PROPERTY PROPE TY BRIEF EFING NG. July 2 201 015 Pro rope - - PowerPoint PPT Presentation

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PROPE PROPERTY TY BRIEF EFING NG. July 2 201 015

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Agen genda

Int ntrodu duct ction John Carter Pr Prope perty ty at T Travis vis Perkin kins Martin Meech Q& Q&A John, Tony & Martin Ref Refres eshm hment ent br brea eak All Br Branc nch t h tours All Wrap ap up up All

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Mark arket t frag agmentati tation

Our ur growt wth not h not cons constrai ained b d by the he mar market

1

Str Structu tural al ad advan antag tages

2

Su Superi rior r prop

• pos
• sitions

3

• Majority of the markets we compete in are highly fragmented
• Proliferation of small family-owned businesses
• Our businesses are #1 or #2 in each of our markets, but with relatively low market shares
• Sour

urcing ng & sup upply c cha hain: n: sourcing terms, range, stocking and distribution efficiency

• Br

Branc nch net h network: 2,000 locations, strong covenant, flexibility to optimise, development value

• IT:

T: selective sharing of software platforms and volume hardware purchasing

• Range &

nge & value: ue: strong promotions & KVI pricing, range extension, own label development, availability

• Space:

e: new branch & store opening programme with implants intensifying space

• Cha

hannel nnel, f format & & cus ustomer er ser ervice: e: investment in online channels, new formats and better service

Frag agmente ted mark arkets ts + + str truc uctur tural al ad advan antag tage + + sup uperi rior

• r prop
• pos
• siti

tion

• n = sus

ustai tainab able le m mark arket t shar are g gai ains

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• TP expansion &

modernisation

• Wickes national footprint
• Plumbing & Heating

format clarity

• Implants intensify returns
• Trade parks
• Streamlined central

functions

• Devolved

management responsibility

• Disciplined planning

& capital allocation

• Regular market

updates

• Supply chain

investment

• Leverage property

capability

• Group sourcing

benefits

• Shared technology

investment

• Improved value
• Extended range
• Product development
• Format renewal
• Technology enabled
• Multi-channel

Lev ever ers of valu lue c e crea eatio tion

Custo stomer inno innovatio ation Optim ptimising ising ne netw twork Scale cale ad advantag antage Portf tfolio lio ma managemen ement

Enabled through people & evolution of unique culture

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PR PROPE PERTY. Mar Martin n Meec eech

Group Pr p Prope perty ty Directo tor

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Agen genda

• 1. Property strategy

p7

• 2. Current estate

p14

• 3. How we operate

p24

• 4. Creating value in the future

p32

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PROPE PROPERTY TY STRATEGY.

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Creat ating ng v val alue ue f from

• m pr

prope

• perty
• Successful property

process requires strong underlying businesses

• Business requirements

always come first

• Identify optimal location

using data / local expertise

• Assess Group site usage or

acquisition needed

• Secure site through

freehold / leasehold

• Enhance existing sites

through implants / trade parks / redevelopment

• Develop freehold site

(planning, development approval, construction)

• Assess strategic

requirements for hold /sell

• Release capital through

sale or sale & leaseback

• Reinvest capital back into

the businesses

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Proper erty ty s str trate tegy f follo llows G Group busin ines ess s str trateg tegy

Group strategy Property strategy

Extend the portfolio

• Select required catchments
• Select best property to fulfil business requirements
• Acquire and develop property on behalf of business

Efficient allocation of capital

• Assess capital allocation of property
• Re-balance the portfolio to best returning businesses

Maximise return on capital

• Optimise the property portfolio
• Continually assess business performance
• Move or close sites; extract value where possible

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Darre rren S Scre reen

12 years experience South Street AM DSG Retail ltd Joined in 2014 Property ty Financ nance Dir irec ector

Phil hilip J ip Joyce ce

P&H Mid & North

28 years experience Home Retail Group Mercian Developments Joined in 2007

An ex experie erienced & & in innovati tive tea team

• Recently strengthened team
• Broad & relevant experience
• Decision making devolved to the businesses

Mar Martin n Meec eech

Group Property Director

36 years property experience (inc. 30 years as corporate property director) Dixons Group Gateway Supermarkets Halfords and Comet

