TIDMTPK
Travis Perkins plc
Interim results for the six months ended 30 June 2017
Executed well against a challenging market backdrop
GBPm Note H1 2017 H1 2016 Change
Revenue 3,221 3,113 3.5%
Like-for-like revenue growth(1) 14h 2.7% 3.1%
Adjusted operating profit(1) 14a 190 194 (2.1)%
Adjusted profit before taxation(1) 14b 175 184 (4.9)%
Adjusted earnings per share(1) 7b 55.8p 58.4p (4.5)%
Net debt(1) 11 377 510
Dividend per share (pence) 8 15.5p 15.25p 1.6%
Lease adjusted ROCE(1)(2) 14f 10.6% 10.9% (0.3)ppt
Operating profit 183 186 (1.6)%
Profit before taxation 168 176 (4.5)%
Basic earnings per share (pence) 7a 53.6p 55.7p (3.8)%
(1) Alternative performance measures are used to provide a guide to
underlying performance and details of the calculations can be found in
the notes listed
(2) LAROCE comparator from 2016 is for the 12 month period ending 31
December 2016 which has been adjusted to exclude from opening capital
employed the impairment to goodwill and other intangible assets written
off at 31 December 2016 and already deducted from Capital Employed at
that date
Highlights
-- Revenue grew by 3.5% in the first half of the year, and by 2.7% on a
like-for-like basis
-- Adjusted operating profit 2.1% lower at GBP190m largely due to the
challenging Plumbing & Heating market and recent investments, including
in information systems
-- Free cash flow of GBP188m was generated, with strong cash conversion of
99%
-- Net debt of GBP377m, lower than June 2016 by GBP133m, and in line with
December 2016
-- Interim dividend of 15.5p, an increase of 1.6% reflecting strong cash
performance
John Carter - Chief Executive Officer said:
"We executed our plan well and delivered a solid overall performance in
the first half of 2017 against a challenging market backdrop of
pronounced input cost inflation and market volatility. The robust growth
and outperformance in our Contracts and Consumer divisions build on
strong customer propositions and successful investments in those
businesses.
In the first half of the year, the Group made a conscious decision to
recover input cost inflation selectively through disciplined pricing
activity. Whilst this had some impact on trading volume, it enabled us
to maintain Group gross margins and positions the business well for the
future.
Today we have announced a comprehensive transformation plan in our
Plumbing & Heating division which is designed to stabilise performance
and to create more options to maximise shareholder value. Whilst we
remain cautious on the macro-economic outlook for the second half, the
Group remains focused on executing the clear plans it has in place which
will deliver strong cash generation and maximise returns."
Enquiries:
Travis Perkins Tulchan Communications
Graeme Barnes David Allchurch
+44 (0) 7469 401819 +44 (0) 207 353 4200
graeme.barnes@travisperkins.co.uk
Cautionary Statement:
This announcement contains "forward-looking statements" with respect to
Travis Perkins' financial condition, results of operations and business
and details of plans and objectives in respect to these items.
Forward-looking statements are sometimes, but not always, identified by
their use of a date in the future or such words as "anticipates", "aims",
"due", "could", "may", "will", "should", "expects", "believes", "seeks",
"intends", "plans", "potential", "reasonably possible", "targets",
"goal" or "estimates", and words of similar meaning. By their very
nature forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. There
are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited
to, the Principal Risks and Uncertainties disclosed in the Group's
Annual Report, changes in the economies and markets in which the Group
operates; changes in the legislative, regulatory and competition
frameworks in which the Group operates; changes in the capital markets
from which the Group raises finance; the impact of legal or other
proceedings against or which affect the Group; and changes in interest
and exchange rates. All forward-looking statements, made in this
announcement or made subsequently, which are attributable to Travis
Perkins or any other member of the Group or persons acting on their
behalf are expressly qualified in their entirety by the factors referred
to above. No assurances can be given that the forward-looking statements
in this document will be realised. Subject to compliance with applicable
law and regulations, Travis Perkins does not intend to update these
forward-looking statements and does not undertake any obligation to do
so. Nothing in this document should be regarded as a profits forecast.
Without prejudice to the above:
(a) neither Travis Perkins plc nor any other member of the Group, nor
persons acting on their behalf shall otherwise have any liability
whatsoever for loss howsoever arising, directly or indirectly, from use
of the information contained within this announcement; and
(b) neither Travis Perkins plc nor any other member of the Group, nor
persons acting on their behalf makes any representation or warranty,
express or implied, as to the accuracy or completeness of the
information contained within this announcement.
This announcement is current as of 2 August 2017, the date on which it
is given. This announcement has not been and will not be updated to
reflect any changes since that date.
Past performance of the shares of Travis Perkins plc cannot be relied
upon as a guide to the future performance of the shares of Travis
Perkins plc.
Summary
The first half of 2017 has seen a number of macroeconomic headwinds
affect our business, including weakening housing transactions and
consumer confidence, as well as industry input cost inflation.
Despite the difficult market background, the Group has again
demonstrated its ability to grow, both in absolute and like-for-like
terms. The Consumer and Contracts divisions have continued to
demonstrate above market revenue growth, driven by strong customer
propositions and the benefits of recent investments in the businesses.
Both divisions grew sales volumes driving growth in operating profit.
In the General Merchanting division, a deliberate trading stance was
taken early in the year to recover cost price inflation, caused by both
currency exchange rate volatility and commodity price pressure. At the
same time, a new pricing tool was rolled out across the division. This
provides better guidance to branch colleagues and results in more
consistent pricing to customers whilst enabling the business to maintain
gross margins.
The markets served by the Plumbing & Heating division continued to be
particularly challenging. In the contract channel, growth with house
builders was not sufficient to offset the reduction in volumes in social
housing and reduced trade with one of our largest customers. The
remaining Plumbing & Heating businesses, encompassing our local
installer, online businesses and wholesaling operations, delivered
growth in revenues following recent actions to improve the customer
propositions. Following the strategic review of the Plumbing & Heating
division, a comprehensive plan has been put in place to stabilise the
business and provide the Group with more options to enhance shareholder
value in the future.
The Group remains focused on disciplined capital management. Net debt
remained in line with the prior year end, and was GBP133m lower than 30
June 2016. Whilst there was an expected, seasonal working capital
outflow in the first half, underlying working capital management was
encouraging. As planned, given the uncertain outlook for the Group's end
markets, capital expenditure was lower year-on-year, and the programme
to recycle capital invested in property continued with a sale and
leaseback transaction completed in the first half of the year.
The Group has continued to make focused investments that will drive
improving returns. The expansion of the Toolstation and Benchmarx
networks has continued at pace, and the Wickes store refit programme is
generating higher sales and corresponding returns.
Investment in the Group's merchant systems continued, with construction
of the new system now well underway. The new system will make it easier
for customers to transact with the Group, at the same time making it
easier for colleagues to service customers. It will also provide
significantly more data with greater accuracy, which will enable better
decision making.
Plumbing & Heating transformation plan
The Plumbing & Heating division has under-performed in recent years,
with weakening sales and reducing profitability. Both the contract and
local installer markets have been increasingly competitive, with the
traditional national plumbing merchants under pressure from the
significant expansion of online and fixed price multichannel operators
and strong local and regional independents.
In the first half of 2017 the new leadership team has undertaken a
comprehensive strategic review of the business. The resulting plan
builds on the foundations put in place by the 2014 restructuring
programme. The near-term focus is on arresting the decline in profits
with actions being taken to address the issues faced, including a
reduction in capacity at all points in the supply chain. The plan seeks
to improve all aspects of the business and create more options to
maximise shareholder value in the future.
By reducing capital employed in the business, the plan is expected to be
broadly cash neutral, whilst the likely income statement charge for the
restructuring will be approximately GBP30m-40m over the next 12 months.
The key elements of the transformation plan build on some of the
successful work previously undertaken to reduce capacity, acquire a
number of digital businesses and invest in the bathrooms, renewables and
spares categories. The comprehensive and wide-ranging improvement plan
covers all of the Plumbing & Heating businesses and is designed to bring
a more customer focused approach to developing the propositions, as well
as driving greater efficiency to underpin profitability. The main
pillars of the plan are:
1. An integrated City Plumbing and PTS branch network: to be run under a
single management team providing customers with more convenience and
improved service. Online brands, where they are valued by customers, will
form an important range extension solution for customers supported by the
branch network.
