US Strategy

Investor & Analyst Day
Washington Tues 23 Oct
Washington,
Agenda
0800
US Strategy and overview
Frank Roach
Branch operations
Kevin Murphy
0945
Coffee
1000
Adjacent businesses and product strategy
Steve Petock
Marketing, online, customer service
Jim Feltman
1130
T
Transfer
f to
t Front
F t Royal
R
l DC
Al B
Byrd
d
1500
Tour of Chantilly, branch showroom
Darcy Curran
1630
Close
Take Q&A after each presentation
2
US St
Strategy
t
& Overview
O
i
Frank Roach,
Roach CEO
Agenda
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Structure of the US business
Market trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
2
Strategic Priorities
Market Share
Gross Margin
– Gross margin improvement
– World-class customer service
– Best associates
– Strategic growth
Improve Productivity
Profitable
Growth
Improve Returns
– Capital discipline / return on
investment
– Operational leverage
Drive consolidation
consolidation, gain share
share, multi
multi-channels
channels and new segments,
segments improve leverage
3
Ferguson
g
Organizational
g
Structure
Frank Roach
CEO
Steve Petock
SVP Business
Development
Steve
Supporting
Petock
SVP
Functional
Business
Development
Departments
Kevin Murphy
COO
Dave Keltner
CFO
Al Byrd
SVP Supply Chain
Jim F
Ji
Feltman
lt
SVP Marketing
Steve Roznowski
SVP HR
Scott Russell
SVP Sourcing
John Wilcox
SVP IT
Terry Hall
General Counsel
Denise Brown
Planning/
Alignment
4
Historic Sales by Business Group
Fiscal
Year
Business Unit
Plumbing Start-up 1953
Sales
('000)
1954
$
FY 12 Sales
('000)
465 $
5,983,000
WW
((Pompano
p
WW - Oct 1986))
1987
$
15,000
,
$
HVAC
(LBS Supply - Jan 1988)
1989
$
4,000
$
Industrial (Integ - 1988)
1989
$
11,500
$
1,205,100
FFF
(J&G Products - Nov 1996)
1997
$
2,600
$
319,100
B2C
(Improvement Direct - Feb 2007)
2007
$
56,000
$
324,700
5
1,480,000
,
,
730,100
Dancing in all the spaces
ƒ Having conflicting strategies is a strategy
ƒ Perform well during the present with an eye on the future
ƒ Embrace
E b
th
the iinconsistencies
i t
i
ƒ Anticipating disruptive technologies ensures sustainability
ƒ Creating disruptive technologies ensures performance
excellence
6
5-year Financial Results
Revenue ($m)
ROIC %
$
$12,000 25.0%
$10,000 20.0%
$8,000 15.0%
$6,000 10.0%
$4,000 5.0%
$2,000 $‐
0.0%
FY08
FY09
FY10
FY11
FY12
FY08
Trading Profit ($m) FY09
FY10
FY11
FY12
Working Capital as a % of Sales
$1,000.0 $
,
18%
$800.0 17%
$600.0 16%
$400.0 15%
$200.0 $‐
FY08
FY09
FY10
FY11
14%
FY12
FY08
7
FY09
FY10
FY11
FY12
Sales Contribution by Business Unit
3%
3%
7%
Blended Branches
Waterworks
12%
Industrial
HVAC
60%
15%
Fire & Fabrication
B2C
8
Blended Branches – Market Share by State
Top 10 Markets by Size
$m
WA
ME
MT
New York
2,100
MA
L Angeles
Los
A
l
1 050
1,050
RI
Chicago
920
CT
Dallas
870
NJ
Houston
780
Washington
720
Philadelphia
580
Atlanta
550
Boston
550
Miami
530
ND
MN
OR
VT
ID
NH
WI
SD
NY
MI
WY
PA
IA
NV
NE
IL
UT
OH
IN
DE
WV
CO
KS
CA
VA
MO
KY
NC
TN
AZ
OK
NM
AR
DC
SC
MS
TX
MD
AL
GA
0.0% to 7.0%
LA
7 0% to 13.5%
7.0%
13 5%
AK
13.5% to 18.5%
FL
HI
18.5% to 25.0%
25.0% +
9
Agenda
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Structure of the US business
Market trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
10
Market Conditions and Forecast
ƒ Market stabilization
ƒ
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− Varies by geography
M d t recovery in
Modest
i residential
id ti l plumbing
l bi
Investment in energy sector
Sl
Slower
population
l ti growth
th
“Shadow” inventory
“Fiscal cliff”
