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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 6.00 | 0.77% | 785.00 | 785.50 | 787.00 | 796.00 | 777.50 | 785.00 | 269,722 | 16:35:15 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Lumber, Plywd, Millwork-whsl | 4.86B | 38.1M | 0.1793 | 43.87 | 1.67B |
Hot Features
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TIDMTPK
Travis Perkins plc
Interim results for the six months ended 30 June 2018
Trade focused businesses performing well, significant challenges in DIY
market
GBPm Note H1 2018 H1 2017 Change
---------------------------------------- ---- ------- ------- --------
Revenue 3,364 3,221 4.4%
Like-for-like revenue growth(1) 4.2% 2.7%
--------
Adjusted operating profit(1) 16a 179 190 (5.8)%
Adjusted operating profit excluding
property profits(1) 162 183 (11.5)%
Adjusted profit before taxation(1) 16b 167 175 (4.6)%
Adjusted earnings per share(1) 8b 53.5p 55.8p (4.1)%
Net debt(1) 13 (461) (377) GBP(84)m
Dividend per share (pence) 9 15.5p 15.5p -
Lease adjusted ROCE(2) 16f 10.1% 11.2% (1.1)ppt
---------------------------------------- ---- ------- ------- --------
Adjusting items 2 (286) -
Operating (loss)/profit (112) 183
(Loss)/Profit before taxation (123) 168
Basic (loss)/earnings per share (pence) 8a (59.8)p 53.6p
---------------------------------------- ---- ------- ------- --------
(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) Lease adjusted ROCE restated for H1 2017 to adjust for the GBP246m
write off of goodwill in Wickes in H1 2018
Highlights
-- Solid revenue growth of 4.4% with like-for-like growth of 4.2%.
-- Good trading performance in the trade focused businesses in General
Merchanting, Plumbing & Heating, Contracts and Toolstation.
-- Challenging UK DIY market negatively impacting sales and profitability in
Wickes, with significant cost reduction plans underway.
-- Cost reduction plans in progress across the Group with benefits weighted
towards H2 2018.
-- Adjusted operating profits decline of 5.8% primarily reflects sales mix,
with weaker Kitchen and Bathroom showroom sales in Wickes, and higher
operating costs in General Merchanting.
-- Adjusting items include an impairment of GBP246m against the goodwill in
Wickes given the challenging DIY market, and reorganisation costs in the
P&H and Wickes businesses.
-- Interim dividend unchanged at 15.5p per share
-- Strong focus on costs given mixed market outlook, with 2018 Group EBITA
anticipated to be in the lower half of the range of analyst expectations.
John Carter -- Chief Executive Officer said:
"Our trade focused businesses in General Merchanting, Contracts,
Toolstation and Plumbing & Heating achieved good sales growth despite
experiencing a volatile first half. These businesses exited the period
with encouraging momentum and, supported by a continued focus on cost,
they remain on track to deliver modest profit growth for the full year.
Our consumer-focused business, Wickes, has had a far more challenging
period as weaker consumer spending trends, combined with a difficult
competitive environment, have held back profitability. Consequently, the
Wickes team is executing a significant cost reduction programme. Whilst
these savings will help drive improved profitability through the second
half of the year, Wickes' profits will be lower than previously
expected.
Against a backdrop of changing market conditions which are expected to
continue for the foreseeable future, the Group has commenced a
comprehensive review of its business, with a view to driving stronger
performance and enhanced value for shareholders in the medium term."
Enquiries:
Travis Perkins Tulchan Communications
Graeme Barnes David Allchurch
+44 (0) 7469 401819 +44 (0) 207 353 4200
graeme.barnes@travisperkins.co.uk
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 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 31 July 2018, 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 Group achieved good overall sales growth of 4.4% to GBP3,364m in the
first half of 2018, with like-for-like sales growth of 4.2%. Group
adjusted operating profits, excluding property profits, declined by
11.5% to GBP162m, in part reflecting a change to the overall sales mix
between businesses, with very strong growth in Plumbing & Heating, and a
significant decline in Wickes. In addition, and as expected, overhead
cost inflation in General Merchanting was concentrated in the first half
of the year, with the benefits from cost reduction activities weighted
to the second half.
Given the current mixed market outlook, the Group continues to focus on
achieving a good balance between tightly controlling the cost base and
maximising efficiency, whilst maintaining the strong trading
propositions put in place in recent years. This balance is flexed for
different businesses across the Group depending on end market conditions
and potential future growth.
The Group's cash conversion was lower in H1 2018 than in recent periods,
at 72%, due to phasing of working capital flows which are expected to
reverse in the second half of the year. This had a corresponding impact
on net debt which rose by GBP119m since December 2017, which is also
expected to reverse through H2 2018.
The Board has declared a 15.5 pence per share interim dividend,
unchanged from 2017.
Outlook
The long-term drivers of market growth remain favourable, centred on the
UK's requirement for more homes and the underinvestment in the repair,
maintenance and improvement (RMI) of existing dwellings and
infrastructure. The mixed backdrop of market lead indicators has,
however, continued since the beginning of 2018, with mortgage approvals
and housing transactions broadly flat, inconsistent house price growth
across the UK, depressed consumer confidence and continued pressure on
wider retail sales figures across many UK consumer facing markets.
These factors make it difficult to accurately forecast market volumes in
the near-term, although recent trends would indicate that the trade
markets are performing more consistently than consumer markets, with UK
DIY the most challenged, with weak demand for big ticket purchases in
particular. At this stage, the Group sees no evidence to suggest a
change to the current market environment through the remainder of 2018.
Assuming that current market conditions persist for the balance of the
year, expectations for the trade businesses remain unchanged for 2018.
Given the first half performance in Wickes in a challenging DIY market,
the Group now anticipates that 2018 EBITA will be in the lower half of
the range of analyst expectations.
*As at 30 July 2018 the range of market expectations for full-year 2018
Group EBITA was GBP360m to GBP390m.
Business and operational review
Against a backdrop of changing market conditions which are expected to
continue for the foreseeable future, the Group has commenced a
comprehensive review of its business, with a view to driving stronger
performance and enhanced value for shareholders over the medium term.
The review will focus on defining a simplified Group structure aligned
more closely with its core customer base. An update on the conclusions
from the review will be provided at a capital markets day in early
December.
Technical guidance
The Group's technical guidance for 2018 is as follows:
-- Effective tax rate of around 19%
-- Finance charges will be similar to 2017
-- Capital expenditure of around GBP140m - GBP160m, excluding investment in
freehold property
-- Property profits will be around GBP25m, with the increase primarily due
to achieving better than expected yields on sale and leaseback
transactions.
-- Dividend pay-out underpinned by strong cash generation
Divisional Review
The Group's trade focused businesses in General Merchanting, Contracts,
Toolstation and the Plumbing & Heating division, performed well despite
volatility in trading conditions through the first half of 2018. The six
month period can be split into three distinct time periods. In January
and February, performance was encouraging, with both sales volumes and
recovery of input cost inflation in line with expectations. The extended
period of poor weather through March and April had a significant impact
on the Group's end markets, with trade customers unable to work on
projects, although this period did provide a mild boost to the Plumbing
& Heating division.
In May and June, the trade-focused businesses showed a significant
recovery in sales, and demonstrated encouraging momentum into the second
half of the year. Whilst market trends remain difficult to read, the
recent trading performance underpins the Group's confidence in
expectations for H2 2018.
General Merchanting
H1 2018 H1 2017 Change
------------------------------------ --------- --------- --------
Total revenue GBP1,065m GBP1,055m 0.9%
Like-for-like growth 0.6%
Adjusted operating profit excluding
property GBP86m GBP97m (11.3)%
Adjusted operating margin excluding
property 8.1% 9.2% (110)bps
LAROCE* 12% 14% (2)ppt
Branch network* 843 850 (7)
* Comparison data from 31 December 2017
The General Merchanting division began the year well with good recovery
of input cost inflation, before a difficult period in March and April
during a sustained period of inclement weather. Sales recovered in May
and June, with volume growth primarily driven by extended range sales
through the heavyside range centre network, growth in online sales and
strong performance in Tool Hire and Managed Services.
Gross margin percentage returned to the level of H1 2017, following the
successful recovery of input cost inflation, particularly in core
categories such as timber, and tight control of category pricing
throughout the half.
Adjusted operating profits declined reflecting a higher overhead cost
base in the business. This was due to the expected step-up in costs
associated with the heavyside range centre network extension to cover
all of England and Wales, as well as inflation on rent, rates and
salaries that came into effect very early in the year.
In response to the higher cost base, as previously announced in March
2018, a significant cost action plan was put in place across the
division, focussing on maximising efficiency across the business,
optimising asset utilisation and tightly managing the overall branch
network. These cost reduction activities are expected to deliver
benefits of approximately GBP10m heavily weighted to the second half of
2018 with more to come in 2019.
Plumbing & Heating
H1 2018 H1 2017 Change
------------------------------------ ------- ------- ------
Total revenue GBP774m GBP669m 15.7%
Like-for-like growth 19.8%
Adjusted operating profit excluding
property GBP20m GBP13m 53.8%
Adjusted operating margin excluding
property 2.6% 1.9% 70bps
LAROCE* 13% 11% 2ppt
Branch network* 388 391 (3)
* Comparison data from 31 December 2017
The Plumbing & Heating transformation programme continues to drive
strong results, with like-for-like sales growth of 20% in the half,
exceeding expectations. Volume growth has come through all three parts
of the business, the online channels, the branch network and the
lower-margin wholesale business, particularly in boilers. Encouragingly,
this pace of growth was maintained throughout the second quarter.
Momentum remains positive into the second half of the year, and there
are further opportunities to improve performance through better customer
engagement and category extensions, although comparators will become
more challenging as the business cycles the start of the improvement
plan in 2017.
The division is also benefitting from the substantial reduction in the
overhead cost base carried out as part of the restructuring process in
2017.
