Travis Perkins plc The largest supplier of building materials in the - - PowerPoint PPT Presentation

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Travis Perkins plc The largest supplier of building materials in the - - PowerPoint PPT Presentation

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Travis Perkins plc The largest supplier of building materials in the UK Year ended 31 December 2011 1 Highlights of the year Market weakened through the year, driven by pressure on consumers and public sector cuts Our

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1

Travis Perkins plc

“The largest supplier of building materials in the UK”

Year ended 31 December 2011

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2

Highlights of the year

  • Market weakened through the year, driven by pressure on consumers

and public sector cuts

  • Our outperformance accelerated, with share gains increasing from

competitor failures, superior LFL growth and moderate network expansion

  • Successful integration of BSS, with synergies ahead of target, and

completion of ToolStation transaction at year end

  • Good financial performance with increases in Group revenue,
  • perating profits, earnings, dividend and cash flow
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3

Financial overview

2011 Turnover £4,779m 51.6% 4.6% Operating profit (before exceptional items) £313m 31.0% 3.5% Operating margin (before exceptional items) 6.6% (1.3)% 0.0% Adjusted profit before tax (before exceptional items) £297m 36.9% 8.5% Profit before tax (after exceptional items) £270m 37.0% 35.1% Adjusted earnings per share 93.1p 20.6% 10.7% Dividend 20.0p 33.3% Free cash flow £294m 5.8% Net debt £583m % movement proforma % movement

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4

Revenue boosted by BSS and strong pricing

%

Trading days

(0.3) Volume (Merchanting 3.9%, Retail (4.2)%) 1.3 Price (Merchanting 5.5%, Retail 2.9% & BSS 4.5%) 4.7

Like-for-like

6.0 Merchanting expansion 1.3 Retail expansion 0.9 BSS acquisition 43.7

Expansion

45.9

Total

51.6

£4,779m £3,153m

2010 Trading days Volume Price Merchanting expansion Retail expansion BSS acquisition 2011

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5

H2 proforma like-for-like in line with Q2

H1 H2 Full Year

(All figures are % change on prior year)

2011 2011 2011 General 10.3 8.4 9.3 Specialist 11.4 7.9 9.6

Merchanting

10.7 8.2 9.4

Retail

0.3 (3.0) (1.3)

BSS

3.0* 2.7* 2.9*

Group

5.9** 4.1** 5.0**

* Excluding major new contract: BSS LFL would be 1.2% for H1, (0.3)% for H2 and 0.5% for 2011 ** Excluding major new contract: Group LFL would have shown H1 LFL as 5.3%, 3.2% for H2 and 4.3% for 2011

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6

Positive LFL trends, dampened a little by snow

7 weeks

(All figures are % change on prior year and delivered sales unless stated)

2012

General Merchanting

5.4

Specialist Merchanting

3.9

Consumer** [ordered] / delivered

(3.1)

Plumbing & Heating*

0.9

Group* [ordered] / delivered

1.8

*Excluding the effect of the major new contract P&H LFL would be (0.9)% and the Group LFL would be 1.1%. **Excludes ToolStation which is non LFL until 2013. Inclusion of ToolStation’s own LFL performance would increase the Consumer division’s ordered LFL to 2.7%.

[0.9] [2.5]

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7

2011 results by division (in 2011 structure)

Sales £2,337m 10.9% £1,436m (1.5)% £1,018m 1.5% Profit £196m 0.6% £54m (10.7)% £46m (23.3)% Margin 8.4% (0.4)% 3.8% (0.4)% 4.5% (1.4)% Profit with synergies £202m 9.4% £67m 9.5% £46m (23.3)% Margin with synergies 8.6% (0.2)% 4.6% 0.4% 4.5% (1.4)% People 10,047 4.2% 5,189 4.9% 6,187 2.1% Sites 1,028 4.8% 404 (9.4)% 436 13.0% Productivity 237 3.9% 279 4.3% 180 (1.0)% Merchanting BSS Retail

Note: Consistent with prior year reporting, these figures include £10m of group costs which for 2012 onwards will be shown separately in figures for the new divisions. Figures for the new division structure shown on slides 22-25 do not, therefore, include these group costs.

