Travis Perkins Annual Report 2008

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FY2008 Annual Report · Travis Perkins

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T R A V I S
P E R K I N S P L C

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T R A VIS PERKI

NS PLC

LO DG E W A Y

HOUSE

HARLES

T O NE R O AD

NO R THAMPT

O N NN5 7UG

TE LEPHO

NE 01604 752 424

2008

ANNU

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O U R G R O U P M I S S I O N

“Continue to deliver better returns by... putting in place and growing the best
businesses, with outstanding people and operations, providing
comprehensive building material solutions, to everyone creating, maintaining,
repairing or improving the built environment,... helping to build Britain”

O U R G R O U P V I S I O N

To ensure that anyone in Britain who wants to access any kind of building
materials through any form of supply channel will have a Travis Perkins group
operation as their first or first alternative choice

O U R G R O U P V A L U E S

At Travis Perkins, we:

Know our customers –
we understand their needs, beat their
expectations, treat them with respect, and
know our major customers personally.

Talk and listen –
we say what we mean clearly and honestly,
we listen carefully; we respond objectively,
we explain our decisions.

Are with you, not against you –
we seek mutual benefits with all
stakeholders; we think about the impact of
our actions; we search for similarities.

Know how to do our jobs –
not just today, but for the next job; we equip
ourselves with the skills needed to perform
and be confident we can perform.

Like to deliver –
we enjoy being the best; we know exactly
what each of us is expected to achieve; we
focus on getting results, simply.

Work together –
we actively work with each other; when
something goes wrong, the first thing we
will do is fix the problem; not look for
someone to blame.

Always try to get better –
we constructively challenge how we work;
we look for fresh ideas that are different; we
only have rules where they are necessary
because we use our common sense.

Are proud to be here –
this is a great company; everyone working
with us is welcome; we make work enjoyable
for everyone.

This document is important and requires your immediate attention. If you are in any doubt as to what action you should take, you are recommended to seek your
own financial advice from your stockbroker or other independent adviser authorised under the Financial Services and Markets Act 2000. If you have sold or
transferred all of your shares in Travis Perkins plc, please forward this document, together with the accompanying documents, as soon as possible either to the
purchaser or transferee or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.

M
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C O N T E N T S

O V E R V I E W

Financial highlights

Who we are

R E P O R T S

Chairman’s statement

Chief executive’s review of the year

Chief operating officer’s review of the year

Finance director’s review of the year

G O V E R N A N C E

Corporate responsibility statement

Directors and professional advisers

Corporate governance

Audit committee report

Health & safety report

Directors’ remuneration report

Nominations committee report

Directors’ report

Statement of directors’ responsibilities

F I N A N C I A L S T A T E M E N T S

Independent auditors’ report

Income statements

Statements of recognised income and expense

Balance sheets

Cash flow statements

Notes to the financial statements

Five year record

110

S H A R E H O L D E R I N F O R M A T I O N

Notice of Annual General Meeting

Notes to Notice of Annual General Meeting

Directions to Annual General Meeting

Other shareholder information

112

114

116

117

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F I N A N C I A L H I G H L I G H T S

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

F R E E C A S H F L O W U P 4 3 % ( N O T E 3 5 )

(cid:129)

G R O S S O P E R AT I N G C O S T S A V I N G S O F £ 7 3 M ( 8 % ) A C H I E V E D

G R O U P R E V E N U E M A I N TA I N E D AT £ 3 , 1 7 9 M

(cid:129)

A D J U S T E D O P E R AT I N G P R O F I T D O W N 1 5 % T O £ 2 7 2 M

(cid:129)

A D J U S T E D E P S D O W N 1 8 % T O 1 2 3 P

(cid:129)

B A S I C E P S D O W N 4 3 % A F T E R E X C E P T I O N A L I T E M S O F £ 5 6 M

O P E R A T I N G H I G H L I G H T S

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

L I K E - F O R - L I K E H E A D C O U N T R E D U C E D B Y 1 6 %

(cid:129)

O P E R AT I N G F O C U S S H I F T E D T O C O S T A N D D E B T R E D U C T I O N

(cid:129)

G A I N S C O N T I N U E I N B O T H T O TA L A N D

L I K E - F O R - L I K E M A R K E T S H A R E

(cid:129)

T R A D E B U S I N E S S E S R AT E D T O P A M O N G S T

N AT I O N A L M E R C H A N T S

(cid:129)

W I C K E S R E TA I N S T O P S L O T I N C O N S U M E R

S U R V E Y S O F D I Y S T O R E S

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F I N A N C I A L H I G H L I G H T S

Revenue

Adjusted:*

Operating profit (note 5a)

Profit before taxation (note 5b)

Profit after taxation (note 5b)

Basic earnings per ordinary share (pence) (note 12)

Statutory:

Operating profit

Profit before taxation

Profit after taxation

Basic earnings per ordinary share (pence)

Total dividend declared per ordinary share (pence) (note 13)

2008

£m

3,178.6

271.5

202.5

143.9

123.0

215.3

146.3

101.9

87.1

14.5

(0.3)

(15.1)

(22.5)

(20.5)

(17.9)

(32.7)

(44.0)

(45.0)

(43.2)

(67.7)

2007

£m

3,186.7

319.9

261.4

181.1

149.8

319.9

261.4

185.3

153.3

44.9

* During 2008 the Group incurred an exceptional charge of £56.2m associated with the severe downturn in the construction market (note 5). During 2007
the Group recognised an exceptional deferred tax credit of £4.2m arising from the reduction in the corporation tax rate to 28% (note 11). Throughout these
financial statements the term “adjusted” has been used to signify that the effect of these exceptional items has been excluded from the disclosure being made.

RE VENUE (£M)

ADJUST E D PROFI T
BE F ORE TAX ATION ( £M)

ADJUST E D BASIC
EARN I NG S
PE R S HARE (PE NCE )

2008

3,178.6

2008

202.5

2008

123.0

2007

2006

3,186.7

2007

261.4

2007

149.8

2,848.8

2006

220.3

2006

127.4

2005

2,640.8

2005

206.7

2005

116.8

2004

1,828.6

2004

206.5

2004

124.4

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Andrew Pike
Company Secretary
and Lawyer

Carol Kavanagh
Group Human
Resources Director

Martin Meech
Group Property Director

W H O W E A R E

Travis Perkins, a major PLC,

is a main supplier to the building and

construction market, one of the largest

industries in the UK.

The present day Company was formed

in 1988 out of a merger between Travis and

Arnold plc, a company with a strong

Midlands and Northern based business, and

Sandell Perkins plc, a company

with an equivalent strength in the

South of England.

The origins of Sandell Perkins

can be traced back over 200 years to 1797

when a carpentry company was first

established in London; Travis and Arnold was

initially formed as a partnership in 1899.

During the early to mid 20th century

both businesses expanded before eventually

becoming listed public companies,

Travis and Arnold was the first to the market

in 1964, followed 22 years later by

Sandell Perkins.

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G E N E R A L I S T M E R C H A N T I N G

The core businesses of Travis and Arnold plc and

Sandell Perkins plc formed, following the merger in

1988, what is now the general merchanting business

Joe Mescall
Divisional Chairman

Mark Nottingham
MD Northern

Ian Church
MD Midlands

Phil Grandsen
MD South East

Norman Bell
MD South West

within the trade division. It trades nationally through the Travis

Perkins brand and comprises four individual businesses.

Joe Mescall, who has been with the Group since 1974,

leads the business in his role as Divisional Chairman. The

Managing Directors of the four

regional businesses are Ian

Church (Travis Perkins Mid-

lands), Phil Grandsen (Travis

Perkins South East), Norman

Bell (Travis Perkins South West)

and Mark Nottingham (Travis

Perkins Northern).

The customers of

the

general merchanting business

are primarily professional

tradesmen, ranging from sole

traders to national house-

builders, whose key require-

ments are product range and

availability, pricing clarity and

customer service. The general

merchanting business, through

the Travis Perkins brand, oper-

ates to high standards in each

of these requirements and continues to improve to meet

customer needs.

The strategy of the general merchanting division aims to

increase market share through implementation of our Best

Practice programme and ongoing branch network expansion.

The Best Practice programme is designed to enhance our

overall service to trade customers and covers all of their key

requirements: all four general merchanting businesses are

operating to high standards in these areas and also have

stretching targets in place to deliver further improvements.

Network expansion will be concentrated on Local Authority

and Housing Association store projects in the short term;

potential exists to double the number of such outlets over the

next few years.

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S P E C I A L I S T M E R C H A N T I N G

The Specialist Merchanting division was formed in

2007 and is led by the Divisional Chairman, Arthur

Davidson. He has worked in merchanting for over

thirty years having joined Keyline prior to its acquisition by

the Travis Perkins Group. The Specialist Merchanting divi-

sion consists of four separate businesses trading under

the following brands, Keyline, City Plumbing Supplies, CCF

and Benchmarx.

Keyline

is a specialist

merchant supplying heavy

building materials and civils

and drainage solutions to the

construction industry through-

out the UK. Keyline is known

for its knowledgeable staff and

excellent delivery service and

is led by Managing Director,

David Stewart, who was

formerly Operations Director

for Keyline in Scotland.

City Plumbing Supplies is a

major nationwide plumbing

and heating merchant serving

both the contract market and

the general plumbing and

heating market. The Company

offers high quality products

and expert service to the trade. The Managing Director of City

Plumbing Supplies is John Frost who joined the Travis Perkins

Group in 1983.

CCF is a leading supplier of interior building products to the

construction industry. It operates throughout the UK, offering

a one-stop-shop to its customers from its nationwide branch

network. CCF’s Managing Director is Kieran Griffin who joined

the group in 1995 and progressed via it’s management

trainee scheme, branch management and regional manage-

ment roles to the position of managing director.

In 2006, Benchmarx became the first group brand to be

created as a completely new business within a market adja-

cent to an existing Travis Perkins market. Based mainly in the

South East, the business is a leading supplier of kitchen and

joinery products to the trade through its competitive pricing,

quality products and knowledgeable staff. Benchmarx is led by

Andrew Harrison, who joined the Travis Perkins Group

following the acquisition of Sharpe and Fisher in 1999.

Arthur Davidson
Divisional Chairman

David Stewart
MD Keyline

John Frost
MD City Plumbing Supplies

Andrew Harrison
MD Benchmarx

Kieran Griffin
MD CCF

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R E T A I L D I V I S I O N

The Retail division comprises two businesses Wickes,

a national chain of DIY retail outlets and Tile Giant a

ceramic tile merchant acquired in 2007.

Jeremy Bird
Divisional Chairman
and MD Wickes

Mo Iqbal
MD Tile Giant

Wickes stores are designed to appeal to tradesmen who

undertake general repairs, maintenance and improvement

projects for households and small businesses and to serious

DIY customers who carry out more complete DIY projects.

These customers are more

demanding in terms of service,

quality and price.

The Company meets these

expectations by offering a

focussed range of high quality,

primarily own brand, compet-

itively priced home improve-

ment products, such as

timber, building materials,

tools and decorative materials.

In addition, Wickes stores offer

a range of kitchens and bath-

rooms, which are sold through

in-store showrooms.

Wickes, which opened its

first store in the UK in 1972 at

Whitefield in Manchester was

acquired by Travis Perkins in

2005 and the Company now

operates from 192 stores nationwide.

The Managing Director of Wickes is Jeremy Bird who

joined Wickes sixteen years ago and has fulfilled various roles

including that of Commercial Director.

In November 2007 Travis Perkins acquired its seventh

brand, Tile Giant. In 2008 the division aquired Tile Magic,

a 17 store chain and Tile it All a 16 store chain. The

acquisitions are consistent with the Group’s strategy for

growth in the ceramic tile market. The brand is now trading

from a total of 78 stores.

Under the leadership of Mo Iqbal, the Managing Director

of Tile Giant, the brand offers a strong pipeline for further

expansion.

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C H A I R M A N ’ S S T A T E M E N T

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

The events in financial markets, and their effects on the

wider economy, continued to dominate as 2008
progressed. Against this background, the Group’s focus
this year has been on the deployment of plans to deal with an
increasingly severe market contraction.

R E S U L T S

Whilst at the interim stage the Group
was able to report increases in sales,
operating profit and earnings per
share,
the deteriorating market
conditions in the second half created
pressure on our overall financial
performance.

Group revenue for 2008 was just
below 2007, and adjusted profit
before tax (i.e. on an underlying basis)
declined by 22.5% and adjusted
earnings per share was similarly down
by 17.9%.

As a result of actions taken to
deal with the reduction in construc-
tion activity the Group has incurred
an exceptional charge of £56.2m.
These actions include a restructuring
of some businesses and functions,
and a programme of headcount
reduction across the Group. The cash
element of re-organisation costs
associated with these actions is
£8.5m, with the remainder of the exceptional charge mainly
representing increased provisions for future lease obligations
and related costs. These increased provisions directly reflect
the bleak outlook for construction and home improvement
markets as the country faces the most severe economic condi-
tions for some years.

The actions we have taken are aimed at reducing costs and
conserving cash. Before the effect of exchange rates on that
portion of our debt denominated in US dollars, against which the
Group is any case fully hedged, we have reduced underlying net
debt by £14.9m.

Virtually all new commitments for acquisitions and brown-
field sites were suspended from early 2008, and the opening of
new branches and stores almost dried up by the half-year. As at
the end of the year our network comprised 1,223 branches. As
we move in to 2009, we envisage restricting our new branch
expansion plans to Tile Giant, where the cash payback from new
branches continues to be very favourable, and, provided it meets
its performance conditions, we will continue to fund the expan-
sion of ToolStation under the terms of our buyout agreement.

D I V I D E N D

In view of the continuing difficulties in our sector, the board is
recommending a suspension of the final dividend. The interim
dividend of 14.5 pence was paid to shareholders in November
2008. We expect to resume dividend payments once the
prospects for our markets have improved.

B O A R D O F
D I R E C T O R S

Mike Dearden has been a non-execu-
tive director of the Group for 8 years,
including the last three years as our
senior
independent non-executive
director. Having been asked in 2006
to extend his appointment by a further
2 years, he retired from the board in
November 2008. Mike made a very
significant contribution to the board,
bringing a wealth of experience of both
business and corporate governance
matters and we wish him well for the
future. Activity is already underway to
identify a non-executive director to
replace Mike. Chris Bunker has taken
over as senior independent director
and the new non-executive director
will be appointed in due course.

E M P L O Y E E S

Given the increased demands imposed on the Group from
market challenges in 2008, I am sure all shareholders will join
me in thanking all our people for their dedication and tenacity. I
know from my visits to branches, stores, distribution centres and
offices that the Group enjoys an extraordinary level of loyalty and
commitment from the vast majority of its people. To those who
have regrettably had to leave us as we reduced our headcount,
we have provided support and wish them well for the future. To
all the people who have worked in the Group, on behalf of share-
holders, I offer my thanks for their efforts in 2008.

O U T L O O K

We expected the well-documented problems emanating from
financial markets would adversely impact growth rates in our
markets progressively over the year. However, the speed and
scale of the impact of the turmoil emanating from the financial
markets has been greater than the expectations of most
commentators and 2009 is likely to prove a very tough year for

Tim Stevenson, Chairman

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CHAIRMAN’S ST

A TEMENT

all participants in the construction sector. As we have
commented previously, we see little prospect of a return to
market growth this year, and limited prospects for a return to
growth in 2010.

It is reassuring to report that our businesses continue to
outperform competitors. In 2008 our divisions grew market
share on a like-for-like basis and continue to record leading
operating margins in each segment of their markets – both key

components of our strategy. Without underplaying the impor-
tance of absolute returns, these relative aspects of our perform-
ance are particularly important to our prospects at this juncture.
This positioning significantly enhances our resilience as we
manage the Group through this downturn, since it means we
continue to enjoy the confidence of our customers and have a
relative advantage in being able to withstand a given fall in
market volume. A number of competitors have already closed
branches and some have exited the sector altogether. We expect
further rationalisation to take place over the next year, improving
our prospects for further like-for-like market share gains from
our estate.

However, outperforming competitors and enjoying the
benefits of sector rationalisation will not, in themselves, be
sufficient to safeguard shareholder returns. We have already

taken decisive action, and stand ready to take further steps if
necessary. Our actions are aimed at cutting costs and
conserving cash to mitigate the effects of the difficult market
and to protect the Group’s capital structure whilst safeguarding
the Group’s core strengths. We believe this stance will produce
the best outcome for shareholders in this unusually challenging
economic environment.

Tim Stevenson
Chairman
18 February 2009

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C H I E F E X E C U T I V E ’ S R E V I E W O F T H E Y E A R

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

I N T R O D U C T I O N

In response to the remarkable worsening of economic condi-

tions during 2008, the Group changed its operational plans
and priorities very significantly. We had anticipated, and
warned shareholders about, a probable downturn in construction
markets and had prepared contingency plans from the latter part
of 2007. However, the speed and severity of the change in
conditions meant that we imple-
mented those contingency plans
more rapidly, and to a greater extent,
than previously expected.

Group’s costs – such as branch rents – are both unavoidable
and fixed.

As 2008 progressed, our markets began to experience
falling volume and, as expected, competition intensified, with a
related deterioration in pricing conditions. Despite this, our work
to protect gross margin, both by the optimisation of pricing and
by sourcing benefits, meant the Group was able to more than
offset the market pricing pressure. Gross margin for the Group
increased by 0.2%, with gross
margin in the merchanting division up
by 0.3%, whilst in the retail division,
it was down by 0.5%.

Our previous priorities – each
successfully pursued – were to drive
market-leading like-for-like (“LFL”)
sales growth and operating margin
performance from each of our busi-
nesses; expand our branch networks;
and to enter adjacent channels for
the distribution of construction mate-
rials. These priorities evolved as
construction markets slowed rapidly
during 2008 to cost and debt reduc-
tion whilst maintaining our market
leading LFL performance.

P E R F O R M A N C E

The Group’s financial results suffered
in 2008 in comparison with the
previous year.

Throughout this annual report, consistent with our approach
last year, the term “adjusted” has been used to signify that the
effects of exceptional items have been excluded from the disclo-
sures being made.

The Group incurred an exceptional charge of £56.2m in
2008 as a result of actions taken in response to the downturn
in construction markets.

For 2008, Group revenue was down very slightly to
£3,178.6m (2007: £3,186.7m), with adjusted operating profit
down 15.1% to £271.5m (2007: £319.9m), adjusted profit
before tax down 22.5% to £202.5m (2007: £261.4m), and
adjusted earnings per share down by 17.9% to 123.0 pence
(2007: 149.8 pence). The revenue decrease of 0.3% comprised
a decline of 4.5% in like-for-like sales, with network expansion
accounting for growth of 4.2%.

Adjusted group operating margin fell by 1.5% to 8.5%
(2007: 10.0%) (note 5c). This primarily reflects a reduction in
overhead recovery from declining LFL sales. Whilst variable costs
have been cut back in line with falling activity levels, and some
significant fixed costs have been eliminated, a proportion of the

Geoff Cooper, Chief Executive

Our trade division continued its
work to ensure we offer superior
services and products to customers.
Our research continues to indicate
the success of this strategy, with our
trade branch network rated as a
preferred source of building mate-
rials in 12 out of the top 13 criteria
used by customers when selecting
a merchant. Although much new
in 2008 on continuous
work
improvement of our trade offer was
curtailed in view of the difficult
market, we made good progress in
improving product availability and
service standards. This superior
offer was used by our sales and
marketing teams as a platform to
launch targeted marketing initia-
tives, particularly in market segments that continued to grow
in 2008, and we achieved good sales gains from new
accounts without sacrificing gross margin.

Trade division sales fell by 0.7%, with sales from new
branch openings contributing 3.5% and LFL sales falling by
4.2%. The latter comprised 6.4% of price inflation offset by a
10.6% decline in volume. Both general and specialist
merchanting performed ahead of their respective markets, with
LFL sales per working day down by 4.1% in general
merchanting and 4.3% in specialist merchanting. We estimate
that our trade businesses have continued to record sales some
2% ahead of market rates, with market share gains coming
mainly from national competitors.

Our retail businesses also achieved creditable revenue
performance, growing both like-for-like and total market share
for much of the year. The Wickes and Tile Giant value-for-money
positioning in the home improvement market has become more
attractive as consumers have found their discretionary
purchasing power eroded. This was reflected in Wickes’ recent
success in retaining its position in the annual Verdict retail

82987 TRAVIS PRE:Layout 1 31/3/09 16:33 Page 11

C H I E F E X E C U T I V E ’ S R E V I E W O F T H E Y E A R

consultancy survey as the nation’s favourite DIY retailer. Whilst
higher priced competitors have increasingly used advertising
and promotions to boost customer perceptions of their price
cutting credentials, we have maintained the more competitive
price position of our product ranges, and continue to attract
customers in greater numbers.

LFL sales for the full year of Wickes’ core products were
down by 4.8% and on the same basis showroom sales fell by
8.1%. Tile Giant LFL sales were up by 5.5%. Our showroom
business was disrupted towards the end of the year by two
significant events; stock liquidation from the administration and
closure of a major kitchen and bathroom competitor; and the
administration and closure of our supplier of conservatories.
Overall LFL sales in the Retail Division were down 5.3% with
1.7% price inflation and a 7.0% volume decrease. Network
expansion added 6.2% to retail sales which in total increased by
0.9%. Retail Division operating margin decreased by 156 basis
points to 5.1% (note 5c) for 2008.

Group underlying net debt, used for covenantable purposes
fell by £14.9m (note 34), despite an outflow of £125.9m on
capital expenditure. This reduction in net debt was boosted by an
inflow of £23.1m from targeted working capital reductions from
our supply chain projects.

The £125.9m net outflow on capital and acquisition expen-
diture, comprised £97.0m spent on expanding the Group and
£43.8m on maintenance capital items less £14.9m of asset
disposal proceeds. Since most work on new expansion oppor-
tunities was halted from early in the year, the majority of this
expenditure related to deals agreed in late 2007 and early
2008 for which the related cash out flow mainly occurred in the
first half-year.

Covenantable net debt is calculated after eliminating the
£80.2m impact of exchange rate movement that is any event
offset by an equal and opposite debit balance in fixed assets.
The improvement in covenantable net debt was achieved despite
very significant pressures on our customers at the year-end
which caused a 3-day deterioration in outstanding debtor
balances. Reported net debt was £1,017.4m.

More importantly, our average net debt position over the year
was tightly controlled against daily targets. This helped us miti-
gate the impact on interest charges of the volatility in LIBOR
rates experienced throughout the year. However with pressure on
operating profit, interest cover for the year, as calculated for
covenant purposes, was 4.3 times compared to 5.4 times in
2007. The net debt to EBITDA covenant, which is not affected by
exchange rate movements was 2.8 times. In both cases our
covenant test level is 3.5 times. We therefore remain in compli-
ance with our lending agreements and expect to do so
throughout 2009.

M A R K E T S

Having grown for longer than we expected through 2007, the
trade market contracted in value terms from the second quarter
of 2008. Market value in 2007 was supported by stronger than
expected and rising inflation in building materials. Despite
commodity and energy prices falling towards the end of the year,
product cost and sales price inflation accelerated, ending the
year at an annual rate of 7 to 8%. In volume terms, we estimate

the construction material market, in which our trade businesses
won market share, has been contracting since January 2008,
and is now running at an annual rate of decline of around 20%.
The retail market followed a similar pattern and trend, with
an early and poor Easter trading period, a small recovery in the
second quarter, and “steps” down in July and October. Although
inflation in retail prices was more modest, at 1.7%, we estimate
the retail market to be currently running at an annual rate of
decline in volume terms of around 15%.

Whilst the long-term prospects for growth in our markets
remain positive, the short and medium term outlook is sensi-
tive to recessionary influences. Our revenue sources are well
balanced with our businesses serving a diverse range of
customers performing a wide variety of construction work,
from infrastructure, new domestic, public sector and commer-
cial construction, to repair maintenance and improvement
(“RMI”) works in all types of building. This downturn was first
felt in the new housing segment of our market, where volumes
to these customers fell in 2008 by 40% over the prior year. In
contrast, activity levels in RMI – a sector where projects are
often non-discretionary by nature - held up well for much of
the year, and our general merchanting and retail businesses
benefitted as a result. In addition, for public sector buildings,
activity in new construction and RMI continued to grow,
despite some signs of reduced availability of funding to some
public sector sponsors.

We monitor about 20 criteria that indicate the likely strength
of purchasing activity for construction materials, including indi-
cators for housing (for example, mortgage approvals), commer-
cial and public sector new build (architects’ enquiries) and
consumer markets (propensity to spend on “big ticket” items).
Generally, trends for spending in our markets react some 6 to 9
months after a change is detected amongst these criteria. The
current downturn has followed this pattern, with market trends
in the merchant and home improvement markets first reacting
in the spring of 2008 to the significant shift in housing market
activity which occurred from October 2007.

Most of the criteria we monitor showed a sharp fall in
activity levels through the first 3 quarters of 2008, followed
by some stabilisation of activity, albeit at a very low level.
Were the established pattern of lag between these criteria
and our markets to be repeated, our markets might be
expected to see a similar stabilisation, again at a low level, by
the middle of 2009. However, two significant reservations that
must be applied to any forward view of our markets; firstly,
the unprecedented nature of the current economic turmoil led
by a sudden withdrawal of credit and now involving an
increase in unemployment means that well established
economic relationships are less reliable; and secondly the
level at which our markets stabilise is difficult to forecast
whilst we are currently experiencing a rapid fall in purchasing
activity by customers.

Our early sales performance in 2009 reflects these trends,
with, LFL sales per trading day in our merchanting division for
January down by 15.8% and LFL sales for retail for the first
five weeks of 2009, on a delivered basis, down by 12.2%. We
are continuing to outperform our markets, aided in particular by
competitor closures and the success of Wickes new marketing
strategy, which uses TV and radio advertising rather than direct

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marketing. This has contributed to a strong start to the year for
our showroom category sales through Wickes, and on an
ordered basis Wickes’ overall LFL sales are up by 1.5%. Mean-
ingful interpretation of February sales trends has not been
possible due to the effect of adverse weather conditions on
construction activity.

We have now established a pattern of out-performing
markets for over 2 years, and expect to continue to do so. For
almost all of that period capacity has been added to our
merchanting market by our competitors, and ourselves and the
retail market has also seen a small capacity increase. However,
the severity of the current downturn has significantly changed
those trends. Branch closures by competitors accelerated
the end of
towards
2008, with around 300
closures now recorded
across merchant and
retail markets. Clearly,
this
the
improves
prospects for LFL sales
in
remaining
branches in the sector,
including our own.

all

We monitor the profit
and cash contribution of
all branches on a contin-
uous basis, compared to
the alternative use value
that could be derived
from
and
closure
possible disposal. In a
“normal” year we would
expect to close around 5
to 10 branches as part
of a continuous process
of
and
upgrading
improving our estate. In
2009 we do not expect
to increase significantly
that level, although it is
clearly sensitive to the level at which our sales performance
stabilises. Given our stronger operating margin we would expect
our competitors to be more vulnerable to the market downturn
than ourselves - as has been the case in recent months. In
assessing potential closures, we allow for the support to future
sales levels provided by actual and probable competitor closures.

M A N A G I N G T H R O U G H
T H E D O W N T U R N

Given the poor short and medium term outlook for our markets,
as indicated by the analysis described above, we have taken
action in 2008, across the Group, to deal with anticipated tough
trading conditions continuing into 2009. We also retain a number
of contingency plans should it be necessary to take further action
in response to downside scenarios we have analysed.

Based on our analysis of previous recessions in our sector
and our monitoring of lead indicators, we estimate that
volumes purchased in our markets will fall by some 25% from

a peak in early 2008, with the trough being reached by the
third quarter of 2009. With inflation, market share gains,
maturing performance from recently opened stores and full
year effects, our annual revenues for 2009, compared to 2008,
are expected to decline by less than our peak to trough esti-
mated decline of 25%.

In this scenario, with cost reduction plans already in place,
an expected net £20 million inflow from working capital, capital
expenditure falling by £80 million, anticipated income from prop-
erty realisations and lower interest rates, we are targeting a
reduction in covenantable net debt by at least £125m in 2009.
Should trading conditions worsen from our forecasts, we will
implement more aggressive contingency plans to further reduce
costs and release cash
with
of
achieving our target for
debt reduction.

aim

the

Led by John Carter,
our Chief Operating
Officer, the actions we
have taken comprise:
cost reduction; working
capital efficiency; en-
hanced management
focus; targeting market
share
gross
gains;
margin protection; prop-
erty realisations; and
reduced capital expendi-
ture – all implemented
while we maintain the
motivation of our people.
these
assumptions and contin-
gency plans proving reli-
able, we have sufficient
capital to manage the
Group
the
downturn, as described
in the Finance Director’s
review of the year. However, given the increased economic volatility,
we are closely monitoring trading trends, and are continuously
updating plans for, and evaluation of, options for protecting the
Group’s capital position.

through

Subject

We believe that the most efficient companies will emerge
from this severe downturn in a relatively stronger position. We
fully intend to be one of those companies and to evaluate attrac-
tive market opportunities which might present themselves.

Management Focus
We have now halted all non–capital development projects,
such as technology developments, except those with an
attractive short-term cash return. All management resources
are now dedicated to “the day job”. This has increased the
time and attention available for developing sales, servicing
customer requirements and maintaining our offer at the
highest possible standards. It has also enabled us to reduce
management resources, both in our central functions and in
our businesses.

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CHIEF EXECUTIVE’S REVIEW OF

THE

Market Share Gains
The strength of our offer in all our businesses continues to drive
LFL growth rates that are superior than each of their markets.
This has been further supported by sales gains from competitor
closures, the maturing of recently opened branches and the
withdrawal of credit insurance from some merchant competi-
tors. All these factors will remain in 2009, and we expect our
overall trend of out-performing the market to continue.

We have also enjoyed considerable success in targeting
contractors working in segments of the construction market that
have continued to grow, and that show good medium-term
prospects. In particular, many more social housing landlords and
their contractors are seeking to outsource their stores opera-
tions and our public sector stores business continues to win the
majority of bids it enters. Prospects for this and similar sectors
have been further boosted
recent government
by
about
announcements
investing in public sector
buildings and infrastructure
as part of its economic
stimulus package. Our
activities here, conducted
by dedicated
teams of
managers, will continue to
add to the market share
gains we have made.

RE TA I L
PRODUCTIVIT Y
PER E MPLOYE E ( £k )

187

2008

2007

2006

197

189

Gross Margin Protection
As the contraction in our
market has deepened, we
have
the
experienced
normal pressure on margins
caused by some merchants
delaying the introduction of
price rises, and by some
retailers seeking to support
volumes
through heavily
advertised price promotions.
Despite this we have been
able
increase gross
margins in 2008 by 0.2%
through the organisation of
our commercial relationships, the extension of our global sourcing
activities, and the introduction of new IT based pricing tools in our
trade branches.

174

2005

such reductions in price due to our tactical buying initiatives.
However, the full year effect of strong cost and price inflation across
our ranges seen in 2008 is likely to underpin continued overall
high inflation in 2009.

Cost Reduction
Action has already been taken to rein back discretionary costs,
cut variable costs to a level capable of handling anticipated 2009
volumes (cuts here were deliberately timed with the lull in
building activity over the winter months to enable us to take this
early action without compromising service), and to streamline
fixed elements of cost, such as management structures.

216

ME RCHA N DIS I NG
PRODUCT IVIT Y
PE R E MPL OYE E (£ k)

Variable costs comprise approximately 40% of our total cost
base, with the largest elements being people and transport.
During the first half of 2008 we were successful in not replacing
leavers to enable us to
achieve the required level of
headcount reduction. This
enabled us to maintain
productivity ratios as LFL
sales fell. However, the
sharp steps down in activity
we saw in the second half
and our prediction of a
continuing contraction of
our markets
in 2009
prompted us to set our
staffing at a level consistent
with
expected
revenues in 2009. Total
been
headcount,
reduced in both businesses
and central functions and is
now over 1900 full time
equivalents (14%) lower
than in January 2008. After
allowing for an extra 600
people added
in new
branches, the LFL fall in
headcount was 2,500, a
reduction of 16%. Our
transport fleet has also
reduced by 14%, with over
300 vehicles eliminated. Some of these vehicles are available for
redeployment, thereby reducing capital expenditure require-
ments in the next two years.

206

220

196

lower

has

2008

2007

2006

2005

These initiatives leave us well placed to compensate for the
further market originated margin pressure we expect to experi-
ence in 2009. Our global sourcing activities are now capable of
significant expansion following our investment in expanded
central distribution facilities, and wider and better use of our
pricing tools is planned. Falling commodity prices and intensifying
competition amongst far eastern exporters are expected to
compensate for Sterling weakness compared to 2008. Our rela-
tionship with key suppliers puts us in a good position to deal with
what we expect to be continued high cost and price inflation, due
in part to Sterling’s recent weakness. We anticipate there will be
some commodity categories where we may see some price defla-
tion. In these cases we are in a strong position to benefit from any

We will continue to manage our transport fleet and head-

count on an active basis.

Working Capital Efficiency
Management of our efficient working capital ratios became
increasingly difficult in 2008 as both suppliers and customers
sought to conserve cash. Despite this, we reduced working
capital by £23m compared with the end of 2007 and also our
total working capital to sales ratio at the end of 2008 was 4.2%
compared to 5.3% at the end of 2007. Our supply chain proj-
ects delivered some £34m of cash savings in 2008 from stock
reductions, whilst at the same time improving product avail-
ability. The work we have completed on working capital manage-

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C H I E F E X E C U T I V E ’ S R E V I E W O F T H E Y E A R

ment has reduced the working capital investment we carry into
2009, which we expect to further improve by £20m as more
projects complete.

Additional resources have been allocated to the collection of
trade debts in an environment where an increased number of
building contractors are struggling to survive. Whilst we have
increased the attention given to this aspect of our business,
improving co-ordination between our central credit control func-
tion and our business teams, we expect a further deterioration
in both debtor days outstanding and our bad debt charge
in 2009.

We enjoy very close and long-standing relationships with our
suppliers and work actively to support development of their busi-
ness plans. Whilst we are conscious of possible restrictions in
the availability of trade credit insurance, we do not anticipate
this impacting the terms on which we trade with our suppliers.
Taken together, the above actions are expected to enable us
to maintain this ratio. With a falling market and sales volume,
cash generation from working capital will significantly
contribute to our target of a £125m reduction in covenantable
net debt in 2009.

Property Realisations
Since late 2005 we have pursued a programme of active
management of our property portfolio to maximise value gener-
ated from each site. That programme has involved, on a site-
by-site basis, sales of surplus land, relocations of trading sites
to less valuable locations, establishment of a special purpose
vehicle to raise capital from low capital growth properties via
partial sale and leaseback, and the purchase of a limited number
of freeholds to maintain the overall quality of our estate. Our
portfolio retains excellent defensive characteristics as we
manage through the downturn, comprising 351 freehold and 57
long leasehold properties in a total estate of 1,307 properties.
The current book value, established from a 1999 valuation
exercise plus subsequent additions at cost, is £257m, an
increase of £15m over the value at the end of 2007. At the same
time as improving the quality of the estate, we have been able
to generate £49.5m of cash and £28.7m contribution to oper-
ating profit over the last three years via 22 projects involving 56
properties.

We have 24 projects under active development covering
41 properties. Whilst the current restriction of funding to prop-
erty developers has reduced our targets for 2009, we still
remain optimistic we will exceed the average annual cash
raised from the programme to date. A number of projects
involve counterparties such as discount food retailers who,
despite the economic conditions, have sustained expansion
plans and available funds.

Reduced Capital Expenditure
Clearly, our decision to halt almost all network expansion and
withdraw from acquisition opportunities will considerably assist
our debt reduction plans. In addition, we have eliminated all but
the most essential capital projects and lengthened the replace-
ment cycle for all classes of asset. This, together with our moth-
balling of delivery vehicles withdrawn from trade branches in
2008, will substantially reduce capital expenditure in 2009,
which we have targeted at £37m. Expenditure at broadly this

level is sustainable for two to three years, following which, with
our depreciation charge at just over £60 million, an increase
would be expected.

Further Cost and Cash Actions
Whilst we have already taken sufficient actions to deal with
our forecast for falling volumes into 2009 in both trade and
retail markets, we retain the flexibility to take action in
response to various alternative scenarios. We expect to be able
to flex our variable costs in line with variations from forecast
volumes handled. The inflation rate on fixed costs, particularly
rents, is falling close to zero. We have also developed plans to
reduce debt and fixed costs further should the need arise. In
2009 a number of projects will complete, including projects
aimed at reducing fuel costs through vehicle tracking tech-
nology, waste costs through greater separation and recycling,
and energy costs through improved management information
and monitoring.

D E V E L O P M E N T

Over the last 3 years we have broadened our revenue sources,
entered a few selected new adjacent markets and channels and
also added 240 branches to our existing businesses. However,
our stance on expansion changed significantly in early 2008.
Apart from deals agreed in late 2007 or the first few weeks of
2008, most expansion activity has been halted. This meant we
added 75 new branches in the first half-year, but only 23 new

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branches in the second half. We are continuing to expand our tile
retail business since each new branch produces a very quick
cash payback, and we will continue to provide funding to Tool-
Station to support its expansion, subject to it meeting perform-
ance conditions incorporated in our acquisition agreement. Aside
from these developments, very few new branches will be added
to our network in 2009.

Wickes
Total retail selling space at Wickes expanded by 3.3% as a result
of launching a net 8 new stores. At 31 December, we traded
from 193 stores. The re-configuration programme, which
involves reclaiming storage space for use as selling area and
the construction of mezzanine floors in stores with very high
sales densities, has been suspended to conserve cash.

Following the liquidation of our supplier of conservatories,
and against a background of recent weakening demand for
these products, we decided to exit this market. During 2009 we
plan to re-lay our showrooms in Wickes stores to incorporate an
expanded bathroom offer – a product category which continues
to offer good growth and synergies across the Group, and yet
where our retail market share has underperformed the rest of
the retail business.

Outside Great Britain, we signed an agreement to develop a
franchised chain of Wickes stores in Eire. The first store, at
Limerick opened in October and, against a background of home
improvement market conditions that are even worse than the
UK, traded in 2008 in line with expectations. Our franchise
partner will evaluate the performance of this store against the
difficult market conditions in Eire before reviewing further expan-
sion plans.

Travis Perkins
We added a net 30 sites during the year to the Travis Perkins’
branch network and traded from 611 sites at the year-end.
Around 80% of new sites were brownfields, which have rela-
tively attractive returns compared to acquisitions. We also added
a gross 27 tool hire outlets taking our total to 191 in the Group.

Keyline
Under the guidance of a new managing director, our heavyside
merchant added 4 branches to its network, finishing the year
with 83 branches. Over recent years we have sought to increase
focus on both depth and breadth of specialist stock range and
to concentrate on major civil engineering customers. This
programme continued in 2008, with 18 branches being re-
configured to take new ranges. Keyline performs strongly
amongst groundwork contractors, who are amongst the first
tradesmen on new housing sites, and have therefore been more
severely affected in this recession. We expect to continue
Keyline’s branch expansion once housing market prospects are
more positive.

City Plumbing Supplies
With a newly refined and better balanced business model
serving plumbing contractors and the installed bathroom sector,
CPS continues to offer good returns from expansion. Having
added a net 7 new branches in 2008 CPS now trades from 196
locations. CPS is the smallest of 4 national businesses serving

the plumbing heating and ventilation market, and we have signif-
icant scope for growth once market conditions become more
favourable.

CCF
Our dry-lining, screeding ceilings and insulation specialist had a
very busy year, integrating the 9 new branches mainly added via
acquisition in 2007. Having closed 1 branch in 2008 through
planned rationalisation, the CCF business operated from 33
branches at the end of the year. CCF’s market is now very largely
held in the hands of major national or international distributors
who have recently invested in the sector, and with only a few
suppliers of the key products, competitive conditions remained
very tight. Despite this, CCF’s “one-stop shop” offer to contrac-
tors means it enjoys a good reputation and new branches deliver
good returns. Following promotion of the incumbent, a Travis
Perkins regional director was appointed as the new managing
director of CCF in June 2008.

Benchmarx
A new managing director was appointed in late 2007 to Bench-
marx, our specialist kitchen and joinery business for the trade
which was launched in 2006. During 2008 the Benchmarx busi-
ness model was refined to improve new branch breakeven
volumes and cash payback profile, and 4 new branches were
opened. The successful elements of this model are now being
retrofitted to the entire estate. Benchmarx serves a market with
attractive returns and growth characteristics and our offer has
scored very highly with our new customers in this market. We
plan further branch openings and we remain committed to
creating a business with a significant market share in this sector.

Tile Giant
We entered the retail tile market at the end of 2007 via the
acquisition of Tile Giant, a 29-store chain operating mainly in
the Midlands. This business has subsequently been expanded
rapidly through 2 acquisitions and a number of brownfield open-
ings. It traded from 78 stores at the year-end and we have a
good pipeline of further opportunities to expand. The cash
payback profile of new tile retail branches remains excellent
despite the impact of a weaker consumer market.

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ToolStation
In April 2008, the Group acquired a 30% equity interest in Tool-
Station, a rapidly growing direct retailer of lightside products
from its founding shareholders for £5 million. Since then the
Group has provided an initial loan of £7 million to allow ToolSta-
tion to repay its outstanding early stage loan capital. The Group
has the right to acquire the outstanding share capital of Tool-
Station through an earn-out formula in April 2012.

4 years ago we built on the Group’s outstanding merchanting
senior management capability via managers joining from
acquired businesses, the addition of a number of external
appointments, and internal promotions. A significant propor-
tion of our management at every level have experienced a
recession in our sector before, and are well equipped to take
action as appropriate to manage their branches, departments
and businesses.

ToolStation sells a wide range of
tools, fixings, hardware, electrical,
plumbing and heating materials to
retail and merchanting customers
throughout the United Kingdom and
through a franchised operation in the
Netherlands. At the date of taking our
interest, ToolStation traded from 11
branches. By the end of 2008, its
network had expanded to 33 outlets,
and it had also grown its sales on a
LFL basis, joining the other businesses
in the Group in taking LFL market
share through a better offer. It plans to
continue its successful strategy of
branch network expansion, with the
aim of operating from at least 80 trade
counters within the next five years.