2. A simplification of the business operating model: the integrated branch
network and online channels will form the core of the business with a
number of the smaller businesses integrated. The wholesale business will
increasingly operate on a standalone basis. These changes will reduce
operating costs as well as provide a more coherent customer proposition.
3. An overhaul of the customer proposition with broader ranges, better
availability, more consistent pricing and online development, alongside
improvements to specialist categories and selective category extension.
4. A dedicated supply chain will be formed to support the P&H business,
decoupled from the group infrastructure, and making better use of the
primary distribution centre in Warrington.
Whilst the trading performance in Plumbing & Heating is expected to
continue to soften in the second half of the year, profitability is
expected to stabilise in 2018.
Outlook
The long term drivers of market growth remain strong, centred on the
UK's requirement for more homes and the structural underinvestment in
the repair, maintenance and improvement of existing dwellings and
infrastructure. Macro-economic data has been weaker in the first half of
2017, and recent lead indicators, including consumer confidence and
housing transactions, have painted a mixed picture for the near-term
performance of the Group's end markets and this is expected to continue
in the second half of 2017.
The Group will continue to focus on executing the clear plans it has in
place whilst ensuring that it responds quickly to any changes in market
conditions. The investments made in recent years leave the Group well
positioned for the future.
Technical guidance
The Group is maintaining the technical guidance for 2017 as issued in
March 2017:
-- Effective tax rate of around 20%
-- Finance charges will be similar to 2016
-- Capital expenditure of around GBP170m - GBP190m, excluding investment in
freehold property
-- Property profits of around GBP20m
-- Progressive dividend policy, underpinned by strong cash generation
Divisional performance
The divisional profit performance in the following section excludes all
property profits which are now shown separately as a Group related
activity.
General Merchanting
H1 2017 H1 2016 Change
Total revenue GBP1,055m GBP1,045m 1.0%
Like-for-like growth (0.1)%
Adjusted operating profit GBP97m GBP100m (3.0)%
Adjusted operating margin 9.2% 9.6% (40)bps
LAROCE* 15% 15% -
Branch network* 851 833 18
*Comparison data from 31 December 2016
Financial performance
Revenue performance in the first half of the year was in line with
expectations, against strong comparators from 2016. The division
experienced significant cost price inflation and executed a disciplined
pricing strategy to recover the impact. This put pressure on trading
volumes in the short term, but has achieved the aim of protecting gross
margins.
Adjusted operating profit declined by 3% in the half as operating costs
rose following investment in IT capabilities, extension of the reach of
the heavyside range centre network and the opening of new branches.
Operational highlights
-- The roll-out of the new pricing framework continued, including selective
price investment, which has improved the value proposition for customers
without negatively impacting margins.
-- Utilisation of the range centres made further progress, with an
additional 37 branches served by the delivery network in the first half
of 2017, and a plan for a further c.140 to be added in the second half,
extending coverage to all of England and Wales. Performance is ahead of
expectations with a good uptake of customers making use of access to the
extended range of an additional 6,500 products, driving promising
returns.
-- Further progress has been made towards an improved multi-channel
proposition. The Travis Perkins transactional website now offers a two
hour click & collect service, and whilst still at an early stage of
development, online sales have been strong.
-- Eleven new Benchmarx branches were opened during the half contributing
additional revenue on top of a good like-for-like performance from the
existing network.
Plumbing & Heating
H1 2017 H1 2016 Change
Total revenue GBP669m GBP679m (1.5)%
Like-for-like growth (1.2)%
Adjusted operating profit GBP13m GBP19m (31.6)%
Adjusted operating margin 1.9% 2.8% (90)bps
LAROCE* 9% 10% (1)ppt
Branch network* 428 439 (11)
*Comparison data from 31 December 2016
Financial performance
Plumbing & Heating revenue reduced by 1.5% in the half and by 1.2% on a
like-for-like basis. Growth in the first quarter was stronger than the
second quarter, as expected, owing to trade customers buying in advance
of manufacturer led cost price increases. Performance reflected the
continued difficult market conditions in the large contract installer
market, impacting PTS, where growth in the new build market was not
enough to offset continued declines in social housing and reduced trade
with one of our largest customers.
City Plumbing showed solid growth in the half, with improving
like-for-like sales. The wholesale business also delivered positive
sales growth with an improving trend through the second quarter.
Operating profit declined in the first half as a result of lower
operating leverage resulting from the decrease in volume in addition to
the very competitive market.
Operational highlights
The focus in the first half of the year has been the establishment of a
new management team under the Group COO and a comprehensive strategic
review. Actions have been taken to stabilise performance and improve the
focus on customers with encouraging early signs. These include:
-- Simplified operating, sales and commercial team structures
-- Restructured branch manager incentives to reward outstanding performance
-- Selectively extended bathroom showroom opening hours to better meet
end-consumer needs, delivering a step up in performance
-- Rolling out 1,100 best-selling lines to City Plumbing branches
-- An enhanced promotional programme, doubling customer participation in Q2
-- Improved digital capabilities, including the launch of a transactional
website for City Plumbing and the upgrade of a number of specialist
websites with improved layouts and search facilities
-- Improved customer service and upselling in the wholesale business
Contracts
H1 2017 H1 2016 Change
Total revenue GBP675m GBP623m 8.3%
Like-for-like growth 9.1%
Adjusted operating profit GBP41m GBP37m 10.8%
Adjusted operating margin 6.1% 5.9% 20bps
LAROCE* 13% 12% 1ppt
Branch network* 168 167 1
*Comparison data from 31 December 2016
Financial performance
The division delivered strong sales growth at 8.3% and 9.1% on a
like-for-like basis. All businesses demonstrated excellent growth, with
CCF the stand out performer.
The division experienced significant input cost inflation in the half.
Gross margin performance in the division was good as all three
businesses focused on pricing activity to recover the input cost
inflation. Adjusted operating margin expanded by 20bps with improvements
from operating leverage partially offset by the shift in sales mix
towards CCF and Keyline.
Divisional LAROCE improved from 12% to 13% driven by the maturing of new
branches.
Operational highlights
-- The CCF branches opened in late 2015 continue to mature driving sales
growth and operating leverage
-- A new sales team structure in CCF ensures that high levels of customer
service are provided across large, medium and smaller customers
-- Keyline continued to focus on specific product categories and customer
groups enabling it to provide a customer specified proposition and to
continue to gain market share
-- A national administration team was launched to support the BSS network
which has reduced costs and allows branch colleagues to focus on
customers
-- In April 2017 the Group acquired TF solutions, a ventilation and air
conditioning distributor which adds adjacent product categories to the
BSS business
Consumer
H1 2017 H1 2016 Change
Total revenue GBP822m GBP766m 7.3%
Like-for-like growth 4.7%
Adjusted operating profit GBP45m GBP44m 2.3%
Adjusted operating margin 5.5% 5.7% (20)bps
LAROCE* 8% 8% -
Branch network* 642 617 25
*Comparison data from 31 December 2016
Financial performance
The division delivered a strong revenue performance with Wickes
outperforming a tough DIY market, and continued strong growth in
Toolstation through network expansion and accelerating like-for-like
growth in existing stores.
Despite continuing to invest in value to maintain price leadership in
both Wickes and Toolstation, gross margin was unchanged in the period.
Adjusted operating margins fell by 20bps primarily due to the on-going
investments in store refits and new store openings, together with the
Group's increasing investment to expand Toolstation in Europe.
Operational highlights
Wickes
-- The programme to roll out store refits continued in the half with a
further 18 completed. These continue to deliver strong growth in sales in
both showroom and core DIY categories with 82 new store formats now in
operation
-- The Kitchen & Bathroom showroom activity delivered excellent growth in
the first half through its compelling range and targeted promotional
activity, albeit this is expected to moderate in the second half
-- Further progress was made to improve the online proposition, with new
range extensions and same-day, one-hour delivery slots
Toolstation
-- Toolstation retained its Which? 'Retailer of the Year' award in 2017 and
continued to achieve industry leading TrustPilot scores
-- UK network expansion continued at pace, with 19 new stores opened
-- Improvements to the digital customer experience, including reducing click
& collect times, extending online only ranges and improving product
reviews, local search, and personalised offers drove a significant step
up in sales growth
-- The expansion of the Dutch Toolstation network continued, with an
additional 5 stores opened bringing the total to 17, and very encouraging
like-for-like performance. Web sales in France and Germany also grew well
and a new website was launched in Belgium in Q1.
