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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Travis Perkins Plc | LSE:TPK | London | Ordinary Share | GB00BK9RKT01 | ORD �0.11205105 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.50 | -0.35% | 712.50 | 712.00 | 714.50 | 714.50 | 700.00 | 700.00 | 5,706 | 08:43:31 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Lumber, Plywd, Millwork-whsl | 4.86B | 38.1M | 0.1793 | 39.88 | 1.52B |
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Travis Perkins (TPK)
Travis Perkins: Full year results for the twelve months ended 31 December 2019; Positive trading performance
against a challenging market backdrop
03-March-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Travis Perkins plc
Full year results for the twelve months ended 31 December 2019
Positive trading performance against a challenging market backdrop
GBPm Note FY 2019 FY 2018 FY 2018 Change vs
as reported IFRS 16(1) illustrativ
e
comparative
s
Revenue 6,956 6,741 6,741 3.2%
Like-for-like 3.8% 4.9% 4.9% (1.1)ppt
revenue
growth(2)
Adjusted 6a 442 375 410 7.8%
operating
profit(2)
Adjusted 12b 112.7p 114.5p 106.0p 6.3%
earnings per
share(2)
ROCE(2) 16 10.1% 10.5% 9.6% 0.5ppt
Covenant net 15a 344 300 44
debt(2)
Dividend per 13 48.5p 47.0p 3.2%
share
Operating profit 232 (22)
/ (loss)
Total profit / 123 (84)
(loss) after tax
Basic earnings 12a 48.9p (34.4)p
per share
(1) Figures adjusted on a non-statutory illustrative basis for IFRS 16 - Leases as previously reported in May
2019
(2) Alternative performance measures are used to provide a guide to underlying performance. Details of
calculations can be found in the notes listed
Financial highlights
· Like-for-like revenue growth of 3.8% with total revenue growth of 3.2%
· Good growth in the Merchant businesses despite challenging market conditions, continued excellent growth
in Toolstation and a strong recovery in Wickes
· Adjusted operating profit growth of 7.8% driven by Wickes recovery, the transformation programme in P&H
and the positive impact of cost reduction activities
· Net adjusting items of GBP187m including a GBP108m impairment relating to halting of the ERP replacement
programme
· Return on Capital Employed increased by 50bps to 10.1% against a 2018 IFRS 16 comparative figure
· Continued strong free cash flow generation of GBP195m
Strategic progress
· Merchant businesses outperformed challenging end-markets, benefitting from business simplification and
greater local empowerment
· Acceleration of Toolstation UK expansion continued with 65 new branches opened and the acquisition of a
controlling share of Toolstation Europe
· Process to demerge Wickes well progressed, due for completion in Q2 2020
· Process to divest the P&H business paused during period of significant uncertainty, sale of the PF&P
wholesale business completed in January 2020
· Cost reduction actions on track; streamlining above-branch operations and increasing the agility of the
Group
Nick Roberts, Chief Executive Officer, commented:
"Against a challenging market backdrop we have delivered a strong operational and financial performance
across the Group. Our merchanting businesses gained market share as a result of a range of initiatives to
improve our customer proposition, including increased local empowerment for our branch managers, while the
pace of the Toolstation expansion accelerated. The actions put in place to improve our Wickes and Plumbing &
Heating businesses meant that both recovered well during the year and made positive contributions towards the
Group's overall performance.
"Our strategic progress in 2019 has been significant, but there remains much work to do in order to build
stronger foundations for the Group to deliver enhanced returns and long-term growth. Our immediate priorities
are the regeneration of the Travis Perkins general merchant, continued growth of Toolstation, further
simplification of our business and successful delivery of the demerger of Wickes.
"The long-term fundamental drivers of the Group's end-markets remain strong, and our businesses enjoy leading
positions in their respective markets. Whilst trading conditions in 2019 have been challenging we have seen
some green shoots of recovery in our lead indicators, although it remains too early to point towards any
tangible improvement in RMI. The Group remains focused on delivering against our key priorities, and we are
optimistic that we can build on the positive performance in 2019, continue to outperform our end-markets and
deliver improved returns for our shareholders."
Enquiries:
Travis Perkins Powerscourt
Graeme Barnes Justin Griffiths / James White
+44 (0) 7469 401819 +44 (0) 207 2501446
graeme.barnes@travisperkins.co.uk travisperkins@powerscourt-group.com
Zak Newmark
+44 (0) 7384 432560
zak.newmark@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 the 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 3 March 2020, 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*
*********
Basis of preparation
The Group's 2019 audited results are reported on the following basis:
· The Group is reporting its accounts under IFRS 16 - Leases which treats all lease obligations as debt,
leading to changes in the income statement and balance sheet. Illustrative comparatives have been presented
as if the new standard had applied in 2018.
· The acquisition of a majority holding in Toolstation Europe was completed on 30 September 2019, and since
that date the financial results have been fully consolidated.
· The financial results for the Plumbing & Heating business have been consolidated into the Group results,
reflecting the pause of the intended sale process in late 2019 due to high levels of uncertainty in the UK
macro environment.
*Financial performance*
The Group produced a positive performance in 2019 against a challenging market backdrop, with early signs of
progress from the strategic initiatives set out in December 2018. Total Group revenues grew by 3.2% in 2019
to GBP6,956m, and by 3.8% on a like-for-like basis. Sales growth was driven by a good performance from the
Merchant businesses despite the challenging market environment, with continued excellent growth in
Toolstation and a strong recovery in Wickes. The P&H business recorded a modest reduction in sales across the
year, but this reduction was concentrated in the lower margin wholesale business, whilst the branch-based
business continued to grow.
Adjusted operating profits grew to GBP442m, an increase of 7.8% when compared to the 2018 illustrative
comparative (including the impact of IFRS 16). The increase of GBP32m was driven by improvements in all
segments, with the biggest increase coming from the strong recovery in Wickes. Toolstation UK also grew
profits strongly, but this was offset by the consolidation of Toolstation Europe in Q4, and the corresponding
losses of around GBP4m. The transformation of P&H continued to make good progress, improving the balance of
business and improving margins. The Group continued to generate good free cash flow of GBP195m in 2019, after capital expenditure but before freehold activity, at a cash conversion rate of 54% (2018: 46%). Covenant net debt increased by GBP44m to GBP344m, primarily driven by higher net working capital, with additional inventory held by the Group as a mitigation against the risk of a 'no deal' exit from the EU. There was also higher spend on acquisitions in the year, with further payments relating to both Underfloor Heating Store and National Shower Spares, and the acquisition of a majority stake in Toolstation Europe. Underlying net debt, excluding the inventory build and acquisitions, would have improved by around GBP45m. Adjusted earnings per share were 112.7p for 2019 (2018 illustrative comparative: 106.0p), an increase of 6.3%. This increase in adjusted EPS was modestly lower than the increase in adjusted operating profits due to higher financing charges in the year, primarily driven by the marking-to-market of foreign exchange contracts. On a statutory basis, operating profit increased to GBP232m from the 2018 loss of GBP(22)m which included a GBP246m goodwill impairment. The positive trading performance in 2019 was partially offset by the impact of the halting of the ERP replacement programme and restructuring charges across the business. The Board recommends a full-year dividend of 48.5p, an increase of 3.2% (2018: 47.0p), reflecting the Board's confidence in the future cash generation and prospects of the Group. *Strategic progress* At a Capital Markets event in December 2018, the Group laid out its plans for the years ahead, with two overarching strategic aims being (i) to focus on serving trade customers through advantaged trade businesses; and (ii) to simplify the Group to increase agility, speed up decision making and enable a leaner cost base. The Group has made good progress towards its strategic goals, and this is reflected in the encouraging financial performance in 2019. *Simplifying the Group* Wickes demerger The Travis Perkins Board has been clear on the Group's purpose to focus on its advantaged trade businesses, with the intention to concentrate the allocation of capital in businesses serving trade-focused end-markets to create maximum value for shareholders. Providing best-in-class service to trade customers represents the Group's heartland, where it has the most experience and advantages in understanding and delivering on specific customer requirements. The propositions required for trade customers and consumers are different. Trade-focused businesses provide tailored propositions to satisfy diverse customer requirements on a regional, local and often individual level. As a consumer-facing retail business, Wickes deploys a centrally controlled proposition, providing a market-leading service to local trade, Do-It-For-Me and DIY customers. The Travis Perkins Board believes that the demerger of Wickes will underpin the creation of enhanced value for shareholders in both Travis Perkins and Wickes by maximising the performance of both businesses through focused capital allocation decisions made by dedicated management teams. The demerger process is proceeding smoothly. Wickes has always operated as a more autonomous business within the Group, in commercial, HR and IT areas. Given Wickes' high lease commitments, the Group has agreed a positive opening cash balance of GBP130m which will realise an appropriate capital structure and leverage position in line with Wickes's retail peers over time. The prospectus is due for publication in late March and the demerger process expected to be completed in Q2 2020. P&H divestment In January 2020, the Group announced the sale of Primaflow F&P, the wholesale business within the Plumbing & Heating segment, for cash consideration of GBP50m. The sale completed on 31 January 2020. This allows the remaining Plumbing & Heating branch and digital businesses to focus on delivering market-leading service to direct trade customers. The Board paused the process to divest the P&H business in Q4 2019 at a time of significant political and economic uncertainty in the UK. The intention to divest the P&H business remains in place and the 2019 results demonstrate a continued improvement in financial performance. The Group's focus is to maximise value for shareholders, and not on the specific timeframe of divestment. In the meantime, the transformation programme has continued to drive greater efficiency and improve the balance of business towards the higher returning branch and digital businesses. Cost reduction activities A key driver for the simplification of the Group is the opportunity to streamline the above-branch cost base, reducing the overall operating cost of the Group, offsetting overhead cost inflation in a low volume growth environment, and making the business more agile. In 2019, the divisional structure over the trade merchanting businesses has been removed, reducing costs but also speeding up decision making. In 2019, the cost base has benefited from the annualisation of cost reduction activities taken in Wickes and Travis Perkins in 2018, with around GBP15m of cost savings rolling into the first half of the year. In December 2018, the Group committed to taking actions to achieve GBP20m-GBP30m of annualised cost reductions by mid-2020. By the end of 2019 all of the planned actions were in place, which will realise annualised savings modestly exceeding expectations, with around two-thirds of the savings achieved in the 2019 results. As well as removing the divisional structure, these savings include