SEC Info - Ferguson plc - ‘20-F’ for 7/31/21

i 203

i 192

i 673

i 168

i 1,236

Exchange rate adjustment

i 5

i 1

i 4

i —

i 10

Acquisitions

i 13

i 34

i 101

i 3

i 151

Adjustment to fair value on prior year acquisitions

i —

i 4

i 9

i 2

i 15

Additions

i 87

i —

i 87

Disposals and transfers

( i 2)

i —

( i 2)

i 306

i 231

i 787

i 173

i 1,497

Exchange rate adjustment

i 3

i —

i 3

i —

i 6

Acquisitions

i —

i 17

i 132

i 15

i 164

Additions

i 72

i —

i 72

Disposals and transfers

( i 10)

i —

( i 10)

Reclassification as held for sale

( i 66)

( i 18)

( i 65)

( i 1)

( i 150)

i 305

i 230

i 857

i 187

i 1,579

Acquired intangible assets

Software

Trade
names and
brands

Customer
relationships

Other

Total

Accumulated amortization and impairment losses

i 136

i 95

i 469

i 113

i 813

Exchange rate adjustment

i 2

i 1

i 3

i —

i 6

Amortization charge for the year

i 35

i 28

i 85

i 17

i 165

Disposals

( i 8)

i —

( i 8)

i 165

i 124

i 557

i 130

i 976

Exchange rate adjustment

i 2

i —

i 2

i —

i 4

Amortization charge for the year

i 39

i 28

i 91

i 15

i 173

Disposals and transfers

( i 12)

i —

( i 12)

Reclassification as held for sale

( i 38)

( i 11)

( i 58)

( i 1)

( i 108)

i 156

i 141

i 592

i 144

i 1,033

Net book value at July 31, 2021

i 149

i 89

i 265

i 43

i 546

Net book value at July 31, 2020

i 141

i 107

i 230

i 43

i 521

At July 31, 2021, customer relationships net book value includes $ i 69 million (2020: $ i 80 million) in relation to the acquisition of Jones Stephens which had a remaining amortization period of i seven years (2020: i eight years).

F-28

The amortization charge for the year includes $ i 5 million (2020: $ i 22 million) in respect of discontinued operations of which $ i 2 million relates to software (2020: $ i 6 million).

12— i Right of use assets and leases

Movements in right of use assets for the years ended July 31, 2021 were as follows:

Land and
buildings

Plant and
machinery

Total right of
use assets

Net book value at July 31, 2019

i —

Adjustment on adoption of IFRS 16

i 940

i 280

i 1,220

Net book value at August 1, 2019

i 940

i 280

i 1,220

Exchange rate adjustment

i 8

i —

i 8

Acquisitions

i 28

i 2

i 30

Additions

i 54

i 61

i 115

Disposals and remeasurements

i 19

( i 3)

i 16

Depreciation charge for the year

( i 191)

( i 77)

( i 268)

Impairment charge for the year

( i 9)

( i 1)

( i 10)

Net book value at July 31, 2020

i 849

i 262

i 1,111

Exchange rate adjustments

i 7

i 1

i 8

Acquisitions

i 12

i —

i 12

Additions

i 45

i 49

i 94

Disposals and remeasurements

i 66

( i 16)

i 50

Depreciation charge for the year

( i 181)

( i 73)

( i 254)

Reclassification as held for sale

( i 108)

( i 18)

( i 126)

Net book value at July 31, 2021

i 690

i 205

i 895

The depreciation charge for the year includes $ i 13 million (2020: $ i 35 million) and the impairment charge for the year ended July 31, 2020 includes $ i 2 million in respect of discontinued operations.

The Group’s land and building leases include leases for branches, distribution centers and offices. Leases in the USA and Canada often include one or more options to extend the lease term and some of the Group’s leases include options to terminate early. Certain leases include variable lease payments that are linked to a consumer price index or market rate. The Group’s land and building leases have a weighted average remaining lease term at July 31, 2021 of i 5.3 years (2020: i 5.9 years).

The Group’s plant and machinery leases include leases for fleet vehicles, trucks and company cars. These leases have a weighted average remaining lease term at July 31, 2021 of i 4.3 years (2020: i 4.5 years).

F-29

The maturity of lease liabilities at July 31, 2021 was as follows:


	2021	2020
	$m	$m
Due in less than one year	i 298	i 325
Due in one to two years	i 283	i 326
Due in two to three years	i 219	i 282
Due in three to four years	i 156	i 211
Due in four to five years	i 99	i 146
Due in over five years	i 148	i 218
Total undiscounted lease payments	i 1,203	i 1,508
Effect of discounting	( i 113)	( i 153)
Lease liabilities	i 1,090	i 1,355
Current lease liabilities	i 263	i 281
Non-current lease liabilities	i 827	i 1,074
Lease liabilities	i 1,090	i 1,355

At July 31, 2021 the Group was committed to future undiscounted lease payments $ i nil million (2020: $ i nil million) relating to short term leases.

Amounts charged/(credited) to the Group income statement during the year were as follows:


	2021	2020
	$m	$m
Depreciation of right of use assets	i 241	i 233
Impairment of right of use assets	i —	i 8
Short term lease expense	i 1	i 10
Low-value lease expense	i 15	i 16
Sublease income	( i 2)	( i 1)
Charged to operating costs	i 255	i 266
Charged to finance costs	i 44	i 49
Total amount charged to the Group income statement	i 299	i 315

F-30

13— i Property, plant and equipment

Land and buildings

Freehold

Finance
leases

Leasehold
improvements

Plant and
machinery

Other
equipment

Total

Cost

i 1,184

i 1

i 498

i 679

i 219

i 2,581

Adjustments on adoption of IFRS 16

i —

( i 1)

i —

( i 2)

( i 13)

( i 16)

i 1,184

i —

i 498

i 677

i 206

i 2,565

Exchange rate adjustment

i 5

—

i 5

i 8

i 4

i 22

Acquisitions

i 15

—

i —

i 4

i —

i 19

Additions

i 127

—

i 11

i 70

i 6

i 214

Disposals and transfers

i 2

—

( i 17)

( i 40)

( i 26)

( i 81)

Reclassification as held for sale

( i 30)

—

i —

( i 1)

i —

( i 31)

i 1,303

—

i 497

i 718

i 190

i 2,708

Exchange rate adjustment

i 3

—

i 3

i 4

i 2

i 12

Acquisitions

i 8

—

i 1

i 11

Additions

i 79

—

i 23

i 63

i 9

i 174

Disposals and transfers

( i 4)

—

( i 27)

( i 26)

( i 19)

( i 76)

Reclassification as held for sale

( i 70)

—

( i 74)

( i 119)

( i 40)

( i 303)

i 1,319

—

i 423

i 641

i 143

i 2,526

Accumulated depreciation and impairment losses

i 278

i —

i 338

i 475

i 141

i 1,232

Adjustments on adoption of IFRS 16

i —

( i 1)

( i 9)

( i 10)

i 278

i —

i 338

i 474

i 132

i 1,222

Exchange rate adjustment

i 1

—

i 3

i 6

i 3

i 13

Depreciation charge for the year

i 36

—

i 34

i 62

i 22

i 154

Impairment charge for the year

i 1

—

i 2

i —

i 5

Disposals

i —

—

( i 13)

( i 36)

( i 19)

( i 68)

Reclassification as held for sale

( i 7)

—

i —

( i 7)

i 309

—

i 364

i 508

i 138

i 1,319

Exchange rate adjustment

i 1

—

i 2

i 1

i 6

Depreciation charge for the year

i 36

—

i 30

i 56

i 14

i 136

Disposals and transfers

( i 1)

—

( i 21)

( i 31)

( i 6)

( i 59)

Reclassification as held for sale

( i 18)

—

( i 45)

( i 88)

( i 30)

( i 181)

i 327

—

i 330

i 447

i 117

i 1,221

Net book value at July 31, 2021

i 992

—

i 93

i 194

i 26

i 1,305

Net book value at July 31, 2020

i 994

—

i 133

i 210

i 52

i 1,389

The depreciation charge for the year includes $ i 6 million (2020: $ i 19 million) and the impairment charge for the year ended July 31, 2020 includes $ i 1 million in respect of discontinued operations.