Property
The Group continued to leverage its property portfolio with selected
investment in freeholds combined with a disciplined disposal programme
to realise embedded value in fully developed properties.
The Group invested GBP23m in new freehold properties and construction in
the half and completed a sale and lease back transaction on a portfolio
of eight properties which realised GBP38m of cash, and GBP1m of property
profits.
Overall the Group recognised profits on the disposal of properties of
GBP7m (H1 2016: GBP3m), with a net release of cash after new freehold
acquisitions of GBP27m.
Financial Performance
Revenue
Group revenue growth was solid in the first half of 2017, with absolute
growth of 3.5%, and 2.7% on a like-for-like basis.
Volume, price and mix analysis
General Plumbing &
Total revenue Merchanting Heating Contracts Consumer Group
Volume (2.5)% (4.4)% 4.2% 3.0% (0.2)%
Price and mix 2.4% 3.2% 4.9% 1.7% 2.9%
Like-for-like
revenue
growth (0.1)% (1.2)% 9.1% 4.7% 2.7%
Network changes 1.1% (0.3)% (1.2)% 2.6% 0.7%
Acquisitions - - 0.4% - 0.1%
Total revenue
growth 1.0% (1.5)% 8.3% 7.3% 3.5%
Quarterly like-for-like revenue analysis
Like-for-like General Plumbing &
revenue growth Merchanting Heating Contracts Consumer Group
Q1 2017 (0.3)% (1.1)% 12.1% 2.9% 2.7%
Q2 2017 0.3% (1.9)% 6.4% 6.5% 2.7%
Half year 2017 (0.1)% (1.2)% 9.1% 4.7% 2.7%
New branch and net store openings contributed 0.8% to revenue growth.
There were no trading day differences in the first half of 2017 compared
to 2016. Across the Group volumes were broadly flat, with all of the
2.7% like-for-like growth coming from price increases and mix changes.
This was in line with expectations as the Group's businesses focused on
mitigating the impact of cost price inflation.
Operating profit and margin
GBPm H1 2017 H1 2016
General Merchanting 97 100 (3.0)%
Plumbing & Heating 13 19 (31.6)%
Contracts 41 37 10.8%
Consumer 45 44 2.3%
Property 7 3 133.3%
Unallocated central costs (13) (9) 44.4%
Adjusted operating profit 190 194 (2.1)%
Amortisation of acquired intangibles (7) (8)
Operating profit 183 186 (1.6)%
Operating profit reduced slightly by 1.6% to GBP183m (H1 2016: GBP186m),
with profit before tax declining by 4.5% to GBP168m due to higher
finance charges.
Adjusted operating profit reduced by 2.1% to GBP190m (H1 2016: GBP194m).
Profit growth in Contracts, Consumer and through property transactions
was offset by a decline in profits in General Merchanting, the expected
decline in Plumbing & Heating and an increase in unallocated costs as
the Group invests in its IT capabilities.
Adjusted operating margin
Plumbing
General &
Merchanting Heating Contracts Consumer Group
H1 2016 adjusted operating margin (excluding property
profits) 9.6% 2.8% 5.9% 5.7% 6.1%
Change in gross margin 0.0% (1.0)% 0.3% 0.0% 0.1%
Margin impact of change in operating costs (0.4)% 0.1% (0.1)% (0.2)% (0.5)%
H1 2017 adjusted operating margin (excluding property
profits) 9.2% 1.9% 6.1% 5.5% 5.7%
The Group's gross margin was maintained in the half through pricing
activity to recover input cost inflation. In Plumbing & Heating, the
intense competitive pricing environment led to a decline in gross margin
which was fully offset, primarily by the Contracts division.
Across the Group operating costs increased in the half, primarily due to
the opening of new branches together with store refits, and investments
made in IT systems.
Finance charge
Net finance charges increased to GBP16m (2016: GBP11m). The increase in
finance charges reflects a full half year of interest on the GBP300m
public bond issued in May 2016, partially offset by lower borrowings on
the revolving credit facility.
Pensions
The Group made GBP10m (H1 2016: GBP11m) of cash contributions to its
defined benefit schemes in the first half of the year.
At 30 June 2017, the combined gross accounting deficit for the Group's
final salary pension schemes was GBP47m (31 December 2016: GBP127m),
which equated to a net deficit after tax of GBP38m (31 December 2016:
GBP103m). The reduction in the deficit was primarily due to strong
returns on plan assets, and favourable changes in demographic
assumptions together with a change in gilt yields which reduced scheme
liabilities.
Taxation
The tax charge for the first half of the year was GBP32.2m (2016:
GBP36.4m), an effective tax rate of 19.2% (2016: 20.7%). The difference
in effective rate between 2017 and 2016 was due to a lower statutory tax
rate and a higher deferred tax charge on share based payments in 2017.
Earnings per share
Profit after taxation decreased by 2.9% to GBP135m (H1 2016: GBP139m)
resulting in basic earnings per share decreasing by 3.8% to 53.6 pence
(H1 2016: 55.7 pence). There is no significant difference between basic
and diluted basic earnings per share.
Adjusted profit after tax reduced by 3.3% to GBP141m (H1 2016: GBP145m)
resulting in adjusted earnings per share (note 11) decreasing by 4.5% to
55.8 pence (H1 2016: 58.4 pence). There is no significant difference
between adjusted basic and adjusted diluted earnings per share.
Reconciliation of reported to adjusted earnings
H1 2017 H1 2016
Earnings EPS Earnings EPS
Basic earnings and EPS attributable to
shareholders GBP135m 53.6p GBP139m 55.7p
Amortisation of acquired intangible
assets GBP7m 2.7p GBP8m 3.3p
Tax on amortisation of acquired
intangible assets GBP(1)m (0.5p) GBP(2)m (0.6p)
Adjusted earnings and EPS attributable to GBP141m 55.8p GBP145m 58.4p
shareholders
Dividend
The Group has a progressive dividend policy reflecting the on-going
strength of cash generation by the Group and the continued confidence in
the Group's outlook over the medium term.
The dividend for the half year 2017 of 15.5 pence (H1 2016: 15.25 pence)
results in a 1.6% increase. The interim dividend will be paid on 07
November 2017, at a cash cost of approximately GBP39m.
Cash flow and balance sheet
Free cash flow
The Group generated strong free cash flow of GBP188m, at a conversion
rate of 99%.
(GBPm) H1 2017 H1 2016
EBITA 190 194
Depreciation of PPE and other non-cash movements 65 57
Disposal proceeds in excess of property profits 41 2
Change in working capital* (54) (29)
Maintenance capital expenditure (25) (20)
Net interest (2) (12)
Tax paid (27) (27)
Adjusted free cash flow 188 165
One-off tax payment - (42)
Free cash flow 188 123
Underlying cash conversion rate 99% 85%
*2017 Change in net working capital figure excludes GBP5m in relation to
the development of cloud-based software
On a broadly similar earnings figure, the stronger cash generation was
driven by the sale and lease back transaction, and a shift in the timing
of interest payments on the Group's borrowings to the second half.
Inventories were held broadly flat in the half, improving stock turnover
against higher sales. An increase in trade receivables was partially
offset by growth in trade payables, with both representing the seasonal
nature of the business, and the typically higher working capital
requirements in the first half of the year.
Investment in maintenance capex was GBP25m, slightly higher than in
2016, and on track to meet expectations for the full year.
Additional cash payments to the defined benefit pension schemes, above
the P&L charge, were GBP5m (2016: GBP7m). The cash cost in the half of
utilisation of exceptional provisions incurred in prior years was GBP6m.
Capital Investments
In April 2017 the Group acquired TF solutions, a ventilation and air
conditioning distributor that adds adjacent product categories to the
BSS business in the Contracts division. Net cash invested in
acquisitions in the first half of the year was GBP7m (2016: GBP4m).