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8

Proforma margin held in line with last year

Merchanting Retail Pre BSS BSS Group

(All numbers are before exceptional items)

% % % % % 2010 operating margin 8.8 5.9 7.8 4.2 6.6 Gross margin (0.8) 1.3 (0.4) 0.1 0.1 Overheads 0.3 (2.7) (0.4) (0.5) (0.6) Property profits 0.1

  • 0.1
  • 0.1

2011 operating margin before synergies 8.4 4.5 7.1 3.8 6.2 Synergies 0.2

  • 0.2

0.8 0.4 2011 operating margin 8.6 4.5 7.3 4.6 6.6

196.2 45.5 54.4

Merchanting Retail BSS

184.4 59.3 60.8

Merchanting Retail BSS

2011 operating profit before synergies (£m) 2010 operating profit (£m)

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9

Continued overhead expenditure investment in initiatives

£1,109m £8m £26m £2m £27m £21m £3m £1,038m

2010 Inflation Variable related to volume Expansion – launch and

  • ngoing
  • perating costs

Support for

  • rganic growth

Other Disposals 2011

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10

Strong free cash flow conversion

(All figures are £'million, unless stated)

2011 2010 Operating profit 313 239 Depreciation and amortisation 64 57 Other non-cash movements 15 10 Gain on disposal of property, plant & equipment (18) (11) Movement in working capital 9 48 Replacement capital expenditure (55) (24) Operating cash flow 328 319 Net interest paid (23) (16) Income taxes paid (26) (42) Proceeds from sale of fixed assets 15 17 Free cash flow 294 278 Free cash flow conversion 94% 116%

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11

£186m of underlying net debt reduction

(All figures are £'million)

2011 2010

Free cash flow 294 278 Dividends (39) (10) Expansion capital expenditure & acquisitions (56) (29) Loan to associates (2) (12) Pension contributions (20) (18) Cash flow 177 209 Non-cash movements 8 (7) Exchange rate movement 1 3 Underlying net debt reduction 186 205 Acquisitions (8) (295) Net debt arising on BSS acquisition

  • (175)

Pension SPV

  • (35)

Sale of business 27

  • Bank fees paid

(6)

  • Issue of shares

10

  • Exceptional items

(18) (7) Net debt at 1 January (774) (467) Reported net debt at 31 December (583) (774)

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12

Net debt : EBITDA ratio improved further (1.73x at H1)

(All figures are £'million, unless stated)

2011 2010 Tangible fixed assets 563 528 Other fixed assets 2,148 2,157 Net working capital 252 263 Taxation creditors and provisions (237) (202) Net debt (583) (774) Net pension deficit (35) (20) Net assets 2,108 1,952 Key ratios (covenant basis) Adjusted interest cover 15.4x 18.9x Adjusted net debt / EBITDA 1.30x 1.92x Gearing (covenantable net debt) 23.1% 36.0% Working capital : sales (incl. BSS pro-forma) 5.3% 5.8%

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13

ToolStation

  • 2011 Turnover £104m
  • Net assets £8m
  • H1 EBIT breakeven
  • H2 EBIT £1.7m
  • Working capital to sales 0.7%
  • Current investment £41m and loan £37m
  • Future additional investment £75m
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14

Guidance

  • Sales
  • Emphasis on gross margin
  • Property profits
  • Tight cost base
  • ToolStation and ex-Focus stores
  • Increased synergy guidance £30m in 2012
  • One–offs
  • Bank refinance
  • Working capital
  • Year-end debt
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15

New structure

General Merchanting Consumer Specialist Merchanting Plumbing and Heating

Group

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General Merchanting - Strong sales overcoming margin pressure

Positioning

  • Market leader (17% share)
  • No.1 national rated merchant proposition

Performance

  • Strong sales growth, outperforming the market
  • Organic development
  • H2 emphasis on gross margins

Focus for 2012

  • Continuous improvement of customer proposition
  • Drive efficiency from Supply Chain investments
  • Push further category management initiatives

Divisional Chairman – Joe Mescall

2011 proforma Sales £1,451m Profit with synergies £165m Margin with synergies 11.6% People 7,478 Sites 629

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17

Specialist Merchanting – Deepen our focus to drive performance

Positioning

  • Businesses in rising No.2 or No.3 positions
  • No.1 rated propositions in each market

Performance

  • Strong CCF sales and profit outperformance
  • Keyline recovered strongly from sector trough
  • Benchmarx network growth through implants
  • Successful Buck & Hickman sale

Focus for 2012

  • Drive sector specialism
  • Further category management
  • Enhance accuracy of service (e.g. OTIF)

Divisional Chairman – Arthur Davidson

2011 proforma Sales £660m Profit with synergies £31m Margin with synergies 4.7% People 1,548 Sites 209

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18

Consumer – Driving strong propositions, but weak market

Positioning

  • Wickes No.3
  • ToolStation and Tile Giant No.2
  • No.1 rated propositions in each channel

Performance

  • Sales growth outperforming the market
  • Strong gross margin
  • Ex-Focus stores trading well
  • Restructured Wickes cost base in H2

Focus for 2012

  • Expand ToolStation
  • Drive full year sales and profits from ex-Focus stores
  • Exploit direct sourcing
  • Enhance systems e.g. stock auto-replenishment