Contracts
H1 2018 H1 2017 Change
------------------------------------ ------- ------- -------
Total revenue GBP718m GBP675m 6.4%
Like-for-like growth 5.1%
Adjusted operating profit excluding
property profits GBP43m GBP41m 4.9%
Adjusted operating margin excluding
property profits 6.0% 6.1% (10)bps
LAROCE* 14% 14% -
Branch network* 165 169 (4)
* Comparison data from 31 December 2017
The businesses in the Contracts division continue to perform strongly,
growing ahead of their end markets and taking market share. After a slow
start to the year, mainly owing to delayed activity on large
construction projects, like-for-like growth rates accelerated throughout
the first half, reaching 9.5% for Q2.
Adjusted operating profit grew in line with sales, with a modest decline
in gross margin driven by the mix of deliveries direct from manufacturer
offset by better operating leverage. Actions to drive efficiency through
the branch network remain a key priority, including rationalisation of
the branch network -- 5 Keyline branches were closed, consolidated or
switched to the Travis Perkins brand with over 90% of sales retained
within the business.
In BSS a programme is underway to streamline processes ahead of the
first roll out of the new Merchanting ERP system in early 2019.
CCF performed well in the period.
Consumer
H1 2018 H1 2017 Change
------------------------------------ ------- ------- --------
Total revenue GBP807m GBP822m (1.8)%
Like-for-like growth (4.2)%
Adjusted operating profit excluding
property profits GBP29m GBP45m (35.6)%
Adjusted operating margin excluding
property profits 3.6% 5.5% (190)bps
LAROCE* 7% 7% -
Branch network* 696 666 30
* Comparison data from 31 December 2017
Toolstation
The sales trend in Toolstation through the first half of the year was
similar to the other trade focussed businesses, with a good start to the
year, a weak period in March and April, and strong recovery thereafter.
Even with the disruptive backdrop, Toolstation achieved another strong
performance with total sales growth of 17.6%, and 10.7% on a
like-for-like basis.
Sales growth was driven by the continued growth of the store network in
the UK, with 22 new stores opened in the half taking the total network
to 317. The rollout will continue at pace in the second half.
Improvements to the proposition are also driving higher sales density,
with front-of-counter consumables, range improvements focused on trade
customers and additional online range extension and the roll out of
"drop-ship" delivery direct from suppliers.
As expected, adjusted operating profits in Toolstation were modestly
lower because of the level of expansionary cost investment in the
business. Opening of new stores and the construction of a third
distribution centre, increasing capacity to support 500 stores will
benefit future sales and profit growth.
The expansion of the Toolstation Europe network continued with further
stores in the Netherlands and an extension of the trial in France, with
encouraging sales results.
Wickes
As highlighted at the time of our Q1 2018 trading update, the UK DIY
market continues to be challenging, and was badly affected by the
inclement weather in March and April. Wickes did not recover as strongly
as the trade focused businesses, with consumer sentiment remaining
subdued. Whilst core DIY sales recovered modestly, helped by the
business's exposure to small trade customers, K&B showroom sales have
proven to be weaker, which has significantly impacted sales and
profitability.
Wickes' sales declined by 5.8% in the first half of the year, and by
7.7% on a like-for-like basis. Gross margin was diluted as input cost
inflation could not be recovered through pricing due to competitive
pressures and an adverse sales mix in the period. Adjusted operating
profit declined by GBP14m. As described in note 2 and 12, the Group has
recognised an impairment of GBP246m in relation to goodwill.
In response to the challenging market conditions, the Wickes team has
implemented a comprehensive cost reduction plan, building on the
activities carried out in Q4 2017. As a direct consequence of these
actions the overhead cost base was GBP9m lower in H1 2018 compared to H1
2017, with further benefits to be realised in the second half of the
year which are expected to underpin an improved profit trend. Shrinkage
has been reduced by 25% by applying an end-to-end focus on the supply
chain, branch staffing levels are being carefully controlled to match
trading volumes, and a significant restructuring was carried out in the
head office functions in May, reducing headcount by a third.
Central costs
Unallocated central costs rose by GBP3m to GBP16m for the half, in line
with the expectations for the full year. Growth was driven primarily by
the investments the Group is making in IT capabilities and digital
platforms, in particular the Group's new ERP system for the Merchant
businesses.
Property
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.
Eight new freehold sites were purchased in H1 2018 at an investment of
GBP36m, with a further GBP5m of construction costs to develop sites
ready for trading. These investments were fully funded in the half by
property disposals of GBP51m, which also generated property profits of
GBP17m.
Financial Performance
Revenue
Group revenue grew by 4.4% in the first half of the year, and by 4.2% on
a like-for-like basis with the main drivers being good growth in the
Plumbing & Heating and Contracts divisions, partially offset by
continuing challenges for the Wickes business.
Volume, price and mix analysis
General Plumbing
Total revenue Merchanting & Heating Contracts Consumer Group
------------------ ------------------ ---------- --------- -------- -----
Volume (2.3)% 16.5% (0.9)% (6.1)% 0.8%
Price and mix 2.9% 3.3% 6.0% 1.9% 3.4%
------------------ ------------------ ---------- --------- -------- -----
Like-for-like
revenue growth 0.6% 19.8% 5.1% (4.2)% 4.2%
Network expansion
and acquisitions 0.3% (4.1)% 1.2% 2.3% 0.2%
Trading days - - - - -
------------------ ------------------ ---------- --------- -------- -----
Total revenue
growth 0.9% 15.7% 6.3% (1.9)% 4.4%
Quarterly like-for-like revenue analysis (see note 16h)
Like-for-like Plumbing
revenue growth General Merchanting & Heating Contracts Consumer Group
---------------- ------------------- ---------- --------- -------- -----
Q1 2018 (1.3)% 19.7% 0.9% (4.6)% 3.0%
Q2 2018 3.0% 20.1% 9.5% (3.1)% 5.9%
H1 2018 0.6% 19.8% 5.1% (4.2)% 4.2%
New branch and store openings net of closures contributed 0.2% to
revenue growth with the expansion of the Toolstation network offset by
the branch closures in P&H in 2017. There was no difference in the
number of trading days in 2018 compared to 2017.
The Group maintained a focus on recovering cost price inflation in the
first half of 2018, with overall price inflation across the Group of
approximately 3%, with the highest increases in the Contracts division
where commodity price inflation has had the most concentrated impact.
Operating profit and margin
GBPm H1 2018 H1 2017
General Merchanting 86 97 (11.3)%
Plumbing & Heating 20 13 53.8%
Contracts 43 41 4.9%
Consumer 29 45 (35.6)%
Property 17 7 142.9%
Unallocated costs (16) (13) 23.1%
Adjusted operating profit 179 190 (5.8)%
Amortisation of acquired
intangibles (5) (7)
Impairment of Wickes goodwill (246) -
Other adjusting items (40) -
Operating (loss)/profit (112) 183
Adjusting items recognised in the period included:
-- An impairment of GBP246m on the goodwill held against Wickes
-- Adjusting items of GBP35m in the Plumbing & Heating division covering
further optimisation of the branch and supply chain networks
-- Adjusting items of GBP10m in Wickes covering the costs of the head office
restructuring programme and software impairment
-- A pension curtailment gain of GBP5m relating to the closure of the
defined benefit schemes.
Adjusted operating margin
General Plumbing
Merchanting & Heating Contracts Consumer Group
---------------------------- ----------- ---------- --------- -------- ------
H1 2017 adjusted operating
margin (excluding property
profits) 9.2% 1.9% 6.1% 5.5% 5.7%
Change in gross margin 0.0% (0.8)% (0.3)% (2.7)% (1.5)%
Margin impact of change
in operating costs (1.1)% 1.5% 0.2% 0.8% 0.6%
---------------------------- ----------- ---------- --------- -------- ------
H1 2018 adjusted operating
margin (excluding property
profits) 8.1% 2.6% 6.0% 3.6% 4.8%
The reduction in Group gross margins reflects the change in sales mix
across the business, with strong growth in lower margin Plumbing &
Heating sales offsetting weakness in higher margin Wickes sales,
particularly Kitchens and Bathrooms. Operating costs were carefully
controlled, with significant year-on-year improvements in Plumbing &
Heating and Consumer, and with the operating cost base in General
Merchanting expected to benefit from cost reduction activities in the
second half of the year.
Finance charge
Net finance charges, shown in note 6, were GBP10m (2017: GBP16m).
Interest costs on borrowings were unchanged from 2017 at GBP11m, with
the majority of the Group's debt covered by the two publically traded
bonds on fixed interest coupons.
The impact of marking-to-market currency forward contracts which
remained outstanding at 30 June 2018 was to reduce the net finance
charge by GBP3.2m (the 2017 impact was to increase the net finance
charge by GBP0.2m). These contracts are used to hedge commercial
currency transactions.
Taxation
The total tax charge for the half year period, excluding the effect of
adjusting items, was GBP32m (2017: GBP32m), which represents an
effective rate of 19.7% (2017: 19.2%). This is slightly higher than the
standard rate of corporation tax for the year of 19.0% (2017: 19.25%)
applicable to profits in the United Kingdom because the effective rate
is inflated by the fall in share price during 2018 which has reduced the
benefit of the deferred tax asset held on share options, and resulted in
a charge to the income statement.
The impairment of GBP246m of goodwill held against the Wickes business
has no impact on the current tax charge.
Earnings per share
Reported earnings per share returned a loss of 59.8p per share for H1
2018 (2017 earnings per share: 53.6p), primarily due to the GBP246m
write off of goodwill in Wickes.
Adjusted earnings per share reduced by 4.1% to 53.5p (2017: 55.8p).
Reconciliation of reported to adjusted earnings
H1 2018 H1 2017
Earnings EPS Earnings EPS
--------------------------------------- ---------- ------- -------- ------
Basic earnings and EPS attributable to
shareholders GBP(149)m (59.8p) GBP135m 53.6p
Adjusting items - -
Plumbing & Heating division
transformation GBP35m 13.8p
Wickes restructuring GBP10m 4.1p
Pension curtailment gain GBP(5)m (1.9p)
Impairment of Wickes goodwill GBP246m 98.9p - -
Amortisation of acquired intangibles GBP5m 1.8p GBP7m 2.7p
Tax on amortisation of acquired
intangibles GBP(1)m (0.4p) GBP(1)m (0.5p)
Tax on adjusting items GBP(8)m (3.0p) - -
Effect of reduction in corporation tax - - - -
on deferred tax
Adjusted earnings and EPS attributable GBP133m 53.5p GBP141m 55.8p
to shareholders
Dividend
The Group's dividend pay-out is underpinned by the on-going strength of
cash generation and continued confidence in the Group's outlook over the
medium term. The interim dividend will be held unchanged in 2018 at
15.50 pence (H1 2017: 15.50 pence) and will be paid on 09 November 2018,
at a cash cost of approximately GBP39m.