F-31

14—Deferred tax assets and liabilities

Deferred tax assets and liabilities, which are offset where the Group has a legally enforceable right to do so, are shown in the balance sheet after offset as follows:


	2021	2020
	$m	$m
Deferred tax assets	i 303	i 216
Deferred tax liabilities	i —	( i 26)
	i 303	i 190

The following are the major deferred tax assets and liabilities recognized by the Group and movements thereon during the current and prior reporting year:

Goodwill
and
intangible
assets

Share-
based
payments

Property,
plant and
equipment

Right of
use
assets

Lease
liabilities

Retirement
benefit
obligations

Inventory

Tax Method Changes

Tax
losses

Trade
and
other
payables

Other

Total

( i 74)

i 25

i 31

i —

i 40

( i 114)

i —

i 88

i 40

i 72

i 108

Adjustment on adoption of IFRS 16

i —

( i 298)

i 372

i —

( i 5)

i —

i 69

At August 1, 2019

( i 74)

i 25

i 31

( i 298)

i 372

i 40

( i 114)

i —

i 88

i 35

i 72

i 177

Credit/(charge) to income

i 3

( i 2)

( i 14)

i 27

( i 34)

i 1

i 5

i —

i 11

( i 13)

( i 29)

Credit to other comprehensive income

i —

i 44

i —

i 44

Credit to equity

i —

i 5

i —

i 5

Acquisitions

( i 12)

i —

i 1

( i 4)

i 4

i —

( i 11)

Exchange rate adjustment

i —

i 4

i —

( i 1)

i —

i 1

i —

i 4

( i 83)

i 28

i 22

( i 275)

i 342

i 84

( i 109)

i —

i 100

i 22

i 59

i 190

Credit/(charge) to income

i 3

i 4

( i 5)

i 26

( i 42)

( i 4)

( i 19)

i 98

i 20

i 60

i 20

i 161

Charge to other comprehensive income

i —

( i 19)

i —

( i 19)

Credit to equity

i —

i 4

i —

i 4

Acquisitions

( i 16)

i —

i 1

i —

i 5

i —

( i 10)

Transfers to held for sale

i 6

( i 1)

( i 17)

i 24

( i 25)

i —

( i 17)

i —

i 1

( i 29)

Transfers between categories

i —

i 195

( i 195)

i —

Exchange rate adjustment

i —

i 5

i —

i 1

i —

i 6

( i 90)

i 35

i 5

( i 225)

i 275

i 62

i 68

( i 97)

i 108

i 82

i 80

i 303

Legislation has been enacted in the UK to increase the standard rate of UK corporation tax from 19 percent to 25 percent with effect from April 2023. Accordingly, the UK deferred tax assets and liabilities have been calculated based on a tax rate which materially reflects the rate for the period in which the deferred tax assets and liabilities are expected to reverse.

Net deferred tax assets have been recognized on the basis that sufficient taxable profits are forecast to be available in the future to enable them to be utilized.

In addition, the Group has unrecognized gross tax losses totaling $ i 404 million (2020: $ i 369 million) that have not been recognized on the basis that their future economic benefit is uncertain. These losses have no expiry date and relate predominantly to capital losses.

No deferred tax liability has been recognized in respect of taxable temporary differences associated with unremitted earnings from the Group’s subsidiary undertakings. However, tax may arise on $ i 551 million (2020: $ i 442 million) of temporary differences but the Group is in a position to control the timing of their reversal and it is probable that such differences will not reverse in the foreseeable future.

F-32

15— i Inventories


	2021	2020
	$m	$m
Goods purchased for resale	i 3,607	i 3,089
Inventory provisions	( i 181)	( i 209)
Net inventories	i 3,426	i 2,880

16— i Trade and other receivables


	2021	2020
	$m	$m
Current
Trade receivables	i 2,803	i 2,604
Less: provision for expected credit losses	( i 17)	( i 36)
Net trade receivables	i 2,786	i 2,568
Other receivables	i 146	i 139
Prepayments	i 399	i 335
	i 3,331	i 3,042
Non-current
Other receivables	i 428	i 377

Included in prepayments is $ i 344 million (2020: $ i 289 million) due in relation to supplier rebates where there is no right of offset against trade payable balances.

Trade receivables have been aged with respect to the payment terms specified in the terms and conditions established with customers.

The loss allowance for trade receivables by aging category is as follows:

Amounts
not yet due

Less than
six months
past due

More than
six months
past due

Total

Expected credit loss rate

i 0.3

i 0.5

i 100

Gross trade receivables

i 1,820

i 977

i 6

i 2,803

Lifetime expected credit losses

( i 6)

( i 5)

( i 6)

( i 17)

Net trade receivables

i 1,814

i 972

i —

i 2,786

Amounts
not yet due

Less than
six months
past due

More than
six months
past due

Total

Expected credit loss rate

i 0.6

i 1.1

i 100

Gross trade receivables

i 1,836

i 751

i 17

i 2,604

Lifetime expected credit losses

( i 11)

( i 8)

( i 17)

( i 36)

Net trade receivables

i 1,825

i 743

i —

i 2,568

No contracts contain a significant financing component. Payment from customers is typically due within 30 to 60 days.

The contractual amount outstanding on trade receivables that were written off during the year and that are subject to enforcement activity was $ i 9 million (2020: $ i 12 million).

F-33

17— i Cash and cash equivalents


	2021	2020
	$m	$m
Cash and cash equivalents	i 1,335	i 2,115

Included in the balance at July 31, 2021 is an amount of $ i 36 million (2020: $ i 248 million) which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within bank overdrafts (note 19). These amounts are subject to a master netting arrangement.

At July 31, 2021, cash and cash equivalents included $ i 95 million (2020: $ i 93 million) which is used to collateralize letters of credit on behalf of Ferguson Insurance Limited.

18— i Trade and other payables


	2021	2020
	$m	$m
Current
Trade payables	i 3,234	i 2,855
Tax and social security	i 92	i 114
Other payables	i 104	i 115
Accruals and deferred income	i 592	i 507
	i 4,022	i 3,591
Non-current
Other payables	i 342	i 338

Trade payables are stated net of $ i 55 million (2020: $ i 50 million) due from suppliers with respect to supplier rebates where an agreement exists that allows these to be net settled.

19— i Borrowings

2021

2020

Current

Non-
current

Total

Current

Non-
current

Total

Bank overdrafts

i 183

i —

i 183

i 248

i —

i 248

Senior unsecured loan notes

i —

i 2,528

i 283

i 2,635

i 2,918

Total borrowings

i 183

i 2,528

i 2,711

i 531

i 2,635

i 3,166

At July 31, 2021 total 144A Bond debt was $ i 1,350 million (2020: $ i 1,350 million) which is held at par value.

