TRAVIS PERKINS PLC
Travis Perkins
The largest supplier of building materials in the UK
A n n uAl R e p oRt An d A c c o u n t s 2 0 1 2
TRAVIS PERKINS PLC
General
Merchanting
Division
travis perkins
Midlands
and north West
travis perkins
northern
travis perkins
south east
travis perkins
south West and Wales
Consumer
Division
tile Giant
toolstation
Wickes
Specialist
Merchanting
Division
Plumbing
and Heating
Division
Benchmarx
Birchwood price tools
ccF
Keyline
Bss
city Heating spares
city plumbing
connections
dHs
F&p Wholesale
pts
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T R A V I S P E R K I N S A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 2
Contents
Overview
Reports
Governance
18
Chairman’s Statement
20
Chief Executive’s
Review of the Year
30
Deputy Chief Executive’s
Review of the Year
38
Finance Director’s
Review of the Year
44
Statement of Principal
Risks and Uncertainties
46
Environmental Report
50
Health & Safety Report
2
Financial Highlights
2
Operating Highlights
3
Financial Summary
5
Key Performance
Indicators
6
Our Group Mission,
Vision and Values
7
Who we are
12
Our Investment Case
14
Our Strategy
15
Delivering our Strategy
17
Our Business Model
54
Directors
56
Corporate
Responsibility Statement
56
Committees and
Professional Advisers
57
Corporate Governance
61
Audit Committee Report
64
Directors’
Remuneration Report
75
Nominations
Committee Report
76
Directors’ Report
80
Statement of
Directors’ Responsibilities
81
Independent
Auditor’s Report
Financial
Statements
82
Income Statements
83
Statements of
Comprehensive Income
84
Balance Sheets
86
Consolidated Statement
of Changes in Equity
87
Statement of
Changes in Equity
88
Cash Flow Statements
89
Notes to the
Financial Statements
130
Five Year Record
Shareholder
Information
132
Notice of Annual
General Meeting
134
Notes to Notice of
Annual General Meeting
136
Directions to Annual
General Meeting
137
Other Shareholder
Information
Forward looking statements
The review of the businesses contained in the annual report and accounts contains forward looking statements with respect to the financial
condition, results, operations and business of the Travis Perkins plc group. These statements and forecasts include risk and uncertainty because
they relate to events and depend on circumstances that occur in the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by the forward statements.
1
Financial
Highlights
Operating
Highlights
Increased BSS synergy
target achieved and
integration programme
near completion
Toolstation network
expansion to 123
branches and Toolstation
Europe trial launched
Gross margin
before synergies
increased by 0.2%
Tight cost control, like-for-
like overheads down 2.3%
Solfex systems acquired
on 30 January 2013
for initial consideration
of £8m
Group revenue up 1.4%
at £4,845m, down 1.4%
on a like-for-like basis
Adjusted operating
profit, up 4.3% to £327m,
adjusted PBT up 1.1% to
£300m, and adjusted EPS
up 2.1% to 95.1p
Sustained adjusted
operating margin at 6.7%
Reported PBT after
exceptional items up
16.2% to £313m
Free cash flow
generated of £242m
Underlying £155m debt
reduction, net debt down
to £452m, and financing
ratios further improved
Full year dividend of 25p
per share up 25%,
with adjusted dividend
cover now 3.8 times
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Financial Summary
Revenue
Adjusted:*
Operating profit
Profit before taxation
Profit after taxation
2012
£m
2011
£m
%
4,844.9
1.4
4,779.1
Note
5a
5b
5b
326.6
299.9
226.8
4.3
1.1
3.6
2.1
3.4
16.2
22.2
20.6
313.2
296.7
219.0
93.1
290.5
269.6
212.4
90.3
Adjusted earnings per ordinary share (pence) 11b
95.1
Statutory:
Operating profit
Profit before taxation
Profit after taxation
Basic earnings per ordinary share (pence)
300.5
313.3
259.6
108.9
Total dividend declared
per ordinary share (pence)
12
25.0p
25.0
20.0p
* Throughout this Annual Report the term ‘adjusted’ has been used to signify that the effects of the exceptional items, amortisation of intangible assets
and the associated tax impacts have been excluded from the disclosure being made.
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Gareth Hurst, Driver
and Trevor Horwood,
Branch Supervisor
at Travis Perkins
4
Managed Services,
Aylesbury
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Key Performance Indicators
Revenue
(£m)
Like-for-like
sales growth (%)
Adjusted profit
before taxation (£m)
Adjusted earnings
per share (pence)
2011
2012
2011
2010
2011
2012
2011
2012
2010
2010
2010
2012
Adjusted pre-tax
return on capital (%)
Free cash flow (£m)
Net debt to
EBITDA
Employee
retention (%)
2010
2011
2012
2010
2011
2010
2012
2010
2011
2012
2011
2012
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Our Group Mission, Vision and Values
Our Group Mission
Our Group Values
‘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’.
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 stake-
holders; we think about the impact of our actions; we search for similarities.
Our Group Vision
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.
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.
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.
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Who we are
TRAVIS
PERKINS
PLC
Norman Bell
Group Development
Director
Carol Kavanagh
Group Human
Resources Director
Martin Meech
Group Property
Director
Andrew Pike
Company Secretary
and General Counsel
Robin Proctor
Supply Chain
Director
Jean-Jacques
Van Oosten
Chief Informatioin
Officer
Travis Perkins plc, is the UK’s
largest supplier to the building and
construction market, one of the most
economically significant activities
in the UK.
The present day Company was
formed in 1988 out of a merger
between Travis and Arnold plc, a
company with 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.
Group reorganisation
On 1 January 2012 we reorganised the business into four divisions, General
Merchanting, Specialist Merchanting, Consumer and Plumbing & Heating.
It is on the new divisional structure described in this section that we have
prepared the Annual Report.
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GENERAL
MERCHANTING
DIVISION
Kevin Appleton
Divisional Chairman
Phil Gransden
MD South East
Kieran Griffin
MD Midlands and
North West
David Kelman
MD North
Mark Nottingham
MD South West
and Wales
network expansion, entry into new
market segments and exploitation
of multi channel opportunities.
The Best Practice programme is
designed to enhance our overall
service to trade customers and
covers all of their key requirements:
even though all four general
merchanting businesses are already
operating to high standards in
these areas they have stretching
targets in place to deliver further
improvements.
Network expansion will be
concentrated on identifying prime
locations through brownfield
openings and small acquisitions.
In addition, store projects and
framework agreements will continue
to be expanded with Local Authorities
and Housing Associations.
Our general merchanting division,
trades nationally through the Travis
Perkins brand and comprises four
geographically organised individual
businesses. It has 636 branches,
supplying building materials to
professional building companies,
contractors and tradesmen
throughout Great Britain.
Kevin Appleton, who joined the
Group in 2011, leads the General
Merchanting business in his role as
Divisional Chairman. The Managing
Directors of the four businesses
are Kieran Griffin (Travis Perkins
Midlands and the North West), Phil
Gransden (Travis Perkins South
East), David Kelman (Travis Perkins
North) and Mark Nottingham
(Travis Perkins South West and
Wales). The customers of the four
general merchanting businesses are
primarily professional tradesmen,
ranging from sole traders to
national housebuilders, whose key
requirements are product range and
availability, competitive pricing and
customer service.
The strategy of the general
merchanting business aims to
increase market share through
implementation of our best practice
programme, ongoing branch
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SPECIALIST
MERCHANTING
DIVISION
Arthur Davidson
Divisional Chairman
Andrew Harrison
MD Keyline
Chris Larkin
MD Benchmarx
Howard Luft
MD CCF
In 2006 Benchmarx became the
first group brand to be created as
a completely new business within
a market adjacent to the markets
already served by the Group. 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 Chris
Larkin, formerly a Regional Director
within Travis Perkins South East,
who became Managing Director in
July 2009.
Rinus Roofing Supplies, an
associate company in which the
Group holds a 25% interest, is
a supplier of roofing materials.
The Group has entered into a
development agreement with Rinus
aimed at creating a new competitor
in this adjacent market. Although
the Group sells many of the products
available through Rinus, specialist
roofing contractors prefer using
specialist distributors in this market.
The specialist merchanting business
consists of three separate businesses
trading from 203 branches under
the following brands; Keyline, CCF
and Benchmarx. We also have an
interest in an associate company,
Rinus Roofing Supplies which has
12 branches. Arthur Davidson is
the Divisional Chairman. He has
worked in merchanting for over
thirty years having joined Keyline
prior to its acquisition by the Travis
Perkins Group.
Andrew Harrison, the Managing
Director of Keyline has been with
the Group since 1989. Keyline is
a specialist merchant supplying
heavy building materials and
civils and drainage solutions to the
construction industry throughout
the UK. Keyline is known for its
knowledgeable staff and excellent
delivery service.
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 Howard Luft,
formerly managing director of Buck
and Hickman, which was sold by the
Group in September 2011.
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CONSUMER
DIVISION
Jeremy Bird
Divisional Chairman
Neil Carroll
MD Toolstation
Simon King
MD Wickes
Andy Morrison
MD Tile Giant
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The consumer division comprises
three businesses; Wickes, a national
chain of DIY retail outlets, Tile
Giant a ceramic tile merchant
acquired in 2007 and Toolstation a
multi-channel operator, which was
acquired by the Group on 3 January
2012. We have 458 branches in the
consumer division.
The Chairman of the Consumer
Division is Jeremy Bird who joined
Wickes 19 years ago and has held
a number of senior positions in the
Group including that of Managing
Director of Wickes. The present
managing director of Wickes is
Simon King who joined the Company
at the end of 2011 and has fulfilled
various external retail roles including
chief operating officer of Asda.
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 224
stores nationwide.
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 undertake
more complete DIY projects. These
customers are more demanding in
terms of service, quality and price.
The business meets its customers’
expectations by offering a focussed
range of high quality, primarily own
brand, competitively priced home
improvement products, such as
timber, building materials, tools and
decorative materials. In addition,
Wickes stores offer a range of
kitchens and bathrooms, which are
sold through both in-store showrooms
and 11 standalone specialist kitchen
and bathroom stores.
In 2007, Travis Perkins acquired
its seventh brand, Tile Giant. The
brand is now trading from 106
stores. Under the leadership of
managing director Andy Morrison,
the brand offers a strong pipeline for
further expansion.
The Group first took a minority
investment in Toolstation, a direct
retailer of lightside products, during
2008 before acquiring the remaining
shares in 2012. Since then, led by
its founder Mark Goddard-Watts,
with support from the Group, this
multi-channel retailer of lightside
products has rapidly expanded
its trade counter network and
now occupies 123 trade counters
throughout Great Britain. It also
operates a very successful catalogue
based internet business.
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Direct Heating Spares
PLUMBING
AND HEATING
DIVISION
Paul Tallentire
Divisional Chairman
Ian Church
MD PTS Group
Frank Elkins
MD BSS Industrial
John Frost
MD City Plumbing
Paul Nieduszynski
MD Birchwood
Price Tools
plumbers, independent merchants
and industrial end users through
a network of 397 branches. 395
branches are located in the United
Kingdom and two in the Republic
of Ireland.
PTS operates from 314 branches
and supplies a wide range of
customers from national contractors
to sole trading plumbers and heating
engineers.