Cash flow and balance sheet
Free cash flow
The Group generated free cash flow of GBP128m, at a conversion rate of
72%.
(GBPm) H1 2018 H1 2017
---------------------------------------- ------- -------
EBITA 179 190
Depreciation of PPE and other non-cash
movements 69 65
Disposal proceeds in excess of property
profits 34 41
Change in working capital* (100) (54)
Maintenance capital expenditure (25) (25)
Net interest (1) (2)
Tax paid (28) (27)
---------------------------------------- ------- -------
Free cash flow 128 188
Underlying cash conversion rate 72% 99%
*H1 2018 Change in net working capital figure excludes GBP7m in relation
to the development of cloud-based software (H1 2017: GBP5m)
On a modestly lower earnings figure, the free cash flow generation of
GBP128m was impacted by a higher working capital out flow in the half.
This is expected to reverse in the second half of the year.
The main driver of the significant increase in trade receivables was the
timing of sales during the half. With strong sales growth in May and
June, and around 80% of the Group's sales made via customer credit
accounts, the phasing of cash receipts is expected to be Q3 weighted.
Inventories were broadly flat compared with December 2017, improving
stock turnover on modestly higher sales, and reflecting significant cost
price inflation. The Group's trade payables position grew in the first
half of the year, broadly in line with the growth in Group sales.
Maintenance capex, which primarily reflects the purchase and maintenance
of specialist fleet vehicles, was GBP25m, unchanged from 2017 and in
line with the Group's expectations. The Group's interest and tax
payments are in line with 2017.
Uses of free cash generated
(GBPm) H1 2018 H1 2017
------------------------------------- ------- -------
Free cash flow 128 188
------------------------------------- ------- -------
Investment capex (58) (56)
Investments in freehold property (41) (23)
Acquisitions 0 (7)
Dividends (76) (75)
Pensions payments (5) (5)
Cash payment in respect of adjusting
items (12) (6)
Purchase of own shares (44) (9)
Other (17) (13)
------------------------------------- ------- -------
Change in cash/cash equivalents (125) (6)
Additional cash contributions to the defined benefit pension schemes
above the income statement charge were GBP5m (2017: GBP5m). The cash
cost of 2018 adjusting items and utilisation of prior year provisions
for adjusting items was GBP12m. There were no acquisitions in the
period.
The Group moved from issuing new shares for employee share schemes to
purchasing shares in the market. The initial set up of this structure
required a GBP44m purchase in the first half of 2018, with modest
further purchases in future periods.
Capital Investments
Allocation of capital to support and improve the business continued in
2018.
(GBPm) H1 2018 H1 2017
Maintenance (including vehicles) (25) (25)
----------------------------------------------
IT - inc. Merchant ERP / Digital capabilities (24) (24)
Growth capex - inc. New stores / store refits (34) (32)
Base capital expenditure (83) (81)
Freehold property - inc. new freehold sites
/ existing leases (41) (23)
----------------------------------------------
Gross capital expenditure (124) (104)
Property disposals 51 50
Net capital expenditure (73) (54)
*IT investments exclude prepayments in relation to the development of
cloud-based software of GBP7m (2017: GBP5m)
Investments in digital capabilities continued as anticipated, with the
main focus being the programme to deliver a new ERP system to support
the Group's Merchant businesses. The programme team are gearing up for
the first deployment of the system into the BSS business in early 2019.
The programme will deliver significant benefits, making it easier for
our customers to do business with the Group, and making it simpler and
more efficient for colleagues to serve customers.
Under accounting practices for the cloud based systems, a portion of the
IT costs are expensed, leading to the higher unallocated central costs,
with the remainder capitalised or treated as a prepayment.
Growth capex spend of GBP34m was similar to 2017 (GBP32m). A greater
proportion of planned capex has already been completed in the first half
of 2018, including fitting out three new Wickes stores, three new Travis
Perkins branches and completing all of the planned Wickes refits for the
year. The expansion of the Toolstation network accelerated, with 22
stores opened in the half, with this pace to be maintained in the second
half of the year.
Net debt and funding
Net debt of GBP461m at 30 June 2018 was an increase of GBP119m from the
end of December 2017, reflecting the lower profitability, temporary
increase in working capital and the move to purchase shares for employee
share schemes in the market as previously described.
Details of non-statutory disclosures are shown in note 16.
Medium Term Guidance H1 2018 FY 2017
------------------------ --------------------- --------- --------- -------
Net debt GBP461m GBP342m GBP119m
Lease debt GBP1,540m GBP1,525m GBP15m
Lease adjusted net debt GBP2,001m GBP1,867m GBP134m
Lease adjusted gearing* 47.6% 42.6% 5ppts
Fixed charge cover 3.5x 3.1x 3.1x -
LA net debt : EBITDAR 2.5x 3.0x 2.7x 0.3x
Lease adjusted gearing (note 16g) increased by 5.0ppts to 47.6% because
of the higher net debt figure. The Group's fixed charge cover ratio
(note 16d) was unchanged at 3.1x. The lease adjusted net debt/EBITDAR
ratio (note 16c) rose to 3.0x, reflecting higher net debt and lower
earnings.
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 33 to
39 of the 2017 Annual Report and Accounts. Details are provided for
inherent risks relating to the changing customer and competitor
landscape, colleague recruitment, retention and succession, supplier
dependency and disintermediation, unsafe practices resulting in harm to
stakeholders, the efficient allocation of capital, business
transformation projects, market conditions, Brexit, defined benefit
pension scheme funding, data security and the changing regulatory
framework.
Condensed consolidated income statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Revenue 3,364.5 3,220.8 6,433.1
------------------------------------- ------------ ------------ ------------
Operating profit before amortisation
and adjusting items 178.7 190.2 380.1
Adjusting items (note 2) (286.3) - (40.9)
Amortisation of acquired intangible
assets (4.5) (6.9) (12.3)
------------------------------------- ------------ ------------ ------------
Operating (loss)/profit (112.1) 183.3 326.9
Share of associates' results (1.1) - (2.2)
Net finance costs (note 6) (10.2) (15.7) (35.0)
------------------------------------- ------------ ------------ ------------
(Loss)/profit before tax (123.4) 167.6 289.7
------------------------------------- ------------ ------------ ------------
Tax before adjusting items (32.1) (32.2) (63.5)
Tax on adjusting items 7.6 - 7.8
------------------------------------- ------------ ------------ ------------
Tax (note 7) (24.5) (32.2) (55.7)
------------------------------------- ------------ ------------ ------------
(Loss)/profit for the period (147.9) 135.4 234.0
------------------------------------- ------------ ------------ ------------
Attributable to:
Owners of the Company (148.9) 134.9 232.8
Non-controlling interests 1.0 0.5 1.2
------------------------------------- ------------ ------------ ------------
(147.9) 135.4 234.0
------------------------------------- ------------ ------------ ------------
Earnings per ordinary share (note
8)
Basic (59.8p) 53.6p 93.1p
Diluted (59.7p) 53.2p 92.2p
------------------------------------- ------------ ------------ ------------
Total dividend declared per share [15.5p] 15.5p 46.0p
(note 9)
------------------------------------- ------------ ------------ ------------
All results relate to continuing operations.
