Ferguson plc

Condensed Consolidated Statements of Earnings

(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Ferguson plc

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Ferguson plc

Condensed Consolidated Balance Sheets

(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Ferguson plc

Condensed Consolidated Statements of Shareholders' Equity

(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Ferguson plc

Condensed Consolidated Statement of Cash flows

(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Ferguson plc

Notes to the Condensed Consolidated Financial Statements

(unaudited)

1 - Summary of significant accounting policies

Background

Ferguson plc is a public company limited by shares incorporated in Jersey under the Companies (Jersey) Law 1991 (as amended) and is headquartered in the UK, operating as the ultimate parent company of all its subsidiaries, collectively the "Company". Its registered office is 13 Castle Street, St Helier, Jersey, JE1 1ES, Channel Islands.

Basis of consolidation

The consolidated financial information includes the results of the Company and entities controlled by the Company (its subsidiary undertakings and controlling interests) and its share of profit/(loss) after tax of its equity method investments.

Intercompany transactions and balances and any unrealized gains and losses arising from intercompany transactions are eliminated on consolidation.

Basis of presentation

Effective August 1, 2021, the Company transitioned from International Financial Reporting Standards ("IFRS") accepted by the International Accounting Standards Board to accounting principles generally accepted in the United States ("U.S. GAAP"). The accompanying condensed consolidated financial statements and notes thereto, including all prior periods presented, have been presented under U.S. GAAP.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair statement, in all material respects, of our condensed consolidated balance sheets as of January 31, 2022 and July 31, 2021, our condensed consolidated statements of earnings, condensed consolidated statements of comprehensive income and condensed consolidated statements of changes in equity for the six-month period ended January 31, 2022 and 2021 and our condensed consolidated statements of cash flows for the six-month period ended January 31, 2022 and 2021. The results of operations for the six-month period ended January 31, 2022, are not necessarily indicative of the results to be expected for the full year.

Certain reclassifications have been made to the accompanying condensed consolidated financial statements and notes thereto to conform to the current presentation.

The condensed consolidated financial statements do not constitute the Company's statutory financial statements. The Company's statutory financial statements for the year ended July 31, 2021, presented under IFRS, have been filed with the Jersey Registrar of Companies and received an unqualified audit opinion.

The condensed consolidated financial statements have been prepared on a going concern basis and under the historical cost convention as modified by the revaluation of financial assets and liabilities measured at fair value.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.

Accounts receivables

Accounts receivables are recognized initially at their transaction price and measured subsequently at amortized cost using the effective interest method, less the loss allowance. The loss allowance for trade receivables is measured at an amount equal to lifetime expected credit losses, estimated based on historical write-offs adjusted for forward-looking information where appropriate. A loss allowance of 100 percent is recognized against trade receivables more than 180 days past due because historical experience indicates that a loss is probable and estimable. The loss is recognized in the income statement. Accounts receivables are written off when recoverability is assessed as being remote. Subsequent recoveries of amounts previously written off are credited to the income statement.

Cash and cash equivalents

Cash and cash equivalents includes cash in-hand, deposits held at call with banks with original maturities of three months or less and overdrafts to the extent there is a legal right of offset and practice of net settlement with cash balances. Overdrafts that do not meet this criteria are classified within other current liabilities in the condensed consolidated balance sheet.

Restricted cash consists of deferred consideration for business combinations, subject to various settle-up agreements.  The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.

Cost of sales

Cost of sales includes the cost of goods purchased for resale, net of earned rebates, and the cost of bringing inventory to a sellable location and condition. Cost of sales does not include any depreciation.

Derivative instruments and hedging activity

Derivative financial instruments, in particular interest rate swaps and foreign exchange swaps, are used to manage the financial risks arising from the business activities of the Company and the financing of those activities. There is no trading activity in derivative financial instruments.

Derivative financial instruments are recognized as assets and liabilities measured at their fair values at the balance sheet date. Where derivative financial instruments do not fulfill the criteria for hedge accounting, changes in their fair values are recognized in the income statement. When hedge accounting is used, the relevant hedging relationships are classified as fair value hedges, cash flow hedges or net investment hedges.

Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the change in its fair value attributable to the hedged risk and the resulting gain or loss is recognized in the income statement where, to the extent the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to the income statement over the period to maturity.

Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recorded in other comprehensive income. When the hedged item is recognized in the financial statements, the gains and losses recognized in accumulated other comprehensive loss are either amortized to the income statement or, if the hedged item results in a non-financial asset, are recognized as adjustments to its initial carrying amount. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss remains in accumulated other comprehensive loss until the forecasted transaction is recognized in the income statement. When the forecasted transaction is no longer expected to occur, the related amounts recorded in accumulated other comprehensive loss are immediately recorded in the income statement.

Discontinued operations

When the Company has disposed of, or classified as held for sale, a business component that represents a strategic shift that has a significant effect on the Company's operations and financial results,  it classifies such operations as discontinued. The post-tax profit or loss of the discontinued operations is shown as a single line on the face of the income statement.

Foreign currency

The condensed consolidated financial statements are presented in U.S. dollars.

Results of operations of foreign subsidiaries are translated into U.S. dollars using average exchange rates during the year. The assets and liabilities of those subsidiaries are translated into U.S. dollars using exchange rates at the current rate of exchange on the last day of the reporting period. The related translation adjustments are included in accumulated other comprehensive loss.

Foreign currency transaction gains and losses are included in net income.

In the event that a subsidiary that is a non-U.S. dollar functional currency is disposed of, the gain or loss on disposal recognized in the income statement includes the cumulative currency translation differences attributable to the subsidiary.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortized, it is carried at cost less accumulated impairment losses. The Company performs an impairment assessment annually or more frequently if changes in circumstances indicate that a triggering event for an impairment evaluation has occurred.

The annual process for evaluating goodwill begins with an assessment for each reporting unit of qualitative factors to determine whether a quantitative evaluation is appropriate for determining potential goodwill impairment. The quantitative impairment assessment compares the fair value of the reporting unit to its carrying value. The reporting units represent the lowest level within the Company at which the associated goodwill is monitored for management purposes and are based on the markets where the business operates. The impairment analysis is performed in the fourth quarter of each fiscal year.

The fair value of a reporting unit is determined using the income approach, which requires significant assumptions regarding future operations and the ability to generate cash flows. These assumptions include a forecast of future operating cash flows over a period of 4 years, a terminal value, capital requirements and a discount rate. Where the carrying value of a reporting unit exceeds the fair value, an impairment loss is recorded.

Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold.

Other intangible assets

An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognized to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Company and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.

Definite-lived intangible assets, primarily brands, trade names and customer relationships, acquired as part of a business combination are capitalized separately from goodwill and are carried at cost less accumulated amortization and accumulated impairment losses. Customer relationship amortization is calculated using a systematic approach based on the timing of expected cash flows. The straight-line method is used for other intangible assets.

The cost of the intangible asset is amortized and charged to operating costs in the income statement over the estimated useful life as follows: 

Computer software that is not integral to an item of property, plant and equipment is recognized separately as an intangible asset and is carried at cost less accumulated amortization and accumulated impairment losses. Costs may include software licenses and external and internal costs directly attributable to the development, design and implementation of the computer software. Costs in respect of training and data conversion are expensed as incurred. Amortization is calculated using the straight-line method so as to charge the cost of the computer software to operating costs in the income statement over the shorter of 5 years or the estimated useful life.

Impairment of long-lived assets

The recoverability of long-lived assets, including right of use assets and definite-lived intangible assets, is assessed whenever events or changes in circumstances indicate that the group may not be able to recover the asset's carrying amount. Long-lived depreciable and amortizable assets are tested for impairment in asset groups, which are defined as the lowest level of assets that generate identifiable cash flows that are largely independent of the cash flows from the other asset groups. An individual asset is tested for recoverability only if it meets the definition of an asset group.