The industrial, commercial,
process, construction and warehouse
markets are serviced through a
network of sixty two branches of BSS
Industrial in the UK and Ireland.
Birchwood Price Tools is a
wholesaler of power tools and
accessories, hand tools, safety wear
and general consumables and F&P
Wholesale supply heating, plumbing
and sanitaryware to smaller
merchanting businesses.
The new plumbing and heating
division was established on 1
January 2012 under the leadership
of its Chairman, Paul Tallentire.
The division consists of the original
plumbing business of the Travis
Perkins group, City Plumbing
Supplies together with the
businesses of The BSS Group, which
were acquired on 14 December 2010.
It is now the leading plumbing and
heating business in the UK operating
from 587 locations.
City Plumbing Supplies, run by
managing director John Frost, is a
major nationwide plumbing and
heating merchant serving both the
contract market and the general
plumbing and heating market from
189 branches. The business offers
high quality products and expert
service to the trade. In 2010, a new
operation was formed, City Heating
Spares, the spare parts division of
City Plumbing.
The ex-BSS businesses are
leading distributors of plumbing
and heating products to specialist
trades. Their principal activities
are the distribution and sale of
heating, ventilation and plumbing
products, tools and industrial
supplies to, amongst others,
industrial contractors, domestic
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Our Investment Case
Market prospects are good for the medium term…
Prospects for growth in our markets in the medium term
are strong. Construction activity is at unsustainably
low levels when compared to long run trends. It is clear
that there is a significant requirement for more housing
across the UK to address household composition and
for significant upgrading and repair of infrastructure,
domestic and public buildings. Climate change concerns
also indicate the value of the building materials market
will increase significantly.
On-going expansion…
There is still significant scope to grow the existing
branch network by extending our multi-channel and
geographic coverage further in the UK. Our estimates
suggest that sufficient opportunities exist for us to
extend our operations to around 3,000 locations, backed
up by an increasingly sophisticated national supply
chain network. We have a significant and popular multi-
channel capabilities across the Group, led by Wickes
and Toolstation, with sales now growing at over 25% p.a.
Potential to enter new market adjacencies…
There is large untapped potential in specialised building
materials distribution market segments where the Group
does not have a presence. The Group has successfully
established itself in six specialist channels since 1999,
with BSS, Toolstation and Tile Giant being the most
recent examples.
UK market leadership allows economies of scale…
Travis Perkins is the largest supplier of building
materials in the UK, a position it has achieved through
major acquisitions, the ‘roll up’ of smaller operators
and the organic development of new branches. Our size
allows us to benefit from economies of scale through
both our centralised back office, business services and
sourcing model. The Group has a history of producing
like-for-like and total market share gains in competitive
trade and consumer markets. It has achieved this
by focussing its operating management on offering
a compelling customer proposition in the market
segments in which it trades.
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Attracting and retaining the best people at all levels…
We have a high quality team, with huge experience of
our industry that has consistently delivered a strong
profit performance regardless of the economic climate
it faces. We attract and retain the best people in our
sector and operate at high levels of engagement having
a culture of continuous improvement, which encourages
colleagues to develop new skills that allow them to excel
in their jobs.
Strong customer proposition and brand identity…
greater focus for each business
Travis Perkins trades through sixteen national brands
via a network of nearly 1,900 locations. Each brand
has developed an overall proposition and customer
experience, which recognises the requirements of its
customers, and has defined a brand essence and values
by which each business will operate. This approach
has improved customer loyalty and its continued
deployment is key to growing both our customer
base and operating margin. All of our businesses are
challenged to achieve a best in class rating by customers
and a best in class operating margin ahead of any
comparable business,
Best practice… leading operational efficiency
We have a strong track record of improving our
operational efficiency through the automation
of systems and processes designed to increase
productivity, improve availability, reduce the cost of
buying and holding stock and manage our property
portfolio to reduce costs and leverage value in our assets.
Our objective is to ensure that each enhancement will
deliver improved returns for shareholders going forward.
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Our Strategy
•
•
•
Operating a performance management system,
closely matched to arrangements for incentives, that
encourages the right economic behaviour and allows
all colleagues to participate in the financial success of
the Group;
Recruiting and developing people whose personal
characteristics are consistent with a culture of
customer sensitivity, continuous improvement and a
drive for performance;
Cautiously, with a low-risk and low-capital approach
that does not adversely affect profits and debt
reduction, exploring the prospects for expansion in
new markets.
Management, at Executive Director, Executive
Committee, Division and individual business levels, are
held to account on both current performance and the
delivery of improved capabilities on each of these aspects
of strategy via a balanced scorecard. This scorecard
forms part of the metrics for incentives for Executive
Directors and the Executive Committee. The balance of
measures is designed to ensure that management are
focussed on both current performance and the long-term
improvement and quality of the Group.
The statements of Mission, Vision, and Values on
page 6 of this annual report set out what we exist to do,
the direction we aim to take the Group, and the way in
which we believe we should work. The strategy we are
following to achieve these aims is designed to maximise,
over the long-term, shareholder returns through
innovation, organic self-help initiatives and targeted
expansion. It involves:
•
Creation, acquisition and development of businesses
that seek to serve all the segments for the distribution
of building materials in the UK;
Continuously improving the customer and supplier
proposition in all our businesses to become the
highest rated in each segment, as measured by
customers, and as tested by seeking to outperform
markets on a like-for-like basis;
Exploit the economies of scale this creates through
the centralisation of common activities and common
purchasing into low cost, highly efficient and powerful
central functions;
Sustaining an organisational model that devolves
authority to operating managers and allows them
to compete with the most effective competitors with
minimal constraints, but always maintaining very
strong controls;
•
•
•
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Delivering our Strategy
The table below shows how we approach the various
dimensions of our strategy, how we judge progress and
how our strategy is integrated with our management of
the principal risks faced by the Group, which are set out
on pages 44 and 45.
Successful execution of our strategy is dependent
upon maintaining our IT capabilities, purchasing and
distributing goods effectively and recruiting and retaining
the best people. We operate a strong and well-resourced
shared service model, which enables branches to
concentrate on delivering excellent customer service,
whilst allowing the central teams to concentrate on
innovation and leadership across the Group.
STRATEGIC
DIMENSION
APPROACH
People
Devolving authority to managers to allow them to compete in the
market, but without weakening our control environment.
Recruiting and developing people with attributes that support our core
values.
Operating a performance management system closely aligned to
incentives.
Coaching, guiding and holding people to account for their attitude as
much as their performance.
Meeting our corporate social responsibilities in areas such as health and
safety, environmental and community relations.
KEY PERFORMANCE
INDICATORS
Colleague retention.
Colleague engagement.
Sales and
margin
management
Exploiting economies of scale from growth to improve our proposition,
gain further market share and improve operating margins.
Centralising purchasing to increase the benefits of common purchasing.
Improving our supply chain capabilities.
Expanding our global sourcing activities to support our own brand
proposition.
Continuously improving our customer and supplier proposition.
Harmonising product specifications across our businesses.
Like-for-like revenue growth.
Like-for-like sales outperformance.
Gross margin gains from sourcing
projects, less margin investment in
proposition.
Adjusted operating profit/margin.
Cost control
and asset
management
Exploiting the economies of scale delivered by growth and centralisation
to improve our operating margins.
Centralising most support services.
Operating a well resourced and innovative property function to improve
asset turn, lower property costs and realise surplus assets.
Group overheads to sales ratio.
Colleague productivity ratio.
Adjusted ROCE.
PRINCIPAL
RISKS AND
UNCERTAINTIES
Colleague
recruitment,
retention and
succession.
Competitive
pressures.
Information
technology failure.
Supplier
dependency and
direct sourcing
operational
difficulties.
Information
technology failure.
Defined benefit
pension scheme
funding.
Expansion
Financial
Using our superior financial performance to expand our branch network
so ensuring we penetrate all catchments in the UK.
Extending our multi-channel capabilities.
Adding additional channels or creating businesses to serve all segments
of the UK building materials market where we can achieve synergies.
Developing and owning trade parks and multiple brand sites.
Shareholder Value created from
expansion projects (at individual
site and whole business level).
Information
technology failure.
Achieving market leading returns on sales and returns on capital
employed.
Reducing debt through cash generation.
Increasing adjusted earnings per share.
Optimising our dividend cover.
Market conditions.
Lease adjusted net debt to EBITDAR.
Free cash flow.
Adjusted ROCE.
Adjusted EPS.
Adjusted PBT.
Adjusted Dividend cover.
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Our Business Model
Travis Perkins is a multi-channel operator selling a wide range of building materials through four divisions to the
trade and consumer primarily through a network of mainly UK branches.
Source products
from over
10,500 suppliers
Stock and then
distribute goods
from 1,890 branches
and 24 warehouses
using a fleet of over
2,300 vehicles
Sell goods and
services to over
190,000 account
and countless cash
customers
Our business model is based upon:
•
•
Being the number one or number two distributor in
the markets in which we operate;
Achieving growth through investing in organic
initiatives and acquisitions that leverage our fixed
and central costs to deliver further benefits from
increasing economies of scale; An organisation
structure, which devolves responsibilities to those
colleagues close to our customers whilst providing
the benefits of shared central services;
•
Thorough performance management monitoring
systems and processes;
•
•
•
A technology approach, where retaining control
by writing our own systems delivers lower cost,
more flexibility and higher matched functionality,
particularly in areas such as logistics, supply chain
and multi-channel;
Incentivisation structures that are linked to
performance and encourage improvement;
A strong culture, which extends to the types of
people we employ and the values and leadership
behaviours we encourage.
In delivering our product
solutions we...
Our products are distributed to
the end user through a supply
chain network which…
We strive to provide our
customers with the highest levels
of service possible by…
Are committed to ensuring that we
buy quality goods and materials
from responsible and ethical
sources, at prices that are fair to all.
Purchase a broad range of over
100,000 products from UK and
overseas manufacturers and
distributors.
Stock a wide range of own brand
products, particularly in our
consumer business, as well as
branded goods supplied by market
leading companies.
Achieve economies of scale by
focussing our purchases towards a
limited number of key suppliers.
Are the largest or second largest
customer for a considerable number
of our suppliers, many of whom
have forged close relationships with
the Group over a long period of time.
Operates from 24 central
warehouses, enabling us to buy
goods in bulk and distribute them to
our branches in smaller quantities.
Utilises a distribution fleet of
192 vehicles to transport product
between warehouses and branches.
Makes around 350,000 branch
deliveries p.a.
Engages over 1,650 colleagues to
ensure the efficient movement of
stock throughout our organisation.
Improves branch efficiency by
ensuring we have an appropriate
mix of suppliers delivering either
direct to our branches or to our
central warehouses.
Gives customers the opportunity
to transact with our multi-channel
businesses through a nationwide
branch network, via the telephone or
over the internet.
Employing the best available people
and investing in their training and
development.
Ensuring branches maintain high
levels of stock availability in full
project quantities.
Offering advice and building related
services that support our customer’s
needs.
Using a fleet of 2,300 vehicles to
provide an efficient, on-time-in–
full, local delivery service, where
customers have chosen not to
collect goods from our sites.
Making credit available for
approximately 80% of customer
purchases in our merchanting
businesses.
Ensuring our prices reflect both the
quality of the goods we sell and the
service we provide, whilst remaining
competitive.