Condensed consolidated statement of comprehensive income
Six months Year
ended Six months ended
30 June ended 31 December
2018 30 June 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
(Loss)/profit for the period (147.9) 135.4 234.0
Items that will not be reclassified subsequently
to profit and loss:
Actuarial gains on defined benefit pension
schemes 73.7 76.8 90.8
Income taxes relating to items not reclassified (14.0) (14.5) (17.1)
------------------------------------------------- ------------ ------------- ------------
Other comprehensive income for the period 59.7 62.3 73.7
------------------------------------------------- ------------ ------------- ------------
Total comprehensive (loss)/ income for
the period (88.2) 197.7 307.7
------------------------------------------------- ------------ ------------- ------------
Attributable to:
Owners of the Company (89.2) 197.2 306.5
Non-controlling interests 1.0 0.5 1.2
-------------------------- ------ ------ -----
(88.2) 197.7 307.7
-------------------------- ------ ------ -----
Condensed consolidated balance sheet
As at As at As at
30 June 30 June 31 December
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
ASSETS
Non-current assets
Goodwill 1,292.8 1,536.1 1,539.2
Other intangible assets 396.9 368.1 387.1
Property, plant and equipment 962.9 930.8 932.0
Interest in associates 25.1 15.6 20.3
Investments 11.3 9.0 9.5
Retirement benefit asset (note 5) 54.9 - -
Other receivables 37.4 13.3 30.4
---------------------------------- ------------
Total non-current assets 2,781.3 2,872.9 2,918.5
---------------------------------- ------------ ------------ ------------
Current assets
Inventories 809.4 767.1 816.3
Trade and other receivables 1,268.3 1,148.2 1,130.2
Derivative financial instruments 2.0 1.5 -
Cash and cash equivalents 151.5 245.3 276.8
---------------------------------- ------------
Total current assets 2,231.2 2,162.1 2,223.3
---------------------------------- ------------ ------------ ------------
Total assets 5,012.5 5,035.0 5,141.8
---------------------------------- ------------ ------------ ------------
Condensed consolidated balance sheet (continued)
As at As at As at
30 June 30 June 31 December
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
EQUITY AND LIABILITIES
Capital and reserves
Issued capital 25.2 25.1 25.2
Share premium account 545.5 531.6 543.4
Merger reserve 326.5 326.5 326.5
Revaluation reserve 15.7 16.8 15.7
Own shares (53.0) (9.0) (15.3)
Other reserves (4.9) (4.0) (4.9)
Retained earnings 1,793.3 1,884.2 1,958.0
--------------------------------------- ------------
Equity attributable to owners of
the Company 2,648.3 2,771.2 2,848.6
Non-controlling interests 12.7 10.2 11.7
--------------------------------------- ------------ ------------ ------------
Total equity 2,661.0 2,781.4 2,860.3
Non-current liabilities
Interest bearing loans and borrowings 606.7 618.9 612.1
Derivative financial instruments 4.9 4.0 4.9
Retirement benefit obligations (note
5) - 46.9 28.3
Long-term provisions 17.8 21.2 17.1
Deferred tax liabilities 75.9 58.2 61.0
--------------------------------------- ------------
Total non-current liabilities 705.3 749.2 723.4
--------------------------------------- ------------ ------------ ------------
Current liabilities
Interest bearing loans and borrowings 5.6 3.5 6.2
Derivative financial instruments - - 1.2
Trade and other payables 1,549.5 1,395.2 1,453.6
Tax liabilities 40.6 51.0 44.5
Short-term provisions 50.5 54.7 52.6
---------------------------------------
Total current liabilities 1,646.2 1,504.4 1,558.1
--------------------------------------- ------------ ------------ ------------
Total liabilities 2,351.5 2,253.6 2,281.5
--------------------------------------- ------------ ------------ ------------
Total equity and liabilities 5,012.5 5,035.0 5,141.8
--------------------------------------- ------------ ------------ ------------
The interim condensed financial statements of Travis Perkins plc,
registered number 824821, were approved by the Board of Directors on 30
July 2018 and signed on its behalf by:
John Carter Alan Williams
Chief Executive Chief Financial Officer
Officer
Condensed consolidated statement of changes in equity
Issued Share Total equity
share premium Merger Revaluation Own Retained before 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
2018 (audited) 25.2 543.4 326.5 15.7 (15.3) (4.9) 1,958.0 2,848.6 11.7 2,860.3
IFRS 9 adoption - - - - - - (2.4) (2.4) - (2.4)
-------- -------- -------- ----------- ------- ----- --------- ----------------------- ---------------- -------
At 1 January
2018 (restated) 25.2 543.4 326.5 15.7 (15.3) (4.9) 1,955.6 2,846.2 11.7 2,857.9
Loss for the
period - - - - - - (148.9) (148.9) 1.0 (147.9)
Other comprehensive
income for the
period net of tax - - - - - - 59.7 59.7 - 59.7
------------------------- -------- -------- -------- ----------- ------- ----- --------- ----------------------- ---------------- -------
Total comprehensive
income for the
period - - - - - - (89.2) (89.2) 1.0 (88.2)
Dividends - - - - - - (75.6) (75.6) - (75.6)
Dividend equivalent
payments - - - - - - (0.5) (0.5) - (0.5)
Issue of share
capital - 2.1 - - - - - 2.1 - 2.1
Purchase of
own shares - - - - (43.6) - - (43.6) - (43.6)
Tax on share
based payments - - - - - - (0.1) (0.1) - (0.1)
Own shares movement - - - - 5.9 - (5.9) - - -
Credit to equity
for equity-settled
share based
payments - - - - - - 9.0 9.0 - 9.0
------------------------- -------- -------- -------- ----------- ------- ----- --------- ----------------------- ---------------- -------
At 30 June 2018
(unaudited) 25.2 545.5 326.5 15.7 (53.0) (4.9) 1,793.3 2,648.3 12.7 2,661.0
------------------------- -------- -------- -------- ----------- ------- ----- --------- ----------------------- ---------------- -------
Condensed consolidated statement of changes in equity (continued)
Issued Share Total equity
share premium Merger Revaluation Own Retained before 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
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 - - - - - 3.1 - 3.1
Purchase of
own shares - - - - (8.9) - - (8.9) - (8.9)
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 non- Non-
share premium Merger Revaluation Own Retained controlling 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 2017
(audited) 25.1 528.5 326.5 16.8 (8.7) - 1760.1 2,648.3 7.3 2,655.6
Profit for the year - - - - - - 232.8 232.8 1.2 234.0
Other comprehensive
income for the year
net of tax - - - - - - 73.7 73.7 - 73.7
------------------------------- -------- -------- -------- ----------- ------- ----- --------- ------------ ------------ -------
Total comprehensive
income for the year - - - - - - 306.5 306.5 1.2 307.7
Dividends - - - - - - (113.0) (113.0) - (113.0)
Issue of share capital 0.1 14.9 - - - - - 15.0 - 15.0
Purchase of own
shares - - - - (19.2) - - (19.2) - (19.2)
Realisation of revaluation
reserve in respect
of property disposals - - - (0.8) - - 0.8 - - -
Difference between
depreciation of assets on a
historical basis and on a
revaluation basis - - - (0.3) - - 0.3 - - -
Tax on share based
payments - - - - - - 0.1 0.1 - 0.1
Option on non-controlling
interest - - - - - (4.9) - (4.9) - (4.9)
Arising on acquisition - - - - - - - - 3.2 3.2
Foreign exchange - - - - - - 0.2 0.2 - 0.2
Own shares movement - - - - 12.6 - (12.6) - - -
Credit to equity
for equity-settled
share based payments - - - - - - 15.6 15.6 - 15.6
At 31 December 2017
(audited) 25.2 543.4 326.5 15.7 (15.3) (4.9) 1,958.0 2,848.6 11.7 2,860.3
------------------------------- -------- -------- -------- ----------- ------- ----- --------- ------------ ------------ -------
Condensed consolidated cash flow statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Operating profit before acquired
intangible amortisation and adjusting
items 178.7 190.2 380.1
Adjustments for:
Depreciation of property, plant and
equipment 51.5 49.0 102.0
Amortisation of internally generated
intangibles 8.4 5.6 12.6
Other non-cash movements -- share
based payments 9.0 9.9 15.6
Other (2.5) 0.3 0.2
Losses of associates - 0.7 -
Gains on disposal of property, plant
and equipment (17.0) (8.9) (30.6)
--------------------------------------- ------------ ------------ ------------
Operating cash flow 228.1 246.8 479.9
Decrease / (increase) in inventories 6.9 0.9 (47.0)
Increase in receivables (146.4) (104.4) (106.3)
Increase in payables 35.1 44.1 76.8
Payments on adjusting items (12.3) (6.0) (20.2)
Pension payments in excess of the
charges to profits (4.6) (5.2) (11.3)
--------------------------------------- ------------ ------------ ------------
Cash generated from operations 106.8 176.2 371.9
Interest paid (1.1) (2.6) (27.6)
Total income taxes paid (27.8) (27.4) (57.2)
--------------------------------------- ------------ ------------ ------------
Net cash from operating activities 77.9 146.2 287.1
--------------------------------------- ------------ ------------ ------------
Cash flows from investing activities
Interest received 0.2 0.2 0.5
Proceeds on disposal of property,
plant and equipment 51.1 50.3 113.9
Development of software (23.1) (19.8) (48.1)
Purchases of property, plant and
equipment (101.1) (84.3) (179.0)
Interests in associates (7.5) (4.9) (11.3)
Dividends received 0.5 - -
Investments - - 0.3
Acquisition of businesses net of
cash acquired - (6.6) (9.7)
--------------------------------------- ------------ ------------ ------------
Net cash used in investing activities (79.9) (65.1) (133.4)
--------------------------------------- ------------ ------------ ------------
Financing activities
Net proceeds from the issue of share
capital 2.1 3.2 15.0
Movement in finance lease liabilities (2.9) (2.6) (7.0)
Shares purchased (43.6) (8.9) (19.2)
Decrease in loans, liabilities to
pension scheme and loan notes (3.3) (3.2) (3.2)
Dividends paid (75.6) (74.8) (113.0)
--------------------------------------- ------------ ------------ ------------
Net cash (outflow) / inflow from
financing activities (123.3) (86.3) (127.4)
--------------------------------------- ------------ ------------ ------------
Net (decrease) / increase in cash
and cash equivalents (125.3) (5.2) 26.3
--------------------------------------- ------------ ------------ ------------
Cash and cash equivalents at the
beginning of the period 276.8 250.5 250.5
--------------------------------------- ------------ ------------ ------------
Cash and cash equivalents at the
end of the period 151.5 245.3 276.8
--------------------------------------- ------------ ------------ ------------
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, available for
sale investments and contingent consideration arising from business
combinations 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 2018 and 30
June 2017 is unaudited. The June 2018 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 2017 information was also
reviewed by KPMG LLP. The financial information for the year ended 31
December 2017 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 2017 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 2018 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 2017, except for the
adoption of new and amended standards as set out below.
The accounting policies adopted by Travis Perkins plc are set out in the
2017 full year financial statements, which are available on the Travis
Perkins website 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 twelve months
from the date of signing these interim financial statements. For this
reason the interim financial statements have been prepared on a going
concern basis.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current
reporting period and the Group had to change its accounting policies and
make retrospective adjustments as a result of adopting the following
standards:
-- IFRS 9 - Financial Instruments,
-- IFRS 15 - Revenue from Contracts with Customers, and
-- Annual improvements to IFRS 2014-2016 cycle
The impact of the adoption of these standards and the new accounting
policies are disclosed in note 17.
Impacts of standards issued but not yet applied by the entity
In January 2016 the IASB issued IFRS 16 - Leases and this was endorsed
by the European Union in October 2017. It will be effective from 1
January 2019. 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. The Group has a project team
working to determine the effect of this new Standard and implement the
processes and systems necessary to comply with its requirements.
Notes to the interim financial statements
1. General information and accounting policies (continued)
Given the complexity of the Standard and the volume of leases, this
project has not been completed at the date of these interim financial
statements, however based on an analysis of all the Group's material
leases the initial estimates are that the implementation of the standard
will result in net debt that is comparable to or lower than
lease-adjusted net debt as currently disclosed in note 16.
The Group plans to apply IFRS 16 - Leases using a "modified
retrospective" approach as described in paragraph C5(b) of the standard.
