[PPT] - Travis Perkins plc Travis Perkins plc Financial Results Financial PowerPoint Presentation

SLIDE 1

1

Travis Perkins plc Travis Perkins plc

Financial Results Financial Results Year ended 31 December 2005 Year ended 31 December 2005

SLIDE 2

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Geoff Cooper Geoff Cooper

Chief Executive Chief Executive

SLIDE 3

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Highlights Highlights

Highest margins in retail sector

Highest margins in retail sector

Record rate of network expansion achieved

Record rate of network expansion achieved

Wickes synergies and buying gains achieved

Wickes synergies and buying gains achieved

Strategy to capitalise on considerable UK

Strategy to capitalise on considerable UK growth opportunity growth opportunity

Early signs of a more stable market in 2006

Early signs of a more stable market in 2006

Merchanting growth sustained

Merchanting growth sustained

SLIDE 4

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Paul Hampden Smith Paul Hampden Smith

Finance Director Finance Director

SLIDE 5

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Financial highlights Financial highlights

Turnover Turnover £2,640.8m £2,640.8m +44.4% +44.4% Operating profit Operating profit £268.0m £268.0m +23.1% +23.1% Profit before tax Profit before tax £206.7m £206.7m +0.1% +0.1% Free cash flow Free cash flow £226.1m £226.1m +50.0% +50.0% Basic earnings per share Basic earnings per share 116.8p 116.8p

6.1%

6.1% Dividend Dividend 34.0p 34.0p +11.5% +11.5%

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Summary income statement Summary income statement

Non Non-

Wickes

Wickes Impact of Impact of 2005 2005 2004 2004 Change Change related related Wickes Wickes £m £m £m £m £m £m £m £m % %

Turnover Turnover 1,881.0 1,881.0 759.8 759.8 2,640.8 2,640.8 1,828.6 1,828.6 44.4 % 44.4 % Operating profit Operating profit 208.3 208.3 59.7 59.7 268.0 268.0 217.7 217.7 23.1 % 23.1 %

Operating margin Operating margin 11.1% 11.1% 7.9% 7.9% 10.1% 10.1% 11.9% 11.9% Net Net finance costs finance costs (7.8) (7.8) (49.8) (49.8) (57.6) (57.6) (8.4) (8.4) Other finance costs Other finance costs (2.6) (2.6) (1.1) (1.1) (3.7) (3.7) (2.8) (2.8)

Profit before tax Profit before tax 197.9 197.9 8.8 8.8 206.7 206.7 206.5 206.5 0.1 % 0.1 % Basic earnings per share Basic earnings per share 116.8p 116.8p 124.4p 124.4p (6.1)% (6.1)% Dividend per ordinary share Dividend per ordinary share 34.0p 34.0p 30.5p 30.5p 11.5 % 11.5 % Dividend cover Dividend cover 3.4x 3.4x 4.1x 4.1x

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Strong pricing and Strong pricing and acquisitional acquisitional growth growth

Trading days Trading days (0.4)% (0.4)%

______________ ______________

Volume Volume (5.2)% (5.2)% Price Price 4.3 % 4.3 %

______________ ______________

Like Like-

for

for-

like

like (0.9)% (0.9)%

______________ ______________

Expansion 2004 Expansion 2004 2.1 % 2.1 % Expansion 2005 Expansion 2005 2.0 % 2.0 % Wickes Wickes 41.6 % 41.6 %

______________ ______________

Expansion Expansion 45.7 % 45.7 %

______________ ______________

Total Total 44.4 % 44.4 %

______________ ______________

2004 Trading days Volume Price 2004 FYE 2005 Wickes 2005

£1,828.6m £1,828.6m £2,640.8m £2,640.8m

One-off expansion

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Trade market stronger than consumer sectors Trade market stronger than consumer sectors

Like Like-

for

for-

like, %

like, % Total, % Total, % Merchant Merchant (1)

(1)

Generalist Generalist 0.2 0.2 4.7 4.7 Specialist Specialist (2.7) (2.7) (0.4) (0.4)

____________ ____________ ____________ ____________

Total Total (0.9) (0.9) 2.9 2.9

____________ ____________ ____________ ____________

Retail Retail (2)

(2)

Core Core (6.8) (6.8) (5.7) (5.7) Showroom Showroom (13.6) (13.6) (10.9) (10.9)

____________ ____________ ____________ ____________

Total Total (7.9) (7.9) (6.6) (6.6)