Neil Ives,
P & H Product
Leader and
Danny
Mackintosh,
Branch
Supervisor,
City Plumbing
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Chairman’s
Statement
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 1 2
Robert Walker
Chairman
Introduction
Travis Perkins is the UK’s largest supplier of materials to
the building and construction markets.
We aim to grow the business by providing the widest
possible range of products and materials, coupled with
the highest levels of consumer service; and in so doing,
provide our shareholders with growing and sustainable
returns, based on market leading margins and return
on capital.
We reacted quickly to the start of the downturn five
years ago by managing costs and trading margins
through the worst construction downturn in living
memory. Since then we have transformed the Group,
through acquisitions and strong organic growth, to
become the leading player in the sector today. Our
trading businesses have market leading propositions
that provide a platform for further growth through
network expansion; supported by value adding, shared
central functions. In the past year, we have made good
progress in strengthening our senior executive bench
through recruitment and management development,
and are well positioned for the next phase in the
Company’s growth story.
2012 was a year of consolidation and steady progress
for many of the Group’s businesses and trading formats.
Progress was achieved despite some very difficult
trading conditions, particularly during the unusually
wet summer months and the disruption and distraction
caused by the London Olympics.
Despite this, we were pleased to complete the
acquisition of Toolstation, adding further branches and
taking initial steps to test the validity of the concept in
Holland. More recently, in January 2013, we acquired
Solfex, an important and fast-growing distributor of
environmental products and building materials. This
will add significantly to the Group’s eco-building range
and environmental credentials. Good progress continued
in integrating the former BSS businesses, and both
cost synergies and progress on systems integration are
ahead of our original targets. We also added additional
branches across the rest of the Group’s trading formats,
bringing the total number of operating branches at the
year end to 1,896.
Results
The markets that our businesses operate in remain
very competitive, having contracted in volume terms
for the fifth year running. Against that background, our
revenue increased by 1.4% to £4.9bn (2011: £4.8bn) with
adjusted pre-tax profits rising by 1% to £300m; adjusted
earnings per share were up by 2.1% to 95.1 pence.
A continued focus on cash generation has reduced
debt by a further £131m to £452m at 31 December 2012
after allowing for the £24m paid to acquire the 70% of
Toolstation shares we did not already own.
Our integration of BSS has made good progress and
our excellent work to realise synergies has resulted in
£32m being recognised in 2012, £7m higher than our
original expectation for 2013.
We are pleased with the performance of the
Toolstation business in its first year of our ownership
and have added a further 20 branches to its portfolio
during 2012.
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“Progress was achieved despite some very
difficult trading conditions, particularly during
the unusually wet summer months.”
Dividend
Supported by good operational delivery and having
carefully considered the current condition of the market
in which the Group operates the Board has decided it
is appropriate to continue increasing dividends ahead
of earnings growth, reducing dividend cover towards its
previously stated target range of 2.5 times to 3.5 times.
The Board is pleased to recommend a final dividend
of 17 pence per share, payable to shareholders on the
register on 3 May 2013, which will give a total dividend
for 2012 of 25 pence per share. With a proposed 25%
increase in full year dividend, dividend cover for the year
based on adjusted earnings per share is now 3.8x (2011:
4.7x). The total cash outflow for dividends declared in
2012 will be £60m.
Board of directors
In September, we announced that Paul Hampden Smith,
our Group Finance Director for the past 16 years, had
decided to retire from the Board in March 2013. It is
impossible to overestimate the contribution that Paul
has made to the Group’s success during his years as
Finance Director and everyone in the Group will want
to join me in wishing Paul every success for the future.
In replacing Paul, we have recruited Tony Buffin as
Group Finance Director, who will join us on 8 April 2013.
He was previously Group CFO for Coles, the substantial
Australian supermarket chain and had previously
worked for Groupe Aeroplan, Loyalty Management
Group, and Alliance Boots.
In January 2013 John Coleman was appointed as our
Senior Independent Director replacing Chris Bunker, who
had held that position for the previous four years. Chris
has been Chairman of the Audit Committee since April
2004, and will step down from this role during 2013.
Employees
Difficult trading conditions always seem to bring the
best out of our colleagues in the business. Once again,
they have produced good results in the most difficult
of circumstances. I would like to pass on my thanks on
behalf of both the Board and our Shareholders.
Outlook
We anticipate difficult conditions in the first half year,
but there are reasons to be more optimistic about the
second half, when recent rises in mortgage and housing
transactions should feed into improved volumes. We will
continue to monitor these lead indicators and trends
carefully, and expect that our next move will be to a
more expansionary stance on volume, whilst continuing
our restrained approach on costs, further benefitting
from overhead gearing and improving operating margins.
Robert Walker
Chairman
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Chief Executive’s
Review of the Year
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 1 2
Geoff Cooper
Chief Executive
Introduction
The Group made good progress in 2012, despite a
challenging construction industry background resulting
from a combination of continuing economic uncertainty,
the wettest weather conditions in living memory and
continued reductions in public sector activity and weak
consumer confidence.
Action in both like-for-like (‘LFL’) and expanded
operations has enabled the Group to achieve increases
in turnover, adjusted operating profits, profits before tax,
earnings per share and to recommend a 25% increase in
the full year dividend.
Construction activity in 2012 fell by about 9%, whilst
the materials distribution market fell in volume by
about 4%.
We have continued to execute trading tactics finely
tuned to the current environment with the aim of
maximising operating profits and operating margin. This
has meant that for most of our businesses and branches
we have focussed on gross margin protection, which
has caused us to turn away some unprofitable sales,
balancing cost control with protecting service levels and
carefully managing working capital.
By focussing more on gross margin we have
de-emphasised our goal of out-performing markets
on a LFL basis, reducing our previous rate of sales
out-performance. For the year as a whole we have
sustained our market share and a market position
consistent with our objective of trading sensibly in a
disappointing market.
Against contracting market volumes, our trading
stance and our continued programme of self-help
initiatives has increased profits by 4.5%, with the main
drivers of our improved financial performance coming
from; Toolstation, for which we acquired the remaining
70% of its share capital on 3 January 2012; the 13 new
ex-Focus stores which were opened in the autumn of
2011; and our BSS synergy programme.
Having acquired Toolstation in 2012 and previously
having acquired BSS, we chose to limit other network
expansion to ‘tidying up’ the estate and a few high
returning projects. However, the economic environment
also presented us with a few other opportunities. In 2012
we saw a small, but clearly discernible worsening in the
outlook for a number of competitor companies in our
sector. Our Specialist division benefited from the slow
demise of the leading civils and heavyside distributor
during the second half of the year and a number of
company administrators and independent owners
offered to sell us small businesses. In most cases we
declined the opportunity, preferring to let the capacity
fall out of the market, but we were able to agree terms to
acquire the trade and assets for five businesses. Overall
this expansion has increased our turnover by 2.8%.
On 1 January we established our new Plumbing
and Heating division under the chairmanship of Paul
Tallentire. He has been closely involved with our BSS
integration programme which has seen a restructuring
of the PTS management team, the roll out of a new
point-of-sales system with enhanced functionality
into PTS and the closure of several poorly performing
branches. Further work remains in the BSS integration
programme, however a significant value of synergies
has been achieved, and many of the organisational and
technology changes have been implemented.
The BSS synergy programme has continued to
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“For the year as a whole we have sustained our
market share and a market position consistent
with our objective of trading sensibly in a
disappointing market.”
exceed our expectations. Having beaten our original
£8m synergy target for 2011 by £12m, we reset our
2012 target to £30m. Thanks to the excellent work of
a large number of colleagues, synergies for 2012 have
totalled £32m of which £6m related to overheads and
£26m to buying gains. Despite this success, our work to
maximise synergies is not yet fully complete. We have
identified further opportunities of around £5m for 2013,
but these will be more difficult to deliver as it will involve
structural change to supply chain activities.
Markets and our response
According to the Consumer Products Association,
construction output in 2012 fell by about 9% as a result
of a significant reduction in public spending coupled
with a slowdown in private sector investment caused
by economic uncertainty. That reduction is the worst
market performance since the depths of the recession
back in 2009.
Despite a relatively strong start to 2012, we predicted,
in early 2012, that volumes in our markets would fall
for the year as a whole. In reality the performances
of our end markets have been mixed. Volumes in the
merchanting market actually reduced by around 2%
whilst retail market volumes are down by around
7% year-on-year, which has resulted in even greater
competition for sales.
The majority of our business is related to RMI
activities which have been a little more robust than the
other parts of the market that we operate in.
for new housing has increased, but low consumer
confidence and restricted funding availability has
caused subdued numbers of mortgage approvals and
housing transactions, which remain at half the level they
were in 2006. The Government’s action to encourage first
time buyers through Funding for Lending, Firstbuy and
the Newbuy guarantee scheme are to be welcomed, but
the overall housing market remains in desperate need of
a kick start.
Public sector spend on construction has contracted
sharply, particularly in new build as the government
cuts have taken effect, but opportunities remain in some
segments such as rail and utilities.
The economic uncertainty continues to impact
consumers, with confidence levels little higher than in
December 2011. Consumers remain cautious because
wage awards are once again below the rate of inflation,
and until recently money has been hard to come by.
This has adversely impacted the consumers’ desire to
make big money purchases.
Financial performance
Throughout this annual report, consistent with our
approach last year, the term ‘adjusted’ has been used
to signify that the effects of exceptional items and
amortisation of intangible assets have been excluded
from the disclosures being made. Details of the
exceptional items are given in the Finance Director’s
review of the year on page 39.
A combination of the economy and the extreme
In the private sector new build has been relatively flat
for most of the year although we have seen some gentle
expansion towards the end of the year. Latent demand
weather conditions had a significant impact on
construction activity and constrained the performance
of our heavy-side businesses.
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C H I E F E X E C U T I V E ’ S R E V I W O F T H E Y E A R
Total revenue is 1.4% higher than for 2011 at
£4,845m (2011: £4,779m), driven by the Toolstation
acquisition and the 13 ex-Focus stores opened during
the autumn of 2011.
We have modified our group trading stance to reflect
the more competitive environment we have experienced
during 2012 with the result that we have traded some
volume to protect margin. Even so, by concentrating
on our customer propositions, we have sustained our
performance relative to the market, which together with
our ability to pass through the bulk of cost inflation
from suppliers has restricted the like-for-like sales
volume reduction to 2.4% in markets that we estimate
fell by around 4%.
The pricing environment has weakened as the year
has progressed with full year price inflation of 1% rather
than a more normal 3%. By quarter 4 month-on-month
sales price inflation for the Group was virtually zero,
with merchanting slightly positive, consumer flat and
plumbing and heating negative due to the impact of
reducing basic commodity pricing.
With the exception of the plumbing and heating
division, like-for-like volumes improved in the second
half of the year when compared with the first half,
particularly in our Specialist division where Keyline
benefited from the failure of a major competitor.
acquisition and our subsequent investment in opening
a further 20 new branches and the full year effect of the
13 new Wickes stores opened in 2011. In our plumbing
and heating division 2012 total sales show a reduction
compared with 2011 principally because of the sale of
Buck and Hickman during September 2011.
With a competitive market we concentrated on
carefully managing our overhead base with the result
that each of our businesses showed an improvement
in operating margin, or at worst a very slight decline
when compared with 2011. Group operating margin has
improved by 0.1% to 6.7% due to an improvement in
overall gross margins for the Group and the additional
benefits from our synergy programme. Whilst the
overhead to sales ratio has increased by 0.3%, this
was principally a mix effect of Toolstation being
consolidated for the first time.