Therefore, the cumulative effect of adopting IFRS 16 - Leases will be
recognised as an adjustment to the opening balance of retained earnings
at 1 January 2019, with no restatement of comparative information.
1. Adjusting items
To enable a reader of the interim financial statements to obtain a clear
understanding of the underlying trading, the Directors have presented
the items below separately in the income statement.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Plumbing & Heating division
transformation 34.4 - 40.9
Impairment of Wickes goodwill (note
12) 246.3 - -
Wickes restructuring and software
impairment 10.3 - -
Pension curtailment gain (note 5) (4.7) - -
286.3 - 40.9
---------------------------------------- ---------- ---------- ------------
In August 2017 the Group announced that, following a comprehensive
strategic review of the Plumbing & Heating division, it would reduce
capacity, integrate the CPS and PTS businesses, overhaul the division's
customer proposition and create a dedicated Plumbing & Heating supply
chain. In accordance with the Group's accounting policy the total cost
of GBP34.4m (2017: GBP40.9m) has been treated as an adjusting item. The
adjusting item consisted of the following:
-- GBP1.2m of property, redundancy and other costs (2017: GBP12.0m)
associated with the closure of six branches
-- GBP22.8m of costs (2017: GBP19.1m) arising from the separation and
rationalisation of the Plumbing & Heating supply chain and the
integration of the CPS and PTS businesses. The costs comprised
property-related costs, redundancy and reorganisation costs and inventory
write-downs and provision adjustments.
-- GBP10.4m of central and divisional costs (2017: GBP9.8m) including
people-related, consultancy and other restructuring costs
The Wickes restructuring and software impairment cost of GBP10.3m
consists of redundancy and reorganisation costs of GBP3.8m incurred in
respect of the cost-reduction programme announced in May 2018 and
software impairment costs of GBP6.5m.
The GBP4.7m pension curtailment gain, recognised as a result of the
closure of the Travis Perkins Pensions and Dependants' Benefit Scheme
and the BSS Defined Benefit Scheme to future accrual, is stated net of
GBP0.5m of associated administrative expenses.
Notes to the interim financial statements
1. Business segments
As required by IFRS 8 - Operating Segments, 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 2018
General Plumbing
Merchanting & Heating Contracts Consumer Unallocated Consolidated
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,065.0 773.8 718.4 807.3 - 3,364.5
------------------------- ------------ ---------- --------- -------- ----------- ------------
Segment result before
amortisation, adjusting
items and property
profits 86.5 19.7 43.0 28.5 (16.0) 161.7
Property profits 1.5 2.7 3.8 9.0 - 17.0
------------------------- ------------ ---------- --------- -------- ----------- ------------
Segment result before
amortisation and
adjusting items 88.0 22.4 46.8 37.5 (16.0) 178.7
Adjusting charges (4.7) (29.7) - (256.6) - (291.0)
Adjusting gains 4.7 - - - - 4.7
Amortisation of
acquired intangible
assets - (0.9) (3.0) (0.6) - (4.5)
Segment result 88.0 (8.2) 43.8 (219.7) (16.0) (112.1)
Share of associates - - - - (1.1) (1.1)
Finance income - - - - 4.2 4.2
Finance costs - - - - (14.4) (14.4)
------------------------- ------------ ---------- --------- -------- ----------- ------------
Profit / (loss)
before taxation 88.0 (8.2) 43.8 (219.7) (27.3) (123.4)
Taxation - - - - (24.5) (24.5)
------------------------- ------------ ---------- --------- -------- ----------- ------------
Profit / (loss)
for the period 88.0 (8.2) 43.8 (219.7) (51.8) (147.9)
------------------------- ------------ ---------- --------- -------- ----------- ------------
Notes to the interim financial statements
3. Business segments (continued)
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
--------------------- ------------ ---------- --------- -------- ----------- ------------
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
--------------------- ------------ ---------- --------- -------- ----------- ------------
Year ended 31 December 2017
General Plumbing
Merchanting & Heating Contracts Consumer Unallocated Consolidated
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2,109.5 1,365.5 1,369.0 1,589.1 - 6,433.1
------------------------ ------------ ---------- --------- -------- ----------- ------------
Segment result
before amortisation
and property profits 182.6 30.8 85.7 82.5 (30.9) 350.7
Property profits 18.0 7.6 1.9 1.9 - 29.4
------------------------ ------------ ---------- --------- -------- ----------- ------------
Segment result
before adjusting
items and amortisation 200.6 38.4 87.6 84.4 (30.9) 380.1
Adjusting items - (40.9) - - - (40.9)
Amortisation of
acquired intangible
assets - (1.0) (6.3) (5.0) - (12.3)
Segment result 200.6 (3.5) 81.3 79.4 (30.9) 326.9
Share of associates - - - - (2.2) (2.2)
Finance income - - - - 0.7 0.7
Finance costs - - - - (35.7) (35.7)
------------------------ ------------ ---------- --------- -------- ----------- ------------
Profit / (loss)
before taxation 200.6 (3.5) 81.3 79.4 (68.1) 289.7
Taxation - - - - (55.7) (55.7)
------------------------ ------------ ---------- --------- -------- ----------- ------------
Profit / (loss)
for the year 200.6 (3.5) 81.3 79.4 (123.8) 234.0
------------------------ ------------ ---------- --------- -------- ----------- ------------
Notes to the interim financial statements
3. Business segments (continued)
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Segment assets:
General Merchanting 1,855.1 1,702.1 1,811.0
Plumbing & Heating 560.1 607.9 592.3
Contracts 915.7 877.3 867.2
Consumer 1,363.2 1,545.9 1,544.6
Unallocated 318.4 301.8 326.7
-------------------- ------- ------- -----------
Total assets 5,012.5 5,035.0 5,141.8
-------------------- ------- ------- -----------
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Segment liabilities:
General Merchanting (438.3) (415.3) (441.5)
Plumbing & Heating (299.7) (299.6) (317.8)
Contracts (332.4) (295.9) (323.5)
Consumer (479.3) (447.8) (403.6)
Unallocated (801.8) (795.0) (795.1)
--------------------- --------- --------- -----------
Total liabilities (2,351.5) (2,253.6) (2,281.5)
--------------------- --------- --------- -----------
1. Seasonality
The Group's trading operations when assessed on a half yearly basis are
mainly unaffected by seasonal factors. In 2017 the period to 30 June
accounted for 50.1% of the Group's annual revenue (2016: 50.1%).
Notes to the interim financial statements
1. Retirement benefit obligations
1. Pension scheme asset / (liability) movement
Six months ended 30 June 2018
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Gross pension asset / (liability)
at 1 January 6.6 (25.7) (19.1)
Restriction of asset recognised - (9.2) (9.2)
Gross asset / (liability) at 1 January 6.6 (34.9) (28.3)
Service costs charged to the income
statement (3.7) (1.4) (5.1)
Curtailment gain 3.6 1.6 5.2
Net interest income / (expense) 0.1 (0.3) (0.2)
Contributions from sponsoring companies 2.9 6.7 9.6
Return on plan assets (excluding
amounts included in net interest) (5.3) (0.8) (6.1)
Actuarial gains arising from changes
in demographic assumptions 6.8 2.1 8.9
Actuarial gains arising from changes
in financial assumptions 63.4 20.2 83.6
Actuarial gains arising from experience
adjustments 10.6 9.9 20.5
Increase arising from IFRIC 14 restriction - (33.2) (33.2)
------------------------------------------- ----------- ------------ ------
Gross pension asset / (liability)
at 30 June 85.0 (30.1) 54.9
------------------------------------------- ----------- ------------ ------
Gross actuarial asset 85.0 3.1 88.1
Additional liability recognised for
minimum funding requirements - (33.2) (33.2)
------------------------------------------- ----------- ------------ ------
Gross pension asset / (liability)
at 30 June 85.0 (30.1) 54.9
------------------------------------------- ----------- ------------ ------
A curtailment gain has been recognised as a result of the closure of the
Travis Perkins Pensions and Dependants' Benefit Scheme and the BSS
Defined Benefit Scheme to future accrual from 31 August 2018.