The carrying value of the Private Placement Notes of $ i 1,178 million comprises a par value of $ i 1,155 million and a fair value adjustment of $ i 23 million from the application of hedge accounting (2020: $ i 1,568 million, $ i 1,530 million and $ i 38 million respectively).

The Group applies fair value hedge accounting to debt of $ i 355 million (2020: $ i 355 million), swapping fixed interest rates into floating interest rates using a series of interest rate swaps.

Included in bank overdrafts at July 31, 2021 is an amount of $ i 36 million (2020: $ i 248 million) which is part of the Group’s cash pooling arrangements where there is an equal and opposite balance included within cash and cash equivalents (note 17). These amounts are subject to a master netting arrangement.

F-34

In April 2020, Ferguson Finance Plc was approved as an eligible issuer under the Covid Corporate Financing Facility (“CCFF”), all commercial paper issued under the CCFF was fully repaid in June 2020 and as a result there are no balances recognized in the financial statements in the current or prior year. The Group did not utilize the funds that were previously drawn down under the facility and Ferguson Finance Plc’s CCFF eligibility expired in October 2020. There are no unfulfilled conditions or contingencies associated with the facility.

No bank loans were secured against trade receivables and the trade receivables facility of $ i i 600 / million was undrawn at July 31, 2021 and July 31, 2020.

There have been no significant changes during the year to the Group’s policies on accounting for, valuing and managing the risk of financial instruments. These policies are summarized in note 1.

Non-current loans are repayable as follows:


	2021	2020
	$m	$m
Due in one to two years	i 250	i —
Due in two to three years	i 55	i 250
Due in three to four years	i 150	i 150
Due in four to five years	i 400	i 150
Due in over five years	i 1,673	i 2,085
Total	i 2,528	i 2,635

20— i Financial instruments and financial risk management

Financial instruments by measurement basis

i i

The carrying value of financial instruments by category as defined by IFRS 9 “Financial Instruments” is as follows:


	2021	2020(2)
	$m	$m
Financial assets
Financial assets at fair value through profit and loss	i 353	i 307
Financial assets at fair value through other comprehensive income	i 18	i 12
Financial assets at amortized cost	i 3,372	i 3,114

Financial liabilities
Financial liabilities at fair value through profit and loss	i 328	i 265
Financial liabilities at amortized cost	i 7,026	i 7,474

/ /

Financial instruments in the category “fair value through profit and loss” and “fair value through other comprehensive income” are measured in the balance sheet at fair value. Fair value measurements can be classified in the following hierarchy:

•Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

•Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2).

•Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The Group’s derivatives relate principally to interest rate swaps to manage its exposure to interest rate movements on its borrowings. They are measured at fair value through profit and loss using forward interest curves which are level 2 inputs. The current element of derivative financial assets is $ i 5 million (2020: $ i 11 million) and the non-current element is $ i 16 million (2020: $ i 28 million). Total net derivative financial instruments is an asset of $ i 21 million (2020: $ i 39 million). No transfers between levels occurred during the current or prior year.

F-35

The Group’s executive deferred compensation plan comprises a financial asset of $ i 332 million (2020: $ i 268 million) which is measured at fair value through profit and loss using level 1 inputs and a financial liability of $ i 328 million (2020: $ i 265 million) which is measured at fair value through profit and loss using level 2 inputs. The fair value of the liability is calculated with reference to the fair value of the associated asset. The financial asset is all classified as non-current. The current element of the financial liability is $ i 31 million (2020: $ i 13 million) and the non-current element is $ i 297 million (2020: $ i 252 million). No transfers between levels occurred during the current or prior year.

The Group has made the irrevocable election to designate its investments in equity instruments as financial assets at fair value through other comprehensive income as this presentation is more representative of the nature of the Group’s investments. The fair value of the investments in the current year are measured using market derived valuation methods which utilize level 3 unobservable inputs compared to the prior year which utilized level 2 inputs. The investments are classified as non-current financial assets in the balance sheet. No dividends were received from these investments in the current and prior year.

The Group’s other financial instruments are measured at amortized cost. Other receivables include an amount of $ i 64 million (2020: $ i 71 million) which has been discounted at a rate of i 1.8 percent (2020: i 1.0 percent) due to the long term nature of the receivable. Other current assets and liabilities are either of short maturity or bear floating rate interest and their fair values approximate to book values. The only non-current financial assets or liabilities for which fair value does not approximate to book value are the Private Placement Notes, which had a book value of $ i 1,178 million (2020: $ i 1,568 million) and a fair value (level 2) of $ i 1,273 million (2020: $ i 1,671 million), and the 144A Bonds which had a book value of $ i 1,350 million (2020: $ i 1,350 million) and a fair value (level 1) of $ i 1,538 million (2020: $ i 1,488 million).

Disclosure of offsetting arrangements

The financial instruments which have been offset in the financial statements are disclosed below:

Notes

Gross
balances(1)

Offset
amounts(2)

Financial
statements(3)

Cash
pooling
amounts(4)

Net
total(5)

Financial assets

Non-current assets

Derivative financial assets

i 16

i —

i 16

i —

i 16

Current assets

Derivative financial assets

i 5

i —

i 5

i —

i 5

Cash and cash equivalents

i 1,335

i —

i 1,335

( i 36)

i 1,299

i 1,356

i —

i 1,356

( i 36)

i 1,320

Financial liabilities

Current liabilities

Borrowings

i 183

i —

i 183

( i 36)

i 147

Non-current liabilities

Borrowings

i 2,528

i —

i 2,528

i —

i 2,528

i 2,711

i —

i 2,711

( i 36)

i 2,675

Total excluding lease liabilities

( i 1,355)

i —

( i 1,355)

i —

( i 1,355)

F-36

Notes

Gross
balances(1)

Offset
amounts(2)

Financial
statements(3)

Cash
pooling
amounts(4)

Net
total(5)

Financial assets

Non-current assets

Derivative financial assets

i 28

i —

i 28

i —

i 28

Current assets

Derivative financial assets

i 19

( i 8)

i 11

i —

i 11

Cash and cash equivalents

i 2,115

i —

i 2,115

( i 248)

i 1,867

i 2,162

( i 8)

i 2,154

( i 248)

i 1,906

Notes

Gross
balances(1)

Offset
amounts(2)

Financial
statements(3)

Cash
pooling
amounts(4)

Net
total(5)

Financial liabilities

Current liabilities

Derivative financial liabilities

i 8

( i 8)

i —

Borrowings

i 531

i —

i 531

( i 248)

i 283

Non-current liabilities

Borrowings

i 2,635

i —

i 2,635

i —

i 2,635

i 3,174

( i 8)

i 3,166

( i 248)

i 2,918

Total excluding lease liabilities

( i 1,012)

i —

( i 1,012)

i —

( i 1,012)

(1)The gross amounts of the recognized financial assets and liabilities under a master netting agreement, or similar arrangement.

(2)The amounts offset in accordance with the criteria in IAS 32.

(3)The net amounts presented in the Group balance sheet.

(4)The amounts subject to a master netting agreement, or similar arrangement, not included in (3).

(5)The net amount after deducting the amounts in (4) from the amounts in (3).