operational cost savings relating to the closure of the heavyside range centre network and the restructuring and streamlining of support functions. As anticipated, in 2019 these savings have partially mitigated inflationary pressure in the overhead cost base with increases in rent and rates, and higher salary costs, in part due to the increase in the National Living Wage. The Group continues to selectively invest in its businesses to improve customer service and drive growth, including the continued expansion of Toolstation and additional investment in front line branch and sales colleagues in Travis Perkins. It remains a Group priority to maintain focus on the simplification of processes and tight control of costs to offset the impact of inflation in the cost base. The programmes to demerge Wickes and create autonomy in the P&H business have led to around GBP15m of dis-synergy costs, which the Group will be taking actions to mitigate over the course of the next two years. IT Modernisation The programme to implement a new ERP platform to support the Merchant businesses was halted in 2019, primarily reflecting significant risks relating to performance of the system. An impairment charge of GBP108m has been recognised in respect of the cancellation of the programme. The Group terminated its relationship with the software provider and does not expect to incur any further liabilities. The Group is investigating alternative ways to modernise the IT landscape across the Group to bring benefit to customers and colleagues with a lower risk profile. *Trade-focused priorities* The Group's strategy to focus on its advantaged trade businesses is built on its strong heritage of a deep understanding of trade customers, and a proven track record of providing excellent customer service. These solid foundations are core to the Group, and have been particularly evident in the specialist merchants in recent years. A number of key priorities have been identified to drive sustainable growth across all the trade-focused businesses in the medium term, improving market share and best positioning the businesses to compete successfully in the future. Actions towards achieving the immediate priorities of the Group are well under way, with encouraging early signs of progress feeding through to the performance of trade businesses in 2019. There remains much to do, and the process to build solid foundations from which to grow the Group in the future will continue throughout 2020. Regeneration of the Travis Perkins general merchant · Greater empowerment of branch managers, enabling them to make quicker, more relevant decisions on behalf of customers and the Group; · Investing in the right areas across branches and sales teams to better understand customer requirements and to tailor trade propositions to best match specific customer groups; · Co-ordinating on a local and regional basis to understand the competitive environment, and developing plans to strengthen the proposition to win local market share; · Ensuring that branches stock the right products in the right volumes to fulfil local customer requirements; · Reducing the administrative burden on branch colleagues by simplifying processes and reducing reporting requirements Accelerate the growth of Toolstation Toolstation continues to demonstrate excellent growth and, in line with the strategic intent to focus on advantaged trade businesses, it remains a priority to which the Group will continue to deploy capital. · Continue to expand the branch network in the UK, further improving customer convenience; · Further extension to the trade-focused product range, both in branch and online, including the addition of more trade-focused brands; · The acquisition of a majority stake in Toolstation Europe, enabling the further expansion of the business in continental Europe Deliver an organisational model fit for the future Strengthening the Group's operational foundations is vital to delivering sustainable future growth. This starts with the Group's people, building on the existing strengths and experience of colleagues to ensure that the right knowledge and skills are in place to continue to deliver excellent service in fulfilling customers' changing requirements.
There is further work to be completed on the structure and operation of the Group's support functions,
including the improvements required to core IT and digital platforms to enable the businesses to perform, and
to adapt their propositions as customer demands change. This will be underpinned by the careful management of
the corresponding overhead cost base as the Group aims to drive efficiency and improve financial performance.
Sustainability is becoming increasingly fundamental to the Group's long-term strategy, particularly around
the environmental impact of building efficiency, and the Group is positioning itself to partner with
customers and suppliers to develop sustainable solutions for the future.
*Outlook*
The long-term fundamental drivers of the Group's end-markets remain strong. The number of new homes built in
the UK continues to lag underlying demand, and ongoing underinvestment in the existing, ageing housing stock
has led to pent up demand for domestic repair, maintenance and improvement activities.
The Group's end market environment became increasingly challenging through the second half of 2019, although
the outcome of the UK general election in December 2019 has now created a more certain political environment.
Whilst there has been an improvement in some of the Group's key lead indicators in the near-term, the Group
retains a cautious stance, particularly as there is a natural lag between increasing housing transactions and
consumer confidence and improvement in the Group's end market performance.
The Group is monitoring the potential impact of the COVID-19 virus carefully and will continue to review the
possible effects on the business and refine its contingency plans as more information about the epidemic
emerges.
The Group remains confident in its ability to deliver on its strategy, and notwithstanding challenging market
conditions in the near-term, the initiatives which are underway to focus on advantaged trade business and
improve efficiency are positioning the Group's businesses well for the future. The Group's overall aim is for
its businesses to outperform their end-markets, with strong cost discipline and continued good free cash flow
generation in all market conditions.
*Technical guidance*
The Group's technical guidance is given on the basis of the Wickes demerger being completed in Q2 2020.
· The results of Wickes in 2020 to the point of demerger will be shown as a discontinued operation
· Consolidation of Toolstation Europe will include a c.GBP(20)m loss in the Toolstation segment
· Excludes all PF&P results following the disposal at the end of January 2020
· Effective tax rate of 20%
· Underlying finance charges before the impact of IFRS 16 lease liabilities will be similar to 2019
· Base capital expenditure in 2020, excluding Wickes, of GBP100m to GBP120m
· Property profits of around GBP20m (after the application of IFRS 16)
· Progressive dividend underpinned by strong cash generation
*Segmental performance*
***********************
*Merchanting*
FY 2019 FY 2018* Change
Total revenue GBP3,703m GBP3,609m 2.6%
Like-for-like growth 3.3% 3.6% (0.3)ppt
Adjusted operating profit** GBP284m GBP279m 1.8%
Adjusted operating margin** 7.7% 7.7% -
ROCE 12% 12% -
Branch network 984 1001 (17)
*2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed
**Segmental adjusted operating profit figures are presented excluding property profits
Merchanting sales grew by 2.6% in 2019, and by 3.3% on a like-for-like basis. Like-for-like sales growth
slowed through the course of the year, with growth of 6.4% in H1 reflecting an easier H1 2018 comparator.
This was followed by increasingly challenging market conditions in the second half of the year as the
significant levels of political uncertainty impacted consumer confidence, and increasingly led to larger
projects being postponed or delayed. The specialist merchants continued the on-going trend of winning market
share in their respective markets. Sales in CCF and Keyline were, however, impacted by the slowdown in larger
projects in the fourth quarter. LFL sales growth was split evenly between volume and price.
Adjusted operating profits grew by 1.8% to GBP284m, representing a stable adjusted operating margin of 7.7%.
Pressure on operating margin was driven by changes to customer mix, with stronger sales growth to larger
customers in Travis Perkins, and a greater proportion of direct-to-site deliveries, also to larger customers,
in Keyline and CCF, both representing comparatively lower margin business, but at a lower cost to serve and a
high return on capital. This mix effect was offset by a focus across the Merchant businesses to control the
above-branch cost base, eliminating the divisional structure, making savings through the supply chain
transformation plan in Travis Perkins with the ongoing closure of the heavyside range centre network, and
working to improve efficiency across the business.
Travis Perkins' performance was encouraging throughout the year, with signs that the early changes made to
reinvigorate the business have positively impacted performance. In a challenging second half, Travis Perkins
maintained flat LFL sales in Q4, demonstrating continued outperformance of the wider market, a trend that has
been achieved through much of 2019. The main areas of progress have been around defining and stocking of the
right product ranges to satisfy local customers, and in the right stock depth to engender real credibility,
particularly in heavyside categories.
The mix of sales growth varied by customer type, with stronger growth in larger, national customers, and
through the Managed Services proposition providing service to local councils and housing authorities.
For CCF, a strong LFL performance in the first half was followed by a flat second half, impacted by the
market slow down, and the continued constraint around plasterboard supply which constricted sales volumes.
Flat LFL sales still represented a significant market share gain during a difficult period.
In 2019 Keyline continued to focus on its core Civils and Drainage specialism. Over the year, total sales
grew modestly, but from a consolidated branch network (five fewer branches) with lower generalist sales and
with share gains in all key product categories. The Rudridge brand was fully integrated into the Keyline
branch network, simplifying the business and unifying business processes.
BSS performed well in 2019, with positive LFL growth in both halves of the year, despite project delays
continuing to impact the business across all regions. Growth was driven by the introduction of new product
ranges into branches, and further development and growth of the specialist tool hire offering.
*Toolstation*
FY 2019 FY 2018* Change
Total revenue GBP445m GBP354m 25.7%
Like-for-like growth 16.3% 11.4% 4.9ppt
Adjusted operating profit** GBP25m GBP24m 4.2%
Adjusted operating margin** 5.6% 6.8% (120)bps
ROCE 7% 10% (3)ppt
Branch network (UK) 400 335 65
Branch network (Europe) 66 40 26
Memo:
Adjusted operating profit - UK GBP29m GBP24m 20.8%
*2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed
**Segmental adjusted operating profit figures are presented excluding property profits
Toolstation UK
In 2019, Toolstation demonstrated outstanding revenue growth of 25.7%, and 16.3% on a like-for-like basis.
Growth was driven by the acceleration of the UK network expansion, with 65 branches opened in 2019, bringing
the overall network up to 400. This opening profile reflects a branch opening every six days, with new
branches demonstrating strong growth trends, including trials of smaller-format branches in smaller catchment
areas.
The range of products available online and through the catalogue was extended by an additional 4,000
products, with added ranges being primarily trade-focused brands which are popular with trade customers.
These new products included extension into new categories, including kitchen and bathroom accessories and
home automation.
Toolstation maintained its market-leading value position, with its "Always Low" pricing model keeping a
differential to peers across both the core product range and a wider basket of products. The new website,
launched in December 2018, drove strong growth in click & collect transactions throughout 2019, as well as
steadily increasing conversion rates of site visitors.