Investments to extend branch networks and further improve propositions
in advantaged businesses continued in the first half of 2017, with
GBP81m invested in capex, in addition to GBP23m spent on purchasing and
developing freehold sites to sustain the future pipeline of network
expansion.
The network expansion programmes continued in Toolstation and Benchmarx,
in addition to new branches opened in Wickes and Travis Perkins. Three
new trade parks were opened in the period, in Welwyn Garden City,
Leicester and South Shields, with multiple trading fascias sharing a
single site, improving sales density and creating a trade destination.
(GBPm) H1 2017 H1 2016
New TP / Wickes / Toolstation
Extending leadership / CCF / Benchmarx branches 15 13
Benchmarx implants / showrooms / tool hire implants
Investing to grow New Wickes / TP formats 17 20
Distribution centres
Re-engineering and
infrastructure build Multi-channel development 24 18
IT infrastructure upgrades
Growth capex 56 51
Freehold property 23 49
Maintenance 25 20
Total capex 104 120
The programme to deliver new systems to support the merchanting
businesses has entered the construction phase. The modernised system
will enable branch staff to provide a better and more efficient service
to customers, as well as providing considerably better data and
information to the business. The programme is on plan, and is due to be
piloted in one of the Group's businesses in H2 2018.
Net debt and funding
Net debt of GBP377m was in line with 31 December 2016, which is a
reduction of GBP133m since 30 June 2016.
Lease debt also remained largely unchanged from the end of 2016. Lease
adjusted net debt was therefore also largely unchanged compared with 31
December 2016.
At 30 June 2017, the Group had funding of GBP1.1bn committed until at
least December 2020.
The Group's credit rating, issued by Standard and Poors, was maintained
at BB+ stable following its review in April 2017.
Details of non-statutory disclosures are shown in note 14.
Medium Term Guidance H1 2017 FY 2016 H1 2016
Net debt GBP377m GBP378m GBP510m
Lease debt GBP1,502m GBP1,506m GBP1,484m
Lease adjusted net
debt GBP1,879m GBP1,884m GBP1,994m
Lease adjusted gearing 43.4% 45.3% 45.8%
Fixed charge cover 3.5x 3.3x 3.3x 3.3x
LA net debt : EBITDAR 2.5x 2.6x 2.7x 2.9x
The Group has maintained the fixed charge cover ratio of 3.3x. The LA
net debt/EBITDAR ratio reduced further, to 2.6x, very close to the
Group's medium term target.
Return on capital measures
The Group's lease adjusted return on capital employed fell to 10.6% from
10.9% in December 2016. The fall was primarily due to the lower profits
generated and the additional capital invested in the business over the
last 12 months.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Group have been, and
are expected to remain consistent with those described on pages 37 to 43
of the 2016 Annual Report and Accounts. Details are provided for risks
relating to market conditions, competitive pressures, information
technology, colleague recruitment, retention and succession, supplier
dependency and direct sourcing, defined benefit pension scheme funding,
future expansion and funding liquidity, further business transformation,
performance of the Plumbing and Heating division, Brexit, legislation
and corporation tax.
Condensed consolidated income statement
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Revenue 3,220.8 3,113.3 6,217.2
Operating profit before amortisation and exceptional
items 190.2 194.4 409.0
Impairment of assets and other exceptional items - - (292.0)
Amortisation of goodwill and acquired intangible
assets (6.9) (8.3) (16.6)
Operating profit 183.3 186.1 100.4
Net finance costs (note 5) (15.7) (10.6) (27.7)
Profit before tax 167.6 175.5 72.7
Tax before exceptional items (32.2) (36.4) (77.1)
Tax on exceptional items - - 18.5
Tax (note 6) (32.2) (36.4) (58.6)
Profit for the period 135.4 139.1 14.1
Attributable to:
Owners of the Company 134.9 138.5 12.7
Non-controlling interests 0.5 0.6 1.4
135.4 139.1 14.1
Earnings per ordinary share (note 7)
Basic 53.6p 55.7p 5.1p
Diluted 53.2p 54.7p 5.0p
Total dividend declared per share (note 8) 15.5p 15.25p 45.0p
All results relate to continuing operations.
Condensed consolidated statement of comprehensive income
Six months Year
Six months ended ended ended
30 Jun 2017 30 Jun 2016 31 Dec 2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Profit for the period 135.4 139.1 14.1
Items that will not be reclassified subsequently to
profit and loss:
Actuarial gains / (losses) on defined benefit pension
schemes 76.8 (2.4) (86.9)
Income taxes relating to items not reclassified (14.5) 0.5 16.5
62.3 (1.9) (70.4)
Items that may be reclassified subsequently to profit
and loss:
Cash flow hedges:
Losses arising during the year - - 0.1
Reclassification adjustment for losses included in
profit - 0.1 -
Other - 0.1 -
- 0.2 0.1
Other comprehensive income / (loss) for the period 62.3 (1.7) (70.3)
Total comprehensive income / (loss) for the period 197.7 137.4 (56.2)
Attributable to:
Owners of the Company 197.2 136.8 (57.6)
Non-controlling interests 0.5 0.6 1.4
197.7 137.4 (56.2)
Condensed consolidated balance sheet
As at As at As at
30 Jun . 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
ASSETS
Non-current assets
Goodwill 1,536.1 1,741.2 1,528.3
Other intangible assets 368.1 373.3 360.8
Property, plant and equipment 930.8 906.4 929.5
Derivative financial instruments - 19.4 -
Interest in associates 15.6 10.3 11.5
Investments 9.0 8.2 9.1
Other receivables 13.3 - 8.3
Total non-current assets 2,872.9 3,058.8 2,847.5
Current assets
Inventories 767.1 740.1 768.0
Trade and other receivables 1,148.2 1,087.6 1,059.3
Derivative financial instruments 1.5 3.2 1.7
Cash and cash equivalents 245.3 134.1 250.5
Total current assets 2,162.1 1,965.0 2,079.5
Total assets 5,035.0 5,023.8 4,927.0
Condensed consolidated balance sheet (continued)
As at As at As at
30 Jun . 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
EQUITY AND LIABILITIES
Capital and reserves
Issued capital 25.1 25.0 25.1
Share premium account 531.6 520.6 528.5
Merger reserve 326.5 326.5 326.5
Revaluation reserve 16.8 18.4 16.8
Hedging reserve - - -
Own shares (9.0) (10.1) (8.7)
Other reserves (4.0) (1.3) -
Retained earnings 1,884.2 1,982.7 1,760.1
Equity attributable to owners of the
Company 2,771.2 2,861.8 2.648.3
Non-controlling interests 10.2 6.5 7.3
Total equity 2,781.4 2,868.3 2,655.6
Non-current liabilities
Interest bearing loans and borrowings 618.9 662.0 621.1
Derivative financial instrument 4.0 - -
Retirement benefit obligations (note
4) 46.9 49.1 127.3
Long-term provisions 21.2 7.3 21.2
Deferred tax liabilities 58.2 63.1 45.8
Total non-current liabilities 749.2 781.5 815.4
Current liabilities
Interest bearing loans and borrowings 3.5 1.0 6.9
Trade and other payables 1,395.2 1,277.2 1,348.3
Tax liabilities 51.0 56.5 43.8
Short-term provisions 54.7 39.3 57.0
Total current liabilities 1,504.4 1,374.0 1,456.0
Total liabilities 2,253.6 2,155.5 2,271.4
Total equity and liabilities 5,035.0 5,023.8 4,927.0
The interim condensed financial statements of Travis Perkins plc,
registered number 824821, were approved by the Board of Directors on 1
August 2017 and signed on its behalf by:
John Carter Alan Williams
Chief Executive Officer Chief Financial Officer
Condensed consolidated statement of changes in equity
Total equity
Issued Share before
share premium Revaluation Own Retained non-controlling Non-controlling Total
capital account Merger reserve reserve shares Other earnings interest interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2017
(Audited) 25.1 528.5 326.5 16.8 (8.7) - 1,760.1 2,648.3 7.3 2,655.6
Profit for the period - - - - - - 134.9 134.9 0.5 135.4
Other comprehensive
income for the
period net of tax - - - - - - 62.3 62.3 - 62.3
Total comprehensive
income for the
period - - - - - - 197.2 197.2 0.5 197.7
Dividends - - - - - - (74.6) (74.6) - (74.6)