Risk management policies

The Group is exposed to market risks arising from its international operations and the financial instruments which fund them. The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk and liquidity risk. The Group has well-defined policies for the management of these risks which have been consistently applied during the financial years ended July 31, 2021 and July 31, 2020. By the nature of its business, the Group also has trade credit and commodity price exposures, the management of which is delegated to the operating businesses. There has been no change since the previous year in the major financial risks faced by the Group.

Policies for managing each of these risks are regularly reviewed and are summarized below. When the Group enters into derivative transactions (principally interest rate swaps and foreign exchange contracts), the purpose of such transactions is to hedge certain interest rate and currency risks arising from the Group’s operations and its sources of finance. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments or speculative transactions be undertaken.

Capital structure and risk management

The capital structure of the Group consists of derivative financial assets/(liabilities), cash and cash equivalents, borrowings, and equity of the Group (comprising share capital, share premium and reserves). To assess the appropriateness of its capital structure based on current and forecast trading, the Group’s principal measure of financial gearing is the ratio of net debt to adjusted EBITDA. The Group aims to operate with investment grade credit metrics and keep this ratio within one to two times. Of the Group’s borrowing facilities, only the U.S. Private Placement debt contains a financial covenant limiting the ratio of net debt to adjusted EBITDA to i 3.5:1. All other borrowing facilities and 144A Bond debt do not contain financial covenants.

F-37

The Group’s sources of funding currently comprise cash flows generated from operations, equity contributed by shareholders and borrowings from banks and other financial institutions. In order to maintain or adjust the capital structure, the Group may pay a special dividend, return capital to shareholders, repurchase its own shares, issue new shares or sell assets to reduce debt.

Credit risk

The Group provides sales on credit terms to most of its customers. There is an associated risk that customers may not be able to pay outstanding balances. At July 31, 2021, the maximum exposure to credit risk was $ i 2,786 million (2020: $ i 2,568 million).

Each of the Group’s businesses have established procedures in place to review and collect outstanding receivables. Significant outstanding and overdue balances are regularly reviewed and resulting actions are put in place on a timely basis. All of the major businesses use professional and dedicated credit teams, in some cases field-based. Appropriate provisions are made for debts that may be impaired on a timely basis. Concentration of credit risk in trade receivables is limited as the Group’s customer base is large and unrelated. Accordingly, the Group considers that there is no further credit risk provision required above the current provision for expected credit losses. The aging of trade receivables is detailed in note 16.

The Group has cash balances deposited for short periods with financial institutions and enters into certain contracts (such as interest rate swaps) which entitle the Group to receive future cash flows from financial institutions. These transactions give rise to credit risk on amounts due from counterparties with a maximum exposure of $ i 1,163 million (2020: $ i 1,873 million). This risk is managed by setting credit and settlement limits for a panel of approved counterparties. The limits are approved by the Treasury Committee and ratings are monitored regularly.

Liquidity risk

The Group maintains a policy of ensuring sufficient borrowing headroom to finance all investment and capital expenditure included in its strategic plan, with an additional contingent safety margin.

The group has estimated its anticipated contractual cash outflows (excluding interest income and income from derivatives), including interest payable in respect of its borrowings (excluding bank overdrafts) and lease liabilities, on an undiscounted basis. The principal assumptions are that floating rate interest is calculated using the prevailing interest rate at the balance sheet date and cash flows in foreign currency are translated using spot rates at the balance sheet date. These cash flows can be analyzed by maturity as follows:

2021

2020

Trade
and
other
payables

Debt
including
lease
liabilities

Interest
on
debt
including
lease
liabilities

Total

Trade
and
other
payables

Debt
including
lease
liabilities

Interest
on
debt
including
lease
liabilities

Total

Due in less than one year

i 3,188

i 263

i 130

i 3,581

i 2,889

i 561

i 148

i 3,598

Due in one to two years

i 31

i 507

i 116

i 654

i 34

i 291

i 131

i 456

Due in two to three years

i 25

i 257

i 103

i 385

i 20

i 507

i 117

i 644

Due in three to four years

i 18

i 295

i 93

i 406

i 15

i 345

i 103

i 463

Due in four to five years

i 19

i 491

i 79

i 589

i 14

i 286

i 92

i 392

Due in over five years

i 244

i 1,782

i 207

i 2,233

i 211

i 2,245

i 285

i 2,741

Total

i 3,525

i 3,595

i 728

i 7,848

i 3,183

i 4,235

i 876

i 8,294

F-38

The Group relies on continued access to funding in order to meet its operating obligations, to support the growth of the business and to make acquisitions when opportunities arise. Its sources of funding include cash flows generated by operations and borrowings from banks and other financial institutions. The Group holds a $ i 1,100 million (2020: $ i 1,100 million) revolving credit facility that matures in March 2026, a $ i 500 million bilateral facility that matures in March 2022 (2020: $ i 500 million), and a $ i 600 million (2020: $ i 600 million) securitization facility that matures in May 2024. This facility is secured against the assets of Ferguson Receivables, LLC, a wholly owned subsidiary of Ferguson Enterprises, LLC. The assets of Ferguson Receivables, LLC can only be used to settle the obligations of Ferguson Receivables, LLC and creditors of Ferguson Receivables, LLC have no recourse to the general credit of Ferguson plc or that of other Group subsidiaries. All facilities were undrawn at July 31, 2021 and July 31, 2020.

The maturity profile of the Group’s undrawn facilities is as follows:


	2021	2020
	$m	$m
Less than one year	i 500	i 500
Between one and two years	i —	i 600
Between two and three years	i 600	i —
Between three and four years	i —	i —
Between four and five years	i 1,100	i 1,100
After five years	i —	i —
Total	i 2,200	i 2,200

At July 31, 2021, the Group has total available facilities, excluding bank overdrafts, of $ i 4,728 million (2020: $ i 5,118 million), of which $ i 2,528 million is drawn (note 19) and $ i 2,200 million is undrawn (2020: $ i 2,918 million and $ i 2,200 million, respectively). The Group does not have any debt factoring or supply chain financing arrangements.

Foreign currency risk

The Group has significant overseas businesses whose revenues are mainly denominated in the currencies of the countries in which the operations are located. Approximately i 94 percent (2020: i 95 percent and 2019: i 93 percent) of the Group’s revenue is in U.S. dollars. Within each country it operates, the Group does not have significant transactional foreign currency cash flow exposures. However, those that do arise may be hedged with either forward contracts or currency options. The Group does not normally hedge profit translation exposure since such hedges have only a temporary effect.

The Group’s policy is to adjust the currencies in which its derivative financial assets/(liabilities), cash and cash equivalents and borrowings, are denominated materially to match the currencies in which its trading profit is generated. The net effect of currency translation was to increase revenue by $ i 60 million (2020: decrease by $ i 25 million) and the net effect on trading profit was $ i nil (2020: $ i nil). These currency effects primarily reflect a movement of the average U.S. dollar exchange rate against Canadian dollars.

Derivative financial assets/(liabilities), cash and cash equivalents and borrowings by currency were as follows:

Derivatives

Cash and
borrowings

Total

Derivatives

Cash and
borrowings

Total

U.S. dollars

i 23

( i 1,640)

( i 1,617)

i 39

( i 1,186)

( i 1,147)

Pounds sterling

( i 1)

i 90

i 89

i —

( i 38)

Other currencies

( i 1)

i 174

i 173

i —

i 173

Total

i 21

( i 1,376)

( i 1,355)

i 39

( i 1,051)

( i 1,012)

F-39

Net investment hedging

Exchange differences arising from the translation of the net investment in foreign operations are recognized in the statement of comprehensive income and accumulated in the translation reserve. Gains and losses on those hedging instruments designated as hedges of the net investments in foreign operations are recognized in equity in the statement of comprehensive income and accumulated in the translation reserve to the extent that the hedging relationship is effective.