Travis Perkins will use its buying
scale, global sourcing capabilities,
supply chain facilities and property
expertise with the aim of accelerating
ToolStation’s rate of growth. Through
this investment Travis Perkins has also
acquired the right to use ToolStation’s
ecommerce, warehousing and fulfil-
ment software for direct selling of
Travis Perkins’ existing merchanting
and retailing brands.

O R G A N I S A T I O N A L
C A P A B I L I T I E S

Over the previous 3 years, we have supported the development
and expansion of the Group with the implementation of a wide
range of development projects and new initiatives, with a
strengthening of our senior management team and the creation
by consolidation of some new central functions – for example
the creation of a new group IT function via the merger of the
former Travis Perkins and Wickes IT functions. During 2008 our
stance on these developments changed.

Most new development projects, except those with a rapid
cash payback, have been postponed. Many new functions have
been reduced in size and cost so they support only essential
activity. One central function has been disbanded all together.
Some external services have been in-sourced as a preferred
alternative to making our people redundant and losing key skills.
Some management teams in businesses and central functions
have been reduced in size.

These changes have affected every business, department
and level of the Group, including senior management. Starting

This work also helped us build and
strengthen our central management
functions, which have been the source
of many of the synergy benefits and
initiatives that have enabled our busi-
ness teams to deliver a market leading
performance. The high quality and
experienced senior management
group were organised in 2007 in to 3
(general merchanting,
divisions
specialist merchanting and retailing),
together with a streamlined senior
management structure for central
functions, to add focus to our contin-
uous improvement programmes. To
further strengthen our management
arrangements, Robin Procter, our
Supply Chain Director will join the
Committee,
Group’s
following the considerable success of
projects to improve supply chain
performance, lower costs, and reduce
working capital.

Executive

Throughout the Group, colleague
retention and experience is monitored
as a key target. We believe that a
significant part of our superior
performance in each market can be
directly linked to the better retention and quality of our people
and management at every level. The recession has caused an
increased rate of senior management turnover amongst a
number of our competitors, and our senior management have
reported an increased frequency of approaches. Whilst it is not
unusual for our managers to be sought after, this increased
attention has meant that unusually in 2008 we experienced
some undesirable turnover amongst this group, with 17 of our
110-strong senior management group leaving the business.
Whilst 11 of these departures were linked to our cost saving
programmes or retirements, 3 leavers joined competitors and 3
left for other reasons.

The action we have taken to deal with the contraction in our
markets has increased the demands on our people. We are, as
evidenced by our superior cost ratios and operating margins, an
effective and efficient organisation. The effect of seeking to
reduce fixed costs in line with sales trends whilst continuing to
run a base level of service has manifested itself in an increased
and more diverse workload for many of our people. They have
responded magnificently. In 2008 I continued my programme of
regular visits to our branches, stores, distribution centres and
offices and by the end of the year had seen over 350 sites. I
also continued to meet with all colleagues in our support func-

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tions over a rolling series of communication and feedback
sessions during the year. I am continually impressed by the dedi-
cation and commitment of my colleagues and would like, on
behalf of the Board, to express my thanks to all of them for all
their hard work.

E N V I R O N M E N T

Summary
In these tougher trading conditions we have refocused our envi-
ronmental priorities on initiatives where environmental efficiency
also generates rapid cost savings. However, despite this, we
have retained our resolve to continue to effectively manage all
the environmental impacts of our activities and to create
commercial opportunities by providing superior environmental
services to our customers.

We continue with 4 key objectives to reduce our environ-
mental impact - to reduce our carbon emissions, reduce waste to
landfill, increase certified timber purchases and prevent pollution.
We are committed to external certification of our perform-
ance and have renewed our certificates for well-managed timber
chain of custody and continue to operate with an ISO 14001
certified environmental management system.

In 2008 we actively communicated with colleagues,
customers, suppliers, regulators, government and civil society,
recognising that a partnership and broad consensus across
operators in the supply chain and those seeking to influence it
is required for genuine reductions in environmental impact.
In particular, we:
(cid:129) Inaugurated our Non-Executive Environmental Advisory

Panel;

(cid:129) Significantly increased our communications activities on

environmental issues;

(cid:129) Continued to work with the Waste and Resources Action
Programme (WRAP), the Energy Saving Trust and Carbon
Trust;

(cid:129) Signed 2 agreements with the Green 500 organisation and

the British Retail Consortium;

(cid:129) Continued our membership and participation in 4 environ-
mental forums at the WWF, United Kingdom Forest and Trade
Network (UKFTN), British Retail Consortium and Construc-
tion Products Association;

(cid:129) Received constructive feedback from 3 reports we produced
on our environmental performance from the Carbon Disclo-
sure Project, Business in the Community, WWF and UKFTN.

Environmental Improvement Plan
We have again asked Lloyds Register of Quality Assurance to
assure both the statements we make and the figures we report
against our key performance indicators in this section of our
annual report. A copy of their statement can be found in the envi-
ronment section of the Travis Perkins web site.
Performance trends can be seen by examining the graphs which
combine information from across the business converted into a
common base. The final indicators are a combination of meas-
ured, averaged and estimated performance. Wherever possible
we have used standardised data collection and reporting tech-
niques and continue to work to improve the accuracy of the
measures reported.

We had set ourselves interim targets for 2008 against which
to judge our progress. The sections below outline how we have
performed against those targets, provide some information about
how we plan to ensure ongoing improvements and, despite
against the trend performance in some areas in 2008, set out
challenging future 5 year targets.
Whilst our objectives have been consistently pursued, environ-
mental reporting is an immature and evolving discipline. From
time to time it becomes necessary for us to refine the metric
that we use to measure and communicate our progress.
This year;
(cid:129) In preparation for the likely UK Carbon Reduction Commit-
ment regulations, and in response to changing government
guidelines published in 2008, we have for the first time, distin-
guished between our carbon dioxide emission reductions
achieved through the purchase of grid based renewable elec-
tricity from those achieved through other efficiencies;

(cid:129) We have made adjustments because of changes in guide-
lines on emission factors to apply to carbon dioxide emission
calculations as well as including an estimate for plane, train
and taxi emissions;

(cid:129) We have employed OECD standardised deflation rates back
to the baseline year to ensure turnover acts as a valid repre-
sentation of activity. We had been using our own measured
rates that are particular to construction products, but recog-
nise that this makes comparison of performance between
companies more difficult;

(cid:129) We have re-calculated our carbon dioxide and waste KPIs
back to the baseline year and present both sets of figures
for comparison;

(cid:129) As we indicated in our half year update, we have provided
information to judge future progress against our new pack-
aging and water reduction targets.

In future years:
(cid:129) We will use only the re-calculated KPIs to illustrate our

performance trends;

(cid:129) We will simplify our measure of waste management by

adopting a single KPI of reduced waste to landfill;

(cid:129) We will continue to listen to and have regard to stakeholder
interest in the way which we communicate performance and
in particular we will ensure that our targets continue to be in

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CHIEF EXECUTIVE’S REVIEW OF

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line with sector agreements and any signatory commitments
to which we have committed, details of which can be found
on our website.

Carbon Management
In 2008 direct and indirect emissions of carbon dioxide were
111,070 tonnes, or 167,241 tonnes if discounts for grid based
renewables are excluded. Whilst we can report a significant
reduction in our emissions of CO2 from energy consumption
(22%); this reduction is mainly from discounting grid renewable
electricity which going forward we are unable to do. Moreover,
the reduction is balanced by similar rises in emissions from
transportation, as we continue to replace customer journeys with
our own deliveries in the merchanting division.

EM ISSIONS 2005-2008

Original data (Based on Travis Perkins sales deflated figures)

Transport

24.8

24.2

26.5

29.3

Energy

14.6

15.2

13.1

11.4

35.5

2005

2006

2007

2008

2008
Target

Revised data (Based on corrected data and OECD sales deflated figures)

Transport

27.1

26.5

25.6

27.6

Energy

32.8

31.8

27.7

30.2

53.9

2005

2006

2007

2008

Tonnes CO2 per £m Group sales

2008
Target

The performance reflects:
(cid:129) Our cessation, in October 2008, of purchasing grid based
renewables for most of our estate, since in the future we
can no longer count these purchases as a reduction in our
carbon emissions;

(cid:129) The ratio of delivered sales to total sales continuing to rise.
Delivered sales accounted for 30% of turnover in the base-
line year of 2005 and 33% of turnover in this last year.
Our performance trend with our revised KPIs - which take into
account, UK government changes in reporting guidelines and
conversion standards, OECD standardised deflation, corrected
energy invoice data from 2005/06, as well as including esti-
mates for our taxi, train and plane business miles - shows a
similar modest reduction in carbon dioxide emissions.

We continue to invest in projects aimed at energy efficiency
improvements. Towards the end of the year we started installing

improved heating controls in the Wickes estate. These controls
offer a 25% minimum reduction in carbon dioxide emissions
from gas consumption.

Our specialist Eco and renewable energy centres that were
launched in 2008 have also generated much interest. Sales of
our solutions for renewable energy, micro-renewables and water
capture and storage equipment remain modest but we have
seen growth in this sector over the year and see this as an
important product group for the future.

Overall we have not succeeded in meeting our 10% reduc-
tion target by 2008. In current market conditions, a 2010 target
of a 20% reduction now seems unlikely. Our plan to take over
direct responsibility for more inbound shipments of products
into our central warehouses, with the consequent rise in asso-
ciated emissions, will make this target even harder to achieve.
Taking in to account the present economic conditions in
construction markets, we feel that a 20% reduction in tonnes of
carbon dioxide emitted per million pounds of sales by 2013 is
appropriate and we will revise our 2010 target to a 15% reduc-
tion from the 2005 baseline year.

Waste Management
In 2008 we diverted 7,499 tonnes or 14.5% of our waste away
from landfill. Much of this reduction to landfill was achieved by
recycling 14% of our waste. Only 0.5% of our waste was sent
for incineration. Using our revised figures, which incorporate
OECD deflation rates, we also reduced our waste to landfill
arising, per million pounds of yard and core sales, by 6% over
2005 as part of a wider focus on cost savings by operational
colleagues within the Group.

WAST E TONNAG E 2005 -2008

Original data (Based on Travis Perkins sales deflated figures)

Recycling

0.9

1.5

3.0

3.3

19.8

17.8

18.8

19.5

18.7

Waste

2005

2006

2007

2008

2008
Target

Revised data (Based on corrected data and OECD sales deflated figures)

Recycling

1.0

1.7

2.8

3.1

22.9

21.2

20.9

21.5

Waste

2005

2006

2007

2008

Tonnes waste per £m yard and core sales
Excludes sales from direct deliveries

2008
Target

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CHIEF EXECUTIVE’S REVIEW OF

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Our improvement plans on recycling are progressing well
and by the end of 2008 we had more than 150 sites sending
cardboard and plastic waste back to regional hubs for
processing and onward sale. Once this is fully operational across
all our distribution networks in early 2009 we expect to be
achieving a recycling rate of 20%.

Even through we have reduced our landfill waste arising

our chain of custody procedures to ensure we maximise supplies
of certified timber and timber products. In 2008 we estimate
that we purchased 80% of our timber from certified well
managed sources, taking us close to our 85% target.

Each incremental movement from this point gets progres-
sively harder because of the availability of material needed for
the “awkward” product groups which remain largely uncertified.

levels on a like-for-like basis, our target of a 10% decrease in
intensity of waste has not been reached and our recycling
target will not be met until 2009. Our challenge now is to adopt
further segregation of waste to allow for recycling so that we
can achieve a 50% reduction in waste to landfill from 2005
levels, by 2013.

However, we recognise that it is important to keep the pressure
on the timber supply chain to promote change in the source
forests of the world.

In 2008 we have had notable success in plywood sourcing
and are now bringing in new FSC sources from China and
Malaysia. We have also replaced our American sourced joists

Packaging and Water Management
The amount of packaging that we pass on to our customers is
also an area of attention. Earlier this year we set ourselves a
20% weight reduction target per million pounds of sales from the
2008 level by 2013. In 2008 an estimated 64,041 tonnes of
packaging waste was generated for products sold to customers,
equating to 22 tonnes per million pound of sales. Our imme-
diate priority is to establish good practice guidance and commu-
nicate this with our suppliers.

Water, like our consumption of other utilities, has an indirect
environmental impact when used. Water supply is likely to reduce
in certain regions because of climate change so it is important
that demand is controlled. Improving the efficiency with which we
use water will be an important way to reduce this demand. We
have set ourselves a target of a 5% reduction in water usage per
million pounds of sales from 2008 levels by 2013. In 2008 we
estimate that we used 403,779 litres equating to 140 litres per
million pound of sales (based on OCED figures).

Timber Management
In 2008 we have seen a growth in demand for certified well-
managed timber products. We have undertaken a full review of

T IMBE R CE RT IF ICAT ION

OCS

FSC

OCS

FSC

OCS

FSC

OCS

FSC

Target

34% 36% 24% 49% 28% 48%

26%

54%

85%

2005

2006

2007

2008

FSC: Forest Stewardship Council OCS: Other Certified Schemes

Timber purchased (£) Note: 2005 data excludes Wickes timber figures

with product manufactured in Germany from FSC sources.

In 2009 we will continue to influence and change our
external supply chain. We will also develop our internal controls
thereby strengthening the chain of custody for certified well-
managed materials.

Whilst our 5-year ambition remains for full certification, we
believe a target of 90% certified by value purchased is achiev-
able by 2011.

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CHIEF EXECUTIVE’S REVIEW OF

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Pollution Prevention
We hold 12 Environmental Permits (PPC “Part B” permits) for
our timber cutting and timber treatment activities. We recorded
no incidents or complaints about these installations.

Across our branch and store network we had 4 reportable
incidents, including spillages of either diesel or paint. In each
case the quantity was small and the established emergency
procedures were used. There were no investigations by the Envi-
ronment Agency.

We are pleased to report that we had no prosecutions for

any environmental offences in 2008.

Complaints
In 2008 we recorded 17 environmental complaints. Four were
from the Vehicle Certification Agency (VCA), the regulator for
some aspects of the Waste Electrical Electronic Equipment
Regulations, over potential non-compliance with the consumer
information requirements in these regulations. The VCA were
satisfied with our responses and are not pursing the matter.

Two complaints were from neighbours about traffic, noise or
lighting. Eight complaints were from customers, 7 of which were
related to customer timber reporting and we continue to work to
with these customers on the issue. Three complaints were from
colleagues dissatisfied with aspects of delivery of our environ-
mental services.

C O M M U N I T Y R E L A T I O N S

With an extensive national presence
of over 1,233 places across Great
Britain where we do business, and
deeply embedded relationships in
local communities, we actively
manage our community relations and
our charitable activities.

Our business raised more than
£665,000 (2007: £885,000) for char-
ities, including our three nationally
supported charities, NCH (the Chil-
dren’s Charity), Mencap (and its sister
charity ENABLE Scotland)
and
Leukaemia Research UK. This total
raised includes direct donations by the
Group amounting to £69,083 (2007:
£153,656) and donations by our
colleagues through our payroll giving
scheme amounting to £76,672 (2007:
£40,254).

In 2008, we continued our role as
main sponsor of Northampton Saints
rugby club and continued to involve our Northamptonshire
colleagues in joint community activities.

I N V E S T O R R E L A T I O N S

Our share price ended the year some 72% lower than at the
beginning of the year compared to a decline in the FTSE 250
index of 40%. 2008 proved to be a trying year for shareholders,
and there has naturally been much debate, internally and

E NVI RONME NTAL I N CI DENT S AN D COMP L AI N TS

COMPLAINTS

INCIDENTS

2005

2006

2007

2008

amongst our advisors, about the underlying causes of the dispro-
portionate movement in our share price.

Regular feedback about investors’ views is gathered after
our scheduled meetings by brokers and occasionally by the
Company Chairman. In addition, in 2008, we engaged an inde-
pendent consultant to research investor’s views and then
reviewed the outcome of this research with the Board. From this
work a number of clear views emerged, with shareholders very
supportive of the Group’s strategy, relative performance and
management capabilities. Unfortunately, with the Group’s activ-
ities involved in two currently unloved sectors – construction and
retailing – and with a balance sheet that until the present crisis
was regarded as suitably efficient, there has been little buying
support for the shares, and hence
the relative underperformance. The
fall in the share price relative to the
prospects for long-term generation
of value for shareholders prompted
a number of long-term “value funds”
to take a position in our stock. Many
of these funds emanate from North
America, and by the end of 2008 we
estimate that 26% of the register
was represented by institutional
investors from that region.

In contrast, deepening poor
economic forecasts for our sectors
attracted the interest of short sellers,
as indicated by the proportion of our
stock on loan. This rose through
2008 from a previous long run
average of around 3 to 4% to over
10% for much of the year. At the
year-end stock on loan was 10%.
Management’s policy, as long term
holders of Travis Perkins shares, is
not to meet with any institution that is known to hold a short
position in our equity. Unfortunately, information about short
positions is difficult to find.

Responsibility for communications with shareholders and
debt providers rests directly with me and Paul Hampden Smith,
our Finance Director, with support and advice from the
Company’s brokers. We do not employ an investor relations
manager. The Company Chairman and Senior Independent
Director attend a selection of investor meetings throughout the

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C H I E F E X E C U T I V E ’ S R E V I E W O F T H E Y E A R

year, and the Company Chairman attends the meetings at which
we present the Group’s interim and preliminary results to buy-
side and sell-side analysts. In addition to these meetings, at least
one day per month is set aside to meet investors and analysts.
This regular programme is supplemented with two trips per
year to meet with investors in Eire, Canada and the USA, and
we host a visit for analysts to a selection of our businesses
once per year.

In 2008 we conducted nearly 200 meetings with investors.
As part of each exercise to present interim and preliminary
results, we typically meet shareholders representing around
60% of the shares outstanding. This includes a “family lunch”
where we meet with representatives of the Travis, Perkins and
Fisher families.

S T R A T E G Y

In last year’s report to shareholders, we set out the progress we
made on our strategic priorities. These priorities were set and
selected to pursue our strategy of out-performing our markets
on a like-for-like basis, expanding our networks and entering
adjacent channels for the supply of building materials.

Whilst we have outperformed our markets and expect to
continue to do so, we have, as noted above, suspended almost
all our expansion activity and have postponed any further moves
into adjacent channels. Given the conditions we face in our
markets and in the wider economy, we believe our current
strategy is very clear – maximise revenues from our existing
assets, cut costs, and generate cash. This, together with the fall
in interest rates, will enable us to reduce debt further and retain
the support of our debt providers by maintaining the biggest
possible margin of safety on our covenants. All our management
and resources are focussed on these priorities.

Until we can see signs of a recovery in our markets, we do
not think it worthwhile to comment on, or further develop, our
longer-term strategies. There will come a time when such a
review and report to shareholders will be appropriate, but that
time is difficult to determine in present conditions.

Our businesses have strong brands, experienced manage-
ment teams and market leading financial performance. Longer-
term growth prospects for our markets remain positive. These
strengths mean we remain confident of our ability to trade
through the present difficult environment and to position the
Group to take advantage of further opportunities we believe will
arise when our sector returns to growth.

Geoff Cooper
Chief Executive
18 February 2009

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F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

I N T R O D U C T I O N

Although we went into 2008 with real concerns about a

downturn in trading within the building sector, the pace
and severity when it happened, was so much greater
than we had anticipated. We had acted to not add new staff to
the payroll, and not replace leavers wherever possible during
the early part of the year, but had to instigate a much more
proactive action plan during the
second half of 2008. This involved
dramatically reducing our headcount,
and network expansion, cutting
capital expenditure and managing
the Group on a positive cash basis.
Each business and functional depart-
ment head across the Group played a
vital and full part in positioning
ourselves for this most difficult of
trading conditions.

We are fortunate that the Group is
blessed with the strongest and most
stable senior operating team within
our sector. They have the widest and
deepest experience of both growing a
business, and of defending its posi-
tion during the hardest of times that
we are now facing.

Our vision – to create a “people first”
environment that facilitates high performance, provides oppor-
tunity for career progression, and celebrates and rewards
success, thereby encouraging all staff to play their part in
making the Travis Perkins Group a great and safe place to work.
We recognise that our success depends upon our people
and the relationships that are built at all levels of our business.
Our people, and the environment in which they work drive the
development of sustainable, profitable customer relationships.
We believe that a high level of colleague engagement is finan-
cially rewarding for the Group, in that it directly contributes to
healthy operating margins in all our businesses.

A proactive approach was taken early in 2008 to the
management of our cost base through our people to prepare
our business for an anticipated fall in sales across our sector. We
accelerated this action in September in response to a more rapid
decline in market prospects.

At the beginning of 2008, Travis Perkins employed over
17,500 people across more than 1,200 sites in the UK. As a
result of these difficult market conditions, the actions we have
taken have reduced the number of employees by over 1,900

full time equivalents – a reduction of 14% or 2,500 FTEs (16%)
on a LFL basis.

A proactive stance was taken in order to limit the number of
redundancies required to achieve this reduction. Early in 2008
we froze most recruitment activity and conducted a review to
identify additional actions to manage the difficult trading environ-
ment confronting us.
The review involved examination of:

(cid:129) Activity impacts – identifying
activities critical to drive addi-
tional business and sustain our
added value. Activities with longer
term benefits have been elimi-
nated or reduced in scale;

(cid:129) Available opportunities – identi-
fying opportunities to accelerate,
through the prudent reallocation
of resources and skills, the
delivery of new revenue or profits.
The review identified a significant
number of opportunities to reduce and
re-align our resources through the
active engagement of all managers
and key colleagues in central functions
and in the businesses. This holistic
approach to reviewing our organisa-
tion and activities, combined with an
early discussion to curtail costs, has
been the key to ensuring we achieve
our cost reduction targets whilst
minimising redundancies.

We worked collaboratively with all of our businesses to put
in place colleague support mechanisms wherever possible. This
ensured that those colleagues whose positions were redun-
dant were helped to make the transition into other roles both
inside and outside the Group. We believe that this supportive
approach for both those leaving and those remaining in the
Group has helped maintain a higher level of morale and moti-
vation than would normally be expected in these circum-
stances. This is particularly pleasing given that this is the first
time for a number of years that our agenda has moved from
growth to deceleration.

Our people have risen to this challenge and have supported
all of our actions with the same intensity and vigour they
showed when making our organisation the success it is today.
In making these changes, many of our senior leaders were
personally impacted financially, however, they have recognised
the need for change if our business is to be protected for the
longer term.

We are pleased that many of the people who have left our

employment have secured positions externally.

O U R P E O P L E

John Carter, Chief Operating Officer

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Engagement – Building on our Success
We concluded an employee opinion survey in 2007 and, as a
result, we now have consistent people metrics for our
employer brand and employee engagement objectives. A
number of operational and employee management practices
have been changed in response to the feedback received.

In 2007, our colleagues told us what a great place Travis
Perkins is to work, however, this message was not as strong in
the wider job market. Early in 2008, work commenced to
improve the impact of our “employer brand”. This involved devel-
oping a new brand identity – “Building People, Building Britain”,
which because we have identified pride as a key ingredient in
driving employee engagement and motivation, focused on devel-
oping pride in our people our contribution as a supplier to the
UK’s Building and Construction industry.

A direct relationship exists between the level of engagement

and colleague retention. Our
own data is confirmed by
external
research, which
shows that highly engaged
employees are more than
twice as likely to be top
performers and will miss 40%
fewer days of work due to
illness. As a result, actions
have been taken throughout
the Group to impact critical
improvement areas, including
initiatives on reward, commu-
nications and training and
development. Further improve-
ments in these improvement areas will take place in response
to our continuous monitoring of employee reaction.

Our next engagement survey will take place in 2009. Mean-
while, we are tracking the impact of initiatives we are taking as
a result of the first survey.

We already have a high degree of loyalty to our brands from
colleagues and for many we are considered to be the employer
of choice in our industry. In Wickes our colleagues were proud
to put their name to our brand, supporting our new TV adver-
tising campaign. We work hard to ensure that every colleague
related decision we make is aligned with being the employer of
choice in our sector. It is this engagement which will see us
though these tough times. Over 80% of our branch managers
and regional directors, who are key to our success this year,
have been promoted from within and have an expertise that
cannot be matched elsewhere.

In Wickes we have strengthened our regional team with
some external appointments to sustain continuous improvement
in our customer offer. We are seeing increased performance
levels as a result of this strategy evidenced by our growth in
market share.

Training and Developing for Success
In reviewing our costs we have considered what training
and development needs to be retained for immediate
success. Other training plans, orientated towards our
previous priorities for growth and expansion, have been
postponed. Maintaining our very high standards of customer

relationship management and sales delivery has been
retained as a key priority.

Senior management development activity has been post-
poned, whilst our investment in improving our role specific
training in sales has been maintained. We will continue to invest
in other individual skills, in particular where we have developed
a number of new products to meet the demands of the current
trading climate. Managing in tough times for leaders who have
not experienced a recession is at the forefront of this delivery.
This follows a re-definition of a number of key roles to drive
results, and to enable all activity to be aligned with the retention
and development of current and new revenue streams. The
impact of these new projects is being felt across the organisa-
tion, and feedback from our senior business leaders has
confirmed that they match the needs of each business and that
they have given our people the best possible start to the year.
Each business has agreed
target revenue increases by
branch so that we can review
the returns from this training
investment and
tailor any
future training to improve sales
further.

In seeking to continually
improve
leadership
our
capacity, we have reviewed our
core management develop-
ment programmes for assis-
tant manager and branch
manager levels. This work has
also focused on building the

skills necessary to manage in tough markets.

We have realigned our training and development team to
meet our vision for people and our three key business needs;
operating management development and succession; sales
improvement, and core skills. Programmes will be tailored to
meet the nuances of the specific brands.

We chose to protect our management trainee scheme from
our reorganisation as it remains a key building block for our
future. Our investment in management trainees increased in
2008 and we now have a record 156 trainees employed across
our brands.

In 2009, our key focus in Wickes retail management devel-
opment will be to address the current trend of bringing in a high
proportion of external deputy managers to meet a shortage of
internal candidates. We anticipate this will impact on our people
retention statistics favourably.

Rewarding Success
We have aligned all bonus plans for both businesses and
individuals to reflect our priority of driving current results.
Our focus is on delivery of key results within colleagues areas
of accountability. Those that have exceeded expectations,
and so have driven profitability and people retention, will be
well rewarded.

As a result of our “You Talk, We Listen” employee survey in
2007, we introduced an “all colleague” bonus scheme in 2008
to reward employees not participating in any other scheme for
their dedication to delivering and exceeding expectations.

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The scheme rewards colleagues in branches that achieve a
high set of standards when measured against key result areas
(“KRAs”), which in turn measure performance against our “Brand
Bullseye” for each brand. This balanced scorecard approach
ensures that there are appropriate measures across both finan-
cial and non financial performance. We are proud that 30% of
qualifying employees earned a bonus payment under this scheme
with a number qualifying for a
“super” bonus, having greatly
exceeded expectations.

There is no doubt that this
motivational tool ensured a
keen focus on each business’s
KRAs and helped us to main-
tain our position as the top
rated merchant in the UK. We
are continuing the scheme in
2009, having made some
improvements
on
employee feedback.

based

This approach to reward

ensures that our people are rewarded for their commitment and
motivated to continue delivering against our high expectations.
In order to continuously improve our position in the DIY
sector we will review our reward strategy in 2009, supporting
Wickes, which continues to be the nation’s favourite DIY retailer,
by rewarding and recognising our store-based colleagues.

Communication and Recognising Success
In tough times, effective communication is key. We took a proac-
tive approach to communication in 2008, ensuring that our
people were consulted and advised ahead of the difficult actions
we needed to take in our business to ensure profitability.

We continued to recognise great ideas and the contribution of
colleagues to our success through our employee publication “The
Bridge” and also through our “Building Britain” awards scheme.
The latter saw many colleagues receiving awards through our
“Getting it Right” scheme by excelling in customer service or
championing our values and also through our annual special
achievement awards, where individuals are nominated by their
peers for going that “extra mile”. Travis Perkins employees Nathan
Davies and Russell Shurmer were recognised for their quick
actions to help the emergency services with equipment and
manpower during the floods that decimated the South West of
England in 2007; Buyer Asif Valiji proved his ability by saving the
company more than £750,000 through his ideas for better
sourcing; Jeff Eyre of City Plumbing Supplies was given an award
for his outstanding commitment to branch performance, colleague
development and his local community; and Kay Greatbatch (Tile
Giant) and Marilyn James (Northampton Head Office) were
honoured for their relentless hard work and dedication to their
respective business areas despite both undergoing treatment for
breast cancer.

When trading is tough it’s up to everyone to dig in and help
all of our businesses. We launched a new programme called
“Skip Spotters” in December 2008 to make it easier for non-
sales employees to seek out new business opportunities and be
rewarded for it. The programme is in its infancy, but progress
so far has been encouraging.

We have improved two-way communications through
employee consultation processes – a liaison group in retail and
an employee representative group in our Northampton head
office. This generated a great opportunity for our people to tell
us what they thought we should be doing. Their feedback was
included in our organisational effectiveness review which, in
turn, supported our £73m cost saving initiative.

We have continued to
develop our culture of open
and honest communication
with employees. Our business
update meetings, hosted by
an executive director and
leaders are held
senior
monthly at our Northampton
head office and our Wickes
support
offer
employees the opportunity to
openly discuss business
issues
their
concerns. The key points of
these discussions are then cascaded to employees across the
Group. In addition, senior leaders in our retail division continue
to drive engagement with monthly “Big Breakfasts”, at which
regional store management discuss business issues raised by
their teams. Within Wickes stores, a new communication event,
“Team 5” has been introduced, ensuring that branch manage-
ment communicate daily with our colleagues, driving engage-
ment and delivery of priorities.

centre,

voice

and

Employer of Choice – Sharing in our Success
Our SAYE scheme had a record number of applicants in 2008
as did our salary sacrifice scheme. We negotiated and launched
a new reward gateway scheme, which enables employees to
take advantage of a number of voluntary benefits together with
discounts on everyday items from high street stores and assis-
tance with their household finances. We believe that our
approach to reward maintains and enhances our position as an
employer of choice with a range of core benefits:
(cid:129) Staff discount – Reward Gateway and TP Group brands;
(cid:129) Pension (including death in service benefit);
(cid:129) Private health care;
(cid:129) Salary exchange scheme - childcare vouchers, cycle2Work,

Give As You Earn, Small Change Big Difference;

(cid:129) Annual leave;
(cid:129) Employee assistance programme;
(cid:129) Flexible working options;
(cid:129) Share save option scheme;
(cid:129) Loyalty awards;
(cid:129) Recognition Awards – Getting It Right, Branch/Store
Manager of the Year in each business unit, Management
Trainee of the Year, Special Achievement Awards, and CEO
Award for Manager of the Year.

We will continue to align our people management activity to
our business objectives and to our people vision in order to
maintain and improve our position of employer of choice in our
sector. Our people are among the best in our industry and it is
through them that we deliver our sales and profit targets,
finding more flexible ways to work in order that we can respond

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quickly as market conditions improve. We are confident that
we are in great shape to deal with the uncertainties of the
current climate and have the agility to move quickly as these
market conditions improve.

H E A L T H & S A F E T Y

Such is the profile and importance of health & safety throughout
the Group we established a Health & Safety Committee of the
Board in November 2007, and a separate report from this
committee covering all our H&S developments and performance
is provided on pages 47 and 48.

On a personal note, I and my senior operating team remain
absolutely committed to the quest of making every facility that
we operate in a safer environment and everything we do a
safer practice for our people, customers and suppliers. We
made great strides forward in 2008 with the appointment of
a world class health & safety consultant, who is very much
helping us generate a greater level of engagement of our staff
at every level.

G E N E R A L M E R C H A N T I N G

The Travis Perkins brand remains the cornerstone of the Group’s
activities and comprises 4 discreet business units, namely South
East, South West, Midlands, and Northern, each with its own

In line with our Brand Bullseye principles we continued our
drive for further improvement on product availability, customer
service, and a more consistently managed pricing approach. A
mandated stock range was introduced in 2007 and fully imple-
mented in 2008 which significantly enhanced availability levels.
The rollout of our customer service package was completed and
we introduced new software to our business that greatly assisted
pricing methods at trade counters.

Assisted by the supply chain team, we made good progress
on reducing the level of slow moving stock in branches, releasing
cash back into the business and opened a stock clearance
centre in Leicester with good success.

As market conditions weakened, a comprehensive
programme of cost reduction was put in place by the business
units. At the end of the year our workforce had been reduced by
13% on a like-for-like basis and distribution capacity reduced by
18%. This action included the removal of our oldest vehicles
from the fleet. By concentrating our efforts on administrative and
support functions, in the main, and reviewing our working prac-
tices, we were able to preserve our customer service focus at the
“front end”. This action and a review of all other cost areas
enabled us to make annualised savings of over £20m in the
Travis Perkins businesses.

Although not a separate business unit in its own right, tool
hire, and its management, under the strong leadership of
Richard Dey, achieved another worthy year of growth and

managing director and management team. It is a generalist
mixed merchant, trading across the main product groups,
offering a “best in class” service to a wide range of customer
types across many segments of the building sector.

In 2008 the number of trading branches was increased by
30 to 611 with 80% of the new outlets being brownfield devel-
opments. We also managed 19 stores in partnership with local
authorities or their contractors.

improved performance. We added a further 27 new outlets
within the year, taking our total trading outlets to 191.

The national repair centre in Northampton became increas-
ingly important, providing an enhanced service to our outlets
and ultimately our customers. It improved our tool utilisation,
allowed us to reduce repair costs through more efficient prac-
tices and greatly assisted us in obtaining better control which
will reduce capital expenditure going forward.

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In our specialist division, trading in the first half was in line with
2007. However, trading in the second half deteriorated quickly.
Sales from new housing fell steeply, although opportunities in
infrastructure, hospitals, schools and RMI remained, but with
increasing pressure on gross margin. Business unit manage-
ment teams across the division responded by focusing on
conserving cash, reducing costs, enhancing customer service,
improving stock availability and on maintaining staff morale.

Across the division, capital expenditure, both for replace-
ment and development, was cancelled unless health & safety
related. Surplus stock reduction targets to release cash were
achieved alongside improving our stock availability levels. Head-
count was reduced by 11% and our transport fleet by 14%, with
surplus vehicles either disposed of or redeployed to reduce the
average age of the remaining fleet. Senior operating manage-
ment was re-organised to reduce costs and to improve effec-
tiveness and visibility, both in branches and with customers.
Credit management teams actively responded to the prospect of
more difficult credit conditions.

Benchmarx
Our 29 branch kitchen & joinery specialist, opened 4 branches
in the first half. The investment in these 4 branches was based
on the successful lower-cost footprint developed in 2007. During
the year, the business increased both its market share and
trading margins and generally traded ahead of our expectations.

CCF
Our 33 branch interiors, drywall, ceilings and insulation specialist
benefited from continued growth in hospital and school projects
although some branches felt the impact of decline in new
housing. Margins came under pressure in the second half but
the business successfully responded by expanding its product
range and by reducing costs and improving productivity. This
included merging two of its three branches in Leeds.

Keyline
Our heavy building materials and civils and drainage specialist,
added 4 branches in the early part of the year, ending it with 83.
The decline in new housing starts heavily impacted the business
and particularly affected its lower margin “direct to site” sales.
However, the business was able to largely protect its trading
margin year-on-year. Having made changes to its senior
management team in the first half of the year, it further
responded by increasing its focus on infrastructure projects
through flexing its product range, where it achieved good
success, and by reducing costs across the business.

City Plumbing Supplies
City Plumbing Supplies opened 8 new branches and as part of its
cost reduction programme reduced 1 by merger. The business
lost some sales volume from its new housing related contractor
base, but further investment in stock availability and customer
loyalty programmes all helped retain sales from jobbing plumbers
and heating engineers. As a result, the business grew its trading
margin. During the second half of 2008 the business also re-
organised its senior management team and improved productivity.

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NUMB ER OF
BRANCH ES

1,223

1,125

783

751

2006

1,022

R E T A I L D I V I S I O N

Wickes
The first indications of the market downturn became visible in
the second quarter when market growth rates stalled. This coin-
cided with a spell of poor weather at Easter at which point our
cost reduction activities started. By the half year it was clear
from lead indicators, such as house
prices and housing transactions, that
events in the global economy would
impact strongly on our business and
that it would not be a short term issue.
We took decisive action at that point to
reduce our cost base and working
capital to a level commensurate with
our forecast. All these changes, which
were in place by the year end, were
done in a way which protected our
sales effort and our share of the
“Sheds” DIY market, which grew by
0.7% in the year.

2007

2008

2004

2005

The sector became more competi-
tive as the market tightened in the
second half. Price led promotional
activity from competitors put retail prices
under pressure whilst inflation from the
weakness of sterling put upward pres-
sure on costs. Despite these pressures,
careful management minimised gross
margin losses as we were able to pass
on much of the inflation into the market.
Network expansion was limited to
those sites which we were contracted
to take. Other site opportunities have
been deferred and two loss making stores were closed. Of the
ten new stores, seven were acquired and converted from a
struggling competitor chain and three were brownfield devel-
opments. The average size of the new stores was approxi-
mately 24,000 sq ft compared with the 30,000 sq ft average
of recent years, reflecting the Company’s view that the lower
fixed costs of smaller stores with smarter supply chains are
right for the future.

Total number of branches in
the Travis Perkins Group

We continued to invest in new products and new formats. Three
new mezzanine floors were fitted and a new showroom format was
trialled for kitchens and bathrooms which will be extended more
widely in 2009. There was significant investment in new kitchens
during the year leaving the business well placed to benefit from
capacity reduction in the sector.

The first franchised Wickes store opened in the Republic of
Ireland towards the end of the year - the store is operated by the
Moritz group. Although there are no immediate plans to open
more stores, this has given us the experience, systems and
capability to consider franchise operations elsewhere in the
future. Further openings will be evaluated by Moritz in the light
of the current difficult market.

Our online business continued to grow faster than the core
business, reflecting the retail industry trend for distance shopping.
We also ran a successful trial of a home catalogue which will be
rolled out nationally in 2009.

We believe that our historic strength of getting the right
balance between quality, value and service puts us in a very
strong position as we enter a period of market decline;
customers will be increasingly attracted to our market leading
quality and the lowest prices in our sector. This is evidenced by
the retention of our title as “Britain’s Favourite DIY Store”, voted
for the second year running by customers in the much respected
Verdict report.

We believe that our business has the
best management in the sector and one
of the strongest and most resilient
brands. For these reasons we are certain
that we are very well placed to outper-
form a consolidating industry, despite the
economic conditions.

Tile Giant
Tile Giant has grown rapidly during the
year to become the clear number 2 in
the ceramic and stone tile market, and
is performing ahead of expectations.

Starting the year with 32 sites, we
added 46 new stores including 17 from
the acquisition of Tile Magic, 16 from
Tile It All and 13 brownfield openings,
to finish 2008 with 78 stores across the
UK. Of the 17 Tile Magic stores acquired
in London and the South East, 15 have
now been rebranded as Tile Giant. Tile It
All continues to trade under its existing
name in the North East and Scotland.
During the year all three tile busi-
nesses have been fully integrated with
each other and with the Group in terms
of IT and accounting systems and most central functions. The
management teams have been effectively combined, and
strengthened with the addition of certain key roles.

The product range has been enhanced by taking the best
from each of the three businesses. The buying of key commodity
items such as adhesives and grouts has been moved to a single
supplier, and significant buying gains have also been achieved
within Wickes’ tiles category.

At the end of 2008 our three existing tile warehouses were
closed and the operations centralised into our new group facility in
Northampton, creating cost savings and also providing a platform
for further expansion.

N A T I O N A L S A L E S A N D
M A N A G E D S E R V I C E S

The Group’s dedicated national sales team manages relation-
ships with major house builders and construction customers, as
well as a number of other organisations with significant
geographic coverage. During 2008 the structure of the team
was changed in order to focus on the most active market
sectors, whilst retaining an appropriate level of attention on all
of the Group’s major customers. This strategy has seen signifi-
cant growth in business derived from contractors working in
markets such as infrastructure, health and education, facilities

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G E OGRAP H ICAL SA LES

management and repair and maintenance of social housing
stock, which has offset a large proportion of the reduction in
sales to major house builder customers.

During 2009 we will continue this targeted customer approach
and further development of long-term framework agreements, with
the primary objective of continued
expansion through each of our
merchant and specialist brands.
Supported by our national sales
office and our design and esti-
mating teams we are well posi-
tioned to sustain and develop this
business and to provide our major
customers with the service they
require during 2009 and beyond.

MERCHANTING

26.2%

17.0%

31.4%

Our managed services team
actively targets the affordable
housing RMI sector, and is respon-
sible for the development, delivery
and ongoing management of
bespoke supply chain solutions to
organisations and their partners
within the social housing market,
a sector which has shown consid-
erable resilience in this downturn. Typically clients are local
authorities, housing associations and contractors working within
the social housing sector.
Our solutions can involve:
(cid:129) The adaptation of a client’s existing store to provide a dedi-

25.4%

established customer insight department which works across
all brands within the Group.

RETAIL

Customer Insight provides our businesses with the inde-
pendent customer views that are the bedrock of our Brand
Bullseyes, and become incorporated into the companies’ plans.
This ensures that the customer is
the central focus of our business
activity. Last year they collected
over 20,000 customer opinions at
various points in the purchase
process. This enables us to pin-
point and assemble their desires
and requirements as to where we
can and should make improve-
ments in our service proposition.
So that the Group remains
customer focused, each business
has a customer target to aim
towards, which we call the a
“Brand Bullseye”. Brand Bullseyes
encompass all the elements of the
customer experience - product
and range, availability, price and
service and these have been built
into the day-to-day activity of each business within the Group.
To ensure day-to-day continuous improvements for all our
customers, all the Bullseye elements are incorporated into our
best practice programmes, which have received significant time
and investment over the past 3 years.