Adjusted operating profit increased by £14m to
£327m (2011: £313m), which resulted in an adjusted
group operating margin of 6.7%, a 0.1% improvement
over 2011. Even though the effect of currency
fluctuations on our portfolio of derivatives increased
financing costs by 62% to £27m (2011: £17m), the
Group still improved adjusted pre-tax profits by £3m
(1%) to £300m (2011: £297m).
Adjusted earnings per share increased by 2.1% to 95.1
Sales expansion arose primarily from the Toolstation
pence (2011: 93.1 pence).
Revenue
Volume
Price
Like-for-like per day
Trading day impact
Expansion / disposals
Total revenue change
General
Merchanting
%
Specialist
Merchanting
%
Consumer
%
Plumbing
& Heating
%
(1.5)
1.5
-
-
0.9
0.9
(0.2)
2.5
2.3
-
1.3
3.6
(6.6)
1.0
*(5.6)
0.3
18.5
13.2
(1.6)
-
(1.6)
-
(4.4)
(6.0)
*Including Toolstation on a proforma basis would result in like-for-like sales for Consumer being -3.1% and for the Group being -0.8%.
Adjusted operating
margin
General
Merchanting
%
Specialist
Merchanting
%
Consumer
%
Plumbing
& Heating
%
2011 operating margin
Gross margin
Synergies
Overheads
11.8
(0.9)
0.2
0.6
2012 property differential
(0.2)
2012 operating margin
11.5
4.5
-
0.1
0.5
0.1
5.2
4.5
0.4
0.1
0.6
-
5.6*
4.6
(0.6)
0.7
(0.2)
-
4.5
Total
%
(2.4)
1.0
(1.4)*
-
2.8
1.4
Total
%
6.6
0.2
0.2
(0.3)
-
6.7
*Excluding Toolstation, gross margin improved by 1.1%, overheads to sales rose by 0.1% and property profits to sales rose by 0.1% giving a year-on-year
divisional operating margin increase of 1.2%.
Joanne
Kavanagh,
Customer Service
Assistant at
Travis Perkins,
Rickmansworth,
with tile display
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Divisions
General Merchanting
2012
£m
2011 Change
%
£m
Turnover
1,457 1,443
0.9%
Adjustment segment profit
167
170
-1.9%
The growth in sales in our General Merchanting
division has arisen from the limited expansion we have
undertaken during the year – LFL sales growth was
zero. Volumes were only 1.5% lower than 2011, whilst
sales prices rose by an average of 1.5% over the course
of the year.
Gross margin declined by 0.9% due to reduced
product inflation (0.5%), customer mix changes arising
from the better performance of large contractors
compared to their smaller competitors (0.2%), and more
competitive market conditions as construction activity
fell (0.2%). In a stable, or even a rising market, we would
expect each of these drivers to reverse.
The tough gross margin conditions were balanced by
management in the division exercising tight cost control,
and the overhead to sales ratio improved by 0.6%.
Divisional operating margin was only 0.1% below 2011,
adjusting for the change in property profits.
Kevin Appleton, the divisional chairman, and his
team have implemented a number of initiatives to drive
profitability. On a selective basis low margin business
is being turned away and customer and product
profitability is being closely monitored to manage mix.
Marketing initiatives are in place to target profitable
segments, and the overall customer service is being
enhanced through the development of dedicated
customer contact centres.
Further opportunities to improve efficiency have been
identified via selective actions aimed at employee and
vehicle productivity.
Specialist Merchanting
2012
£m
2011 Change
%
£m
Turnover
604
582
3.6%
Adjusted segment profit
32
26 20.2%
Under the guidance of Arthur Davidson, the Specialist
division recorded a strong performance driven by
Keyline, our heavy-side, civils and drainage business.
The division gained further market share and reported
a 2.3% like-for-like sales growth on the back of above
average price inflation. The team did well to protect
gross margin recording a flat year-on-year performance
in increasingly competitive markets.
The failure of the largest civils merchant brought
some short-term benefit to Keyline as both customers
and suppliers sought to put more business our way.
Even though many of the closed branches have now
been sold and re-opened, the Keyline team is working
hard to retain the new business they have won. New
opportunities in rail and utilities are being pursued by
dedicated teams established during the year.
Net margin progress in Keyline was good and
according to our key suppliers our business growth with
them outperformed their respective markets. Having
suffered from the lack of buying gains in the first half, we
created opportunities which crystallised in the second
half without a rise in stock levels.
CCF faced intensified competition during the
year as its markets have been particularly difficult.
The commercial market is affected by both lower
commercial construction activity and reduced new
public sector spending in buildings such as hospitals
and schools, which has all but dried up.
Benchmarx has seen another improvement in its
performance with sales growing by nearly 20%. LFL
sales growth was close to double digits and at the same
time gross margin advanced. The business has been
targeting the contracts market and the investment made
is now starting to pay off.
As with our other divisions, the Specialist businesses
paid close attention to managing the overhead base with
the result that the ratio of overheads to sales fell by 0.5%
equivalent to savings of approximately £3m.
Consumer
2012
£m
2011 Change
%
£m
Turnover
1,152 1,018 13.2%
Adjusted segment profit
65
46 40.7%
Our Consumer Division, led by Jeremy Bird has
significantly outperformed in 2012, with the Wickes, Tile
Giant and Toolstation businesses all producing excellent
results. The consumer division markets were the hardest
hit of any that our divisions operate in, so that makes
the result achieved in 2012 even more remarkable. A
combination of careful margin management, strong
overhead control and targeted investment resulted in
profits rising by 40.7% whilst turnover on a reported
basis was up only 13.2%. If Toolstation is excluded from
the 2012 result, divisional turnover was flat year-on-
year, whilst profits increased by 26.5%.
Wickes has made further market share gains, for the
sixth year in a row. Both the Trade and Kitchen and
Bathroom offerings have done well, but our performance
in the DIY segment has been less strong as discretionary
spend has been under pressure.
Our trading tactics continue to deliver both higher
gross margins and sustained market share through
careful management of promotions, range developments
and working with suppliers to reduce supply chain costs.
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Research continues to indicate the clarity and simplicity
of the Wickes and Tile Giant propositions are compelling
for many customers.
Toolstation performed strongly as those stores opened
with our support pre-acquisition moved further towards
maturity. Like-for-like sales are up 21%, significantly
ahead of other multi-channel operators, profits are
approximately 280% higher and the estate has grown by
20 branches during the year.
Overheads were well controlled throughout the
division with the ratio of overheads to sales for Wickes
and Tile Giant increasing by only 0.1% despite turnover
remaining flat. Wickes like-for-like costs fell as a result of
changing the store colleague structure late in 2011 and
from re-targeting their marketing spend.
Plumbing and Heating
2012
£m
2011 Change
%
£m
Gross turnover
1,632 1,736
-6.0%
Adjusted segment profit
73
80
-8.7%
If the results of Buck and Hickman and 17 P&H
branches divested in 2011 are excluded from the 2011
comparative, turnover has decreased by £21m (1.2%),
whilst net profit fell by £5m (6.3%).
Throughout 2012, trading in both the commercial
and domestic markets has been difficult. The domestic
heating market was subdued all year with the markets for
the key product groups of boilers and radiators 2% and
10% down year-on-year respectively. The ending of the
last phase of government subsidies impacted demand
and new initiatives such as Green Deal, Renewable Heat
Incentive and the energy company ECO commitments
did not have any real impact during the year.
In a low demand market, competition remained
intense and throughout the year decisions were taken
to improve pricing and monitor customer profitability.
In PTS several long standing supply relationships were
re-negotiated or terminated altogether.
The Group has a good record of pre-price increase
stock buying. With sales price deflation in our plumbing
market those opportunities to bolster margins through
buying gains have been considerably more limited.
The industrial businesses of BSS were the strongest
performer in a weakening plumbing market. Some major
contract wins helped protect sales with margins slightly
above last year’s levels due to a number of self-help
measures improving product mix. Good overhead control
resulted in an improvement in overall operating margin.
The domestic business, which includes PTS and
F&P, our wholesale distribution business supplying
second tier merchants, has suffered as a result of a sharp
contraction in the boiler and radiator markets and low
product inflation. Tight competitive conditions have
resulted in a reduction in margins, and management
have taken action to cut costs by restructuring the
network, closing nine branches.
City Plumbing performed well and whilst its like-
for-like turnover is slightly down, it has improved its
gross margin compared with 2011. Our ‘Endeavour’ new
showroom concept has continued to outperform the
rest of the estate and so we will extend their presence
throughout the estate during 2013.
P&H divisional overheads were tightly controlled
with some additional costs being incurred by PTS for
the full year administration of the solus British Gas
contract to whom we are proud to provide an industry
leading service.
Overseas expansion
During the year we have taken our first tentative
step into international markets. In conjunction with
the founder of Toolstation, we have made a small
investment of less than €2m in five Toolstation branches
located in the Netherlands that were previously
franchised to an independent operator. The initial focus
has been on expanding the product range and improving
marketing, but much work still needs to be done. Whilst
we anticipate making further small investments in 2013
and 2014, it will be some time before we are able to
determine whether the venture will be successful.
Investors and lenders
Holders of the Company’s equity are concentrated
primarily in the UK and North America, with North
American investors now holding 26% of the Company’s
shares. We are committed to frequent and open dialogue
with our shareholders and we take a pro-active stance to
ensure we meet with as many of them as possible.
During the year a combination of me, Paul Hampden
Smith and John Carter met with 44 investors holding
55% of our shares at least once. We also met with a
significant number of non-holders as we sought to widen
our investor base.
We find that both investors, members of the analyst
community and our lenders benefit from seeing
our operations first hand. It provides them with an
opportunity to see our sites and talk with the hard
working colleagues who make Travis Perkins such a
strong company. During 2012 we undertook 3 store,
warehouse and branch visits and we intend to continue
this in 2013. In the autumn, once we have completed our
annual strategy review, we expect to combine a site tour
with a strategic update for both investors and analysts.
I reported last year that in difficult markets for
raising finance we had secured a £550m revolving credit
facility that is available to draw down from April 2013.
As with our investors, we think it is important to build
relationships with our banks and other lenders and
so we maintain regular contact throughout the year.
I am pleased to report that the confidence the banks
showed in the Group last year has continued. Following
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C H I E F E X E C U T I V E ’ S R E V I W O F T H E Y E A R
discussions with several banks who were interested in
making further funds available to the Group at improved
rates, we have secured a £50m of medium term
committed funding by way of a bilateral loan.
Executive committee
If we are to maintain our position as the UK’s leading
supplier of building materials we need to invest in
our executive team to ensure we have the best talent
available to develop and deliver our strategy. During
2012 there have been two significant changes to our
Executive Committee.
After 40 years of service with the Group, Joe Mescall
retired on 31 December 2012. Whilst the phrase ‘can
never be replaced’ is over-used and is rarely true, it
should be applied to unique people and Joe is definitely
one of these. He has a great blend of long and varied
experience, well honed leadership skills and first class
trading ‘nous’ which is admired by everyone who has
had the privilege to work with him.
Joe’s position has been taken by Kevin Appleton.