Issue of share
capital - 3.1 - - (8.9) - - (5.8) - (5.8)
Tax on share based
payments - - - - - - (0.3) (0.3) - (0.3)
Options on
non-controlling
interest - - - - - (4.0) - (4.0) - (4.0)
Own shares movement - - - - 8.6 - (8.6) - - -
Arising on
acquisition - - - - - - - - 2.4 2.4
Foreign exchange - - - - - - 0.5 0.5 - 0.5
Credit to equity for
equity-settled share
based payments - - - - - - 9.9 9.9 - 9.9
At 30 June 2017
(Unaudited) 25.1 531.6 326.5 16.8 (9.0) (4.0) 1,884.2 2,771.2 10.2 2,781.4
Condensed consolidated statement of changes in equity (continued)
Total equity
Issued Share before
share premium Merger Revaluation Own Retained non-controlling Non-controlling Total
capital account reserve reserve shares Other earnings interest interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2016 (Audited) 25.0 518.9 326.5 18.4 (15.5) (1.5) 1,918.1 2,789.9 5.9 2,795.8
Profit for the period - - - - - - 138.5 138.5 0.6 139.1
Other comprehensive income/(expense) for the period
net of tax - - - - - 0.2 (1.9) (1.7) - (1.7)
Total comprehensive income for the period - - - - - 0.2 136.6 136.8 0.6 137.4
Dividends - - - - - - (72.8) (72.8) - (72.8)
Issue of share capital - 1.7 - - 5.4 - (5.2) 1.9 - 1.9
Tax on share based payments - - - - - - (1.4) (1.4) - (1.4)
Foreign exchange - - - - - - (0.4) (0.4) - (0.4)
Credit to equity for equity-settled share based
payments - - - - - - 7.8 7.8 - 7.8
At 30 June 2016 (Unaudited) 25.0 520.6 326.5 18.4 (10.1) (1.3) 1,982.7 2,861.8 6.5 2,868.3
Condensed consolidated statement of changes in equity (continued)
Total Equity
Issued Share before
share premium Merger Revaluation Own Retained non-controlling Non-controlling Total
capital account reserve reserve shares Other earnings interest interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2016 (Audited) 25.0 518.9 326.5 18.4 (15.5) (1.5) 1,918.1 2,789.9 5.9 2,795.8
Profit for the year - - - - - - 12.7 12.7 1.4 14.1
Other comprehensive income/(expense) for the year
net of tax - - - - - 0.1 (70.4) (70.3) - (70.3)
Total comprehensive income for the year - - - - - 0.1 (57.7) (57.6) 1.4 (56.2)
Dividends - - - - - - (110.5) (110.5) - (110.5)
Issue of share capital 0.1 9.6 - - - - - 9.7 - 9.7
Realisation of revaluation reserve in respect of property
disposals - - - (1.8) - - 1.8 - - -
Difference between depreciation of assets on a historical
basis and on a revaluation basis - - - (0.2) - - 0.2 - - -
Deferred tax rate change - - - 0.4 - - - 0.4 - 0.4
Tax on share based payments - - - - - - (1.1) (1.1) - (1.1)
Reserves adjustment - - - - - 1.4 (1.4) - - -
Own shares movement - - - - 6.8 - (6.8) - - -
Credit to equity for equity-settled share based payments - - - - - - 17.5 17.5 - 17.5
At 31 December 2016 (Audited) 25.1 528.5 326.5 16.8 (8.7) - 1,760.1 2,648.3 7.3 2,655.6
Condensed consolidated cash flow statement
Six months ended Six months ended Year ended
30 Jun 2017 30 Jun 2016 31 Dec 2016
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Operating profit before acquired intangible amortisation
and exceptional items 190.2 194.4 409.0
Adjustments for:
Depreciation of property, plant and equipment 49.0 41.5 97.6
Amortisation of internally generated intangibles 5.6 7.4 7.5
Other non-cash movements - share based payments 9.9 7.8 17.5
Other 0.3 (0.4) 0.2
Losses of associates 0.7 1.0 1.1
Gains on disposal of property, plant and equipment (8.9) (3.9) (18.0)
Operating cash flow 246.8 247.8 514.9
Decrease / (increase) in inventories 0.9 22.3 (5.7)
Increase in receivables (104.4) (122.4) (83.3)
Increase in payables 44.1 71.1 93.9
Payments on exceptional items (6.0) - (11.6)
Pension payments in excess of the charges to profits (5.2) (6.5) (13.5)
Cash generated from operations 176.2 212.3 494.7
Interest paid (2.6) (14.2) (22.6)
Current income taxes paid (27.4) (26.5) (62.2)
Exceptional income tax payments (note 6) - (42.5) (42.5)
Total income taxes paid (27.4) (69.0) (104.7)
Net cash from operating activities 146.2 129.1 367.4
Cash flows from investing activities
Interest received 0.2 1.9 0.4
Proceeds on disposal of property, plant and equipment 50.3 5.5 42.9
Development of software (19.8) (11.8) (30.8)
Purchases of property, plant and equipment (84.3) (107.8) (197.5)
Interests in associates (4.9) (3.4) (4.6)
Investments - - (1.1)
Acquisition of businesses net of cash acquired (6.6) (3.5) (3.2)
Net cash used in investing activities (65.1) (119.1) (193.9)
Financing activities
Net proceeds from the issue of share capital 3.2 2.0 9.7
Movement in finance lease liabilities (2.6) 9.5 15.9
Debt arrangement fees - (2.5) (2.4)
Repayment of loans - - (123.1)
Shares purchased (8.9) - -
Decrease in loans, liabilities to pension scheme and
loan notes (3.2) (195.9) (113.2)
Gain on settlement of swap contracts - - 16.8
Issue of in sterling bond - 300.0 300.0
Dividends paid (74.8) (72.8) (110.5)
Net cash (outflow) / inflow from financing activities (86.3) 40.3 (6.8)
Net increase in cash and cash equivalents (5.2) 50.3 166.7
Cash and cash equivalents at the beginning of the
period 250.5 83.8 83.8
Cash and cash equivalents at the end of the period 245.3 134.1 250.5
Notes to the interim financial statements
1. General information and accounting policies
The interim financial statements have been prepared on the historical
cost basis, except that derivative financial instruments are stated at
their fair value. The condensed interim financial statements include the
accounts of the Company and all its subsidiaries ("the Group").
Basis of preparation
The financial information for the six months ended 30 June 2017 and 30
June 2016 is unaudited. The June 2017 information has been reviewed by
KPMG LLP, the Group's auditor, and a copy of their review report appears
at the end of this interim report. The June 2016 information was also
reviewed by KPMG LLP. The financial information for the year ended 31
December 2016 does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. A copy of the statutory accounts
for the year ended 31 December 2016 as prepared under International
Financial Reporting Standards as adopted by the EU ("IFRS") has been
delivered to the Registrar of Companies. The auditor's report on those
accounts was not qualified, did not include a reference to any matters
to which the auditor drew attention by way of emphasis without
qualifying the report and did not contain statements under section
498(2) or (3) of the Companies Act 2006.
The unaudited interim financial statements for the six months ended 30
June 2017 have been prepared in accordance with IAS 34 "Interim
Financial Reporting" and have been prepared on the basis of IFRS.
The annual financial statements of the Group are prepared in accordance
with IFRS. As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial statements
has been prepared applying the accounting policies and presentation that
were applied in the preparation of the Company's published consolidated
financial statements for the year ended 31 December 2016.
The accounting policies adopted by Travis Perkins plc are set out in the
2016 full year financial statements, which are available on the Travis
Perkins web site www.travisperkinsplc.co.uk.
The Directors are currently of the opinion that the Group's forecasts
and projections show that the Group should be able to operate within its
current facilities and comply with its banking covenants. The Group is
however exposed to a number of significant risks and uncertainties,
which could affect the Group's ability to meet management's projections.
The Directors believe that the Group has the flexibility to react to
changing market conditions and is adequately placed to manage its
business risks successfully. After making enquiries, the Directors have
formed a judgement that there is a reasonable expectation that the Group
has the resources to continue in operational existence for the
foreseeable future. For this reason, interim financial statements have
been prepared on a going concern basis.