26.0%

20.5%

14.4%

39.1%

% of total 2008 annual sales

cated facility;

(cid:129) The identification of a new location for a dedicated store

and/or Travis Perkins trading branch;

(cid:129) The adaptation of an existing branch to provide dedicated

services;

(cid:129) The utilisation of a number of branches to provide a multi

site solution for national or regional agreements.

These partnerships are complimentary to the Government’s effi-
ciency drive and are predominantly based upon Travis Perkins’
core competencies of service, purchasing, stock management,
distribution, cost control and administration.

Our strong focus on continuous improvement has enabled
housing organisations, along with their own labour workforce or
appointed contractors, to work in partnership with the objective
of delivering an improved service for their tenants.

Stores exclusively supplying local authorities, housing asso-
ciations, and contractors increased from 11 in 2007 to 19 during
2008, and we enjoyed strong sales growth as a result. Addition-
ally, the Group is servicing in excess of 40 other projects through
existing branches.

In May of 2008, we were awarded Supplier of the Year at
the Housing Excellence Awards, organised by Northern, Midlands
and Southern Housing magazines, in recognition of our work
with social housing providers and their contractors.

C U S T O M E R S E R V I C E
A N D I N S I G H T

The Group’s various businesses have increasingly become more
customer focused in recent years, and to this end we have an

Independent customer research shows that over the last
three years, our customer satisfaction levels for both the TP
builders merchant and Wickes retail outlets have substantially
improved, which is a testament to our commitment to the
customer and the total customer experience at all of our brands
and businesses.

S U P P L Y C H A I N

Customers and our brands are benefiting from the Group’s
well timed investment in supply chain development. In a chal-
lenging market we have managed to significantly reduce our
over-stocks whilst still driving forward our product availability
to the highest levels in our respective markets. The supply
chain team have taken a low investment approach, focused
on engaging colleagues through simple targeted reporting,
building on our mandated ranging success of 2007 and our
excellent branch KRA (“Key Result Area”) system. An example
of this is the use of a monthly Top 30 “lost sales” analysis by
branch, which has driven significant improvements in sales,
through linking availability measures to their true conse-
quences in lost sales. We now target driving down lost sales
rather than percentage availability improvement. Reducing lost
sales helps our customers and allows visibility of how our
efforts are improving the sales line.

Suppliers also benefit. Although we hear much talk of collab-
oration in many markets, little action is evident. We believe the
key to this is personal relationships, strengthened through the
common goal of driving out lost sales and generating profits. We
present lost sales information to our suppliers through a now

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improved supplier KRA solution and will begin sending direct
“lost sales” text messages to their senior managers and
managing directors in early 2009. Our supplier teams can see
first hand the challenges of product availability and work proac-
tively to resolve any issues with Travis Perkins Group often before
our internal team are aware of them.

Infrastructure has also improved. 2008 saw the successful
start up of a 500,000 sq ft multi-brand warehouse providing
reliable access to a wider set of products, which in turn drives
up our branch product availability. Even in the tough market
conditions of 2008 this has proved an excellent tactical and
strategic decision, suppliers being very keen to get access to
our leverage and scale of distribution, with the resulting bene-
fits for them in additional sales and reduced costs. This solution
improves availability, improves margin and reduces our impact
on the environment by consolidation of multiple supplier deliv-
eries into single vehicle loads to branches. The facility also
provides storage for the Tile Giant business following the closure

of its three sites alongside additional storage space for our
growing portfolio of globally sourced own label products.

A complex programme of consolidating our timber supply
centres (Kings Lynn, Aylesford, Ferndown and Cardiff) from four
sites to three was completed in August improving efficiency and
cost while providing a strong operating platform for future growth
in the timber business

In our branches, local distribution is a key requirement of

our business model and a significant cost to the business. We
reacted quickly to reducing volume in 2008 by removing 306
vehicles from our 2,256 strong trade fleet. This is just the start
of a programme of efficiency improvements in this function.
Following a successful trial, we implemented vehicle tracking
and utilisation technology in all our CCF brand vehicles. The
move has proved a significant asset to this business, reducing
costs and environmental impacts through improved utilisation.
This programme will be rolled out to our other merchant busi-
nesses during 2009 and once utilisation has improved, we will
then focus on the customer service benefits that we know this
technology can provide.

The supply chain platform we are creating for our brands
enhances customer service, improves efficiency, leverages
group scale, supports margin and working capital improvement
whilst significantly reducing our operational impact on the envi-
ronment. This will continue to evolve into an efficient high service
model, supporting our brands to meet the ever increasing
demands of our customers and helping them to remaining
leaders in their respective markets.

Quality Assurance (QA) and
Corporate Social Responsibility (CSR)
The prime responsibility of the group quality assurance depart-
ment is to protect all of the group brands with two key objectives:
(cid:129) Firstly, to ensure that Travis Perkins companies only use
suppliers who have acceptable control of their manufac-
turing, environmental, ethical and health & safety processes;
(cid:129) And secondly, to ensure that Travis Perkins companies only
stock product that conforms to national and international
regulations, is safe, fit-for-purpose and conforms to
required specifications.

As our business has grown so has the challenge of QA. At the
end of 2008 the number of primary suppliers to the Group
was in the order of 600, supplying in excess of 130,000
product lines. As a result we have continued to invest in the QA
department during 2008 whilst also improving the efficiency
of its operations.

Within the supplier base there are 1,341 known manufac-
turing sites of own brand/label products, of which 545 are based
in Asia. These figures represent an increase of 13% and 16%
respectively against 2007, mainly as a result of our increased
global sourcing activities. We rank all our manufacturing sites
through site audits and will shut operations down if they do not
meet our exacting criteria. We consider all Asian operations to be
“high risk” and will not commit to supply until our team have
audited a site. We continue to maintain a Group QA Asia office
based in Shenzhen, southern China, to fully support the Asian
supplier base, in addition to the Group QA UK offices in the
merchant and retail divisions.

Own brand is a key focus for our QA teams, however, 2008
saw an extension of our primary supplier assessment
programme covering branded suppliers and major distributors.
We audit the QA processes of our primary suppliers to ensure
they are following our rules when supplying to the Group. A
further 48 suppliers had audits during the year bringing the total
to 105 suppliers assessed at primary level.

In addition we have enhanced our product approval and
product technical data bases to take account of our responsibil-

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ities in respect of “REACH” (“Registration, Evaluation and Restric-
tions of Chemical Substances”) which came into force during
the year.

Objectives for 2009 include greater focus on product
failure and customer returns through direct feedback from
customers via our website business customer reviews, with
further development of the strategic supplier development
programme
brand
for
suppliers. We will also further
extend our Asian operation and
skills to support our environment
and ethical obligations as our
sourcing geography grows.

own

Suppliers and Global Sourcing
Manufacturers and suppliers are
vital stakeholders to all brands and
businesses within the Group, and we
remain fully committed to estab-
lishing long term and collaborative
relationships with all our major
suppliers, whether UK based or
International.

Within the merchanting busi-
nesses we primarily support manu-
facturers that develop and produce
products that have high and tangible
brand equity, are of the utmost high
quality and utilise leading technology.
We do however also have a substan-
tial requirement for own brand and
own label products throughout the
Group to meet our customers’ expectations and requirements,
most notably within Wickes. Wickes is largely an own label,
limited assortment retailer, where customers rely on our sourcing
teams to find and present the best value products pitched at
brand leader quality for each product type.

We continue to invest and strengthen our direct sourcing
capability and have enjoyed an increase in volumes and margin
benefits as a result of this activity. We very much take our
responsibilities and overall business risk extremely seriously and
continue to strengthen and enhance every aspect of the process
of globally sourcing.

Due the differences in models between Wickes and the other
businesses within the Group, we have expressed separately
below the number of product suppliers and the percentage the
top 50 suppliers represent in each channel:

Trade business (including Tile Giant)
Number of product suppliers
Top 50 representation of total purchases
Wickes
Number of product suppliers
Top 50 representation of total purchases

2008
7,050
59%

2007
6,750
58%

228
86%

245
84%

I would like to place on record our genuine thanks to all our
major suppliers, for their fabulous and continued support and
efforts throughout 2008.

M A R K E T I N G

In 2008, as we moved into more difficult trading conditions, we
increased our trade marketing focus on retaining our customers
and growing our share of their spend, driving footfall into our
branches and increasing our number of trading accounts.

We continue to support our trade businesses in increasing
their market and customer focus.
Our Brand Bullseyes guide every-
thing that we do and ensure that we
are focusing our activity in the areas
that matter most to our customers.
We ensure that each of our busi-
nesses is communicating in a way
that is targeted and relevant to their
market, so ensuring we get the
best returns on our marketing
investment.

to
We are giving priority
improving the quality of our customer
data, allowing us increasingly to
segment and analyse our customers,
identifying those who offer us the
most potential and making sure we
put together offers and activity to
meet their needs. We have devel-
oped marketing plans to cover all
stages of the customer journey, from
acquiring and welcoming new
customers through to reactivating
dormant accounts. The programme
has successfully delivered additional
business to our branches, and we continue to measure and refine
the activity to generate profitable sales.

It is becoming increasingly important for our branches to
be able to promote themselves locally. We have set up a fast
and cost effective system to allow branches to order person-
alised advertising materials via our intranet. This ensures we
produce consistent materials that meet our brand guidelines
and comply legally.

In order to offer our customers better value and increase our
buying and marketing efficiencies, we are also concentrating on
developing our own brand offering. “4Trade” is being developed
as a good quality range of trade products sold across all
merchant businesses, replacing individual private label prod-
ucts, so significantly reducing SKUs. “Iflo” is our range of bath-
room components, offering bathroom installers and plumbers
guaranteed good quality products at competitive prices. We
remain fully committed to offering our customers a full range of
manufacturers brands.

In 2008 we moved our in-house design, print and distribu-
tion (“DPD”) facility to new premises, allowing us to work more
efficiently and take on additional work for the Travis Perkins
Group. We have moved a significant proportion of our literature
and point of sale design and production to DPD, and have
already achieved annualised savings of £600k, with the addi-
tional benefit of cash flow improvement by moving work from
outside suppliers to sit within the Group. A significant cost saving

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has been achieved by distributing printed materials to our
branches using our existing distribution network. We expect to
continue to deliver additional savings whilst maintaining or
improving the quality of our service.

In 2008, The Travis Perkins Group confirmed a three-year
agreement to become title sponsor of the Travis Perkins plc
Senior Masters at Woburn Golf Club. The tournament will be
played over the world-famous Duke’s Course up to and
including the tenth anniversary of the tournament in 2010.
Supported by five of our key suppliers - DeLonghi, Expamet,
Knauf, Vaillant and Wavin - the 2008 event helped us to build
customer relationships through hospitality, build awareness for
our corporate and business brands and promote our product
and service offering to current and potential customers. The
event was a great success with record attendance levels and
many opportunities to get closer to our customers and suppliers.
We look forward to the 2009 and 2010 events producing even
better results.

A N D F I N A L L Y

2008, as predicted, proved to be a most demanding year within
and across all the operational and support functions within the
Group. However, it was the manner and the exceptional spirit of
every single person, in each team, in each business, in each
division and in each department, that rose to the challenges we
faced, that proved to be the most impressive feature of the year.
We know markets and trading will remain extremely difficult
for the foreseeable future, but we are so fortunate to have such
a highly talented, and highly motivated group of people within the
Travis Perkins Group. I express my sincere thanks for their
outstanding contributions and efforts during last year.

John Carter
Chief Operating Officer
18 February 2009

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F I N A N C E D I R E C T O R ’ S R E V I E W O F T H E Y E A R

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

I N T R O D U C T I O N

This report provides a commentary on how the business

performed during 2008 in comparison to the Group’s
financial objectives, which are set out below, together
with details of the financial aspects of the Group’s strategy, risk
management procedures and operating policies.

F I N A N C I A L
O B J E C T I V E S

The Directors of the Group remain
committed to the long-term creation
of shareholder value, which they
believe is achieved through:
(cid:129) Increasing the Group’s market
share via a combination of like-
for-like sales growth and targeted
expansion through acquisitions,
brown field openings and in-store
development;

(cid:129) Improving profitability with a
medium term target for profit
growth
terms
in percentage
exceeding that for sales;

(cid:129) Investing in projects and acquisi-
tions where the pre-tax return on
capital employed exceeds the
weighted average cost of capital
of the Group by a minimum of 4%;
(cid:129) Generating sufficient free cash

Paul Hampden Smith, Finance Director

flow to enable the Group to expand its operations whilst
funding attractive returns to shareholders, reducing its debt
and pension deficit;

(cid:129) Operating an efficient balance sheet, by structuring sources
of capital to minimise the Group’s weighted average cost of
capital consistent with maintaining an investment grade

Revenue (decline) / growth
Like-for-like revenue (decline) / growth
Adjusted operating profit to sales ratio
Profit before tax (decline) / growth
Adjusted profit before tax (decline) / growth
Net debt to adjusted EDITDA
Adjusted interest cover (note 10)
Adjusted return on capital (note 36)
Adjusted free cash flow (note 35)
Adjusted dividend cover (note 13)

financial profile with interest cover between four and six
times EBITA;

(cid:129) Maintaining long-term dividend cover at between two and a

half and three and a half times earnings.

Whilst the above are appropriate long-term objectives, our
short-term objectives give priority to maximising cash genera-
tion. This has involved curtailing business expansion and devel-
opment and suspending dividend payments in order to reduce

net debt more quickly.

F I N A N C I A L
R E V I E W

To ensure the business is focused
upon achievement of appropriate
targets, a series of key financial
performance indicators are monitored
throughout the business. These are
shown in the table below. For 2008,
where indicated, these measures are
stated on an adjusted basis stripping
out the effects of the exceptional
reorganisation costs and in 2007,
where indicated, the exceptional
deferred tax credit.

Results
As a result of the economic downturn
the Group has taken steps to reduce
its overhead base by challenging all
areas of expenditure. A combination
of reducing headcount, virtually stopping business expansion,
eliminating marginal activities and challenging suppliers to be
more cost effective has been successful, but it has resulted in
the Group incurring some significant one-off charges. In addition,
the slowdown in the property market means that there is consid-
erably less opportunity to sublet the Group’s empty trading prop-

2008
(0.3)%
(4.5)%
8.5%
(44.0)%
(22.5)%
2.8x
4.3x
12.9%
£185.3m
8.5x

2007
11.9%
8.1%
10.0%
12.7%
18.7%
2.5x
5.4x
15.9%
£157.8m
3.3x

2006
7.9%
1.4%
9.8%
12.2%
6.6%
2.4x
4.9x
14.6%
£216.6m
3.4x

2005
44.4%
(0.9)%
10.1%
0.1%
0.1%
2.9x
4.9x
14.8%
£226.1m
3.4x

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erties, a situation which may exist for many years. Accordingly
it is likely that the Group will have to pay significant property
running costs in respect of these properties for longer than previ-
ously anticipated.

Therefore, to enable readers of the financial statements to
obtain a clear understanding of underlying trading, the Directors
have shown separately the exceptional level of spend in the
group income statement. The total charge of £56.2m includes
a cost of redundancy and re-organisation (£10.5m), onerous
property lease provisions (£39.5m) and asset write offs (£6.2m).
Adjusted earnings before interest, tax, depreciation and
amortisation (“EBITDA”) (note 37) were £330.3m (2007:
£373.0m), a decrease of 11.4%.

With turmoil in the financial markets pushing 6 month LIBOR
rates up as high as 6.40% during the year and causing the
margin on the Company’s new £1bn facility to be more than
double that on the previous facility, it is not surprising that total
net interest expense, before other finance income of £4.8m
(2007: £3.3m) and £6.3m of derivative mark to market losses
(2007: £0.3m gains), was £5.4m higher than last year at
£67.5m (2007: £62.1m). Adjusted interest cover (note 10), is
approximately 4.3 times (2007: 5.4 times).

Adjusted group profit before tax (note 5b) was £58.9m or

22.5% lower than last year at £202.5m (2007: £261.4m).

The adjusted tax charge was £58.6m (28.9%) compared
with £80.3m (before tax in respect of the exceptional items
credit), (30.7%) in 2007. The rate is higher than the UK corpo-
ration tax rate principally because of non-qualifying property
expenditure and other items, which are not allowable for tax.

Profit after tax was £101.9m a decrease of 45.0%. Adjusted
profit after tax (note 5b) was £143.9m, a decrease of £37.2m
(20.5%) compared to 2007.

Basic earnings per share was 87.1 pence. Adjusted basic
earnings per share (note 12b) was 17.9% lower at 123.0 pence,
compared with 149.8 pence in 2007.

Cash Flow
Despite recording lower adjusted operating profits, good working
capital control has resulted in the Group generating £337.6m of
adjusted cash from operations (2007: £331.9m, after adjust-
ment for week 53 supplier payments of £28m), an increase of
1.7%. Adjusted free cash flow, (calculated before, expansionary
capital expenditure, special pension contributions, exceptional
reorganisation costs and dividends) was £185.3m (note 35),
17.4% higher than for 2007 (after adding back the 53rd week
extra supplier payment run made in 2007).

The free cash generated by the Group was used in part to
fund expansion capital expenditure of £53.5m (2007: £82.2m)
in the existing business, new acquisitions of £22.5m (2007:
£47.2m before loan notes issued of £8m), investments of £0.3m
(2007: £nil) and interests in associates of £20.7m (2007: £nil).

Pensions
At 31 December 2008, the gross deficit of the pension scheme
was £69.9m (31 December 2007: gross deficit £16.0m). The
net deficit after allowing for deferred tax was £50.4m (2007:
net deficit £11.5m).

As equity markets fell during 2008, asset values reduced
and so by the year-end the scheme deficit increased by £121m.

The deficit was increased by a further £19m due to the net effect
of interest on scheme liabilities and scheme experience gains.
However, the yield on the index of AA corporate bonds with a
maturity greater than 15 years had risen by 40 basis points by
31 December 2008, increasing the liability discount rate to
6.20% and so reducing the value of scheme liabilities, and the
deficit, by £44m. The deficit also fell due to a £30m benefit from
a 0.4% lower inflation assumption and also due to £12m of
company funding in excess of the current pension service cost.
The scheme is now 86% funded (2007: 97%) with the net
deficit representing approximately 12% (2007: 1%) of the
Company’s market capitalisation at 31 December 2008.

The triennial actuarial valuation of the scheme, due as at 30
September 2008, is in progress. The directors are currently
discussing the Actuary’s initial findings with the Trustees of the
scheme.

Equity
Total equity, at 31 December 2008, was £1,018.2m. The
decrease of £18.7m compared to 31 December 2007 was the
result of retained profits for the year being lower than the aggre-
gate of actuarial losses in the pension scheme and losses incurred
on cash flow hedges as a result of interest rate movements.

The Group’s adjusted return on capital in 2008 (note 36)
was 12.9% (2007: 15.9%), which remains higher than the
Group’s weighted average cost of capital.

At the year-end the share price was 340 pence (2007:
1,204 pence) and the market capitalisation £0.4bn (2007:
£1.5bn), representing 0.4 times (2007: 1.4 times) sharehold-
ers’ funds. During the year, the daily closing share price ranged
from 1,191 pence to 223 pence.

Properties
At 31 December 2008, the carrying value of the Group’s 351
freehold and 57 long leasehold property portfolio, which was last
revalued in 1999 on an existing use basis, is £257m.

Goodwill and Other Intangibles
At the year-end, a series of tests were undertaken to determine
whether there had been any impairment to the balance sheet
carrying values of goodwill and other intangible assets. The key
assumptions behind the calculations are as follows:
(cid:129) Cash flow forecasts, were derived from the most recent
financial budgets and plans for the three years ending 2011,
which were approved by the Directors. Cash flows for the
following two years were extrapolated from cash flows for
2011 using similar assumptions to those applied to 2011;
(cid:129) The weighted average cost of capital (“WACC”) of the Group

of 7.5%;

(cid:129) Long-term forecast growth rates of 2.5% in line with the
average long-term GDP growth trend applied from 2014
onwards.

In summary, the tests indicated that, despite the weak markets
currently being experienced, the value of discounted future cash
flows meant it remained appropriate not to write off any of the
goodwill previously acquired by the Group.

Approximately 55% of the carrying value of the Group’s
goodwill and intangible assets is allocated to the Wickes cash-
generating unit. On the basis of the assumptions stated above,

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the calculations show that for there to be no impairment, the
minimum profit in 2013 would need to be £41m, which
compares to £46m for 2008.

Whilst the Directors consider that their assumptions are real-
istic, it is possible an impairment would be identified if any of the
above key assumptions were changed significantly.

After additions of £21.7m during the year, the net book value
of goodwill and other intangibles in the balance sheet is
£1,513.9m (2007: £1,492.2m).

P R I N C I P A L R I S K S A N D
U N C E R T A I N T I E S

Going Concern
A review of the Group’s business activities, together with the
factors likely to affect its future development, performance and
position are set out on pages 10 to 21 of the Chief Executive’s
review of the year. The financial position of the group, its cash
flows, liquidity position and borrowing facilities are shown in the
balance sheet, cash flow statement and accompanying notes in
the financial statements. Further information concerning the
Group’s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures
to credit risk and liquidity risk can be found below.

The Directors, in their consideration of going concern, have
reviewed the Group’s future cash forecasts and revenue projec-
tions, which they believe are based on prudent market data and
past experience and believe, based on those forecasts and
projections, that it is appropriate to prepare the financial state-
ments of the Group on the going concern basis.

Management is currently of the opinion that the Group’s
forecasts and projections, taking account of reasonably possible
changes in trading performance, show that the Group should be
able to operate within its current facilities and comply with its
banking covenants. In arriving at their conclusion that the Group
has adequate financial resources, the Directors were mindful
that the Group has a robust policy towards liquidity and cash
flow management and that it is financed through £1.2bn of facil-
ities committed to 2013.

A breach of the one or more of the Group’s banking
covenants could result in the Group’s debt becoming immedi-
ately repayable. Whilst this circumstance is currently not envis-
aged, the Group is subject to a number of significant risks and
uncertainties, which arise as a result of the current economic
environment. These risks are discussed below in the following
sections: Liquidity and Net Debt; Interest Rate and Currency
Derivatives; Credit Risk; Market Conditions and Competitive
Pressures; Product Availability and Product Prices and Pensions.
Should a covenant breach become likely, the Group would
enter into negotiations with its debt providers which could result
in it accepting higher financing costs or being forced into
actions, such as raising equity, or a significant sale and lease-
back, which ordinarily it would not contemplate. It is the current
expectation of the Directors that this would be achievable.

The Directors believe that the Group is adequately placed to
manage its business risks successfully despite the current
uncertain economic outlook and challenging macro economic
conditions. As noted on pages 12 to 14 of the “Managing

Through the Downturn” section of the Chief Executive’s review
of the year, during 2008 additional measures have been taken
to safeguard cash and cost reduction programs and working
capital arrangement policies have been put in place which will
continue in 2009. The Directors consider that the Group has the
flexibility to react to changing market conditions as a substan-
tial proportion of the Group’s costs are variable or discretionary
and can be reduced or increased in line with the needs of the
business. Actions available to management include further head-
count reductions, supply chain improvements and additional
working capital savings.

After making enquiries, the Directors have formed a judge-
ment at the time of approving the financial statements, that there
is a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence
for the foreseeable future. For this reason, they continue to adopt
the going concern basis in preparing the financial statements.

Financial Risk Management
Financial risk management is an integral part of the way the
Group is managed. In the course of its business, the Group is
exposed primarily to liquidity risk, interest rate risk, foreign
exchange risk, credit risk, capital risk and tax risk. The overall
aim of the Group’s financial risk management policies is to
minimise potential adverse effects on financial performance and
net assets. The Group manages the principal financial risks
within policies and operating parameters approved by the Board
of Directors and does not enter into speculative transactions.

Treasury activities, which fall under the day-to-day respon-
sibility of me as Finance Director, are managed centrally under
a framework of policies and procedures approved by and moni-
tored by the Board. The policies in respect of interest and
currency hedging, the investment of surplus funds and the
quality and acceptability of financial counterparties were
reviewed and re-approved by the Board during the year.

The treasury department is not a profit centre. Its objec-
tives are to protect the assets of the Group and to identify and
then manage financial risk. In applying these policies, the
Group will utilise derivative instruments, but only for risk
management purposes.

The Board receives monthly reports on cash flows, debt
levels and covenant compliance with comparisons to budgets
and forecasts. In addition, all derivative related activity is reported
to the Board at the next board meeting. As described in the
Corporate Governance Report on page 43, the Board receives
regular reports on specific areas of risk. As part of these risk
reviews papers are presented on areas such as budgeting and
planning, debt strategy (including derivative policy) and banking
relations and working capital control.

Liquidity and Net Debt (Note 24)
LIQUIDITY RISK
The Group’s policy on liquidity risk is to ensure that sufficient
cash is available to fund on-going operations. The Board
manages exposure to liquidity risk by maintaining adequate facil-
ities to meet the future needs of the business. Those needs are
determined by continuously monitoring forecast and actual cash
flows taking into account the maturity of financial assets and
liabilities included in the balance sheet.

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The Group’s principal borrowing facilities are provided by a
group of core relationship banks in the form of a term loan and
a revolving credit facility and by US institutions in the form of
US$ denominated notes. The quantum of committed borrowing
facilities available to the Group is reviewed regularly and is
designed to comfortably exceed forecast peak gross debt levels.

LIQUIDITY MANAGEMENT
The Group’s treasury team are
responsible for monitoring the
Group’s short and medium
term liquidity requirements
using a combination of annual
budgets which have been
analysed on a daily basis using
historic
quarterly
trends,
trading and cash flow re-fore-
casts and short term forecasts
adjusted for actual events as
they occur. They are then
charged with drawing down
sufficient funds to meet those
needs whilst minimising
borrowing costs and reducing
the incidences of investing
surplus funds.

Medium term borrowing
and hedging requirements (up
to 5 years) are determined
from
the Group’s annual
budget and three-year plan.
These, which are prepared to
show monthly trading, cash
flows and debt requirements for the entire period, are updated
and approved by the Board each year.

To ensure the Board continues to take pre-emptive action the
Group re-forecasts profits and cash flows on a quarterly basis.

FACILITIES
Liquidity headroom was increased during 2008 through a refi-
nancing of the Group’s UK bank debt, which secured a new
committed £1bn, 5-year facility in April. Strong cash generation
and plans to continue conserving cash have reduced manage-
ment’s estimate of the Group’s future borrowing requirements.
There are currently 16 banks in the new syndicate, with approx-
imately 80% of the facility being advanced by half of them.

Prevailing market conditions at the time of the refinancing
resulted in the margin over LIBOR, applied to the Group’s
borrowings by the syndicate banks, more than doubling. Addi-
tionally, the Group had to pay £14.7m in facility arrangement
fees to the banks, which are being amortised through finance
charges over the period the facility is available.

Of the £1bn syndicated credit facility, £525m is represented
by a fully drawn amortising term loan and the remainder a
revolving credit facility, which can be drawn down as required.
In addition the Group had access to a £50m uncommitted over-
draft facility at 31 December 2008, although since the year-end
this has been reduced to £40m as it was not being fully utilised.
Liquidity headroom is expected to remain high with the term

loan due to be repaid in six £35m tranches each half year,
commencing April 2010, with the balance falling due in April
2013. The revolving credit facility is available to the Group until
April 2013.

Tranches of the syndicated facility can be drawn down for
weekly, monthly, three monthly and six monthly terms, with the
actual duration of draw downs being dependent upon manage-
ment’s interest rate expecta-
tions. For all of 2008, due to
the high differential between 6
Month LIBOR and weekly and
monthly LIBOR the Group has
drawn funds on a weekly or
monthly basis.

In early 2006 the Group
issued $400m fixed rate guar-
anteed unsecured notes (the
“Notes”) with a broad range of
US financial institutions. The
debt comprises $200m of
Notes repayable in 2013 and
the remainder in 2016. At
inception, the fixed interest
rate net proceeds were
swapped into Sterling 6-month
LIBOR determined variable
rate debt.

DEBT
As at 31 December 2008 the
Group had net debt of
£1,017m
(2007: £941m)
(note 33). However, if the
£109m movement in debt caused by the falling Sterling US
dollar exchange rates is eliminated, debt at 31 December would
have been £909m a reduction of £32m over the year. The Notes
are fully hedged and so by the dates they are redeemable in
2013 or 2016, the exchange effects will have fully reversed.

The peak level of daily borrowings on a cleared basis during
the year ended 31 December 2008 was £1,112m (2007:
£1,022m). The maximum month end cleared borrowings were
£1,043m (2007: £984m). At 31 December 2008 the Group had
undrawn facilities of £332m (2007: £215m).

OPERATING LEASES
Note 30 gives details about the Group’s operating lease commit-
ments, most of which relate to properties occupied by the Group
for trading purposes.

COVENANT COMPLIANCE
The Group’s borrowings are subject to covenants set by the
lenders. Covenant compliance is measured semi-annually
using financial results prepared under IFRS extant at 31
December 2007.

The key financial covenants are the ratio of net debt to earn-
ings before interest tax, depreciation and amortisation “EBITDA”
which must be less than 3.5 times, and the ratio of earnings
before interest, tax and amortisation “EBITA” to net interest which
must be above 3.5 times. At 31 December 2008 the Group

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achieved net debt to EBITDA of 2.8x (note 37) and interest cover
of 4.3x (note 10).

In addition to these financial covenants the Group’s
borrowing agreements include general covenants and potential
events of default. At the date of this report there had been no
breaches of the financial covenants and the Group had complied
in all other respects with the terms of its borrowing agreements.

Credit Risk
FINANCING
Credit risk refers to the risk that a counterparty will default on its
contracted obligations resulting in loss to the Group. It arises on
financial instruments such as trade receivables, short-term bank
deposits, banking facilities, interest rate derivatives and foreign
currency hedging transactions. To reduce the risk of loss arising

Interest Rate and Currency Derivatives (Note 25)
INTEREST RATE RISK
One of the principal risks facing the Group is an exposure to
interest rate fluctuations. The Group has borrowed in Sterling at
floating rates, whilst its US$ denominated Notes have fixed rates
of interest.

The Group’s hedging policy is to generate its preferred
interest rate profile, and so manage its exposure to interest rate
fluctuations, through the use of interest rate derivatives.
Currently the policy is to maintain the profile of borrowings in
the approximate ratio of 33% to 75% at fixed interest rates and
the remainder at variable rates.

The Group has entered into a number of interest rate
derivatives designed to protect it from fluctuating interest and
exchange rates on its borrowings. At the year-end, the Group
had nine interest rate derivatives fixing interest rates on
approximately 70% of the Group’s cleared debt. The maturity of
the Group’s derivatives is as follows;

Vanilla interest rate swaps
Vanilla interest rate swaps
Vanilla interest rate swaps
Cancellable swaps
Cap and collar

Maturity

February 2010
February 2013
April 2013
October 2013
February 2010

Notional
Value
£237m
£100m
£100m
£100m
£118m

CURRENCY RISK
Having taken out 4 cross currency swaps, to protect it from
exchange rate fluctuations, in respect of its $400m fixed rate
guaranteed unsecured notes, the Group is not exposed to signif-
icant foreign exchange risk.

Whilst the majority of purchases of goods and services are
invoiced in Sterling, goods acquired from overseas either directly
from manufacturers or through UK based distributors continue
to increase. Overseas originated purchases currently approxi-
mate to 40% of group purchases and so adverse movements in
Sterling, could, to the extent they cannot be passed on to
customers, affect profitability.

The Group settles its currency related trading obligations
using a combination of currency purchased at spot rates and
currency bought in advance on forward contracts. Its policy is to
purchase forward contracts for between 30% and 70% of its
anticipated requirements twelve months forward. At 31
December 2008 the nominal value of currency contracts, most
of which were $US denominated, was $46m and €2m. At 31
December 2008, based upon forecast currency requirements
for 2009, a US$10c change in the exchange rate would impact
costs, before any corresponding selling price amendment, by
approximately £1m.

from counterparty default, the Group has a policy of dealing with
credit-worthy counterparties. The Group has policies and proce-
dures to ensure that customers have an appropriate credit
history and that account customers are given credit limits appro-
priate to their circumstances, which are regularly monitored.

The Group does not have any significant credit risk expo-
sure to any single counterparty or any group of counterparties
having similar characteristics (other than banks providing
banking facilities, interest rate derivatives and cross currency
swaps). The Group defines counterparties as having similar char-
acteristics if they are connected entities. The credit risk in liquid
funds and derivative financial instruments is limited because the
counterparties used are banks with high credit-ratings assigned
by international credit-rating agencies.

At the year-end, the Group had open currency hedging
contracts with four banks, open interest rate derivative contracts
with 6 banks and had 16 banks within its banking syndicate.
There were 19 companies holding the Group’s US$ denominated
Notes, of which the largest held 21% by value. The Group has
entered into only one currency hedging contract and no swaps
with a counterparty that is not a current member of its banking
syndicate. The Group’s banking counterparties ratings as of 18th
February 2009, are shown in the table on the opposite page.

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Banking Counterparty Ratings

Rating

AA+ to AA-
A+ to A-

Number
of Banks
No.
9
8

Amount of
UK Bank Facilities
£m
528
472

Notional Value of
Interest Rate Derivatives
£m
337
318

Notional Value of
Cross Currency Swaps
$m
150
250

CUSTOMER CREDIT
Within the Group’s trade businesses, one of the key aspects of
service is the provision of credit to customers, with the Group
carrying the associated credit risk.

Trade receivables consist of a large number of customers,
none of which represents more than 0.5% of sales, spread
across diverse industries and geographical areas. However, the
nature of the industry is such that there is a risk that some of
these customers will be unable to pay outstanding balances.

Ongoing evaluation of the financial condition of accounts
receivable and reviews of the total credit exposure to all
customers is performed monthly, using external credit risk serv-
ices where necessary. Increased credit levels are approved by
both operational and financial management with personal guar-
antees being obtained, where appropriate, before credit is
advanced. Whilst day-to-day credit control is the responsibility of
the centrally based teams, the Group also operates an in-house
debt recovery team, headed by a qualified solicitor, that is
responsible for recovering debt that remains unpaid. The Group
does not have credit guarantee insurance.

During the recession of 1990/91, the Group experienced
bad debt levels of up to 1.35% of credit sales. Over the past 10
years, the bad debt charge has averaged below 0.5%, however,
during the latter part of 2008, the Group experienced an
increasing level of bad debts, with the bad debt charge for the
year reaching 0.9% of credit sales (2007: 0.4%).

Debtor days at 31 December 2008 were 59 days (2007: 56
days). An increase in one debtor day at 31 December would
have reduced cash flow by approximately £5m

Capital Risk
The Group manages its capital risk by ensuring it has a capital
structure appropriate to the ongoing needs of the business that
ensures it remains within the covenant limits that apply to its
banking arrangements. The capital structure of the Group
consists of debt, which includes the borrowings disclosed in note
24, cash and cash equivalents and equity attributable to equity
holders of the parent, comprising issued capital, reserves and
retained earnings as disclosed in notes 21 to 23.

The capital structure is formally reviewed by the Board as
part of its annual strategy review, but it is kept under review by
me throughout the year. As necessary, the Company will rebal-
ance its capital structure through raising or repaying debt,
issuing equity or paying dividends.

Tax Risk
The Group seeks to efficiently manage its tax affairs whilst at
the same time complying with the relevant laws and disclosure
obligations placed upon it. However, the complexity of tax legis-
lation means that there will always be an element of uncertainty
when determining its tax liabilities.

To minimise compliance risk the Group utilises qualified in-
house expertise and takes external advice when making judge-
ments about the amount of tax to be paid and the level of
provisions required.

Future tax charges and payments could be affected by
changes in legislation and accounting standards beyond the
control of the Group.

Market Conditions and Competitive Pressures
The Group’s products are sold to tradesmen and retail customers
for a broad range of end uses in the built environment. The
performance of the market is affected by general economic condi-
tions and a number of specific drivers of construction activity,
including housing transactions, house price inflation, consumer
confidence, interest rates and unemployment. The Board
conducts an annual review of strategy, which includes an assess-
ment of likely competitor activity, market forecasts and possible
future trends in products, channels of distribution and customer
behaviour. Significant events including those in the supply chain
that may affect the Group are monitored by the Executive
Committee and reported to the Board monthly by the Group CEO.
Market trends and competitor performance are also tracked on an
ongoing basis and reported to the Board each month.

Whilst the Directors have considered reasonable changes in
market conditions and competitive pressures, in the current
environment a further significant downturn could impact group
sales and margins to a greater extent than they have currently
envisaged in their consideration of future trading for the
purposes of the going concern statement above.

Product Availability and Product Prices
Security of supply of products and product quality are monitored
by product category directors in the trade and retail businesses.
Supplier financial strength, product quality and service levels are
monitored on a continuous basis. An annual risk assessment
with recovery plans is prepared for the major suppliers across
the Group. The Group is not significantly exposed to one supplier
or product type with no supplier accounting for more than 7% of
total goods purchased in 2008. An established QA process is in
place throughout the business.

However, the ability to pass on price increases to customers
is affected by competitor activity and the economic climate. An
inability to raise selling prices could reduce margins.

The market price of products distributed by the Group,
particularly commodity products, can vary significantly and
affect operating results. The Group’s businesses actively take
steps to protect themselves from anticipated price rises.

Any restrictions on third party credit insurance available to
suppliers could result in them reducing their own credit expo-
sure to the Group. If this were to occur, it could adversely impact
the Group’s working capital and therefore it’s debt levels.

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Acquisitions and Other Expansion
Growth by acquisition continues to be an important part of the
strategy of the Group. Significant risk can arise from acquisi-
tions in terms of the initial valuation, the integration programme
and the ongoing management of the acquisition. Detailed
internal analysis of the market position of major acquisition
targets is undertaken and valuations are completed using
discounted cash flow financial
models. Independent advisors are
used to comment on the strategic
implications and the assumptions in
valuation models for larger acquisi-
tions. A rolling programme of post
acquisition audits is completed and
reviewed by the Board each year.

Human Resources
The ability to recruit and retain staff
at all levels of the Group is an
important driver of our overall
performance. Salaries and other
benefits are benchmarked annually
to ensure that the Group remains
competitive. A recruitment toolkit is
available for both trade and retail
outlets. A wide-range of training
to
in place
programmes are
encourage
development
staff
and management development
programmes are used to assist
those identified for more senior positions. The Group Human
Resources Director monitors staff turnover by job type and
reports to the Board annually. Succession plans are established
for the most senior positions within the Group and these are
reviewed annually.

Information Technology and Business Continuity
The operations of the Group depend on a wide range of IT
systems to operate efficiently. An IT strategy committee reviews
performance levels of the key systems and prioritises develop-
ment work. Maintenance is undertaken on an ongoing basis to
ensure the resilience of group systems and escalation proce-
dures are in place to resolve any performance issues at an early
stage. Our two new data centres mirror each other with data
processing switched from one to the other on a regular basis. An
IT disaster recovery plan exists and is tested regularly together
with the business continuity plan with arrangements in place for
alternative data sites for both trade and retail businesses. Off-
site back-up routines are in place.

The Group distributes products from five major warehouses
in Great Britain. The loss of any single warehouse through fire
or other major incident could have a material effect on the
availability of product in the trade and retail outlets. Each ware-
house has fire detection and alarm systems and a business
continuity plan.

Legislation
The Group is affected, both positively and negatively, by the
legislative environment within which it operates. Planning and

building legislation impacts its customers, and consequently
the Group, whilst health & safety, employment, environmental
and competition laws together with the rules of the Financial
Services Authority and the Listing Rules influence its day to
day operations.

The Group has an in-house legal team headed by the Group
Company Secretary, health & safety and environmental experts
that monitor changes in legislation
that affect the Group and enable it
to take timely action to ensure any
impacts are reduced.

Environmental
Failure to operate within the highest
environmental
standards may
reduce the Group’s profitability if
such action causes it to come into
conflict with legislative require-
ments. Furthermore, with height-
ened environmental awareness,
companies that fail to meet environ-
mental standards may find their
ability to trade or gain access to
capital markets reduced.

The Group has accreditation for
its environmental management
system to the ISO 14001 standard.
Further details of the Group’s envi-
ronmental policies and performance
are given in the Chief Executive’s
review of the year. However, to mitigate the potential environ-
mental risks, the Group undertakes comprehensive reviews
across all its businesses involving independent external advisers.
External verification of environmental performance is undertaken
and repeated on an annual basis.

Pensions
The risks in this area relate to the potential for contributions
required to meet the benefits promised in the final salary scheme
rising to a level that restricts other corporate activity. The Scheme
Trustees and the Group obtain independent actuarial advice and
formal valuations are carried out at least every three years. The
Trustees receive reports on the investment performance quar-
terly. The Travis Perkins’ final salary scheme was closed to all
new members in April 2006.

The accounting deficit at 31 December 2008 is £70m. The
Group currently has arrangements in place to eliminate the
deficit over a period of 8 years. Any deterioration in the scheme’s
funding position could impact the Group’s liquidity.

Paul Hampden Smith
Finance Director
18 February 2009

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F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

The Company has not produced a separate corpo-

rate responsibility statement in the report and
accounts since it believes these matters are suffi-
ciently important to receive the personal attention of indi-
vidual directors rather than risking less focus through the
exercise of collective responsibility. Instead full details of
those areas normally covered by such a report are contained
either in the reports of the directors responsible for such
matters, or in a separate report, as explained below:

Environment
Chief Executive’s review of the year

Health & Safety
See separate Health & Safety report on pages 47 and 48

Supply Chain
Chief Operating Officer’s review of the year

Employees
Chief Operating Officer’s review of the year

Community Relations
Chief Executive’s review of the year

The Board takes account of the significance of environ-
mental, social and governance matters in its conduct of
the Company’s business. The Board believes that it has
adequate information to identify and assess the major envi-
ronmental, social and governance risks and as part of the
system of internal control receives reports on the risks
associated with these matters. The Board has received
briefings on such matters during 2008.