Notes to the interim financial statements
5. Retirement benefit obligations (continued)
Six months ended 30 June 2017
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Gross pension liability at 1 January (61.8) (65.5) (127.3)
Service costs charged to the income
statement (3.5) (1.2) (4.7)
Net interest expense (0.8) (0.8) (1.6)
Contributions from sponsoring companies 3.0 6.9 9.9
Return on plan assets (excluding
amounts included in net interest) 27.2 16.8 44.0
Actuarial gains arising from changes
in demographic assumptions 19.8 6.2 26.0
Actuarial gains arising from changes
in financial assumptions 9.0 4.5 13.5
Increase arising from IFRIC 14 restriction - (6.7) (6.7)
------------------------------------------- ----------- ----------- -------
Gross deficit at 30 June (7.1) (39.8) (46.9)
------------------------------------------- ----------- ----------- -------
Gross actuarial deficit (7.1) (33.1) (40.2)
Additional liability recognised for
minimum funding requirements - (6.7) (6.7)
------------------------------------------- ----------- ----------- -------
Gross pension liability at 30 June (7.1) (39.8) (46.9)
------------------------------------------- ----------- ----------- -------
Notes to the interim financial statements
5. Retirement benefit obligations (continued)
Year ended 31 December 2017
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Gross pension liability at 1 January (61.7) (65.6) (127.3)
Service costs charged to the income
statement (7.0) (2.6) (9.6)
Net interest expense (1.5) (1.6) (3.1)
Contributions from sponsoring companies 7.0 13.9 20.9
Return on plan assets (excluding
amounts included in net interest) 56.7 24.2 80.9
Actuarial gains arising from changes
in demographic assumptions 20.2 6.6 26.8
Actuarial (losses) / gains arising
from changes in financial assumptions (2.2) 1.1 (1.1)
Actuarial losses arising from experience
adjustments (4.9) (1.7) (6.6)
Increase arising from IFRIC 14 restriction - (9.2) (9.2)
------------------------------------------- ---------- ----------- -------
Gross pension asset / (liability)
at 31 December 6.6 (34.9) (28.3)
------------------------------------------- ---------- ----------- -------
Gross actuarial surplus / (deficit) 6.6 (25.7) (19.1)
Additional liability recognised for
minimum funding requirements - (9.2) (9.2)
------------------------------------------- ---------- ----------- -------
Gross pension asset / (liability)
at 31 December 6.6 (34.9) (28.3)
------------------------------------------- ---------- ----------- -------
1. Net pension asset
Six months ended 30 June 2018
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Gross pension asset / (liability)
at 30 June 85.0 (30.1) 54.9
Deferred tax (10.4)
---------------------------------- ----------- ------------ ------
Net pension asset at 30 June 44.5
---------------------------------- ----------- ------------ ------
Six months ended 30 June 2017
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Gross pension liability at 30 June (7.1) (39.8) (46.9)
Deferred tax 9.0
----------------------------------- ----------- ------------ ------
Net pension liability at 30 June (37.9)
----------------------------------- ----------- ------------ ------
Notes to the interim financial statements
5. Retirement benefit obligations (continued)
Year ended 31 December 2017
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Gross pension asset / (liability)
at 31 December 6.6 (34.9) (28.3)
Deferred tax 5.4
------------------------------------- ---------- ----------- ------
Net pension liability at 31 December (22.9)
------------------------------------- ---------- ----------- ------
1. Amounts recognised in the statement of comprehensive income
Six months ended 30 June 2018
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Return on plan assets (excluding amounts
included in net interest) (5.3) (0.8) (6.1)
Actuarial gains arising from changes
in demographic assumptions 6.8 2.1 8.9
Actuarial gains arising from changes
in financial assumptions 63.4 20.2 83.6
Actuarial gains arising from experience
adjustments 10.6 9.9 20.5
Increase arising from IFRIC 14 restriction - (33.2) (33.2)
------------------------------------------- ----------- ------------ ------
Actuarial gains / (losses) on defined
benefit pension schemes 75.5 (1.8) 73.7
------------------------------------------- ----------- ------------ ------
Six months ended 30 June 2017
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Return on plan assets (excluding amounts
included in net interest) 27.2 16.8 44.0
Actuarial gains arising from changes
in demographic assumptions 19.8 6.2 26.0
Actuarial gains arising from changes
in financial assumptions 9.0 4.5 13.5
Increase arising from IFRIC 14 restriction - (6.7) (6.7)
------------------------------------------- ------------ ------------ -----
Actuarial gains on defined benefit
pension schemes 56.0 20.8 76.8
------------------------------------------- ------------ ------------ -----
Notes to the interim financial statements
5. Retirement benefit obligations (continued)
Year ended 31 December 2017
TP Schemes BSS Schemes Group
GBPm GBPm GBPm
Return on plan assets (excluding amounts
included in net interest) 56.7 24.2 80.9
Actuarial gains arising from changes
in demographic assumptions 20.2 6.6 26.8
Actuarial gains / (losses) arising
from changes in financial assumptions (2.2) 1.1 (1.1)
Actuarial (losses) / gains arising
from experience adjustments (4.9) (1.7) (6.6)
(Increase) / decrease arising from
IFRIC 14 restriction - (9.2) (9.2)
----------------------------------------- ----------- ----------- -----
Actuarial gains / (losses) on defined
benefit pension schemes 69.8 21.0 90.8
----------------------------------------- ----------- ----------- -----
1. Finance costs
1. Net finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Interest receivable 1.0 0.4 0.7
Net gain on re-measurement of derivatives
at fair value 3.2 - -
------------------------------------------ ---------- ---------- ------------
Finance income 4.2 0.4 0.7
------------------------------------------ ---------- ---------- ------------
Interest on bank loans and overdrafts (1.2) (1.0) (2.6)
Interest on sterling bonds (10.4) (10.4) (21.0)
Amortisation of issue costs of bank
loans (0.7) (0.7) (1.5)
Other interest (0.1) (0.3) (0.7)
Interest on obligations under finance
leases (0.2) (0.3) (0.8)
Unwinding of discounts -- liability
to pension scheme (1.2) (1.2) (2.4)
Unwinding of discounts -- property
provisions (0.3) (0.4) (0.7)
Other finance costs -- pension scheme (0.3) (1.6) (3.1)
Net loss on re-measurement of derivatives
at fair value - (0.2) (2.9)
------------------------------------------ ---------- ---------- ------------
Finance costs (14.4) (16.1) (35.7)
------------------------------------------ ---------- ---------- ------------
Net finance costs (10.2) (15.7) (35.0)
------------------------------------------ ---------- ---------- ------------
Notes to the interim financial statements
6. Finance costs (continued)
1. Interest for non-statutory measures
Year Year Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Interest on bank loans and overdrafts 2.8 2.4 2.6
Interest on sterling bonds 21.0 21.0 21.0
Amortisation of issue costs of
bank loans 1.5 1.5 1.5
Interest on obligations under finance
leases 0.7 0.5 0.8
Unwinding of discounts -- liability
to pension scheme 2.4 2.4 2.4
Interest for fixed charge ratio
purposes 28.4 27.8 28.3
-------------------------------------- -------- -------- ------------
1. Tax
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Current tax
UK corporation tax
- current year (24.0) (34.7) (57.5)
- prior year - - (0.4)
------------------- ---------- ---------- ------------
Total current tax (24.0) (34.7) (57.9)
------------------- ---------- ---------- ------------
Deferred tax
- current year (0.5) 2.5 (2.5)
- prior year - - 0.3
------------------- ---------- ---------- ------------
Total deferred tax (0.5) 2.5 (2.2)
------------------- ---------- ---------- ------------
Total tax charge (24.5) (32.2) (55.7)
------------------- ---------- ---------- ------------
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.
Notes to the interim financial statements
1. Earnings per share
1. Basic and diluted earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Earnings for the purposes of basic
and diluted earnings per share being
net profit attributable to equity
shareholders of the Parent Company (148.9) 134.9 232.8
-------------------------------------- ----------- ----------- ------------
No. No. No.
Weighted average number of shares
for the purposes of basic earnings
per share 249,131,207 251,798,828 250,100,896
Dilutive effect of share options
on potential ordinary shares 182,869 1,825,582 2,468,248
-------------------------------------- ----------- ----------- ------------
Weighted average number of shares
for the purposes of diluted earnings
per share 249,314,076 253,624,410 252,569,144
-------------------------------------- ----------- ----------- ------------
Earnings per share (59.8p) 53.6p 93.1p
-------------------------------------- ----------- ----------- ------------
Diluted earnings per share (59.7p) 53.2p 92.2p
-------------------------------------- ----------- ----------- ------------
1. Adjusted earnings per share
Adjusted earnings per share are calculated by excluding the effects of
amortisation of acquired intangible assets and adjusting items from
earnings.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Earnings for the purposes of basic
and diluted earnings per share being
net profit attributable to equity shareholders
of the Parent Company (148.9) 134.9 232.8
Adjusting items 286.3 - 40.9
Amortisation of acquired intangible
assets 4.5 6.9 12.3
Tax on amortisation of acquired intangible
assets (0.9) (1.3) (2.1)
Tax on adjusting items (7.6) - (7.8)
Effect of reduction in corporation
tax rate on deferred tax - - -
------------------------------------------------ ---------- ---------- ------------
Earnings for adjusted earnings per
share 133.4 140.5 276.1
------------------------------------------------ ---------- ---------- ------------
Adjusted earnings per share 53.5p 55.8p 110.4p
------------------------------------------------ ---------- ---------- ------------
Adjusted diluted earnings per share 53.5p 55.4p 109.3p
------------------------------------------------ ---------- ---------- ------------
Notes to the interim financial statements
1. Dividends
Amounts were recognised in the financial statements as distributions to
equity shareholders in the following periods:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Final dividend for the year ended 31
December 2017 of 30.5 pence (2016: 29.75
pence) per share 75.6 74.8 74.7
Interim dividend for the year ended
31 December 2017 of 15.25 pence per
share - - 38.3
------------------------------------------ ---------- ---------- ------------
The proposed interim dividend of 15.5p per share in respect of the year
ending 31 December 2018 was approved by the Board on 30 July 2018 and
has not been included as a liability as at 30 June 2018. It will be paid
on 9 November 2018 to shareholders on the register at close of business
on 5 October 2018. The shares will be quoted ex-dividend on 4 October
2018.
1. Borrowings
At the period end, the Group had the following borrowing facilities
available:
As at As at As at
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Drawn facilities:
5 year committed revolving credit facility - - -
Sterling bond 2014 (due 2021) 260.9 264.1 262.6
Sterling bond 2017 (due 2023) 300.0 300.0 300.0
560.9 564.1 562.6
------------------------------------------- -------- -------- ------------
Undrawn facilities:
5 year committed revolving credit facility
(expires December 2020) 550.0 550.0 550.0
Bank overdraft 30.0 30.0 30.0
------------------------------------------- -------- -------- ------------
580.0 580.0 580.0
------------------------------------------- -------- -------- ------------
1. Share capital
Allotted
-----------------
No. GBPm
Ordinary shares of 10p
At 1 January 2018 251,994,708 25.2
Allotted under share option schemes 149,215 -
------------------------------------ ----------- ----
At 30 June 2018 252,143,923 25.2
------------------------------------ ----------- ----
Notes to the interim financial statements
1. Impairment
The Group tests goodwill and other non-monetary assets with indefinite
useful lives for impairment annually or more frequently if there are
indications that an impairment may have occurred. The recoverable
amounts of the goodwill and other non-monetary assets with indefinite
useful lives are determined from value in use calculations. The key
assumptions for the value in use calculations are those regarding the
discount rates, growth rates and like-for-like market volume changes
which impact sales and therefore cash flow projections and maintenance
capital expenditure. Management estimates pre-tax discount rates that
reflect current market assessments of the time value of money and the
risks specific to the cash generating unit groupings that are not
reflected in the cash flow projections.
