give a comment on the overall inflation, Mike?

Yes, I mean, nothing -- it was probably behind your question Howard, which is we saw the second half inflation increased and therefore you probably see the harder comps come through in the second half just building on what John said. So does that help?

Yes.

Thanks. Aynsley Lammin from Canaccord, just two, please. Wondering if you could just give a bit more context around the absence of any share buyback or special dividend? Does that just reflect the fact that the pipeline on acquisitions is stronger? Is there an element of caution just where we are in the cycle? Just interested in your thoughts there. And then, secondly, just on cost inflation, maybe the ease of finding kind of drivers and labor inflation rates in the U.S. wonder what your views are of the trends over the next 12 months? Thanks.

Yes, the interest in your phrase of absence of buybacks, we’ve only just finished the last set. I think we’ve absolutely delivered. We’ve got a very clear capital allocation policy. I think your question is probably relating to the net debt EBITDA being at 0.6 at the end of the year, is that correct? Yes, so if you just -- let me share how I think about that. If you add on the acquisitions that we’ve done since the year-end that 0.6 [indiscernible]. I’ve got a good pipeline of acquisitions ahead of ourselves. And of course we always have our busy season of investment in working capital up to the sort of December, January. So I think I would be sat here at the half year talking to you with the net debt EBITDA of one point something, somewhere between 1 and 1.5, that’s sort of how I tend to think of ourselves as being checked today rather than the 0.6 that you might see in the accounts. That’s absolutely within our range. I think also you've heard John talk about, we have got something like $450 million of CapEx guidance investing in the organic part of the business. That’s what I call box number one on our capital allocation. We talked about the dividend already. So we are increasing the dividend and the pipeline looks pretty good. We just talked about that. So I think with all that told, that really says that we always continue to monitor. None of those are mutually exclusive. As a Board, we continue to review, do we have surplus capital? Nothing. We’ve also got a record of demonstrating that when we believe that we do have surplus capital we do get it back on a reasonable prompt basis. So again, I think we…

Gregor Kuglitsch from UBS. Can I just comeback on the acquisitions? I don’t know if it's as simple as dividing roughly the $650 by the $40 million to kind of get us into the multiples that you're paying? I’m probably not quite accurate, but if you can give us may be some color on what kind of multiples you’re paying, I guess, that's on pre-synergy basis, and then how you think over time those multiples evolve as you integrate the bolt-on? That’s question number one. Question number two is, on the flow-through rate, I guess overall you’ve given some color on cost inflation. Obviously, last year was a good year. Any color you would like to provide for the year ahead would be helpful? Obviously, I guess it does depend a little bit on the level of growth as well, especially in the U.S., and I will leave it there. Thanks.

So I will do the first one. You do the second one, good. I think on the acquisitions, they really fall into two categories. There are -- and we're only talking about buying quality businesses. But it is important that we get them integrated and those integration costs, we routinely -- as you know, in the U.S., we’ve always charged those directly to P&L and we get on with this. There was one acquisition in the year which was at a reasonably sizable which was not at that point profitable, but we were very, very positive with that synergies that we were going to generate from that business. Other than that sort of an outlier like that, the multiples haven't really moved very much. We are still paying normal multiples that we paid over several years and we expect to get benefits usually that are buying benefits for bolt-on -- for bolt-ons of a couple of percent on gross margin and then we are more efficient on the back office there. So usually multiples are coming down by sort of 2x -- in a multiple of 2x or 3x earnings within the first 12 months, that's pretty typical. But there's no change really overall on the multiples that we’ve paid for good quality businesses.

In terms of the flow-through, I mean, again, I think we have been consistent that in good markets we would expect the flow-through to be high single-digit, whether that’s 9, 10 or 11, there's no change to that guidance at all. So I think -- and certainly the notes I’ve seen this morning, I think are expecting us to flow-through. It's about 10% in good markets. So no change there.

Morning. This is Charlie Campbell from Liberum. I’ve got three. One of the first one is quite quick, just following on the acquisitions, obviously a step up in activity. Is that because vendors are becoming -- choosing to sell as it were or you were looking harder? Is there an element of that there? And the second question, I suppose, which may be related just thinking about the U.S residential RMI cycle. You’ve told us you’re very confident, the strength of that, but clearly mortgage rates rising and others perhaps less confident. So just wonder where the mortgage rate ties in with confidence on U.S RMI? Then the third question on the U.K. You talked about another $30 million I think of restructuring this year, if I heard right. Just wondering where that is. Is that really further more branch closures? Should we be thinking of that when we’re modeling the U.K going forward?