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D I R E C T O R S A N D P R O F E S S I O N A L A D V I S E R S

C H A I R M A N

C H I E F E X E C U T I V E

Tim Stevenson O.B.E. (aged 60) joined the Board in September
2001 and became Chairman on 1 November 2001. He is a
barrister and held a number of senior positions in Burmah
Castrol plc between 1975 and 2000, including Chief Executive
from 1998. He is also non-executive Chairman of Morgan
Crucible plc, and Lord Lieutenant of Oxfordshire. He is Chairman
of the Nominations Committee and a member of the Remuner-
ation and Health & Safety Committees.

Geoff Cooper (aged 54) joined the Company in February 2005
and was appointed Chief Executive on 1 March 2005. He is a
chartered management accountant and worked in management
consultancy before joining Gateway (now Somerfield plc) as
Finance Director in 1990. In 1994 he became Finance Director
of UniChem plc, subsequently Alliance UniChem plc (which later
became part of Alliance Boots plc), where he was appointed
Deputy Chief Executive in 2001. He is non-executive Chairman
of Dunelm Group Plc.

F I N A N C E D I R E C T O R

C H I E F O P E R A T I N G O F F I C E R

Paul Hampden Smith (aged 48) is a chartered accountant and
joined Sandell Perkins in 1988. Following the merger with Travis
& Arnold, he was appointed regional finance director. In 1992,
he became Finance Director of Travis Perkins Trading Company
Limited and was appointed Finance Director of Travis Perkins
plc in 1996. He was a non-executive director of The Polestar
Company Ltd until November 2008.

John Carter (aged 47) joined Sandell Perkins as a management
trainee in 1978. Having held regional management positions,
he was appointed as Managing Director, Operations in 1996,
and became a director of Travis Perkins plc in July 2001. He
was appointed Chief Operating Officer in February 2005, and is
a member of the Health & Safety Committee.

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D I R E C T O R S A N D P R O F E S S I O N A L A D V I S E R S

Chris Bunker (aged 62) was appointed as a non-executive
director in January 2004. He is a chartered management
accountant and was Finance Director of Thames Water plc, from
2000 until March 2004. He was previously Finance Director of
Tarmac PLC and Westland Group PLC. He is a non-executive
director of D S Smith Plc and formerly was a non-executive
director of Mowlem plc, Baltimore Technologies plc and Xansa
PLC. He is the Senior Independent Director and Chairman of the
Audit Committee and a member of the Nominations and Remu-
neration Committees.

Andrew Simon O.B.E. (aged 63) was appointed as a non-exec-
utive director in 2006. He is non-executive Deputy Chairman of
Dalkia Plc, and a non-executive director of Finning International
Inc., Management Consulting Group plc and SGL Carbon AG. He
was previously Chairman and/or Chief Executive of Evode Group
plc from 1980 to 1993, and has also held non-executive direc-
torships with Severn Trent Plc, Ibstock PLC, Laporte Plc, Asso-
ciated British Ports Holdings PLC, and Brake Bros Holdings Ltd.
He is chairman of the Remuneration and Health & Safety
Committees, and a member of the Audit Committee.

John Coleman (aged 56) was appointed as a non-executive
director in February 2005. He is a chartered management
accountant and Chairman of AGA Rangemaster Group plc. He
was Chief Executive of House of Fraser plc from 1996 to 2006
and previously Chief Executive of Texas Homecare and of a
number of businesses within Burton Group PLC. He is a member
of the Remuneration, Audit and Nominations Committees.

Stephen Carter C.B.E. served as a non executive director and
member of the Audit Committee until his resignation on 8 January
2008. Michael Dearden served as a non-executive director
during the year until his retirement on 11 November 2008. He
was Senior Independent Director and a member of the Audit,
Nominations, Remuneration and Health & Safety Committees.

Secretary: A. S. Pike

Audit Committee:
C. J. Bunker (Chairman), J. Coleman, A. H. Simon

Remuneration Committee:
A. H. Simon (Chairman), C. J. Bunker J. Coleman, T. E. P. Stevenson

Nominations Committee:
T. E. P. Stevenson (Chairman), C. J. Bunker, J. Coleman

Health & Safety Committee:
A. H. Simon (Chairman), J. P. Carter, T. E. P. Stevenson

Executive Committee:
G. I. Cooper (Chief Executive and Committee Chairman)
J. P. Carter (Chief Operating Officer)
P. N. Hampden Smith (Finance Director)
J. Bird (Managing Director, Wickes)
A. J. Davidson (Chairman, Specialist Merchanting)
C. Kavanagh (Group HR Director)
M. R. Meech (Group Property Director)
J. Mescall (Chairman, General Merchanting)
A. S. Pike (Company Secretary & Lawyer)
R. D. Proctor (Supply Chain Director) (appointed February 2009)

Investment Bankers/Advisors: HSBC Bank plc; Tricorn Partners
Corporate Broker: Citibank; Dresdner Kleinwort Wasserstein
Bankers: The Royal Bank of Scotland plc; Barclays Bank plc
Solicitors: Clifford Chance LLP, London; Linklaters LLP, London;

Hewitsons, Northampton

Auditors: Deloitte LLP, Birmingham
Registrars: Capita Registrars, Huddersfield

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C O R P O R A T E G O V E R N A N C E

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

C O M B I N E D C O D E

The London Stock Exchange first issued the Combined

Code on Corporate Governance (“the Code”) in 1998
and it was revised most recently in June 2008. Section
1 of the Code is applicable to companies. A statement explaining
how the Company has applied the principles and the extent to
which it has complied with the provisions of the Code appears
below. The Code contains fourteen main principles of gover-
nance, which are divided into the following four areas:

1. Directors
The Company is controlled through a board of directors, which
presently comprises the Chairman, three executive and three
non-executive directors. Tim Stevenson is Chairman and Geoff
Cooper is Chief Executive. Chris Bunker is the Senior Inde-
pendent Director, a role which was fulfilled by Michael Dearden
until his retirement on 11 November 2008. John Coleman and
Andrew Simon are also independent non-executive directors.
Appointments of new directors are made by the Board on the
recommendation of the Nominations Committee. It is intended to
appoint a further non-executive director in the near future. All
directors will submit themselves for re-election at least every
three years.

The Board has a formal schedule of matters reserved to it
and meets at least ten times a year. It is responsible for overall
group strategy, policy on corporate governance matters, acqui-
sition policy, approval of major capital expenditure and consid-
eration of significant financial and operational matters. It
monitors the exposure to key business risks and reviews the
strategy of the trading subsidiaries, their annual budgets and
progress towards the achievement of those budgets and their
capital expenditure programmes. It also considers legislative,
environmental, health & safety and employment issues. The
Board has approved a written statement of the division of key
responsibilities between the Chairman and the Chief Executive.
The Chairman leads the Board, ensuring that each director
is able to make an effective contribution. He also monitors the
information provided to the Board to ensure it is sufficient, timely
and clear, and from time to time, the Board reviews the adequacy
of this information.

The Board held fourteen meetings during 2008, three of
which were by conference telephone call. One meeting dealt
with consideration of the Company’s long-term strategy and
seven meetings either included visits to parts of the Company’s
operations or included presentations by senior executives on
their areas of responsibility. Individual visits to operational sites
by non-executive directors also occurred. In addition to the

regular board meetings, key financial information is circulated
to directors outside of meetings. The Chairman has regular
direct contact with the executive directors and keeps the non-
executive directors informed of material developments between
board meetings.

All directors have direct access to the Company Secretary
and may take independent professional advice in the further-
ance of their duties if necessary. The Company maintains
directors & officers’ insurance in respect of the risk of claims
against directors.

The Chairman held two meetings during the year with all the
non-executive directors, without the executive directors being
present. The Senior Independent Director held a number of indi-
vidual discussions with other directors during the year, without
the Chairman being present, to evaluate the Chairman’s
performance, and then provided feedback to the Board. The
Board has an induction process for new directors, which is facil-
itated by the Company Secretary. The Chairman ensures that all
directors receive appropriate training on appointment and then
subsequently as required, taking into account the need to update
their skills and their knowledge of the Company’s business. They
are also regularly provided with information on forthcoming legal
and regulatory changes and corporate governance develop-
ments, and briefings on the key risks facing the Company,
including those identified in the Corporate Responsibility state-
ment on page 39.

The Board has established five standing committees: the
Audit Committee, the Remuneration Committee, the Nomina-
tions Committee, the Health & Safety Committee and the Exec-
utive Committee, which operate within defined terms of
reference. Details are available on the Company’s website or
may be obtained from the Company Secretary. The minutes of
committee meetings are available to all the directors. The
reports of the Audit Committee, Health & Safety Committee,
Remuneration Committee and Nominations Committee and are
on pages 45 and 46, 47 and 48, 49 to 57 and 58 respectively.
The Executive Committee members are listed on page 41.
Other executives are invited to attend from time to time in rela-
tion to specific matters. The principal purpose of the Committee
is to assist the executive directors in the performance of their
duties in relation in particular to:
(cid:129) Strategy, operational plans, policies, procedures and

budgets;

(cid:129) The monitoring of operational and financial performance;
(cid:129) The assessment and control of risk;
(cid:129) The prioritisation and allocation of resources.
The number of board and committee meetings attended by each
director (in whole or in part) during the year was as follows:

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C O R P O R A T E G O V E R N A N C E

PLC Board

Number of meetings

Attendances:

C. J. Bunker

J. P. Carter

J. Coleman

G. I. Cooper

M. B. Dearden

P. N. Hampden Smith

A. H. Simon

T. E. P. Stevenson

No.

Audit

No.

Remuneration

Nomination

Health & Safety

Executive

No.

During the year, the Board undertook an evaluation of its
performance and the performance of its committees and the
individual directors. This consisted of interviews by the Chairman
with each other director and the Company Secretary separately,
focussing on the operation of the Board and, its committees and
in particular on those matters identified in 2007 where measures
were taken to enhance performance. These interviews formed
the basis of a report by the Chairman that was the subject of a
discussion by the Board, which was satisfied that the process
showed that the Board and its committees worked effectively.
However, it agreed a number of measures, in particular relating
to the presentation of board business, aimed at further
enhancing its performance. A board evaluation process will be
carried out in 2009.

2. Directors’ Remuneration
The Remuneration Committee consists of the Chairman and
three independent non-executive directors, and meets at least
four times a year. Its responsibilities include remuneration policy
and a review of the performance of executive directors prior to
determining their remuneration. The remuneration of the non-
executive directors is determined by the Board as a whole,
except that the Remuneration Committee makes a recommen-
dation in respect of the Chairman’s salary. No director plays a
part in the discussion about his own remuneration.

The Remuneration Report is set out on pages 49 to 57.

3. Accountability and Audit
A review of the performance of the Group’s trading subsidiaries
and the financial position of the Group is included in the Chief
Executive’s review of the year, in the Chief Operating Officer’s

review of the year and in the Finance Director’s review of the
year set out on pages 10 to 38. The Board uses them, together
with the Chairman’s statement on pages 8 and 9 to present a full
assessment of the Company’s position and prospects. The Direc-
tors’ responsibilities for the financial statements are described
on page 63.

INTERNAL CONTROL
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness. In designing the
system of internal control, consideration is given to the signifi-
cant risks to the business, the probability of these risks mani-
festing themselves and the most cost effective means of
controlling them. The system is designed to manage rather than
eliminate risk and therefore can only provide reasonable, and
not absolute, assurance against material misstatement or loss.
The day-to-day operation of the system of internal control
has been delegated to executive directors and senior manage-
ment, but the effectiveness of the system is regularly reviewed
by the Board in a process that accords with the Turnbull Guid-
ance. The Board and the Executive Committee receive regular
reports on specific areas of risk. If appropriate, these reports
include recommendations for improvement in controls or for the
management of those risks. Measures to integrate risk manage-
ment processes into the Group’s operations, to extend aware-
ness of the importance of risk management and to ensure that
recommended improvements are implemented, are regularly
reviewed and refreshed. Senior executives are asked, twice a
year, to confirm the adequacy of internal controls in their areas
of responsibility, identify any control weaknesses, and to confirm
the accuracy and completeness of information given to the

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C O R P O R A T E G O V E R N A N C E

directors and to the external auditors.

In conjunction with the Audit Committee, the Board has carried
out an annual review of the overall effectiveness of the system of
internal control and risk management procedures, during the year
and up until the date of approval of the annual report.

AUDIT COMMITTEE AND AUDITORS
The report of the Audit Committee is set out on pages 45 and 46.

4. Relations with Shareholders
The Company encourages two-way communication with both
its institutional and private investors and responds promptly to
all enquiries received. During the year the Chairman, the Senior
Independent Director and the executive directors, either sepa-
rately or together, attended a number of meetings with analysts,
and with shareholders representing circa 60% of the issued
share capital. The Chairman and executive directors report to
the Board on any meetings with shareholders or analysts. In
addition, written reports about the Company by analysts or
brokers are circulated to all directors.

As well as sending annual and interim reports to share-

holders, the Company issued two interim management state-
ments and one further trading update during the year. All share-
holders receive at least twenty working days notice of the Annual
General Meeting at which all directors are available for ques-
tions and a short business presentation takes place. Each
substantive issue is the subject of a separate resolution. The
numbers of proxy votes for and against each resolution are
announced at the meeting, after the voting has taken place, and
are subsequently published on the Company’s website.

G O I N G C O N C E R N

This matter is dealt with on page 34 of the Finance Director’s
review of the year.

C O R P O R A T E G O V E R N A N C E
C O M P L I A N C E S T A T E M E N T

The Company is pleased to report that it has complied
throughout the year ended 31 December 2008 with the provi-
sions set out in Section 1 of the Code.

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R O L E O F T H E A U D I T
C O M M I T T E E

The Audit Committee is responsible for:
(cid:129) The integrity of the financial statements of the Company and
any formal announcements relating to the Company’s finan-
cial performance, and reviewing significant financial
reporting judgements contained therein;

(cid:129) Reviewing the Company’s internal financial controls and,
unless expressly addressed by the Board itself, the
Company’s internal control and risk management systems;
(cid:129) Monitoring and reviewing the effectiveness of the Company’s

internal audit function;

(cid:129) Making recommendations to the Board, for a resolution to be
put to the shareholders for their approval in general meeting,
in relation to the appointment and remuneration of the
external auditors;

(cid:129) Reviewing the audit plans of the external auditors and for

monitoring the conduct of the audit;

(cid:129) Reviewing the external auditors’ independence and objectivity
and the effectiveness of the audit process, taking into consid-
eration relevant UK professional and regulatory requirements;
(cid:129) Reviewing the Company’s policy on the engagement of the
external auditors to supply non-audit services, taking into
account relevant guidance regarding the provision of non-
audit services by an external audit firm.

The Audit Committee is required to report its findings to the
Board, identifying any matters in respect of which it considers
that action or improvement is needed, and make recommenda-
tions as to the steps to be taken.

Committee also invited the Group Chairman, the Finance
Director, the Chief Operating Officer, the Group Financial
Controller, the Group Head of Business Risk and Assurance
and the external auditors to attend each meeting. During each
meeting, the external auditors and the Group Head of Busi-
ness Risk and Assurance were given the opportunity to talk
with the Committee without the presence of management. In
addition, during the year, the Committee Chairman held a
number of meetings with the Group Head of Business Risk and
Assurance and with the external auditors, all without manage-
ment being present.

M A I N A C T I V I T I E S O F T H E
C O M M I T T E E D U R I N G T H E Y E A R

At its meeting in February, the Committee reviewed the annual
financial statements of the Company and received reports from
the internal auditors on internal control matters and from the
external auditors on the conduct of their audit, their review of
accounting policies, areas of judgment and the financial state-
ments and their comments on statements concerning risk and
internal control. A similar review was undertaken at its July
meeting when the interim statements were considered. At these
meetings, and at its meetings in June and November, the
Committee also reviewed:
(cid:129) The committee’s terms of reference and recommended

minor changes to the Board;

(cid:129) An evaluation of its work carried out as part of the Board
evaluation process referred to on page 43, and reported to
the Board on this evaluation;

The Committee’s full terms of reference are available on the

(cid:129) Any comments received on its 2007 report from institutional

Company’s website, or on request to the Company Secretary.

investor bodies;

C O M P O S I T I O N O F T H E
A U D I T C O M M I T T E E

Chris Bunker was Chairman of the Committee throughout 2008.
Michael Dearden was a member until his retirement on 11
November 2008, when he was replaced by Andrew Simon. John
Coleman was appointed a member on 28 January 2008,
following the resignation of Stephen Carter. All members of the
Committee are considered to be independent. The Company
Secretary, Andrew Pike, is secretary to the Committee. The Board
considers that Chris Bunker has the recent and relevant finan-
cial experience required by the Combined Code (see also the
Board profiles on pages 40 and 41).

M E E T I N G S A N D A T T E N D A N C E

The Committee met four times during 2008 to consider inter
alia, the annual and interim results. The Chairman of the

(cid:129) The effectiveness of the system of internal financial control
and the system for monitoring and reporting on risks faced
by the Group;

(cid:129) The strategy, staffing, processes and effectiveness of the
internal audit department and recommended to the Board
minor changes to the terms of reference of that department;
(cid:129) The status of actions taken in response to recommendations

arising from internal audit work;

(cid:129) The operation of the Group’s “whistleblowing” policy;
(cid:129) The policy on engagement of the external auditor for non-
audit work, as referred to below, and its policy on the employ-
ment of anyone previously employed by the external auditor;
(cid:129) The plans presented by the external auditor for conduct of
the year-end audit including terms of engagement, fees and
letters of representation;

(cid:129) The effectiveness, independence, and objectivity of the
external auditors, taking into account written assurances
provided by Deloitte LLP with regard to its quality and inde-
pendence controls, and its ethical standards;

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(cid:129) The Group’s accounting policies and forthcoming changes to
International Financial Reporting Standards and other regu-
latory changes;

(cid:129) Methods of fraud prevention;
(cid:129) Responsibilities in the Group for health & safety audits;
(cid:129) The Group’s tax planning.

E X T E R N A L A U D I T O R S

The Company places great importance on the effectiveness and
independence of its external auditors and together with them is
careful to ensure their objectivity is not compromised. At its
November meeting, the auditors presented to the Committee
their plans for the forthcoming audit together with details of their
proposed fees and how they ensure that their objectivity and
independence are not compromised.

It is the role of the Committee to ensure compliance with the
Board’s policy in respect of services provided by, and fees paid
to, the auditors. Audit fees are negotiated by the Finance Director
and approved by the Audit Committee. For other services that
could be provided by the auditors, the Company’s policy is:

General Principles
The Group should not employ the auditors to provide non-audit
services where either the nature of the work or the extent of
such services might impair the auditors’ independence or
objectivity. Any assignment to the auditors of non-audit work
with a fee over £25,000 requires the approval of the Chairman
of the Committee.

Work as Auditor and Reporting Accountant
The auditors are invited by the Company to undertake those
services that they are required to and are most suited to
perform. Such work includes certification in respect of borrow-
ings, Stock Exchange related reporting, review of the satisfaction
of share scheme performance criteria, accounting advice and
reviews of accounting standards and, where appropriate, assis-
tance with acquisitions.

Taxation
The auditors assist the Group to meet general tax compliance
requirements as well as providing advice on tax planning. Should
opportunities arise for them to advise on special tax projects,
their suitability is assessed at the time to ensure it would not
compromise their audit independence, with the work being
tendered where appropriate.

Advisory and Consultancy Work
On occasions, the auditors may be best placed to undertake
other advisory or consultancy work due to their knowledge of
the Group. However, certain types of work are prohibited, where
such work might prejudice the independence or objectivity of

the auditors. Any work for which the fee might exceed £50,000
is subject to competitive tender.

In view of the exceptional market conditions experienced
during the year, Deloitte were requested to undertake a number
of assignments associated with the Group’s financing arrange-
ments and related tax matters. The increased non-audit fees
incurred during the year reflect these assignments. However, the
Committee remains satisfied that their independence and objec-
tivity as auditors were not impaired.

Deloitte LLP (or its predecessor firms) a leading international
audit partnership, was first appointed as auditor to Group
companies more than 30 years ago and its fees are regularly
compared with peer companies by the Committee. There are no
contractual restrictions on the Group with regard to its appoint-
ment. In accordance with professional standards, the partner
responsible for the audit is changed every 5 years.

Following its February 2009 meeting, the Committee recom-
mended to the Board that a resolution be put to shareholders at
the Annual General Meeting for the re-appointment of the
external auditors, and to authorise the Directors to fix their remu-
neration.

I N T E R N A L A U D I T

As well as its reviews of the internal audit department’s strategy
and processes, as described above, during its meetings in 2008,
the Committee received presentations from the Group Head of
Business Risk and Assurance, about the results of work under-
taken by the department, and approved its plans for work in
2009. The Committee was satisfied with the overall effective-
ness of the department.

O V E R V I E W

As a result of its work during the year, and taking into account
the result of the Board and Committee evaluation process
described on page 43, the Committee has concluded that it has
acted in accordance with its terms of reference and has ensured
the independence, objectivity and effectiveness of the external
and internal auditors.

The Chairman of the Committee will be available at the
Annual General Meeting to answer any questions about the work
of the Committee.

Chris Bunker
Chairman, Audit Committee
18 February 2009

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H E A L T H & S A F E T Y R E P O R T

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

Health & safety (“H&S”) remains a Group priority. We

have taken a further major step in improving our stan-
dards in this area by appointing an industry leading
H&S expert to advise the Group. With his support, we have
launched a change programme designed to win “hearts and
minds”, as an important step in embedding a strong H&S culture
at every level in the Group . The response from the business
unit management teams has been extremely positive. Most
importantly, the first visible actions resulting from this
programme, aimed at changing attitude and behaviour in indi-
vidual businesses, have been more wide-reaching and benefi-
cial than we expected.

We recognise that we are still in the early stages of our H&S
development, but we are confident we will make considerable
progress in achieving our vision of making injuries a rare occur-
rence. Our new electronic accident reporting system now
provides a much more accurate representation of our true H&S
performance. We believe this more accurate reporting has led
initially to a worsening of our reported H&S performance, but we
expect that to start levelling out in 2009 and then improving as
we move into 2010.

G R O U P H E A L T H & S A F E T Y
C O M M I T T E E

The Role of the Committee
The Group H&S Committee was established in November 2007
to encourage and assist the Group’s executive management in
its drive towards achieving and maintaining industry-leading
standards in health & safety. The Committee is responsible for
reviewing H&S policies, practices and group performance to
ensure they meet or exceed legal obligations and contribute to
achievement of the Group’s H&S objectives. These objectives
are designed to ensure that the business achieves its vision of
making injuries a rare occurrence.
To execute its role, the Committee ensures that:
(cid:129) Routine H&S reports and audits used by management and

its purpose and role. The full terms of reference of the H&S
Committee are available on the Company’s website, or, on
request from the Company Secretary.

Composition of the Committee
Throughout 2008, Andrew Simon chaired the Group H&S
Committee and Tim Stevenson, Mike Dearden (until his retire-
ment) and John Carter were members of it with the Company
Secretary, Andrew Pike, being its secretary. The Chairman of the
Committee also invited the Group HR Director and Group Head
of H&S to attend each meeting during the year. The Board
considers that the Group Head of H&S has relevant H&S knowl-
edge, experience and qualifications.

The Committee met 3 times during 2008 to execute its role,
working in tandem with the operationally-focused Trading Board
Health & Safety Committee (See below).

Main Activities of the Committee During the Year
At its meeting on 9 April 2008, the Committee reviewed group
H&S performance during 2007. The Committee noted that
despite a reduction in the number of lost time injuries, it was
anticipated that statistics would worsen in 2008, following the
introduction of an electronic accident reporting system linked to
the HR absence system. The H&S team’s objectives were
reviewed, along with the joint Institute of Directors and Health &
Safety Commission’s guidance on leading H&S at work.

At this, and the subsequent meetings on 24 July and 14

October, the Committee also dealt with the following issues:
(cid:129) Serious incidents or injuries reported, with various recom-

mendations;

(cid:129) Trading Board Health & Safety Committee terms of reference

and minutes;

(cid:129) H&S material presented at internal business conferences;
(cid:129) H&S performance;
(cid:129) Proposed group initiatives to further improve the H&S culture
and improve local ownership and management of issues;
(cid:129) Plans for the creation of a single group H&S team, covering

the Committee are appropriately interpreted;

all brands and businesses.

(cid:129) Senior managers in the Group are kept informed of their H&S

responsibilities and duties;

(cid:129) The Committee and the Board are kept abreast of regulatory

changes and their impact;

(cid:129) Any extraordinary H&S issue or incident is reported imme-
diately to the Committee, together with subsequent investi-
gation findings;

(cid:129) Where it considers action or improvement is needed, this is
reported to the Board, making recommendations as to the
steps to be taken.

The Committee is authorised by the Board to investigate, using
the resources of the Group Head of H&S, any activity relating to

T R A D I N G B O A R D
H E A L T H & S A F E T Y C O M M I T T E E

The terms of reference and membership of the Trading Board
Health & Safety Committee were revised in March 2008, so as
to reflect the increasing commitment to achieving industry-
leading performance. Membership throughout 2008 comprised
the Chief Operating Officer, John Carter, as Chairman, together
with the Group HR Director, business unit managing directors
and the Group Head of H&S. The Committee met 3 times during
2008 to execute its role.

82987 TRAVIS PRE:Layout 1 1/4/09 10:47 Page 48

TH & SAFETY REPOR

The Role of the Committee

The Committee ensures that:
(cid:129) Best practice is promoted by approving appropriate actions

to address H&S issues raised with the Committee;

(cid:129) Awareness of H&S issues is raised across business func-
tions, with discussions and decisions from the Committee
being actively reported throughout the Group, including the
need for further investment, where necessary;

(cid:129) H&S performance is measured by reviewing accident statistics
and internal and external audits presented to the Committee,
and by agreeing actions to drive continuous improvement;
(cid:129) Any extraordinary H&S issue or incident is investigated and

the findings reported to this Committee;

(cid:129) Significant findings or proposals are reported to the Exec-
utive Committee and the Group H&S Committee, to ensure
that actions are taken to eliminate risks and improve
safety performance.

Main Activities of the Committee During the Year
At each meeting, the Committee dealt with the following issues:
(cid:129) It reviewed reported lost time injuries and near misses
across the Group, and made various recommendations;

(cid:129) H&S performance;
(cid:129) Development of group initiatives to further improve the H&S
culture and increase local ownership and management of
issues.

In addition, the Committee agreed and commenced a cultural
change programme to engage fully, with the hearts and minds
of all colleagues.

H E A L T H & S A F E T Y
P E R F O R M A N C E

2008 H&S performance was disappointing in that both the group
frequency and severity rates worsened, when compared the
previous years’ statistics.

RIDDOR (“Reporting of Injuries, Diseases and Dangerous
Occurrences Regulation”) reportable injuries remained at similar
levels to 2007, but there was a significant increase in non-
RIDDOR lost time injuries losing 3 working days or less. This is
believed to be primarily a result of increased attention to H&S

matters, including management refresher training, the increasing
emphasis on H&S across the Group’s businesses and the intro-
duction of the electronic accident reporting system referred to
above. The data captured has proven to be more accurate than
that previously reported using paper based systems.

There were no RIDDOR workplace fatalities during 2008,
although 2 delivery vehicles were involved in separate road
traffic accidents that tragically resulted in the death of a pedes-
trian in each case.

The Health & Safety Executive concluded their investiga-
tion into a 2007 fatality in Scotland, following a Keyline collec-
tion from a customer site. The Keyline delivery driver was
individually prosecuted, and found guilty under the Health &
Safety at Work Act, along with the construction company, and
Keyline was fined £2,400 for its failure to provide traffic cones
on a delivery vehicle.

Enforcement officer inspections of branches showed a
favourable improvement in performance and standards, with
numerous complimentary letters received. The total number of
improvement notices reduced to 8 across the whole group.

EHO Notices
2006
No.

7
29

2007
No.

8
9

2008
No.

-
8

Prohibition
Improvement

H&S Committee meetings were held at each branch or store
4 times during the year with a centrally prescribed agenda and
supporting materials such as a manual handling refresher DVD
and online test.

A refresher DVD was launched for all lorry mounted crane
drivers in Travis Perkins and Keyline, reminding them of good
practice during deliveries, and the need to plan the loading of the
vehicle to facilitate the delivery at the customer address. Similar
DVDs are being produced for CCF and CPS drivers.

A new group H&S induction DVD was produced as part of a
total review of induction training. The resultant training
programme – Setting Foundations – is being introduced to each
individual business and will be completed during 2009.

ACCI DENT FREQUEN CY RATE

ACCI DENT S EVE RIT Y RAT E

MERCHANT

RETAIL

GROUP

MERCHANT

RETAIL

GROUP

12.5

11.0

12.0

8.5

6.5

8.0

11.0

6.5

10.0

2008

2007

2006

2008

2007

2006

0.24

0.2

0.24

0.23

0.1

0.2

0.21

0.05

0.17

Lost time injuries per million man hours

Days lost per thousand man hours

82987 TRAVIS PRE:Layout 1 31/3/09 16:34 Page 49

D I R E C T O R S ’ R E M U N E R A T I O N R E P O R T

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

I N T R O D U C T I O N

This report sets out the Company’s remuneration policies

for its directors and senior executives and describes how
those policies are applied in practice.

The directors confirm that this report has been drawn up in
accordance with the requirements of Schedule 7A of the
Companies Act 1985 and the Combined Code on Corporate
Governance (“the Code”). A resolution to approve the report will
be proposed at the Annual General Meeting.

U N A U D I T E D I N F O R M A T I O N

Remuneration Committee
The Committee comprises Andrew Simon (Chairman), Tim
Stevenson, Chris Bunker and John Coleman, all of whom are
independent non-executive directors. It met six times in 2008.
The Committee is responsible for the broad policy on directors’
and senior executives’ remuneration. It determines all aspects of
the remuneration packages of the executive directors and
reviews with the Chief Executive, the remuneration packages of
other senior executives. It also oversees the administration of
the employee share schemes. The Committee’s terms of refer-
ence, which are available on our website, or from the Company
Secretary require it to give due regard to the best practice
contained in the Code.

The Committee keeps itself fully informed of relevant devel-
opments and best practice in remuneration matters and seeks
advice where appropriate from external advisors. New Bridge
Street Consultants have provided advice to the Committee on
executive remuneration and share schemes in the past year.
They were appointed by the Committee and provide no other
type of services to the Company. In addition, Geoff Cooper (Chief
Executive), Paul Hampden Smith (Finance Director), Andrew Pike
(Company Secretary) and Carol Kavanagh (Group Human
Resources Director) have assisted the Committee in its work,
but never in respect of their own remuneration.

Policy on Executive Directors’ Remuneration
The Company’s policy on executive remuneration is to ensure
that it has an appropriate mix of fixed and variable pay over the
short and long term, to attract, motivate and retain high quality
executives with an appropriate blend of skills and experience.
This is supported by the following policies:
1. We aim to be competitive in the way we reward our execu-
tive directors, both in base salary and in total remuneration.
In determining this, we take account of the relative experi-
ence of the individual, their roles, internal relativities and the
markets in which the Company competes.

2. We ensure that remuneration packages contribute to the
delivery of short and long-term shareholder value. This is

reflected in the Company’s annual bonus plan and share
plans, which are explained in more detail below. A signifi-
cant proportion of a director’s total remuneration package is
variable, being subject to the achievement of specified busi-
ness objectives. In applying this policy, the Committee has
taken account of the provisions of Schedule A of the Code.
3. We encourage executives to own Travis Perkins shares. This
is exemplified by the compulsory deferral of bonus in shares
and by our shareholding guidelines.

Following a strategic review of the remuneration structure in
2006 and the adoption of new incentive plans at the 2007 AGM,
2008 was a year of implementation.

No significant changes to the principal elements of the policy
in relation to executive directors were made for the 2008 financial
year and for 2009, the only change has been to the components
of the annual cash bonus scheme; details are described below.

The components of the remuneration of the executive direc-

tors are as follows:

Basic Salary
Salaries are normally reviewed in November each year, with
increases taking effect from 1 January in the following year.
The prevailing economic climate and the approach to salary
awards for other employee groups influenced the approach to
base salary increases for 2009 for the executive directors and
other executives. Although a base pay increase of 2.5% was
awarded to other employees with effect from 1 January 2009,
no salary increases were awarded to the three executive direc-
tors (or other executives) and their basic annual salaries remain
as at 1 January 2008.
John Carter
Geoff Cooper
Paul Hampden Smith

£362,250
£517,500
£362,250

Pension Arrangements
Historically, the general policy was for executive directors to be
members of the Company’s final salary pension scheme, but
from 1 February 2006 all new employees, including any execu-
tive directors, have been, and will be, provided with defined
contribution benefits.

In the final salary scheme, executive directors accrue bene-
fits at the lesser of 30ths or such rates as, at age 60, would
provide a pension of 2/3rds of final pensionable salary. In the
case of John Carter and Paul Hampden Smith, the accrual rates
are approximately 1/57 and 1/42 respectively. Final pension-
able salary is defined as the average of the best consecutive
three of the last ten years of pensionable salary. For pensionable
service from 1 December 2004, pensionable salary for all
members is basic salary only, excluding bonuses. As with all
other members, executive directors’ dependants are eligible for
dependants’ pensions and payment of a lump sum in the event

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D I R E C T O R S ’

R E M U N E R A T I O N R E P O R T

of death in service. From April 2006, an “earnings cap” has been
applied in respect of benefits based on service only to that date.
Also since that date, a salary supplement has been made avail-
able as an alternative to further service accrual in the final salary
scheme, at the member’s option, for members the value of
whose benefits are at least 80% of the Lifetime Allowance. Geoff
Cooper ceased to accrue service related benefit at April 2006
and instead receives a salary supplement calculated with regard
to the cost the Company would have incurred in providing
continuing pension accrual.

However, during 2007 the Committee reviewed the approach
to setting supplement rates and decided that executives
choosing a salary supplement in future would be offered a flat
rate, and that the rates used for the Company’s defined contri-
bution plan would be used (25% for executive directors). This
change in policy does not apply to Geoff Cooper (and one other
senior executive) who have already chosen a salary supplement.
Salary supplements are not taken into account for the

purposes of bonuses or other benefits.

There have been no changes in the basis of directors’
pension entitlements during the year. There are no unfunded
pension commitments or similar arrangements for directors.

Annual Bonus Payments
For the 2008 financial year, no bonus payments were triggered
for the executive directors.

At the beginning of the year, the Committee establishes
the targets that must be met in order for a bonus to be paid.
The changes implemented for 2009 are designed to reflect a
very different trading environment to previous years and to
ensure that bonus targets are closely aligned with business
priorities and shareholders interests. The total maximum
bonus levels remain unchanged. For the most senior execu-
tives, earning per share growth is retained as a bonus crite-
rion, representing 50% of maximum bonus. In recognition of
the business focus for 2009, up to 30% of maximum bonus
will be awarded against an interest cover criterion. The
remaining 20% of maximum bonus will be measured on indi-
vidual objectives agreed by the Committee. This means that
for the executive directors, 80% of the maximum bonus
relates to Group business performance and 20% to personal
performance. On-target bonuses are calibrated at half the
maximum for the interest cover element and two thirds of the
maximum for the EPS part. Targets are set by reference to the
Company’s financial plans at the beginning of the year. Indi-
vidual bonuses are capped at 120% of salary for the Chief
Executive and 100% of salary for the Chief Operating Officer
and the Finance Director.

One of the conclusions of the incentives review in 2006 was
that the annual bonus plan should be de-coupled from the long-
term incentives. Accordingly, the annual bonus outcome does
not determine the quantum of matching share awards.

Share Incentives
(A) AWARDS MADE IN 2008
Performance Share Awards
The Performance Share Plan provided for the award to the most
senior executives of shares of a value up to 150% of salary
(although 120% is the maximum awarded to date). The vesting

of performance share awards will depend on the extent to which
an earnings per share performance condition is satisfied over a
three year vesting period. The following calibration applies:

Three year Earnings per Share Growth Vesting Percentage

Less than RPI + 3% per annum
RPI + 3% per annum
Between RPI + 3% per annum
and RPI + 10% per annum

RPI + 10% per annum

0%
30%

30% to 100% pro rata
100%

In the use of EPS as a performance measure in share incentive
schemes, the Committee has recognised the potential impact
of changes in accounting standards. It has therefore adopted
an approach whereby the basis used for measuring EPS growth
for each performance period is static even if the method of
measurement of EPS in the company accounts changes over
the same period. This will ensure consistency in the measure-
ment of the performance of the business for the purposes of
the share schemes.

Share Matching Awards
Senior executives were able to invest up to 50% of post tax basic
salary to buy investment shares. Matching shares are awarded,
the number of which is calculated by reference to the pre-tax
value of the amount invested. Therefore, the number of Matching
shares shall not exceed two times the number of Investment
Shares multiplied by the fraction: 100

100-40

The vesting of Matching Share awards will depend on the
extent to which a three year average cash return on capital
employed (“CROCE”) target is met. This has been chosen
because the management and efficient utilisation of cash within
the Group is important in the creation of future shareholder
value. CROCE is defined as cash generated from operations (as
stated on the cash flow statement in the Company’s published
accounts) adjusted for tax (as per the tax note and income state-
ment) and maintenance capital expenditure (as per the cash flow
statement and free cash flow note) divided by the average capital
employed during the year (as per the return on equity and return
on capital notes). The Matching Award will vest by reference to
a weighted average of CROCE over a performance period of
three financial years of which the first is the financial year ending
31 December 2008.
For the 2008 award, the following calibration applies:
(cid:129) None of the Matching Award will vest unless the weighted

average of CROCE is at least 11.5% p.a.;

(cid:129) At the 11.5% target, 30% of the Matching Award will vest,

equivalent to a 0.6:1 match;

(cid:129) The whole of the Matching Award will vest if the weighted

average of CROCE is 12.5% p.a. or more;

(cid:129) If the weighted average of CROCE falls between these two
figures, a proportion of the Matching Award will vest, on a
straight line basis.

Share Options
During 2008 the Committee undertook a review of how incen-
tive provision was bearing up in relation to market conditions.

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D I R E C T O R S ’

R E M U N E R A T I O N R E P O R T

Although it was felt that the approach previously agreed, as
described in the 2007 report, remained appropriate for the long
term, in the short term it was recognised that existing awards
were unlikely to achieve their objectives. Therefore, following
consultation with major shareholders, the following changes
were made:
(cid:129) A one off option grant was made to the most senior execu-
tives (but excluding the executive Directors) of a fixed
number of share options; in the long term, it remains the
policy that the most senior executives, including the execu-
tive directors, will not receive grants of options.

(cid:129) A move to a six monthly grant policy for other executives, at

pro rata reduced numbers of options;

(cid:129) The use in 2008 of a three year CROCE performance crite-
rion for options. CROCE was defined as for the Share
Matching Award;

(cid:129) For the options to be exercisable, average CROCE over the
three year performance period must be in excess of 9% per
year. Between 9% and 10% the number of exercisable
options is calculated on a straight line basis between 0%
and 100%.

Options were not granted at a discount to the market value.
Performance criteria for earlier share option grants are
summarised on page 50.

There is no re-testing of the performance condition if not

met after three years.

(B) AWARDS VESTED IN 2008
Share Options
For the most senior executives, for the grants made in 2005,
EPS needed to exceed inflation by at least 9% over a 3 year
period to allow 25% of their options to be exercised, and for all
options to be exercisable, EPS growth needed to exceed infla-
tion by at least 21% over that period. Between 9% and 21%, the
number of exercisable options was calculated on a straight line
basis. EPS exceeded inflation by 9.22% and consequently
26.38% of options were exercisable.

There were 15 occasions during the year on which the
Committee exercised its discretion for early leavers, to extend
the exercise period to allow testing of performance conditions
over the full 3 years. None of these early leavers were executive
directors.

Share Matching Awards
For the awards made in 2005, EPS needed to exceed inflation
by at least 12% over a three year period to allow any vesting of
the Matching Awards. EPS exceeded inflation by 9.22% and
consequently the Matching Awards lapsed.

There were no occasions during the year on which the
Committee exercised its discretion to transfer shares to early
leavers.

(C) AWARDS MADE IN 2009
At the date of this report, no awards have been made in 2009
under any of the share incentive schemes.

Share Dilution
At 31 December 2008, shares under grant for executive share
schemes over a 10 year period represented 3.62% of issued

share capital and shares under grant for all employee share
schemes over the previous 10 years represented 8.86%. There
were 5,395,538 (4.4% of issued share capital) unallocated
shares and 289,142 allocated shares (0.2%) held in the
employee trust.

Shareholding Guidelines
In March 2005, the Company issued shareholding guidelines to
its most senior executives encouraging them to build up a share-
holding in the Company over a five-year period. The guidelines
were reviewed in December 2006 and again in early 2009. The
target shareholding is 100% of salary for the executive directors
and 50% of salary for the other executives. Share options, which
have vested, but not been exercised, count towards these
targets. While these guidelines are not mandatory, the
Committee has reserved the right to take into account an indi-
vidual’s position relative to the target, when making future
awards under the Company’s share incentive arrangements. At
31 December 2008, each executive director had met the target
shareholding level based on the average share holding during
2008 and the average price over the calendar years 2005 to
2008. The five year period over which the target level of share-
holding is to be built up by the three executive directors expires
in March 2010.

Service Contracts
The Company’s policy for executive directors is to have contracts
which are not for a fixed period, and which are terminable on
twelve months notice from the Company, and six months from
the director. It is not the policy to specify what compensation
would be payable on termination by the Company. If such
compensation was due, it would be calculated by reference to
the unexpired part of the notice period, and the director’s salary
and other benefits, including pension rights, taking due account
of the duty to mitigate loss. Contracts do not specify any partic-
ular level of compensation in the event of termination following
change of control of the Company.

Each of the executive directors has a service contract, the
date of which is shown below, which will be available for inspec-
tion at the Annual General Meeting.
John Carter
Geoff Cooper
Paul Hampden Smith
It is the Company’s policy to allow each executive director to
hold one non-executive directorship in another company (and to
retain the fee payable).