Inventories

Inventories, which comprise goods purchased for resale, are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method or the average cost method as appropriate to the nature of the transactions in those items of inventory. The cost of goods purchased for resale includes import and custom duties, transport and handling costs, freight and packing costs and other attributable costs less trade discounts, rebates and other subsidies. It excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Provisions are made against slow-moving, obsolete and damaged inventories for which the net realizable value is estimated to be less than the cost. The risk of obsolescence of slow-moving inventory is assessed by comparing the level of inventory held to estimated future sales on the basis of historical experience.

Leases

The Company enters into contractual arrangements for the utilization of certain non-owned assets which are evaluated as finance or operating leases upon commencement. These principally relate to property for the Company's branches, distribution centers and offices which have varying terms including extension and termination options and periodic rent reviews. The Company's leases primarily consist of operating leases.

The Company recognizes a right of use asset and a lease liability at the lease commencement date. Non-lease components of a contract are not separated from lease components unless the non-lease component is an embedded derivative.

Lease liabilities are initially measured at the present value of lease payments using the interest rate implicit in the lease, or if this is not readily available, at the Company's incremental borrowing rate. Lease payments comprise fixed payments, variable payments that depend on an index or rate, payments expected under residual value guarantees and payments under purchase and termination options which are reasonably certain to be exercised. Lease terms are initially determined as the non-cancelable period of a lease adjusted for options to extend or terminate a lease that are reasonably certain to be exercised. Lease liabilities are subsequently measured at amortized cost using the effective interest method.

Right of use assets are carried at cost less accumulated amortization, impairment losses, and any subsequent remeasurement of the lease liability. Initial cost comprises the lease liability adjusted for lease payments at or before the commencement date, lease incentives received, initial direct costs and an estimate of restoration costs. The Company recognizes minimum rent expense on a straight-line basis over the lease term. During the periods ending January 31, 2022 and 2021, the Company obtained right of use contracts in exchange for new operating lease liabilities of $211 million and $142 million, respectively.

Leases that have a term of 12 months or less are recognized as an expense on a straight-line basis over the lease term.

Property, plant and equipment ("PPE")

PPE is carried at cost less accumulated depreciation and accumulated impairment losses, except for land and assets in the course of construction, which are not depreciated and are carried at cost less accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. In addition, subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

Assets are depreciated to their estimated residual value using the straight-line method over their estimated useful lives as follows: 

The residual values and estimated useful lives of PPE are reviewed and adjusted if appropriate at each balance sheet date. The Company reviews at the balance sheet date whether events or circumstances indicate that the carrying value of its PPE may be impaired. If such circumstances are determined to exist, an estimate of the recoverable amount of the asset, or the appropriate grouping of assets, is compared to its carrying value to determine whether an impairment exists.

Rebates

In line with industry practice, the Company has agreements ("supplier rebates") with a number of its suppliers whereby volume-based rebates, marketing support and other discounts are received in connection with the purchase of goods for resale from those suppliers.

The majority of volume-based supplier rebates are determined by reference to guaranteed rates of rebate. These are calculated with minimal judgment required to determine the amount. A small proportion of volume-based supplier rebates are subject to tiered targets where the rebate percentage increases as volumes purchased reach agreed targets within a set period of time. The Company estimates supplier rebates based on forecasts which are informed by historical trading patterns, current performance and trends.

Rebates relating to the purchase of goods for resale are accrued as earned and are recorded initially as a deduction in inventory with a subsequent reduction in cost of sales when the related product is sold.  Supplier rebates receivable are offset with amounts owing to each supplier at the balance sheet date and are included within trade payables where the Company has the legal right to offset and net settles balances. Where the supplier rebates are not offset against amounts owing to a supplier, the outstanding amount is included within prepayments.

Revenue recognition and net sales

The Company's revenues are derived primarily from the sale of a broad range of plumbing and heating products. The Company's customers predominantly operate within the repair, maintenance and improvement sector and are served through a network of branches and distribution centers.

Revenue is the consideration expected to be received in exchange for the provision of goods falling within the Company's ordinary activities. Net sales is derived from revenue, net of intra-group sales, estimated and actual sales returns, trade and early settlement discounts, Value Added Tax and similar sales taxes.