Impacts of standards and interpretations in issue but not yet effective
In January 2016 the IASB issued IFRS 16 "Leases", which is yet to be
endorsed by the European Union. This Standard will have a material
effect on the Group because the value of the operating leases it has
entered into will be included in the balance sheet in future as lease
liabilities and associated right-of-use assets. An associated finance
charge and depreciation charge will replace the operating lease charge
and as a result there is expected to be an impact on operating profit
and on profit after tax in future periods. The Group is midway through a
project to implement this new standard and will provide an update on the
anticipated impact in its 2017 Annual Report.
IFRS 15 "Revenue from contracts with customers" supersedes IAS 18
"Revenue". The new standard provides a single model for revenue
recognition based on when identified performance obligations are
satisfied. The approach now focuses on the transfer of control rather
than the transfer of risks and rewards. On initial assessment,
management do not expect there to be a material effect on revenue
recognition or measurement as revenue is recognised at the point of sale
of a product for branch revenue, revenue from the installation of
kitchens and bathrooms is recognised when the Group has fulfilled all
its obligations under the installation contract and online revenue is
recognised on either dispatch or delivery. This is currently consistent
with the passing of control under IFRS 15.
Notes to the interim financial statements
1. General information and accounting policies (continued)
IFRS 9 "Financial Instruments" supersedes IAS 39 "Financial Instruments:
Recognition and Measurement". The new standard introduces a
principles-based approach to the classification and measurement of
financial instruments, a new impairment model to be applied and changes
to hedge accounting. Upon initial assessment, management do not expect
there to be a material effect on the financial statements
There are no other new standards, amendments to existing standards or
interpretations that are not yet effective that would be expected to
have a material impact on the Group.
2. Business segments
As required by IFRS 8 the operating segments are identified on the basis
of internal reports about components of the Group that are regularly
reviewed by the Chief Operating Decision Maker ("CODM"), which is
considered to be the Board of Directors, to assess their performance.
All four divisions sell building materials to a wide range of customers,
none of which are dominant, and operate almost exclusively in the United
Kingdom. Segment profit represents the profit earned by each segment
without allocation of certain central costs, finance income and costs
and income tax expense. Unallocated segment assets and liabilities
comprise financial instruments, current and deferred taxation, cash and
borrowings and pension scheme assets and liabilities.
Six months ended 30 June 2017
General Plumbing
Merchanting & Heating Contracts Consumer Unallocated Consolidated
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,054.7 669.2 674.8 822.1 - 3,220.8
Result
Segment
result
before
amortisation
and property
profits 97.3 13.2 41.2 45.4 (13.9) 183.2
Property
profits 6.0 0.1 0.2 0.7 - 7.0
Segment
result
before
amortisation 103.3 13.3 41.4 46.1 (13.9) 190.2
Amortisation
of acquired
intangible
assets - (0.5) (4.0) (2.4) - (6.9)
Segment
result 103.3 12.8 37.4 43.7 (13.9) 183.3
Finance
income - - - - 0.4 0.4
Finance costs - - - - (16.1) (16.1)
Profit /
(loss)
before
taxation 103.3 12.8 37.4 43.7 (29.6) 167.6
Taxation - - - - (32.2) (32.2)
Profit /
(loss) for
the period 103.3 12.8 37.4 43.7 (61.8) 135.4
Notes to the interim financial statements
2. Business segments (continued)
Six months ended 30 June 2016
General Plumbing
Merchanting & Heating Contracts Consumer Unallocated Consolidated
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,045.0 679.2 623.1 766.0 - 3,113.3
Result
Segment
result
before
amortisation
and property
profits 99.8 19.2 36.6 43.7 (7.5) 191.8
Property
profits 3.8 (1.1) (0.1) - - 2.6
Segment
result
before
amortisation 103.6 18.1 36.5 43.7 (7.5) 194.4
Amortisation
of acquired
intangible
assets - (2.8) (3.0) (2.5) - (8.3)
Segment
result 103.6 15.3 33.5 41.2 (7.5) 186.1
Finance
income - - - - 1.9 1.9
Finance costs - - - - (12.5) (12.5)
Profit /
(loss)
before
taxation 103.6 15.3 33.5 41.2 (18.1) 175.5
Taxation - - - - (36.4) (36.4)
Profit /
(loss) for
the period 103.6 15.3 33.5 41.2 (54.5) 139.1
Year ended 31 December 2016
General Plumbing
Merchanting & Heating Contracts Consumer Unallocated Consolidated
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2,073.4 1,358.9 1,266.7 1,518.2 - 6,217.2
Result
Segment
result
before
amortisation
and property
profits 193.9 36.0 76.3 101.0 (14.8) 392.4
Property
profits 13.6 3.3 (0.3) - - 16.6
Segment
result
before
exceptional
items and
amortisation 207.5 39.3 76.0 101.0 (14.8) 409.0
Exceptional
items (11.3) (232.3) (9.7) (36.4) (2.3) (292.0)
Amortisation
of acquired
intangible
assets - (5.3) (6.3) (5.0) - (16.6)
Segment
result 196.2 (198.3) 60.0 59.6 (17.1) 100.4
Finance
income - - - - 0.7 0.7
Finance costs - - - - (28.4) (28.4)
Profit /
(loss)
before
taxation 196.2 (198.3) 60.0 59.6 (44.8) 72.7
Taxation - - - - (58.6) (58.6)
Profit /
(loss) for
the year 196.2 (198.3) 60.0 59.6 (103.4) 14.1
Notes to the interim financial statements
2. Business segments (continued)
30 Jun 2017 30 Jun 2016 31 Dec 2016
GBPm GBPm GBPm
Segment assets:
General Merchanting 1,702.1 1,639.4 1,661.5
Plumbing & Heating 607.9 823.8 613.1
Contracts 877.3 860.6 831.4
Consumer 1,545.9 1,524.2 1,526.4
Unallocated 301.8 175.8 294.6
Total assets 5,035.0 5,023.8 4,927.0
30 Jun 2017 30 Jun 2016 31 Dec 2016
GBPm GBPm GBPm
Segment liabilities:
General Merchanting (415.3) (380.1) (388.5)
Plumbing & Heating (299.6) (286.6) (332.5)
Contracts (295.9) (267.4) (255.9)
Consumer (447.8) (395.3) (409.0)
Unallocated (795.0) (826.1) (885.5)
Total liabilities (2,253.6) (2,155.5) (2,271.4)
3. Seasonality
The Group's trading operations when assessed on a half yearly basis are
mainly unaffected by seasonal factors. In 2016 the period to 30 June
accounted for 50.1% of the Group's annual revenue (2015: 49.5%).