6 August 2001
1 February 2005
8 October 1996

Non-Executive Directors
The policy of the Board is to recruit non-executive directors of the
highest calibre, with a breadth of skills and experience appro-
priate for the Company’s business. Non-executive directors are
appointed for a period of three years, at the end of which the
appointment may be renewed by mutual agreement. It is the
Board’s policy that non-executive directors should serve for six
years (two three year terms) and that any term beyond this
should be subject to a rigorous review. This review would take
into account both the need for progressive refreshing of the
Board, and the particular requirements of the Company at the
time of the possible extension.

82987 TRAVIS PRE:Layout 1 31/3/09 16:34 Page 52

DIRECT

ORS’

REMUNER

A TION REPOR

Non-executive directors do not have a service contract, but
each has received a letter of appointment expiring on the
following dates:
Chris Bunker
John Coleman
Andrew Simon
Tim Stevenson
The letters of appointment will be available for inspection at the
Annual General Meeting.

January 2010
February 2011
February 2012
September 2010

The remuneration of the non-executive directors is deter-
mined by the Board (in the case of the Chairman, on the recom-
mendation of the Remuneration Committee). Each non-executive
director receives an annual fee. In addition Chris Bunker and
Andrew Simon receive an additional fee for, in the case of the
former, the role of Senior Independent Director and for chairing
the Audit Committee and, in the case of the latter, for chairing the
Remuneration and Health & Safety Committees. Fees were
reviewed at the end of 2008 and it was decided to make no
increases in 2009. Non-executive directors do not receive any
other benefits and are not eligible to join a company pension
scheme. No compensation is payable on termination of their
employment, which may be without notice from the Company.
They cannot participate in any of the Company’s share schemes.

Total Shareholder Return
As required by the Companies Act the graph below shows total
shareholder return for Travis Perkins’ shares over the last five
years, relative to the FTSE 250 Index. Total shareholder return is
defined as a combination of growth in the Company’s share price
and dividends paid to shareholders. The FTSE 250 Index has been
chosen as a comparable broad equity market index because the
Company has been a member of it for the five year period.

TO TAL S HAREH OL DER RE T UR N ( T S R)

250%

200%

150%

100%

50%

Dec 03

Dec 04

Dec 05

Dec 06

Dec 07

Dec 08

Travis Perkins TSR

FTSE 250 TSR

A U D I T E D I N F O R M A T I O N

Travis Perkins’ Share Price Information

2008

340p
1,191p
721p
223p

Mid-market price at the year end
Highest mid-market price during the year
Average mid-market price during the year
Lowest mid-market price during the year

The Directors’ holdings of ordinary 10p shares of Travis Perkins plc at 31 December 2008 and 2007 were as follows:

Directors’ Shareholdings

Director

Chris Bunker
John Carter
John Coleman
Geoff Cooper
Paul Hampden Smith
Andrew Simon
Tim Stevenson

Interest

Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner

2008
No.

7,000
42,618
1,450
57,996
87,878
2,000
12,400

2007

1,204p
2,121p
1,783p
1,180p

2007
No.

7,000
34,915
1,450
43,531
45,720
2,000
12,400

Details of directors’ share options and awards are given on pages 54 to 57. Between 31 December 2008 and the date of this report,
the only change to the above Directors’ shareholdings is to Paul Hampden Smith’s whose shareholding had increased to 87,949
because of his monthly contribution to the Share Incentive Plan.

82987 TRAVIS PRE:Layout 1 31/3/09 16:34 Page 53

D I R E C T O R S ’

R E M U N E R A T I O N R E P O R T

Amount of Directors’ Emoluments
Part of each executive director’s remuneration may consist of benefits in kind not payable in cash, such as the provision of a company
car, a fuel card, and private healthcare insurance. No director receives an expense allowance, which is chargeable to tax. Details of direc-
tors’ remuneration are set out in the table below.

Basic salary

Annual bonus

Benefits in kind

2008
£’000

2007
£’000

2008
£’000

2007
£’000

2008
£’000

2007
£’000

Executive
Geoff Cooper1
Paul Hampden Smith2
John Carter
Non-executive
Tim Stevenson
Chris Bunker
Stephen Carter3
John Coleman
Michael Dearden4
Andrew Simon

748
376
362

180
46
1
38
42
46

714
362
350

180
46
38
38
46
46

1,839

1,820

-
-
-

-
-
-
-
-
-

542
310
310

-
-
-
-
-
-

29
1
30

-
-
-
-
-
-

100
3
29

-
-
-
-
-
-

Total
remuneration
2008
£’000

2007
£’000

777
377
392

180
46
1
38
42
46

1,356
675
689

180
46
38
38
46
46

1,162

132

1,899

3,114

1 Highest paid director - Basic salary includes a salary supplement of £230,000 (2007: £214,091) which replaced continuing
pension accrual from April 2006. This does not count when calculating annual bonus and granting share incentives. Geoff Cooper
also received, and retained, in 2008, £82,000 (2007: £77,500) in respect of his non-executive chairmanship of Dunelm Group Plc.
2 Basic salary includes a £12,000 “cash for car” allowance and a £1,500 fuel allowance, which do not count when calculating
annual bonus and granting share incentives. Paul Hampden Smith also received, and retained, in 2008, £37,500 (2007: £15,625)
in respect of his non-executive directorship of The Polestar Company Ltd.

3 Resigned 8 January 2008.
4 Retired 11 November 2008.

Pension entitlements of the executive directors during the year were as follows:

Directors’ Pension Entitlements

Age at 31 December 2008

Accrued pension at 31 December 2007
Accrued pension at 31 December 2008

Increase in accrued pension in 2008

Real increase in accrued pension in 2008

Transfer value of the real increase in accrued pension

net of member’s contributions
Value of increase in accrued benefit

Member’s contributions towards pension
Increase in transfer value net of member’s contributions
Transfer value of benefits accrued at 31 December 2007

Transfer value of benefits accrued at 31 December 2008

John Carter
47

Paul Hampden Smith
48

Geoff Cooper
54

£’000
243
253

(2)

(68)
(40)

28
533
3,025

3,586

£’000
51
61

73
101

28
182
620

830

£’000
4
5

(1)
(1)

-
11
78

Notes:
Geoff Cooper ceased future accrual on 5 April 2006, but benefits up to that date retain a link to current salary (subject to the Earnings
Cap, which applied up to April 2006).
Salary Sacrifice was introduced for member contributions in April 2006. The figures above include the sacrificed amounts.

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R E M U N E R A T I O N R E P O R T

Share Matching Scheme
The following shares (1 April 2005 award price 1,675p, 2 April 2007 award price 2,012p, 1 April 2008 purchase price 1,066p) remain
outstanding at 31 December 2008:

Deferred Shares
No.

Deferred Matching Shares
No.

Investment Matching Shares
No.

At 1 January 2008
Granted during the year
Lapsed during the year
Vested during the year

At 31 December 2008

37,417
-
(579)
(12,668)

24,170

Participation by directors in the Share Matching Scheme is as follows:

37,417
-
(12,576)
-

24,841

92,773
278,176
(36,632)
-

334,317

Geoff Cooper
2008
No.

2007
No.

6,017
6,017
60,852

6,017
6,017
12,636

Paul Hampden Smith
2008
No.

2007
No.

4,109
4,109
44,069

7,269
7,269
16,065

John Carter
2008
No.

2007
No.

4,109
4,109
23,950

7,154
7,154
13,961

Deferred shares
Deferred matching shares
Investment matching shares

At 31 December

72,886

24,670

52,287

30,603

32,168

28,269

The performance criteria for the vesting of the share matching shares granted in 2008 are disclosed on page 50. For share matching
shares granted in 2007, EPS needs to exceed inflation by at least 4% a year over a three year period to allow any vesting of the
Matching Awards. Vesting is at 33 1/3% if EPS exceeds inflation by 4%, a year pro rata between 100% & 33 1/3% if EPS exceeds
inflation by between 8% and 4%, and 100% if EPS exceeds inflation by 8%.

The following shares (5 March 2008 award price 1,079p) remain outstanding at 31 December 2008:

Performance Share Plan

At 1 January 2008
Granted during the year
Lapsed during the year

At 31 December 2008

Shares
No.

-
364,362
(9,175)

355,187

Participation by directors in the Performance Share Plan is as follows:

Geoff Cooper
2008
No.

2007
No.

Paul Hampden Smith
2008
No.

2007
No.

John Carter
2008
No.

2007
No.

At 31 December

57,553

33,572

The performance criteria for the vesting of the Performance Share Plan shares awarded in 2008 are disclosed on page 50.

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D I R E C T O R S ’

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The following shares (5 March 2008 award price 1,267p) remain outstanding at 31 December 2008:

Deferred Share Bonus Plan

At 1 January 2008
Granted during the year
Lapsed during the year
Vested during the year

At 31 December 2008

Shares
No.

-
53,222
(131)
(1,623)

51,468

Participation by directors in the Deferred Share Bonus Plan is as follows:

Geoff Cooper
2008
No.

2007
No.

Paul Hampden Smith
2008
No.

2007
No.

John Carter
2008
No.

2007
No.

At 31 December

10,692

6,104

Share Options
The following options over ordinary shares have been granted under the 1995 and the 2001 Executive Share Option Schemes and the
2002 Travis Perkins’ Sharesave Scheme and remained outstanding at 31 December 2008:

Outstanding
at 1 January
2008
No.

32,751
12,260
164,891
118,521
137,157
206,575
1,666
503,839
211,559
795,624
7,180
18,918
863,776
7,237
-
-

Granted
during
year
No.

-
-
-
-
-
-
-
-
-
-
-
-
-
-
623,682
914,688

EXECUTIVE SHARE OPTIONS

Lapsed
during
year
No.

Exercised
during
year
No.

Outstanding
31 December
2008
No.

Exercise
price

Exercise
period

-
-
(18,000)
-
-
(1,666)
-
(165,265)
(115,289)
(94,152)
-
-
(62,947)
-
(35,664)
-

(32,751)
-
(8,320)
-
-
-
-
-
-
-
-
-
-
-
-
-

-
12,260
138,571
118,521
137,157
204,909
1,666
338,574
96,270
701,472
7,180
18,918
800,829
7,237
588,018
914,688

571.5p
602.5p
756.0p
1,071.5p
1,067.5p
1,311.0p
1,447.0p
1,675.0p
1,435.0p
1,611.0p
1,777.0p
1,784.0p
1,970.0p
1,589.0p
1,078.0p
255.0p

Anytime until 7/9/10
Anytime until 3/7/11
Anytime until 9/4/12
Anytime until 10/4/13
Anytime until 15/3/14
Anytime until 29/10/14
Anytime until 31/3/15
Anytime until 29/9/15
From 19/4/09 until 18/4/16
From 14/9/09 until 13/9/16
From 23/11/09 until 22/11/16
From 22/3/10 until 21/3/17
From 4/10/10 until 3/10/17
From 7/3/11 until 6/3/18
From 19/11/11 until 18/11/18

3,081,954

1,538,370

(492,983)

(41,071)

4,086,270

The performance criteria for the exercise of executive share options granted in 2008 under the 2001 Executive Share Option Scheme
are set out on pages 50 and 51. For earlier grants, for the most senior executives, the number of options vesting at EPS growth of RPI
plus 9% and the EPS growth required to achieve 100% vesting are shown in the table on the next page.

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Options vesting at RPI + 9%

EPS growth for 100% vesting

50%
25%
25%

RPI + 15%
RPI + 21%
RPI + 15%

SHARESAVE OPTIONS

Lapsed
during
year
No.

Exercised
during
year
No.

Outstanding
31 December
2008
No.

Exercise
price

Exercise
period

(2,283)
(36,134)
(24,141)
(83,990)
(141,030)
(181,145)
(239,932)
(109,168)
(388,892)
(149,764)
(114,605)
(43,945)

(24,633)
-
(10,407)
-
(546)
(177)
(29)
-
(15)
-
-
-

-
91,541
-
42,019
222,315
51,447
85,967
44,765
97,455
41,733
2,278,227
1,417,449

847.5p
1,079.0p
1,156.0p
1,156.0p
1,159.0p
1,159.0p
1,254.0p
1,254.0p
1,414.0p
1,414.0p
562.0p
562.0p

Anytime until 31/5/09

From 1/12/09 until 31/5/10
Anytime until 31/5/09
From 1/12/10 until 31/5/11
From 1/12/09 until 31/5/10
From 1/12/11 until 31/5/12
From 1/12/10 until 31/5/11
From 1/12/12 until 31/5/13
From 1/12/11 until 31/5/12
From 1/12/13 until 31/5/14

Granted
during
year
No.

-
-
-
-
-
-
-
-
-
-
2,392,832
1,461,394

Year

2001 - 2004
2005
2006 - 2007

Outstanding
at 1 January
2008
No.

26,916
127,675
34,548
126,009
363,891
232,769
325,928
153,933
486,362
191,497
-
-

2,069,528

3,854,226

(1,515,029)

(35,807)

4,372,918

At 31 December 2008, in addition to the directors, (see next page) there were 260 employees (2007: 192) who had holdings of exec-
utive share options and 4,613 employees (2007: 5,040) who were participating in the Sharesave Scheme.
The Company also provides a Share Incentive Plan: the Travis Perkins Buy-As-You-Earn Plan (BAYE). All employees with at least three
months service may purchase partnership shares. As at 31 December 2008 there were 735 participants (2007: 494) who had
purchased shares.

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D I R E C T O R S ’

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DIRECTORS’ SHARE OPTIONS included within the previous tables

Outstanding
at 1 January
2008
No.

Granted
during
year
No.

Exercised
during
year
No.

Outstanding Exercise
price

Lapsed
during 31 December
2008
No.

year
No.

Exercise
period

John
Carter

Geoff
Cooper

Paul
Hampden
Smith

29,398
32,786
17,387
31,343
34,217
745
31,091
-
53,731
57,262
1,389
50,761
-
30,000
39,351
31,031
40,983
18,750
31,343
819
34,217
31,091
1,158
-

-
-
-
-
-
-
-
2,895
-
-
-
-
2,895
-
-
-
-
-
-
-
-
-
-
2,895

-
-
-
-
-
-
-
-
-
-
-
-
-
(30,000)
-
-
-
-
-
-
-
-
-
-

-
-
-
(23,076)
-
(745)
-
-
(39,558)
-
(1,389)
-
-
-
-
-
-
-
(23,075)
(819)
-
-
(1,158)
-

29,398
32,786
17,387
8,267
34,217
-
31,091
2,895
14,173
57,262
-
50,761
2,895
-
39,351
31,031
40,983
18,750
8,268
-
34,217
31,091
-
2,895

1,071.5p
1,067.5p
1,311.0p
1,675.0p
1,611.0p
1,254.0p
1,970.0p
562.0p
1,675.0p
1,611.0p
1,159.0p
1,970.0p
562.0p
571.5p
756.0p
1,071.5p
1,067.5p
1,311.0p
1,675.0p
1,156.0p
1,611.0p
1,970.0p
1,414.0p
562.0p

Anytime until 9/4/12
Anytime until 10/4/13
Anytime until 15/3/14
Anytime until 31/3/15
From 19/4/09 until 18/4/16

From 22/3/10 until 21/3/17
From 01/12/13 until 31/5/14*
Anytime until 31/3/15
From 19/4/09 until 18/4/16

From 22/3/10 until 21/3/17
From 01/12/13 until 31/5/14*

Anytime until 3/7/11
Anytime until 9/4/12
Anytime until 10/4/13
Anytime until 15/3/14
Anytime until 31/3/15

From 19/4/09 until 18/4/16
From 22/3/10 until 21/3/17

From 01/12/13 until 31/5/14*

598,853

8,685

(30,000)

(89,820)

487,718

* Sharesave options
30,000 of directors share options were exercised on 17 April 2008.

S H A R E H O L D E R S ’ A P P R O V A L

The shareholders will be invited to approve the remuneration
policy set out in this report at the Annual General Meeting, at
which the Chairman of the Committee will be available to
answer any questions.
Approved by the Board and signed on its behalf by:

Andrew Simon
Chairman, Remuneration Committee
18 February 2009

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N O M I N A T I O N S C O M M I T T E E R E P O R T

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

The principal role of the Nominations Committee is to

identify and nominate for Board approval, candidates to
fill board vacancies as and when they arise. It is required
to prepare a description of the role, and capabilities required,
for any appointment, and to maintain contact with major share-
holders about appointments to the Board. It also reviews the
induction process for newly appointed directors, reviews annu-
ally the time required of non-executive directors, keeps the
structure, size and composition of the Board under review, and
considers succession planning for both executive and non-exec-
utive directors and for other senior executive posts. The terms of
reference of the Committee are available on the Company’s
website or from the Company Secretary.

During the year, the Committee members were Tim Stevenson
(Chairman), together with Chris Bunker, Michael Dearden (until
his retirement in November) and John Coleman (from November)
each of whom are independent non-executive directors.

The Committee did not deal with the appointment of any new
directors or senior executives during the year. However it met in
January 2008 to carry out a general view of succession planning
for executive directors and other senior executive posts.

The Chairman of the Nominations Committee will be avail-
able at the Annual General Meeting to answer any questions
about the work of the Committee.

Tim Stevenson
Chairman, Nominations Committee
18 February 2009

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D I R E C T O R S ’ R E P O R T

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

The Directors present their annual report and audited accounts
for the year ended 31 December 2008.

P R I N C I P A L A C T I V I T I E S

Travis Perkins is one of the largest builders merchants and
home improvement retailers in the UK. The principal activities
of the Group are the sale of timber, building materials, and
plumbing and heating products, and the hiring of tools, to the
building trade, industry generally and, (since the acquisition
in 2005 of Wickes), to the general public, within the United
Kingdom. The Directors are not aware, at the date of this
report, of any likely major changes in the Group’s activities in
the next year.

E N H A N C E D B U S I N E S S R E V I E W

A review of the Group’s position, developments and future
prospects is contained in the Chairman’s statement on pages 8
and 9, the Chief Executive’s review of the year on pages 10 to 21,
the Chief Operating Officer’s review of the year on pages 22 to 31
and the Finance Director’s review of the year on pages 32 to 38.
A review of the Group’s environmental performance is contained
in the Chief Executive’s review of the year on pages 17 to 20.

R E S U L T S A N D D I V I D E N D S

The Group results and dividend for the year ended 31 December
2008 are set out on page 66. The Board is not recommending
the payment of a final dividend for 2008.

B A L A N C E S H E E T A N D P O S T
B A L A N C E S H E E T E V E N T S

The balance sheet on pages 68 and 69 shows the Group’s finan-
cial position. At the year end, in both net assets and cash terms,
it is consistent with the prior year. No significant events have
occurred since the balance sheet date.

P R I N C I P A L R I S K S A N D
U N C E R T A I N T I E S

A review of the Group’s principal risks and uncertainties are
contained in the Finance Director’s review of the year on pages
34 to 38.

D I R E C T O R S A N D
T H E I R I N T E R E S T S

The names of the Directors at 31 December 2008, together with
their biographical details, are set out on pages 40 and 41. All of

those Directors held office throughout the year. Stephen Carter
and Michael Dearden served as non-executive directors during
the year until 8 January and 11 November 2008 respectively. It
is intended to appoint a further non-executive director in the near
future. In accordance with the Company’s Articles of Associa-
tion, John Carter, Andrew Simon and Tim Stevenson will retire
by rotation and, being eligible, will offer themselves for re-elec-
tion at the forthcoming Annual General Meeting. John Carter has
a rolling 12 month notice period in his contract. As non-execu-
tive directors, Tim Stevenson and Andrew Simon do not have
service contracts. In the light of the evaluation of their perform-
ances as a result of the process described on page 43, Tim
Stevenson, Chairman, confirms on behalf of the Board that
Andrew Simon continues to be effective in, and committed to, his
role as a non-executive director, including his chairmanship of the
Remuneration and Health & Safety Committees, and Chris
Bunker, the senior independent director, confirms on behalf of
the board that Tim Stevenson continues to be effective in, and
committed to, his role as Chairman.

Directors and officers of the Company are entitled to be
indemnified out of the assets of the Company in respect of any
liability incurred in relation to the affairs of the Company, or any
associate company, to the extent the law allows. In this regard,
the Company is required to disclose that under article 146 of the
Company’s Articles of Association, the Directors have the benefit
of an indemnity, to the extent permitted by the Companies Act
1985 and Companies Act 2006 against liabilities incurred by
them in the execution of their duties and exercise of their
powers. This indemnity is currently in force. In addition, if
proceedings against Directors are instituted subsequent to any
person acquiring control of the Company, the Company has
agreed with each of the Directors that pursuant to article 146(D)
of the Company’s Articles of Association, the Company shall
provide a Director with funds (subject to certain restrictions) to
meet expenditure incurred by that director in defending any
criminal or civil proceedings.

A copy of the Company’s Articles of Association (which
contains this indemnity) is available for inspection at the
Company’s registered office during normal business hours and
will be available for inspection at the Company’s forthcoming
Annual General Meeting.

None of the Directors had an interest in any contract to
which the Company or any of its subsidiaries was a party during
the year.

The Company has undertaken to comply with the best prac-
tice on approval of directors’ conflicts of interests in accordance
with the Company’s Articles of Association. Under the Companies
Act 2006, a director must avoid a situation where he has, or can
have, a direct or indirect interest that conflicts, or possibly may
conflict, with the Company’s interests.

The disclosable interests of Directors at 31 December 2008,

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D I R E C T O R S ’

R E P O R T

including holdings, if any, of wives and of children aged under
18, were as detailed in the Directors’ Remuneration Report on
pages 52, 54 to 55 and 57.

S U B S T A N T I A L
S H A R E H O L D I N G S

As at 18 February 2009, the Company had received notifica-
tion under the Disclosure and Transparency Rules that the hold-
ings and voting rights exceeding the 3% notification threshold
were as follows:

AVIVA Investors Global Solutions
C.M.Travis*
Standard Life Investment Management
E.R.A.Travis*
Investec Asset Management
Sprucegrove Investment Management
Legal & General
Dimensional Fund Advisors Inc

Number
8,467,391
7,293,138
6,736,596
6,719,959
6,091,184
5,377,933
4,893,942
4,060,811

%
6.90
5.94
5.49
5.48
4.96
4.38
3.99
3.31

*C. M. Travis and E. R. A. Travis have each disclosed their voting
rights over the same 3,835,446 ordinary shares in aggregate,
by virtue of each of them being a trustee of the same Travis
family trusts which held ordinary shares.

C L O S E C O M P A N Y S T A T U S

The close company provisions of the Income and Corporation
Taxes Act 1988 do not apply to the Company.

E M P L O Y E E S A N D
C H A R I T A B L E D O N A T I O N S

Statements on these matters are contained in the Chief Oper-
ating Officer’s review of the year on pages 22 to 25 and in the
Chief Executive’s review of the year on page 20, respectively.
Details of the number of employees and related costs can be

found in note 7 to the financial statements.

The Company is committed to equality of opportunity and
recognises the benefit of diversity within its workforce. It has an
equal opportunities policy aimed at ensuring that employment
decisions are based on ability and potential regardless of gender,
race, colour, ethnic origin or sexual orientation, age or disability.
In particular, applications for employment by disabled persons
are always fully considered, bearing in mind the aptitudes of the
person concerned. In the event of a member of staff becoming
disabled, every effort is made to ensure that their employment
with the Group continues and that appropriate training is
arranged. It is the policy of the Company that the training, career
development and promotion of disabled persons should, as far
as possible, be identical to that of other employees.

The Group’s policies and practices have been established to
keep employees informed on matters relevant to them as
employees through regular meetings and newsletters. Employee
representatives are consulted regularly on a wide range of
matters affecting their interests. All employees with more than
three months’ service are eligible to participate in the Company’s
Sharesave and Buy as You Earn plans. Details are provided in the

Director’s Remuneration Report.

P O L I T I C A L D O N A T I O N S

The Group did not give any money for political purposes in the
UK nor did it make any donations to EU political organisations or
incur any EU political expenditure during the year.

S U P P L I E R P A Y M E N T P O L I C Y

The Group’s policy is to pay all of its suppliers in accordance with
established terms. Group trade creditors at 31 December 2008
represented 47 days (31 December 2007: 48 days) of average
purchases of goods and services. The Company trade creditors at
31 December 2008 represented 30 days (2007: 30 days).

A U D I T O R S

A resolution to re-appoint Deloitte LLP as the Company’s audi-
tors and to authorise the Directors to fix the auditors’ remuner-
ation will be proposed at the Annual General Meeting.

S T A T E M E N T O N D I S C L O S U R E
O F I N F O R M A T I O N T O
A U D I T O R S

Each of the persons who is a director at the date of approval of
this report confirms that:
(cid:129) So far as the Director is aware, there is no relevant audit
information of which the Company’s auditors’ are unaware;
and

(cid:129) The Director has taken all reasonable steps that he ought to
have taken as a director in order to make himself aware of
any relevant audit information and to establish that the
Company’s auditors’ are aware of that information.

This confirmation is given and should be interpreted in accor-
dance with the provisions of s234ZA of the Companies Act 1985.

S H A R E C A P I T A L A N D
C H A N G E O F C O N T R O L

As at 31 December 2008 the Company had an authorised share
capital of 135,000,000 ordinary shares of 10 pence each, with
an aggregate nominal value of £13,500,000 and an allotted
and fully paid share capital of 122,719,114 ordinary shares of
10 pence each, with an aggregate nominal value of
£12,271,911 (including shares owned by the employee share
ownership trust). The ordinary shares are listed on the London
Stock Exchange. All the shares rank pari passu. The rights and
obligations attaching to the Company’s shares are set out in the
Company’s Articles of Association (a copy of which will be avail-
able for inspection from the date of this notice up to the time of
the Annual General Meeting at the registered office of the
Company during usual business hours and at the place of the
Annual General Meeting for at least 15 minutes before and
during the meeting). Fully paid shares in the Company are freely
transferable. There are no persons that hold securities carrying
special rights with regard to the control of the Company. Details
of the structure of the Company’s share capital and changes in

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R E P O R T

the share capital during the year are also included in note 21 to
the financial statements.

The Travis Perkins Employee Share Ownership Trust owns
5,684,680 shares in the Company (4.63%) for use in connec-
tion with the Company’s share schemes. Any voting or other
similar decisions relating to those shares would be taken by
the trustees, who may take account of any recommendation of
the Company.

There are no restrictions on voting rights attaching to the
Company’s ordinary shares. The Company is not aware of any
agreements between holders of securities that may result in
restrictions on the transfer of securities or on voting rights.

The rules governing the appointment and replacement of
board members and changes to the Articles of Association
accord with usual English company law provisions. The powers
of the Company’s Directors are set out in the Company’s Articles
of Association. In particular, the Board has the power to purchase
its own shares and is seeking renewal of that power at the forth-
coming Annual General Meeting within the limits set out in the
notice of that meeting.

There are a number of agreements to which the Company
is a party that may take effect, alter or terminate upon a
change of control following a takeover bid. None of these
agreements is considered to be significant in the context of
the Company as a whole.

There are no agreements providing for compensation for
Directors or employees on change of control. As set out in the
Directors Remuneration Report on page 51, service contracts
for executive directors do not specify any particular level of
compensation in the event of termination following change of
control of the Company. As noted above, the Company has
agreed with each of the Directors that it shall provide a Director
with funds (subject to certain restrictions) to meet expenditure
incurred in defending any criminal or civil proceedings if such
proceedings are instituted subsequent to any person acquiring
control of the Company.

A N N U A L G E N E R A L M E E T I N G
S P E C I A L B U S I N E S S

The Annual General Meeting of the Company will be held at
Northampton Rugby Football Club, Franklin’s Gardens, Weedon
Road, Northampton, NN5 5BG on Thursday 21 May 2009 at
11.45 a.m. A buffet lunch will be available. The following items
are to be proposed at the forthcoming Annual General Meeting
as items of special business, and the Board recommends that
shareholders vote in favour of all resolutions put before the
Annual General Meeting.

Resolution 7:
DIRECTORS’ REMUNERATION REPORT
In accordance with the Directors’ Remuneration Report Regula-
tions 2002, this resolution seeks shareholders’ approval of the
Directors’ Remuneration Report as set out on pages 49 to 57.

Resolution 8:
INCREASE IN AUTHORISED SHARE CAPITAL
This resolution proposes that the authorised share capital of
the Company be increased from £13.5 million to £22 million,

representing a percentage increase of approximately 63%.
This increase is being sought in order to give the Company
sufficient authorised share capital to take full advantage of the
ability to allot ordinary shares under the authorities proposed
in resolution 9.

Resolution 9:
AUTHORITY TO ALLOT SHARES
Paragraph (a) of this resolution would give the Directors the
authority to allot ordinary shares up to an aggregate nominal
amount equal to £4,090,637 (representing 40,906,371 ordi-
nary shares of 10 pence each). This amount represents approx-
imately one-third of the issued ordinary share capital of the
Company as at 18 February 2009, the latest practicable date
prior to publication of this Notice.

In line with recent guidance issued by the Association of
British Insurers (the “ABI”), paragraph (b) of this resolution would
give the Directors authority to allot ordinary shares in connection
with a rights issue in favour of ordinary shareholders up to an
aggregate nominal amount equal to £8,181,274 (representing
81,812,742 ordinary shares of 10p each), as reduced by the
nominal amount of any shares issued under paragraph (a) of
this resolution. This amount (before any reduction) represents
approximately two-thirds of the issued ordinary share capital of
the Company as at 18 February 2009, the latest practicable date
prior to publication of this Notice. If this authority is exercised, the
Directors intend to follow ABI guidance issued from time to time
(including as to the re-election of directors).

The authorities sought under paragraphs (a) and (b) of this
resolution will expire at the earlier of 30 June 2010 (the last date
by which the Company must hold an annual general meeting in
2010) and the conclusion of the annual general meeting of the
Company held in 2010.

The Directors have no present intention to exercise either of
the authorities sought under this resolution, except, under para-
graph (a), to satisfy options under the Company’s employee
share option schemes.

Resolution 10:
LIMITED AUTHORITY TO ALLOT SHARES FOR CASH
This resolution would give the Directors the authority to allot ordi-
nary shares (or sell any ordinary shares which the Company elects
to hold in treasury) for cash without first offering them to existing
shareholders in proportion to their existing shareholdings.

Except as provided in the next paragraph, this authority
would be limited to allotments or sales in connection with pre-
emptive offers and offers to holders of other equity securities if
required by the rights of those shares or as the board otherwise
considers necessary, or otherwise up to an aggregate nominal
amount of £613,596 (representing 6,135,956 ordinary shares).
This aggregate nominal amount represents approximately 5%
of the issued ordinary share capital of the Company as at 18
February 2009, the latest practicable date prior to publication of
this Notice. In respect of this aggregate nominal amount, the
Directors confirm their intention to follow the provisions of the
Pre-Emption Group’s Statement of Principles regarding cumula-
tive usage of authorities within a rolling 3-year period where the
Principles provide that usage in excess of 7.5% should not take
place without prior consultation with shareholders.

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D I R E C T O R S ’

R E P O R T

Allotments made under the authorisation in paragraph (b) of
resolution 10 would be limited to allotments by way of a rights
issue only (subject to the right of the board to impose neces-
sary or appropriate limitations to deal with, for example, frac-
tional entitlements and regulatory matters).

The authority will expire at the earlier of 30 June 2010 (the
last date by which the Company must hold an annual general
meeting in 2010) and the conclusion of the annual general
meeting of the Company held in 2010. Any issue of shares for
cash will, however, still be subject to the requirements of the UK
Listing Authority.

Resolution 11:
CHANGE TO NOTICE PERIOD OF GENERAL MEETINGS
The Shareholder Rights Directive is intended to be implemented
in the United Kingdom in August this year. One of the require-
ments of the Directive is that all general meetings must be held
on 21 days’ notice unless shareholders have agreed to a shorter
period. We are currently able to call general meetings (other than
annual general meetings) on 14 days’ notice. We are proposing
this resolution so that we can continue to do so after the Direc-
tive is implemented.

Resolution 12:
AUTHORITY TO PURCHASE OWN SHARES
The authority for the Company to purchase its own shares of 10
pence each granted at last year’s Annual General Meeting will
expire on the date of the forthcoming Annual General Meeting.
The Directors wish to renew this authority and a special resolu-
tion, which is set out in full in the Notice of Annual General
Meeting on page 113, will be proposed as special business at
the forthcoming Annual General Meeting to give the Company
the authority to purchase its own ordinary shares in the market
as permitted by the Companies Act 1985. The authority limits the
number of shares that could be purchased to a maximum of
12,271,911 (representing 10% of the issued ordinary share
capital of the Company as at 18 February 2009) and sets

minimum and maximum prices. This authority will expire no later
than 30 June 2010.

The Directors consider that it is in the best interests of the
Company to have available this authorisation, in case of circum-
stances when it would be appropriate to use it. They would only
use it after consideration of the effect on earnings per share and
the longer term benefit for the Company and shareholders
generally. The fact that such authorisation is being sought should
not be taken to imply that shares would be purchased at any
particular price or indeed at all. Any ordinary shares purchased
pursuant to this authority may either be held as treasury shares
or cancelled by the Company, depending on which course of
action is considered by the Directors to be in the best interests
of shareholders at the time.

As at 18 February 2009, there were options over 9,249,171
ordinary shares in the capital of the Company, (including 24,170,
Deferred Shares, 24,841 Deferred Matching Shares, 334,317
Investment Matching Shares, 51,468 Deferred Bonus Share
Plan shares and 355,187 Performance Share Plan shares -
these are described in the Remuneration Report on pages 54 to
57), which represent 7.54% of the Company’s issued ordinary
share capital (excluding any treasury shares). If the authority to
purchase the Company’s ordinary shares were exercised in full,
these options would represent 8.37% of the Company’s issued
ordinary share capital (excluding any treasury shares). As at 18
February 2009, the Company did not hold any treasury shares
in the Company and no warrants over ordinary shares in the
capital of the Company existed.

By order of the Board
Andrew Pike
Company Secretary
18 February 2009

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S T A T E M E N T O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

The Directors are responsible for preparing the Annual

Report, Directors’ Remuneration Report and the finan-
cial statements in accordance with applicable law and

regulations.

Company law requires the Directors to prepare financial
statements for each financial year. The Directors are required
by the IAS Regulation to prepare the group financial statements
under International Financial Reporting Standards (“IFRS”) as
adopted by the European Union and have also elected to
prepare the Parent Company financial statements in accor-
dance with IFRS as adopted by the European Union. The finan-
cial statements are also required by law to be properly prepared
in accordance with the Companies Act 1985 and Article 4 of
the IAS Regulations.

International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Company’s
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transac-
tions, other events and conditions in accordance with the defi-
nitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards
Board’s “Framework for the preparation and presentation of
Financial Statements”. In virtually all circumstances, a fair pres-
entation will be achieved by compliance with all applicable

International Financial Reporting Standards. Directors are also
required to:
(cid:129) Properly select and apply accounting policies;
(cid:129) Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; and

(cid:129) Provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions in the entity’s financial position and
financial performance.

The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company, for safeguarding the assets,
for taking reasonable steps for the prevention and detection of
fraud and other irregularities and for the preparation of a direc-
tors’ report and directors’ remuneration report and enhanced
business review that comply with the requirements of the
Companies Act 1985.

The Directors are responsible for the maintenance and
integrity of the Company website. Legislation in the United
Kingdom governing the preparation and dissemination of finan-
cial statements may differ from legislation in other jurisdictions.

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I N D E P E N D E N T A U D I T O R S ’ R E P O R T T O

T H E M E M B E R S O F T R A V I S P E R K I N S P L C

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

We have audited the Group and Parent Company

financial statements (the “financial statements”) of
Travis Perkins plc for the year ended 31 December
2008 which comprise the Group and Parent Company Income
Statements, the Group and Parent Company Balance Sheets,
the Group and Parent Company Cash Flow Statements, the
Group and Parent Company Statement of Recognised Income
and Expense and the related notes 1 to 37. These financial
statements have been prepared under the accounting policies
set out therein. We have also audited the information in the
Directors’ Remuneration Report that is described as having been
audited.

This report is made solely to the Company’s members, as a
body, in accordance with section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditors’ 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 and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.

R E S P E C T I V E
R E S P O N S I B I L I T I E S O F
D I R E C T O R S A N D A U D I T O R S

The Directors’ responsibilities for preparing the Annual Report,
the Directors’ Remuneration Report and the financial statements
in accordance with applicable law and International Financial
Reporting Standards (“IFRSs”) as adopted by the European Union
are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the financial statements and the
part of the Directors’ Remuneration Report to be audited in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial
statements give a true and fair view and whether the financial
statements and the part of the Directors’ Remuneration Report
to be audited have been properly prepared in accordance with
the Companies Act 1985 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. We also report to you
whether in our opinion the information given in the Directors’
Report is consistent with the financial statements. The informa-
tion given in the Directors Report includes that specific informa-
tion presented in the Chairman’s statement, the Chief Executive’s
review of the year and the Finance Director’s review of the year
that is cross referred from the Business Review section of the
Directors Report.

In addition we report to you if, in our opinion, the Company
has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or

if information specified by law regarding directors’ remunera-
tion and other transactions is not disclosed.

We review whether the Corporate Governance Statement
reflects the Company’s compliance with the nine provisions of
the 2006 Combined Code specified for our review by the Listing
Rules of the Financial Services Authority, and we report if it does
not. We are not required to consider whether the board’s state-
ments on internal control cover all risks and controls, or form an
opinion on the effectiveness of the Group’s corporate gover-
nance procedures or its risk and control procedures.

We read the other information contained in the Annual
Report as described in the contents section and consider
whether it is consistent with the audited financial statements.
We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with
the financial statements. Our responsibilities do not extend to
any further information outside the Annual Report.

B A S I S O F A U D I T O P I N I O N

We conducted our audit in accordance with International Stan-
dards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial state-
ments and the part of the Directors’ Remuneration Report to be
audited. It also includes an assessment of the significant esti-
mates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies
are appropriate to the Group’s and Company’s circumstances,
consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reason-
able assurance that the financial statements and the part of the
Directors’ Remuneration Report to be audited are free from
material misstatement, whether caused by fraud or other irreg-
ularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the finan-
cial statements and the part of the Directors’ Remuneration
Report to be audited.

O P I N I O N

In our opinion:
(cid:129) The financial statements give a true and fair view, in accor-
dance with IFRSs as adopted by the European Union, of the
state of the Group’s and the Parent Company’s affairs as at
31 December 2008 and of the Group’s and the Parent
Company’s results for the year then ended;

(cid:129) The financial statements and the part of the Directors’
Remuneration Report to be audited have been properly

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I N D E P E N D E N T A U D I T O R S ’

R E P O R T T O T H E M E M B E R S O F T R A V I S P E R K I N S P L C

prepared in accordance with the Companies Act 1985 and,
as regards the group financial statements, Article 4 of the
IAS Regulation; and

(cid:129) The information given in the Directors’ Report is consistent

with the financial statements.

As explained in Note 1 to the group financial statements, the
Group in addition to complying with its legal obligations to
comply with IFRSs as adopted by the European Union, has also
complied with the IFRSs as issued by the International
Accounting Standards Board.
In our opinion, the group financial statements give a true and
fair view, in accordance with IFRSs, of the state of the Group’s
affairs as at 31 December 2008 and of its profit for the year
then ended.

Deloitte LLP
Chartered Accountants and Registered Auditors
Birmingham, United Kingdom
18 February 2009

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I N C O M E S T A T E M E N T S

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

T H E G R O U P

2008

£m

2008

£m

Pre-exceptional

Exceptional

Notes

items

(Note 5)

2008

£m

Total

2007

£m

2007

£m

Pre-exceptional

Exceptional

items

(Note 11)

3,178.6

3,186.7

4.2

2007

£m

Total

3,186.7

319.9

3.7

(62.2)

261.4

(76.1)

185.3

153.3p

151.9p

44.9p

T H E C O M P A N Y
––––––––––––––––––––––

2008

£m

55.0

36.0

2.8

(71.8)

(33.0)

20.4

(12.6)

2007

£m

125.3

115.5

0.4

(58.0)

57.9

18.1

76.0

319.9

3.7

(62.2)

261.4

(80.3)

181.1

Notes

Revenue

Operating profit

Finance income

Finance costs

Profit/(loss) before tax

Tax

271.5

7.7

(76.7)

202.5

(58.6)

(56.2)

14.2

215.3

7.7

(76.7)

146.3

(44.4)

Profit/(loss) for the year

143.9

(42.0)

101.9

Earnings per

ordinary share

Basic

Diluted

Total dividend declared
per ordinary share

87.1p

86.1p

14.5p

Revenue

Operating profit

Finance income

Finance costs

(Loss)/profit before tax

Tax

(Loss)/profit for the year

All results relate to continuing operations.