11
Key Indicators
Top Ferguson Economic Indicators
1. Housing Starts (Ths.)
Yr/Yr
Growth
29.1%
Mo/Mo
Growth
2.3%
2. Unemployment Rate
Recent
Trend
Ã
Yr/Yr
Change
850
8.4
750
8.2
650
-1.0 point
Mo/Mo
Recent
-0.2 points
Change
Trend
{
8.0
Mar‐12
Apr‐12
May‐12
Jun‐12
Jul‐12
Aug‐12
Mar‐12
3. Consumer Confidence Index
Yr/Yr
Growth
23.9
points
Mo/Mo
Growth
9.0 points
Recent
Trend
Apr‐12
May‐12
Jun‐12
Jul‐12
Aug‐12
4. Non-Residential Construction Put-in-Place (($Mil))
{
80
70
60
50
Yr/Yr
Growth
Mo/Mo
Growth
2.2%
-1.3%
Recent
Trend
$580,000 Ä
$570,000 $560 000
$560,000 Apr‐12
May‐12
Jun‐12
Jul‐12
Aug‐12
Sep‐12
$550,000 Mar‐12
5. Existing Single-family Home Sales (Ths.)
Yr/Yr
Growth
9 3%
9.3%
Mo/Mo
Growth
7 8%
7.8%
Recent
Trend
Ã
May‐12
Jun‐12
Jul‐12
Aug‐12
6. 30-yr Mortgage Rates
Yr/Yr
Change
100.0
5,000 4.00 50.0
4,500 3.50 4,000 0.0
Apr‐12
-0.67
0.67
points
Mo/Mo
Change
0.05
points
May 12
May‐12
Jun 12
Jun‐12
Recent
Trend
Ä
3.00 Mar12
Mar‐12
12
Mar‐12
Mar
Apr12
Apr‐12
12
Apr‐12
Apr
May‐12
May
12
Jun‐12
Jun
12
Jul‐12
Jul
12
Aug‐12
Aug
12
Mar 12
Mar‐12
12
Apr 12
Apr‐12
Jul 12
Jul‐12
Aug 12
Aug‐12
Market Share Gains – Last 3 Years
30%
25%
20%
FY10
15%
FY11
FY12
10%
5%
0%
Blended
B2C
FFF
Industrial
13
Waterworks
HVAC
And Nearly all People Under age 45
Expect to buy in the Future
Percent of Respondents Who E
Expect
pect to B
Buy a Home at Some Point in the F
Future
t re
100
90
80
70
60
50
40
30
20
10
0
Under 25
25 to 34
35 to 44
45 to 54
55 to 64
Source: Drew and Herbert, 2012. Based on Fannie Mae National Housing Survey 2010-2012.
14
Agenda
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Structure of the US business
Market Trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel Optimization
B dE
Brand
Experience
i
Acquisitions
15
Our Business
B2B
• Ferguson Online
B2C
• Ferguson.com
Customer
Relationship
Management
• Build.com
Build com
Our Business
Brand Identity
• Brand Awareness
Channel
Optimization
• Differentiated Customer
Experience
E
i
• Structure
‐ Customer Intelligence
• Process
‐ Customer
Segmentation
16
Inflection Points
ƒ We have had many in our history
− Training program
− Showrooms
Sh
− Diversification
• Business, geographic and people
−
−
−
−
−
Horizon 2000
Distribution Centers
Business Groups
Technology
Business Model
17
Our Business
Traditional
Manufacturer
Distribution
Center
B2B
Traditional
Ferguson ONLINE
Branch
Channels
Current
Enablers
Manufacturer
Customer
Relationship
M
Management
t
Distribution
Center
Traditional
Branch
Channels
B2C
Channel
Optimization
Ferguson.com,
Build.com
Contractor
Overarching
Brand Identity
Contractor
Customer
Customer
18
Agenda
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Structure of the US business
Market trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
19
Channels of eBusiness
eBusiness
Consumer
Business
B2B
12 – 18 Months
B2C
10% off R
Revenue
20
Ferguson Online
3.9 M
selfself
service
events
66,000
customers
131,000
quotes,
bids,
orders
21
Build.com Revenue Growth
Revenue ($m's)
350
300
250
200
150
100
50
0
Organic
Acquired
FY08
FY09
FY10
FY11
22
FY12
Ferguson + Build.com + PED
IR500 Ranking
R ki
Ferguson Online Sales Æ #60
Total B2B eBusiness Æ #41
((ahead of Home Depot
p at #42))
Total B2C Sales Æ #46
(ahead of Lowe’s
Lowe s at #47)
Total eBusiness Sales Æ #26
(ahead of Overstock
Overstock.com
com at #27)
#1 – Amazon
#15 – Grainger
23
Agenda
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Structure of the US business
Market trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
24
Customer Relationship Management
ƒ Business model
ƒ Matrix
ƒ Sales
S l managementt
− Share of wallet
− New customers
25
Customer Segmentation Analysis
Future Road Map
Customers
Needs
Analysis
Customer
Profitability
Model
Who?