Kevin joined us from the Lavendon Group where he
held the position of CEO for 10 years. He brings a lot of
relevant experience from the customer-focused delivery
services and logistics sectors having previously held
managing director roles for a division of FedEx and the
Dexlon group. I am confident that the new experiences
Kevin brings will build on the achievements of Joe and
the TP team to ensure that we continue to stay ahead of
our competitors.
Our second key appointment was Jean-Jacques
(‘JJ’) Van Oosten to the position of Chief Information
Officer. This position is critical to the Group’s continued
development so it was important that we employed a
person with a proven track record of determining IT
strategy, leading large teams and delivering complex IT
projects in a multichannel environment.
JJ was previously at Tesco plc where he held the
role of CIO and Market place Director both reporting
to the CEO of Tesco.com. He led and delivered critical
programmes which established Tesco’s multi channel
IT capability. Prior to that he was the Group CIO for
Kingfisher plc, where he established and led a shared
service centre for IT that combined twelve technology
teams across multiple geographies. He was also
responsible for delivering systems for B&Q Trade
counter and leading the multi-channel agenda.
Charitable and community activities
We are passionate about the charitable work we
undertake, and we continue to have strong and
extremely valuable partnerships with a number of
British charities. The enthusiasm and commitment
shown by our colleagues as they fundraise is something
we are enormously proud of. We are also delighted by
the support frequently provided by our customers and
our suppliers.
Each of our 16 businesses supports their preferred
charity, selected by employees, and throughout
2012 they pursued a range of activities to raise
funds. An army of employees across the Group grew
dubious moustaches in support of Movember and
Prostate Cancer UK, the charity partner of our Keyline
business, while Tim Parsons and Paul Widger from
our PTS business braved sweltering heat to cycle 500
kilometres from Ho Chi Minh City in Vietnam to Angkor
Wat in Cambodia, raising over £14,400 for Cancer
Research UK.
The Travis Perkins business was awarded ‘Business
of the Year’ at the 2012 Business Charity Awards,
sponsored by the Charities Aid Foundation (CAF), for its
outstanding partnership with Breast Cancer Campaign
and Together for Short Lives over the last three years.
As the driving force behind a number of charitable
initiatives, including painting a number of Travis Perkins
delivery trucks pink, Ian Church was awarded ‘Business
Charity Champion 2012’. Ian, formerly Managing
Director of Travis Perkins in the Midlands and now
Managing Director of our PTS business, understands
the power of charitable activity as a way of driving the
engagement of employees and customers.
Internally, our employees can support additional
charitable activity through payroll-giving and a
‘Colleague Lottery’, and the popularity of these schemes
remains undiminished.
Thanks to wonderful activities like these, we are
pleased to have donated more than £2.1m (2011: £1.9m)
through group activities, including £165,716 (2011:
£146,217) directly from the Group, to worthwhile causes
in the fields of cancer research, support for children and
young people, and the hospice movement, to name a few.
We encourage our colleagues and businesses to
support community activities in the areas they live, work
and operate. During the year many opportunities arose
where we were able to help; here are just a few examples.
BSS Industrial donated sleeping bags to charities
across various locations in December, giving a small
helping hand to the homeless over the harsh winter.
Travis Perkins supported the next generation of builders
by donating materials to Live Train, a London-based
training scheme which equips unemployed people with
the skills and experience to start a sustainable career in
the construction industry.
CCF and Travis Perkins branches in Reading teamed
up to fit new flooring for West Street, a house for
severely disabled children in Henley on Thames, whilst
colleagues from Travis Perkins Hyde helped create a
memorial garden in memory of PCs Fiona Bone and
Nicola Hughes, the two Greater Manchester Police
officers who were tragically killed in September.
Piotr
Trebiatowski,
Warehouse
Operative
at Brackmills
distribution
centre
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Post year end acquisition
We expect the renewables market for construction
materials to show growth ahead of market averages for
some time, as consumers become better informed and
invest to reduce their energy costs whilst improving
carbon generated.
On 30 January we acquired the renewable energy
distribution specialists, Solfex Energy Systems (‘Solfex’),
a company that in December 2012 was listed as the UK’s
fifth fastest growing private company in the Sunday
Times Virgin Fast Track 100.
Solfex uses its distribution platform to integrate and
supply components to the UK’s renewable companies
and provides a value-added service to customers through
comprehensive technical and customer support. It is a
valuable addition to the Plumbing and Heating Division
of our Group.
Our strategy of offering our customers an integrated
approach to energy efficient building will be greatly
enhanced by the market leading proposition created by
the Solfex team.
2013 performance
It is difficult to draw any conclusions from the first few
weeks of trading because the January 2012 comparator
was quite strong whilst 2013 has seen a continuation of
the poor weather conditions experienced in 2012. Overall
group LFL sales, on a delivered basis, for the first seven
weeks were down 5.1%.
General
Specialist
Plumbing
Merchanting Merchanting Consumer & Heating
%
%
%
%
(4.5)
2.0
(7.6)
(5.4)
Total
%
(5.1)
We view underlying like-for-like sales in February as
broadly flat.
Outlook
Our like-for-like sales in quarter 4 of 2012 showed an
improving trend on the two previous quarters in most
of our businesses making it difficult to read for signals
of underlying activity. Accordingly, we look to medium
term indicators to plan our resource levels for 2013
and beyond.
In the short term, trends will be volatile; we
currently anticipate that our markets will be stronger
in the second quarter, mainly due to a relatively weak
comparator in 2012 and potential recovery from low
activity levels expected in first three months of this year.
Whilst this suggests difficult conditions will remain
in the first half year, there are reasons to be more
optimistic about the second half. The recent rise in
mortgage and housing transaction activity should feed
into improved volumes in the market by the second
half of the year. In the public sector market, the huge
potential spending on various infrastructure programmes
announced by the government should begin to gradually
show in real activity on (and in) the ground.
Overall we believe that market volumes for 2013 are
likely to be lower than 2012, but the rate of decrease will
be smaller than last year at around 1% to 2%. Inflation is
likely to stay low with early indications suggesting it will
be around 1% to 2% for the second year running.
Since the financial crisis in 2008, the term ‘roller
coaster’ could fairly be applied to the gradient of annual
and monthly change in our markets. Five years later,
we have yet to experience a flatter track, and we wait
for evidence of a steady recovery from the current
unsustainably low levels of activity.
We have an excellent track-record of matching our
margin and costs to the prevailing market conditions,
and we judge our cautious stance to be appropriate.
However, we shall be monitoring lead indicators
carefully, and expect that our next change will be to
a more expansionary stance in volume. We plan to
combine this with a restrained approach to costs, so as
to benefit from overhead gearing and further improve
operating margins. We anticipate increasing expenditure
only for unavoidable inflation and pension increases and
subject to satisfactory trading continuing, we plan to
invest further in pursuing our multichannel strategy.
Whilst, for most of our businesses, our operating
margins remain ahead of our competitors, the ‘trough’
levels of market activity are consistent with, against
recent history, operating margins, which we regard
as unsatisfactory for three of our four divisions. For
Specialist, P&H and Consumer divisions a combination
of self help initiatives and a recovering market should
deliver steady growth in operating margins. For Travis
Perkins, investments in improvements to the proposition
will be applied to increasing market share on a LFL
basis, whilst sustaining operating margins.
So in summary, we think the performance of our
markets in 2013 may begin to turn, but it will be
mainly through our own endeavours to outperform our
competition and manage our operating margin that the
Group will be driven forward.
Geoff Cooper
Chief Executive
28
Cain Doolan,
Manager,
BSS Industrial,
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Deputy Chief
Executive’s
Review of the Year
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 1 2
John Carter
Deputy Chief Executive
Introduction
After planning our new divisional structure during
2011 and ensuring that we had the right people in
place with the right blend of skills to take our business
forward, 2012 has been a year where our efforts have
been directed towards consolidating our previous
achievements whilst managing in a commercially
challenging environment.
Early in the year we changed slightly our approach to
generating sales. We retreated from our previous stance
where we had sought to outperform the market and took
a more long term view of accepting slightly lower, but
more sustainable growth in order to protect our gross
margins from significant erosion.
Improving the overall operating margin of the Group
remains a priority and that has required us to maintain
our focus on costs. Mindful that we do not want to
Like-for-like revenue change – General Merchanting
Like-for-like revenue change – Specialist Merchanting
Like-for-like revenue change – Consumer
Like-for-like revenue change – P&H
Like-for-like revenue outperformance
Colleague retention
Revenue from expansion
damage the Group’s ability to take advantage of the
market once it starts to improve we have proactively
managed each business to achieve a gentle reduction
of costs rather than undertaking wholesale cost cutting.
Our priority has been to review all businesses to ensure
they have the right cost structure for the business they
are currently handling.
Business model
Our strategy is set out on page 14. The business model
we deploy to execute that strategy is shown in the table
on page 17.
Operationally we measure our success through a
comprehensive ‘balanced scorecard’ of key performance
indicators (‘KPI’), which are aligned to achieving our
strategy:
2012
0.0%
2.3%
(5.6)%
(1.6)%
1.4%
84.0%
2.8%
2011
9.3%
11.5%
(1.3)%
3.4%
5.0%
87.0%
2.0%
Health and safety – see separate report on pages 50 to 52. Environment – see separate report on pages 46 to 49.
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“Improving the overall operating margin of the
Group remains a priority and that has required
us to maintain our focus on costs.”
2012 has not been a year for making large
investments in new initiatives. We started the year
determined to continue with a number of operational
initiatives where we had already achieved improvements
and could envisage further progress. We also wanted to
ensure that any new investments either resulted in a
rapid payback or were necessary to maintain progress
toward our longer term strategies. As a result the main
areas of focus have been:
•
•
•
•
•
•
Continuing our drive to eliminate accidents and
injuries from the Group;
Investigating and further improving our customer
proposition;
Reducing the administrative burden on branch
colleagues so they can spend more time with
customers;
Generating additional purchasing and overhead
synergies from the BSS acquisition and continuing
with the integration of that business into the Group;
Leveraging our investment in our direct sourcing
operations;
Dealing with the opportunities for improvement
identified by our bi-enniel colleague engagement
survey.
given on pages 50 to 52, but in summary we are intent
on eliminating accidents and injuries and making
everyone associated with our group fully understand the
role that we all play, and the responsibilities we all have,
in maintaining a safety culture across all our locations.
The training and culture journey for managers and
colleagues is the most critical part of winning hearts
and minds to keep colleagues safe, and great progress
has been made in engagement and in improving the
communication process across the network.
Sales and margin management
We are set up to be the best whatever the market
circumstances – in good times we take advantage
to grow, in bad times we undertake the careful
management of costs. In the current markets the
approach our operators must take is to:
•
•
•
Focus on customers – manage our resources so we get
the most out of what we have;
Concentrate on the quality of trading – review our
trading stance to drive profit and ensure we are not
letting the competition take our business;
Trust our central resources to deliver the right
improvements that will enable branches to improve
profitability.
Stay Safe
Following the reorganisation of the group health and
safety team in 2012, which enables us to manage safety
in a different way; we have invested a lot of energy and
resource into Stay Safe during the year. Full details are
We pride ourselves on the service we provide to our
customers, but we are not complacent and we recognise
the need to continually improve. Our customer
proposition team under the leadership of Norman
Bell is working on a major project to look at how we
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can streamline our processes and make it easier for
customers to deal with us. We are reviewing all aspects
of our customer touch points from ease of opening a
new trading account through to the simplification of our
invoices and statements.