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S T A T E M E N T S O F R E C O G N I S E D
I N C O M E A N D E X P E N S E

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

Actuarial (losses) and gains on defined benefit pension scheme

(Losses)/gains on cash flow hedges

Tax on items taken to equity

Net (expense)/income recognised directly in equity

Transferred to income statement on cash flow hedges

Tax on items transferred from equity

Profit/(loss) for the year

Total recognised income and expense for the year

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008

£m

(70.3)

(17.1)

19.6

(67.8)

(3.6)

101.9

30.5

2007

£m

51.9

0.4

(15.7)

36.6

(1.4)

0.4

185.3

220.9

2008

£m

(17.1)

(3.6)

(12.6)

(33.3)

2007

£m

0.4

(0.1)

0.3

(1.4)

76.0

74.9

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B A L A N C E S H E E T S

A S A T 3 1 D E C E M B E R 2 0 0 8

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

Notes

2008

£m

2007

£m

2008

£m

0.2

80.3

21.0

2007

£m

0.2

3.0

1,801.4

1,668.4

0.7

1.0

534.5

1,351.4

162.5

505.0

1,329.7

162.5

80.3

19.6

3.4

2.0

19.5

3.0

3.5

2.0

4.5

2,173.2

2,010.2

1,903.6

1,672.6

321.9

386.2

2.4

7.7

718.2

330.2

421.9

0.7

26.3

779.1

56.8

2.4

59.2

115.8

0.7

46.3

162.8

2,891.4

2,789.3

1,962.8

1,835.4

ASSETS

Non-current assets

Property, plant and equipment

Goodwill

Other intangible assets

Derivative financial instruments

Interest in associate

Investment property

Available-for-sale investments

Investment in subsidiaries

Deferred tax asset

Total non-current assets

Current assets

Inventories

Trade and other receivables

Derivative financial instruments

Cash and cash equivalents

Total current assets

Total assets

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B A L A N C E S H E E T S

C O N T I N U E D

A S A T 3 1 D E C E M B E R 2 0 0 8

EQUITY AND LIABILITIES

Capital and reserves

Issued capital

Share premium account

Other reserve

Hedging reserve

Own shares

Accumulated profits

Total equity

Non-current liabilities

Interest bearing loans and borrowings

Derivative financial instruments

Retirement benefit obligation

Long-term provisions

Amounts due to subsidiaries

Deferred tax liabilities

Total non-current liabilities

Current liabilities

Interest bearing loans and borrowings

Unsecured loan notes

Trade and other payables

Tax liabilities

Short-term provisions

Total current liabilities

Total liabilities

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

Notes

2008

£m

2007

£m

2008

£m

2007

£m

12.3

179.5

23.8

(17.8)

(83.7)

904.1

12.3

178.9

24.2

2.9

(83.9)

902.5

12.3

178.4

(17.8)

(83.7)

87.2

12.3

177.8

2.9

(83.9)

152.6

1,018.2

1,036.9

176.4

261.7

1,007.3

863.9

25.8

69.9

47.8

74.7

29.8

16.0

13.7

75.3

983.9

25.9

653.6

835.5

29.8

593.9

1,225.5

998.7

1,663.4

1,459.2

13.9

3.9

582.2

9.1

38.6

647.7

88.0

15.4

585.0

32.3

33.0

753.7

103.8

3.9

15.3

86.4

15.4

12.7

123.0

114.5

1,873.2

1,752.4

1,786.4

1,573.7

Total equity and liabilities

2,891.4

2,789.3

1,962.8

1,835.4

The financial statements were approved by the Board of Directors on 18 February 2009 and signed on its behalf by:

G. I. Cooper

P. N. Hampden Smith } Directors

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C A S H F L O W S T A T E M E N T S

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

Operating profit
Adjustments for:
Depreciation and impairment of property, plant and equipment
Other non cash movements
Losses of associate
Write down of value of investments
Gain on disposal of property, plant and equipment and investment

Operating cash flows before movements in working capital
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Cash payments on exceptional items
Cash payments to the pension scheme in excess of
the charge to profits

Cash generated from operations
Interest paid
Income taxes paid

Net cash from operating activities

Cash flows from investing activities
Interest received
Acquisition of shares in unit trust and subsidiaries
Proceeds on disposal of property, plant and equipment
and investment
Purchases of property, plant and equipment
Interest in associate
Acquisition of businesses net of cash acquired (note 29)

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

271.5

63.0
4.6
1.4
-
(6.0)

334.5
13.3
32.3
(22.5)
(8.5)

(11.5)

337.6
(63.0)
(66.0)

208.6

0.3
(0.3)

14.9
(97.3)
(20.7)
(22.5)

2007
£m

319.9

56.3
3.7
-
-
(7.6)

372.3
(30.1)
(39.8)
11.1
-

(9.6)

303.9
(72.7)
(74.5)

156.7

0.2
-

4.8
(123.7)
-
(47.2)

2008
£m

36.0

0.1
0.5
-
8.3
-

44.9
-
79.1
60.5
-

184.5
(61.0)
-

123.5

0.2
(141.3)

-
-
(20.7)
-

2007
£m

115.5

0.1
0.6
-
-
(0.5)

115.7
-
27.4
43.1
-

186.2
(69.4)
-

116.8

-
(41.7)

0.5
-
-
-

Net cash used in investing activities

(125.6)

(165.9)

(161.8)

(41.2)

Financing activities
Proceeds from the issue of share capital
Bank facility finance charges
Purchase of own shares
Payment of finance lease liabilities
Repayment of unsecured loan notes
(Decrease)/increase in bank loans
Dividends paid

Net cash from financing activities

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

0.6
(14.7)
-
(2.1)
(11.5)
(33.7)
(52.5)

(113.9)

(30.9)
26.3

(4.6)

6.8
-
(76.0)
(1.9)
(0.2)
98.6
(48.1)

(20.8)

(30.0)
56.3

26.3

0.6
(14.7)
-
-
(11.5)
(33.7)
(52.5)

(111.8)

(150.1)
46.3

(103.8)

6.8
-
(76.0)
-
(0.2)
75.2
(48.1)

(42.3)

33.3
13.0

46.3

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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 0 8

1. G EN E RA L I N F ORMAT ION

Overview
Travis Perkins plc is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office
is given on page 117. The nature of the Group’s operations and its principal activities are set out in the Chief Executive’s review of the year,
the Chief Operating Officer’s review of the year and the Finance Director’s review of the year on pages 10 to 38.

These financial statements are presented in pounds sterling, the currency of the primary economic environment in which the

Group operates.

Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the
International Accounting Standards Board. The financial statements have also been prepared in accordance with IFRS adopted by the
European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulations.

Basis of preparation
The financial statements have been prepared on the historic cost basis, except that derivative financial instruments are stated at their fair
value. The consolidated financial statements include the accounts of the Company and all entities controlled by the Company (its subsidiaries)
(together referred to as “the Group”) from the date control commences until the date that control ceases. Control is achieved where the
Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. As
such, the results of subsidiaries acquired during the year are included in the consolidated income statement from the effective date of
acquisition.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not yet been applied

in these financial statements were in issue, but not yet effective:

(cid:129) IFRS 2 (Amended)
(cid:129) IFRS 3 (Revised)
(cid:129) IAS 1
(cid:129) IAS 27 (Revised)
(cid:129) IFRS 8

- Share Based Payment
- Business Combinations
- Presentation of Financial Statements
- Consolidated and Separate Financial Statements
- Operating Segments

The Directors anticipate that adoption of these Standards and Interpretations in future periods will have no material impact on the financial
statements of the Group.

Management is 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 impact on the Group’s ability to meet management’s forecast and projections and hence its ability to meet its banking covenants.
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 despite the current uncertain economic outlook and challenging macro economic conditions. Whilst a covenant breach is not
currently envisaged, the Directors have considered mitigating actions available to them should a covenant breach become a possibility.

A detailed consideration of going concern, risks and uncertainties is provided on pages 34 to 38 in the Finance Director’s review of

the year.

After making enquiries, the Directors have formed a judgement at the time of approving the financial statements, that there is a reasonable
expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the financial statements.

2. SIGN IF ICANT AC COUNT I NG POL IC IES

The principal accounting policies adopted in preparing the financial statements are set out below.

Revenue recognition
Revenue is recognised when goods or services are received by the customer and the risks and rewards of ownership have passed to
them. 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.

Exceptional Items
Exceptional items are those items of income and expenditure that by reference to the Group are material in size and unusual in nature or
incidence, that in the judgement of the Directors, should be disclosed separately on the face of the financial statements (or in the notes in

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 72

the case of a segment) to ensure both that the reader has a proper understanding of the Group’s financial performance and that there is
comparability of financial performance between periods.

Items of income or expense that are considered by the Directors for designation as exceptional items include, but are not limited to, such
items as significant restructurings, onerous contracts, write-downs or impairments of current and non-current assets, the costs of integrating
acquired businesses, gains or losses on disposals of businesses, investments or individual assets, re-measurement gains or losses arising
from changes in the fair value of derivative financial instruments to the extent that hedge accounting is not achieved or is not effective.

Business combinations and goodwill
All business combinations are accounted for using the purchase method. The cost of an acquisition represents the cash value of the
consideration and/or the fair value of the shares issued on the date the offer became unconditional, plus expenses. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the
acquisition date. It is this fair value, which is incorporated into the consolidated accounts.

Goodwill arising on acquisition represents the excess of the cost of acquisition over the share of the aggregate fair value of identifiable
net assets (including intangible assets) of a business or a subsidiary at the date of acquisition. All material intangible fixed assets obtained
on acquisition have been recognised separately in the financial statements. Goodwill is initially recognised as an asset and allocated to
cash generating units, then at least annually, is reviewed for impairment. Any impairment is recognised immediately in the income
statement and is not subsequently reversed, as such, goodwill is stated in the balance sheet at cost less any provisions for impairment
in value.

Goodwill arising on acquisitions before the date of transition to IFRS (1 January 2004) has been retained at the previous UK GAAP
amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been
reinstated and is not included in determining any subsequent profit or loss on disposal.

Intangible assets
Intangible assets identified as part of the assets of an acquired business are capitalised separately from goodwill if the fair value can be
measured reliably on initial recognition. Intangible assets are amortised to the income statement on a straight-line basis over a maximum
of 20 years except where they are considered to have an indefinite useful life. In the latter instance they are reviewed annually for impairment.

Investment properties
Investment properties, which are held to earn rental income or for capital appreciation or for both, are stated at deemed cost less
depreciation. Properties are depreciated to their estimated residual value on a straight-line basis over their estimated useful lives, up to a
maximum of 50 years.

Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease.

Non-current assets held for sale
Non-current assets held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any impairment in value. Assets are
depreciated to their estimated residual value on a straight-line basis over their estimated useful lives as follows:

(cid:129) Buildings - 50 years or if lower, the estimated useful life of the building or the life of the lease
(cid:129) Plant and equipment - 4 to 10 years
(cid:129) Freehold land is not depreciated

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter,
the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds net
of expenses and the carrying amount of the asset in the balance sheet and is recognised in the income statement. Where appropriate,
the attributable revaluation reserve remaining in respect of properties revalued prior to the adoption of IFRS is transferred directly to
accumulated profits.

Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised
at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over
the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits
of ownership of the asset are classified as operating leases.

Operating lease rental payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
Reverse lease premia and other incentives receivable for entering into a lease agreement are recognised in the income statement over

the life of the lease.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 73

Impairment of tangible and intangible assets excluding goodwill
The carrying amounts of the Group’s tangible and intangible assets other than investment properties, deferred tax assets and inventories are
reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the asset’s recoverable
amount is estimated and compared to its carrying value. Where the asset does not generate cash flows that are independent from other assets,
the Group estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. Where the carrying value exceeds
the recoverable amount a provision for the impairment loss is established with a charge being made to the income statement.

For intangible assets that have an indefinite useful life the recoverable amount is estimated at each annual balance sheet date.
Impairment losses recognised in respect of CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU

and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

Inventories
Inventories, which consist of goods for resale, are stated at the lower of average weighted cost and net realisable value. Cost comprises
direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Net realisable value is the estimated selling price less the estimated costs of disposal.

Financial instruments
Financial assets and liabilities are recognised in the balance sheet when the Group becomes a party to the contractual provisions of
the instrument.

Trade receivables
Trade receivables are measured at amortised cost which is carrying amount less provision for irrecoverable amounts. Allowances for the
estimated irrecoverable amounts are made in the income statement when the receivable is considered to be uncollectible.

Impairment of financial assets
Financial assets are treated as impaired when in the opinion of the Directors, the likelihood of full recovery is diminished either by events
or change of circumstance.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.

Bank and other borrowings
Interest bearing bank loans and overdrafts, loan notes and other loans are recognised in the balance sheet at amortised cost. Finance
charges associated with arranging a bank facility are recognised in the income statement over the life of the facility. All other borrowing
costs are recognised in the income statement in the period in which they are incurred.

Trade payables
Trade payables are measured at amortised cost.

Foreign currencies
Transactions denominated in foreign currencies are recorded at the rates ruling on the date of the transaction.

At the consolidated balance sheet date, unhedged monetary assets and liabilities denominated in foreign currencies are translated at

the rate of exchange ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its exposure to interest rate and foreign exchange risks arising from financing
activities. The Group does not enter into speculative financial instruments. In accordance with its treasury policy, the Group does not hold
or issue derivative financial instruments for trading purposes.

Derivative financial instruments are stated at fair value. The fair value of derivative financial instruments is the estimated amount the
Group would receive or pay to terminate the derivative at the balance sheet date, taking into account current interest and exchange rates
and the current creditworthiness of the counterparties.

Changes in the fair value of derivative financial instruments, that are designated and effective as hedges of the future variability of cash

flows, are recognised directly in equity and the ineffective portion is recognised immediately in the income statement.

For an effective hedge of an exposure to changes in the fair value of a hedged item, the hedged item is adjusted for changes in fair

value attributable to the risk being hedged with the corresponding entry in the income statement.

For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken to the income

statement as they arise.

Derivatives embedded in commercial contracts are treated as separate derivatives when their risks and characteristics are not closely

related to those of the underlying contracts, with unrealised gains or losses being reported in the income statement.

The fair value of hedged derivatives is classified as a non-current asset or non-current liability if the remaining maturity of the hedge

relationship is more than 12 months, otherwise they are classified as current.

Foreign currency forward contracts are not designated effective hedges and so are marked to market at the balance sheet date, with

any gains or losses being taken through the income statement.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 74

Financial assets and financial liabilities
Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit or loss’ (“FVTPL”), ‘available-
for-sale’ (“AFS”) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets
and is determined at the time of initial recognition.

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
The Group has defined the classes of financial assets to be other financial assets, cash and borrowings, derivative financial instruments

and trade and other payables.

Financial assets and financial liabilities at FVTPL
Financial assets and financial liabilities are classified as at FVTPL where the financial asset or the financial liability is either held for trading
or it is designated as FVTPL.

A financial asset or financial liability is classified as held for trading if:

(cid:129) it has been acquired principally for the purpose of selling or of disposal in the near future; or
(cid:129) it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-

term profit-taking; or

(cid:129) it is a derivative that is not designated and effective as a hedging instrument.

Financial assets and financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in the income statement
unless it is an effective cash flow relationship. The net gain or loss recognised in the income statement incorporates any interest earned
or paid on the financial asset and financial liability respectively.

Loans and receivables
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified
as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables which applies to all amounts owed
to the Group when the recognition of interest would be immaterial.

Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over
the relevant period. The effective interest is the rate that exactly discounts estimated future cash payments through the expected life of
the financial liability, or, where appropriate, a shorter period.

Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Taxation
The tax expense represents the sum of the tax currently payable and the deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items which are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantially enacted by
the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit. This is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred
tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 75

Pensions and other post-employment benefits
For defined benefit schemes, operating profit is charged with the cost of providing pension benefits earned by employees in the
period. The expected return on pension scheme assets less the interest on pension scheme liabilities is shown as a finance cost within the
income statement.

Actuarial gains and losses arising in the period from the difference between actual and expected returns on pension scheme assets,
experience gains and losses on pension scheme liabilities and the effects of changes in demographics and financial assumptions are
included in the statement of recognised income and expense.

Recoverable pension scheme surpluses and pension scheme deficits and the associated deferred tax balances are recognised in full in

the period in which they occur and are included in the balance sheet.

Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

Employee share incentive plans
The Group issues equity-settled share-based payments to certain employees (long term incentives, executive share options and Save As
You Earn), which do not include market related conditions. These payments are measured at fair value at the date of grant by the use of
the Black Scholes option-pricing model taking into account the terms and conditions upon which the options were granted. The cost of
equity-settled awards is recognised on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares
that will eventually vest. No cost is recognised for awards that do not ultimately vest.

Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the Directors’
best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the
effect is material.

Equity instruments and own shares
The Group has applied the requirements of IFRS 2 – Share Based Payments. In accordance with the transitional provisions, IFRS 2 has
been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.

Equity instruments represent the ordinary share capital of the Group and are recorded at the proceeds received, net of directly attributable

incremental issue costs.

Consideration paid by the Group for its own shares is deducted from total shareholder equity. Where such shares vest to employees
under the terms of the Group’s share options or the Group’s share save schemes or are sold, any consideration received is included in
shareholders’ equity.

Dividends
Dividends proposed by the Board of Directors and unpaid at the period end are not recognised in the financial statements until they have
been approved by shareholders at the Annual General Meeting.

3. CR IT ICA L J UDG EMENTS A N D K EY SOUR C ES OF EST I MATI ON A N D UNC ERTA I NT Y

These consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of financial
statements requires the Directors to make estimates and assumptions about future events that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities. Future events and their effects cannot be determined with absolute certainty.
Therefore, the determination of estimates requires the exercise of judgement based on various assumptions and other factors such as
historical experience, current and expected economic conditions. The Directors constantly re-evaluate these significant factors and makes
adjustments where facts and circumstances dictate. The Directors believe that the following accounting policies are critical due to the
degree of estimation required and/or the potential material impact they may have on the Group’s financial position and performance:

Inventory valuation
Inventories are stated at the lower of cost and net realisable value. Provisions for excess or obsolete inventory are recorded based upon
assumptions about future demand and market conditions.

The level of inventory provisioning required is sensitive to changes in the forecast sales of particular products which is dependent on
changes in conditions in the Group’s markets. If changes in actual market conditions are less favourable than those projected, additional
inventory provisions may be required; similarly if changes in actual market conditions are more favourable than predicted, it may be possible
to release a proportion of the inventory provision.

Debtor recoverability
The Group provides credit to a significant number of its customers. At each period end an assessment is made of the extent to which those
customers may not pay amounts due to the Group and a doubtful debt provision is established accordingly. Determining the likelihood of
the Group incurring bad debts requires the Directors to exercise judgement. To the extent this judgement ultimately proves to be inaccurate
it would change the profit for the period.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 76

Provisions for returns and warranty claims
The products sold by the Group are covered by warranties given to it by the suppliers from whom the goods are bought. Should any of those
suppliers cease to trade then any liabilities for product warranties would rest with the Group. In such circumstances the Directors would
have to estimate the value of any provision required to meet the obligations of the Group. At the balance sheet date the Directors have
estimated that there is no need for any material warranty and product guarantee provisions to be made. While the Directors believe that
the Group’s warranty provisions are adequate and that the judgements applied are appropriate, the ultimate cost of product warranty could
differ materially from the estimates.

Income taxes
The Group is subject to the income tax laws of the United Kingdom. These laws are complex and subject to different interpretations by
taxpayers and tax authorities. When establishing income tax provisions, the Directors make a number of judgements and interpretations
about the application and interaction of these laws. Changes in these tax laws or in their interpretation could impact the Group’s effective
tax rate and the results of operations in a given period.

The process of estimating the Group’s tax position requires an assessment of temporary differences resulting from differing treatment
of items for tax and accounting purposes. These differences result in the recognition of deferred tax assets and liabilities. Deferred tax assets
are included within the consolidated balance sheet to the extent that we believe they are recoverable. In recognising deferred tax assets,
the Group considers profit forecasts including the effect of exchange rate fluctuations on sales and external market conditions.

Management’s judgement is required in determining the provision for income taxes, deferred tax assets and liabilities. Deferred tax
assets have been recognised where the Directors believe there are sufficient taxable temporary differences or convincing other evidence
that sufficient taxable profit will be available in future to realise deferred tax assets. Although the deferred tax assets which have been
recognised are considered realisable, actual amounts could be reduced if future taxable income is lower than expected. This can materially
affect the Group’s reported net income and financial position.

Goodwill
In testing for impairment, the Directors have made certain assumptions concerning the future development of the business that are
consistent with its annual budget and three-year plan. Whilst the Director’s consider these assumptions are realistic should these
assumptions regarding the growth in profitability be unfounded then it is possible that goodwill included in the balance sheet could be
impaired. Further details concerning the impairment of goodwill and intangibles are given in note 14.

Pension liabilities
The Group has chosen to adopt assumptions that Directors believe are in line with the median. If the future return on equities is lower than
anticipated, or if the difference between actual inflation and the actual increase in pensionable salaries is greater than that assumed, or if
the average life expectancy of pensioners increases, then the pension deficit would be greater than currently stated in the balance sheet.

Property leases
The Group is party to a number of leases on properties that are no longer required for trading. Whilst every effort is made to profitably sub-
let these properties, it is not always possible. Where a lease is onerous to the Group, a provision is established for the difference between
amounts contractually payable to the landlord and amounts contractually receivable from the tenant (if any) for the period up until the point
it is judged that the lease will no longer be onerous.

The Directors believe that their estimates, which are based upon the current state of the UK property market, are appropriate. However,
it is possible that it may take longer to dispose of leases than they anticipate. As a result the provisions may be understated, but in the
opinion of the Directors this is unlikely to be material.

Insurance provisions
The Group has been substantially self-insured since 2001. The nature of insurance claims is that they frequently take many years to fully
crystalise, therefore the Directors have to estimate the value of provisions to hold in the balance sheet in respect of historic claims. Under
the guidance of the Group’s insurance advisors, the value of incurred claims is estimated using the Generalised Cape Cod Method. The
provision is determined by deducting the value of claims settled to date from the estimated level of claims incurred. Whilst the Generalised
Cape Cod Method is an insurance industry standard methodology, it relies on historic trends to determine the level of expected claims. To
the extent that the estimates are inaccurate the Group may be underprovided, but in the opinion of the Directors any under-provision is
unlikely to be material.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 77

4. R EV EN UE

Sale of goods
Management charges
Dividends from subsidiaries

Other operating income
Finance income

5. PROF IT

(a) Operating profit

Revenue
Cost of sales

Gross profit
Selling and distribution costs
Administrative expenses
Other operating income
Share of results of associate

Operating profit
Exceptional items

Adjusted operating profit

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

3,178.6
-
-

3,178.6
11.2
7.7

3,197.5

2007
£m

3,186.7
-
-

3,186.7
11.4
3.7

3,201.8

2008
£m

-
7.3
47.7

55.0
-
2.8

57.8

2007
£m

-
7.0
118.3

125.3
-
0.4

125.7

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

3,178.6
(2,080.3)

1,098.3
(728.1)
(164.7)
11.2
(1.4)

215.3
56.2

271.5

2007
£m

3,186.7
(2,087.3)

1,099.4
(649.1)
(141.8)
11.4
-

319.9
-

319.9

2008
£m

55.0
-

55.0
-
(19.0)
-
-

36.0
-

36.0

2007
£m

125.3
-

125.3
-
(9.8)
-
-

115.5
-

115.5

As a result of the economic downturn the Group has taken steps to reduce its overhead base by challenging all areas of expenditure.
A combination of reducing headcount, virtually stopping business expansion, eliminating marginal activities and challenging suppliers to
be more cost effective has been successful, but it has resulted in the Group incurring some significant one off charges. In addition, the
slowdown in the property market means that there is considerably less opportunity to sublet the Group’s empty trading properties, a
situation which may exist for many years. Accordingly it is likely that the Group will have to pay significant property running costs in respect
of these properties for longer than previously anticipated.

Therefore, to enable readers of the financial statements to obtain a clear understanding of underlying trading, the Directors have shown
separately the exceptional level of spend in the Group income statement. The total charge of £56.2m includes a cost of redundancy and
re-organisation (£10.5m), onerous property lease provisions (£39.5m) and asset write offs (£6.2m). £40.4m and £15.8m were included
in selling and distribution costs and administrative expenses respectively.

Operating profit has been arrived at after charging/(crediting):

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

Provisions against inventories
Cost of inventories recognised as an expense
Pension costs in administration expenses
Pension costs in selling and distribution costs
Depreciation of property, plant and equipment
Staff costs (see note 7)
Gain on disposal of property, plant and equipment
Fair value movement on derivatives
Fair value movements on loans
Rental income
Hire of vehicles, plant and machinery
Other leasing charges – property
Auditor’s remuneration for audit services

2008
£m

6.0
2,074.3
4.2
7.7
63.0
376.4
(6.0)
(108.2)
108.2
(5.8)
14.7
125.7
0.4

2007
£m

(0.5)
2,087.8
3.1
10.2
56.3
364.0
(7.6)
(2.3)
2.3
(4.6)
16.2
111.3
0.3

2008
£m

-
-
1.1
-
-
4.9
-
(108.2)
108.2
-
-
-
0.1

2007
£m

-
-
0.3
-
-
7.4
-
(2.3)
2.3
-
-
-
0.1

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 78

5. PROF IT (cont i n ued)

During the year the Group incurred the following costs for services provided by the Company’s auditors:

Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
Fees paid the Company’s auditors for other services:
The audit of the Company’s subsidiaries pursuant to legislation
Other services pursuant to legislation
Other services relating to taxation – compliance

– advisory

Corporate finance transactions
Other services

T H E G R O U P
–––––––––––––––––––

2008
£000

139

245
12
5
386
153
10

950

2007
£000

104

225
30
30
95
-
-

484

Other services pursuant to legislation includes £9,000 (2007: £9,000) which was paid to the auditors by the Travis Perkins Pension and
Dependents Benefit Scheme.

A description of the work of the Audit Committee is set out in the Audit Committee report on pages 45 to 46, and includes an explanation

of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors.

(b) Adjusted profit before and after tax

Profit before tax
Exceptional items

Adjusted profit before tax

Profit after tax
Exceptional items
Tax effect of exceptional items
Exceptional deferred tax credit

Adjusted profit after tax

Builders
Merchanting
––––––––––––––––––––

2008
£m

2007
£m

Revenue

2,237.9

2,254.2

Operating profit
Share of associate losses
Exceptional items

Adjusted segment result

206.5
-
18.3

224.8

257.7
-
-

257.7

T H E G R O U P
–––––––––––––––––––

2008
£m

146.3
56.2

202.5

2007
£m

261.4
-

261.4

T H E G R O U P
–––––––––––––––––––

2008
£m

101.9
56.2
(14.2)
-

143.9

2007
£m

185.3
-
-
(4.2)

181.1

Retail
––––––––––––––––––––

Group
––––––––––––––––––––

2008
£m

940.7

10.2
-
37.9

48.1

2007
£m

932.5

62.2
-
-

62.2

2008
£m

2007
£m

3,178.6

3,186.7

216.7
(1.4)
56.2

271.5

8.54%

319.9
-
-

319.9

10.04%

Adjusted operating margin

10.05%

11.43%

5.11%

6.67%

The segmental results for merchanting and retail are shown in note 6.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 79

6. BUSI NE SS A N D G E OGRAPH ICA L S EGMENTS

For management purposes, the Group is currently organised into two operating divisions – Builders Merchanting and Retailing, both of which
operate entirely in the United Kingdom. These divisions are the basis on which the Group reports its primary segment information. As the
Group’s operations are entirely UK based, the Group does not present any secondary segment information. Segment results, assets and
liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Unallocated corporate
items comprise mainly interest bearing loans and borrowings. There are no inter-segment sales.

Revenue

Result
Segment result

Share of associate losses
Net finance costs

Profit before taxation
Taxation

Profit for the year

Segment assets
Unallocated corporate assets

Consolidated total assets

Segment liabilities
Unallocated corporate liabilities

Consolidated total liabilities

Consolidated net assets

Capital expenditure
Depreciation

Revenue

Result
Segment result

Net finance costs

Profit before taxation
Taxation

Profit for the year

Segment assets
Unallocated corporate assets

Consolidated total assets

Segment liabilities
Unallocated corporate liabilities

Consolidated total liabilities

Consolidated net assets

Capital expenditure
Depreciation

––––––––––––––––––––––––––––––––––––––––
Retail Consolidated

2008

Builders
merchanting
£m

2,237.9

£m

940.7

£m

3,178.6

206.5

10.2

1,298.5

1,345.6

(546.8)

(185.9)

751.7

1,159.7

82.6
47.4

15.9
15.6

216.7

(1.4)
(69.0)

146.3
(44.4)

101.9

2,644.1
247.3

2,891.4

(732.7)
(1,140.5)

(1,873.2)

98.5
63.0

––––––––––––––––––––––––––––––––––––––––
Consolidated

Retail

2007

Builders
merchanting
£m

2,254.2

£m

932.5

£m

3,186.7

257.7

62.2

1,382.6

1,305.9

(435.7)

(242.0)

946.9

115.5
40.7

1,063.9

24.1
15.6

319.9

(58.5)

261.4
(76.1)

185.3

2,688.5
100.8

2,789.3

(677.7)
(1,074.7)

(1,752.4)

139.6
56.3

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 80

7. STA FF COST S

(a) The average monthly number of persons employed (including executive directors)

Sales
Distribution
Administration

(b) Aggregate remuneration

Wages and salaries
Share based payment
Social security costs
Other pension costs (note 8)

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
No.

12,264
1,561
1,589

15,414

2007
No.

11,572
1,521
1,487

14,580

2008
No.

-
-
41

2007
No.

-
-
44

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

329.8
4.6
30.1
11.9

376.4

2007
£m

319.6
3.7
27.3
13.4

364.0

2008
£m

3.6
0.5
0.4
0.4

4.9

2007
£m

5.8
0.6
0.5
0.5

7.4

8. PENS ION A R RA NG E MENT S

Defined benefit scheme
During the year, the Group operated a final salary scheme; the Travis Perkins Pensions and Dependants Benefit Scheme (“the TP scheme”),
which is a 1/60th scheme. The TP scheme is funded by contributions from group companies and employees. Contributions are paid to
the Trustees on the basis of advice from an independent professionally qualified actuary who carries out a valuation of the scheme every
three years.

Employees are entitled to start drawing a pension, based on their membership of the scheme, on their normal retirement date.

If employees choose to retire early and draw their pension, then the amount they receive is scaled down accordingly.

A full actuarial valuation of the TP scheme was carried out on 30 September 2005. The IAS 19 valuation has been based upon the
provisional results of the 30 September 2008 valuation, then updated to 31 December 2008 by a qualified actuary. The present values of
the defined obligations, the related current service costs and the past service costs for the scheme were measured using the projected
unit method.

(a) Major assumptions used by the actuary at the balance sheet date (in nominal terms)

Rate of increase in pensionable salaries
Rate of increase of pensions in payment
Discount rate
Inflation assumption

At
31 December
2008

At
31 December
2007

4.0%
2.3%
6.2%
3.0%

4.4%
2.3%
5.8%
3.4%

In respect of longevity the valuation adopts the PMA/PFA92 tables with improvements in life expectancy to continue in the medium term,
with base year appropriate to the member’s date of birth. This results in the following life expectancies at illustrative ages:
Weighted average life expectancy for mortality tables used to determine pension liability at 31 December 2008:

Member age 65 (current life expectancy)
Member age 45 (life expectancy on reaching age 65)

Male
Years
21.5
23.0

Female
Years
24.5
26.0

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 81

8. PEN SI ON A R RA NG EM ENTS (con t i nued)

(b) Amounts recognised in income in respect of the defined benefit scheme

Current and past service costs charged to operating profit in the income statement
Interest cost
Expected return on scheme assets

Total pension costs

2008
£m

8.9
31.8
(36.6)

4.1

2007
£m

11.4
29.8
(33.1)

8.1

The total charge to the profit and loss account disclosed in note 7 of £11.9m (2007: £13.4m) comprises defined benefit scheme current
and past service costs of £8.9m (2007: £11.4m) and £3.0m (2007: £2m) of contributions made to the defined contribution scheme.

The directors have agreed with the Scheme Actuary and the Trustees to continue the present rate of contributions in 2009, pending a

new schedule of contributions being agreed following completion of the 30 September 2008 valuation.

Note 5 shows where pension costs have been charged in the income statement. Actuarial gains and losses have been included in the

Statement of Recognised Income and Expense.

AT 3 1 D E C E M B E R 2 0 0 8

AT 3 1 D E C E M B E R 2 0 0 7

–––––––––––––––––––––––––––– ––––––––––––––––––––––––––––

Equities
Bonds, gilts and cash
Property

Total fair value of assets
Actuarial value of liability

Deficit in scheme
Related deferred tax asset

Net pension liability

Expected
return

Fair value
£m

Expected
return

Fair value
£m

7.40%
3.65% - 6.00%
5.65%

243.6
7.55%
132.6 4.30% - 5.60%
6.30%
44.5

420.7
(490.6)

(69.9)
19.5

(50.4)

344.9
131.3
57.7

533.9
(549.9)

(16.0)
4.5

(11.5)

The actual returns on scheme assets

2008
–––––––––––––––––––

£m

(120.6)

(22.6)

2007
–––––––––––––––––––

£m

19.6

3.9

(d) The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit scheme

and the movement during the year

At 1 January
Expense recognised in the income statement
Contributions received by the scheme
Actuarial (losses)/gains recognised in the statement of recognised income and expenditure

At 31 December

2008
£m

(16.0)
(4.1)
20.5
(70.3)

(69.9)

2007
£m

(80.8)
(8.1)
21.0
51.9

(16.0)

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 82

8. PENS ION A R RA NG E MENT S (con t i n ued )

(e) Movements in the present value of defined benefit obligations in the current period

At 1 January
Service cost
Past service cost
Interest cost
Contributions from scheme members
Actuarial gains
Benefits paid

At 31 December

(f) Movements in the present value of fair value of scheme assets in the current period

At 1 January
Expected return of scheme assets
Actuarial losses
Contributions from sponsoring companies
Contributions from scheme members
Benefits paid

At 31 December

(g) Cumulative actuarial gains and losses recognised in equity

At 1 January
Net actuarial (losses)/gains recognised in the year

At 31 December

(h) History of experience gains and losses

Fair value of scheme assets (£m)
Present value of scheme obligations (£m)

Deficit in the scheme (£m)

Experience adjustments on scheme liabilities
Amounts (£m)

Percentage of scheme liabilities (%)

2008

420.7
(490.6)

(69.9)

13.4

2.7%

2007

533.9
(549.9)

(16.0)

Experience adjustments on scheme assets
Amounts (£m)

Percentage of scheme assets (%)

(157.2)

(37.4%)

(13.5)

(2.5%)

2006

500.5
(581.3)

(80.8)

14.7

2.9%

2008
£m

(549.9)
(8.7)
(0.2)
(31.8)
(5.3)
86.9
18.4

(490.6)

2008
£m

533.9
36.6
(157.2)
20.5
5.3
(18.4)

420.7

2008
£m

(99.4)
(70.3)

(169.7)

2005

431.6
(574.4)

(142.8)

9.0

1.6%

42.2

9.8%

2007
£m

(581.3)
(11.3)
(0.1)
(29.8)
(5.3)
65.4
12.5

(549.9)

2007
£m

500.5
33.1
(13.5)
21.0
5.3
(12.5)

533.9

2007
£m

(151.3)
51.9

(99.4)

2004

253.4
(381.7)

(128.3)

0.1

10.9

4.3%

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 83

8. PEN SI ON A R RA NG EM ENTS (con t i nued)

(i) Sensitivities
We have estimated the effects of changing the key assumptions (discount rate, inflation and life expectancy) on the IAS 19 balance sheet
position as at 31 December 2008 and on projected amounts to be recognised in the income statement for 2009.

Assumption

Discount rate

Inflation

Longevity

Increase of 1.0%
Decrease of 1.0%
Increase of 1.0%
Decrease of 1.0%
Increase of 1 year
Decrease of 1 year

Effect on 2008
balance sheet
gross deficit

Effect on
2009 income
statement

87.5
(109.9)
(65.5)
56.2
(11.7)
11.7

(4.2)
4.6
6.4
(5.7)
1.0
(1.1)

(j) Defined contribution scheme
There is one defined contribution scheme in the Group. The pension cost, which represents contributions payable by the Group, amounted
to £3.0m (2007: £2.0m).

9. SHA R E - BASE D PAYMENTS

Details of the share option schemes run by the Company, including information concerning vesting periods, amounts outstanding and the
exercise price are contained in the remuneration report on pages 50 to 51 and 54 to 57.

The following disclosures relate to share option and SAYE grants made after 7 November 2002.
The Black-Scholes option-pricing model is used to calculate the fair value of the options and the amount to be expensed. No performance

conditions were included in the fair value calculations. The inputs into the model expressed as weighted averages are as follows:

Share price at grant date (pence) – Group
Option exercise price (pence) – Group
Share price at grant date (pence) – Company
Option exercise price (pence) – Company
Volatility (%) – Group and Company
Option life (years) – Group and Company
Risk-free interest rate (%) – Group and Company
Expected dividends as a dividend yield (%) – Group and Company

Executive Options
–––––––––––––––––––––––

SAYE
–––––––––––––––––––

2008

589
589
589
589
21.3%
4.0
3.6%
2.4%

2007

1,967
1,967
1,967
1,967
19.7%
4.0
5.3%
2.3%

2008

702
562
702
562
21.4%
3.8
4.2%
2.1%

2007

1,767
1,414
1,767
1,414
23.2%
3.6
4.5%
2.1%

Volatility was based on historic share prices over a period of time equal to the vesting period. Option life used in the model has been based
on options being exercised in accordance with historical patterns. For executive share options the vesting period is 3 years. If options
remain unexercised after a period of 10 years from the date of grant, these options expire. Options are forfeited if the employee leaves the
Group before options vest. SAYE options vest after 3 or 5 years and expire 3½ or 5½ years after the date of grant. The risk-free interest
rate of return is the yield on zero-coupon UK Government bonds on a term consistent with the vesting period. Dividends used are based
on actual dividends where data is known and future dividends estimated using a dividend cover of 3 times. It has also been assumed that
performance conditions in respect of the executive share options and the share matching scheme will be met.

The expected life used in the model has been adjusted, based upon management’s best estimate, for the effect of non-transferability,

exercise restrictions and behavioural considerations.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 84

9. SHA R E - BASE D PAYMENTS (con t i nued )

The number and weighted average exercise price of share options is as follows:

The Group

–––––––––––––––––––––––––

2008

–––––––––––––––––––––––––

2007

In thousands of options

Outstanding at the beginning of the period
Forfeited during the period
Exercised during the period
Granted during the period

Outstanding at the end of the period

Exercisable at the end of the period

Weighted
average
exercise
price
p

1,504
1,282
1,161
570

914

1,345

Number
of
options
No.

4,447
(2,026)
(2)
5,393

7,812

716

Weighted
average
exercise
price
p

1,349
1,361
1,139
1,725

1,504

1,456

Number
of
options
No.

4,163
(764)
(531)
1,579

4,447

911

Share options were exercised on a regular basis throughout the year. The weighted average share price for options exercised during the
year was 765 pence (2007: 1,643 pence).

Details of the options outstanding at 31 December 2008 were as follows:

Range of exercise prices (pence)
Weighted average exercise price (pence)
Number of shares (thousands)
Weighted average expected remaining life (years)
Weighted average contractual remaining life (years)

–––––––––––––––––––––––––

2008

–––––––––––––––––––––––––

2007

Executive
options

255 - 1,970
1,232
3,441
2.4
8.4

SAYE

Executive
options

562 - 1,414
664
4,373
3.4
3.9

1,068 - 1,970
1,674
2,754
2.3
9.3

SAYE

848 - 1,414
1,255
2,069
2.4
3.9

The Company

–––––––––––––––––––––––––

2008

–––––––––––––––––––––––––

2007

In thousands of options

Outstanding at the beginning of the period
Forfeited during the period
Exercised during the period
Granted during the period

Outstanding at the end of the period

Exercisable at the end of the period

Weighted
average
exercise
price
p

1,651
1,565
-
492

1,463

1,446

Number
of
options
No.

749
(308)
-
113

554

101

Weighted
average
exercise
price
p

1,478
1,411
1,395
1,964

1,651

1,421

Number
of
options
No.

642
(97)
(42)
246

749

281

There were no share options exercised during the year. Details of the options outstanding at 31 December 2008 were as follows:

–––––––––––––––––––––––––

2008

–––––––––––––––––––––––––

2007

Executive
options

255 - 1,970
1,535
512
1.7
7.7

SAYE

Executive
options

SAYE

562 - 1,414
598
42
4.1
4.6

1,068 - 1,970
1,661
731
2.0
7.9

1,069 - 1,414
1,270
18
2.6
3.1

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 85

9. SHA R E- BAS ED PAYME NT S (con t i n ued )

The Group and the Company
Executive options were granted on 7 March 2008 and 19 November 2008. SAYE options were granted on 1 December 2008. The aggregate
of the estimated fair values of the options granted on those dates is £11.9m for the Group and £0.2m for the Company.

Shares were granted under the share matching scheme on 1 April 2008. The estimated fair value of the shares at that date was £3.0m

for the Group and £1.2m for the Company.

Shares were granted under the performance share plan on 5 March 2008. The estimated fair value of the shares at that date was

£3.9m for the Group and £1.2m for the Company.

The Group charged £4.6m (2007: £3.7m) and the Company charged £0.5m (2007: £0.6m) to the income statement in respect of

equity-settled share-based payment transactions.

10. NE T FI NA NC E COST S

Interest on bank loans and overdraft*
Interest on unsecured loans
Interest on obligations under finance leases
Unwinding of discounts in provisions
Net loss on re-measurement of derivatives at fair value

Finance costs

Net gain on re-measurement of derivatives at fair value
Other finance income - pension scheme
Interest on bank deposits

Finance income

Net finance costs

Adjusted interest cover

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

(64.6)
(0.2)
(1.6)
(1.6)
(8.7)

(76.7)

2.4
4.8
0.5

7.7

(69.0)

4.3x

2007
£m

(58.6)
(0.5)
(1.9)
(1.2)
-

(62.2)

0.3
3.3
0.1

3.7

(58.5)

5.4x

2008
£m

(62.9)
(0.2)
-
-
(8.7)

(71.8)

2.4
-
0.4

2.8

2007
£m

(57.5)
(0.5)
-
-
-

(58.0)

0.3
-
0.1

0.4

(69.0)

(57.6)

*Includes £2.2m (2007: £1.7m) of amortised bank finance charges.

Adjusted interest cover is calculated by dividing adjusted operating profit of £268.7m (operating profit of £271.5m less £3.8m of IFRS
adjustments) by the combined value of interest on the bank loans and overdraft (excluding amortised bank finance charges), unsecured
loans, and interest on bank deposits, which total £62.1m. The comparative for interest cover is calculated using the calculation set out in
the previous loan facility agreement. The calculation set out in the new facility agreement would give a comparative adjusted interest total
of £57.3m, adjusted operating profit of £319.9m, and consequently cover of 5.6x.