Notes to the interim financial statements
4. Retirement benefit obligations
(a) Pension scheme deficit movement
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Actuarial deficit at 1 July / 1 January (127.3) (1.1) (1.1)
Restriction of asset recognised - (34.4) (34.4)
Additional liability recognised for minimum funding
requirements - (16.7) (16.7)
Gross deficit at 1 July / 1 January (127.3) (52.2) (52.2)
Service costs charged to the income statement (4.7) (4.3) (8.7)
Net interest expense (1.6) (0.9) (1.7)
Contributions from sponsoring companies 9.9 10.7 22.2
Return on plan assets (excluding amounts included
in net interest) 44.0 72.7 184.3
Actuarial gains arising from changes in demographic
assumptions 26.0 - 4.8
Actuarial gains / (losses) arising from changes in
financial assumptions 13.5 (124.5) (335.6)
Actuarial (losses) / gains arising from experience
adjustments - (0.6) 6.4
(Increase) / decrease arising from IFRIC 14
restriction (6.7) 50.0 53.2
Gross deficit at 30 June / 31 December (46.9) (49.1) (127.3)
Actuarial deficit (40.2) (46.9) (127.3)
Additional liability recognised for minimum funding
requirements (6.7) (2.2) -
Gross deficit at 30 June / 31 December (46.9) (49.1) (127.3)
(b) Net pension scheme deficit
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Gross deficit at 30 June / 31 December (46.9) (49.1) (127.3)
Deferred tax 9.0 9.3 24.1
Net deficit at 30 June / 31 December (37.9) (39.8) (103.2)
Notes to the interim financial statements
4. Retirement benefit obligations (continued)
(c) Amounts recognised in the statement of comprehensive income
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Return on plan assets (excluding amounts included
in net interest) 44.0 72.7 184.3
Actuarial gains arising from changes in demographic
assumptions 26.0 - 4.8
Actuarial gains / (losses) arising from changes in
financial assumptions 13.5 (124.5) (335.6)
Actuarial (losses) / gains arising from experience
adjustments - (0.6) 6.4
(Increase) / decrease arising from IFRIC 14
restriction (6.7) 50.0 53.2
Actuarial gains / (losses) on defined benefit pension
schemes 76.8 (2.4) (86.9)
Notes to the interim financial statements
5. Finance costs
a) Net finance costs
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Interest receivable 0.4 0.1 0.4
Net gain on re-measurement or settlement of derivatives
at fair value - 1.8 0.3
Finance income 0.4 1.9 0.7
Interest on bank loans and overdrafts (1.0) (2.8) (4.2)
Interest on sterling bonds (10.4) (5.5) (16.1)
Amortisation of issue costs of bank loans (0.7) (0.6) (1.9)
Other interest (0.3) (1.0) (1.2)
Interest on obligations under finance leases (0.3) (0.4) (0.6)
Unwinding of discounts - liability to pension scheme (1.2) (1.2) (2.4)
Unwinding of discounts - property provisions (0.4) (0.1) (0.3)
Other finance costs - pension scheme (1.6) (0.9) (1.7)
Net loss on re-measurement or settlement of derivatives
at fair value (0.2) - -
Finance costs (16.1) (12.5) (28.4)
Net finance costs (15.7) (10.6) (27.7)
b) Interest for non-statutory measures
Year Year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Interest on bank loans and overdrafts (2.4) (8.0) (4.2)
Interest on sterling bonds (21.0) (9.3) (16.1)
Amortisation of issue costs of bank loans (1.5) (3.9) (1.9)
Interest on obligations under finance leases (0.5) (0.6) (0.6)
Unwinding of discounts - liability to pension
scheme (2.4) (2.5) (2.4)
Interest for fixed charge ratio purposes (27.8) (24.3) (25.2)
Notes to the interim financial statements
6. Tax
Six months Year
ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Current tax
UK corporation tax
- current year (34.7) (36.2) (63.1)
- prior year - - 3.7
Total current tax (34.7) (36.2) (59.4)
Deferred tax
- current year 2.5 (0.2) 4.6
- prior year - - (3.8)
Total deferred tax 2.5 (0.2) 0.8
Total tax charge (32.2) (36.4) (58.6)
Tax for the interim period is charged on profit before tax, based on the
best estimate of the corporate tax rate for the full financial year.
7. Earnings per share
a) Basic and diluted earnings per share
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Earnings
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to equity
share holders of the Parent Company 134.9 138.5 12.7
No. No. No.
Number of shares
Weighted average number of shares for the purposes
of basic earnings per share 251,798,828 248,833,390 249,073,416
Dilutive effect of share options on potential ordinary
shares 1,825,582 4,471,772 4,029,146
Weighted average number of shares for the purposes
of diluted earnings per share 253,624,410 253,305,162 253,102,562
Notes to the interim financial statements
7. Earnings per share
b) Adjusted earnings per share
Adjusted earnings per share are calculated by excluding the effects of
amortisation of intangible assets and exceptional items in 2017 and 2016
from earnings.
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to equity
share holders of the Parent Company 134.9 138.5 12.7
Exceptional items - - 292.0
Amortisation of acquired intangible assets 6.9 8.3 16.6
Tax on amortisation of acquired intangible assets (1.3) (1.5) (2.9)
Tax on exceptional items - - (15.1)
Effect of reduction in corporation tax rate on deferred
tax - - (3.4)
Earnings for adjusted earnings per share 140.5 145.3 299.9
Adjusted earnings per share 55.8p 58.4p 120.4p
Adjusted diluted earnings per share 55.4p 57.4p 118.5p
8. Dividends
Amounts were recognised in the financial statements as distributions to
equity shareholders in the following periods:
Year
Six months ended Six months ended ended
30 June 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Final dividend for the year ended 31 December 2016
of 29.25 pence (2015: 29.25 pence) per share 74.8 72.5 72.5
Interim dividend for the year ended 31 December 2016
of 15.25 pence per share - - 38.0
The proposed interim dividend of 15.5p per share in respect of the year
ending 31 December 2017 was approved by the Board on 1 August 2017 and
has not been included as a liability as at 30 June 2017. It will be paid
on 10 November 2017 to shareholders on the register at close of business
on 29 September 2017. The shares will be quoted ex-dividend on 28
September 2017.
Notes to the interim financial statements
9. Borrowings
At the period end, the Group had the following borrowing facilities
available:
As at 30 Jun As at 30 Jun As at 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Drawn facilities:
5 year committed revolving credit facility - 40.0 -
Sterling bond 2014 (due 2021) 264.1 269.4 266.0
Sterling bond 2016 (due 2023) 300.0 300.0 300.0
564.1 609.4 566.0
Undrawn facilities:
5 year committed revolving credit facility (expires
December 2020) 550.0 510.0 550.0
Bank overdraft 30.0 30.0 30.0
580.0 540.0 580.0
10. Share capital
Allotted
No. GBPm
Ordinary shares of 10p
At 1 January 2017 250,804,680 25.1
Allotted under share option schemes 280,944 -
At 30 June 2017 251,085,624 25.1
11. Net debt reconciliation
Six months ended 30 Jun 2017 Six months ended 30 Jun 2016 Year ended 31 Dec 2016
GBPm GBPm GBPm
Net debt at 1
January (377.5) (447.4) (447.4)
Increase in
cash and
cash
equivalents (5.2) 50.3 166.7
Cash flows
from debt 5.9 (111.1) (93.8)
Exchange gain
on
settlement
on US$
notes - - 0.1
Finance
charges
movement (0.7) (0.6) (1.4)
Amortisation
of swap
cancellation
receipt 1.7 - 0.7
Discount
unwind on
liability to
pension
scheme (1.2) (1.2) (2.4)
Net debt at
30 June / 31
December (377.0) (510.0) (377.5)
Notes to the interim financial statements
12. Financial instruments
The fair values of financial assets and financial liabilities are
determined as follows:
-- Foreign currency forward contracts are measured using quoted forward
exchange rates;
-- Interest rate swaps are measured at the present value of future cash
flows estimated and discounted based on the applicable yield curves
derived from quoted interest rates; and
-- Deferred consideration liabilities are calculated using forecasts of
future performance of acquisitions discounted to present value.
The following table provides an analysis of financial instruments that
are measured subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which the fair value is
observable:
-- Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
-- Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset
or liability either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
-- Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
There were no transfers between levels during the year. There are no
non-recurring fair value measurements.
As at As at As at
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Included in assets
Level 2
Foreign currency forward contracts at fair value through
profit and loss 1.5 3.2 1.7
Interest rate swaps designated and effective as hedging
instruments carried at fair value - 19.4 -
1.5 22.6 1.7
Current assets 1.5 3.2 1.7
Non-current assets - 19.4 -
1.5 22.6 1.7
As at As at As at
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Included in liabilities
Level 3
Option on non-controlling interest at fair value through
reserves 4.0 - -
Deferred consideration at fair value through profit
and loss - 1.0 -
4.0 1.0 -
Current liabilities - 1.0 -
Non-current liabilities 4.0 - -
4.0 1.0 -
13. Related party transactions
The Group has a related party relationship with its subsidiaries and
with its directors. Transactions between group companies, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. There have been no related party transactions
with directors other than in respect of remuneration. In the first half
of 2017 the Group made loans to associates of GBP4.8m (2016: GBP3.4m).
Operating transactions with associated companies were not significant
during the period.
14. Non-statutory information
a) Adjusted operating profit
Adjusted operating profit is calculated by excluding the effects of
amortisation of intangible assets and exceptional items from operating
profit.
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Operating profit 183.3 186.1 100.4
Exceptional items - - 292.0
Amortisation of acquired
intangible assets 6.9 8.3 16.6
Adjusted operating profit 190.2 194.4 409.0
b) Adjusted profit before taxation
Adjusted profit before taxation is calculated by excluding the effects
of amortisation of intangible assets and exceptional items from profit
before taxation.