Customer
Insights,
Marketing &
Branch
information
In
development
Plumber
What are your
needs?
Example
- Tract
Plumber
I buy low
price, cheap,
white, chrome
Share of
Wallet
Customer
Segmentation
Channel
Optimization
Developed
Market
Research
All GMs,
managers and
sales managers
All GMs,
managers and
sales managers
Are you
profitable for
th
the
company?
How much
business do
we do
d with
ith
you?
Break down
customers by
cost,
t profitability
fit bilit
& opportunity
Place customers in
the appropriate
channel
h
l
Low
profitability in
current cost
model
50%
Share of
wallet model
Decrease cost
to serve Eliminate
Outside/inside
local delivery
Recommendations
FOL
DC Directs
26
Agenda
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Structure of the U
U.S.
S business
Market Trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
27
Channel Optimization Analysis Future Activity
Order Channel/
Fulfillment
Channel
Touch Point
Customer
Type by
business
Counter
Showroom
Online and
Ecommerce
Contact
Center
Inside
sales
Property
Mgt
Mgt.
customer
No
No
Yes
Yes
No
Short
term
Yes
Yes
Yes
Yes
Small
Plumber
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
The
Cleveland
project
No
No
Yes
Yes
No
Yes
No
No
Yes
Yes
Bath &
Kit h
Kitchen
dealer
No
No
Yes
Yes
No
No
Sometimes
Sometimes
Yes
Yes
Consumer
Yes
Yes
Yes
Yes
No
No
Sometimes
Yes
Yes
Yes
28
Outside
Sales
Local Branch
Truck
Delivery
Local Pickup
(CPU)
DC
Direct
Vendor
Direct
Contact Centers
ƒ Contact Centers become a wayy we do business
−
−
−
−
−
−
Leveraging labor without adding headcount in the branches
Counter – sweet 16 focus
Lead management and nurturing
Commercial water heaters
Appliance warranties
Subject
S
bject matter experts
e perts (Hydronics,
(H dronics HVAC,
HVAC Plbg,
Plbg Waterworks,
Water orks
Industrial, etc)
29
Channel Optimization
ƒ Bricks and Mortar
ƒ Contact Center
ƒ CRM
ƒ eCommerce
ƒ Direct
(manufacturer or DC)
ƒ Manufacturer
Virtual
30
New Business Model
Business
Channel
Optimization
Facilities
Maintenance
Business
• Bricks and Mortar
• Direct
• eCommerce
• Contact Center
- Customer to Center
- Associate to Center
• Sales Optimization
31
Business
The Existing Customer Experience
Fort Myers
Warehouse
Counter
Showroom
Branch 1
Outside Sales
Inside Sales
Customer
Warehouse
Counter
Warehouse
W h
Counter
C
t
Showroom
Outside Sales
Inside Sales
Showroom
Sh
Outside
Sales
O t id S
l
Inside Sales
Branch 2
Branch 3
FOL
32
New Customer Experience Pilot
Counter
Outside Sales
Counter
Showroom
Branch 1
Counter
Cisco Telephony
Showroom
Receptionist
Customer
Branch 2
Counter
Showroom
Branch 3
Super
Branch
Customer Facing
FOL
33
Agenda
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ƒ
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Structure of the US business
Market trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
34
The Experience
ƒ In the absence of service
service, customers buy “on
on price
price”
ƒ Service is about an experience
ƒ The showroom “experience” shows the value of a
‘bricks and mortar’ model
ƒ If experience exists, ‘bricks and mortar’ and
eCommerce can coexist
Ferguson.com and Build.com
35
Two Brand Strategies
Consumer Brand
Trade Brand
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pp
to
Trusted supplier
professional contractor
Unparalleled breadth of
products offered “Same Day,
p
y,
Next Day”
Form lifetime relationships
with our customers
Passion for Performance
“Outhustle” the other guy
M lti h
Multi-channel
l
Terry Bradshaw is the official
spokesperson
ƒ
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ƒ
36
Product experts with an
unrivaled knowledge
Latest products displayed in
luxurious environments
Multi-sensory, multi-channel
experience
“Kate” represents
p
our
consumer brand in national
and local advertising
Agenda
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Structure of the U
U.S.
S business
Market trends
B i
Business
model
d l
eBusiness
C t
Customer
Relationship
R l ti
hi M
Managementt
Channel optimization
B d experience
Brand
i
Acquisitions
37
Acquisitions
ƒ Acquisitions reflecting business and geographic diversity
ƒ Bolt-on
− All businesses
− Strong brand
ƒ Aggressive integration
− Ferguson person onsite
− Expansion plans begin immediately
− Align governance, health & safety, product integrity,
benefits package
− IT Integration
− Name change – low priority
38
2012-13 Acquisitions
39
Questions