Divisional Chairman – Jeremy Bird

*Excludes ToolStation

2011 *proforma Sales £1,018m Profit with synergies £46m Margin with synergies 4.5% People 6,187 Sites 328

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SLIDE 19

Positioning

  • No.1 plumbing & heating merchant
  • No.1 rated proposition

Performance

  • Strong industrial / commercial performance
  • Boiler scrappage scheme impact
  • British Gas contract win
  • Synergies (£m):

Focus for 2012

  • Expand toolhire implants
  • Harmonise technology with Group IT
  • Invest in roll-out of new concept bathroom showrooms

19

P&H – Creation of the market leader

2011 2012 2013 Original forecast 8 12 25 Update at July 2011 15 25 25 Latest view 20 30 30

Divisional Chairman – Paul Tallentire

2011 proforma Sales £1,662m Profit with synergies £81m Margin with synergies 4.9% People 6,168 Sites 594

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20

All Divisions supported by central initiatives

Focus of Initiative

Category Management Direct Sourcing Multi-Channel Capabilities & Expansion

Operating Margin Proposition Share Gain

Supply Chain Customer Services Trade Parks and Implants Colleague Safety & Engagement Supply Chain Capability & Technology Own Brand Expansion CRM Capability and Technology Retail Space Release

Asset Turn

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21

Driving for even stronger performance

  • Strengthen propositions
  • Enhance operating margin
  • Upgrade processes and systems
  • Exploit direct sourcing and own-brand products
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22

Strategy refresh

Travis Perkins is now the largest UK supplier of building materials

Source: TP Analysis of publicly available data for 2010. Data for TP adjusted to consolidate turnover of associates of the Group. Data for Kingfisher includes sales of general merchandise and is not therefore all building materials.

Ridgeons Burdens Howden SIG Grafton

  • St. Gobain

Wolseley Kingfisher Travis Perkins

Sales

Ridgeons Burdens Howden SIG Grafton

  • St. Gobain

Wolseley Kingfisher Travis Perkins

Adjusted EBIT

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23

Strategy refresh

We have a well balanced business across the market

General Merchanting Specialist Merchanting Consumer Plumbing & Heating

Sales Sales

Collected Delivered

Sales EBIT

Timber Forest Products Heavy BM Lightside Plumbing & Heating Toolhire Multi-channel

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Our prospects remain strong

  • Our markets retain good medium to long term drivers of growth
  • Under investment in existing stock of buildings
  • Growth in population and household formation
  • Need to upgrade infrastructure
  • Carbon agenda drives spend in old and new building technologies

……….but recovery is being held back…………..

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…by short term headwinds…

  • Construction still in a trough – output expected to decline by up to 5%

in 2012 (distributors’ market will do better due to mix factors)

  • However, 2009 – 2013 aggregate output has not changed

significantly from the immediate post-Lehman’s forecast

  • Sense that activity is close to subsistence levels – they could fall from

here for a short period, but latent demand is strong ...especially in housing...

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Public sector cuts to construction are delaying return to growth

(8,000) (6,000) (4,000) (2,000) 2,000 4,000 6,000 8,000 10,000 12,000 2010 2011 2012 2013 2014 2015 OUTPUT £M (Constant prices 2005) YEAR Private Housing (New build and R&M) Public Infrastructure Commercial & Industrial Private Non Housing R&M

Source: TP Analysis of CPA forecasts.

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27

Aggregate construction output has hardly varied

Progression of Annual Industry Forecasts

FORECAST PERIOD £bn 2008- 2012 total (exc 2009) Winter 2011 £533 Autumn 2011 £531 Summer 2011 £532 Winter 2010 £532 Summer 2010 £530 Winter 2009 £529 Summer 2009 £528 Winter 2008 £527

Source: TP Analysis of CPA forecasts.

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SLIDE 28

Strong latent demand in housing

CPA view Experian view

28

Additional housing gap (2011-15) 672,000

  • Overall, 121,500 net new houses in 2011
  • 267,000 new households per annum
  • 1.3m households in 5 years
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29

Our prospects remain strong

  • Our markets retain good medium to long term drivers of growth
  • Significant opportunity now to drive profits, operating margin and

cash

  • Further profitable network expansion opportunities give 5-7 years

growth

  • Low risk / low capital opportunities to establish case for new ventures
  • Adjacent channels
  • Upstream / downstream
  • International via, for example JV / Franchise
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SLIDE 30

Proposition

Significant opportunity now to drive profits, operating margin and cash

Operating Margin Proposition Asset Turn Share Gains

30

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SLIDE 31

Proposition

Significant opportunity now to drive profits, operating margin and cash

31

Operating Margin Proposition Asset Turn Share Gains

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SLIDE 32

Proposition

Significant opportunity now to drive profits, operating margin and cash

Operating Margin Proposition Asset Turn Share Gains

32

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33

Current network expansion potential is c. 3000

Current branches Potential branches

1827

CCF

BPT

All Brands

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34

…and owned trade parks will increase brands’ attractiveness

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35

Travis Perkins plc

“The largest supplier of building materials in the UK”