Business responsibility Geographic responsibility

Nick ck Pinne inney

Contracts South West

20 years experience Strutt & Parker Morgan Stanley Joined in 2014

Stev eve B e Ben ennet ett

G Merchant South East

15 years experience Dixons Carphone Kingfisher Joined in 2015

Jo L

• Lor
• rd

Consumer London

25 years experience CBRE, Homebase, Capital & Regional plc Joined in 2015

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Neg egotia iatin ing t ter erms

Mat aterial v val alue ue f from

• m be

being ng a a group of

• up of compani

companies

Flex exib ibil ilit ity y of us use Strong

• ng ba

balance nce s she heet

Scale = competitive advantage:

• Local, regional and

national levels

• Attracts high quality

people into team

• Strong covenant

Combined Group balance sheet:

• Access to funding
• Funding at better

financing terms Decision making held by Travis Perkins:

• Opportunity to switch

sites between brands given # of fascias

• Spread risk exposure

through the cycle

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Freeho hold v d vs. . Leas aseho hold d – str trateg tegic b ben enef efits its

Freeho eehold Lea easeho ehold

• Long term site security
• Flexibility to optimise use
• Future asset appreciation and

alternative use

• Greater flexibility to tailor to

specific customer needs

• Lower up-front cash cost
• Balance sheet efficiency
• Greater availability of leasehold

properties

• Suitable for small generic sites

Aim Aim to in increa ease f e freeh eehold p proportio ion to d driv ive s e super erio ior o

• per

eratin ing re returns

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Freeho hold v d vs. . Leas aseho hold d – financi nancial al i imp mplicat cation

• ns
• Current existing use property estate

value ~£500m

• Financed using on balance sheet debt
• Large immediate capital investment
• Lower on-going property costs
• Direct capital employed – included in

both ROCE and LAROCE

• Current leasehold debt value of

~£1,469m (based on 8x rental costs)

• Shortening business lifecycles
• Small immediate capital investment

with on-going lease commitment

• Off balance sheet debt – added back

to assess LAROCE

Minim inimal L LAROC ROCE co compr pressio ion ( n (20-30 bps bps o

• ver 5 years) thr

hrough in h investment nt in f in freeho hold d pr prope perty

Freeho eehold Lea easeho ehold

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CURRE RRENT NT ES ESTATE TE.

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Different nt b bus usine ness de demands mands on

• n pr

prope

• perty t

team am

Implant lant / sm / small f all format at ~500 – 5,000ft2 Small all / / mediu dium tr trade ade ~15,000ft2 + Yard Distr istrib ibutio tion ce n centr ntre ~600,000ft2 Lar arger tr trade ade / / retail tail ~25-30,000ft2

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12 22 39 67 118 151 203 257 277 329 430 477 534 627 (1) (11) (24) (34) (37) (38) (44) (49) (57) (122) (142) (157) (222) (250)

• 250

500 750 1,000 1,250 1,500 1,750 2,000 2,250 2000 000 20 2001 20 2002 20 2003 20 2004 20 2005 20 2006 20 2007 20 2008 20 2009 20 2010 2011 11 2012 12 2013 13 2014 14

# Branches Year

Mergers & disposals Organic growth Acquisitions Base

Trac ack recor cord d of

• f strong
• ng or
• rgani

anic ne c networ

• rk g

growt wth

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Wh What t does es th the e curren ent p t portf tfolio lio lo look lik like? e?

Gr Group to tota tal: l: 2,012 fascias (at 31 May 2015)

39% 9% 25% 27%

General Merchanting Travis Perkins 660 Benchmarx 133 Contracts Keyline 80 BSS 63 CCF 34 Consumer Wickes 232 Toolstation 200 Tile Giant 110 P&H CPS 275 PTS 202 Other 23

Midlands and North London South East (exc. London) South West

36% 23% 12% 29%

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Cu Curren ent p t portf tfoli lio – freeh eehold ld v

• vs. lea

leaseh ehold

(by value) Freeh eehold* Lease sehold** d**

Gro roup 17 17% 83% 83% General Merchanting 47% 53% Contracts 27% 73% P&H 3% 97% Consumer 1% 99%