Year
Six months ended Six months ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Profit before taxation 167.6 175.5 72.7
Exceptional items - - 292.0
Amortisation of acquired
intangible assets 6.9 8.3 16.6
Adjusted profit before taxation 174.5 183.8 381.3
Notes to the interim financial statements
14. Non-statutory information (continued)
c) Ratio of lease adjusted net debt to EBITDAR (rolling 12 months)
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
EBIT 97.6 263.8 100.4
Depreciation and amortisation 126.0 109.3 121.7
EBITDA 223.6 373.1 222.1
Exceptional items 292.0 140.6 292.0
Adjusted EBITDA 515.6 513.7 514.1
Property operating lease rentals 187.8 185.5 188.3
Adjusted EBITDAR 703.4 699.2 702.4
Reported net debt 377.0 510.0 377.5
Property operating rentals x8 1,502.4 1,484.0 1,506.4
Lease adjusted net debt 1,879.4 1,994.0 1,883.9
Lease adjusted net debt to adjusted EBITDAR 2.7x 2.9x 2.7x
d) Fixed charge cover (rolling 12 months)
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Adjusted EBITDAR 703.4 699.2 702.4
Property operating lease rentals 187.8 185.5 188.3
Interest for fixed charge cover (note 5) 27.8 24.3 25.2
Fixed charge 215.6 209.8 213.5
Fixed charge cover 3.3x 3.3x 3.3x
Notes to the interim financial statements
14. Non-statutory information (continued)
e) Adjusted free cash flow
Six months ended Six months ended Year ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Operating profit before acquired intangible amortisation
and exceptional items 190.2 194.4 409.0
Depreciation and amortisation of internally generated
intangible assets 54.6 48.9 105.1
Other non-cash movements 10.9 8.3 19.0
Gain on disposal of property plant and equipment (8.9) (3.9) (18.0)
Movement on working capital* (54.4) (29.0) 13.2
Net interest paid (2.4) (12.4) (22.2)
Non-exceptional income tax paid (27.4) (26.5) (62.2)
Replacement capital expenditure (25.0) (19.9) (50.4)
Proceeds from disposal of property, plant and equipment 50.3 5.5 42.9
Adjusted free cash flow 187.9 165.4 436.4
*Excludes GBP5m in relation to the development of cloud-based software
(31 December 2016: GBP8.3m; 30 June 2016: GBPnil).
Notes to the interim financial statements
14. Non-statutory information (continued)
f) Capital ratios (rolling 12 months)
(i) Revised group lease adjusted capital employed
30 Jun 31 Dec
30 Jun 2016 2016
2017 (Revised) (Revised)
GBPm GBPm GBPm
Opening net assets 2,868.3 2,738.5 2,795.8
Net pension deficit 39.8 81.9 42.4
Net borrowings 529.4 406.0 467.4
Exchange and fair value adjustment (19.4) (10.6) (20.0)
Opening capital employed as previously stated 3,418.1 3,215.8 3,285.6
Impairment of goodwill and other intangibles (235.4) (376.0) (235.4)
Tax on impairment of goodwill and other
intangibles 3.8 11.3 3.8
Revised opening capital employed 3,186.5 2,851.1 3,054.0
Closing net assets 2,781.4 2,868.3 2,655.6
Net pension deficit 37.9 39.8 103.2
Net borrowings 377.0 529.4 377.5
Exchange and fair value adjustment - (19.4) -
Closing capital employed as previously stated 3,196.3 3,418.1 3,136.3
Impairment of goodwill and other intangibles - (235.4) -
Tax on impairment of goodwill and other
intangibles - 3.8 -
Revised closing capital employed 3,196.3 3,186.5 3,136.3
Revised average capital employed 3,191.4 3,018.8 3,095.2
Property operating lease rentals x8 1,502.4 1,484.0 1,506.4
Revised lease adjusted capital employed 4,693.8 4,502.8 4,601.6
To calculate revised group lease adjusted capital employed, capital
employed at 1 July 2015, 1 January 2016 and 1 July 2016 has been
adjusted to exclude the impairments to goodwill and other intangible
assets written off at 31 December 2015 and 31 December 2016 and already
deducted from capital employed at that date.
Notes to the interim financial statements
14. Non-statutory information (continued)
f) Capital ratios (rolling 12 months) (continued)
(ii) Revised group lease adjusted return on capital employed
30 Jun 31 Dec
2016 2016
30 June 2017 (Revised) (Revised)
GBPm GBPm GBPm
Operating profit 97.6 263.8 100.4
Amortisation of acquired intangible
assets 15.2 17.4 16.6
Exceptional items 292.0 140.6 292.0
Adjusted operating profit 404.8 421.8 409.0
50% of property operating lease rentals 93.9 92.7 94.1
Revised lease adjusted operating profit 498.7 514.5 503.1
Revised lease adjusted capital employed 4,693.8 4,502.8 4,601.6
Revised lease adjusted return on capital
employed 10.6% 11.4% 10.9%
g) Lease adjusted gearing
As at As at As at
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Reported net debt 377.0 510.0 377.5
Property operating lease rentals x8 1,502.4 1,484.0 1,506.4
Lease adjusted net debt 1,879.4 1,994.0 1,883.9
Property operating lease rentals x8 1,502.4 1,484.0 1,506.4
Total equity 2,781.4 2,868.3 2,655.6
4,283.8 4,352.3 4,162.0
Lease adjusted gearing 43.9% 45.8% 45.3%
Notes to the interim financial statements
14. Non-statutory information (continued)
h) Like-for-like sales
General Plumbing
Merchanting & Heating Contracts Consumer Total
GBPm GBPm GBPm GBPm GBPm
2016 H1 revenue 1,045.0 679.2 623.1 766.0 3,113.3
Like-for-like revenue (1.0) (8.4) 56.7 36.3 83.6
1,044.0 670.8 679.8 802.3 3,196.9
New branch opening 17.9 - 5.3 21.7 44.9
Closures (7.2) (1.6) (13.2) (1.6) (23.6)
Acquisitions - - 2.9 - 2.9
Trading days - - - (0.3) (0.3)
2017 H1 revenue 1,054.7 669.2 674.8 822.1 3,220.8
Like-for-like sales are a measure of underlying sales performance for
two successive periods. Branches contribute to like-for-like sales once
they have been trading for more than twelve months. Revenue included in
like-for-like sales is for the equivalent times in both years being
compared. When branches close revenue is excluded from the prior year
figures for the months equivalent to the post closure period in the
current year.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared in accordance
with IAS 34 "Interim Financial Reporting" as adopted by the EU;
-- The Interim Management Report includes a fair review of the information
required by:
1. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
2. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position
or performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could
do so.
By order of the Board
John Carter Alan Williams
Chief Executive Officer Chief Financial Officer
1 August 2017 1 August 2017
INDEPENDENT REVIEW REPORT TO TRAVIS PERKINS PLC
Conclusion
We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the six
months ended 30 June 2017 which comprises the condensed consolidated
income statement, condensed consolidated statement of comprehensive
income, condensed consolidated balance sheet, condensed consolidated
statement of changes in equity, condensed consolidated cash flow
statement and the related explanatory notes.
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 30 June 2017 is
not prepared, in all material respects, in accordance with IAS 34
Interim Financial Reporting as adopted by the EU and the Disclosure
Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
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 Auditing Practices Board for use in the UK. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report 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. .
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 DTR of the UK
FCA.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards
as adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the EU.
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.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms
of our engagement to assist the company in meeting the requirements of
the DTR of the UK FCA. Our review has been undertaken so that we might
state to the company those matters we are required to state to it in
this 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 reached.
Greg Watts
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
1 August 2017
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Travis Perkins PLC via Globenewswire
http://www.travisperkinsplc.co.uk/
(END) Dow Jones Newswires
August 02, 2017 02:00 ET (06:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Travis Perkins (LSE:TPK)
Historical Stock Chart
From Mar 2024 to Apr 2024
Travis Perkins (LSE:TPK)
Historical Stock Chart
From Apr 2023 to Apr 2024