At a headline level, adjusted operating profits grew by 4.2%, but this included the consolidation of the
start-up losses in Toolstation Europe in Q4 of around GBP4m. Excluding these losses, UK profits grew by over
20% with operating margin remaining broadly stable. The business continues to invest heavily not only through
capital investment to develop new branches, but also in operating costs for teams to run the growing network.
The inclusion of Toolstation Europe assets and losses in Q4 2019 also impacted ROCE, reducing it by 3ppts. UK
ROCE was stable at 10%.
Toolstation Europe
The Group acquired a further 50% share in Toolstation Europe at the end of September 2019, giving a majority
97% share in the business. Since Q4 2019, Toolstation Europe results have been fully consolidated into the
Group's results (previously accounted for as an associate).
The development of the Toolstation business in Europe continued, with a further 26 branches opened, bringing
the total to 66. In the Netherlands the network rollout continues, with 22 branches opened which continue to
perform strongly. The branch trial in France continues to perform well, and a first trial branch was opened
in Belgium.
*Retail*
FY 2019 FY 2018* Change
Total revenue GBP1,342m GBP1,250m 7.4%
Like-for-like growth 8.6% (4.3)% 12.9ppt
Adjusted operating profit** GBP97m GBP77m 26.0%
Adjusted operating margin** 7.2% 6.2% 100bps
ROCE 7% 5% 2ppt
Store network - Wickes 235 241 (6)
Store network - Tile Giant 94 96 (2)
*2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed
**Segmental adjusted operating profit figures are presented excluding property profits
Wickes demonstrated a strong recovery in performance in 2019, with revenue growth of 7.7% and 8.7% on a
like-for-like basis. Growth was primarily driven by self-help actions supported by beneficial changes in the
competitive market and extreme weather conditions in Q1 2018. Like-for-like growth was strong in both Core at
+6.5% and Do It For Me (DIFM) categories at +14.1%.
Core sales performance benefited from a clear and well-balanced trading plan combined with the addition of
new ranges, particularly in decorating and landscaping, together with improvements made in the supply chain
to increase product availability in store. TradePro continues to be an attractive proposition for trade
customers with membership now at around half a million members at the end of 2019.
Kitchen & Bathroom (K&B) revenue remained strong throughout the year, benefitting from an improved range and
service proposition, and strong order book carried forward from Q4 2018. The proportion of kitchens sold with
a full installation service increased to 56% (up from 54% in 2018), reflecting the high-quality end-to-end
service provided to end consumers.
Twelve additional Wickes refits were completed in the year with one new store opened, bringing the total
number of new store formats up to 135 of a total network of 235 stores. There was continued development of
digital capability and customer service channels, including "online-in-store" capability, allowing colleagues
to sell the full online range of products to customers in store, either for in store collection or home
delivery. This enables colleagues to provide a full project service to all customers, whilst maintaining a
tight SKU range in store. Over half of Wickes sales are digitally-led, with 95% of sales touching the
physical store.
Adjusted operating profit for the Retail segment showed a significant improvement over 2018, with growth of
26.0% to GBP97m, whilst adjusted operating profit margin improved by 100bps to 7.2%. In Wickes, gross margin
pressure in 2018 from competitor pricing activity has stabilised through 2019. Improved profitability
reflected volume growth in Core and DIFM categories driving operating leverage, combined with the benefits of
significant overhead cost reduction carried out in the first half of 2018. The improvement in adjusted
operating profit drove a 2ppt increase in return on capital employed.
The Board proposes to demerge Wickes to shareholders as a standalone listed business in Q2 2020. Further
information on Wickes's investment case from the Capital Markets Day on the 29 January 2020 can be found on
the Investor Relations section of the Travis Perkins plc website.
*Plumbing & Heating*
FY 2019 FY 2018* Change
Total revenue GBP1,465m GBP1,528m (4.1)%
Like-for-like growth (1.7)% 16.1% (17.8)ppt
Adjusted operating profit** GBP48m GBP44m 9.1%
Adjusted operating margin** 3.3% 2.9% 40bps
ROCE 13% 11% 2ppt
Branch network 375 373 2
*2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed
**Segmental adjusted operating profit figures are presented excluding property profits
Although total revenue in the P&H business fell by 4.1% in 2019, and by 1.7% on a like-for-like basis, the
majority of the sales decline was concentrated in the low-margin PF&P wholesale business. The higher-margin
branch and digital businesses grew in like-for-like terms, with the branch based merchant business
demonstrating encouraging like-for-like growth of 3.3%.
The transformation programme has continued, driving greater efficiency and improving the balance of business
towards the higher returning branch and digital businesses. Adjusted operating profit increased by 9.1% to
GBP48m despite the decrease in sales, benefitting from the change to business mix, improvements to product
ranges and on-going actions to tightly manage the overhead cost base.
The separation of the Plumbing & Heating business has progressed to plan in 2019, enabling the business to
operate autonomously from the Group. The Board paused the process to divest the P&H business in late 2019 at
a time of significant political and economic uncertainty in the UK. Whilst the intention to divest the P&H
business remains, the 2019 results demonstrate continued improvement in financial performance and the focus
for the Group is to realise a suitable valuation for shareholders, rather than a specific timeframe for
divestment.
In January 2020, the Group announced the sale of Primaflow F&P, the wholesale business within the Plumbing &
Heating segment, for a cash consideration of GBP50m. The sale completed on 31 January 2020. Sale of the
wholesale business enables the remaining Plumbing & Heating branch and digital businesses to focus on
delivering market-leading service to direct trade customers.
*Central costs*
Unallocated central costs increased modestly by GBP2m to GBP33m (2018: GBP31m when adjusted for IFRS 16). The
increase was primarily driven by the additional costs required to manage the separation activities to
increase the autonomy of the P&H and Wickes businesses. These costs, and the changes to central allocations,
combined with inflationary pressure, offset cost reduction actions taken to rightsize the central function in
line with the Group's simplification plans, whilst also focusing on delivering an efficient support service
to branches.
*Property transactions*
The Group continues to recycle its freehold property portfolio to provide the best trading locations for its
businesses, whilst managing the level of capital allocated to owning and developing freehold sites.
Four new freehold sites were purchased in 2019 at an investment of GBP6m (2018: GBP38m), with a further GBP15m of
construction costs to develop sites to be ready for trading (2018: GBP10m). These investments were fully funded
in the year by asset disposals of GBP82m, which also generated property profits of GBP21m. The application of
IFRS 16 defers an element of the property profits recognised on sale and leaseback transactions. For 2018,
the comparative property profit figure would have been GBP17m when adjusted for IFRS 16 (FY 2018 as reported:
GBP27m).
*Financial Performance*
***********************
*Revenue analysis*
Group revenue grew by 3.2% in total, and by 3.8% on a like-for-like basis. There was a good performance from
the Merchant businesses against a challenging market backdrop, continued excellent growth in Toolstation and
a strong recovery in Wickes.
*Volume, price and mix analysis*
Total revenue Merchanting Toolstation Retail Plumbing & Group
Heating
Volume 1.7% 15.7% 8.9% (4.1)% 2.3%
Price and mix 1.6% 0.6% (0.3)% 2.4% 1.5%
Like-for-like 3.3% 16.3% 8.6% (1.7)% 3.8%
revenue growth
Network (0.7)% 9.3% (1.2)% (2.4)% (0.6)%
expansion and
acquisitions
Trading days - - - - -
Total revenue 2.6% 25.6% 7.4% (4.1)% 3.2%
growth
The continued expansion of the Toolstation network was offset by branch closures from the rest of the Group.
There was no difference in the number of trading days in 2019 compared to 2018. The Group maintained its
stance to recover input cost inflation across the trade-focused businesses in 2019, with overall price
inflation across the Group of 1.5%.
*Quarterly like-for-like revenue analysis*
Like-for-like Merchanting Toolstation Retail Plumbing Total
revenue growth & Heating Group
Q1 2019 10.6% 19.1% 10.0% (4.0)% 7.3%
Q2 2019 2.7% 15.7% 9.4% (3.9)% 3.4%
Q3 2019 1.6% 15.4% 9.7% 0.0% 3.4%
Q4 2019 (1.4)% 15.3% 4.6% 0.9% 1.2%
H1 2019 6.4% 17.3% 9.7% (3.9)% 5.3%
H2 2019 0.2% 15.4% 7.2% 0.4% 2.3%
FY 2019 3.3% 16.3% 8.6% (1.7)% 3.8%
For the Group as a whole, quarterly like-for-like sales slowed through the course of the year reflecting a
strong start from the impact of poor weather setting a low comparator in Q1 2018. This was followed by market
conditions growing more challenging in the second half of the year as the significant levels of political
uncertainty impacted consumer confidence, and increasingly led to larger projects being postponed or delayed.