We know that regular targeted communication with
our customers helps build a relationship based on
trust and can stimulate sales. We are looking at ways
of improving our customer segmentation and from
that how we can better inform our customers of our
capabilities and then help them transact with the Group.
The quality of our customer proposition is partly
dependent upon product range availability and the
services we provide. Our supply chain team’s mission
is to make building materials supply ‘Easy’ for both
branches and customers, their ‘Easy Supply of Products’
(ESP) programme being a key pillar of the Group’s
plans for growth and the continued development of its
multichannel offer.
Our new Chief Information Officer, JJ Van Oosten
joined us mid year and undertook a fundamental review
of our IT strategy and capability. Our strategically
important multi-channel project is focussing on
using alternative technology, with the result that our
website redesign project continued, albeit at a slower
pace during 2012. In 2013 the pace of multichannel
developments will accelerate and the new site, which
will allow customers to trade on-line, will be introduced
into Wickes initially before being rolled out to our
merchanting businesses.
We are challenging the way building materials have
traditionally been supplied to our businesses through
collaborating with our suppliers. For example, we now
have 12 colleagues from key suppliers implanted within
the Group, working with us to create the best route to
market for their products. As a result, our availability and
service offer with these suppliers continues to improve
with customers more likely to source these suppliers’
products through our branches.
With the Group providing access to over 100,000
products, sourced from over 10,500 suppliers, it is
essential that the distribution infrastructure and
systems can support our branches and customers to
complete their transactions and projects as quickly as
possible, making them and the Group more profitable.
The integration of BSS continues to progress well and
in most cases well ahead of expectations. The synergy
program delivered a net £32m benefit versus the initial
projection of £25m announced at the point of acquisition
and the forecast of £30m at the end of last year.
The implementation of the new PTS point of sale
computer system (POS) has progressed very well during
2012 with over 120 PTS branches, representing more
than 50% of revenue, now being on the system. This will
be a landmark in PTS’ history as it will be the first time
that each branch manager will have an unequivocal view
of daily performance in real time. We plan to complete
the PTS roll out by mid 2013 before transferring both
BSS Industrial and F&P Wholesale to a version of the
same system.
The General Merchanting division has been targeting
branches to improve the quality of orders taken and
the mix of products sold. It is currently piloting four
regional customer centres designed to improve account
management for our smaller customers and engineer
opportunities to upsell.
In August an improved search capability was
launched on the General Merchanting website allowing
customers to search and request quotes for over 9,000
products on line. This is the start of a journey to improve
our multi-channel offering, but it is already generating a
good level of sales.
Both Wickes and Tile Giant have improved their
performance in 2012. Despite tough competition,
both have increased their gross margins and overall
profitability. Dropping Mycard in June allowed the
Wickes team to invest some of the subsequent savings
into selectively reducing prices.
A lot of work has been undertaken to complete the
integration of ten UGS branches into Keyline. We have
invested in infrastructure, systems and stock availability
to bring them up to the standard we expect of our
branches and given our colleagues the tools they need to
maximise their effectiveness.
Our work on leveraging the strength of our own brand
products has continued. The popular Scruffs safety-wear
range, supplied by Birchwood Price Tools, has replaced
ranges previously stocked in Wickes and Travis Perkins;
sales have exceeded our expectations.
We have also invested in our geotechnics expertise
having previously had a limited capability. On 3 October
a new team joined us from a competitor and we look
forward to expanding our presence in this increasingly
important market.
Tight cost control and asset management
Group scale means we are able to develop solutions that
can often be shared across multiple businesses and
markets, improving services, return on investment and
lowering cost. We undertake a large number of projects
during the course of a year, each of which contributes
to improving our operating margin. It is not possible to
discuss all of them, but the following paragraphs set
out details of some of the more significant changes we
have made.
In 2012 Keyline transferred responsibility for much
branch administration to a central team based in
Northampton. This freed up branch colleague time to
enable them to focus on customers whilst improving
the efficiency with which we deal with suppliers and
customers. In 2013 we will be taking a similar step in our
General Merchanting division.
Stephen Doody,
Yard Supervisor
at Keyline
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Our property department under the direction of
Martin Meech is an important profit generating centre,
but it also has an important part to play in controlling
our cost base. Where possible we will look to exit leases
if a branch is performing poorly and we can integrate
the branch activity into a nearby branch. There are a
number of opportunities in PTS and we believe that
opportunities exist in respect of a number of Wickes
properties as we target smaller 20,000 sq. ft. footprint
stores to lower property costs. This will also allow us to
open in previously unattractive locations that could not
support larger stores.
Supply chain continues to leverage our group
distribution infrastructure. During the year we have
transferred the:
•
Wickes bathroom home delivery operation in-house,
without increasing our space footprint, which has
improved service at the same time as reducing costs;
Moved our PTS radiator supply to an in-house
solution, improving service and margins;
Provided our biggest customer, British Gas, with a
supply chain for its insulation installation business.
•
•
By selectively investing in GPS in our distribution
vehicles to get a return we have been able to strengthen
the management of our vehicle costs whilst also
reducing our environmental impact.
Our IT department is being restructured and
re-focused so we can reduce the costs of ‘keeping the
lights on’ and divert more resource towards developing
the IT infrastructure that will support the business on its
strategic journey. One of the first changes will be moving
from Microsoft to Google Enterprise allowing us to use
new technologies to improve utilisation and efficiency.
Improve return on capital
We spend a considerable amount of time finding ways
to improve our management of working capital. A lot
of colleagues are involved in ensuring that we receive
prompt payments from our customers. In 2012 we have
piloted giving CCF drivers PDF devices that allow them to
electronically process proof of delivery documents at the
time of making the delivery. We are also developing our
central cash allocation systems to reduce the time we
spend dealing with receipts and to make it easier for our
customers to manage their accounts.
Achieving the balance between maintaining stock
availability in nearly 2,000 outlets and controlling the
value of stock in our balance sheet requires a great deal
of skill. We continue to manage our branch mandated
stock and are currently considering making it more
branch specific to reduce the level of slow moving stock
that can accumulate from a one-size fits all approach.
We are also seeking to improve the co-ordination
of inventory reduction across the Group by sharing
knowledge and best practice.
We have developed and implemented i-Replen, a
34
new automated stock ordering system for Wickes
stores that improves availability reduces stock and
frees up management time. We believe that in due
course this will help reduce Wickes stock without
impacting availability.
Our distribution infrastructure has been developed
with a flexible approach and low levels of automation,
to ensure that we can respond quickly to the rapidly
changing service demands of the market, driven in part
by the growth of multichannel business. The success of
the model in improving sales, profitability and service
means the business will open a further 650,000 sq. ft.,
warehouse in Warrington in 2015 to support the Groups
growth and multichannel ambitions. This investment
will see the Group take a further step in improving
service by providing access to more centralised products
and reducing delivery lead times.
External expansion
With our aim of increasing our return on capital, we
have been more selective when making investments
to improve our proposition. At 31 December 2012 we,
and our associate companies, operated from 1,896
branches (including 12 Rinus Roofing and 5 Toolstation
Netherlands sites) a net increase of 28 during the year.
We opened 48 new sites, 20 of which were for
Toolstation where new branches rapidly achieve
profitability and have an above group average return on
incremental capital employed. We also closed 17 under-
performing sites, 9 of which were in our plumbing and
heating division and sold 3 others.
We now have tool-hire operations situated on 200 sites
including 8 new implants for the commercial contract
market in BSS Industrial branches. The dedicated teams
installed in each of the BSS locations have delivered
excellent service and sales and the number of customers
using the service is ahead of projections. In 2013 further
roll out of the offering is planned.
Our managed services offering goes from strength
to strength and we opened another 8 sites in 2012. Our
record of winning more than our expected share of
these opportunities continues as those tendering the
contracts recognise the skills that we possess and the
opportunities that will give them to improve their own
profitability.
Sales of spares grew by 11% year-on-year due to
the good like-for-like performance from the existing
plumbing and heating locations and the opening of
new sites. We now operate from over 200 sites across
the Group.
We opened 39 new bathroom showrooms, 13 of
which were in Travis Perkins General merchant sites
and now have 51 showrooms in the Group with plans
to continue the roll out in 2013. The new showroom
concept, which has received excellent feedback from
both trade customers and the retail customers of the
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“Developing highly skilled colleagues
who can progress as our business grows
is of paramount importance to us.”
tradesmen, has resulted in significant sales growth and
improvements in product mix have been seen across the
new network.
People
Our vision is to create a great place to work; one that is
safe, rewarding and empowering and so we were pleased
that for the third year running we were independently
assessed to be one of Britain’s top employers.
We employ over 23,400 people. Our customer insight
work indicates that high levels of colleague engagement
have a very positive impact on customer experience,
both in terms of satisfaction and ratings of customer
service. Therefore, seeking feedback from those
colleagues is vital, especially when we face a challenging
trading environment.
In 2012 we undertook our biennial ‘You Talk We
Listen’ employee survey in our head office locations,
and our General and Specialist Merchanting and our
Consumer divisions. 79% (2011: 63%) of colleagues
responded with overall engagement scores increasing
when compared with 2011. 84% of colleagues were
proud to work in their location. Teams across the Group
reviewed the results, then identified and implemented
actions to address any issues.
Developing highly skilled colleagues who can progress
as our business grows is of paramount importance
to us, so we work hard to support them throughout
their career. In 2012 51% (2011: 44%) of management
appointments were filled by internal candidates.
•
•
During 2012:
In partnership with Ashridge business school
we delivered the ‘Horizons’ business leadership
programme to 60 directors. It focused on leadership
behaviours, business strategy and fostering
collaboration across the Group;
Our branch managers were able to attend the 6 day
‘Evolve’ management development programme which
delivers leadership, sales and commercial modules.
We provide a diverse range of development opportunities
for all our colleagues ranging from practical job skills
and product knowledge through to management and
leadership development. We also invest in training
technology and during the year we launched iLearn.
It is a platform, which enhances the online learning
options available to all colleagues, whilst also providing
technology to manage and record colleagues’ learning
and development activity.
Our commitment to apprenticeships continued
with high levels of activity throughout the year. This
commitment was supported by the development of
our apprenticeship website, designed to attract young
people into our business.
The Travis Perkins Group ‘Building People’
Apprenticeship scheme (which replaced our
management trainee scheme in 2011) is aimed at
attracting and developing the skills and knowledge
of young people within our branch operations and
management roles. We hope that this new scheme
will develop the same high quality future leaders and
managers that we see in our business today. There are
two parts to the scheme:
•
The branch scheme is aimed at attracting those who
are new to merchanting, with many joining as their
first job;
The management apprenticeship scheme is focused
on attracting talent from other merchanting branch
networks, with apprentices’ development being
accelerated through completion of the scheme.
Over 30 apprentices graduated with a nationally-
recognised qualification during the year and a second
tranche of 30 high calibre ‘Building People’ apprentices
joined us during the autumn. We also have 500
apprentices enrolled onto the Wickes Level Two Retail
Apprenticeship Scheme.
•
Sharing knowledge with our people is key to
engagement so they can see, where we are going as a
business, the part each of us plays in that journey, and
that we listen to what they are saying.
Many of our brands produce internal magazines
and newsletters, so that everyone can see and better
understand what is happening across the Group.