The Group has net financial liabilities denominated in foreign currencies which have been designated as hedges of the net investment in its overseas subsidiaries. The principal value of those financial liabilities designated as hedges at the balance sheet date was $ i 187 million (2020: $ i 368 million and 2019: $ i 327 million). The loss on translation of those financial instruments into U.S. dollars of $ i 31 million (2020: $ i 31 million and 2019: $ i 36 million gain) has been taken to the statement of comprehensive income. There was no hedge ineffectiveness in the year.

Interest rate risk

At July 31, 2021, i 85 percent (2020: i 83 percent) of borrowings (excluding bank overdrafts) were at fixed rates. The Group borrows in the desired currencies principally at rates determined by reference to short term benchmark rates applicable to the relevant currency or market, such as LIBOR. Rates which reset at least every 12 months are regarded as floating rates and the Group then, if appropriate, considers interest rate swaps to generate the desired interest rate profile.

The Group reviews deposits and borrowings by currency at Treasury Committee and Board meetings. The Treasury Committee gives prior approval to any variations from floating rate arrangements.

The interest rate profile of the Group’s derivative financial assets/(liabilities), cash and cash equivalents and borrowings, including the effect of interest rate swaps is set out below:

2021

2020

Floating

Fixed

Total

Floating

Fixed

Total

U.S. dollars

i 533

( i 2,150)

( i 1,617)

i 1,284

( i 2,431)

( i 1,147)

Pounds sterling

i 89

i —

i 89

( i 38)

i —

( i 38)

Other currencies

i 173

i —

i 173

i —

i 173

Total

i 795

( i 2,150)

( i 1,355)

i 1,419

( i 2,431)

( i 1,012)

The Group’s weighted average cost of debt is i 4.5 percent. The Group holds issued fixed rate borrowings at July 31, 2021 of $ i 2,505 million comprising 144A Bonds of $ i 1,350 million and Private Placement Notes of $ i 1,155 million (2020: $ i 2,786 million, $ i 1,350 million and $ i 1,436 million respectively) and these carried a weighted average interest rate of i 3.8 percent fixed for a weighted average duration of i 6.6 years (2020: i 3.7 percent for i 7.0 years). The Group holds interest rate swap contracts comprising fixed interest receivable on $ i 355 million of notional principal. These are designated as a fair value hedge against $ i 355 million of Private Placement Notes swapping fixed interest for floating. These contracts expire between November 2023 and November 2026 and the fixed interest rates range between i 3.3 percent and i 3.5 percent. At July 31, 2021, there were $ i nil floating rate borrowings, excluding overdrafts. At July 31, 2020, floating rate borrowings, excluding overdrafts, had a weighted average interest rate of i 1.7 percent.

Monitoring interest rate and foreign currency risk

The Group monitors its interest rate and foreign currency risk by reviewing the effect on financial instruments over various periods of a range of possible changes in interest rates and exchange rates. The financial impact for reasonable approximation of possible changes in interest rates and exchange rates are as follows. The Group has estimated that an increase of one percent in the principal floating interest rates to which it is exposed would result in a credit to the income statement of $ i 8 million (2020: $ i 14 million). The Group has estimated that a weakening of the U.S. dollar by i 10 percent against financial instruments denominated in a foreign currency in which the Group does business would result in a charge to the translation reserve of $ i 7 million (2020: $ i 52 million). The Group does not consider that there is a useful way of quantifying the Group’s exposure to any of the macroeconomic variables that might affect the collectability of receivables or the prices of commodities.

F-40

21— i Provisions

Environmental
and legal

Ferguson
Insurance

Restructuring

Property
provisions

Other
provisions

Total

i 82

i 77

i 40

i 15

i 51

i 265

Adjustment on adoption of IFRS 16

i —

( i 14)

i 14

( i 1)

i 82

i 77

i 26

i 29

i 50

i 264

Utilized in the year

( i 4)

( i 20)

( i 27)

( i 1)

( i 4)

( i 56)

Changes in discount rate

i 6

i —

i 1

i —

i 7

(Credit)/charge for the year

( i 1)

i 18

i 22

i 1

( i 10)

i 30

Acquisition of businesses

i 2

i —

i 2

Exchange rate adjustment

i 1

i 3

i 2

i 8

i 86

i 76

i 22

i 33

i 38

i 255

Utilized in the year

( i 4)

( i 19)

( i 8)

( i 1)

( i 3)

( i 35)

Changes in discount rate

( i 5)

i —

( i 5)

Charge/(credit) for the year

i 15

i 13

( i 1)

i —

i 3

i 30

Reclassified as held for sale

( i 8)

i —

( i 10)

( i 33)

( i 2)

( i 53)

Exchange rate adjustment

i —

i 1

i 3

i 84

i 70

i 4

i —

i 37

i 195

Provisions have been analyzed between current and non-current as follows:

Environmental
and legal

Ferguson
Insurance

Restructuring

Property
provisions

Other
provisions

Total

Current

i 20

i 2

i —

i 30

i 72

Non-current

i 64

i 50

i 2

i —

i 7

i 123

Total provisions

i 84

i 70

i 4

i —

i 37

i 195

Environmental
and legal

Ferguson
Insurance

Restructuring

Property
provisions

Other
provisions

Total

Current

i 10

i 5

i 10

i 8

i 20

i 53

Non-current

i 76

i 71

i 12

i 25

i 18

i 202

Total provisions

i 86

i 76

i 22

i 33

i 38

i 255

The environmental and legal provision includes $ i 64 million (2020: $ i 72 million) for the estimated liability for asbestos litigation on a discounted basis using a long term discount rate of i 1.8 percent (2020: i 1.0 percent). This amount has been actuarially determined as at July 31, 2021 based on advice from independent professional advisers. The Group has insurance that covers asbestos litigation payments and settlements and based on a review of the insurance carriers and policies in place, the amount of performing insurance cover significantly exceeds the expected future claims. On that basis, it has been determined it is virtually certain the insurance will be recoverable and accordingly an insurance receivable of $ i 64 million (2020: $ i 71 million) has been recorded in other receivables. No material profit or cash flow impact is therefore expected to arise in the foreseeable future in respect of asbestos claims against the Group. Due to the nature of these provisions, the timing of any settlements is uncertain.

Ferguson Insurance provisions represent an estimate, based on historical experience, of the ultimate cost of settling outstanding claims and claims incurred but not reported on certain risks retained by the Group (principally USA casualty and global property damage). Due to the nature of these provisions, the timing of any settlements is uncertain.

Restructuring provisions include branch closure costs. The weighted average maturity of these obligations is approximately i two years.

F-41

Other provisions include warranty costs relating to businesses disposed of and product warranty provisions. The weighted average maturity of these obligations is approximately i 1.5 years.