*Operating profit and margin*
GBPm FY 2019 FY 2018 FY 2018 FY 2018 Change*
illustrat
ive
IFRS16
As adjustmen IFRS16
reported t illustrativ
(pre-IFR e
S16) comparative
s
Merchanting 284 273 6 279 1.8%
Toolstation 25 22 2 24 4.2% Retail 97 47 30 77 26.0% Plumbing & 48 39 5 44 9.1% Heating Property 21 27 (10) 17 23.5% Unallocated costs (33) (33) 2 (31) 6.5% Adjusted 442 375 35 410 7.8% operating profit Amortisation of (9) acquired intangible assets Adjusting items (200) Operating profit 233 *Changes calculated versus FY 2018 illustrative comparatives including the impact of IFRS 16 as previously disclosed Adjusting items of GBP200m were included in operating profit in 2019 (2018: GBP387m). · An IT-related impairment charge and associated costs of GBP108m relating to the cancelled Merchant ERP project; · Adjusting items of GBP47m relating to the separation and disposal preparation of the P&H business; · Restructuring costs of GBP22m relating to the simplification and streamlining of above-branch support structures, including the closure of the heavyside range centre network; · Adjusting items totalling GBP13m relating to the closure of the Built business in April 2019; · Adjusting items of GBP12m relating to increasing the autonomy of the Wickes business. In addition, a fair value gain of GBP40m was recognised as an adjusting item in associate income on the acquisition of Toolstation Europe. Adjusting deferred tax relating to rollover relief on prior year property profits was GBP27m. *Finance charge* Net finance charges, shown in note 10, were GBP87m (2018: GBP24m). Of this GBP63m year-on-year difference, around GBP57m was due to the interest charge on leased assets recognised as a result of the implementation of IFRS 16 - Leases. Net finance costs before lease interest were higher in 2019 by around GBP7m, primarily reflecting the difference in the fair value re-measurement of foreign exchange and derivatives. In 2019, the mark-to-market was a loss of GBP5m, compared to a GBP3m gain in 2018. There was an additional charge of GBP2m relating to the early refinancing of the Group's revolving credit facility, which was completed in January 2019, offset by an IAS19 related pension credit in 2019. *Taxation* The tax charge for continuing activities for the period to 31 December 2019, including the effect of adjusting items, is GBP58m (2018: GBP34m). This represents an effective tax rate (ETR) of 32.1% (2018: negative 69.0%). The tax charge for the year before adjusting items is GBP69m (2018: GBP60m) giving an adjusted ETR of 19.7% (standard rate 19%, 2018 actual 17.1%). The adjusted ETR rate is higher than the standard rate due to the effect of expenses not deductible for tax purposes (such as depreciation of property) and unutilised overseas losses, although these are mostly offset by the increase in the deferred tax asset related to employee share schemes following an increase in the share price in 2019. *Earnings per share* The Group reported a statutory profit after tax of GBP123m (2018: loss after tax of GBP84m) resulting in a basic earnings per share of 48.9 pence (2018: loss per share of 34.4 pence). There is no significant difference between basic and diluted basic earnings per share. Adjusted profit after tax was GBP281m resulting in adjusted earnings per share (note 12b) increasing by 6.3% to 112.7 pence when compared with an illustrative comparative figure for 2018 of 106.0 pence[1]. *Reconciliation of reported to adjusted earnings* GBPm 2019 2018 Earnings for the purposes of earnings per share 121 (86) Adjusting items 160 387 Amortisation of acquired intangible assets 9 10 Adjusting deferred tax 27 - Tax on adjusting items (36) (24) Tax on amortisation of acquired intangible assets (2) (2) Earnings for adjusted earnings per share 279 285 *Cash flow and balance sheet* ****************************** *Free cash flow* The Group redefined its basis for measuring free cash flow (FCF) in 2019, to better reflect the cash generation of the business. Under the new definition, FCF excludes all freehold property transactions, both investments and disposals, and includes all base capex: the sum of maintenance and investment capital expenditure. GBPm 2019 2018 Group adjusted EBITA excluding property profits 421 348 Depreciation of PPE and other non-cash movements 141 137 Change in working capital (129) (107) Net interest paid (excluding lease interest) (26) (26) Interest on lease liabilities (57) - Tax paid (53) (55) Adjusted operating cash flow 297 296 Capital investments Capex excluding freehold transactions (121) (143) Proceeds from disposals excluding freehold 19 14 transactions Free cash flow before freehold transactions 195 168 Under the new definition, FCF of GBP195m was generated in 2019 (2018: GBP168m). The increase was primarily driven by the higher operating profits generated by the Group and lower base capital expenditure. As expected, there was an increase in working capital in 2019. Inventories, which have been held broadly stable in recent years, increased by around GBP80m in the year, with over GBP60m relating to the Group's inventory planning to mitigate the risk of a no-deal exit from the EU. This elevated level was maintained throughout 2019 as the potential risk was delayed by a prolonged period of political uncertainty. Going forwards, the Group expects the period of uncertainty to continue, and will make decisions regarding the optimal level of inventory to protect customers' access to materials in 2020. Trade receivables grew in line with the growth in credit sales, with around two thirds of Group sales being conducted through a customer credit account. *Capital investment* In line with the Group's guidance for 2019, capital investment was lower than in prior years, with GBP121m of base capital expenditure (2018: GBP143m). GBPm 2019 2018 Maintenance (56) (57) IT (12) (42) Growth capex (53) (44) Base capital expenditure (121) (143) Freehold property (22) (48) Gross capital expenditure (143) (191) Disposals 82 98 Net capital expenditure (61) (93) Maintenance capital expenditure was broadly stable at GBP56m (2018: GBP57m), primarily driven by the required maintenance and replacement of the Group's vehicle fleet. Growth capex investment was GBP9m higher than in 2018. Investment in 2019 was concentrated towards the Group's key priorities: the acceleration of the Toolstation branch network expansion and investments required in the Merchanting branch network to improve convenience for customers and optimise branch returns. Capex spend on IT was lower in 2019 following the halting of the Merchant ERP programme. The Group is investigating alternative ways to modernise the IT landscape across the Group whilst maintaining a lower business risk profile. *Uses of free cash flow* Free cash flow (GBPm) 195 Investments in freehold property (22) Disposal proceeds from freehold transactions 64 Acquisitions / disposals (43) Dividends (116) Pensions payments (10) Purchase of own shares (8) Cash payments on adjusting items (90) Other (18) Change in cash/cash equivalents (48) Property transactions in 2019 yielded a net cash inflow of GBP42m (2018: GBP36m inflow). The cash cost of acquisitions was higher in 2019 at GBP43m (2018: GBP6m inflow), including the acquisition of a controlling share of Toolstation Europe, and further payments towards the previous acquisitions of Underfloor Heating Store and National Shower Spares. Additional cash contributions to the defined benefit pension schemes above the income statement charge, excluding the annual payment against the pension SPV, were GBP10m (2018: GBP7m). The cash cost of 2019 adjusting items, and utilisation of prior year provisions for adjusting items was GBP90m, with costs incurred towards the transformation and separation of the P&H business, increasing the autonomy of the Wickes business ahead of demerger, and costs incurred in the streamlining and simplification of above-branch services, including the removal of the Merchanting divisional structure and the programme to close the heavyside range centre network. Under the new policy initiated in 2018 for the Group to purchase shares in the market for employee share schemes, GBP8m of shares were purchased in the period. *Net debt and funding* The move to accounting under IFRS 16 has changed the balance sheet metrics around debt. The Group has defined new debt measures as follows: · Covenant net debt - A new KPI which matches the definition of net debt in the Group's banking and bond covenants. 2018 covenant net debt has been recalculated as a direct comparative figure. · Net debt - The Group has stopped reporting lease adjusted net debt as the implementation of IFRS 16 - Leases means that the effect of leases is already reflected in the statutory measure of net debt. 2018 results have not been restated. Covenant net debt increased by GBP44m year-on-year, primarily driven by the increase in inventory, the cash costs relating to adjusting items in 2018 and 2019, and higher acquisition costs. The net debt to adjusted
EBITDA metric under IFRS 16, with net debt now including all lease obligations, reduced to 2.5x, achieving
the Group's medium term leverage target of 2.5x. The Group's balance sheet will change significantly when the
Wickes business is demerged and the Group will consider the suitability of the existing medium term leverage
target for the future.
Medium Term 2019 2018 Change
Guidance
Covenant net debt GBP344m GBP300m GBP44m
Net debt under IFRS16 GBP1,788m
Lease adjusted net GBP1,833m
debt
Net debt : Adjusted 2.5x 2.5x 2.7x (0.2)x
EBITDA*
*2018 comparative figure is calculated as Lease Adjusted Net Debt to EBITDAR with a lease adjustment based on
8x the annual net rent charge. Whilst not directly comparable, the two methods are broadly consistent.
Funding
As at 31 December 2019, the Group's committed funding of GBP950m comprised:
· GBP250m guaranteed notes due September 2021, listed on the London Stock Exchange
· GBP300m guaranteed notes due September 2023, listed on the London Stock Exchange
· A revolving credit facility of GBP400m, refinanced in January 2019, which runs until 2024, advanced by a
syndicate of 8 banks.
As at 31 December 2019, the Group had undrawn committed facilities of GBP400m (2018: GBP550m) and cash deposits
of GBP140m (2018: GBP190m).
*Dividend*
At the Capital Markets event in December 2018, the Group reiterated its commitment to a progressive dividend
policy which is supported by the Board's confidence in the Group's expected future cash flow generation. The
proposed dividend for the full year 2019 of 48.5 pence (2018: 47.0 pence) results in a 3.2% increase (2018:
2.2% increase).
Following the demerger of Wickes, the Board will be reviewing the capital structure and dividend policy of
the Group, and will provide an update with the interim results in August 2020.
An interim dividend of 15.5 pence was paid to shareholders in November 2019 at a cost of GBP38m. If approved,
the proposed final dividend of 33.0 pence per share will be paid on 13 May 2020, to shareholders on the
register at the close of business on 3 April 2020, the cash cost of which will be approximately GBP83m.
*Principal risks and uncertainties*
The risk environment in which the Group operates does not remain static. During the year, the Directors have
reviewed the Group's principal risks and have concluded that as the nature of the business and the
environment in which it operates remain broadly the same, the principal risks it faces are largely unchanged
from those listed on pages 34 to 41 of the 2018 Annual Report and Accounts. However, whilst the risk profile
for the Group remains relatively stable relative to 2018, one new principal risk has been identified in
relation to IT systems and infrastructure. This risk has been introduced given the Group's plans to modernise
its IT structure and replace a number of legacy systems. The inherent risk associated with business
transformation initiatives, including the IT modernisation programme, has been reassessed to 'high',
reflective of the scale of change activities ongoing or planned within the Group. The Directors have also
increased their assessment of the inherent risk associated with cyber threats and data security to 'high' to
acknowledge that the continual changes in both threat sources and the tactics employed by cyber criminals
present an ongoing challenge for all companies, including the Group.
Accordingly the 2019 Annual Report and Accounts will report risks under the following captions: the changing
customer and competitor landscape, talent management, supplier risks, health and safety, capital allocation,
change management, portfolio management, market conditions, Brexit, IT systems and infrastructure, cyber
threat and data security and legal compliance.