Yes, thanks. Look, on the M&A we have absolutely been looking hard and working hard and trying to find the acquisitions that we wants to do, that's the key here. So there is part of that -- part of this is just -- what did you say last time? It's like buses. They come along in threes or whatever. There are sometimes even more, but so we’ve absolutely been working hard to find the acquisitions that we wanted to do. First point. There has been a step up in opportunities. There has been a marked step up for example in the industrial space. You'll see we haven't really done a lot in there. We are very selective about what we're pursuing here, very selective. So whilst there is a step up, it's a step up that we absolutely wants to do, we’re in control off. This isn't just people putting their businesses for sale and hey let's buy anything in our space. It needs to fit culturally with our organization. It needs to be a quality business, people need to wants to join. They need to want to be part of the Ferguson story. For example, all of those things are very important to us having the right margins and the capability for us to add value through synergies as well. On the sort of RMI, I think if you look at some of the lead indicators, for example, LIRA, we still see that remaining a pretty positive indicator today. Clearly, if you look back, I remember sort of four or five years ago, we said well, if we are not going to get 10% growth in new build, how is the market going to carry on [indiscernible] whatever else. And -- but I think that we’ve shown that in a market of 1.2 million or 1.3 million new starts in the U.S., we can do very well. So we don't need to see those new starts really stepping up. You can see new starts in the U.S., it's about 70% of our business. Fine, that’s good. Its good business. We like doing it. Its good margin. We can do it well. Absolutely, our customers want the service. But it's not at levels that it was at a decade ago, but prior to the year-end financial crisis. I think the other sort of indicators in an RMI, affordability. To us when you look at the affordability levels, they still seem to be okay, actually close to the long-run average. And so most of those indicators to us still suggest continuing decent demand and certainly they are suggestive of a market which we can continue to press on and do well with. Mike, do you want to cover the …?

Yes, in terms of the U.K., as I said, I would expect all of those P&L and cash cost to be in the first half of the year. That’s where the balance of the program that was announced a couple of years ago. The three main items in that are all public and are being worked on already and it's really three main buckets. One is the rebranding and getting the sites under one brand and in fit the purpose state with the new product range in them. The second one is the closure of the national distribution center up in Leamington Spa and the sale of that land at Leamington Spa. That land is held in assets held for sale. And the third one is the continuing roll out of the IT system. Those are the three main buckets of which we’ve got left to complete by the end of the half year.

Chirag Vadhia, HSBC. Could you talk a little bit more about the investment in the organic expansion that you have, just some details on whether what the $400 million is going into in the inventory types? And then also little bit perhaps on what sort of savings you see from any of the branch closures and where that's being spent into the expansion? Thanks.

Yes. So -- we got the chart with the four specific projects on, that’s $170 million actually of the $400 million. And then there is a fairly normal mix of technology, refurbs, some new for example showrooms and those types of investments. So I don’t think there's anything out of the ordinary. It looks a little bit strange this year because it's sort of a little bit higher, but we were a bit lower last year. So I think we just got -- that is just because one or two of these are a bit lumpy, I’m afraid. If you look at the investments in working capital, just a reminder, our investments in working capital is absolutely proportionate really to the growth. We make incremental improvements, but it's really pretty proportional to the growth in the business. I think going forward, there's a little bit more inventory required for our own brand investment. But from a big sweep of the -- of history and a balance sheet perspective, it won't make any difference to the investment returns.

Thank you. This is Karl Green from Credit Suisse. Just a couple of questions on own brand, following on from that point. Can you indicate how fast it's growing overall including the M&A. And also organically I guess thinking about the penetration is proportionate to the other overall sales. It's probably we haven't run quite hard to keep up with the good growth that the U.S is seeing overall. So just some indications as to how that’s performing, because I’m wondering if it had any obvious or notable impact on the gross profit margin or indeed the EBITDA margin? And then following on for that, just to your comment about most of the own brand manufacturing or contract manufacturing taking place in the U.S., are you minded at all to consider perhaps cheap M&A opportunity overseas where there might be a discount available for the uncertainty around tariffs? Thank you.

Yes. It's a great point about the growth. We did struggle last year actually to stay up with the growth, but we were putting resources in throughout last year for this initiative, which really if you look it just takes time frankly to do all of this specification, the design work to go out there source product through all the QA, all the importation stuff that you need. And then actually interesting, one of the things that we've learned along the way is you can't just land this product into a distribution center and think it's going to sell itself. Our vendors travel around all of our branches constantly trying to excite our salespeople and our branch people to sell their products. And we have to do the same slightly strangely, with our own product, just telling people, oh, here's a product please go and sell it. No, actually they need to believe this is a good quality product with a good pricing point and it's suitable for this application in the circumstances you got to go and provide all the support that’s needed to sell that into the business. But what I will tell you is my challenge to all of our teams is that I want us to get own brand growth at double the rate of growth of the business. We are not there yet, all right. Now what that would actually tell you if you work the math back, with the acquisitions we’ve just done, I think we’re at 8%, Mike. So, it would tell you that we were gently drift up from 8% to 9% to 10%, 1% broadly a year I think it's the way it sort of broadly would work. I would love to see that. We didn't achieve that last year, but…