22— i Retirement benefit obligations

(i)Long-term benefit plans provided by the Group

The principal UK defined benefit plan is the Wolseley Group Retirement Benefits Plan which provides benefits based on final pensionable salaries. The assets are held in separate trustee administered funds. The Group contribution rate is calculated on the Projected Unit Credit Method and agreed with an independent consulting actuary. The plan was closed to new entrants in 2009, it was closed to future service accrual in December 2013, when it was replaced by a defined contribution plan, and during October 2016, it was closed for future non-inflationary salary accrual.

In 2017, the Group secured a buy-in insurance policy with Pension Insurance Corporation for the UK defined benefit plan. This policy covered all of the benefits provided by the plan to pensioner members at the time. The insurance asset is valued as exactly equal to the insured liabilities. The deferred members of the plan at the time were not covered by this policy.

In 2019, the Group offered some deferred members of the UK defined benefit plan an enhanced transfer value to settle their benefits accrued under the plan.

In 2021, prior to the disposal of the UK business, Wolseley UK Limited, the UK defined benefit plan was transferred to Ferguson UK Holdings Limited.

The last triennial valuation for the UK defined benefit pension plan was done as at April 2019 and the deficit reduction funding payments agreed with the trustees as a result of this have been paid. The next triennial valuation is due in April 2022.

The principal plans operated for USA employees are defined contribution plans, which are established in accordance with USA 401k rules. Companies contribute to both employee compensation deferral and profit sharing plans.

In Canada, defined benefit plans and a defined contribution plan are operated. Most of the Canadian defined benefit plans are funded. The contribution rate is calculated on the Projected Unit Credit Method as agreed with independent consulting actuaries.

The Group operates a number of smaller defined benefit and defined contribution plans providing pensions or other long term benefits such as long service or termination awards.

Investment policy

The Group’s investment strategy for its funded post-employment plans is decided locally and, if relevant, by the trustees of the plan and takes account of the relevant statutory requirements. The Group’s objective for the investment strategy is to achieve a target rate of return in excess of the increase in the liabilities, while taking an acceptable amount of investment risk relative to the liabilities. This objective is implemented by using specific allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return.

For the UK plan, the buy-in insurance policy represents approximately i 28 percent of the plan assets. For the remaining assets, the strategy is to invest in such a way that the expected cash flows broadly match a high proportion of the plan’s expected liability cash flows by investing in predominately income-generating asset classes. The investment strategy is subject to regular review by the trustees of the plan in consultation with the Company. For the non-UK plans, the investment strategy is to invest predominantly in equities and bonds.

Investment risk

The present value of the UK defined benefit plan liability is calculated using a discount rate determined by reference to high quality corporate bond yields; if the actual return on plan assets is below this rate, it will decrease a net surplus or increase a net pension liability. Currently, the plan is predominately invested in fixed income debt instruments such as corporate and government bonds. Due to the long-term nature of the plan liabilities and the maturity of the plan, the trustees of the pension plan consider the investment allocation appropriate to provide protection against the inflation and interest risk inherent in the plan’s underlying liabilities.

F-42

Interest risk

A decrease in the bond interest rate will increase the UK plan liability and this will be partially offset by an increase in the value of the plan’s debt investments.

Longevity risk

The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of the UK plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

(ii) i Financial impact of plans

As disclosed in the Group balance sheet

2021

2020

Non-current asset

i 108

i —

Non-current liability

( i 12)

( i 61)

Net asset/(liability)

i 96

( i 61)

2021

2020

Analysis of Group balance sheet net asset/(liability)

Non-UK

Total

Non-UK

Total

Fair value of plan assets

i 2,175

i 129

i 2,304

i 2,012

i 110

i 2,122

Present value of defined benefit obligations

( i 2,067)

( i 141)

( i 2,208)

( i 2,039)

( i 144)

( i 2,183)

Net asset/(liability)

i 108

( i 12)

i 96

( i 27)

( i 34)

( i 61)

Analysis of total expense recognized in the Group income statement

2021

2020

2019

Administrative costs

i 3

i 2

Settlement losses, past service costs and administrative costs

i —

i 9

Charged to operating costs (note 9)

i 3

i 11

Charged/(credited) to finance costs (note 4)

i 2

( i 3)

( i 5)

Total expense recognized in the Group income statement

i 5

i —

i 6

Expected employer contributions to the defined benefit plans for the year ending July 31, 2022 are $ i 2 million.

The remeasurement of the defined benefit net asset is included in the Group statement of comprehensive income.

Analysis of amount recognized in the Group statement of comprehensive income

2021

2020

2019

The return on plan assets (excluding amounts included in net interest expense)

i 34

i 96

i 134

Actuarial gain/(loss) arising from changes in demographic assumptions

i 22

( i 62)

i 38

Actuarial gain/(loss) arising from changes in financial assumptions

i 20

( i 211)

( i 210)

Actuarial gain/(loss) arising from experience adjustments

i 31

( i 58)

i 2

Remeasurement of retirement benefit plans

i 107

( i 235)

( i 36)

Tax (charge)/credit

( i 19)

i 44

i 6

Total amount recognized in the Group statement of comprehensive income

i 88

( i 191)

( i 30)

The cumulative amount of actuarial losses recognized in the Group statement of comprehensive income is $ i 652 million (2020: $ i 759 million and 2019: $ i 524 million).

F-43

The fair value of plan assets is as follows:

2021

2020

Non-UK

Total

Non-UK

Total

On August 1

i 2,012

i 110

i 2,122

i 1,788

i 116

i 1,904

Interest income

i 31

i 3

i 34

i 39

i 3

i 42

Employers’ contributions

i 55

i 1

i 56

i 15

i —

i 15

Benefit payments

( i 68)

( i 9)

( i 77)

( i 64)

( i 9)

( i 73)

Remeasurement gain:

Return on plan assets (excluding amounts included in net interest expense)

i 18

i 16

i 34

i 94

i 2

i 96

Exchange rate adjustment

i 127

i 8

i 135

i 140

( i 2)

i 138

At July 31

i 2,175

i 129

i 2,304

i 2,012

i 110

i 2,122

Actual return on plan assets

i 49

i 19

i 68

i 133

i 5

i 138

Employers’ contributions included special funding contributions of $ i 53 million (2020: $ i 13 million).

The plan assets were invested in a diversified portfolio comprised of:

2021

2020

Non-UK

Total

Non-UK

Total

Equity type assets quoted

i —

i 48

i 165

i 65

i 230

Government bonds quoted

i 492

i 40

i 532

i 566

i 23

i 589

Corporate bonds quoted

i 884

i 13

i 897

i 385

i 12

i 397

Cash

i 19

i 1

i 20

i 44

i —

i 44

Insurance policies

i 602

i —

i 602

i 609

i —

i 609

Securitized fixed income assets

i 178

i —

i 178

i 167

i —

i 167

Other

i —

i 27

i 76

i 10

i 86

Total fair value of assets

i 2,175

i 129

i 2,304

i 2,012

i 110

i 2,122

The present value of defined benefit obligations is as follows:

2021

2020

Non-UK

Total

Non-UK

Total

On August 1

i 2,039

i 144

i 2,183

i 1,610

i 141

i 1,751

Current service costs (including administrative costs)

i 3

i —

i 3

i —

i 3

Interest cost

i 31

i 4

i 35

i 4

i 39

Benefit payments

( i 68)

( i 9)

( i 77)

( i 64)

( i 9)

( i 73)

Remeasurement (gain)/loss:

Actuarial (gain)/loss arising from changes in demographic assumptions

( i 22)

i —

( i 22)

i 62

i —

i 62

Actuarial (gain)/loss arising from changes in financial assumptions

( i 11)

( i 9)

( i 20)

i 202

i 9

i 211

Actuarial (gain)/loss arising from experience adjustments

( i 31)

i —

( i 31)

i 57

i 1

i 58

Exchange rate adjustment

i 126

i 11

i 137

i 134

( i 2)

i 132

At July 31

i 2,067

i 141

i 2,208

i 2,039

i 144

i 2,183

F-44

An analysis of the present value of defined benefit obligations by funding status is shown below:


	2021	2020
	$m	$m
Amounts arising from wholly unfunded plans	i 3	i 3
Amounts arising from plans that are wholly or partly funded	i 2,205	i 2,180
Total present value of defined benefit obligations	i 2,208	i 2,183

(iii)Valuation assumptions

The financial assumptions used to estimate defined benefit obligations are:

2021

2020

Non-UK

Discount rate

i 1.7

i 2.9

i 1.5

i 2.4

Inflation rate

i 3.1

i 2.0

i 2.9

i 2.0

Increase to deferred benefits during deferment

i 2.4

n/a

i 2.1

n/a

Increases to pensions in payment

i 3.0

i 2.0

i 2.6

i 2.0

Salary increases

i 2.4

n/a

i 2.1

i 2.5

The life expectancy assumptions used to estimate defined benefit obligations are:

2021

2020

Non-UK

Years

Current pensioners (at age 65)—male

i 22

Current pensioners (at age 65)—female

i 25

i 24

Future pensioners (at age 65)—male

i 23

Future pensioners (at age 65)—female

i 25

i 26

The weighted average duration of the defined benefit obligation is i 20.0 years (2020: i 21.1 years).

(iv)Sensitivity analysis

The Group considers that the most sensitive assumptions are the discount rate, inflation rate and life expectancy. The sensitivity analyses below shows the (increase)/decrease in the Group’s defined benefit plan net asset/liability of reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

2021

2020

Change

Non-UK

Change

Non-UK

Discount rate

+ i 0.25

i 85

i 4

+ i 0.25

i 88

i 5

( i 0.25)

( i 89)

( i 5)

( i 0.25)

( i 96)

( i 5)

Inflation rate

+ i 0.25

( i 77)

i —

+ i 0.25

( i 85)

i —

( i 0.25)

i 78

i 3

( i 0.25)

i 75

i 4

Life expectancy

i 1 year

( i 70)

( i 5)

i 1 year

( i 56)

( i 5)

The UK defined benefit plan holds a buy-in policy asset which exactly equals the insured liability. The above sensitivities are in respect of the Group’s remaining defined benefit plan net asset/liability.

F-45

23— i Share capital

(i) i Ordinary shares in issue

2021

2020

Allotted and issued shares

Number of
shares

Cost

Number of
shares

Cost

Number/cost of ordinary 10 pence shares in the Company (million)

i 232

i 30

i 232

i 30

The authorized share capital of the Company is i 500 million ordinary i 10 pence shares (2020: i 500 million ordinary i 10 pence shares).

All the allotted and issued shares, including those held by Employee Benefit Trusts and in Treasury, are fully paid or credited as fully paid.

A summary of the movements in the year is detailed in the following table:


	2021	2020
Number of ordinary 10 pence shares in the Company in issue at July 31	i 232,171,182	i 232,171,182

(ii)Treasury shares

The shares purchased under the Group’s buy back programs have been retained in issue as Treasury shares and represent a deduction from equity attributable to shareholders of the Company.

A summary of the movements in Treasury shares in the year is detailed in the following table:

2021

2020

Number of
shares

Cost

Number of
shares

Cost

Treasury shares held by the Company on August 1

i 7,280,222

i 570

i 2,036,945

i 146

Treasury shares purchased under irrevocable commitment from prior year

i —

i 2,139,221

i 159

i 570

i 305

Treasury shares purchased

i 3,020,368

i 400

i 3,452,349

i 292

Disposal of Treasury shares to settle share options

( i 437,774)

( i 39)

( i 348,293)

( i 27)

Treasury shares held by the Company at July 31

i 9,862,816

i 931

i 7,280,222

i 570

Consideration received in respect of shares transferred to participants in certain long term incentive plans and all-employee plans amounted to $ i 18 million (2020: $ i 11 million).

F-46

(iii)Own shares

Two Employee Benefit Trusts have been established in connection with the Company’s discretionary share option plans and long term incentive plans.

A summary of the movements in own shares held in Employee Benefit Trusts is detailed in the following table:

2021

2020

Number of
shares

Cost

Number of
shares

Cost

Own shares in the Company on August 1

i 1,277,347

i 88

i 1,563,778

i 102

New shares purchased

i —

i 307,345

i 26

Exercise of share options

( i 444,158)

( i 30)

( i 593,776)

( i 40)

Own shares in the Company at July 31

i 833,189

i 58

i 1,277,347

i 88

Consideration received in respect of shares transferred to participants in the discretionary share option plans and long term incentive plans amounted to $ i nil (2020: $ i nil). At July 31, 2021, the shares held in the trusts had a market value of $ i 117 million (2020: $ i 114 million).

Dividends due on shares held by the Employee Benefit Trusts are waived in accordance with the provisions of the trust deeds.

24— i Reconciliation of profit to cash generated from operations

Profit for the year is reconciled to cash generated from continuing and discontinued operations as follows:

2021

2020

2019

Profit for the year attributable to shareholders

i 1,508

i 961

i 1,108

Net finance costs

i 146

i 144

i 70

Share of (profit)/loss after tax of associates

( i 1)

i 2

( i 2)

Gain on disposal of interests in associates and other investments

i —

( i 7)

( i 3)

Impairment of interests in associates

i —

i 22

i 9

Tax charge

i 253

i 307

i 267

Loss/(gain) on disposal and closure of businesses and impairment of assets held for sale

i 184

i 3

( i 53)

Amortization of acquired intangible assets

i 134

i 130

i 110

Amortization of non-acquired intangible assets

i 39

i 35

i 31

Depreciation and impairment of right of use assets

i 254

i 278

i —

Depreciation and impairment of property, plant and equipment

i 136

i 159

i 147

Gain on disposal of property, plant and equipment, and assets held for sale

( i 3)

( i 7)

(Increase)/decrease in inventories

( i 825)

i 19

( i 172)

(Increase)/decrease in trade and other receivables

( i 769)

i 210

( i 132)

Increase/(decrease) in trade and other payables

i 1,023

( i 9)

i 227

Decrease in provisions and other liabilities

( i 57)

( i 25)

Share-based payments

i 71

i 26

i 34

Cash generated from operations

i 2,093

i 2,252

i 1,609

F-47

25— i Acquisitions

The Group acquired the following businesses during the year ended July 31, 2021, which are all engaged in the distribution of plumbing and heating products and were acquired to support growth in the USA. i All transactions have been accounted for by the acquisition method of accounting.

Name

Date of
acquisition

Country of
incorporation

Shares/asset
deal

Acquired %

Old Dominion Supply, Inc.

October 2020

USA

i 100%

Atlantic Construction Fabrics, Inc.

November 2020

USA

Assets

i 100%

Nova Wildcat Amerock Holdings, Inc.

January 2021

USA

i 100%

Clarksville Lighting & Appliance, LLC

January 2021

USA

Assets

i 100%

The Kitchen Showcase, Inc.