Consolidated income statement
For the year ended 31 December 2019
GBPm 2019 2018
Revenue 6,955.7 6,740.5
Adjusted operating profit (note 6) 441.5 374.5
Amortisation of acquired intangible assets (9.0) (9.5)
Adjusting items - operating (note 7) (200.4) (386.7)
Operating profit / (loss) (note 6) 232.1 (21.7)
Adjusting items - remeasurement of associates 40.3 -
(note 7)
Share of associates' results (4.3) (4.0)
Finance costs (note 10) (92.2) (27.9)
Finance income (note 10) 4.9 4.2
Profit / (loss) before tax 180.8 (49.4)
Adjusting items - deferred tax (note 7) (27.1) -
Other Tax (note 11) (30.9) (34.1)
Profit / (loss) for the year 122.8 (83.5)
Attributable to:
Owners of the Company 121.1 (85.6)
Non-controlling interests 1.7 2.1
122.8 (83.5)
Earnings per ordinary share (note 12a)
Basic 48.9p (34.4)p
Diluted 48.4p (34.4)p
All results relate to continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2019
GBPm 2019 2018
Profit / (loss) for the year 122.8 (83.5)
Items that will not be reclassified subsequently to profit and
loss:
Actuarial (loss) / gain on defined (43.0) 102.0
benefit pension schemes
Foreign exchange differences on 3.2 -
retranslation of foreign operations
Income tax relating to other 8.3 (19.3)
comprehensive income
Other comprehensive income for the year (31.5) 82.7
net of tax
Total comprehensive income / (loss) for 91.3 (0.8)
the year
All other comprehensive income is attributable to the owners of the Company.
Consolidated balance sheet
As at 31 December 2019
GBPm 2019 2018
Assets
Non-current assets
Goodwill 1,359.1 1,289.2
Other intangible assets 332.6 385.4
Property, plant and equipment 882.0 913.2
Right-of-use assets 1,276.8 -
Interest in associates 1.9 34.2
Investments 6.7 6.6
Retirement benefit asset 57.5 81.2
Other receivables - 43.3
Total non-current assets 3,916.6 2,753.1
Current assets
Inventories 937.8 855.3
Trade and other receivables 1,239.7 1,253.8
Cash and cash equivalents 207.9 255.4
Total current assets 2,385.4 2,364.5
Assets of disposal group classified as held for 138.0 -
sale
Total assets 6,440.0 5,117.6
Consolidated balance sheet continued
As at 31 December 2019
GBPm 2019 2018
Equity and liabilities
Capital and reserves
Issued share capital 25.2 25.2
Share premium account 545.6 545.4
Merger reserve 326.5 326.5
Revaluation reserve 14.5 14.7
Own shares (50.8) (47.8)
Foreign exchange reserve 3.2 -
Other reserve (4.1) (5.6)
Retained earnings 1,722.6 1,847.5
Equity attributable to the owners of the Company 2,582.7 2,705.9
Non-controlling interests 4.4 11.8
Total equity 2,587.1 2,717.7
Non-current liabilities
Interest bearing loans and borrowings 583.3 605.2
Lease liabilities 1,253.6 -
Derivative financial instruments - 0.9
Deferred tax liabilities 62.7 77.8
Retirement benefit liability 4.9 -
Long-term provisions 8.0 18.4
Total non-current liabilities 1,912.5 702.3
Current Liabilities
Interest bearing loans and borrowings - 3.8
Lease liabilities 158.7 -
Derivative financial instruments 2.5 4.7
Trade and other payables 1,613.9 1,603.2
Tax liabilities 13.4 25.9
Short-term provisions 60.4 60.0
Total current liabilities 1,848.9 1,697.6
Total liabilities 3,761.4 2,399.9
Liabilities of disposal group classified as held 91.5 -
for sale
Total equity and liabilities 6,440.0 5,117.6
Consolidated statement of changes in equity
For the year ended 31 December 2018
GBPm Share Share Merge Revaluation Own Foreign Other Retained Total Non Total
capit premi r reserve shares exchang earnings equity equity
al um reser e before
ve reserve non-con
trollin controlling
g interest
interes
t
At 1 January 25.2 543.4 326.5 15.7 (15.3) - (4.9) 1,955.6 2,846.2 11.7 2,857.9
2018
Loss for the - - - - - - - (85.6) (85.6) 2.1 (83.5)
year
Other - - - - - - - 82.7 82.7 - 82.7
comprehensive
income for the
period net of
tax
Total - - - - - - - (2.9) (2.9) 2.1 (0.8)
Comprehensive
(loss) /
income for the
year
Dividends paid - - - - - - - (114.1) (114.1) (2.0) (116.1)
Dividend - - - - - - - (0.8) (0.8) - (0.8)
equivalent
payments
Issue of share - 2.0 - - - - - - 2.0 - 2.0
capital
Purchase of - - - - (43.4) - - - (43.4) - (43.4)
own shares
Adjustments in - - - (1.0) - - - 1.0 - - -
respect of
revalued fixed
assets
Equity-settled - - - - - - - 19.6 19.6 - 19.6
share-based
payments, net
of tax
Tax on - - - - - - - 0.1 0.1 - 0.1
equity-settled
share-based
payments
Options on - - - - - - (0.7) - (0.7) - (0.7)
non-controllin
g interest
Foreign - - - - - - - (0.1) (0.1) - (0.1)
exchange
Own shares - - - - 10.9 - - (10.9) - - -
movement
At 31 December 25.2 545.4 326.5 14.7 (47.8) - (5.6) 1,847.5 2,705.9 11.8 2,717.7
2018
Consolidated statement of changes in equity continued
For the year ended 31 December 2019
GBPm Share Share Merger Revaluation Own Foreign Other Retained Total Non Total
exchang equity equity
e before
reserve non-con
capital premium reserve reserve shares earnings trollin controlling
g
interes
t
interest
At 1 January 25.2 545.4 326.5 14.7 (47.8) - (5.6) 1,847.5 2,705.9 11.8 2,717.7
2019
Impact of - - - - - - - (106.1) (106.1) - (106.1)
change in
accounting
policy
Adjusted 25.2 545.4 356.5 14.7 (47.8) - (5.6) 1,741.4 2,559.8 11.8 2,611.6
balance at 1
January 2019
Profit for the - - - - - - - 121.1 121.1 1.7 122.8
year
Other - - - - - 3.2 - (34.7) (31.5) - (31.5)
comprehensive
income for the
period net of
tax
Total - - - - - 3.2 - 86.4 89.6 1.7 91.3
Comprehensive
income for the
year
Dividends paid - - - - - - - (116.2) (116.2) - (116.2)
Dividend - - - - - - - (0.1) (0.1) - (0.1)
equivalent
payments
Issue of share - 0.2 - - - - - - 0.2 - 0.2
capital
Purchase of - - - - (7.7) - - - (7.7) - (7.7)
own shares
Adjustments in - - - (0.2) - - - 0.2 - - -
respect of
revalued fixed
assets
Arising on - - - - - - - (11.9) (11.9) (9.1) (21.0)
Acquisition
Equity-settled - - - - - - - 23.0 23.0 - 23.0
share-based
payments
Tax on - - - - - - - 4.5 4.5 - 4.5
equity-settled
share-based
payments
Option on - - - - - - 1.5 - 1.5 - 1.5
non-controllin
g interest
Own shares - - - - 4.7 - - (4.7) - - -
movement
At 31 December 25.2 545.6 326.5 14.5 (50.8) 3.2 (4.1) 1,722.6 2,582.7 4.4 2,587.1
2019
Consolidated cash flow statement
For the year ended 31 December 2019
GBPm 2019 2018
Cash flows from operating activities
Adjusted operating profit 441.5 374.5
Adjustments for:
Depreciation of property, plant and equipment 97.5 101.0
Depreciation of right-of-use assets* 174.3 -
Lease terminations and impairments* 2.2 -
Amortisation and impairment of 23.5 15.5
internally-generated intangibles
Share-based payments 19.9 19.6
Foreign exchange 4.1 -
Other non-cash movements 4.2 2.1
Gain on disposal of property, plant and (20.6) (26.8)
equipment
Purchase of toolhire assets (9.2) -
Adjusted operating cash flows 737.4 485.9
Increase in inventories (104.2) (49.5)
Decrease / (increase) in receivables 12.5 (141.4)
(Decrease) / increase in payables (36.4) 80.9
(Decrease) / increase in supplier financing (0.1) 2.9
arrangements
Payments in respect of adjusting items (90.0) (40.6)
Pension payments in excess of the income (9.9) (7.2)
statement charge
Cash generated from operations 509.1 331.0
Interest paid (27.0) (26.2)
Interest on lease liabilities* (57.0) -
Debt arrangement fees (2.9) -
Current income taxes paid (52.9) (55.1)
Net cash from operating activities 369.4 249.7
Cash flows from investing activities
Interest received 0.8 0.7
Proceeds on disposal of property, plant and 82.0 98.4
equipment
Development of computer software (8.4) (44.4)
Purchases of property, plant and equipment (125.2) (146.9)
Interest in associates (20.6) (17.6)
Acquisition of businesses (23.0) (3.0)
Disposal of business - 9.0
Net cash used in investing activities (94.4) (103.8)
Consolidated cash flow statement continued
For the year ended 31 December 2019
GBPm 2019 2018
Cash flows from financing activities
Proceeds from the issue of share capital 0.2 2.0
Purchase of own shares (7.7) (43.4)
Repayment of lease liabilities* (175.6) (6.5)
Payments to pension scheme (3.4) (3.3)
Dividends paid (116.2) (116.1)
Purchase of non-controlling interest (19.8) -
Net cash from financing activities (322.5) (167.3)
Net (decrease) / increase in cash and cash (47.5) 21.4
equivalents
Cash and cash equivalents at 1 January 255.4 276.8
Cash and cash equivalents at 31 December 207.9 255.4
* These are new or altered captions arising from the implementation of IFRS 16 - Leases
Notes
1) The Group's principal accounting policies are set out in the 2019 Annual Report & Accounts, which is
available from 3 March 2020 on the Company's website www.travisperkinsplc.co.uk.
2) The proposed final dividend of 33.0 pence (2018: 31.5 pence) is payable on 13 May 2020. The record date
is 3 April 2020.