Clyde Lewis at Peel Hunt. Three, if I may. One, I think in Canada you mentioned that you’ve joined a buying group, which surprise me a little bit for some time, I heard a major, major, major materials' merchant joining a buying group. Could you just maybe explain the thinking behind that obviously what the savings might be as well? The second was on facility supply in the U.S. Obviously, low market share, huge market, can you maybe just sort of say a little bit more about the strategy of what you’re hoping to do to try and grow that market share? And the last one was the U.K. You’ve announced obviously the plans to sell Wasco. U.K looks increasingly like again, lost soul, and has it got future within the new Ferguson?

You can help me out there. I wish I would had the inflation work. Yes, look, OCTO, it was very interesting. It came along as an opportunity. We talk to them over quite a considerable period of time. Their members originally had similar market share to us. We actually went through a clean room due diligence process. So there's no data leakage. So we got a third-party professional services firm to do all that. We like the people there doing some sensible things and we felt this was an eminently sensible thing to do. We do maintain if we can negotiate better, we still maintain the terms, say, for example, we maintain our own payment terms, for example and of course if there is unbundling because we are going through a central distribution center rather than to branch than we retain those benefits as well, but it just made sense. Interestingly, it wasn't the only time in the group that we joined the buying group, because we did it in France a number of years ago when we own the business in France, in the South which we did for a while as well just pooling our -- essentially pooling our buying resources with other people. So it makes sense. It gives us economic advantage and we will see how it goes. We don't have a lifetime's commitment to this. Our commitment is really -- and their commitment as well is, yes, it works whilst it works. And today it works. So I’m very pleased with the team for being imaginative and also for implementing, because it clearly had a favorable impact on our business last year. Facility supply business did really well actually last year, very pleased. So last year when we sat here, I said the focus at…

Thanks. John Messenger from Redburn. Three, if I could. First, could you just give us a bit of flavor on how build.com has done in overall terms, John. And are you happy with kind of a 13% organic growth? It kind of -- it's not that different to the rest of the division, I guess is. Just to understand if that’s something that you’re comfortable with and for that business unit. And if I’m right, does it need to get bigger and broader quicker, I guess is my question, particularly given the costs of pay-per-view and the rest of it goes with that business unit. So -- and is its profitability broadly in line at margin with the rest of the U.S or is it better or worse? Second one was just on obviously the M&A. We can see from the numbers that your kind of pre-tax return on what you’re spending '17 in the first full-year it was about 11% pre-tax return. Now historically you've shot for a 15% number. Clearly we’re in a low inflation, a low rate world. Is double-digit or 11%, 12%, the right kind of number in terms of hurdle that you’re using in reality today? And the final one, just its domicile and its listing, and sorry to come back to it, but on the domicile point, given the tax changes, would it makes sense to re-domicile back to the U.K or jump and go straight to the U.S? And secondly on the listing, is the Board at least going to actually be in a position maybe to move quicker and that obviously politics is changing? Brexit risks are there, but if the lunatics take over the asylum, shouldn't you be ready or maybe move in advance of that, given what we heard about over the last couple of weeks. So, if you wait too long, is there not a logic here rather than any of giving 10% to the share base away for example to share to the employees or to the government in reality, should you not move and make preparations?

Right. Yes, got of those. Yes, Build, let's start with Build. Look, am I pleased with 13% growth? I would like more growth. It's not my nature to be either patient or tolerance as you know. So, I would like a stronger growth here, but here is the thing and Mike, myself, Kevin, the rest of the team we absolutely we want to grow a -- we've always said it is profitable growth that we want. We don’t want the other type, all right. Today I think we have a decent -- we’ve a good business, which is differentiated from the other operators in that space. And it had good double-digit growth for a long time, but it is important that we maintain the profitability from that business, okay. You asked a question about its margin, actually gross margins are slightly lower than the business, not a long way off, but they’re slightly lower. Net margins are also slightly low, but not a long way off, okay. So I think it's important for us that we have the same -- we apply the same principles to build.com and the other B2C businesses that we have for the rest of the business. I don't think it needs to be. I don’t think it needs to do something dramatic scale wise to be a sensible business for us. If you go back to why we acquired the business and why we’ve grown it since, we did that because it's synergistic with the business to use our distribution centers, use our access to products. We use some of our back office too. So that’s -- it does not need to be the size of Amazon or Wayfair or whatever else. And it definitely doesn’t need to burn that type of expense. The key to us is to be differentiated I think because otherwise if you're just bidding on search terms forever, those search terms get more expensive over time. We've seen that, we know that. And so we need to be smarter than that. Remember, we do have call centers, so -- and we do also have quite a lot of repeat custom from trade buyers in that space. I think both of those things are cause for optimism that we can continue to make a good return from that part of the business. Does that cover off your build.com question, John? Is that okay? Yes. M&A, Mike, do you want cover the hurdle rate or …?