____________ ____________ ____________ ____________

Group total Group total (2.6) (2.6) 44.4 44.4

(1) (1) Per trading day Per trading day (2) (2) 53 weeks to 31 December 53 weeks to 31 December

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Operating margin impacted by expansion Operating margin impacted by expansion

2004 Wickes dilution New openings Trading margin 2005

11.9% 11.9% 10.1% 10.1% 2004 margin 2004 margin 11.9 % 11.9 % Wickes dilution Wickes dilution (1.2)% (1.2)% New openings New openings (0.2)% (0.2)% Trading margin Trading margin (0.4)% (0.4)% Overheads Overheads 0 % 0 %

______________ ______________

2005 margin 2005 margin 10.1 % 10.1 %

______________ ______________

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Stretched buying gains deliver out Stretched buying gains deliver out-

performance

performance

Initial synergy list Stretched buying gains 2006 synergy target 2006 stretched target

2005 2005 target target 2005 2005 2006 2006 2006 2006

riginal
riginal

target target

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22.0% 14.4% 25.0% 25.5% 24.0% 21.5% 19.8% 23.8% 29.8% 1998* 1999* 2000* 2001* 2002* 2003* 2004 2005 2005

Dilution from expansion recovers steadily Dilution from expansion recovers steadily

Merchanting Merchanting

nly
nly

Group Group

Return on average capital employed Return on average capital employed

* 1998 * 1998-

2003

2003 – – UK GAAP UK GAAP

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Higher merchanting productivity per employee Higher merchanting productivity per employee

£160k £171k £182k £192k £196k

2001 2002 2003 2004 2005

Year ended 31 December (excluding Wickes) Year ended 31 December (excluding Wickes)

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Healthy interest cover Healthy interest cover

2005 2005 2004 2004 £m £m £m £m

Tangible fixed assets Tangible fixed assets 449.3 449.3 344.9 344.9 Other fixed assets Other fixed assets 1,436.3 1,436.3 304.8 304.8 Net working capital Net working capital 103.3 103.3 195.0 195.0 Taxation creditors, dividends, provisions & other Taxation creditors, dividends, provisions & other (148.6) (148.6) (73.6) (73.6) Net debt Net debt (982.4) (982.4) (30.7) (30.7) Pension deficit Pension deficit (99.9) (99.9) (89.8) (89.8) ______ ______ ______ ______

Net assets Net assets 758.0 758.0 650.6 650.6

______ ______ ______ ______

Key ratios Key ratios

Interest cover (times) Interest cover (times) (UK GAAP basis)

(UK GAAP basis)

4.9 4.9 25.9 25.9 Net debt / EBITDA (times) Net debt / EBITDA (times) (UK GAAP basis)

(UK GAAP basis)

2.9 2.9 0.1 0.1 Balance sheet gearing Balance sheet gearing (IFRS basis)

(IFRS basis)

129.6% 129.6% 4.7% 4.7%

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Debt diversified via US private placement Debt diversified via US private placement

Before Before After After Amortisation period Amortisation period US PP US PP US PP US PP £m £m £m £m

Facility with UK banks Facility with UK banks 1,200 1,200 970 970 2 2-

5 years

5 years Debt with US banks Debt with US banks

230

230

7 & 10 year non 7 & 10 year non-

amortising

amortising ______ ______ ______ ______

Total debt facility Total debt facility 1,200 1,200 1,200 1,200 Interest rate swaps Interest rate swaps

Fixed interest 37%, Cap & collar 18%, Floating 45% (based on yea

Fixed interest 37%, Cap & collar 18%, Floating 45% (based on year end r end unsecured facilities) unsecured facilities)

All US debt swapped into floating Sterling

All US debt swapped into floating Sterling

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Decreased pension deficit Decreased pension deficit

Travis Perkins Travis Perkins Wickes Wickes Total Total £m £m £m £m £m £m Deficit at 1 January 2005 Deficit at 1 January 2005 (128.3) (128.3)

(128.3)

(128.3) Deficit at date of acquisition Deficit at date of acquisition

(45.4)

(45.4) (45.4) (45.4) Service costs charged to P&L Service costs charged to P&L (11.6) (11.6)

(11.6)

(11.6) Other finance costs Other finance costs (2.6) (2.6) (1.1) (1.1) (3.7) (3.7) Contributions Contributions 40.2 40.2 3.6 3.6 43.8 43.8 Actuarial gain / (loss) Actuarial gain / (loss) 1.5 1.5 0.9 0.9 2.4 2.4