• Group predominantly leasehold
• Freehold concentrated in merchant yards &

South East

• Weighting of freehold driven by:

– acquisitions – business requirements

0% F Freeho hold ld 50% F Freeho hold ld

* Calculated using estimated current-use freehold market value ** Value of Leasehold portfolio calculated at 7% yield

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Freeho hold por d portfolio

• Freeholds concentrated in Travis Perkins and Keyline
• NBV of freehold property is £326m (2014 AR)
• Current existing use property estate value ~£500m

Freeh eehold* mix mix

Gro roup 17 17% General Merchanting 47% Contracts 27% P&H 3% Consumer 1%

• Value realisation from Freehold

– Third party rental savings – Asset appreciation – Profit realised through property transactions

• Consistent property returns despite market volatility
• Value creation ahead of the market

* Calculated using estimated current-use freehold market value

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Leas aseho hold por d portfolio mat

• matche

hed t d to

• bus

usine ness ne needs ds

• Leaseholds concentrated in

Wickes, Toolstation & PTS

• Rental uplifts cap / collar
• Selective re-gears to reduce rent

where tenure attractive

• Ability to rotate fascias

Lea easeh ehold* mix mix Gro roup 83% 3% General Merchanting 53% Contracts 73% P&H 97% Consumer 99% Sma mall forma rmat

(Ti Tile le Giant nt / / Tool

• olstation

ion / Cit ity P y Plumbin ing )

Med ediu ium f m forma rmat

(Wick ickes)

Si Size

3,000 to 7,000 ft2 25,000 to 30,000 ft2

Loc

• cation
• n

Trade locations 2nd or 3rd tier retail High grade commercial 2nd tier retail

In Initial le l lease term erm

Average ~5-10 years Average ~15 years

WA WALE†

~7 years ~10 years

Aver erage ge re rent / ft2

£6 to £10 / ft2 £14 to £16 / ft2

Prop

• perty c

y cos

• sts

Low

• w

Low

• w

† Weighted Average Lease Expiry excluding break clauses

* Value of Leasehold portfolio calculated at 7% yield

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2 4 6 8 10 12 14 16 18 20 0* 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18+ Rent ent v value ( ue (£m) Out utstand nding ng Lea ease t e ter erm ( (Yea ears)

Activ tivel ely s shorten tenin ing g WALE† over tim er time

• 30% of rental expense expires within the next 5 years (~45% < 7 years expiry)
• Opportunity to optimise the portfolio to achieve the Group strategy

† Weighted Average Lease Expiry excluding break clauses

* Leases in an on-going rolling period

Expiry within 5 years = 30% Expiry within 7 years = 45%

Weighted average lease expiry† December 2014 = 9.5 years

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• 5

10 15 20 25 30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Pro roperty ty Pro rofits fits R Realis lised (£m)

Prope

• perty i

is cr creat ating an an ong

• ngoi
• ing

ng pr prof

• fit s

stream am

• Growing portfolio; organic and through acquisition
• Optimisation of the portfolio
• Increased focus on realising property benefits
• Profit & cash stream during economic uncertainty

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Re Recy cycling ng capi capital al t thr hroug

• ugh por

h portfolio

• manag

manageme ment nt

Freehold activity since 2008 £m Cumulative Cash spent

(156)

Cumulative Cash received

148

Net Cash spend

(9)

Change in NBV* (2008 to 2014)

106

Cumulative profit recognised

103

*Excludes capital appreciation on held properties

Properties acquired Paddington Travis Perkins Existing Warrington Range Centre New Richmond Travis Perkins Existing Putney Travis Perkins Existing Croydon CCF New Properties disposed Farnham Travis Perkins Relocation Eastleigh Travis Perkins Relocation Balham Travis Perkins Relocation Lymington Travis Perkins Relocation Chelmsford Travis Perkins Downsize Capital released – freehold maintained St Pancras Travis Perkins Development

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HOW WE W WE OPER ERATE TE.