11. TA X

Current tax
UK corporation tax
- current year
- prior year

Total current tax

Deferred tax
- current year
- prior year

Total deferred tax

Total tax charge

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

2007
£m

42.0
(0.6)

41.4

3.1
(0.1)

3.0

44.4

73.6
(1.0)

72.6

3.2
0.3

3.5

76.1

2008
£m

(20.4)
0.2

(20.2)

-
(0.2)

(0.2)

2007
£m

(18.1)
-

(18.1)

-
-

(20.4)

(18.1)

On 26 June 2007 the House of Commons approved the Finance Bill which reduced the UK standard rate of Corporation tax from 30%
to 28% with effect from 1 April 2008. This reduction in rate resulted in an exceptional deferred tax credit of £4.2m to the 2007 charge.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 86

11. TA X (con t i nued)

The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax
to the profit before tax are as follows:

The Group

Profit before tax

Tax at the UK corporation tax rate of 28.5% (2007: 30%)
Tax effect of expenses that are not deductible in determining taxable profit
Depreciation of non-qualifying property
Property sales
Prior period adjustment
Effect of reduction in corporation tax rate on deferred tax

Tax expense and effective tax rate for the year

2008
–––––––––––––––––––

2007
–––––––––––––––––––

£m

146.3

41.7
2.6
2.0
(1.2)
(0.7)
-

44.4

28.5%
1.8%
1.3%
(0.8%)
(0.5%)
-

30.3%

£m

261.4

78.4
1.7
2.1
(1.3)
(0.6)
(4.2)

76.1

30.0%
0.6%
0.8%
(0.5%)
(0.2%)
(1.6%)

29.1%

The Company

2008
–––––––––––––––––––

2007
–––––––––––––––––––

(Loss)/profit before tax
Intercompany dividends

Loss before tax and dividends received

Tax at the UK corporation tax rate of 28.5% (2007: 30%)
Tax effect of expenses that are not deductible in determining taxable profit

Tax expense and effective tax rate for the year

£m

(33.0)
(47.8)

(80.8)

(23.0)
2.6

(20.4)

(28.5%)
3.2%

(25.3%)

£m

57.9
(118.3)

(60.4)

(18.1)
-

(18.1)

(30.0%)
-

(30.0%)

12. EA R N I NGS PE R SHA R E

The Group and the Company

(a) Basic and diluted earnings per share

Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit
attributable to equity holders of the Parent Company

Number of shares

2008
£m

2007
£m

101.9

185.3

No.

Weighted average number of ordinary shares for the purposes of basic earnings per share
Dilutive effect of share options on potential ordinary shares

117,004,114
1,352,096

120,839,499
1,109,765

Weighted average number of ordinary shares for the purposes of diluted earnings per share 118,356,210

121,949,264

At 31 December 2008, 4,680,005 (2007: 3,254,859) share options had an exercise price in excess of the market value of the shares on
that day. As a result, for 2008, these share options were excluded from the calculation of diluted earnings per share.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 87

12. EA R N I NGS PER S HA R E ( con t i n ued )

(b) Adjusted earnings per share
Adjusted earnings per share are calculated by excluding the effect of the exceptional items in 2008 and the deferred tax credit in 2007
from earnings.

Earnings for the purposes of basic and diluted earnings per share being net profit
attributable to equity holders of the Parent Company
Exceptional items
Tax on exceptional items
Exceptional deferred tax credit

Earnings for adjusted earnings per share

Adjusted basic earnings per share

Adjusted diluted earnings per share

13. D IVI DE N DS

The Group and the Company
Amounts were recognised in the financial statements as distributions to equity shareholders as follows:

Final dividend for the year ended 31 December 2007 of 30.4p (2006: 25.3p) per ordinary share
Interim dividend for the year ended 31 December 2008 of 14.5p (2007: 14.5p) per ordinary share

Total dividends recognised during the year

2008
£m

101.9
56.2
(14.2)
-

143.9

123.0p

121.6p

2007
£m

185.3
-
-
(4.2)

181.1

149.8p

148.4p

2008
£m

35.5
17.0

52.5

2007
£m

30.8
17.3

48.1

The proposed final dividend of nil pence per ordinary share in respect of the year ending 31 December 2008 was approved by the Board
on 18 February 2009.

Adjusted dividend cover of 8.5x (2007: 3.3x) is calculated by dividing adjusted basic earnings per share (note 12) of 123.0 pence

(2007: 149.8 pence) by the total dividend for the year of 14.5 pence (2007: 44.9 pence).

There are no income tax consequences in respect of the dividends declared, but not recognised in the financial statements.
The dividends declared for 2008 at 31 December 2008 and for 2007 at 31 December 2007 were as follows:

Interim paid
Final proposed

Total dividend declared for the year

2008
Pence

14.5
-

14.5

2007
Pence

14.5
30.4

44.9

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 88

14. GOODWI LL

The Group

Cost
At 1 January 2007
Recognised on acquisitions during the year

At 1 January 2008
Recognised on acquisitions during the year

At 31 December 2008

Builders
merchanting

£m

342.8
28.8

371.6
9.9

381.5

Retail

£m

939.2
18.9

958.1
11.8

969.9

Total

£m

1,282.0
47.7

1,329.7
21.7

1,351.4

At 31 December 2008, before impairment testing, goodwill and intangibles of £882.4m million was allocated to Wickes and £631.5m to
the Merchanting business. On the acquisition of the Wickes’ business, £250m of goodwill, which represented synergies arising from the
acquisition, was allocated to the builders merchanting CGU.

Goodwill arising on the acquisition of businesses during the year was allocated to those cash generating units (“CGU”) that are expected
to benefit from those acquisitions. With the exception of the Wickes’ business no individual CGU is significant in comparison with the total
carrying amount of goodwill.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The
recoverable amounts of the CGUs 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 expected changes to selling prices and direct costs during the period. These
assumptions have been reviewed during the year in light of the current economic environment which has resulted in more conservative
estimates about the future. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time
value of money and the risks specific to the CGUs. As a result of these deliberations the Directors’ calculations have not shown there is
any need to change the assumptions from last year.

The turnover growth rates in each CGU are based on the Directors expectations for the next 5 years. Growth is predicted to be lower
than in previous years as a result of the difficult economic conditions that are directly affecting the construction and related industries.
Changes in selling prices and direct costs used in the calculations are based on past practices and expectations of future changes in the
market. It is anticipated that like-for-like sales volumes will fall during 2009, flatten out for a period before resuming growth at a point
in 2010.

At the beginning of the financial period the fair value of goodwill and intangibles in both segments was substantially in excess of its book
value. Due to current market conditions at the year end the fair value is closer to book value however, the Directors’ calculations have shown
that no impairments have occurred. The key assumptions applied in the value in use calculations were:

(cid:129) Cash flow forecasts which were derived from the most recent financial budgets and plans for the three years ending 2011, which were
approved by the directors. Cash flows for the following two years are extrapolated from cash flows for 2011 using similar assumptions
to those applied to 2011;

(cid:129) The weighted average cost of capital (“WACC”) of the Group of 7.5%;
(cid:129) Long-term forecast growth rates of 2.5% in line with the average long-term GDP growth trend applied from 2014 onwards.

Whilst management believe the assumptions are realistic, it is possible an impairment would be identified if any of the above key

assumptions were changed significantly. For instance factors which could cause an impairment are:

(cid:129) Significant underperformance relative to the forecast results;
(cid:129) Changes to the way the assets are used or our strategy for the business;
(cid:129) A deterioration in the industry or the economy.

The impairment review calculations are based upon anticipated discounted future cash flows. These calculations are sensitive to changes
in future cash flows, the discount rate applied and the terminal growth rate. The Directors believe the assumptions used are appropriate,
but have conducted a sensitivity analysis to determine the changes in assumptions that would result in an impairment to goodwill and
intangibles of £100m:

Weighted average cost of capital increase
Long term growth rate reduction

Merchanting

Wickes

17.6%
42.4%

0.9%
1.1%

On the basis of the assumptions stated above, the calculations show that for there to be no impairment in Wickes related goodwill and
intangibles, its minimum operating profit in 2013 would need to be £41m, which compares to an underlying profit of £46m for 2008.

The Company has no goodwill.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 89

15. OTH ER I NTA NG I BLE AS SE T S

Cost
At 1 January and at 31 December

T H E G R O U P
–––––––––––––––––––

2008
£m

2007
£m

162.5

The Wickes brand is not amortised. As a leading brand in the DIY sector, with significant growth prospects, it is considered to have an
indefinite useful life and is reviewed annually for impairment. Details of impairment testing are given in note 14. No impairments were
identified in either year.

The Company has no intangible assets.

16. PROPE RT Y, PL A NT A N D EQUI PMENT

T H E G R O U P
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Freehold
£m

Long
leases
£m

Cost or valuation
At 1 January 2007
Additions
Additions from acquired businesses
Disposals

At 1 January 2008
Additions
Additions from acquired businesses
Disposals

At 31 December 2008

Accumulated depreciation
At 1 January 2007
Charged this year
Disposals

At 1 January 2008
Charged this year
Disposals

At 31 December 2008

Net book value
At 31 December 2008

At 31 December 2007

193.5
43.0
10.2
(1.6)

245.1
18.0
1.8
(0.5)

264.4

21.8
3.1
(0.2)

24.7
4.2
(0.1)

28.8

235.6

220.4

22.5
2.1
0.1
-

24.7
-
0.7
-

25.4

2.8
0.4
-

3.2
0.5
-

3.7

21.7

21.5

The cost element of the fixed assets carrying value is analysed as follows:

Short
leases
£m

90.4
9.2
-
(3.7)

95.9
12.2
-
(4.2)

103.9

21.2
6.9
(2.6)

25.5
6.8
(2.0)

30.3

73.6

70.4

Plant &
equipment
£m

323.7
71.5
3.5
(21.5)

377.2
64.6
1.2
(33.8)

409.2

157.9
45.8
(19.2)

184.5
51.4
(30.3)

205.6

203.6

192.7

Total
£m

630.1
125.8
13.8
(26.8)

742.9
94.8
3.7
(38.5)

802.9

203.7
56.2
(22.0)

237.9
62.9
(32.4)

268.4

534.5

505.0

T H E

C O M P A N Y
–––––––––

Plant &
equipment
£m

0.5
-
-
-

0.5
0.1
-
(0.1)

0.5

0.2
0.1
-

0.3
0.1
(0.1)

0.3

0.2

T H E G R O U P
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Freehold
£m

73.8
190.6

264.4

Long
leases
£m

6.1
19.3

25.4

Short
leases
£m

1.9
102.0

103.9

Plant &
equipment
£m

-
409.2

409.2

Total
£m

81.8
721.1

802.9

THE

COMPANY
––––––––

Total
£m

-
0.5

0.5

At valuation
At cost

Those freehold and leasehold properties included at valuation in the consolidated balance sheet were revalued at their open market value
on an existing use basis. The valuations were performed as at 31 December 1999 by an independent professional valuer, Lambert Smith
Hampton, Consultant Surveyors and Valuers.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 90

16. PROPE RT Y, PL A NT A N D EQUI PME NT ( con t i nued )

Included within freehold property is land with a value of £87.1m (2007: £84.4m) which is not depreciated.

The carrying amount of assets held under finance leases is analysed as follows:

Long
leases
£m

0.8

0.9

Short
leases
£m

14.4

17.5

Plant &
equipment
£m

2.6

2.7

Total
£m

17.8

21.1

2008

2007

Comparable amounts determined according to the historical cost convention:

Freehold
£m

256.8
(45.8)

211.0

195.4

Long
leases
£m

23.7
(5.0)

18.7

19.2

Short
leases
£m

112.5
(35.8)

76.7

73.5

Plant &
equipment
£m

409.2
(205.6)

203.6

192.7

Total
£m

802.2
(292.2)

510.0

480.8

Cost
Accumulated depreciation

Net book value
At 31 December 2008

At 31 December 2007

17. I NV ESTM ENT PROPE RT Y

Cost
At 1 January 2007
Disposals

At 1 January 2008 and at 31 December 2008

Accumulated depreciation
At 1 January 2007
Provided in the year

At 1 January 2008
Provided in the year

At 31 December 2008

Net book value
At 31 December 2008

At 31 December 2007

THE

COMPANY
––––––––

Total
£m

THE

COMPANY
––––––––

Total
£m

-
-

0.2

T H E

G R O U P
––––––

£m

4.2
(0.3)

3.9

0.3
0.1

0.4
0.1

0.5

3.4

3.5

Investment property rental income totalled £0.3m (2007: £0.3m). In addition the Group also receives income from subletting all or part of
100 ex-trading and trading properties, the amount of which is not material.

As no external valuation has been performed, the Directors have estimated that the fair value of investment property equates to its

carrying value. As such, it is not material to the Group’s balance sheet.

The Company has no investment property.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 91

18. I NVE ST MENT S

(a) Interest in associates

Equity investment
Loan facility
Interest on loan facility
Share of losses

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

5.2
15.5
0.3
(1.4)

19.6

2007
£m

-
-
-
-

2008
£m

5.2
15.5
0.3
-

21.0

2007
£m

-
-
-
-

On 4 April 2008 Travis Perkins plc acquired a 30% investment in ToolStation Limited for a total consideration of £5.2m. In addition Travis
Perkins plc has provided a non-revolving loan facility totalling £15.5m. In the twelve month period to 31 December 2008 ToolStation
recognised total revenues of £24.2m and a loss before tax of £4.7m. At 31 December 2008 total aggregate assets were £13.7m and total
aggregate liabilities (including the loan facility provided by Travis Perkins plc) were £23.7m.

(b) Shares in group undertakings

Cost

At 1 January
Additions

At 31 December
Provision for impairment

Net book value at 31 December

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

1,673.0
141.3

1,814.3
(12.9)

2007
£m

1,619.1
53.9

1,673.0
(4.6)

1,801.4

1,668.4

The principal operating subsidiaries of the Group and Company at 31 December 2008 are as follows:

Subsidiary

Registered Office

Travis Perkins Trading Company Limited*
(Builders merchants)
Keyline Builders Merchants Limited*
(Builders merchants)
Wickes Building Supplies Limited
(DIY retailers)
City Plumbing Supplies Holdings Limited
(Plumbers merchants)
CCF Limited*
(Ceiling & dry lining distribution)
Travis Perkins (Properties) Limited*
(Property management company)
Benchmarx Kitchens and Joinery Limited
(Specialist distribution)
Tile Giant Limited
(Ceramic tile merchants)
* Held directly by Travis Perkins plc

Lodge Way House, Harlestone Road,
Northampton NN5 7UG
Southbank House, 1 Strathkelvin Place,
Kirkintilloch, Glasgow G66 1HX
Lodge Way House, Harlestone Road,
Northampton NN5 7UG
Lodge Way House, Harlestone Road,
Northampton NN5 7UG
Lodge Way House, Harlestone Road,
Northampton NN5 7UG
Lodge Way House, Harlestone Road,
Northampton NN5 7UG
Lodge Way House, Harlestone Road,
Northampton NN5 7UG
Lodge Way House, Harlestone Road,
Northampton NN5 7UG

The Directors have applied s231 of the Companies Act 1985 and therefore list only significant subsidiary companies.

All subsidiaries are 100% owned. Each company is registered and incorporated in England and Wales, other than Keyline Builders
Merchants Limited and 10 dormant companies, which are registered and incorporated in Scotland, City Investments Limited and 13 dormant
companies, which are registered and incorporated in Jersey and 2 dormant companies registered and incorporated in Northern Ireland.

Fair value investment

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

2.0

2007
£m

2.0

2008
£m

2007
£m

The investment represents a minority holding in a unit trust that acquired properties from the Group in 2006. The investment presents the
Group with an opportunity to generate returns through both income and capital gains. The Directors consider that the carrying amount of
this investment approximates its fair value.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:06 Page 92

19. OTH E R F I NANC IA L ASS ET S

Trade receivables
Allowance for doubtful debts

Amounts owed by subsidiaries
Other receivables, prepayments and accrued income

Trade and other receivables

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

295.2
(32.3)

262.9
-
123.3

386.2

2007
£m

310.7
(21.5)

289.2
-
132.7

421.9

2008
£m

-
-

-
36.9
19.9

56.8

2007
£m

-
-

-
97.0
18.8

115.8

The Group’s principal financial assets are trade and other receivables, which for the Group at the balance sheet date comprise principally
amounts receivable from the sale of goods, together with amounts due from rebates and sundry prepayments. The Directors consider
the only class of asset containing significant credit risk is trade receivables. The average credit term for sales of goods is 59 days
(2007: 56 days).

The amounts presented in the balance sheet are net of allowances for doubtful debts of £32.3m (2007: £21.5m), estimated by the
Group’s management based on prior experience and their assessment of the current economic environment. The Directors consider the
carrying amount of trade and other receivables approximates their fair values.

No interest is charged on the trade receivable from the date of the invoice until the date the invoice is classified as overdue according
to the trading terms agreed between the Group and the customer. Thereafter, the Group retains the right to charge interest at 4%
above the National Westminster Bank base rate per annum on the outstanding balance. The Group has provided fully for all receivables
outstanding over 90 days beyond agreed terms. Trade receivables between 0 and 90 days are specifically provided for based on estimated
irrecoverable amounts.

Movement in the allowance for doubtful debts

At 1 January
Amounts written off during the year
Increase in allowance recognised in profit and loss

At 31 December

T H E G R O U P
–––––––––––––––––––

2008
£m

21.5
(6.0)
16.8

32.3

2007
£m

20.4
(6.6)
7.7

21.5

In determining the recoverability of the trade receivables, the Group considers any change in the credit quality of the trade receivable from
the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large.
Accordingly, the Directors believe that no further credit provision is required in excess of the allowance for doubtful debts.

Included in the Group’s trade receivable balance are unprovided against debtors with a carrying amount of £28.9m (2007: £22.8m) which
are past due at the reporting date for which the Group has not identified a significant change in credit quality and as such, the Group
considers that the amounts are still recoverable. Except for some instances of personal guarantees the Group does not hold any collateral
over these balances.

Ageing of past due but not impaired receivables

Days overdue

0 – 30 days
31 – 60 days
61 – 90 days

T H E G R O U P
–––––––––––––––––––

2008
£m

22.7
3.5
2.7

28.9

2007
£m

17.0
3.7
2.1

22.8

Included in the allowance for doubtful debts are specified trade receivables with a balance of £18.7m (2007: £12.5m) which have been
placed into liquidation. The impairment represents the difference between the carrying amount of the specific trade receivable and the
amount it is anticipated will be recovered.

None of the Company’s debts are overdue. The directors do not consider there to be any significant credit risk, as the majority of the

debt is due from subsidiaries.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 93

20. CASH AN D CASH EQUI VA L E NT S

Cash and cash equivalents comprise cash held by the Group and Company and short-term bank deposits with an original maturity of
three months or less. The carrying amount of these assets approximates their fair value.

21. SHAR E CAPI TA L

Ordinary shares of 10p

At 1 January 2007
Allotted under share option schemes

At 1 January 2008
Allotted under share option schemes

T H E G R O U P A N D T H E C O M P A N Y
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Authorised
–––––––––––––––––––––––––––

Issued and fully paid
–––––––––––––––––––––––––––

No.

135,000,000
-

£m

13.5
-

No.

122,047,994
593,855

122,641,849
77,265

£m

12.2
0.1

12.3
-

12.3

At 31 December 2008

135,000,000

13.5

122,719,114

The net contribution received for the issue of shares during the year was £0.6m. Details of the share option schemes are given in the
remuneration report on pages 50 and 51 and 54 to 56.

The Company has one class of ordinary share that carries no right to fixed income. The holders of ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with
regard to the Company’s residual assets.

22. OW N SHA R ES

The Group and the Company

At 1 January
Acquired during the year
Re-issued during the year

At 31 December

Allocated to grants of executive options
Not allocated to grants of executive options

2008
No.

2007
No.

5,698,300
-
(13,620)

479,953
5,218,347
-

5,684,680

5,698,300

289,142
5,395,538

289,142
5,409,158

5,684,680

5,698,300

The own shares are stated at cost and held by the Employee Share Ownership Trust to satisfy options under the Group’s share option
schemes. All rights attaching to own shares are suspended until the shares are re-issued.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 94

23. R E SE RVE S

The Group

At 1 January 2007
Dividends paid
Total recognised income and expense
Difference between depreciation of
assets on a historical basis and
on a revaluation basis
Realisation of revaluation reserve in
respect of property disposals
Effect of share options
Own shares
Premium on the issue of equity shares

At 31 December 2007
Dividends paid
Total recognised income and expense
Difference between depreciation of
assets on a historical basis and
on a revaluation basis
Effect of share options
Own shares
Premium on the issue of equity shares

Share
premium
account
£m

172.2
-
-

-
-
-
6.7

178.9
-
-

-
-
-
0.6

At 31 December 2008

179.5

Other
reserve
£m

25.3
-
-

Hedging
reserve
£m

4.0
-
(1.1)

-
-
-
-

2.9
-
(20.7)

-
-
-
-

(0.4)

(0.7)
-
-
-

24.2
-
-

(0.4)
-
-
-

23.8

Own
shares
£m

Accumulated
profits
£m

(7.9)
-
-

-
-
(76.0)
-

(83.9)
-
-

-
-
0.2
-

727.3
(48.1)
222.0

0.4

0.7
0.2
-
-

902.5
(52.5)
51.2

0.4
2.7
(0.2)
-

Total
reserves
£m

920.9
(48.1)
220.9

-
0.2
(76.0)
6.7

1,024.6
(52.5)
30.5

-
2.7
-
0.6

(17.8)

(83.7)

904.1

1,005.9

The other reserve represents the revaluation surplus that has arisen from property revaluations in 1999 and prior years.

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments

related to hedged transactions that have yet to occur.

The own shares reserve represents the cost of shares purchased in the market and held by the Employee Share Ownership Trust to satisfy

options under the Group’s share option schemes.

The cumulative total of goodwill written off directly to reserves for acquisitions from December 1989 to December 1998 is £40.1m. The

aggregate information for the accounting periods prior to this period is not available.

The Company

At 1 January 2007
Total recognised income and expense
Dividends paid
Effect of share options
Own shares
Premium on the issue of equity shares

At 31 December 2007
Total recognised income and expense
Dividends paid
Effect of share options
Own shares
Premium on the issue of equity shares

At 31 December 2008

Hedging
reserve
£m

Own
shares
£m

Accumulated
profits
£m

Total
reserves
£m

4.0
(1.1)
-
-
-
-

2.9
(20.7)
-
-
-
-

(17.8)

(7.9)
-
-
-
(76.0)
-

(83.9)
-
-
-
0.2
-

(83.7)

124.9
76.0
(48.1)
(0.2)
-
-

152.6
(12.6)
(52.5)
(0.1)
(0.2)
-

87.2

292.1
74.9
(48.1)
(0.2)
(76.0)
6.7

249.4
(33.3)
(52.5)
(0.1)
-
0.6

164.1

Share
premium
account
£m

171.1
-
-
-
-
6.7

177.8
-
-
-
-
0.6

178.4

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 95

24. B OR ROWI NGS

A summary of the Group policies and strategies with regard to financial instruments can be found in the Finance Director’s review of the
year on pages 34 to 37. At 31 December 2008 all borrowings were made in Sterling except for the unsecured senior notes (note 24 (i)).

(a) Summary

Unsecured senior notes
Bank loans (note 24c)*
Bank overdraft*
Finance leases (note 24d)
Loan notes (note 24e)
Finance charges netted off bank debt*

Current liabilities
Non-current liabilities

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

311.4
685.0
12.3
25.0
3.9
(12.5)

1,025.1

17.8
1,007.3

1,025.1

2007
£m

203.3
718.6
-
30.0
15.4
-

967.3

103.4
863.9

967.3

2008
£m

311.4
685.0
103.8
-
3.9
(12.5)

1,091.6

107.7
983.9

1,091.6

2007
£m

203.3
718.6
-
-
15.4
-

937.3

101.8
835.5

937.3

*These balances together total the amounts shown as bank loans in note 24(b).

(b) Analysis of borrowings

The Group

Borrowings repayable
On demand or within one year
More than one year, but not more than two years
More than two years, but not more than five years
More than five years

The Company

Borrowings repayable
On demand or within one year
More than one year, but not more than two years
More than two years, but not more than five years
More than five years

Bank loans
and overdraft
–––––––––––––––––––

Other
borrowings
–––––––––––––––––––

2008
£m

12.3
70.0
602.5
-

684.8

2007
£m

86.4
632.2
-
-

718.6

2008
£m

5.5
1.5
159.1
174.2

340.3

2007
£m

17.0
1.5
4.7
225.5

248.7

Bank loans
and overdraft
–––––––––––––––––––

Other
borrowings
–––––––––––––––––––

2008
£m

103.8
70.0
602.5
-

776.3

2007
£m

86.4
632.2
-
-

718.6

2008
£m

3.9
-
155.7
155.7

315.3

2007
£m

15.4
-
-
203.3

218.7

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 96

24. B OR ROWI NGS (con t i n ued )

Drawn facilities
5 year term loan
5 year revolving credit facility
Unsecured senior notes
Bank overdraft

Undrawn facilities
5 year revolving credit facility
Bank overdraft

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

525.0
160.0
311.4
12.3

1,008.7

315.0
37.7

352.7

2007
£m

183.6
535.0
203.3
-

921.9

165.0
50.0

215.0

2008
£m

525.0
160.0
311.4
103.8

1,100.2

315.0
-

315.0

2007
£m

183.6
535.0
203.3
-

921.9

165.0
-

165.0

The disclosures in note 24(c) do not include finance leases, loan notes, or the effect of finance charges netted off bank debt.

(d) Obligations under finance leases

The Group

Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
After five years

Less: future finance charges

Present value of lease obligations

Less: Amount due for settlement within 1 year
(shown under current liabilities)

Amount due for settlement after 1 year

Minimum
lease payments
–––––––––––––––––––

Present value
of minimum
lease payments
–––––––––––––––––––

2008
£m

3.1
10.9
28.7

42.7
(17.7)

25.0

2007
£m

4.2
12.2
35.2

51.6
(21.6)

30.0

2008
£m

1.6
6.1
17.3

25.0
-

25.0

(1.6)

23.4

2007
£m

1.6
6.2
22.2

30.0
-

30.0

(1.6)

28.4

As a result of the introduction of IAS 17 – “Leases”, the Group considers certain properties to be subject to finance leases. Excluding 999
year leases, the average loan term for these properties is 50 years and the average borrowing rate has been determined at the inception
of the lease to be 8.9%. In addition the Group leases certain fixtures and equipment under finance leases, the obligations for which are
secured by the lessors’ charges over the leased assets. The average lease term is 3-4 years. For the year ended 31 December 2008, the
average implicit borrowing rate was 14.9% (2007: 14.9%). Interest rates are fixed at the contract date. All lease obligations, which are
denominated in Sterling, are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

(e) Loan notes
Included in borrowings due within the year are £3.9m (2007: £15.4m) in respect of loan notes issued as consideration for the acquisition
of two groups during 1999 and 2000. The loan notes of £0.3m issued in 1999 to acquire Sharpe and Fisher can be redeemed on 31 January
and 31 July each year, the final redemption date being 31 January 2010. The £3.6m of loan notes issued for the acquisition of the business
of Broombys Limited are redeemable on 30 June and 31 December each year until the final redemption date of 30 June 2015. The loan
notes of £7.7m issued in 2007 to acquire Tile Giant Ltd were redeemed during the year.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 97

24. B OR ROWI NGS ( cont i nued)

(f) Interest
The weighted average interest rates paid were as follows:

Unsecured senior notes
Bank loans and overdraft
Other borrowings

2008
%

5.8
6.3
5.1

2007
%

5.8
6.4
5.6

Bank term loans and revolving credit facilities of £1,000m (2007: £883.6m) were arranged at variable interest rates. The $400m unsecured
senior notes were issued at fixed rates of interest and swapped into variable rates. This exposes the Group to fair value interest rate risk.
As detailed in note 25, to manage the risk the Group entered into interest rate derivatives arrangements, which for 2008, fixed interest
rates on £655.5m of borrowing. For the year to 31 December 2008 this had the effect of reducing the weighted average interest rates
paid by 0.4%.

In respect of income earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest

rates at the balance sheet date and the periods in which they reprice.

The Group

2008
–––––––––––––––––––

2007
–––––––––––––––––––

Unsecured senior notes
Unsecured variable rate bank facilities
Loan notes
Bank overdraft

Effective
interest
rate

5.8%
3.6%
6.0%
2.8%

6 months
or less
Total
£m

311.4
685.0
3.9
12.4

1,012.7

Effective
interest
rate

5.8%
6.4%
5.7%
-

6 months
or less
Total
£m

203.3
718.6
15.4
-

937.3

The Company

2008
–––––––––––––––––––

2007
–––––––––––––––––––

Unsecured senior notes
Unsecured variable rate bank facilities
Loan notes
Bank overdraft

Effective
interest
rate

5.8%
3.6%
6.0%
2.8%

6 months
or less
Total
£m

311.4
685.0
3.9
103.8

1,104.1

Effective
interest
rate

5.8%
6.4%
5.7%
-

6 months
or less
Total
£m

203.3
718.6
15.4
-

937.3

(g) Fair values
For both the Group and the Company the fair values of financial assets and liabilities have been calculated by discounting expected cash
flows at prevailing rates at 31 December. There were no significant differences between book and fair values on this basis and therefore
no further information is disclosed. Details about the fair values of derivatives are given in note 25.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 98

24. B OR ROWI NGS (con t i n ued )

(h) Guarantees and security
There are cross guarantees on the overdrafts between group companies.

The companies listed in note 18, with the exception of Benchmarx Kitchens and Joinery Limited and Tile Giant Limited, together with

Wickes Limited are guarantors of the following facilities advanced to Travis Perkins plc:

(cid:129) £525m term loan;
(cid:129) £475m revolving credit facility;
(cid:129) $400m unsecured senior notes (note 24(i));
(cid:129) Interest rate and currency derivatives, (note 25).

The group companies have entered into other guarantee and counter-indemnities arrangements in respect of guarantees issued in

favour of group companies by the clearing banks amounting to approximately £13.2m (2007: £19.4m).

(i) Unsecured senior notes
On 26 January 2006 the Group finalised a US private placement that resulted in it receiving $400m. $200m of the unsecured senior notes
is repayable in January 2013 and $200m in January 2016. The US borrowings carry fixed rate coupons of between 130 bps and 140 bps
over US treasuries. As described in note 25, to protect itself from currency movements and bring interest rate exposures back into line with
the Group’s desired risk profile the Group entered into five cross currency swaps.

25. FI NA NCI A L I N ST RUME NT S

Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and
the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument
are disclosed in note 2 to the financial statements.

The carrying value of categories of financial instruments

Financial assets
Designated as fair value through profit and loss (FVTPL)
Derivative instruments in designated hedge accounting
relationships
Loans and receivables (including cash and cash equivalents)
Available-for-sale

Financial liabilities
Designated as fair value through profit and loss (FVTPL)
Derivative instruments in designated hedge accounting
relationships
Borrowings at amortised cost (note 24a)
Trade and other payables at amortised cost (note 28)

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

2.4

80.3
393.9
2.0

478.6

2007
£m

0.7

3.0
448.2
2.0

453.9

2008
£m

2.4

80.3
56.8
-

139.5

8.1

17.7
1,025.1
582.2

1,633.1

29.8
967.3
585.0

1,582.1

17.7
1,091.6
15.3

1,132.7

2007
£m

0.7

3.0
162.1
-

165.8

29.8
937.3
12.7

979.8

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s
maximum exposure to credit risk.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 99

25. FI NA NC IA L I NSTRUM ENT S ( con t i nued)

Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:

(cid:129) Foreign currency forward contracts are measured using quoted forward exchange rates and applicable yield curves from quoted interest

rates matching the maturities of the contracts.

(cid:129) Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves

derived from quoted interest rates.

Included in assets

Interest rate swaps designated and effective as cash flow
hedging instruments
Foreign currency forward contracts at fair value through
profit and loss
Interest rate cap and floor options carried at fair value through
profit and loss
Cross currency interest rate swaps designated and effective
as hedging instruments carried at fair value

Current assets
Non-current assets

Included in non-current liabilities
Cross currency interest rate swaps designated and effective as
hedging instruments carried at fair value
Interest rate cap and floor options carried at fair value through
profit and loss
Interest rate swaps carried at fair value through profit and loss
Interest rate swaps designated and effective as cash hedging instruments

Non-current liabilities

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

2.4

80.3

82.7

2.4
80.3

82.7

2.1
6.0
17.7

25.8

2007
£m

3.0

0.1

0.6

3.7

0.7
3.0

3.7

29.8

-
-
-

29.8

2008
£m

2.4

80.3

82.7

2.4
80.3

82.7

2.1
6.0
17.7

25.8

2007
£m

3.0

0.1

0.6

3.7

0.7
3.0

3.7

29.8

-
-
-

29.8

Interest risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by
the Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts and forward
interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal
hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section

of this note.

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 100

25. FI NA NCI A L I N ST RUME NT S ( con t i nued)

Interest rate swaps
The Group adopts a policy of ensuring that its exposure to changes in interest rates on borrowings is either on a fixed rate basis or is subject
to movements within pre-defined limits. To achieve its desired interest rate profile the Group uses interest rate swaps and interest rate collars.
As part of their interest rate management processes, in respect of the facilities described in note 24, the Group and the Company are
parties to two amortising interest rate swaps, four non-amortising interest rate swaps, two non amortising interest rate swaps with a call
option, with one amortising interest rate floor option and an amortising interest rate cap option. Two amortising interest rate swaps each
have a notional value of £118.5m, the remaining non-amortising swaps have notional values of £50m each. The interest rate cap and floor
options provide a collar on £118.5m of borrowings between rates of 4.21% and 5.7%. Contracts with nominal values of £537m have fixed
interest payments at an average rate of 4.95% for periods up until October 2013 and have floating interest receipts equal to 6 month LIBOR.
At 31 December 2008 the fair value of interest rate derivatives, all of which terminate between 1 year and five years from the balance
sheet date, to which the Group and the Company were parties was estimated at £(25.8)m (2007: £3.6m). This amount is based on market
values of equivalent instruments at the balance sheet date. Interest rate swaps excluding those with a call option are designated and
effective as cash flow hedges and the fair value thereof has been deferred in equity. An amount of £(2.7)m (2007: £0.6m) in respect of
the fair value movement on the cap and floor has been taken to the income statement through net finance charges as the Company has
not applied hedge accounting. An additional amount of £(6.0)m (2007: £nil) in respect of the fair value movement on interest rate swaps
with a call option has been taken to the income statement through net finance charges as the Company has not applied hedge accounting.

Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating interest rate amounts calculated
on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of
issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the
reporting date is determined by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the
contract, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year.

The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts as at the reporting date:

Cash flow hedges outstanding – receive floating pay fixed contracts

Average contract
fixed interest rate
––––––––––––––––––––

Notional principal
amount
––––––––––––––––––––

Fair value
––––––––––––––––––––

2008
%

4.95
5.02
-

2007
%

-
4.95
5.07

2008
£m

237.0
200.0
-

437.0

2007
£m

-
278.0
50.0

328.0

2008
£m

(4.2)
(13.5)
-

(17.7)

2007
£m

-
3.0
-

3.0

1 to 2 years
2 to 5 years
Greater than 5 years

The interest rate swaps settle on a half yearly basis. The floating rate on the interest rate swaps is 6 months LIBOR. The Group will settle the
difference between the fixed and floating interest rate on a net basis. All interest rate swap contracts exchanging floating rate interest
amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from
variable interest rates on borrowings. The interest rate swaps and the interest rate payments on the loan occur simultaneously and the
amount deferred in equity is recognised in profit or loss over the period that the floating rate interest payments on debt impact profit or loss.

Currency swaps
In order to eliminate the currency risk associated with the $400m unsecured senior notes described in note 24(i) the Group and the
Company have entered into five cross currency swaps in varying amounts between £23m and £63m to fix the exchange rate at £1 equal
to $1.73 for the entire lives of the unsecured loan notes, although there is a mutual break clause on each swap on 1 December 2010. The
forward options fix the notional amount receivable and payable in respect of the unsecured senior notes to £231m as well as fixing the
exchange rate applicable to future coupon payments.

The currency swaps manage the Group’s and the Company’s exposure to the fixed interest rate on the US dollar denominated borrowing
arising out of a private placement on 26 January 2006. There are two interest rate swaps of £58m that convert the borrowing rate on $200m
of debt from 5.77% to a variable rate on 6 month LIBOR plus a weighted average basis point increment of 81.9. At 26 January 2006 the
variable rates were both at 5.43%. A further three interest rate swaps of £29m, £23m and £63m convert the borrowing rates on US$50m,
US$40m and US$110m of debt from 5.89% to a variable rate based on six month LIBOR plus basis point increment of 86.5, 86.7 and
86.05 respectively. At 26 January 2006 the variable rates were at 5.47 weighted average %.

At 31 December the fair value of currency derivatives was estimated at £80.3m (2007: £(29.8)m). All of these currency swaps are

designated and effective as fair value hedges.

100

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 101

25. FI NA NC IA L I NSTRUM ENT S ( con t i nued)

Fair value hedges outstanding – receive fixed pay floating contracts

Average contract
floating interest rate
––––––––––––––––––––

Notional principal
amount
––––––––––––––––––––

Fair value
––––––––––––––––––––

2008
%

6.6
6.6

2007
%

-
7.0

2008
£m

115.6
115.6

231.2

2007
£m

-
231.2

231.2

2008
£m

35.8
44.5

80.3

2007
£m

-
(29.8)

(29.8)

2 to 5 years
Greater than 5 years

Interest rate swap contracts exchanging fixed rate interest for floating rate interest are designated and effective as fair value hedges in
respect of interest rates. During the period, the hedge was 100% effective in hedging the fair value exposure to interest movements and
as a result, the carrying amount of the loan was adjusted by £108.2m (2007: £2.3m), which was included in profit or loss at the same
time that the fair value of the interest rate swap was included in profit or loss.

The Group acquires goods for sale from overseas, which when not denominated in Sterling are paid for principally in US dollars. The
Group has entered into forward foreign exchange contracts (all of which are less than one year in duration) to buy US dollars to hedge the
exchange risk arising from these anticipated future purchases. At the balance sheet date the total notional value of contracts to which the
Group was committed was US$46m (2007: US$17m). The fair value of these derivatives is £2.4m (2007: £(0.1)m). These contracts have
not been designated as hedges and accordingly the fair value movement has been reflected in the income statement.

The following table details the Group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on
the undiscounted net cash inflows/(outflows) on the derivative instrument that settle on a net basis and the undiscounted gross inflows
and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed
has been determined by reference to the projected interest and foreign currency rates as illustrated by the yield curves existing at the
reporting date.

2008
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

0-1 year
£m

1-2 years
£m

2-5 years
£m

5+ years
£m

Total
£m

376.7
(289.4)

87.3
(30.5)

56.8

(26.4)

30.4
(1,012.6)
(582.2)
(42.7)

159.9
(129.6)

30.3
-

30.3

30.3
(155.7)
-
(28.7)

(154.1)

(1,607.1)

Gross settled
Interest rate swaps - receipts
Interest rate swaps - payments

Foreign exchange forward contracts

Total gross settled
Net settled
Interest rate swaps

Total derivative financial instruments
Borrowings (note 24)
Other financial liabilities (note 28)
Finance leases (note 24d)

Total financial instruments

16.3
(11.7)

4.6
(30.5)

(25.9)

(3.9)

(29.8)
(16.2)
(582.2)
(3.1)

(631.3)

16.3
(6.2)

10.1
-

10.1

(11.0)

(0.9)
(70.0)
-
(3.1)

(74.0)

184.2
(141.9)

42.3
-

42.3

(11.5)

30.8
(770.7)
-
(7.8)

(747.7)

101

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 102

25. FI NA NCI A L I N ST RUME NT S ( con t i nued)

Gross settled
Interest rate swaps - receipts
Interest rate swaps - payments

Foreign exchange forward contracts

Total gross settled
Net settled
Interest rate swaps

Total derivative financial instruments
Borrowings (note 24)
Other financial liabilities (note 28)
Finance leases (note 24d)

Total financial instruments

2007
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

0-1 year
£m

1-2 years
£m

2-5 years
£m

5+ years
£m

11.7
(15.6)

(3.9)
(8.5)

(12.4)

3.0

(9.4)
(101.8)
(585.0)
(4.2)

(700.4)

11.8
(14.4)

(2.6)
-

(2.6)

1.3

(1.3)
(632.2)
-
(3.2)

(636.7)

35.3
(43.1)

(7.8)
-

(7.8)

0.7

(7.1)
-
-
(9.0)

(16.1)

225.4
(260.0)

(34.6)
-

(34.6)

0.1

(34.5)
(203.3)
-
(35.2)

(273.0)

Total
£m

284.2
(333.1)

(48.9)
(8.5)

(57.4)

5.1

(52.3)
(937.3)
(585.0)
(51.6)

(1,626.2)

Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative
financial instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability
outstanding at the balance sheet date was outstanding for the whole year. A 1.0% increase or decrease is used when reporting interest
rate risk internally to key management personnel. If interest rates had been 1.0% higher/lower and all other variables were held constant,
the Group’s:

(cid:129) Profit before taxation for the year ended 31 December 2008 would have decreased/increased by £7m (2007: increased/decreased by

£5m) including £4m (2007: decreased/increased by £nil) of movement on interest rate swaps with options;

(cid:129) Net equity would have decreased/increased by £11m (2007: decreased/increased by £2m) mainly as a result of the changes in the fair

value of interest rate derivatives.

The Group’s sensitivity to interest rates has decreased during the current period mainly due to the increase in the nominal value of interest
rate derivatives.

102

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 103

26. PROV I SI ON S

At 1 January 2008
Additional provision in the year
Utilisation of provision
Unwinding of discount

At 31 December 2008

Included in current liabilities
Included in non-current liabilities

––––––––––––––––––––––––––––––––––––––––––––––––––––

T H E G R O U P

Property
£m

Insurance
£m

Other
£m

23.3
40.0
(6.8)
1.6

58.1

10.3
47.8

58.1

22.8
7.1
(2.2)
-

27.7

27.7
-

27.7

0.6
-
-
-

0.6

0.6
-

0.6

Total
£m

46.7
47.1
(9.0)
1.6

86.4

38.6
47.8

86.4

The Group has a number of vacant and partly sub-let leasehold properties. Where necessary provision has been made for the residual lease
commitments after taking into account existing and anticipated sub-tenant arrangements, which this year has resulted in a significant
increase in the provision which forms part of the exceptional items shown in note 5b.