____________ ____________ ____________ ____________ ____________ ____________

Gross deficit at 31 December 2005 Gross deficit at 31 December 2005 (100.8) (100.8) (42.0) (42.0) (142.8) (142.8) Deferred tax asset Deferred tax asset 30.3 30.3 12.6 12.6 42.9 42.9

____________ ____________ ____________ ____________ ____________ ____________

Net deficit at 31 December 2005 Net deficit at 31 December 2005 (70.5) (70.5) (29.4) (29.4) (99.9) (99.9)

____________ ____________ ____________ ____________ ____________ ____________

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Free cash flow up 50% Free cash flow up 50%

Operating profit Operating profit 268.0 268.0 217.7 217.7 Depreciation Depreciation 54.5 54.5 33.4 33.4 Other non Other non-

cash movements

cash movements 2.4 2.4 (0.3) (0.3) Gain on disposal of property, plant and equipment Gain on disposal of property, plant and equipment 0.7 0.7 (0.4) (0.4) Movement in working capital Movement in working capital 13.7 13.7 (1.7) (1.7)

__________ __________ __________ __________

Cash flow from operations Cash flow from operations 339.3 339.3 248.7 248.7 Net interest paid Net interest paid (38.2) (38.2) (8.0) (8.0) Income taxes paid Income taxes paid (47.0) (47.0) (54.2) (54.2) Replacement capital expenditure Replacement capital expenditure (28.0) (28.0) (35.8) (35.8)

__________ __________ __________ __________

Free cash flow Free cash flow 226.1 226.1 150.7 150.7

__________ __________ __________ __________

Year ended Year ended Year ended Year ended 31 Dec 2005 31 Dec 2005 31 Dec 2004 31 Dec 2004 £m £m £m £m

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Net debt reduced by £71m from Net debt reduced by £71m from proforma proforma peak peak

Free cash flow Free cash flow 226.1 226.1 150.7 150.7 Dividends Dividends (38.6) (38.6) (30.0) (30.0) Expansion capital expenditure Expansion capital expenditure (42.2) (42.2) (29.3) (29.3) Acquisition of businesses Acquisition of businesses (1,045.5) (1,045.5) (39.0) (39.0) Wickes finance leases acquired Wickes finance leases acquired (20.0) (20.0)

Shares issued

Shares issued 6.4 6.4 90.6 90.6 Purchase of own shares Purchase of own shares (8.1) (8.1)

Special pension contributions

Special pension contributions (28.5) (28.5) (25.8) (25.8) Derivative financial instruments Derivative financial instruments (1.3) (1.3)

__________

__________ __________ __________

Increase / (decrease) in cash balances Increase / (decrease) in cash balances (951.7) (951.7) 117.2 117.2 Net debt at 1 January Net debt at 1 January (30.7) (30.7) (147.9) (147.9)

__________ __________ __________ __________

Net debt at Net debt at 31 December 31 December (982.4) (982.4) (30.7) (30.7)

__________ __________ __________ __________

Year ended Year ended Year ended Year ended 31 Dec 2005 31 Dec 2005 31 Dec 2004 31 Dec 2004 £m £m £m £m

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Summary financial highlights Summary financial highlights

Strong cash flow

Strong cash flow

Tight cost control and productivity gains

Tight cost control and productivity gains

Good buying performance

Good buying performance

Industry leading operating margins in both divisions

Industry leading operating margins in both divisions

2006: balance between synergy gains and cost pressures?

2006: balance between synergy gains and cost pressures?

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John Carter John Carter

Chief Operating Officer Chief Operating Officer

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Profit gains from price / volume trade off Profit gains from price / volume trade off

LFL sales growth performing in line with market

LFL sales growth performing in line with market

33% of branches have increased margin over 2004

33% of branches have increased margin over 2004

Margins stable

Margins stable

Competitor reactions contained

Competitor reactions contained

Trade cash card weapon

Trade cash card weapon

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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25

Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Wickes profit cushioned in poor market Wickes profit cushioned in poor market

Aggressive cost reduction

Aggressive cost reduction – – like for like 11% fewer people employed at like for like 11% fewer people employed at December 2005 December 2005

Price advantage sustained and margin gains achieved

Price advantage sustained and margin gains achieved

To October:

To October:

like for like market share gained

like for like market share gained

October

October – – January: January:

tactical promotions

tactical promotions

Post

Post-

year end:

year end:

less heat?

less heat?