Revenue from the sale of goods is recognized when the customer obtains control of the goods, which is the point they are delivered to, or collected by, the customer. Revenue from the provision of goods is only recognized when the transaction price is determinable and it is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods to be transferred to the customer. Payment terms between the Company and its customers vary by the type of customer, country of sale and the products sold. The Company does not have significant financing components in its contracts and the payment due date is typically shortly after sale.

In some instances, goods are delivered directly to the customer by the supplier. The Company has concluded it is the principal in these transactions as it is primarily responsible to the customer for fulfilling the obligation and has the responsibility for identifying and directing the supplier to deliver the goods to the customer.

The Company offers a right of return to its customers for most goods sold. Revenue is reduced by the amount of expected returns, estimated based on historical data, in the period in which the related revenue is recorded. Returns have remained stable over time and the terms and conditions of sale have remained broadly unchanged for several years. Early settlement discounts are known shortly after the sale and can therefore be reliably estimated.

The Company also provides customers with assurance-type warranties for some own brand goods that provide assurance the goods comply with agreed-upon specifications and will operate as specified for a set period following the date of sale. Obligations under these warranties are estimated using historical claim experience and are accrued in the period of sale.

The Company has no contracts with customers that have an expected duration of more than one year.

Share-based compensation

Share-based incentives are provided to associates under the Company's long term incentive plans and all-employee sharesave plans. The Company recognizes a compensation cost in respect of these plans that is based on the fair value of the awards, measured using Binomial valuation methodologies. For equity-settled plans, the fair value is determined at the date of grant (including the impact of any non-vesting conditions such as a requirement for employees to save) and is not subsequently remeasured unless the conditions on which the award was granted are modified. For liability-settled plans, the fair value is determined at the date of grant and is remeasured at each balance sheet date until the liability is settled. Generally, the compensation cost is recognized on a straight-line basis over the vesting period. Adjustments are made to reflect expected forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.

Tax

Current tax represents the expected tax payable (or recoverable) on the taxable income (or losses) for the year using tax rates enacted at the balance sheet date and taking into account any adjustments arising from prior years. The Company establishes deferred income tax assets and liabilities for temporary differences between the tax and financial accounting bases of assets and liabilities as well as from net operating losses. Deferred tax is determined using tax rates that have been enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent that a portion is not more likely than not to be realized. Many factors are considered when assessing whether it is more likely than not that the deferred tax assets will be realized, including recent cumulative earnings, expectations of future taxable income, carryforward periods and other relevant quantitative and qualitative factors.

The Company recognizes the tax benefit from uncertain tax positions taken or expected to be taken in income tax returns only if it is more likely than not that the tax position will be sustained upon examination by tax authorities, based on the technical merits of the position. The Company recognizes interest and penalties related to uncertain tax positions within income tax expense.

Accounting developments and changes

ASU No. 2020-04. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. This ASU, and subsequent clarifications, provide practical expedients for contract modification accounting related to the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022. The amendments should be applied on a prospective basis. The Company continues to evaluate the impact of reference rate reform and does not currently expect a material impact to the Company's consolidated financial statements.

ASU No. 2021-08. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments address how to determine whether a contract liability is recognized by the acquirer in a business combination and provides specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in an interim period. The Company is evaluating this standard update and does not expect a material impact to the Company's consolidated financial statements.

Recent accounting pronouncements pending adoption that are not discussed above are either not applicable, or will not have, or are not expected to have, a material impact on our consolidated financial condition, results of operations or cash flows.

2 - Segment information

The Company reports its financial results of operations on a geographical basis in the following two reportable segments: USA and Canada. The Company uses adjusted operating profit as its measure of segment profit. Certain income and expenses are not allocated to the Company's segments and, thus, the information that management uses to make operating decisions and assess performance does not reflect such amounts. Items not allocated are presented in the table below:

An additional disaggregation of net sales by end market for continuing operations is as follows:

Total identifiable assets by segment were:

3 - Net interest expense

Net interest expense relating to discontinued operations are disclosed in note 5.