In the 2017 Annual Report & Accounts it was disclosed that the Wickes
CGU was sensitive to key assumptions. As Wickes has underperformed its
forecasts so far in 2018 an impairment review has been performed. The
Directors' calculations have shown that an impairment of GBP246.3m has
occurred in relation to goodwill.
The key variables applied to the value in use calculations were:
-- Cash flow forecasts are risk-adjusted and were derived from the most
recent board approved corporate plan updated for changes in current
trading conditions.
-- The sales market volume assumptions underlying the cash flow forecasts
are the Directors' estimates of likely future changes based on historical
performance (excluding future investment and enhancements) and the
current outlook for both the UK economy and the UK DIY market. This is a
key operating assumption because the state of the DIY market determines
the Directors' approach to margin and cost maintenance.
-- The performance of kitchen and bathroom sales and forecast cost savings
are key drivers of operational cash flows.
-- A pre-tax discount rate is calculated by reference to the weighted
average cost of capital ("WACC") of the Group calculated with reference
to market information and equals 8.65%.
-- Cash flows beyond the corporate plan period (2022 and beyond) have been
determined using a growth rate of 2.0%. This represents average GDP
growth in UK over the past 20 years and the Bank of England target for
nominal growth.
Sensitivity of results to changes in assumptions
Whilst management believe the assumptions are realistic, it is possible
that a materially different impairment would be identified if any of the
above key assumptions were changed significantly. The impact on the
impairment charge recognised of a change in each assumption, all other
assumptions remaining the same, is shown in the table below.
Terminal value Discount rate Long-term growth rate
---------------------- ----------------------- -----------------------
Reduction Increase Reduction
in assumption Impact in assumption Impact in assumption Impact
5% GBP30m 1% GBP119m 0.5% GBP54m
-------------- ------ -------------- ------- --------------- ------
Notes to the interim financial statements
1. Net debt reconciliation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Net debt at 1 January (341.5) (377.5) (377.5)
(Decrease) / increase in cash and
cash equivalents (125.3) (5.2) 26.3
Cash flows from debt 6.2 5.9 7.0
Cash flows from pension liability - - 3.2
Finance charges movement (0.7) (0.7) (1.5)
Amortisation of swap cancellation
receipt 1.7 1.7 3.4
Discount unwind on liability to
pension scheme (1.2) (1.2) (2.4)
---------------------------------- ---------- ---------- ------------
Net debt at 30 June / 31 December (460.8) (377.0) (341.5)
---------------------------------- ---------- ---------- ------------
1. 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
-- 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.
There were no transfers between levels during the year. There are no
non-recurring fair value measurements.
Notes to the interim financial statements
14. Financial instruments (continued)
As at As at As at
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Included in assets
Level 2
Foreign currency forward contracts
at fair value through profit and
loss 2.0 1.5 -
2.0 1.5 -
------------------------------------- -------- -------- ------------
Current assets 2.0 1.5 -
Non-current assets - - -
------------------------------------- -------- -------- ------------
2.0 1.5 -
------------------------------------- -------- -------- ------------
Included in liabilities
Level 2
Foreign currency forward contracts
at fair value through profit and
loss - - 1.2
Level 3
Option on non-controlling interest
at fair value through reserves - 4.0 -
Deferred consideration at fair value
through equity 4.9 - 4.9
4.9 4.0 6.1
------------------------------------- -------- -------- ------------
Current liabilities - - 1.2
Non-current liabilities 4.9 4.0 4.9
------------------------------------- -------- -------- ------------
4.9 4.0 6.1
------------------------------------- -------- -------- ------------
Notes to the interim financial statements
1. Related party transactions
The Group has related party relationships 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 2018 the
Group made loans to associates of GBP7.5m (2017: GBP4.9m). Operating
transactions with the associates were not significant during the period.
1. Non-statutory information
1. Adjusted operating profit
Adjusted operating profit is calculated by excluding the effects of
amortisation of acquired intangible assets and adjusting items from
operating profit.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Operating (loss)/profit (112.1) 183.3 326.9
Adjusting items 286.3 - 40.9
Amortisation of acquired intangible
assets 4.5 6.9 12.3
Adjusted operating profit 178.7 190.2 380.1
------------------------------------ ---------- ---------- ------------
1. Adjusted profit before taxation
Adjusted profit before taxation is calculated by excluding the effects
of amortisation of acquired intangible assets and adjusting items from
profit before taxation.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
(Loss)/profit before taxation (123.4) 167.6 289.7
Adjusting items 286.3 - 40.9
Amortisation of acquired intangible
assets 4.5 6.9 12.3
Adjusted profit before taxation 167.4 174.5 342.9
------------------------------------ ---------- ---------- ------------
Notes to the interim financial statements
16. Non-statutory information (continued)
1. Ratio of lease adjusted net debt to EBITDAR (rolling 12 months)
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Operating profit 28.3 97.6 326.9
Depreciation and amortisation 129.8 126.0 126.9
------------------------------------ -------- -------- -----------
EBITDA 158.1 223.6 453.8
Adjusting items 327.2 292.0 40.9
------------------------------------ -------- -------- -----------
Adjusted EBITDA 485.3 515.6 494.7
Property operating lease rentals 192.5 187.8 190.6
Adjusted EBITDAR 677.8 703.4 685.3
------------------------------------ -------- -------- -----------
Reported net debt (note 13) 460.8 377.0 341.5
Property operating lease rentals x8 1,540.0 1,502.4 1,524.8
------------------------------------ -------- -------- -----------
Lease adjusted net debt 2,000.8 1,879.4 1,866.3
------------------------------------ -------- -------- -----------
Lease adjusted net debt to adjusted 3.0x 2.7x 2.7x
EBITDAR
------------------------------------ -------- -------- -----------
1. Fixed charge cover (rolling 12 months)
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Adjusted EBITDAR 677.8 703.4 685.3
-------------------------------------- ------- ------- -----------
Property operating lease rentals 192.5 187.8 190.6
Interest for fixed charge cover (note
6) 28.4 27.8 28.3
-------------------------------------- ------- ------- -----------
Fixed charge 220.9 215.6 218.9
-------------------------------------- ------- ------- -----------
Fixed charge cover 3.1x 3.3x 3.1x
-------------------------------------- ------- ------- -----------
Notes to the interim financial statements
1. 6. Non-statutory information (continued)
1. Adjusted free cash flow
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Operating profit before acquired intangible
amortisation and adjusting items 178.7 190.2 380.1
Depreciation and amortisation of internally
generated intangible assets 59.9 54.6 114.6
Other non-cash movements (share based
payments) 9.0 10.9 15.6
Gain on disposal of property plant
and equipment (17.0) (8.9) (30.6)
Movement on working capital* (100.3) (54.4) (54.4)
Net interest paid (0.9) (2.4) (27.1)
Income tax paid (27.8) (27.4) (57.2)
Maintenance capital expenditure (25.0) (25.0) (48.0)
Proceeds from disposal of property,
plant and equipment 51.1 50.3 113.9
Dividends received 0.5 - -
-------------------------------------------- ---------- ---------- ------------
Adjusted free cash flow 128.2 187.9 406.9
-------------------------------------------- ---------- ---------- ------------
*Excludes GBP7.0m in relation to the development of cloud-based software
(31 December 2017: GBP22.1m; 30 June 2017: GBP5.0m).
1. Capital ratios (rolling 12 months)
(i) Lease adjusted operating profit
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Operating profit 28.3 97.6 326.9
Amortisation of acquired intangible
assets 9.8 15.2 12.3
Adjusting items 327.2 292.0 40.9
---------------------------------------- ------- -------
Adjusted operating profit 365.3 404.8 380.1
50% of property operating lease rentals 96.3 93.9 95.3
---------------------------------------- ------- ------- -----------
Revised lease adjusted operating profit 461.6 498.7 475.4
---------------------------------------- ------- ------- -----------
Notes to the interim financial statements
16. Non-statutory information (continued)
f) Capital ratios (rolling 12 months) (continued)
(ii) Lease adjusted capital employed
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Opening 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) -
Impairment of goodwill and other intangibles - (235.4) -
Tax on impairment of goodwill and other
intangibles - 3.8 -
--------------------------------------------- ------- ------- -----------
Opening capital employed as previously
stated 3,196.3 3,186.5 3,136.3
Impairment of goodwill and other intangibles (246.3) (246.3) (246.3)
Revised opening capital employed 2,950.0 2,940.2 2,890.0
--------------------------------------------- ------- ------- -----------
Closing net assets 2,661.0 2,781.4 2,860.3
Net pension (asset)/liability (44.5) 37.9 22.9
Net borrowings 460.8 377.0 341.5
--------------------------------------------- ------- ------- -----------
Closing capital employed as previously
stated 3,077.3 3,196.3 3,224.7
Impairment of goodwill and other intangibles - (246.3) (246.3)
-----------
Closing capital employed 3,077.3 2,950.0 2,978.4
--------------------------------------------- ------- ------- -----------
Average capital employed 3,013.7 2,945.1 2,934.2
Property operating lease rentals x8 1,540.0 1,502.4 1,524.8
--------------------------------------------- ------- ------- -----------
Lease adjusted capital employed 4,553.7 4,447.5 4,459.0
--------------------------------------------- ------- ------- -----------
(iii) Lease adjusted return on capital employed
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Revised lease adjusted operating profit 461.6 498.7 475.4
Revised lease adjusted capital employed 4,553.7 4,447.5 4,459.0
----------------------------------------- ------- ------- -----------
Revised lease adjusted return on capital
employed 10.1% 11.2% 10.7%
----------------------------------------- ------- ------- -----------
Notes to the interim financial statements
16. Non-statutory information (continued)
1. Lease adjusted gearing
As at As at As at
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Reported net debt 460.8 377.0 341.5
Property operating lease rentals x8 1,540.0 1,502.4 1,524.8
------------------------------------ -------- --------- -------------
Lease adjusted net debt 2,000.8 1,879.4 1,866.3
------------------------------------ -------- --------- -------------
Property operating lease rentals x8 1,540.0 1,502.4 1,524.8
Total equity 2,661.0 2,781.4 2,860.3
------------------------------------ -------- --------- -------------
4,201.0 4,283.8 4,385.1
------------------------------------ -------- --------- -------------
Lease adjusted gearing 47.6% 43.9% 42.6%
------------------------------------ -------- --------- -------------
1. Like-for-like sales
General Plumbing
Merchanting & Heating Contracts Consumer Total
GBPm GBPm GBPm GBPm GBPm
2017 H1 revenue 1,054.7 669.2 674.8 822.1 3,220.8
Like-for-like
revenue change 7.1 131.8 35.5 (34.0) 140.4
---------------- ------------ ---------- --------- -------- -------
1,061.8 801.0 710.3 788.1 3,361.2
Branch opening 8.1 1.7 3.6 26.6 40.0
Branch closures (4.9) (33.4) (1.8) (7.4) (47.5)
Acquisitions - 4.5 6.3 - 10.8
2018 H1 revenue 1,065.0 773.8 718.4 807.3 3,364.5
---------------- ------------ ---------- --------- -------- -------
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.