3) The financial information set out in this statement does not constitute the Company's statutory accounts
for the years ended 31 December 2019 or 31 December 2018, but is derived from those accounts. Statutory
accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered in
due course. The auditor has reported on those accounts: their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way of emphasis without
qualifying their reports and (iii) did not contain a statements under section 498 (2) or (3) of the
Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2019 is now
complete. Whilst the financial information included in this announcement has been computed in accordance
with International Financial Reporting Standards ("IFRS") this announcement does not itself contain
sufficient information to comply with IFRS.
4) This announcement was approved by the Board of Directors on 2 March 2020.
5) It is intended to post the Annual Report & Accounts to shareholders on 26 March 2020 and to hold the
Annual General Meeting on 28 April 2020. Copies of the annual report prepared in accordance with IFRS will
be available from the Company Secretary, Travis Perkins plc, Lodge Way House, Lodge Way, Harlestone Road,
Northampton NN5 7UG from 26 March 2020 or is available on the Group's website at www.travisperkinsplc.com
[1].
6. Profit
a. Operating profit
GBPm 2019 2018
Revenue 6,955.7 6,740.5
Cost of sales (4,921.1) (4,812.7)
Gross profit 2,034.6 1,927.8
Selling and distribution costs (1,475.9) (1,607.4)
Administrative expenses (353.6) (375.0)
Profit on disposal of properties 20.6 26.8
Other operating income 6.4 6.1
Operating profit / (loss) 232.1 (21.7)
Adjusting items 200.4 386.7
Amortisation of acquired intangible assets 9.0 9.5
Adjusted operating profit 441.5 374.5
Profit on disposal of properties (20.6) (26.8)
Adjusted operating profit before property 420.9 347.7
disposals
Other operating income consists of rents receivable.
???????????b. Adjusted profit ????
GBPm 2019 2018
Profit / (loss) before tax 180.8 (49.4)
Adjusting items (note 7) 160.1 386.7
Amortisation of acquired intangible assets 9.0 9.5
Adjusted profit before tax 349.9 346.8
Total tax (58.0) (34.1)
Tax on adjusting items (36.3) (24.2)
Adjusting items - deferred tax 27.1 -
Tax on amortisation of acquired intangible (1.6) (1.6)
assets
Adjusted profit after tax 281.1 286.9
Adjusted profit excludes adjusting items and amortisation of acquired intangible assets.
7. Adjusting items
GBPm 2019 2018
Adjusting items - operating
IT-related impairment charge 107.6 15.7
Plumbing and Heating separation and disposal 46.5 45.3
process
Wickes separation and demerger costs 11.7 -
Merchant supply chain and support centre 21.5 58.4
restructuring
Loss on the sale and closure of business 13.1 10.3
Impairment of Wickes and Tile Giant goodwill - 252.1
Pension-related items - 4.9
200.4 386.7
Adjusting items - business acquisitions
Fair value gain on the acquisition of Toolstation (40.3) -
Europe
(40.3) -
Adjusting items - tax
Rollover relief deferred tax 27.1 -
27.1 -
187.2 386.7
IT-related impairment charge
The previous programme to develop a new ERP platform to support the Merchant businesses was halted in 2019.
As a result the existing capitalised spend has been written off. The charge consists of the write-off of
GBP59.7m of capitalised development spend (2018: GBP6.7m) and GBP44.3m of prepaid licence fees, as well as GBP3.6m of
associated costs incurred in 2019.
Plumbing and Heating separation and disposal process
In 2019 the Plumbing and Heating business was separated from the Group's central IT infrastructure and
support functions to enable the business to operate autonomously and support any future disposal. Costs of
GBP46.5m have been incurred in 2019 in relation to these activities, which have been disclosed as an adjusting
item, and consists of the following:
· GBP23.6m of costs related to the separation of IT systems including people costs and the cost of additional
infrastructure
· GBP9.8m of non-IT separation costs such as the carve out of support functions, people costs and
parallel-running costs in the transition
· GBP7.6m professional fees incurred in preparation for the sale of the segment and in support of the
separation process
· GBP5.5m of other costs, including a charge for share-based payments resulting from the restructuring
activity
7. Adjusting items continued
Wickes separation and demerger costs
In July 2019, the Group announced its intention to demerge the Wickes business as part of its strategy of
simplifying the Group and focusing on the trade. In accordance with the Group's accounting policy, the total
cost of GBP11.7m has been disclosed as an adjusting items and consists of the following:
· GBP9.8m of costs related to the separation of IT and support functions from the Group's shared services.
This includes a GBP0.7m impairment charge for IT assets that are no longer in use
· GBP1.2m of fees incurred for professional services in preparation for demerger
· GBP1.1m of restructuring costs related to redundancy payments and the outsourcing of services
· Release of GBP0.4m related to the under-utilisation of a 2018 restructuring provision initially recognised
as an adjusting item
Merchant supply chain and support centre restructuring
The restructuring charge of GBP21.5m relates to cost reduction activities in the supply chain and support
centre of the merchant businesses and includes the costs of the closure of the Group's range centres and
timber network. The adjusting item consists of the following:
· GBP5.3m of property costs relating to the range centre and timber network closures
· GBP16.3m of other costs relating to the supply chain closures, including redundancy costs, asset disposal
costs and inventory write-downs
· GBP2.0m of other restructuring projects in the Merchant supply chain, including the cost of integrating
Rudridge into the Keyline business
· Release of GBP2.1m related to the under-utilisation of property closures provisions initially recognised as
an adjusting item
Closure of the Built business
The closure of the Built business in April 2019 resulted in the recognition of GBP8.6m of property-related
charges and redundancy, stock write-off and other closure costs of GBP4.5m.
Fair value gain on the acquisition of Toolstation Europe
The Group's investment in associates balance for Toolstation Europe was re-measured at fair value when the
Group obtained control. This resulted in the recognition of a gain of GBP40.3m which has been disclosed as an
adjusting item due to its unusual nature and magnitude.
Rollover relief deferred tax
The Group changed its property strategy and therefore its assessment of its ability to use rollover relief
indefinitely on capital gains in 2019, resulting in creation of a deferred tax charge of GBP27.1m relating to
2018 and earlier. In accordance with Group accounting policies this is disclosed as an adjusting item. This
has arisen due to a change in an estimate resulting from a change in facts and circumstances and not a change
in an accounting policy.
7. Adjusting items continued
2018
The following items were disclosed as adjusting in 2018:
Impairment charge of GBP252.1m in respect of goodwill in the Wickes and Tile Giant CGUs
Impairment charge related to intangible fixed assets of GBP15.7m arising from the termination of certain IT
projects in the Wickes business (GBP6.5m) and in the central IT function (GBP2.5m) and from two specific
components of the Group's ERP project (GBP6.7m)
Costs of GBP45.3m incurred in 2018 in the Plumbing & Heating division to reduce capacity, integrate the CPS and
PTS businesses, overhaul the division's customer proposition, create a dedicated Plumbing & Heating supply
chain and prepare for a future sale process
Restructuring costs of GBP58.4m related to cost-reduction programmes announced in 2018. This included GBP16.0m
for Merchanting supply chain rationalisation, GBP16.3m for the closure of 27 branches, GBP12.8m of redundancy and
reorganisation costs in the Wickes business and GBP13.3m of Group costs
Pension-related charge of GBP4.9m consisting of a GBP4.7m curtailment gain recognised as a result of the closure
of the Group's two main defined benefit pension schemes to future accrual and a GBP9.6m charge for the
equalisation of guaranteed minimum pension ("GMP") benefits between men and women
8. Business segments
The operating segments are identified on the basis of the 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,
to assess performance and allocate capital. From 1 January 2019 the Group has changed its internal reporting
structure and as a result has identified four operating segments:
· Merchanting
· Retail
· Toolstation
· Plumbing & Heating
These segments reflect the Group's organisation around differences in products (general building versus
plumbing & heating), customers (trade versus consumer) and price and range flexibility (fixed range and fixed
price versus variable and variable range).
All operating segments sell building materials to a wide range of customers, none of which are dominant, and
operate almost exclusively in the United Kingdom. The information previously reported under the business
segments note has been restated to reflect the new operating segments.
Segment result represents the result of each segment without allocation of certain central costs, finance
income and costs and tax. Unallocated segment assets and liabilities comprise financial instruments, current
and deferred tax, cash and borrowings and pension scheme assets and liabilities.