4 - Tax

The Company's tax provision was calculated using an estimated annual tax rate, adjusted for discrete items occurring during the period to arrive at an effective tax rate. The effective income tax rate from continuing operations for the six-months ended January 31, 2022 was 21.9% and included a net tax benefit of $39 million, or 3.1%, related to certain discrete and other tax adjustments resulting from amended prior year state tax returns in the United States and other prior year adjustments. The effective income tax rate from continuing operations for the six-months ended January 31, 2021 was 17.6% and included a net tax benefit of $54 million, or 7.5%, attributable to certain discrete items, primarily related to release of uncertain tax positions following closure of the tax audits.

5 - Discontinued operations and disposals

On January 29, 2021, the Company disposed of the shares in its UK business, Wolseley UK Limited. As such, the disposal group has been presented as a discontinued operation.

The results from discontinued operations, which have been included in the condensed consolidated statement of earnings are as follows:

In the six-months ended January 31, 2022, other income primarily comprised a gain on the sale of land in connection with the Company's former Nordic operations that were disposed of in a prior year, generating $25 million in cash flow from investing activities.

In the six-months ended January 31, 2021, the discontinued operations, as well as the loss on disposal, were related to the disposal of the UK business, Wolseley UK Limited.

6 - Dividends

Since January 31, 2022, the Company declared an interim ordinary dividend of $0.84 per share. These dividends have not been included as a liability in the balance sheet as of January 31, 2022.

Dividends are declared in U.S. dollars and paid in both pounds sterling and U.S. dollars. For those shareholders paid in pounds sterling, the exchange rate used to translate the declared value is set in advance of the payment date. As a result of foreign exchange rate movements between these dates, the total amount paid (shown in the Company's cash flow statement) may be different to that stated above.

7 - Earnings per share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.

The following table shows the calculation of diluted shares:

8 - Shareholders' equity

The following table presents a summary of the Company's share activity:

Share Repurchases

In September 2021, the Company announced a program to repurchase up to $1 billion of shares with the aim of completing the purchases within 12 months.

As of January 31, 2022, the Company has completed approximately $417 million of the previously announced $1 billion buyback. The Company is currently purchasing shares under an irrevocable and non-discretionary arrangement (the "Arrangement") with $290 million in accrued repurchases remaining which is recorded as a current liability in the condensed consolidated balance sheet.

The Company expects to complete the remaining repurchases under the Arrangement in March 2022, at which time, the Company expects to enter into a new irrevocable and non-discretionary repurchase contract with similar terms and conditions as the current Arrangement.

On March 15, 2022, the Company announced an increase of $1 billion to its share buy back program, bringing the total to $2 billion.

9 - Goodwill and other intangible assets

The following table shows the change in goodwill and intangible assets during the six months ended January 31, 2022:

The net book value of goodwill at January 31, 2022 comprised $2,008 million cost and $85 million of cumulative impairment losses (July 31, 2021: $1,913 million and $85 million, respectively).

10 - Acquisitions

The Group acquired the following businesses during the period ended January 31, 2022. Each of the acquired businesses are engaged in the distribution of plumbing and heating products and were acquired to support growth in the USA. All transactions have been accounted for by the acquisition method of accounting.

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

The fair values acquired are provisional figures, being the best estimates currently available. Further adjustments may be necessary when additional information is available for certain judgmental areas. For the acquisition of Plumbing Supply Company, the fair value adjustments have not been completed, primarily related to the valuation of intangible assets, due to the proximity of the acquisition closing date to the end of the reporting period. Amendments to fair value estimates may be made to these figures in the 12-months following the date of acquisition when additional information is available for certain judgmental areas.

The fair value estimates of intangible assets are considered non-recurring, Level 3 measurements within the fair value hierarchy and are estimated as of the acquisition date of the respective acquisitions.

The goodwill 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, operating efficiencies and other synergies available in connection with existing markets.

The acquisitions contributed $23 million to revenue and $6 million loss to the Company's profit before tax, including acquired intangible amortization, transaction and integration costs, for the period between the date of acquisition and the balance sheet date.