Notes to the interim financial statements
1. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 - Financial
Instruments and IFRS 15 - Revenue from Contracts with Customers on the
Group's financial statements and also discloses the new accounting
policies that have been applied from 1 January 2018, where they are
different to those applied in prior periods.
The new standards have generally been adopted without restating
comparative information. The reclassifications and the adjustments
arising from the new impairment rules are therefore not reflected in a
restated balance sheet as at 31 December 2017, but are recognised in the
closing balance sheet as at 30 June 2018 or, for the change to the
Group's financial asset impairment model necessitated by IFRS 9 -
Financial Instruments, have been recognised in the opening balance sheet
at 1 January 2018.
1. IFRS 15 - Revenue from Contracts with Customers
Impact of adoption
The Group has adopted IFRS 15 - Revenue from Contracts with Customers
from 1 January 2018 which resulted in changes in accounting policies and
the reclassification of amounts recognised in the financial statements.
None of the adjustments impacted the Group's retained earnings and this
standard is not expected to have a significant impact on the Group.
Provisions for customer returns were previously presented on a net basis,
as part of accruals and deferred income. Following adoption of IFRS 15 -
Revenue from Contracts with Customers they are now shown on a gross
basis and liabilities for the full amount expected to be refunded to
customers (GBP3.1m as at 1 January 2018) are included in trade and other
payables. Subsequently assets for the value of goods expected to be
returned are included in trade and other receivables (GBP1.8m as at 1
January 2018).
Accounting policies
Revenue recognition
Revenue is recognised when the Group has satisfied its performance
obligations to the customer and the customer has obtained control of the
goods or services being transferred.
Revenue is measured at the fair value of consideration received or
receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts and value
added tax. For the Group, services comprise tool hire and kitchen and
bathroom installations. Tool hire revenue is recognised on a straight
line basis over the period of hire. Revenue from the installation of
kitchens and bathrooms is recognised when the Group has fulfilled all
its performance obligations under the installation contract.
Customer rebates
Where the Group has rebate agreements with its customers, the value of
customer rebates paid or payable, calculated in accordance with the
agreements in place based on the most likely outcome, is deducted from
turnover in the year in which the rebate is earned.
Notes to the interim financial statements
17. Changes in accounting policies (continued)
1. IFRS 9 - Financial Instruments
Impact of adoption
IFRS 9 - Financial Instruments replaces the provisions of IAS 39 -
Financial Instruments: Recognition and Measurement that relate to the
recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting.
The adoption of IFRS 9 - Financial Instruments from 1 January 2018
resulted in changes in accounting policies and adjustments to the
amounts recognised in the financial statements. The new accounting
policies are set out below. In accordance with the transitional
provisions in IFRS 9 - Financial Instruments, comparative figures have
not been restated.
Classification and measurement
On 1 January 2018 (the date of initial application of IFRS 9 - Financial
Instruments), the Group's management has assessed which business models
apply to the financial assets held by the Group and has classified its
financial instruments into the appropriate IFRS 9 - Financial
Instruments categories. The main effects resulting from this
reclassification are as follows:
New classification Carrying amount
Original under IFRS 9 - Financial 1 January 2018
Note classification Instruments GBPm
FINANCIAL ASSETS
Derivative financial Designated as
instruments a) FVTPL Mandatorily at FVTPL -
Available
Cash and cash equivalents -for-sale Amortised cost 276.8
Trade and other Loans and
receivables b) receivables Amortised cost 1,049.2
Designated instrument
by instrument as
Available-for-sale Available either FVOCI or
investments c) -for-sale FVTPL 4.7
--------------------- ----- --------------- -------------------------- ---------------
FINANCIAL LIABILITIES
Derivative financial Designated as
instruments a) FVTPL Mandatorily at FVTPL (1.2)
--------------------- ----- --------------- -------------------------- ---------------
1. Under IAS 39 - Financial Instruments: Recognition and Measurement, these
foreign currency forward contracts were designated as fair value through
profit and loss (FVTPL) because they were managed on a fair value basis
and their performance was monitored on this basis. These assets have been
classified as mandatorily measured at FVTPL under IFRS 9 - Financial
Instruments.
2. Trade and other receivables that were classified as loans and receivables
under IAS 39 - Financial Instruments: Recognition and Measurement are now
classified at amortised cost as the business model is to hold the
financial asset to collect contractual cash flows which represent solely
the payment of principal and interest. An increase of GBP2.4m in the
allowance for impairment over these receivables was recognised in opening
retained earnings at 1 January 2018 on transition to IFRS 9 - Financial
Instruments.
3. These equity securities represent investments that the Group intends to
hold for the long term for strategic purposes. As permitted by IFRS 9 -
Financial Instruments, the Group has designated these investments on a
instrument by instrument basis as either fair value through other
comprehensive income ("FVTOCI") or FVTPL.
Notes to the interim financial statements
17. Changes in accounting policies (continued)
Impairment of financial assets
Trade receivables and contract assets are subject to the new expected
credit loss model in IFRS 9 - Financial Instruments and therefore the
Group has revised its impairment methodology. The impact of the change
in impairment methodology on the Group's retained earnings and equity is
a reduction of GBP2.4m in retained earnings and net assets at 1 January
2018.
The Group applies the IFRS 9 - Financial Instruments simplified approach
to measuring expected credit losses. This uses a lifetime expected loss
allowance for all trade receivables and contract assets. To measure the
expected credit losses, trade receivables and contract assets have been
grouped based on shared credit risk characteristics and the days past
due. The contract assets relate to unbilled work in progress and have
substantially the same risk characteristics as the trade receivables for
the same types of contracts. The Group has therefore concluded that the
expected loss rates for trade receivables are a reasonable approximation
of the loss rates for the contract assets. On that basis, the loss
allowance as at 1 January 2018 was determined to be GBP2.4m higher than
these previously recognised under the incurred loss model of IAS 39 -
Financial Instruments: Recognition and Measurement. The amount restated
represents the impairment loss recognised on current trade receivables
and contract assets.
The loss allowance at 30 June 2018 is GBP23.5m. Under the incurred loss
model of IAS 39 - Financial Instruments: Recognition and Measurement it
would have been GBP20.2m.
Trade receivables and contract assets are written off when there is no
reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure
of a debtor to engage in a repayment plan with the Group, and the
commencement of legal proceedings.
Accounting policies
The adoption of IFRS 9 - Financial Instruments has not had a significant
effect on the Group's accounting policies related to financial
liabilities and derivative financial instruments. The impact of IFRS 9 -
Financial Instruments, on the classification and measurement of
financial assets is set out below.
Investments and other financial assets
Classification:
From 1 January 2018, the Group classifies its financial assets in the
following measurement categories:
-- those to be measured subsequently at fair value (either through Other
Comprehensive Income "FVOCI", or through profit or loss "FVTPL"), and
-- those to be measured at amortised cost.
The classification depends on the business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be
recorded in profit or loss or OCI. For investments in equity instruments
that are not held for trading, this will depend on whether the Group has
made an irrevocable election at the time of initial recognition to
account for the equity investment at FVTPL or at FVOCI.
The Group reclassifies debt investments when and only when its business
model for managing those assets change.
Measurement:
At initial recognition, the Group measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through
profit or loss (FVTPL), transaction costs that are directly attributable
to the acquisition of the financial asset. Transaction costs of
financial assets carried at FVTPL are expensed in profit or loss.
Notes to the interim financial statements
17. Changes in accounting policies (continued)
Debt instruments
Subsequent measurement of debt instruments depends on the Group's
business model for managing the asset and the cash flow characteristics
of the asset. There are two measurement categories into which the Group
classifies its debt instruments:
-- Amortised costs: Assets that are held for collection of contractual cash
flows where those cash flows represent solely payments of principal and
interest are measured at amortised cost. Interest income from these
financial assets is included in finance income using the effective
interest rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other
gains/(losses), together with foreign exchange gains and losses.
Impairment losses are presented as separate line item in the statement of
profit or loss.
-- FVTPL: Assets that do not meet the criteria for amortised cost or FVOCI
are measured at FVTPL. A gain or loss on a debt instrument that is
subsequently measured at FVTPL is recognised in profit or loss and
presented net within other gains/(losses) in the period in which it
arises.
Equity instruments
The Group subsequently measures all equity investments at fair value.
Where the Group's management has elected to present fair value gains and
losses on equity investments in OCI, there is no subsequent
reclassification of fair value gains and losses to profit or loss
following the derecognition of the investment. Dividends from such
investments continue to be recognised in profit or loss as other income
when the Group's right to receive payments is established.
Changes in the fair value of financial assets at FVTPL are recognised in
other gains/(losses) in the statement of profit or loss as applicable.
Impairment losses (and the reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from other
changes in fair value.
Impairment:
From 1 January 2018, the Group assesses on a forward looking basis the
expected credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9 - Financial Instruments, which requires expected
lifetime losses to be recognised from initial recognition of the
receivables.
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
30 July 2018 30 July 2018
INDEPENT 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 2018 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 2018 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. 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 - Interim Financial Reporting 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 30 July 2018
(END) Dow Jones Newswires
July 31, 2018 02:00 ET (06:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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