8. Business segments continued
a. Segment information
2019
GBPm Merchanting Retail Toolstation Plumbing Unallocated Consolidated
&
Heating
Revenue 3,703.4 1,342. 445.1 1,464.8 - 6,955.7
4
Segment 275.4 85.0 22.0 3.7 (154.0) 232.1
result
Amortisation 6.1 - 2.6 0.3 - 9.0
of acquired
intangible
assets
Adjusting 23.5 11.6 - 45.4 119.0 200.4
items
Adjusted 305.0 96.6 24.6 49.4 (34.1) 441.5
segment
result
Less (20.7) - - (1.0) 1.1 (20.6)
property
profits
Adjusted 284.3 96.6 24.6 48.4 (33.0) 420.9
segment
result
excluding
property
profits
Adjusted 8.2% 7.2% 5.5% 3.4% - 6.3%
segment
margin
Adjusted 7.7% 7.2% 5.5% 3.3% - 6.1%
segment
margin
excluding
property
profits
Average 2,287.4 1,479. 344.9 356.9 (82.3) 4,386.8
capital 9
employed
Segment 3,037.3 1,705. 552.4 860.2 284.6 6,440.0
assets 5
Segment (1,224.6) (1,134 (241.0) (528.7) (723.9) (3,852.9)
liabilities .7)
Consolidated 1,812.7 570.8 311.4 331.5 (439.3) 2,587.1
net assets
Capital 89.0 23.8 13.2 15.8 1.0 142.8
expenditure
Amortisation 6.1 - 2.6 0.3 - 9.0
of acquired
intangible
assets
Depreciation 67.4 27.8 4.3 8.0 9.0 116.5
and
amortisation
of software
8. Business segments continued
a. Segment information continued
2018*
GBPm Merchanting Retail Toolstation Plumbing Unallocated Consolidated
&
Heating
Revenue 3,608.8 1,249.6 354.4 1,527.7 - 6,740.5
Segment 237.7 (208.8) 21.0 (5.4) (66.2) (21.7)
result
Amortisation 6.3 1.5 0.9 0.8 - 9.5
of acquired
intangible
assets
Adjusting 34.4 272.3 - 46.3 33.7 386.7
items
Adjusted 278.4 65.0 21.9 41.7 (32.5) 374.5
segment
result
Less (6.3) (17.7) - (2.8) - (26.8)
property
profits
Adjusted 272.1 47.3 21.9 38.9 (32.5) 347.7
segment
result
excluding
property
profits
Adjusted 7.7% 5.2% 6.2% 2.7% - 5.6%
segment
margin
Adjusted 7.5% 3.8% 6.2% 2.5% - 5.2%
segment
margin
excluding
property
profits
Average 1,930.9 712.9 169.3 263.8 (87.9) 2,989.0
capital
employed
Lease 2,281.9 1,543.9 280.4 436.4 (74.4) 4,468.2
adjusted
capital
employed
Lease 300.2 116.9 28.8 52.5 (31.6) 466.8
adjusted
operating
profit
excluding
property
profits
Segment 1,848.0 1,333.9 910.3 645.2 380.2 5,117.6
assets
Segment (490.8) (458.2) (318.9) (392.2) (739.8) (2,399.9)
liabilities
Consolidated 1,357.2 875.7 591.4 253.0 (359.6) 2,717.7
net assets
Capital 143.8 36.1 11.0 4.7 1.9 197.5
expenditure
Amortisation 6.3 - 2.4 0.8 - 9.5
of acquired
intangible
assets
Depreciation 78.4 23.0 6.1 8.8 0.2 116.5
and
amortisation
of software
????????????????????
During 2018 an impairment loss was recognised in the Consumer segment in respect of goodwill totalling
GBP252.1m.
*Restated for comparability purposes into the four new business segments.
9. Pension schemes
GBPm 2019 2018
At 1 January actuarial asset / (deficit) 81.2 (19.1)
Additional liability recognised for minimum - (9.2)
funding requirements
81.2 (28.3)
Current service costs and administrative expenses (1.4) (6.5)
charged to the income statement
Past service costs - (4.9)
Net interest income 2.4 0.4
Contributions from sponsoring companies 13.4 18.5
Return on plan assets (excluding amounts included 161.8 (25.8)
in net interest)
Actuarial (loss)/gain arising from changes in (1.2) (4.0)
demographic assumptions
Actuarial gain / (loss) arising from changes in (209.8) 99.5
financial assumptions
Actuarial gain arising from experience 6.2 23.1
adjustments
Reduction in minimum funding requirement - 9.2
liability
Gross pension asset / (liability) at 31 December 52.6 81.2
Deferred tax asset (8.9) (15.4)
Net pension asset at 31 December 43.7 65.8
10. Net finance costs
Finance costs and finance income
GBPm 2019 2018
Interest on bank loans and overdrafts (2.0) (1.2)
Interest on bonds (21.0) (21.0)
Unwinding of discounts - property provisions (0.2) (0.2)
Unwinding of discounts - pension SPV loan (2.2) (2.1)
Amortisation of issue costs of bank loans* (2.9) (1.5)
Other interest (2.3) (0.7)
Other finance costs - pension scheme - (0.8)
Net loss on remeasurement of foreign exchange (3.3) -
Net loss on remeasurement of derivatives at fair (1.3) -
value
Finance costs before lease interest (35.2) (27.5)
Interest on lease liabilities (57.0) -
Interest on obligations under finance leases - (0.4)
Finance costs (92.2) (27.9)
Net gain on remeasurement of derivatives at fair - 1.8
value
Net gain on remeasurement of foreign exchange - 0.7
Other finance income - pension scheme 2.4 -
Interest receivable 2.5 1.7
Finance income 4.9 4.2
Net finance costs (87.3) (23.7)
*Includes a GBP1.5m accelerated charge recognised as the result of the replacement of the Group's previous
banking agreement with a new GBP400m agreement in January 2019.
11. Tax
GBPm 2019 2018
Current tax:
Current year 44.0 47.1
Prior year (3.1) (10.4)
Total current tax 40.9 36.7
Deferred tax:
Current year (12.1) (2.7)
Prior year 29.2 0.1
Total deferred tax 17.1 (2.6)
Total tax charge / (credit) 58.0 34.1
Prior year charge for deferred tax includes GBP27.1m in relation to the adjusting items, as described in note
7.
12. Earnings per share
a. Basic and diluted earnings per share
GBPm 2019 2018
Earnings for the purposes of earnings 121.1 (85.6)
per share
Weighted average number of shares for 247,957,050 248,681,183
the purposes of basic earnings per share
Dilutive effect of share options on 2,293,525 345,820
potential ordinary shares
Weighted average number of ordinary 250,250,575 249,027,003
shares for the purposes of diluted
earnings per share
Earnings / (loss) per share 48.9p (34.4)p
Diluted earnings / (loss) per share 48.4p (34.4)p
1,878,458 share options (2018: 5,284,836 share options) had an exercise price in excess of the average market
value of the shares during the year. As a result, these share options were excluded from the calculation of
diluted earnings per share.
Adjusted earnings per share are calculated by excluding the effect of the exceptional items and amortisation
acquired intangible assets from earnings.
GBPm 2019 2018
Earnings for the purposes of earnings per share 121.1 (85.6)
Adjusting items 160.1 386.7
Amortisation of acquired intangible assets 9.0 9.5
Tax on adjusting items (36.3) (24.2)
Adjusting deferred tax 27.1 -
Tax on amortisation of acquired intangible assets (1.6) (1.6)
Adjusted earnings 279.4 284.8
Adjusted earnings per share 112.7p 114.5p
Adjusted diluted earnings per share 111.6p 114.4p
13. Dividends
Amounts were recognised in the financial statements as distributions to equity shareholders as follows:
GBPm 2019 2018
Final dividend for the year ended 31 December 2018 78.2
of 31.50p (2017: 30.50p) per ordinary share
75.6
Interim dividend for the year ended 31 December 2019 38.0 38.5
of 15.50p (2018: 15.50p) per ordinary share
Total dividend recognised during the year 116.2 114.1
The Directors are recommending a final dividend of 33.0p in respect of the year ended 31 December 2019. The
anticipated cash payment in respect of the proposed final dividend is GBP83.2m (2018: GBP79.4m).
There are no income tax consequences in respect of the dividends declared, but not recognised in the
financial statements. The dividends for 2019 and for 2018 were as follows:
Pence 2019 2018
Interim paid 15.5 15.5
Final proposed 33.0 31.5
Total dividend for the year 48.5 47.0
14. Free cash flow
GBPm 2019 2018*
Adjusted operating profit 441.5 374.5
Less: Profit on disposal of properties (20.6) (26.8)
Adjusted operating profit excluding property 420.9 347.7
profit
Depreciation of property, plant and equipment 97.5 101.0
Amortisation of internally generated intangibles 23.5 15.5
Share-based payments 19.9 19.6
Movement on working capital (128.7) (107.0)
Other net interest paid (26.2) (25.5)
Interest on lease liabilities (57.0) -
Income tax paid (52.9) (55.1)
Capital expenditure excluding freehold purchase (120.9) (143.1)
Disposal of plant and equipment 19.4 13.8
Free cash flow 195.5 167.8
*The Group's definition of free cash flow has been revised and is now defined as net cash flow before
dividends, capital expenditure and disposal proceeds on freehold property, pension deficit repair
contributions, adjusting cash flows and financing cash flows. Compared to the previous definition, free cash
flow now excludes all freehold property related cash flows and includes growth capital expenditure. In the
Directors' view this revised metric better reflects the cash the Group needs in order to invest and expand
its operations, pay dividends to shareholders and access the best property locations.
15. Net debt
a. Covenant net debt
Following the implementation of IFRS 16 - Leases, the Group has started reporting covenant net debt, a new
KPI that matches the definition of net debt in the Group's banking and bond covenants. The Group has stopped
reporting lease adjusted net debt as the implementation of IFRS 16 - Leases means that the effect of leases
is already reflected in net debt.
GBPm 2019 2018
Cash and cash equivalents 207.9 255.4
Non-current interest bearing loans and (583.3) (588.0)
borrowings
Non-current lease liabilities (1,253.6) (17.2)
Current lease liabilities (158.7) (3.8)
Net debt (1,787.7) (353.6)
Less: Liability to pension scheme 31.5 32.8
Less: Lease liabilities 1,412.3 21.0
Covenant net debt (343.9) (299.8)
b. Movement in net debt
The Group
GBPm Cash and Leases Term Unsecured Liability Total
cash loan senior to
equivalents and US$ loan pension
revol notes and scheme
ving sterling
credi bonds
t
facil
ity
and
loan
notes
At 1 January (276.8) 27.5 (2.2) 559.3 33.7 341.5
2018
Cash flow 21.4 (6.5) - - 3.3 18.2
Finance - - 0.8 0.7 - 1.5
charges
movement
Amortisation - - - (3.4) - (3.4)
of swap
cancellation
receipt
Discount - - - - (4.2) (4.2)
unwind on
liability to
pension
scheme
At 1 January (255.4) 21.0 (1.4) 556.6 32.8 353.6
2019
Recognition - 1,566.9 - - - 1,566.9
of lease
liability
Cash flow 47.5 (232.6) (2.9) - (3.4) (191.4)
Finance - - 2.2 0.7 - 2.9
charges
movement
Amortisation - - - (3.4) - (3.4)
of swap
cancellation
receipt
Discount - - - - 2.1 2.1
unwind on
liability to
pension
scheme
Discount - 57.0 - - - 57.0
unwind on
lease
liability
31 December (207.9) 1,412.3 (2.1) 553.9 31.5 1,787.7
2019
16. Return on capital ratios
Group return on capital employed is calculated as follows:
GBPm 2019 2018
Operating profit 232.1 (21.7)
Amortisation of acquired intangible assets 9.0 9.5
Adjusting items 200.4 386.7
Adjusted operating profit 441.5 374.5
Opening net assets 2,611.6 2,860.3
Net pension (surplus) / deficit (65.8) 22.9
Net debt including opening adjustment for 1,876.9 341.5
change in accounting policy
Goodwill amortisation and impairment - (252.1)
Opening capital employed 4,422.7 2,972.6
Closing net assets 2,587.1 2,717.7
Net pension surplus (43.7) (65.8)
Net debt 1,787.7 353.6
Closing capital employed 4,331.1 3,005.5
Average capital employed 4,376.9 2,989.0
Group return on capital employed is calculated as follows:
GBPm 2019 2018
Adjusted operating profit 441.5 374.5
Average capital employed 4,376.9 2,989.0
Return on capital employed 10.1% 12.5%
17. Net debt to adjusted EBITDA
Due to the impact of the adoption of IFRS 16 - Leases on 1 January 2019, net debt and adjusted EBITDA are not
prepared on a consistent basis to previous years. The Group previously presented lease adjusted net debt to
adjusted earnings before interest, tax, depreciation, amortisation and operating lease rentals ("EBITDAR").