If each acquisition had been completed on the first day of the financial period, the Company's net sales would have been $13,393 million and the impact on profit before tax, including additional amortization, transaction and integration costs, would not be material. 

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

11 - Debt

The carrying value of debt consists of the following:

Included in bank overdrafts at January 31, 2022 is an amount of $46 million (2021: $36 million) which is part of the Company's cash pooling arrangements where there is an equal and opposite balance included within cash and cash equivalents. These amounts are subject to a master netting arrangement.

The Company applies fair value hedge accounting to debt of $355 million (2021: $355 million), swapping fixed interest rates into floating interest rates using a series of interest rate swaps. As a result, the carrying value of the combined current and non-current Private Placement Notes comprised a par value of $1,155 million and a fair value adjustment of $9 million (2021: $23 million) from the application of hedge accounting.

As of January 31, 2022, $500 million was outstanding under the Company's Accounts Receivables Securitization Facility (the "Facility"). In December 2021, the Company exercised the accordion feature to increase the total funds available to $800 million. In addition, the Company added a new accordion feature whereby the commitment on the Facility may be increased up to $1 billion. The Facility was undrawn as of January 31, 2021.

Subsequent to January 31, 2022, the Company repaid $250 million of the loans outstanding under the Facility.

12 - Assets and liabilities at fair value

The Company's assets and liabilities recorded at fair value are summarized as follows:

The Company'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 on a recurring basis through profit and loss using forward interest curves which are level 2 inputs. No transfers between levels occurred during the current or prior year.

The Company's deferred compensation plan comprises a financial asset measured at fair value on a recurring basis through profit and loss, as well as financial liability measured at fair value through profit and loss. The fair value of the liability is calculated with reference to the fair value of the associated asset. No transfers between levels occurred during the current or prior year.

The fair value of the equity investments in the current year are measured on a non-recurring basis using market derived valuation methods upon occurrence of orderly transactions for identical or similar assets which is deemed a level 3 input.

Due to their short maturities or their insignificance, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximated their fair values at January 31, 2022 and 2021.

The Company estimates that, based on current market conditions, the total fair value of its 144A bonds was $1,441 million (Level 1), compared with the carrying value of $1,337 million. The fair value of the Company's Private Placement Notes is estimated at $1,222 million (Level 2), compared with a carrying value of $1,162 million. The higher fair value resulted from changes, since issuance, in the corporate debt markets and investor preferences.

13 - Accumulated other comprehensive income

The change in accumulated other comprehensive income was as follows:

Amounts reclassified from accumulated other comprehensive income related to pension and other postretirement items consisted of:

14 - Retirement benefit obligations

The Company maintains pension plans in the U.K. and Canada.  The components of net periodic pension cost are as follows:

During the six months ended January 31, 2022, $5 million (2021: $9 million) of pretax costs were reclassified from other comprehensive income to a component of net periodic cost. The impact of exchange rate fluctuations is included on the net amortization line above.

For the six months ended January 31, 2022, the Company included $2 million (2021: $nil million) related to the components of net periodic cost, excluding service cost, in other (income) expense in the condensed consolidated statement of earnings.

15 - Related party transactions

The Company purchases goods and services from companies that are, or are indirect wholly owned subsidiaries of companies that are, controlled or significantly influenced by persons who are also Ferguson Non-Executive Directors. For the six months ended January 31, 2022, the Company purchased goods and services totaling $11 million (2021: $10 million) from and owed $nil (2021: $nil) to these companies. The goods and services are purchased on an arm's-length basis.

INDEPENDENT REVIEW REPORT TO FERGUSON PLC

We have been engaged by Ferguson plc (the "Company") to review the condensed set of financial statements for Ferguson plc and its subsidiaries (the "Group") in the half-yearly financial report for the six months ended January 31, 2022 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Company will be prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the accounting policies the Company intends to use in preparing its next financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended January 31, 2022 is not prepared, in all material respects, in accordance with the accounting policies the Company intends to use in preparing its next annual financial statements and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Deloitte LLP

Statutory Auditor

London, United Kingdom

March 14, 2022