2006 plans:

2006 plans:

15% range expansion

15% range expansion

doubling of promotional lines (“dump stacks”)

doubling of promotional lines (“dump stacks”)

mezzanine development

mezzanine development

small store expansion

small store expansion

cluster strategy adopted

cluster strategy adopted

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Strong gross margin gains Strong gross margin gains

Group purchase volumes up by 45% from 2004 to 2005

Group purchase volumes up by 45% from 2004 to 2005

TP number 1 in 20 out of 25 top suppliers

TP number 1 in 20 out of 25 top suppliers

Average spend per supplier up by 10% (merchanting)

Average spend per supplier up by 10% (merchanting) and 7% (retail) and 7% (retail)

47 Phase I synergy projects completed

47 Phase I synergy projects completed

2005 contribution

2005 contribution

2006 full year effect

2006 full year effect

2 out of 7 Phase II projects complete for 2006

2 out of 7 Phase II projects complete for 2006

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Better service Better service

Significant new market research completed

Significant new market research completed

Key customer drivers and service criteria re

Key customer drivers and service criteria re-

set

set

Clear opportunities identified

Clear opportunities identified

Implementation H2 2006

Implementation H2 2006

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Operational achievements Operational achievements

City Plumbing turned round

City Plumbing turned round

Travis Perkins / Keyline profit gains from price / volume

Travis Perkins / Keyline profit gains from price / volume trade trade-

off
ff
CCF excellent performance with good market prospects

CCF excellent performance with good market prospects

Wickes profit cushioned in poor market conditions

Wickes profit cushioned in poor market conditions

Strong gross margin gains

Strong gross margin gains

Better service

Better service

Record rate of branch expansion

Record rate of branch expansion

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Growing and improving the network Growing and improving the network

31 Dec 31 Dec

Acquisition Acquisition Brownfield Brownfield Consolidation Consolidation 31 Dec

31 Dec

Net 2006 Net 2006 8 8 March

March 2004 2004 2005 2005

movement movement

2006 2006

to date to date

TP TP 492 492

18 18 25 25 (2) (2)

533 533

6 6

539 539 Keyline Keyline 72 72

1 1 2 2 (2) (2)

73 73

1 1

74 74 CCF CCF 21 21

2

2

23

23

23

23 City Plumbing City Plumbing 166 166

17

17 (5) (5)

178 178

178

178 Wickes Wickes

171

171 5 5

176

176

176

176 Total branches Total branches 751 751

190 190 51 51 (9) (9)

983 983

7 7

990 990

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Growing the network Growing the network

South Wales South Wales 1998 1998

6 branches 6 branches

TP TP CPS / P&H CPS / P&H Keyline Keyline CCF CCF Wickes Wickes

2005 2005

52 branches 52 branches

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Growing the network Growing the network

Manchester Manchester 1998 1998 –

– 8 branches

2005 2005 –

– 24 branches 8 branches 24 branches

TP TP CPS / P&H CPS / P&H Keyline Keyline CCF CCF Wickes Wickes

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Growing the network Growing the network

London London 2005 2005 –

– 121 branches 121 branches

1998 1998 –

– 45 branches 45 branches

TP TP CPS / P&H CPS / P&H Keyline Keyline CCF CCF Wickes Wickes

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Plenty of scope for further expansion Plenty of scope for further expansion

Current Current Available Available Pipeline Pipeline network network & adjacent & adjacent at 8 March at 8 March catchments catchments 2006 2006

TP TP 539 539 150 150 53 53

Market towns & some Market towns & some urban infill urban infill

Keyline Keyline 74 74 30 30 9 9

Urban infill Urban infill

CCF CCF 23 23 10 10 3 3

Regional infill Regional infill

City Plumbing City Plumbing 178 178 >100 >100 16 16

Plus joint sites Plus joint sites

Wickes Wickes 176 176 150 150 20 20

More small stores More small stores

Total branches Total branches 990 990 440 440 101 101

Plus regional acquisitions Plus regional acquisitions

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Geoff Cooper Geoff Cooper

Chief Executive Chief Executive

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Market outlook Market outlook

Economic variable Economic variable 2006 outlook 2006 outlook 2006 news & lead indicators 2006 news & lead indicators