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Site ite need eeds to to b be o e optim timal for th r the e busin ines ess

• Business appraisal – site selection is

based on optimal site for the business

• Optimise existing sites: Trade parks &

implants – Additional sales without increasing capital

employed through property

• Conduct in-depth local property

searches

• Comprehensive list of potential sites

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Gravity mode modelling ng dr drives cat catchme hment nt anal analysis

Analysis drives catchment selection for new locations and informs closure decisions

Gravit ity m model el in inputs

• Mortgaged/owner occupied

housing stock

• Size and type of housing
• Type & age of occupants
• Household income
• Local area demographics

Des esir irable m e market ket character eris istic ics

• Not currently served by TP
• Limited competition
• Favourable demographics
• Low cannibalisation
• Model gives market expectations
• Priority list of catchments

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Site acqui acquisition

• n and de

and developme

• pment
• Site availability
• Leasing negotiation
• Freehold negotiation
• Due diligence process
• Legal requirements
• Transaction completion
• Manage project through

capital sign-off process

Freehold / Leasehold decision Site development Stakeholder management Branch

• pening
• Build from scratch
• Refurbish or adapt

existing buildings

• Site design including

access, multi-use, specialist building design and stay-safe

• Selection of contractors
• Project management of

all building works

• Local councils and

planning authorities

• Community groups
• Lobbyists
• Customers
• Suppliers
• Building contractors
• Highways agencies
• Archaeologists
• Branch design – interior

shop area and external yard

• Branch fit out – racking

placement (interior and exterior)

• Focus on customer,

supplier and employee safety

• On-going maintenance

support

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Succe uccess t to-dat date i in n Cons

• nsume

umer

Optimising the Wickes store in Folkestone

• Move store location
• Downsized from 40,000ft2 to 25,000ft2
• Reduced property costs but increased

turnover and returns Fast expansion of the Toolstation network

• Good availability of < 5,000ft2 units
• Large number of appropriate catchments

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Re Rebal balanci ancing ng t the he por portfolio

Three examples:

• 14 sites converted from Keyline to TP
• P&H re-segmentation programme
• Tile Giant small box conversions

Switc tchi hing ng site tes be betw tween n br brands nds Business decisions drive property activity Impla lants nts into nto existi ting ng br branc nche hes

• Develop new businesses without increasing
• verall property costs

– Tool Hire – Heating spares – Managed Services

• Utilise excess space in existing branches

– Benchmarx - implants in TP – Toolstation - 21 implants in Wickes

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Optim timis isin ing th g the e portf tfolio lio – Trade ade P Par arks

• Maximise returns from a single site by co-location
• Driving shared footfall
• Planning for the future – maximise flexibility

Comparison of Trade park versus standalone TP Travis Perkins Trade Park Typical site freehold value £2m to £5m £5m to £8m Typical LAROCE at maturity 25% 25%+ Typical site size 1 to 1.5 acres up to 5 acres

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Freeho hold d opt

• ptimi

misation oppor

• n opportuni

unities

• Further opportunities to extract capital for redeployment
• Sales uplift from implants in TP branches
• Original freehold purchased in 1982
• Positive outcomes of property development:

– New format, high-performing branch – Benchmarx implant – Freehold ownership maintained – £24m of capital released over 3 years through

facilitating student accommodation development

– No net cost incurred

Freeh eehold op

• ptimisa

sation

• n – tr

trans nsform rmati tion n of Travis Perki rkins ns – St t Pancr ncras

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CRE REATING NG VALUE IN E IN TH THE E FUT UTUR URE.

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Expandi panding ng the he T TP / / Be Benc nchmar hmarx e estat ate

Guidance dance

• Expand the branch network

5 - 15 branches p.a.

• Centralised distribution enables smaller branches
• ~150 sites would benefit from relocation
• Replenish property pipeline
• Expand the branch network

30+ branches p.a.

• Utilise excess TP space – increase sales density

and intensify returns

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Guidance dance

• Expand the network

10 - 15 branches p.a.

• Planning consents
• Branch relocations
• Average store size ~25,000 ft2
• Freehold development increases ability to access
• ptimal sites at pace
• Significantly expand the branch network

30+ branches p.a.