This is shown below for the comparative year.
GBPm 2019 2018
Operating profit 232.1 (21.7)
Depreciation and amortisation 300.2 126.0
EBITDA 532.3 104.3
Adjusting operating items 200.4 386.7
Share of associates' results (4.3) (4.0)
Adjusted EBITDA 728.4 487.0
Net debt 1,787.7 353.6
Net debt to adjusted EBITDA 2.5x 0.7x
Lease adjusted net debt to adjusted EBITDAR n/a 2.7x
18. Revenue reconciliation and like-for-like sales
The Group has changed its internal reporting structure and as a result has changed the definition of
operating segments. The segmental information for revenue and like-for-like sales has been restated to
reflect the new operating segments.
GBPm Merchanting Retail Toolstation Plumbing Total
& Heating
2018 revenue 3,608.8 1,249.6 354.4 1,527.7 6,740.5
Like-for-like 116.7 105.1 57.5 (26.0) 253.3
revenue
3,725.5 1,354.7 411.9 1,501.7 6,993.8
Network change (22.1) (12.3) 33.2 (36.9) (38.1)
2019 revenue 3,703.4 1,342.4 445.1 1,464.8 6,955.7
Like-for-like sales are a measure of underlying sales performance for two successive periods. Branches and
stores contribute to like-for-like sales once they have been trading for more than 12 months. Revenue
included in like-for-like is for the equivalent times in both years being compared, including changes to the
number of trading days. When branches close revenue is excluded from the prior year figures for the months
equivalent to the post closure period in the current year.
19. Business combinations
On 30 September 2019 the Group acquired an additional 49.5% of the ordinary share capital of Toolstation
Europe Limited for transferred cash consideration of GBP21.9m, giving the Group a controlling 97.1% share of
the business. This investment will enable the Group to accelerate the expansion of the Toolstation network in
Europe.
In accordance with the requirements of the acquisition accounting method, the existing 47.5% investment in
associate has been remeasured to fair value. This fair value has been calculated based on the amount paid for
the additional 49% acquired, creating a gain of GBP40.3m that has been credited to the consolidated income
statement as an adjusting item.
On 2 January 2019 the Group acquired the remaining 25% of the issued share capital of National Shower Spares
Limited for cash consideration of GBP1.3m. National Shower Spares Limited is now a wholly-owned subsidiary.
On 17 May 2019 the Group acquired an additional 35% of the issued share capital of the Underfloor Heating
Store Limited for cash consideration of GBP18.5m. The Group now owns 90% of the issued share capital of this
subsidiary. As a result of this transaction, the amount of non-controlling interest recognised in the Group's
equity was reduced by GBP6.8m.
On 15 January 2019 the Group acquired the trade and assets of Ambient Electrical Limited, an online retailer
of electric underfloor heating products, for cash consideration of GBP1.0m, generating goodwill of GBP0.8m.
On 30 September 2018 the Group sold the trade and assets of Birchwood Price Tools business for the total cash
consideration of GBP9.0m, generating a loss on disposal of GBP10.3m, which has been disclosed as an adjusting
item. Total net assets sold consist of GBP12.5m of working capital, GBP0.6m of other debtors and other creditors
and GBP0.3m of fixed assets. As a result of the above disposal GBP5.9m of Group's intangible fixed assets were
derecognised.
20. Adoption of IFRS 16 - Leases
This note explains the impact of the adoption of IFRS 16 - Leases on the Group's financial statements and
discloses the new accounting policies that have been applied from 1 January 2019.
The Group has adopted IFRS 16 - Leases using the modified retrospective approach as described in paragraph
C5(b) of the standard. Therefore the cumulative effect of adopting IFRS 16 - Leases was recognised as an
adjustment to the opening balance of retained earnings at 1 January 2019 with no restatement of comparative
information. Comparative information continues to be reported under IAS 17 - Leases and IFRIC 4 - Determining
Whether an Arrangement Contains a Lease.
Practical expedients applied
In applying IFRS 16 - Leases for the first time, the Group has used the following practical expedients
permitted by the standard:
· the use of a single discount rate for portfolios of leases with reasonably similar characteristics
· reliance on previous assessments of whether leases are onerous instead of performing an impairment review
· accounting for low value operating leases and operating leases with a remaining lease term of less than
12 months as at 1 January 2019 on straight line basis as an expense without recognising a right-of-use
asset or a lease liability
· the use of hindsight in determining the lease term where the contract contains options to extend or
terminate the lease
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial
application. Instead, for contracts entered into before the transition date the Group relied on its
assessment made applying IAS 17 - Leases and IFRIC 4 - Determining whether an Arrangement contains a Lease.
Measurement of lease liabilities
On adoption of IFRS 16 - Leases, the group recognised liabilities in relation to leases which had previously
been classified as operating leases under the principles of IAS 17 - Leases. These liabilities were measured
at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The incremental borrowing rate represents the rate of interest that the entity
within the Travis Perkins Group that entered into the lease would have to pay to borrow over a similar term
and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use
asset in a similar economic environment. The weighted average incremental borrowing rate applied to the
property leases on 1 January 2019 was 4.4% and for fleet and other leases was 1.8%.
For leases previously classified as finance leases the entity recognised the carrying amount of the lease
asset and the lease liability immediately before transition as the carrying amount of the right-of-use asset
and the lease liability at 1 January 2019.
20. Adoption of IFRS 16 - Leases continued
The reconciliation of differences between the operating lease commitments disclosed under the prior standard
and the additional lease liabilities recognised on the balance sheet at 1 January 2019 is as follows:
GBPm
Operating lease commitments disclosed as at 31 December 1,797.7
2018
Additional lease commitments not included in the 2018 95.0
Annual report & Accounts
Restated operating lease commitments 1,892.7
Impact of discounting (398.5)
Finance lease liabilities as at 31 December 2018 21.0
Adjustments as a result of a different treatment of 8.1
extension and termination options
Lease liability recognised as at 1 January 2019 1,523.3
Comprising
Current lease liabilities 170.5
Non-current lease liabilities 1,352.8
1,523.3
Measurement of right-of-use assets
Right of use assets are measured at either:
· Their carrying amount as if IFRS 16 had been applied since the lease commencement date, discounted by the
lessees' incremental borrowing rate as at 1 January 2019. The Group has applied this methodology to the
Group's 330 most material property leases where sufficient historical information has been available to
facilitate this and the majority of plant and equipment leases.
· At amounts equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments
relating to that lease recognised on the balance sheet as at 31 December 2018. This has been applied to the
remaining portfolio of leases.
An impairment adjustment to the right-of-use assets of GBP11.3m in relation to previous onerous lease
provisions was recognised at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
GBPm 1 January 2019
Properties 1,326.9
Plant and equipment 79.1
Total right-of-use assets 1,406.0
20. Adoption of IFRS 16 - Leases continued
Adjustments to balance sheet items
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
GBPm
Property, plant and equipment (18.3)
Prepayments (35.2)
Right-of-use assets 1,406.0
Deferred tax asset 21.3
Onerous lease and rent review provisions 17.0
Accruals 5.4
Finance lease creditor 21.0
Lease liabilities (1,523.3)
Net impact on retained earnings (106.1)
Impact on segment disclosures
Segment assets and segment liabilities for December 2019 increased as a result of the adoption of IFRS 16 -
Leases. Lease liabilities are now included in segment liabilities, whereas finance lease liabilities were
previously excluded from segment liabilities. Segment assets and liabilities as at 1 January 2019 were
affected as follows:
GBPm Segment assets Segment liabilities
Merchanting 390.4 (399.4)
Retail 745.4 (861.4)
Toolstation 90.7 (93.0)
P&H 118.3 (118.8)
Unallocated 29.0 (7.3)
Total 1,373.8 (1,479.9)
Impact on the Group's basic and diluted earnings per share
If Group has applied IFRS 16 - Leases from 1 January 2018 using the same transition options and accounting
policy choices, and calculated using the same lease data and lease accounting system, then the Group's basic
and diluted earnings per share and adjusted earnings per share would have been lower by approximately 9 pence
for the year ended 31 December 2018.
21. Contingent liability
Following the change in approach to the replacement of the Group's merchant ERP system announced in July
2019, the Group terminated its relationship with Infor (the software provider) in October 2019 and formally
set out its damages claim.
There is a contingent liability in respect of the Group's possible obligations under the relevant contracts,
which include break clauses limiting the Group's maximum possible contractual exposure to c. GBP65m.
In the view of Directors, it is probable that the Group will be able to successfully resolve this matter
without making any payments to the software provider. Accordingly no provision has been made in respect of
these contracts. The Directors expect this matter to resolve in the next 48 months.
ISIN: GB0007739609
Category Code: FR
TIDM: TPK
LEI Code: 2138001I27OUBAF22K83
Sequence No.: 50000
EQS News ID: 987907
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b4854157332e0d2a914974516d4a6414&application_id=987907&site_id=vwd&application_name=news
(END) Dow Jones Newswires
March 03, 2020 02:00 ET (07:00 GMT)
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