However, we have reviewed our internal and external
communications activity this year and realised there is
more we can do to raise awareness of the Travis Perkins
Group as a whole.
We have also appointed a Head of Corporate
Communications to support the internal and employee
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“In 2013, we will continue to take a balanced
view when managing sales, seeking to protect
margin where necessary, but all the time
ensuring that our costs are well controlled.”
communications work already underway in our
businesses. She will also identify areas to improve
communication with new and existing audiences, and
so build our brand reputation and influence opinion in
our sector.
Our Save as You Earn (SAYE) scheme is a real success
with 1,200 or 19% more colleagues, joining in 2012.
It’s really encouraging that 7,500 (2011: 6,300) of our
colleagues are keen to share in the success of the Group
through the SAYE scheme, even when there are so many
other demands on their money.
Pension membership increased during the year as
a result of our work to introduce a new pension plan
which meets the government’s requirements for auto-
enrolment from March 2013. In total, at January 2013
42% (2011: 27%) of our colleagues are now members of a
group pension plan.
Awards
For the second year running the innovation, skills and
performance of our supply chain team and our Wickes
distribution team were recognised during 2012. Between
them, they were shortlisted for 5 awards of which they
won four:
•
Hermes Retail Week – Supply Chain Leader of the Year
was our group supply chain director Robin Proctor;
Hermes Retail Week – Multichannel Project of the
Year Award went to the Wickes National Delivery
Service.
Hermes Retail Week – Grand Prix Award (Overall
Winner) was also awarded to the Wickes National
Delivery Service.
The European Supply Chain Excellence Awards –
Public Sector was won jointly by British Gas and Travis
Perkins for our collaboration project.
•
•
•
Management changes
There have been few changes in our senior management
group during 2012.
Chris Bosworth was appointed managing director of
Group spares; a new role that will focus on the multi-
channel growth of spares across the Travis Perkins group.
On 31 December 2012 Mo Iqbal left our business,
six years after we purchased Tile Giant and he came
on board to oversee its integration and expansion. Mo
brought great expertise and knowledge to the Group
and has had a huge influence in the success of our tile
business. We wish him well in his new endeavours.
Outlook
I think it is important that I place on record my
appreciation for the work undertaken by all colleagues
in all our businesses and supporting functions. The
success of our Group is founded on the quality and the
commitment of people throughout our organisation.
2012 has been another testing year for them, but once
again, they have excelled. Early indications are that
in the short term certainly, 2013 may be not be any
better, but I know that colleagues will continue to deliver
outstanding results regardless of the circumstances.
We have many initiatives underway to deliver
improvements across the Group, some of which I have
described in this report. In 2013, we will continue to take
a balanced view when managing sales, seeking to protect
margin where necessary, but all the time ensuring that
our costs are well controlled. In that way we will continue
to maximise the advantage of our operational gearing
and so sustain our overall operating margin.
In addition our marketing team won the ‘Best Use of
Direct Marketing’ award at the Construction marketing
awards in December. That was followed in February
2013 by the team winning the award for ‘Best B2B’ for
its customer lifestyle optimisation campaign at the Data
Strategy Awards.
John Carter
Deputy Chief Executive
John Williams,
Warehouse
Supervisor at CCF
Birmingham
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Finance Director’s
Review of the Year
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 1 2
Paul Hampden Smith
Finance Director
Financial achievements
2012 has been a year of consolidation as we have
continued to manage our businesses so they are well
positioned to take advantage of the opportunities that
will arise when our markets start to improve. Our balance
sheet is stronger, with lease adjusted net debt to adjusted
EBITDAR reducing from 3.4 times to 3.2 times, our
dividend up by 25% and in January 2013 we have secured
a £50m increase in our medium term funding.
Investment has been carefully targeted towards
projects that give the best short-term returns, in
particular Toolstation expansion, our focus on lowering
debt has realised a further £155m reduction in
underlying debt (before business acquisitions of £24m)
and we have made significant progress on the BSS
synergy and integration projects.
Our operating margin has improved and we have
maintained strong cost control; even though RPI
annual inflation in 2012 was 3.1% we have reduced our
like-for-like overheads by 2.3% whilst continuing to
invest in the business.
Financial performance
The following table shows the Group’s key financial
performance indicators:
Adjusted operating profit to revenue
Group adjusted overheads to revenue
Profit before tax growth
Adjusted profit before tax growth
Adjusted earnings per share
Adjusted dividend cover
Free cash flow (note 35)
Lease adjusted net debt to adjusted EBITDAR (note 36)
Adjusted pre-tax return on capital (note 37)
2012
6.7%
23.8%
16.2%
1.1%
95.1p
3.8x
£242m
3.2x
11.5%
2011
6.6%
23.6%
37.0%
36.9%
93.1p
4.7x
£294m
3.4x
11.3%
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“Investment has been carefully targeted
towards projects that give the best short-term
returns, in particular Toolstation expansion.”
Financial results
Changes in turnover, operating profit and operating
margins have been discussed in the Chief Executive’s
Review of the year.
Net financing costs before exceptional charges
have increased by £10m to £27m. The primary cause
of the increase was £4m of mark-to-market losses
(2011: £4m of gains) from revaluing forward currency
contracts taken out during the course of the year to fix
the exchange rate at which goods sourced in foreign
currency will be purchased. In addition, as highlighted
in last year’s report, putting in place the Group’s new
borrowing facility increased interest costs by around
£4m. The average interest rate during the year was 3.9%
(2011: 3.0%).
Pre-tax exceptional items of £31m were credited to
the income statement (2011: debit £14m) during the
year due to:
•
£15m (2011: £14m) of costs arising from the BSS
integration programme, which continues to progress
well;
Sub-letting several vacant retail sites, for which
£6m of the exceptional onerous lease provisions,
established in 2008, were released;
Applying the requirements of the International
Financial Reporting Standard relating to acquisitions,
which resulted in a £36m non-taxable revaluation
gain in respect of the Group’s 30% investment
in Toolstation immediately prior to the Group’s
acquisition of the remaining 70% of its shares;
•
•
•
Fair valuing the outstanding consideration for
Toolstation at the year-end resulted in a £4m credit to
the income statement.
After exceptional items, profit before tax, rose by £43m
to £313m, a 16.2% increase (2011: £270m).
The tax charge was £54m (2011: £57m). If the impact
of the non-taxable exceptional items is excluded from
profit before tax and the £13m (2011: £13m) exceptional
deferred tax credit (caused by the 1% corporation tax
rate reduction in April 2012) is ignored, the underlying
tax charge was £69m (2011: £75m). That represents
an effective rate of 24.5% (2011: 26.5%). We expect our
corporation tax rate to reduce further in the coming
years in line with government announced falls in the
statutory tax rate to 23.25% in 2013, 21.5% in 2014
and 21.0% in 2015. The reduction in the effective rate
from last year reflects the drop in the statutory tax rate
during the year.
Basic earnings per share were 20.6% higher at 108.9
pence (2011: 90.3 pence). Adjusted earnings per share
(note 11) were 95.1 pence (2011: 93.1 pence). There
is no significant difference between basic and diluted
earnings per share and between adjusted and diluted
adjusted earnings per share.
Capital employed and balance sheet
Our balance sheet remains strong with over £2bn of net
assets and once again our calculations show there were
no impairments to the carrying values of goodwill and
other intangible assets. Across the Group, our operating
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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
assets continue to be highly cash and profits generative.
Capital employed at the end of 2012 was £2,308m
(2011: £2,108m). The Group’s adjusted pre-tax return
on capital for the year was 11.5%, (2011: 11.3%), which
continues to be above our weighted average cost of
capital (‘WACC’).
During the year, the daily closing share price ranged
between 794p (2011: 711p) and 1,149p (2011: 1,127p).
The shares closed the year at a price of 1,088p (2011:
796p), increasing the Group’s market capitalisation
over the year by 37% to £2.66bn (2011 £1.94bn). This
represented 1.2 times shareholders funds (31 December
2011: 0.9 times).
Extracting value from our business assets
The Group’s property team has continued to make an
important contribution to group profits by realising
£15m of gains (2011: £16m) from 10 projects. The largest
contribution came from the St Pancras development,
the contract for which became unconditional in July.
Property disposals realised £30m of cash in 2012, but
a further £9m of proceeds on the St Pancras deal does
not fall due, and so will not be recognised, until the
development is completed.
At the year-end, the carrying value of our freehold
and long leasehold property portfolio was £287m (2011:
£285m).
Pension fund performance
At 31 December 2012 the combined accounting net
deficit of the Group’s defined benefit pension schemes
was £45m (2011: £34m), which represents an £11m
worsening over the course of the year. The Travis
Perkins final salary pension scheme has a surplus of
£2m (2011: £19m), whilst the aggregate gross deficits
on the two BSS related defined benefit schemes totalled
£59m (2011: £65m).
Positive influences on the gross deficit in the year
were due to:
•
Returns on scheme assets exceeding expectations by
£28m due to strong equity performance;
The impact of changes in inflation which reduced the
combined deficit by around £12m;
£23m of excess contributions and £11m of other
finance income.
•
•
Two factors had an adverse effect on the combined
deficit:
•
A 0.3% reduction in the discount rate to 4.6%, which
reflects another year of falling yields on high quality
corporate bonds, has increased the deficit by £61m;
The allowance for scheme experience between the
2008 actuarial valuation and the 2011 actuarial
valuation of the Travis Perkins scheme impacted the
deficit by £21m;
•
salaries. In addition, the employing companies have
agreed to increase their annual combined deficit cash
contribution by £2m to £15m backdated to September
2011. Future deficit contributions will increase, although
not significantly, if the Company’s investment rating
changes or dividends rise above a pre-agreed limit.
The triennial valuation of the BSS defined benefit
scheme as at 1 June 2012 has been agreed with the
Trustees. The future service contribution rate, based
on the projected unit approach is 10.3%. In order to
eliminate the deficit, additional payments of £10m per
annum will be made over the ten years to May 2022.
Having finalised the triennial actuarial valuations of
the Travis Perkins and the BSS Group defined benefit
schemes, the cash contribution to reduce the combined
deficits will increase by £5m in 2013 to £28m before
reducing to £26m thereafter.
In 2013 we will apply the new requirements of
IAS 19, the accounting standard on pensions, for the
first time. This will result in other finance income (a
non-cash item) in the income statement reducing by
approximately £12m.
Continued focus on debt reduction
Net debt was £131m lower than the previous year-end
at £452m (2011: £583m) as a result of a continuing
focus on capital investment and working capital
management. Free cash flow for the year was £242m
(2011: £294m) (note 35), lower than 2011 partly as a
result of not repeating the prior year tax cash benefit
from the BSS acquisition.
Gross capital and investment expenditure totalled
£110m (2011: £121m). £54m (2011: £55m) was spent
on capital replacements, and £56m (2011: £66m) on
expansion.
The peak and minimum levels of daily borrowings on
a cleared basis during the year ended 31 December 2012
were £827m and £468m respectively (2011: £949m and
£597m). The maximum month end cleared borrowings
were £682m (2011: £867m).
Toolstation
On the 3 January 2012 the Group acquired the
remaining 70% of the issued share capital of Toolstation
Limited for an initial £24m with additional and final
consideration becoming payable in early 2014 based
upon the performance and expansion of the business in
the year ending 31 December 2013.