• Conforming leasehold sites (avg. store < 5,000ft2)

Growi wing ng t the he Cons

• nsume

umer b bus usine ness

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Fillin illing o g out t th the e Co Contr tracts n netw etwork rk

• ‘Mini warehouses’
• Capacity is critical

– Use new racking to increase stock intensity

• Keyline – optimise branch locations with TP

– Site switching between Keyline and TP – Open new capital efficient branches

• CCF – additional branches needed to

achieve national coverage

• BSS – maintain leading network

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Re Re-segme ment nting ng t the he P&H br brands ands

CPS PS 201 2014 PTS TS 201 2014 CPS PS 201 2016 PTS TS 201 2016 180 conversions (180) conversions (50) closures

~18 180 branc nch c h conver ersions ns

• v
• ver 2

2 ye years

~190 branches ~310 branches ~380 branches ~80 branches

(10) store closures 20 new stores

• Assessment of existing

locations

• PTS moving to depot /

logistics model

• CPS sites placed to

attract tradesmen (trade desk) and end-customer (showroom)

• 14 week end-to-end

branch conversion process

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• 5

10 15 20 25 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Prop ropert rty P y Prof rofit its R Realis ised ( (£m)

Creat ating ng a a sus ustai ainab able pr prope

• perty pr

prof

• fit s

stream am

• Overall goals of the property team are
• To provide the business with the best

located sites – secured for the long term

Limited focus on property portfolio management Ramp up Sustainable profits and cash On-going profits from property of ~£20m p.a.

• Add value through freehold development
• Recycle cash to re-invest in the business

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Key ey m mes essages ges

Mark arket t frag agmentati tation

1

Str Structu tural al ad advan antag tages

2

Su Superi rior r prop

• pos
• sitions

3

• Hundreds of catchment opportunities exist across our business
• Opening new branches and optimising existing sites are fundamental enablers for our businesses to take

market share

• Group size and balance sheet strength allows us to access more sites at a lower ultimate cost
• Ability to develop freehold sites is an additional source of value generation
• Flexibility between brands allows us to optimise sites and provides flexibility during an economic downturn
• We can create superior propositions through co-location of multiple businesses on a single site
• Co-location provides a cost advantage and creates a customer destination giving improved maturity profiles,

a larger customer pool, and generates overall higher returns

Property strategy supports Group business strategy + earns a sustainable profit stream

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LA LAROCE +40bp 0bps to 10. 0.4%

QUES ESTIO TIONS NS.

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AP APPEN ENDI DIX.

I. I. Histori rical pr prope perty val alue cr creat ation

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• I. His

isto toric rical p l proper erty v valu lue c e crea eatio tion

(£m) 2008 2008 2009 2009 201 2010 201 2011 201 2012 201 2013 201 2014

Cumul umulative ve chan ange ge

Freehold NBV (opening) 220.4 235.6 226 226.5 239 239.5 26 262. 2.3 265. 5.5 287. 7.3

• Additions

18.0 2.5 10.5 29.7 10.9 32.3 42.9 146.8

• Acquisitions

1.8

• 7.1
• 0.3

0.4 9.6

• Disposals

(0.4) (7.6) (0.6) (2.4) (3.1) (5.6) (0.2) (19.9)

• Depreciation

(4.2) (4.0) (4.0) (4.5) (4.6) (5.2) (4.3) (30.8)

Freeho hold N d NBV BV (closing ng) 235 235.6 226 226.5 239 239.5 26 262. 2.3 265. 5.5 287. 7.3 326 326.1

105.7 .7

Ca Cash h rece ceived d from di disposals 14. 4.9 20. 0.8 17. 7.2 15. 5.0 32. 32.3 16. 6.9 30. 0.8

147 47.9 .9

Pro rope perty ty pro profi fits ts r recognised 5. 5.5 11. 1.2 11. 1.5 16. 6.3 15. 5.0 17. 7.4 26. 6.2

103. 3.1

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CO CONTACT CT.

in inves estor.r .rel elatio ions@travis isperk erkin ins.co .co.u .uk Graeme eme Barn rnes es | | +44 7 7469 4 401 819 gr graeme eme.b .barn rnes es@travis isper erkin ins.c .co.u .uk Matt tt Johns hnson

• n | +4

+44 7584 4 491 2 1 284 ma matt.j .johnson@travis isperk erkin ins.co .co.u .uk

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