RMI output RMI output Slightly positive Slightly positive New housing output New housing output Slightly negative Slightly negative Consumer spending Consumer spending Slightly positive Slightly positive Consumer confidence Consumer confidence Slightly positive Slightly positive House price inflation House price inflation Neutral Neutral House transactions House transactions Slightly negative Slightly negative DIY overall DIY overall Neutral Neutral Merchanting overall Merchanting overall Neutral Neutral Enquiries & orders rising Enquiries & orders rising Reservations & pricing rising Reservations & pricing rising Forecasts holding steady Forecasts holding steady Spending lagging confidence Spending lagging confidence Blipped? Blipped? Possible upturn Possible upturn Neutral Neutral Neutral Neutral

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Current sales Current sales

Current like for like trends Current like for like trends(1)

(1):

:

Generalist Generalist (1.3)% (1.3)% Specialist Specialist 1.3 % 1.3 %

_______________ _______________

Total merchanting Total merchanting (0.4)% (0.4)% Core Core (9.6)% (9.6)% Showroom Showroom (14.9)% (14.9)%

_______________ _______________

Total retail Total retail (10.6)% (10.6)%

_______________ _______________

Total Group Total Group (2.8)% (2.8)%

_______________ _______________

(1) Sources: (1) Sources: Generalist and specialist merchanting LFL 2 months to February 2 Generalist and specialist merchanting LFL 2 months to February 2006 006 Retail LFL 9 weeks to 4 March 2006 Retail LFL 9 weeks to 4 March 2006

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Space expansion Space expansion

2005 annualised rate of growth 2005 annualised rate of growth

Market Market TP Group TP Group TP Group TP Group (excluding (excluding (including (including acquisitions) acquisitions) acquisitions) acquisitions)

Merchanting Merchanting

Plumbing & heating

Plumbing & heating 6% 6% 5% 5% 5% 5%

Other

Other 3% 3% 3% 3% 6% 6% DIY Retail DIY Retail 4% 4% 4% 4% 4% 4%

Notes: Notes: Merchanting market is revenue capacity expansion Merchanting market is revenue capacity expansion Retail market is space expansion Retail market is space expansion Retail market growth rate is net of B&Q announced closure progra Retail market growth rate is net of B&Q announced closure programme mme Source: Source: Company estimates Company estimates

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41

Property potential confirmed Property potential confirmed

Potential sites Potential sites Relocation of business Relocation of business 116 116 Disposal of spare land Disposal of spare land 33 33 Add brands to existing site Add brands to existing site 71 71 Sale & leaseback for reinvestment Sale & leaseback for reinvestment 82 82 Expansion onto adjacent land Expansion onto adjacent land 21 21 Redevelop Redevelop 24 24 Non Non-

traded properties to dispose

traded properties to dispose 4 4 No change No change 59 59

_________ _________

Total freehold & long lease estate Total freehold & long lease estate 410 410

_________ _________

Wickes Wickes – – mezzanines mezzanines 26 26 Wickes Wickes – – small store refits small store refits 60 60

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Strategy on track Strategy on track

Drive scale Drive scale

continued growth prospects

continued growth prospects

Improve service

Improve service

H2 2006 impact onwards

H2 2006 impact onwards

Profit from tactical pricing

Profit from tactical pricing

profit gains held, margin now stable

profit gains held, margin now stable

Category improvements

Category improvements

retail range expanded, promotional density

retail range expanded, promotional density increased increased

Specialist channels

Specialist channels

3 markets under review for organic development

3 markets under review for organic development

Expand brand networks

Expand brand networks

2006 pipeline strong

2006 pipeline strong

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43

Strategy on track Strategy on track

Drive scale Drive scale

continued growth prospects

continued growth prospects Widen margin Widen margin

on track to meet buying gain targets
n track to meet buying gain targets

Productivity gains Productivity gains

further progress expected

further progress expected Property review Property review

annual release of cash

annual release of cash

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44

Group well positioned for 2006 and beyond Group well positioned for 2006 and beyond

Early signs of more stable market

Early signs of more stable market

Operational gearing to increased volume improved

Operational gearing to increased volume improved

Reduced costs and improved productivity

Reduced costs and improved productivity

Further synergy and buying gains

Further synergy and buying gains

Overhead cost pressures similar to 2005

Overhead cost pressures similar to 2005

Merchanting profitably performing at market rate

Merchanting profitably performing at market rate

Greater emphasis on retail LFL performance

Greater emphasis on retail LFL performance

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45