So you were going to give me lunatics and asylum.

Actually, yes. [Multiple speakers].

The metrics for us haven't changed at all, John. Again, we do have, I think, John mentioned, we do have some first year integration costs on some of the acquisitions, not all. It tends to depend on the type of acquisition. But I mean, we always say sort of 15% second year, the ones that we have recently done I would expect those to absolutely deliver that, if not some more. So no change to the metrics or our thinking, or the multiples going back to the last -- to the previous question, either.

When you think of the -- the way we try I always think of the 15% is as we talk before about the turns of synergies that you get. If we get three turns of synergies, 15% is six -- just over 6x, you get three turns of synergies. You can sort of get back to the types of multiples that are normal for good quality businesses. Does that make sense?

[Indiscernible].

Well, you do the domicile.

Let me do the domicile and you can do the lunatics. The tax domicile, again just going back on Switzerland, because I’m sure most of you aren't plugged into Swiss parliament and tax. So last Friday, the government passed legislation on a whole range of Swiss tax measures that they would like to enact. In Switzerland they have a 100 days for the public to get enough signatures, if they want to take it to a public vote. That public vote if they get enough signatures, will go to a public vote in May and they will either accept or reject it. If it doesn’t go to a public vote, then the Act will pass. As with most tax legislation, it's unclear when it's likely to be enacted which is why I’ve guided to FY '20. It certainly won't come in before our FY '20 year, is our belief. It could be later. And I think that will add about 3% to our tax rate as we go into the out years. I think as before, John, there's really no change, but clearly its higher up the list. And we continue to keep our tax domicile sort of front and center to see where else provides us with stability both politically and economically. Switzerland has been very good to us and clearly we will continue to put that higher at the list given the recent changes. So I think the U.S is unlikely to work and I think there are other jurisdictions that we will continue to look at, okay.

Go on. And then the lunatics and the asylum, were you talking about the Birmingham or the Manchester mob which …

[Indiscernible] more and more in terms of obviously shareholding and ownership and the price which [indiscernible].

Look, John, I’m not sure that anything which has happened sort of politically in the recent past should color our view or will color our view over the short-term. I definitely wouldn’t like to be making headlines on that one. Any others? One other, and then we will pack up.

Ami Galla from Citi. Just two questions from me. First one a clarification on your guidance on the operating profit drop through in the U.S. Is this the underlying flow through that you’re talking about, would this include the acquisitions that you've made and which also a follow-up question is your underlying drop through actually much higher than the 10% level that we are talking about. My second question is rally on the competitive side in the U.S. I mean we’ve always talked about how the market is fragmented, but the competition is also quite tough. Home Depot rolling out next day delivery across 35 metropolitan cities, it grabs headlines to what extent does this impact your business on an ongoing basis?

Yes, so on the flow through, we always generally guide overall. Of course, that’s never quite right because it also depends on the types of acquisitions that we do. You’ve heard us do some own brand, but clearly if we do some bolt-on classic bricks and mortar, it does slightly change, because on some you tend to have more first-year costs than others. So I think overall it is the best guidance we tend to think off around 10% both last year and the year ahead of us. You do the second?

Yes, I mean, the -- you saw on the chart, of the nine business units there, Home Depot was really competing with the residential trade column on the left, which is our counter business, okay? That’s where they compete and then a little bit in the -- on the B2C side, which is one on the far right. Not really in areas like Waterworks or HVAC, they're rather specialists. I think with all of our competitors -- and by the way Home Depot has always been -- Home Depot and Lowe's are there as -- as competitors in that bar and have been for a generation, okay? So there's nothing new or significantly changing about that. We have to absolutely stay ahead of the game. Ours -- we have to offer the best service. If our service isn't as good as Home Depots, we deserve to die at their hands. So the only way -- we don't have a right to exist every day, we don’t have any contracted business, we haven't got any contractual protection for that business every day whether somebody goes right to Home Depot or left the Ferguson depends on us and our service. But I would say with things like delivery, we already do a phenomenal amount of our delivery is either next day or same day. We do a lot of same day deliveries, okay? There are lots -- I don’t know whether you saw the spider chart last time we put up, there are lots of attributes of our service that are not very easily replicatable. Just a little example. When I go to our branches, our customers have almost always got a mobile number of our associates, someone who can go and open the branch out of hours. I don’t see that…