It is Group policy to substantially self insure itself against claims arising in respect of damage to assets, or due to employers or public
liability claims. The nature of insurance claims means they may take some time to be settled. The insurance claims provision represents
management’s best estimate, based upon external advice of the value of outstanding insurance claims where the final settlement date is
uncertain.

The following table details the Group’s liquidity analysis of its provisions. The table has been drawn up based on the undiscounted net

cash outflows.

2008
Property
Insurance
Other

2007
Property
Insurance
Other

The Company has no provisions.

0-1 year
£m

1-2 years
£m

2-5 years
£m

5+ years
£m

10.6
27.7
0.6

38.9

9.6
22.8
0.6

33.0

8.5
-
-

8.5

6.1
-
-

6.1

24.3
-
-

24.3

7.2
-
-

7.2

37.0
-
-

37.0

4.9
-
-

4.9

Total
£m

80.4
27.7
0.6

108.7

27.8
22.8
0.6

51.2

103

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 104

27. DE F ER R E D TAX

The Group
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior
reporting periods.

Recognised
in non-
current Recognised Recognised
in equity
assets
£m
£m

in income
£m

31 Dec Recognised Recognised
in equity
in income
£m
£m

2007
£m

-
-
-
-
1.5
-

1.5
-

1.5

1.4
-
-
2.6
(1.3)
(3.3)

(0.6)
4.1

3.5

-
(0.4)
3.7
-
-
-

3.3
15.6

18.9

14.6
12.1
(0.5)
(10.6)
14.2
45.5

75.3
(4.5)

70.8

(0.7)
-
-
0.2
(1.1)
-

(1.6)
4.6

3.0

-
-
0.5
-
0.5
-

1.0
(19.6)

(18.6)

At
1 Jan
2007
£m

13.2
12.5
(4.2)
(13.2)
14.0
48.8

71.1
(24.2)

46.9

At
31 Dec
2008
£m

13.9
12.1
-
(10.4)
13.6
45.5

74.7
(19.5)

55.2

Provided

Capital allowances
Revaluation
Share based payments
Provisions
Business combinations
Brand

Deferred tax liability
Deferred tax asset

Net deferred tax

At the balance sheet date the Group had unused capital losses of £61m (2007: £67.0m) available for offset against future capital profits.
No deferred tax asset has been recognised because it is not probable that future taxable profits will be available against which the Group
can utilise the losses.

Other than disclosed above, no deferred tax assets and liabilities have been offset.
The Group has recognised a deferred tax asset of £19.5m (2007: £4.5m) in respect of the deficit on its pension scheme. The Directors

believe that the deferred tax asset will be realised as the deficit is reduced over the coming years.

The Company

Provided

Share based payments
Provisions

At
1 Jan
2007
£m

(1.2)
(0.5)

(1.7)

Recognised
in equity
£m

0.7
-

0.7

At
31 Dec
2007
£m

(0.5)
(0.5)

(1.0)

Recognised
in equity
£m

Recognised
in income
£m

0.5
-

0.5

-
(0.2)

(0.2)

At
31 Dec
2008
£m

-
(0.7)

(0.7)

28. OTH E R F I NANC IA L L I ABI L I T I E S

Trade payables
Other taxation and social security
Other payables
Accruals and deferred income

Trade and other payables

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

396.4
35.8
77.2
72.8

582.2

2007
£m

405.7
34.8
72.0
72.5

585.0

2008
£m

-
-
15.3
-

15.3

2007
£m

-
-
12.7
-

12.7

The Group
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 47 days (2007: 48 days). The Directors consider that the carrying amount of trade payables approximates to
their fair value. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

The Company
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 30 days (2007: 30 days). The Directors consider that the carrying amount of trade payables approximates to
their fair value.

104

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 105

29. AC QUI SI TI ON OF BUS I NE S SE S

During the year the Group acquired 10 limited companies details of which on an individual basis are not material to the financial statements.
All the acquisitions were accounted for using the purchase method of accounting.

–––––––––––––––––––––––––––––––––––––

2008

2007
–––––––––––––––––––––––––––––––––––––

Book
value
acquired
£m

Provisional
fair value
adjustments
£m

Provisional
fair value
acquired
£m

Book
value
acquired
£m

Provisional
fair value
adjustments
£m

Provisional
fair value
acquired
£m

5.2
5.1
3.0
0.9
(7.1)
(0.4)
(2.7)

4.0

(1.5)
(0.3)
(0.1)
-
(0.4)
-
-

(2.3)

Net assets acquired:
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Tax liabilities
Bank overdrafts and loans

Goodwill

Satisfied by:
Cash
Cash and cash equivalents acquired
Deferred consideration
Issue of loan notes

3.7
4.8
2.9
0.9
(7.5)
(0.4)
(2.7)

1.7
21.7

23.4

22.5
0.9
-
-

23.4

13.8
5.7
12.0
1.6
(12.2)
(1.5)
(6.1)

13.3

-
-
-
-
-
-
-

13.8
5.7
12.0
1.6
(12.2)
(1.5)
(6.1)

13.3
47.7

61.0

47.2
1.6
4.5
7.7

61.0

On the day following completion, the trade and assets of each acquired business were transferred into another Travis Perkins’ subsidiary.
The acquired subsidiary companies are now dormant.

Acquisitions made in the periods under review are not material to the Group in respect of turnover, profits or cashflows. Therefore, the
results and cash flows of the Group, prepared on the basis that the acquisitions were made on 1 January 2008, are not disclosed on the
grounds of materiality.

The individual turnovers, results and cash flow effects of the acquired businesses are not sufficiently material to warrant separate
disclosure. The acquired branches have now been fully integrated into the Travis Perkins’ group accounting systems. As such, the Directors
are unable to calculate meaningful cash flow effects of each of the acquired businesses for the period of Travis Perkins ownership without
incurring undue expense and delay.

Goodwill arising on acquisitions
The goodwill arising on acquisitions made during the year is attributable to the anticipated profitability of these acquisitions and the future
operating synergies arising in the enlarged group. No intangible assets were acquired during the year.

Prior period acquisitions
The provisional fair values ascribed to the net assets of acquisitions made during 2007 and disclosed in the 2007 financial statements
were finalised during the year. There were no significant changes to the values disclosed last year.

105

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 106

30. OPE RATI NG LEASE A R RA NG E ME NT S

The Group leases a number of trading properties under operating leases. The leases are typically 25 years in duration, although some have
lessee only break clauses of between 10 and 15 years. Lease payments are reviewed every five years and increases applied in line with
market rates. The Group also leases certain items of plant and equipment. The Company has no operating lease arrangements.

The Group as lessee

Minimum lease payments under operating leases recognised in income for the year

2008
£m

129.0

2007
£m

115.1

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:

Within one year
In the second to fifth years inclusive
After five years

2008
£m

125.7
471.4
1,078.1

1,675.2

2007
£m

118.2
446.6
1,069.7

1,634.5

The Group as lessor
The Group sublets a number of ex-trading properties to third parties. Property rental income earned during the year in respect of these
properties was £5.7m (2006: £4.6m).

At the balance sheet date, the Group had contracts with tenants for the following future minimum lease payments:

Within one year
In the second to fifth years inclusive
After five years

31. R E L AT E D PA RT Y T RA NS AC T I ON S

2008
£m

4.1
12.9
18.1

35.1

2007
£m

4.0
12.3
18.1

34.4

The Group has a related party relationship with its subsidiaries and with its directors. Transactions between group companies, which are
related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Company and its
subsidiaries are disclosed below. In addition the remuneration, and the details of interests in the share capital of the Company, of the
Directors, are provided in the audited part of the remuneration report on pages 52 to 57.

The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified in

IAS 24 Related Party Disclosures.

Short term employee benefits
Share based payments

2008
£m

4.8
2.4

7.2

2007
£m

5.3
1.0

6.3

The Company undertakes the following transactions with its active subsidiaries:

(cid:129) Providing day-to-day funding from its UK banking facilities;
(cid:129) Levying an annual management charge to cover services provided to members of the Group of £7.3m (2007: £7.0m);
(cid:129) Receiving annual dividends totalling £47.8m (2007: £118.3m).

Details of balances outstanding with subsidiary companies are shown in note 19 and on the Balance Sheet on page 69.

There have been no material related party transactions with directors.
Details of transactions with the Group’s Associate Company ToolStation are shown in note 15. Operating transactions with ToolStation

during the year were not significant.

106

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 107

32. CA PI TA L COMM I TME NT S

Contracted for but not provided in the accounts

33. NE T DE BT R ECONCI LI AT ION

Net debt at 1 January
(Decrease)/increase in cash and cash equivalents
Cash flows from debt
Increase in fair value of debt
Finance charges netted off bank debt
Finance lease surrendered
Loan notes issued

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

1.7

2007
£m

39.7

2008
£m

2007
£m

T H E G R O U P
–––––––––––––––––––

T H E C O M P A N Y
–––––––––––––––––––

2008
£m

(941.0)
(30.9)
47.3
(108.2)
12.5
2.9
-

2007
£m

(804.4)
(30.0)
(96.5)
(2.3)
(1.7)
1.6
(7.7)

2008
£m

(891.0)
(150.1)
45.2
(108.2)
12.5
-
-

2007
£m

(837.6)
33.3
(75.0)
(2.3)
(1.7)
-
(7.7)

(891.0)

Net debt at 31 December

(1,017.4)

(941.0)

(1,091.6)

34. G EARI NG

Net debt under IFRS
IAS 17 finance leases
Fair value adjustment to debt
Finance charges netted off bank debt

Net debt under covenant calculations

Total equity

Gearing

T H E G R O U P
–––––––––––––––––––

2008
£m

(1,017.4)
24.5
80.2
(12.5)

(925.2)

2007
£m

(941.0)
28.8
(27.9)
-

(940.1)

1,018.9

1,036.9

90.8%

90.7%

107

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 108

35. AD JUSTE D FR EE CASH FL OW

Net debt at 1 January
Net debt at 31 December

Increase in net debt
Dividends
Net cash outflow for expansion capital expenditure
Net cash outflow for acquisitions
Net cash outflow for acquisition of investments
Own shares purchased
Cash impact of exceptional items
Interest in associate
Shares issued
Movement in fair value of debt
Movement in finance charges netted off bank debt
Loan notes issued
Lease surrendered
Special pension contributions

Free cash flow
Additional payment run on 53rd Monday

Adjusted free cash flow

36. AD JUSTE D R ET UR N ON EQUI T Y AN D R ET UR N ON CAPITA L

Adjusted return on equity

Profit before tax
Exceptional items

Adjusted profit before tax

Closing equity
Net pension deficit
Closing goodwill written off

Opening equity
Net pension deficit
Opening goodwill written off

Average net assets

Adjusted return on equity

T H E G R O U P
–––––––––––––––––––

2008
£m

(941.0)
(1,017.4)

(76.4)
52.5
53.5
22.5
0.3
-
8.5
20.7
(0.6)
108.2
(12.5)
-
(2.9)
11.5

185.3
-

185.3

2007
£m

(804.4)
(941.0)

(136.6)
48.1
82.2
47.2
-
76.0
-
-
(6.8)
2.4
1.6
7.7
(1.6)
9.6

129.8
28.0

157.8

T H E G R O U P
–––––––––––––––––––

2008
£m

146.3
56.2

202.5

1,018.2
50.4
92.7

1,161.3

1,036.9
11.5
92.7

1,141.1

1,151.2

17.6%

2007
£m

261.4
-

261.4

1,036.9
11.5
92.7

1,141.1

920.3
56.6
92.7

1,069.6

1,105.4

23.6%

108

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 109

36. AD J UST E D R E TUR N ON EQUI T Y A N D R ET U R N ON CAPI TA L ( cont i nued )

Adjusted return on capital

Operating profit
Exceptional items

Adjusted operating profit

Opening net assets
Goodwill written off
Net borrowings
Exchange adjustment
Pension deficit

Opening capital employed
Closing net assets
Goodwill written off
Net borrowings
Exchange adjustment
Pension deficit

Closing capital employed

Average capital employed

Adjusted return on capital

T H E G R O U P
–––––––––––––––––––

2008
£m

215.3
56.2

271.5

1,036.9
92.7
941.0
27.9
11.5

2,110.0
1,018.2
92.7
1,017.4
(80.2)
50.4

2,098.5

2,104.2

12.9%

2007
£m

319.9
-

319.9

920.3
92.7
804.4
30.3
56.6

1,904.3
1,036.9
92.7
941.0
27.9
11.5

2,110.0

2,007.2

15.9%

The calculation of capital employed has been amended to exclude exchange adjustments arising on debt with a result that the return on
capital employed for 2007 has been restated.

37. AD JUSTE D EAR N I NGS BEF OR E I NT ER E ST, TAX AN D DEP R EC IATI ON

Adjusted earnings before interest, tax and depreciation (“EBITDA”) is derived as follows:

Profit before tax
Net finance costs
Depreciation and impairments

EBITDA under IFRS
Exceptional items
Reversal of IFRS effect

Adjusted EBITDA under covenant calculations

Net debt under covenant calculations

Adjusted net debt to EBITDA

T H E G R O U P
–––––––––––––––––––

2008
£m

146.3
69.0
63.0

278.3
56.2
(4.2)

330.3

925.2

2.80x

2007
£m

261.4
58.5
56.3

376.2
-
2.8

379.0

940.1

2.48x

The comparative for net debt to EBITDA is calculated using the calculation set out in the previous loan facility agreement. The calculation
set out in the new facility agreement would give a comparative adjusted EBITDA of £373.0m and consequently a ratio of 2.52x.

109

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 110

F I V E Y E A R R E C O R D

Consolidated income statement

2008
£m

2007
£m

2006
£m

2005
£m

2004
£m

Revenue

3,178.6

3,186.7

2,848.8

2,640.8

1,828.6

Operating profit before exceptional items
Exceptional items

Operating profit
Net finance costs

Profit before tax
Income tax expense

Net profit

Adjusted return on capital

Adjusted return on equity

Basic earnings per share
Adjusted earnings per share

Dividend declared per ordinary share (pence)

Branches at 31 December (No.)

271.5
(56.2)

215.3
(69.0)

146.3
(44.4)

101.9

12.9%

17.6%

87.1p
123.0p

14.5p

1,223

319.9
-

319.9
(58.5)

261.4
(76.1)

185.3

15.9%

23.6%

153.3p
149.8p

44.9p

1,125

278.0
11.6

289.6
(57.7)

231.9
(64.9)

167.0

14.6%

21.8%

137.9p
127.4p

37.4p

1,022

268.0
-

268.0
(61.3)

206.7
(65.9)

140.8

14.8%

23.2%

116.8p
116.8p

34.0p

983

Average number of employees (No.)

15,414

14,580

13,831

14,048

Consolidated cash flow statement

Cash generated from operations
Net interest paid
Income taxes paid
Net purchases of investments, property and plant
Interest in associates
Acquisition of businesses net of cash acquired
Proceeds from issuance of share capital
Dividends paid
Bank facility finance charges
Own shares acquired
Payment of finance lease liabilities
Repayment of unsecured loan notes
(Decrease)/increase in bank loans

Net (decrease)/increase in cash and cash equivalents
Net debt at 1 January
Non cash adjustment
Loan notes issued
Cash flow from debt and debt acquired

Net debt at 31 December

2008
£m

337.6
(63.0)
(66.0)
(82.4)
(20.7)
(22.5)
0.6
(52.5)
(14.7)
-
(2.1)
(11.5)
(33.7)

(30.9)
(941.0)
(92.8)
-
47.3

(1,017.4)

2007
£m

303.9
(72.5)
(74.5)
(118.9)
-
(47.2)
6.8
(48.1)
-
(76.0)
(1.9)
(0.2)
98.6

(30.0)
(804.4)
(2.4)
(7.7)
(96.5)

(941.0)

2006
£m

323.3
(59.0)
(57.3)
(13.5)
-
(10.9)
6.9
(42.5)
-
-
(2.8)
(0.3)
(143.7)

0.2
(982.4)
-
-
177.8

(804.4)

2005
£m

310.8
(38.2)
(47.0)
(70.2)
-
(1,045.5)
6.4
(38.6)
-
(8.1)
(2.3)
(0.8)
872.7

(60.8)
(30.7)
-
-
(890.9)

(982.4)

217.7
-

217.7
(11.2)

206.5
(64.4)

142.1

25.0%

29.2%

124.4p
124.4p

30.5p

751

9,385

2004
£m

222.9
(8.0)
(54.2)
(65.1)
-
(39.0)
90.6
(30.0)
-
-
(1.0)
(3.2)
(30.0)

83.0
(128.5)
(19.4)
-
34.2

(30.7)

110

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 111

Consolidated balance sheet

2008
£m

2007
£m

2006
£m

2005
£m

Assets
Non-current assets
Property, plant and equipment
Goodwill and other intangibles
Derivative financial instruments
Interest in associate
Investment property and other investments
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total assets

Issued capital
Share premium account
Own shares
Other reserves
Accumulated profits

Total equity

Non-current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Retirement benefit obligations
Long term provisions
Deferred tax liabilities
Current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Tax liabilities
Short-term provisions

Total liabilities

Total equity and liabilities

2004
£m

340.7
304.8
-
-
4.2
38.5

200.6
287.8
116.9

534.5
1,513.9
80.3
19.6
5.4
19.5

321.9
388.6
7.7

505.0
1,492.2
3.0
-
5.5
4.5

330.2
422.6
26.3

426.4
1,444.5
3.8
-
5.9
24.2

294.4
364.3
56.3

445.2
1,436.3
1.3
-
4.1
42.9

263.2
322.4
56.1

2,891.4

2,789.3

2,619.8

2,571.5

1,293.5

12.3
179.5
(83.7)
6.0
904.1

12.3
178.9
(83.9)
27.1
902.5

1,018.2

1,036.9

12.2
172.2
(7.9)
29.3
727.3

933.1

763.6
30.9
80.8
13.1
71.1

97.1
0.2
565.2
34.2
30.5

12.1
165.6
(8.1)
23.1
565.3

758.0

1,027.4
-
142.8
13.2
72.6

11.1
5.1
482.3
33.3
25.7

1,813.5

2,571.5

12.1
159.2
-
26.7
452.6

650.6

137.8
-
128.3
-
38.3

9.8
-
293.4
22.6
12.7

642.9

1,293.5

863.9
29.8
16.0
13.7
75.3

103.4
-
585.0
32.3
33.0

1,752.4

2,789.3

1,686.7

2,619.8

1,007.3
25.8
69.9
47.8
74.7

17.8
-
582.2
9.1
38.6

1,873.2

2,891.4

111

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:07 Page 112

N O T I C E O F A N N U A L G E N E R A L M E E T I N G

Notice is hereby given that the forty-fifth Annual General
Meeting of Travis Perkins plc will be held at Northampton Rugby
Football Club, Franklin’s Gardens, Weedon Road, Northampton,
NN5 5BG on Thursday 21 May 2009 at 11.45 a.m.

The Resolutions
Resolutions 1 to 9 (inclusive) will be proposed as ordinary
resolutions. Resolutions 10 to 12 (inclusive) will be proposed as
special resolutions.

Ordinary Business
1. To receive the Company’s annual accounts for the financial
year ended 31 December 2008, together with the directors’
report, and the directors’ remuneration report and the
auditors’ report on those accounts and on the auditable part
of the directors’ remuneration report.

2. To re-appoint Andrew Simon as a non-executive director, who
is retiring by rotation pursuant to Article 76 of the Company’s
Articles of Association. Biographical details of Andrew Simon
appear on page 41.

3. To re-appoint John Carter as a director, who is retiring by
rotation pursuant to Article 76 of the Company’s Articles of
Association. Biographical details of John Carter appear on
page 40.

4. To re-appoint Tim Stevenson as a non-executive director, who
is retiring by rotation pursuant to Article 76 of the Company’s
Articles of Association. Biographical details of Tim Stevenson
appear on page 40.

5. To re-appoint Deloitte LLP, Chartered Accountants, as auditors
of the Company to hold office from the conclusion of this
meeting until the conclusion of the next general meeting of
the Company at which accounts are laid and to authorise the
Directors to fix their remuneration.

6. To re-appoint as a director any person who has been
appointed as a director by the Board in accordance with Article
72 of the Company’s Articles of Association after 1 April 2009
but prior to this Annual General Meeting. (See Note 10)

Special Business
7. That the directors’ remuneration report for the financial
year ended 31 December 2008 set out on pages 49 to 57
be approved.

8. That the authorised share capital of the Company be
increased from £13,500,000 to £22,000,000 by the creation
of 85 million ordinary shares of 10 pence each.

9. That, in substitution for all existing authorities, the Directors be

generally and unconditionally authorised to exercise all the
powers of the Company to allot:

(a) relevant securities (as defined in the Companies Act 1985)
up to an aggregate nominal amount of £4,090,637; and

(b) relevant

securities
securities comprising equity
(as defined in the Companies Act 1985) up to an aggregate
nominal amount of £8,181,274 (such amount to be
reduced by the aggregate nominal amount of relevant
securities issued under paragraph (a) of this resolution 9)
in connection with an offer by way of a rights issue:

ii.

to ordinary shareholders in proportion (as nearly as
may be practicable) to their existing holdings; and

to holders of other equity securities as required by the
rights of those securities or, subject to such rights, as
the directors otherwise consider necessary,

and so that the Directors may impose any limits
or restrictions and make any arrangements which
they consider necessary or appropriate to deal with
treasury shares, fractional entitlements, record dates,
legal, regulatory or practical problems in, or under the
laws of, any territory or any other matter, such
authorities to apply until the end of the Company’s
next annual general meeting after this resolution is
passed (or, if earlier, until the close of business on
30 June 2010) but, in each case, so that the Company
may make offers and enter into agreements before
the authority expires which would, or might, require
relevant securities to be allotted after the authority
expires and the Directors may allot relevant securities
under any such offer or agreement as if the authority
had not expired.

10. That, in substitution for all existing powers and subject
to the passing of resolution 9, the Directors be generally
empowered to allot equity securities (as defined in the
Companies Act 1985) for cash pursuant to the authority
granted by resolution 9 and/or where the allotment constitutes
an allotment of equity securities by virtue of section 94(3A) of
the Companies Act 1985, in each case free of the restriction
in section 89(1) of the Companies Act 1985, such power to
be limited:

(a)

to the allotment of equity securities in connection
with an offer of equity securities (but in the case
of an allotment pursuant to the authority granted
by paragraph (b) of resolution 9, such power shall
be limited to the allotment of equity securities in
connection with an offer by way of a rights issue only):

112

82987 TRAVIS ACCOUNTS:82987 TRAVIS ACCOUNTS 1/4/09 16:55 Page 113

N O T I C E O F A N N U A L G E N E R A L M E E T I N G

ii.

to ordinary shareholders in proportion (as nearly as
may be practicable) to their existing holdings; and

to holders of other equity securities, as required by
the rights of those securities or, subject to such rights,
as the directors otherwise consider necessary,

(b)

to the allotment of equity securities pursuant to the
authority granted by paragraph (a) of resolution 9 and/or
an allotment which constitutes and allotment of equity
securities by virtue of section 94 (3A) of the Companies
Act 1985 (in each case otherwise than in the
circumstances set out in paragraph (a) of this resolution
10) up to a nominal amount of £613,596 calculated, in
the case of equity securities which are rights to subscribe
for, or to convert securities into, relevant shares (as
defined in the Companies Act 1985) by reference to the
aggregate nominal amount of relevant shares which may
be allotted pursuant to such rights.

Such power to apply until the end of the Company’s next
annual general meeting after this resolution is passed (or, if
earlier, until the close of business on 30 June 2010) but so
that the Company may make offers and enter into agreements
before the power expires which would, or might, require equity
securities to be allotted after the power expires and the
Directors may allot equity securities under any such offer or
agreement as if the power had not expired.

11. That a general meeting other than an annual general meeting

may be called on not less than 14 clear days’ notice.

12. That the Company be and is hereby generally and
unconditionally authorised to make one or more market
purchases (within the meaning of section 163(3) of the
Companies Act 1985) of ordinary shares of 10 pence each in
the capital of the Company (“ordinary shares”), provided that:

(a)

(b)

(c)

(d)

(e)

the maximum aggregate number of ordinary
shares authorised to be purchased is 12,271,911
(representing 10% of the issued share capital of the
Company as at 18 February 2009);

the minimum price (exclusive of expenses) which may be
paid for an ordinary share is its nominal value of
10 pence;

the maximum price (exclusive of expenses) which may be
paid for an ordinary share is an amount equal to 105% of
the average of the middle market quotations for an
ordinary share as derived from The London Stock
Exchange Daily Official List for the five business days
immediately preceding the day on which that ordinary
share is purchased;

this authority expires at the conclusion of the next Annual
General Meeting of the Company or 30 June 2010,
whichever is the earlier; and

the Company may make a contract to purchase ordinary
shares under this authority before the expiry of such
authority, which will or may be executed wholly or partly
after the expiry of such authority, and may make a
purchase of ordinary shares pursuant to any such
contract.

By order of the Board

Andrew Pike Company Secretary

Lodge Way House, Harlestone Road, Northampton NN5 7UG

18 February 2009

Registered in England No. 824821

Directions to Northampton Rugby Football Club can be found on
page 116.

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N O T E S T O T H E N O T I C E O F
A N N U A L G E N E R A L M E E T I N G

1. A member of the Company is entitled to appoint a proxy to
exercise all or any of his rights to attend, speak and vote at a
general meeting of the Company. A member may appoint
more than one proxy, provided that each proxy is appointed to
exercise the rights attaching to different shares. A proxy need
not be a member.

2. To appoint more than one proxy, (an) additional proxy form(s)
may be obtained by contacting the Registrars or you may
photocopy the form. Please indicate in the box next to the
proxy holder’s name the number of shares in relation to which
they are authorised to act as your proxy. Please also indicate
by ticking the box provided if the proxy instruction is one of
multiple
forms must
be signed and should be returned together in the same
envelope.

instructions being given. All

3. The right to appoint a proxy under note 1 abovedoes not apply
to persons whose shares are held on their behalf by another
person and who have been nominated
to receive
communication from the Company in accordance with Section
146 of the Companies Act 2006 (“nominated persons”).
Nominated persons may have a right under an agreement with
the registered shareholder who holds shares on their behalf
to be appointed (or to have someone else appointed) as a
proxy. Alternatively, if nominated persons do not have such a
right, or do not wish to exercise it, they may have a right under
such an agreement to give instructions to the person holding
the shares as to the exercise of voting rights.

4. To be effective, the instrument appointing a proxy and any
authority under which it is signed (or a notarially certified copy
of such authority) for the Annual General Meeting to be held
at Northampton Rugby Football Club, Franklins Gardens,
Weedon Road, Northampton, NN5 5BQ at 11.45 am on
Thursday 21 May 2009 and any adjournment(s) thereof must
be returned to Capita Registrars, Proxy Department, The
Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU,
by 11.45 am on 19 May 2009. Alternatively you may submit
your proxy form online by accessing the Shareholder portal at
www.capitaregistrars.com, logging in and selecting the “Proxy
Voting” link. If you have not previously registered for electronic
communications, you will first be asked to register as a new
user, for which you will require your investor code (which can
be found on the enclosed proxy form, your share certificate
and dividend tax voucher), family name and post code (if
resident in the UK).

CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service may
do by using the procedures described in the CREST Manual.
CREST personal members or other CREST sponsored
members, and those CREST members who have appointed a
voting service provider(s) should refer to their CREST sponsors

or voting service provider(s), who will be able to take the
appropriate action on their behalf.

In order for a proxy appointment made by means of CREST
to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance
with Euroclear UK & Ireland Limited’s specifications and must
contain the information required for such instructions, as
described in the CREST Manual. The message must be
transmitted so as to be received by the Company’s agent (ID
RA10) by the latest time(s) for receipt of proxy appointments
specified in the notice of meeting. For this purpose, the time
of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Application
Host) from which the Company’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by
CREST.

CREST members and, where applicable, their CREST
sponsors and voting service providers should note that
Euroclear UK & Ireland Limited does not make available
special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take
(or, if the CREST member is a CREST personal member
or sponsored member or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary
to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors
or voting service providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations
of the CREST system and timings.

The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001.

In each case the proxy appointments must be received by
the Company not less than 48 hours before the time
appointed for holding the meeting or any adjournment thereof.
A form of proxy is enclosed with this notice. The
appointment of a proxy does not preclude a member from
attending the meeting and voting in person, in which case any
votes of the proxy will be superseded.

5. Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered on the
register of members of the Company as at 6.00 p.m on
Tuesday 19 May 2009 shall be entitled to attend or vote at the
meeting in respect of the number of shares registered in their
name at that time. Changes to entries on the register of
members after that time shall be disregarded in determining
the
to attend or vote at
the meeting.

rights of any person

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5
6. The register referred to in note means the issuer register of
members and the operator register of members maintained in
accordance with Regulation 20 of the Uncertificated Securities
Regulations 2001.

7. The following documents will be available for inspection at the
Registered Office of the Company during usual business hours
on any weekday (Saturdays and public holidays excluded)
from the date of this Notice to the date of the meeting and at
Northampton Rugby Football Club from 11.15 a.m. on the day
of the meeting until the conclusion of the meeting.
(cid:129) The register of directors’ interests kept by the Company.
(cid:129) Copies of contracts of service of directors and non-
executive directors’ letters of appointment with the
Company, or with any of its subsidiary companies.

(cid:129) A copy of the Company’s Articles of Association.
(cid:129) A statement giving particulars of directors’ relevant

transactions.

8. At 18 February 2009 (being the latest practicable date before
publication of this notice) the issued share capital of the
Company consisted of 122,719,114 ordinary shares, carrying
one vote each. Therefore, the total voting rights in the
Company as at 18 February 2009 were 122,719,114.

In order to facilitate voting by corporate representatives
at the meeting, arrangements will be put in place at the
meeting so that: (i) if a corporate shareholder has appointed
the Chairman of the meeting as its corporate representative
with instructions to vote on a poll in accordance with the
directions of all of the other corporate representatives for that
shareholder at the meeting, then on a poll those corporate
representatives will give voting directions to the Chairman and
the Chairman will vote (or withhold a vote) as corporate

representative in accordance with those directions; and (ii) if
more than one corporate representative for the same
corporate shareholder attends the meeting but the corporate
shareholder has not appointed the Chairman of the meeting
as its corporate representative, a designated corporate
representative will be nominated, from those corporate
representatives who attend, who will vote on a poll and the
other corporate representatives will give voting directions to
that designated corporate
representative. Corporate
shareholders are referred to the guidance issued by the
Institute of Chartered Secretaries and Administrators on
proxies and corporate representatives (www.icsa.org.uk) for
further details of this procedure. The guidance includes a
sample form of representation letter if the Chairman is being
appointed as described in (i) above.

10. At the time of printing this Notice, the Board is expecting to
appoint an additional non-executive director in the near future.
It is the Board’s expectation that the appointment will take
place before this Annual General Meeting is held. According
to Article 72 of the Company’s Articles of Association, a person
appointed as a director by the Board may hold his post only
until the dissolution of the next annual general meeting.
Therefore, if the above appointment takes place as expected,
the Annual General Meeting will be asked to consider and, if
thought fit, approve a resolution for the re-appointment of that
person. As the appointment is still under discussion, it is not
possible to provide with this Notice the name of, or details
concerning, the proposed director. The Board can confirm,
however, that it will send to shareholders a copy of the
announcement made by the Company pursuant to the Listing
Rules in relation to the appointment of the new director once
this has been made.

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D I R E C T I O N S T O N O R T H A M P T O N
R U G B Y F O O T B A L L C L U B

Franklin’s Gardens, Weedon Road, Northampton, NN5 5BG
The Travis Perkins AGM will be held in The Captains Lounge and The Rodber Suite. Parking is directly outside in the VIP Car Park
(follow VIP Car park signs off Weedon Road).

TO M1
JUNCTION 16
W E E D O N R O A D A 4 5

TO WELFORD AND
MARKET HARBOROUGH

DUSTON ROAD

Y
A
W
E
T
A
G
L
L
O
T

W E E D O N ROAD A4500

BEACON BINGO

NORTHAMPTON
RUGBY FOOTBALL
CLUB

CINEWORLD

SIXFIELDS

TGI FRIDAYS

W
A
Y

NORTHAMPTON
TOWN FOOTBALL CLUB

TO M1
JUNCTION 15A

E R O A D A4500

SPENCER B RI D

VIP CAR PARK

D A

428

TO NORTHAMPTON
TOWN CENTRE

RAILWAY
STATION

Directions from the Railway Station
Turn right out of the station. Continue past Thomas A Becket
pub, Church and Co. factory and bus station. At fork in road
bear left and Franklin’s Gardens is on your left. Walk takes
approx 15 minutes.

Nearest Airports

London Luton and Nottingham East Midlands.

Further Information
For detailed directions you might want to try the following
websites:
Multimap (www.multimap.com)
The AA (www.theaa.com)
The RAC (www.rac.co.uk)

For further details about the venue:
www.northamptonsaints.co.uk

From the South (via the M1)
Exit off motorway at junction 15A and follow the signs towards
Sixfields. At roundabout with TGI Fridays on the right and a BP
petrol station on the left carry straight on up the hill. At
Cineworld roundabout turn right towards the Town Centre. Go
straight over the next roundabout (Sainsbury’s is on the left
before the roundabout and Wickes on the right after the
roundabout) and set of traffic lights. Continue on that road
(Weedon Road). The entrance to the Saints is on the right
immediately after Beacon Bingo. Follow signs for VIP car park
off Weedon Road.

From the North (via the M1)
Exit off motorway at junction 16 and follow the A45 to
Northampton. At Cineworld roundabout continue straight on
and follow directions from the South.

From the East, Peterborough, Cambridge, Wellingborough
Follow A45 to M1 junction 15. Head north to junction 15A then
follow directions from the South.

From Welford, Market Harborough
Aim towards the Kingsthorpe area of Northampton. Turn right
at the major set of traffic lights (the Cock Hotel is on the
corner), signposted Sixfields. Continue on this road until you
get to Cineworld roundabout (approx 3 miles) then continue as
from the South.

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I N F O R M A T I O N

Some of the sites provide information about branch locations
and allow access to prices and the product range available.
Customers are also able to construct their own price quotation
that includes any special price arrangements that have been
negotiated with the Group.

E L E C T R O N I C C O M M U N I C A T I O N

In accordance with the Companies Act 2006 and the Company’s
Articles of Association, the Company is allowed to use its website
to publish statutory documents and communications to
shareholders, such as the Annual Report and Accounts and the
Notice of the AGM. You can therefore view or download a copy of
the Annual Report and Accounts and the Notice of the AGM by
going to our website at www.travisperkinsplc.com (see section
called ‘Investor Centre’). If you received a hard copy of this report
in the post then you will not have consented to this method
of publication. Should you now wish to consent to this
method of publication, you should contact Capita Registrars,
Shareholder Administration Support, Freepost RLYX-GZTU-KRRG,
34 Beckenham Road, Beckenham, BR3 9ZA. By reducing the
number of communications sent by post, it will not only result in
cost savings to the Company but also reduce the impact that the
unnecessary printing and distribution of reports has on the
environment. Please note that if you consent to website
publication, you will continue to be notified each time that the
Company places a statutory communication on the website. This
notification will be sent to you by post. However, you may also
choose to receive notifications by e-mail and we would encourage
you to do so. If you wish to receive these notifications by email,
you should register at www.capitashareportal.com, and follow
the instructions given below under the heading ‘Accessing the
Share Portal’.

Please telephone Capita Registrars on 0871 664 0391
(within the UK, calls cost 10p per minute plus network extras)
or +44 20 8639 3367 if calling from outside the UK if you have
any queries.

S H A R E H O L D E R E N Q U I R I E S

Shareholder enquiries should be directed to the Company
Secretary at the Company’s registered office Lodge Way House,
Lodge Way, Harlestone Road, Northampton NN5 7UG (telephone
01604 752424; email cosec@travisperkins.co.uk) or to the
Company’s registrars, Capita Registrars, at Northern House,
Woodsome Park, Fenay Bridge, Huddersfield, HD8 0GA (telephone
0871 664 0300 (calls cost 10p per minute plus network extras);
email ssd@capitaregistrars.com).

Should your query relate to a pensions matter please email
pensions@travisperkins.co.uk or if your query relates to a
marketing matter please email marketing@travisperkins.co.uk

F I N A N C I A L D I A R Y

Annual General Meeting
Announcement of interim results
Announcement of 2009 annual results

21 May 2009
July 2009
February 2010

A N N U A L G E N E R A L M E E T I N G –
C A T E R I N G A R R A N G E M E N T S

It has always been the Company’s custom to provide a light
luncheon for shareholders following the A.G.M. This year, a buffet
luncheon will be available. Unlike in previous years, you need not
notify the Company in advance if you would like lunch.

I N T E R N E T

There are sites on the internet that carry a range of information
about the Group and its principal brands, products and services
at the following addresses:

www.travisperkinsplc.com (investor relations site)
www.travisperkins.co.uk*
www.bmpublicsector.co.uk
www.cityplumbing.co.uk*
www.ccfltd.co.uk*
www.toolsinthepost.co.uk*
www.toolmart.co.uk
www.keyline.co.uk*
www.wickes.co.uk*
www.tilegiant.co.uk
www.benchmarxjoinery.co.uk
www.ifloco.uk
www.toolstation.co.uk*

*These sites allow credit account holders to order on-line with the
exception of the Wickes, Toolsinthepost and ToolStation sites
which allow on-line ordering by secure card transaction.

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I N F O R M A T I O N

N OT ES

CAP ITA R EG ISTRAR S

1. Before consenting to receive documents and communications
via the website, shareholders should ensure that they have a
computer with internet access and the Adobe Acrobat reader
facility. The Adobe Acrobat reader software may be obtained via
the website free of charge.

If you elect to receive notifications of the publication of the
documents and communications on the website electronically,
it will be your responsibility to notify our registrars, Capita, of
any subsequent change in your e-mail address or other
contact details.

If you are not resident in the United Kingdom, it is your
responsibility to ensure that you may validly receive documents
and communications electronically (either generally or in
relation to any particular document or communication) without
the Company being required to comply with any governmental
or regulatory procedures or any similar formalities. The
Company may deny electronic access to documents and
communications relating to certain corporate actions in respect
of those shareholders who it believes are resident in
jurisdictions where it is advised that to provide such access
would or may be a breach of any legal or regulatory
requirements.

4. The Company’s obligation to provide shareholder documents
to you is satisfied when it transmits an electronic message.
The Company is not responsible for any failure in transmission
for reasons beyond its control any more than it is for postal
failures. In the event of the Company becoming aware that an
electronic communication to you has not been successfully
transmitted, a further two attempts will be made. If the
transmission is still unsuccessful, a hard copy of the relevant
notification will be posted to your registered address.

5. Your registration to receive electronic communications and
your relevant contact address details will stand until such time
as the Company receives alternative instructions from you by
e-mail or in writing.

6. The Company takes all reasonable precautions to ensure no
computer viruses are present in any electronic communication
it transmits, but the Company shall not be responsible for any
loss or damage arising from the opening or use of any e-mail
or attachments sent by the Company or on its behalf. The
Company recommends
that shareholders subject all
messages to computer virus checking procedures. Any
electronic communication received by or on behalf of the
Company, including the lodgement of an electronic proxy form,
that is found to contain any computer virus will not
be accepted.

7. The Company reserves the right, irrespective of your election,
to revert to sending hard copy documentation by post
whenever
to
do so.

it necessary or desirable

it considers

The Company’s registrars, Capita Registrars (“Capita”), provide a
number of services that, as a shareholder, might be useful to you;-

Registrar’s On-line Service
By logging onto www.capitashareportal.com and following the
prompts, shareholders can view and amend various details on
their account. Please note that you will need to register to use this
service for which purpose you will require your unique investor
code, which can be found on your share certificate, proxy card or
dividend tax voucher.

Share Dealing Services
Capita offers an on-line and telephone share dealing service which
is available by logging on to www.capitadeal.com or telephoning
0871 664 0446 (calls cost 10p per minute plus network extras).
For the on-line service, Capita’s commission rates are 1% of the
value of the deal (minimum £17.50, maximum £50) and for the
telephone service, Capita’s commission rates are 1.50% of the
value of the deal (minimum £22.50, maximum £100). An additional
£2.50 will be levied on all share dealings to cover Capita’s
compliance and administrative costs.

Dividend Re-investment Plan (“DRIP”)
The Board has not proposed the payment of a final dividend for
2008. Nevertheless, shareholders may wish to know about this
plan, which allows you to use your dividends to buy further shares
in Travis Perkins. The DRIP is administered by Capita IRG Trustees
Ltd (“CIRGT”). CIRGT will instruct the broker to buy shares on the
dividend payment date at the then current market price. Any cash
left over which is insufficient to purchase a whole share will be
carried forward and held without interest, in a Client Money bank
account. The DRIP commission, charged to the shareholder is 1%
of the purchase price of the shares, with a minimum charge of
£2.50. This is exclusive of stamp duty reserve tax at 0.5% of the
deal value. Should you wish to apply you should request
an application pack by telephoning 0871 664 0381 (calls cost
10p per minute plus network extras) or, if calling from
overseas +(44) 20 8639 3402; alternatively you can email
shares@capitaregistrars.com.

Dupicate Share Register Accounts
If you are receiving more than one copy of our report, it may be
that your shares are registered in two or more accounts on our
register of members. If that was not your intention you might
consider merging them into one single entry. Please contact
Capita who will be pleased to carry out your instructions.

Overseas Shareholders
Capita has an International Payment Service that allows you to
receive your dividend payments in your local currency, sent directly
to your local bank account - potentially saving you time and
from Shareholder
money. Further details are available
Administration, Capita Registrars, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU; telephone UK: 0871 664 0386
(Calls cost 10 pence per minute plus network extras) or
+44 20 8639 3405 (from outside the UK) or by logging on to
www.capitaregistrars.com/international.

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