June 2021

USA

Assets

i 100%

Moore Industrial Supply

July 2021

USA

Assets

i 100%

Canyon Pipe & Supply, Inc.

July 2021

USA

Assets

i 100%

The assets and liabilities acquired and the consideration for all acquisitions in the year are as follows:


	2021	2020
	$m	$m
Intangible assets:
Software	i —	i 13
Trade names and brands	i 17	i 34
Customer relationships	i 132	i 101
Other	i 15	i 3
Right of use assets	i 12	i 30
Property, plant and equipment	i 11	i 19
Inventories	i 51	i 58
Trade and other receivables	i 45	i 62
Cash, cash equivalents and bank overdrafts	i 13	i 6
Lease liabilities	( i 12)	( i 30)
Trade and other payables	( i 30)	( i 28)
Deferred tax	( i 10)	( i 11)
Provisions	i —	( i 2)
Total	i 244	i 255
Goodwill arising	i 80	i 78
Consideration	i 324	i 333
Satisfied by:
Cash	i 299	i 321
Deferred consideration	i 25	i 12
Total consideration	i 324	i 333

The fair values acquired are provisional figures, being the best estimates currently available. Further adjustments may be necessary when additional information is available for some of the judgmental areas.

The goodwill arising on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Group has gained access and additional profitability and operating efficiencies available in respect of existing markets.

The acquisitions contributed $ i 159 million to revenue, $ i 9 million to segment trading profit, $ i 10 million loss to the Group’s operating profit, $ i 15 million loss to the Group’s profit before tax and $ i 17 million loss to the Group’s profit after tax for the period between the date of acquisition and the balance sheet date.

F-48

If each acquisition had been completed on the first day of the financial year, continuing revenue would have been $ i 22,999 million, continuing trading profit would have been $ i 2,195 million, continuing operating profit would have been $ i 2,044 million, continuing profit before tax would have been $ i 1,895 million and continuing profit after tax would have been $ i 1,653 million.

The net outflow of cash in respect of the purchase of businesses is as follows:

2021

2020

2019

Purchase consideration

i 299

i 321

i 656

Deferred and contingent consideration in respect of acquisitions from prior years

i 49

i 36

i 12

Cash consideration

i 348

i 357

i 668

Cash, cash equivalents and bank overdrafts acquired

( i 13)

( i 6)

( i 11)

Net cash outflow in respect of the purchase of businesses

i 335

i 351

i 657

26—Disposals

On January 29, 2021, the Group disposed of the shares in its UK business, Wolseley UK Limited. There were no other disposals in the year ended July 31, 2021.

The Group recognized a total loss on disposals in the period of $ i 356 million (2020: $ i nil million), which is comprised of a loss on the current period disposal of the UK business of $ i 370 million (2020: $ i nil million) and a gain on prior year disposals of $ i 14 million (2020: $ i nil million). The total loss is reported within discontinued operations.

The loss on current period disposal is as follows:


	2021	2020
	$m	$m
Consideration received	i 422	i —
Net assets disposed of	( i 390)	i —
Disposal costs and provisions	( i 32)	i —
Recycling of deferred foreign exchange losses	( i 370)	i —
Current period loss on disposal	( i 370)	i —

Net assets disposed of were held in assets and liabilities held for sale.

The net inflow of cash in respect of disposals of businesses related to discontinued operations is as follows:

2021

2020

2019

Cash consideration received for current period disposals (net of cash disposed of)

i 395

i —

i 220

Cash consideration received in respect of prior year disposals

i 19

i 9

( i 2)

Cash paid in respect of prior year disposals

( i 2)

( i 16)

Disposal costs paid

( i 32)

i —

( i 1)

Net cash flow in respect of disposals of businesses

i 380

i 7

i 201

F-49

27—Changes in cash and cash equivalents, bank overdrafts and liabilities arising from financing activities

Cash and
cash
equivalents
(note 17)

Bank
overdrafts
(note 19)

Total cash,
cash
equivalents
and bank
overdrafts

Derivative
financial
instruments
(note 20)

Loans
(note 19)

Obligations
under
finance
leases

Total
excluding
lease
liabilities

Lease
Liabilities
(note 12)

Total
including
lease
liabilities

At July 31, 2018

i 833

( i 375)

i 458

( i 2)

( i 1,530)

( i 6)

( i 1,080)

i —

( i 1,080)

Cash movements

Proceeds from loans and derivatives

i —

( i 7)

( i 750)

i —

( i 757)

i —

( i 757)

Repayments of loans

i —

i 2

i —

i 2

i —

i 2

Finance lease capital payments

i —

i 3

i —

i 3

Changes due to disposal of businesses

( i 1)

i —

( i 1)

i —

( i 1)

Changes due to acquisition of businesses

i 11

i —

( i 3)

i 8

i —

i 8

Other cash flows

i 628

i —

i 628

i —

i 628

Non-cash movements

Fair value and other adjustments

i —

i 25

( i 26)

i —

( i 1)

i —

( i 1)

Exchange movements

( i 10)

i 6

i 7

i —

i 3

i —

i 3

i 1,133

( i 47)

i 1,086

i 22

( i 2,297)

( i 6)

( i 1,195)

i —

( i 1,195)

Adjustment on adoption of IFRS 16

i —

i 6

( i 1,481)

( i 1,475)

At August 1, 2019

i 1,133

( i 47)

i 1,086

i 22

( i 2,297)

i —

( i 1,189)

( i 1,481)

( i 2,670)

Cash movements

Proceeds from loans and derivatives

i —

( i 7)

( i 1,162)

i —

( i 1,169)

i —

( i 1,169)

Repayments of loans

i —

i 566

i —

i 566

i —

i 566

Lease liability capital payments(1)

i —

i 295

Interest paid on lease liabilities(1)

i —

i 53

Changes due to acquisition of businesses

i 6

i —

i 6

i —

i 6

Other cash flows

i 771

i —

i 771

i —

i 771

Non-cash movements

Lease liability additions

i —

( i 115)

Changes in lease liabilities due to acquisition of businesses

i —

( i 30)

Discount unwinding on lease liabilities

i —

( i 53)

Fair value and other adjustments

i —

i 28

( i 20)

i —

i 8

( i 16)

( i 8)

Exchange movements

i 4

( i 4)

( i 5)

i —

( i 5)

( i 8)

( i 13)

i 2,115

( i 248)

i 1,867

i 39

( i 2,918)

i —

( i 1,012)

( i 1,355)

( i 2,367)

Cash movements

Proceeds from loans and derivatives

i —

( i 4)

i —

( i 4)

i —

( i 4)

Repayments of loans

i —

i 375

i —

i 375

i —

i 375

Lease liability capital payments(1)

i —

i 296

Interest paid on lease liabilities(1)

i —

i 46

Changes due to disposal of businesses

( i 27)

i —

( i 27)

i 133

i 106

Changes due to acquisition of businesses

i 13

i —

i 13

i —

i 13

Other cash flows

( i 702)

i —

( i 702)

i —

( i 702)

Non-cash movements

Lease liability additions

i —

( i 97)

Discount unwinding on lease liabilities

i —

( i 46)

Changes in lease liabilities due to acquisition of businesses

i —

( i 12)

Fair value and other adjustments

i —

( i 13)

i 15

i —

i 2

( i 44)

( i 42)

Exchange movements

i 1

( i 1)

i —

( i 11)