Year ended 31 December 2011

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36

Appendix

Travis Perkins plc further analysis

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37

Facilities

66% 34%

Fixed Floating

74% 26%

Bank loans Unsecured Senior Notes

Facility

  • 100

200 300 400 500 600 < 1 year 1 - 2 years 2 - 5 years > 5 years £m

Bank Unsecured Senior Notes

Interest Facility maturity profile

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38

Interest

2011 Net debt movement Implied forward rate increases Higher margin BSS debt IFRS Elimination of ToolStation interest received Derivative gains OFIC 2012

£16m £30m-£35m

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39

Number of shares for EPS calculation

2012 2011 Number of shares 237,709,697 235,151,104

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SLIDE 40

Analysis of turnover

40

Merchanting Retail BSS Heavyside-50% (2010:49%) Lightside-32% (2010:32%) Timber & FP-16% (2010:17%) 2%(2%) Credit-80% (2010:79%) Cash-20% (2010:21%) Yard-84% (2010:85%) Direct-16% (2010:15%) North-21% (2010:21%) South East-32% (2010:32%) South West -22%(2010:23%) Midlands-25% (2010:24%) Lightside-62% (2010:63%) Timber &FP-22% (2010:21%) Heavyside-16% (2010:16%) Collected-66% (2010:66%) Delivered-34% (2010:34%) South East-41% (2010:41%) North-19% (2010:19%) Midlands-24% (2010:24%) South West-16% (2010:16%) RMI-100% (2010:100%) RMI-51% (2010:52%) New Housing-27% (2010:27%) Other New -23% (2010:21%) Credit-90% (2010:90%) Cash-10% (2010:10%) South East-20% (2010:19%) North-36% (2010:35%) Midlands-25% (2010:25%) South West-6% (2010:16%) Delivered-57% (2010:57%) Collected - 43% (2010:43%) RMI-61% (2010:56%) New Housing-23% (2010:28%) Other New -16% (2010:16%) P&H-93% (2010:93%) Lightside-7% (2010:7%)

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SLIDE 41

New - Public Sector, 8% New - Infrastructure, 3% New - Industrial, 2% New - Commercial, 5% New - Private Sector, 19% RMI - Merchanting - Public Sector, 10% RMI - Merchanting - Private Sector, 31% RMI - Retail, 22%

Analysis of turnover

41

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SLIDE 42

Merchanting Retail BSS

42

Employee productivity

£290k £182k £198k £216k £215k £228k £237k £180k £186k £292k 2008 2009 2010 2011 2008 2009 2010 2011 2010 2011

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SLIDE 43

TP BSS

(All figures are £'million)

scheme schemes Group Gross asset / (deficit) at 1 January 2011 32 (60) (28) Service costs charged to P&L (4) (4) (8) Contributions 19 8 27 Other finance income 11 1 12 Actuarial loss (39) (10) (49) Gross deficit at 31 December 2011 19 (65) (46) Deferred tax (5) 16 11 Net deficit at 31 December 2011 14 (49) (35)

43

Pension deficit increased due to declining gilt yields

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44

Summary of branch and store numbers

31-Dec Acquisition Brownfield Consolidation OFT Disposals 31-Dec Travis Perkins (General) 625

  • 9

(5)

  • 629

Keyline 80

  • 8
  • 88

CCF 30

  • 30

Rinus Roofing Supplies

  • 5

2

  • 7

Benchmarx 52

  • 32
  • 84

Specialist 162 5 34 8

  • 209

Wickes * 201 13 10 (3)

  • 221

Tile Giant 101

  • 7

(1)

  • 107

Toolstation ** 84

  • 24
  • 108

Consumer 386 13 41 (4) 436 Plumbing Trade Supplies 317

  • 17

(2) (15) 317 BSS Industrial 63

  • (1)
  • 62

City Plumbing 194

  • (1)

(3) 190 Direct Heating Spares 1

  • 1

F&P Wholesale 11

  • 11

Other BSS business *** 44

  • 1

(32)

  • 13

UGS 10

  • (10)
  • BSS

640

  • 18

(46) (18) 594 Group 1,813 18 102 (47) (18) 1,868

* includes 10 (2010: 5) stand-alone K&B Show rooms and 1 franchise store in Ireland (2010: 1) ** includes 5 (2010: 5) franchise stores in The Netherlands *** includes disposal of 29 Buck & Hickman branches

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45

Travis Perkins plc

“The largest supplier of building materials in the UK”

Year ended 31 December 2011