After taking into account the requirements of the
purchase and sale agreement the cash payment in
2014 is currently expected to be £51m. This acquisition
resulted in goodwill of £103m being recognised in the
balance sheet during 2012.
The triennial valuation of the Travis Perkins defined
benefit scheme for September 2011 was finalised during
the year. The future service contribution rate has been
increased to 13.1% (previously 11.5%) of pensionable
Financial capital management
Strong financial capital management is a fundamental
component of the overall group strategy.
The Directors are committed to the generation of
Wickes
Kettering
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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
long-term shareholder value, which we believe will be
achieved through:
•
Increasing the Group’s market share via a
combination of LFL sales growth and targeted
expansion through acquisitions, brown field openings
and in-store development;
Investing in projects and acquisitions where the
post-tax return on capital employed exceeds the
weighted average cost of capital of the Group;
Generating sufficient free cash flow to enable the
Group to expand its operations whilst funding
attractive returns to shareholders and reducing its
debt and pension deficit;
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 financial profile. On a lease
adjusted basis this would mean a ratio of net debt and
capitalised operating leases to EBITDAR would be less
than three times (31 December 2012: 3.2 times);
Maintaining long-term adjusted dividend cover at
between two and a half and three and a half times
earnings (2012: 3.8 times).
•
•
•
•
The Group maintains a capital structure that is both
appropriate to the on-going needs of the business and
ensures it remains within the covenant limits that apply
to its banking arrangements.
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 rebalance its capital structure by raising or
repaying debt, issuing equity or paying dividends.
The Group’s capital structure is intended to balance
equity and debt in a way, which comfortably retains
the Group’s investment grade status, maintains the
financial flexibility for business development and
optimises the efficiency of its finance costs given that
the cost of debt is below the cost of equity. This equates
to a maximum lease adjusted net Debt / EBITDAR
target of sub 3 times ratio.
The current preferred capital structure of the Group
consists of debt, which includes the bank borrowings
and the US private placement notes, cash and cash
equivalents and equity attributable to equity holders
of the parent, comprising issued capital, reserves and
retained earnings. However, the Board regularly reviews
the sources of debt available to the Group with the aim
of maintaining both diversified sources and diversified
maturities.
The Group is also party to a large number of leases,
most of which relate to premises occupied by the Group
for trading purposes. Note 30 gives further details
about the Group’s operating lease commitments. At 31
December 2012, the annual rent roll for leased properties
was approximately £189m. Our aim is to maintain a
ratio approximating to 20% of properties owned, 80%
leased, by value.
42
The capital structure of the Group at 31 December
comprised:
Cash and cash equivalents
Bank loans
2012
£m
139
2011
£m
79
(264)
(323)
US private placement notes at fair value (261)
(279)
Loan notes
Finance leases
Liability to pension scheme
Pension fund deficit
(3)
(26)
(37)
(45)
(3)
(20)
(37)
(34)
Equity attributable to shareholders
(2,308)
(2,108)
Total balance sheet capital employed
(2,805)
(2,725)
Operating leases (8x property rentals)
(1,512)
(1,408)
Total capital employed
(4,317)
(4,133)
Liquidity and funding
In addition to its equity, the Group is financed through
a combination of unsecured bank borrowings and
unsecured guaranteed private placement notes at
fixed and floating rates of interest. The Board regularly
reviews the facilities available and seeks to maintain
them at a level sufficient to facilitate execution of its
strategy, whilst ensuring that liquidity headroom will
cover reasonably possible contingencies.
At 31 December 2012, the Group had a committed
UK bank facility of £739m and $400m of $US private
placement notes in issue. In addition, it had £40m of
uncommitted overdraft facilities. The UK bank facility
expires in April 2013 when it will be replaced by a
£550m revolving credit facility advanced by a syndicate
of 10 banks, which runs until December 2016.
Since the year-end, there have been several changes
to the Group’s debt facilities. On 26 January 2013,
7 years after they were issued, $200m of US senior
notes fell due for repayment. The Board has decided
not to issue replacement notes for the time being, so,
to increase the Group’s liquidity headroom, it entered
into a new £50m bilateral committed revolving credit
facility of fifteen-months duration. In addition, to
reduce excess liquidity headroom on its existing
syndicated loan facility £50m was prepaid two months
early. As a result of these changes borrowing costs have
been reduced.
The remaining $200m of funding from US senior
notes, which is available until January 2016, together
with the existing committed bilateral and syndicated
bank facilities provide the Group with the liquidity it
requires for the foreseeable future.
At 31 December 2012, the Group had undrawn
committed facilities of £475m (2011: £475m). The
maturity profile of the Group’s facilities is as follows:
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Committed facilities available at the year-end
January 2013 (fully drawn)
April 2013 (£264m drawn)
January 2016 (fully drawn)
£m
126
739
135
Committed facilities at 31 December 2012
1,000
Known changes in 2013
January 2013 repayment
New facility committed to March 2014
April 2013 repayment
New facility committed to December 2016
Committed facilities from 4 April 2013
•
•
•
(126)
50
(739)
550
735
Effective financial risk management
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 my
day-to-day responsibilities, are managed centrally under
a framework of policies and procedures approved by and
monitored by the Board.
The Group’s policy is to enter into derivative contracts
only with members of its UK banking facility syndicate,
provided such counterparties meet the minimum rating
set out in the Board approved derivative policy.
The Group’s hedging policy is to generate its preferred
interest rate profile, and so manage its exposure
to interest rate fluctuations, by using interest rate
derivatives. Currently the policy is to maintain between
33% and 75% of drawn borrowings at fixed interest 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 £175m notional value
of interest rate derivatives fixing interest rates on
approximately 39% (2011: 38%) of the Group’s cleared
gross debt (before cash and cash equivalents). In total
53% (2011: 66%) of the Group’s gross debt is at fixed
interest rates.
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 2012 the
nominal value of currency contracts, all of which were
$US denominated, was $113m.
To protect itself against adverse currency movements
and enable it to achieve its desired interest rate profile,
the Group has entered into 4 cross currency swaps and 4
forward contracts in respect of its $400m of $US private
placement notes.
In summary, the key points of our financial risk
management strategy are that we:
• Seek to maintain a strong balance sheet;
•
Accord top priority to effective cash and working
capital management;
Maintain borrowing facility liquidity headroom of
over £100m and continue good relationships with our
bankers;
Manage counterparty risk by raising funds from a
syndicate of lenders, the members of which maintain
investment grade credit ratings;
Operate within comfortable margins to our banking
covenants:
•
The ratio of net debt to EBITDA (earnings before
interest, tax depreciation and amortisation) has to
be lower than 3.0; it was 0.95 at the year-end (note
36); and
The number of times operating profit covers
interest charges has to be a least 3.5 times and it
was 13.1 times at 31 December 2012.
•
•
Have a conservative hedging policy that reduces
the Group’s exposure to currency and interest rate
fluctuations.
Going concern
After reviewing the Group’s forecasts and risk
assessments and making other enquiries, the Directors
have formed a judgement at the time of approving
the financial statements, that there is a reasonable
expectation that the Group and the Company 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.
In arriving at their opinion the Directors considered
the:
• Group’s cash flow forecasts and revenue projections;
• Reasonably possible changes in trading performance;
Committed facilities available to the Group to late
•
2016 and the covenants thereon;
Group’s robust policy towards liquidity and cash flow
management; and
Group management’s ability to successfully manage
the principal risks and uncertainties outlined on
pages 44 and 45 during periods of uncertain economic
outlook and challenging macro economic conditions.
•
•
Paul Hampden Smith
Finance Director
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Statement of Principal
Risks and Uncertainties
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 1 2
A number of factors affect the operating results,
financial condition and prospects of each of the
businesses in the Travis Perkins Group. This section
describes the risk factors that are considered by the
Directors to be material, their potential impacts and the
factors that mitigate them. However, these should not be
regarded as a complete and comprehensive statement
of all potential risks and uncertainties. Additional risks
and uncertainties that are not presently known to the
Directors, or which they currently deem immaterial,
may also have an adverse effect on the Group’s operating
results, financial condition or prospects.
RISK DESCRIPTION
Market conditions
IMPACT
DIRECTION
RISK MITIGATION
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
conditions and a number of specific
drivers of construction and DIY activity,
including housing transactions, net
disposable income, house price inflation,
consumer confidence, interest rates and
unemployment.
Competitive pressures
Market trends, particularly in respect of
customers’ preferences for purchasing
materials through a range of supply
channels and not just through our
traditional competitors may affect the
Group’s performance so making traditional
branch based operations less relevant.
Public sector buying groups could reduce
sales if public bodies chose to buy direct
from the manufacturers.
Disintermediation may become more of
a threat if manufacturers decide to deal
directly with the end user.
Information technology
The operations of the Group depend
on a wide range of complex IT systems
operating efficiently and effectively.
The rapid expansion of the Group together
with an increasing demand for IT services,
particularly as we embrace modern and
future platforms such as multi-channel,
could result in development programmes
being delayed.
Increasing levels of cyber crime represent
a significant threat with the potential
to cause loss of system availability or
financial loss.
Adverse
effect on
financial
results.
Adverse
effect on
financial
results.
The Board conducts an annual review of strategy, which includes an
assessment of likely competitor activity, market forecasts and possible
future trends in products, channels of distribution and customer
behaviour.
The Group maintains a comprehensive tracking system for lead
indicators that influence the market for the consumption of building
materials in the UK.
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 Chief Executive.
Changes to market practice are tracked on an on-going basis and reported
to the Board each month.
We are building our multi-channel capabilities so they compliment our
existing operations and provide our customers with the opportunity to
transact with the group as they wish.
The Group is leading the industry in terms of the development of new
and innovative supply solutions, and works closely with customers and
suppliers on a programme of continuous improvement of current models.
We continue to refine our pricing strategies to ensure we retain our
competitiveness.
The Group’s branding strategy allows it to use sites flexibly. Alternative
space utilisation models are possible, including maintaining smaller
stores and implanting additional services into existing branches.
Adverse
effect on
financial
results.
Adverse
effect on the
Company’s
reputation.
The strategic demands of the business, resources available to IT,
performance levels of key systems and IT security are kept under review
by the Executive Committee.
Maintenance is undertaken on an on-going basis to ensure the resilience
of group systems, with escalation procedures operating to ensure any
performance issues are resolved at an early stage. Our three 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 consumer businesses. Off-site
back-up routines are in place.
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RISK DESCRIPTION
Colleague recruitment, retention and succession
IMPACT
DIRECTION
RISK MITIGATION
Many colleagues have worked for the Group for some
considerable time during which they have gained valuable
knowledge and expertise.
The ability to recruit, retain and motivate suitably qualified
staff is an important driver of the Group’s overall performance.
Ensuring succession for key positions throughout the Group is
important if it is to continue to be successful in the future.
Avoiding ‘recession fatigue’ amongst our key management
layers and ensuring a continuous flow of innovation in the
Group.
Inability to
develop and
execute our
development
plans.
Competitive
disadvantage.
The Group Human Resources Director monitors
staff engagement and turnover by job type and
reports to the Executive Committee regularly
and to the Board annually. Succession plans are
established for the most senior positions within the
Group and these are reviewed annually.
Our reward and recognition systems are actively
managed to ensure high levels of employee
engagement.
A wide-range of training programmes are in
place to encourage staff development, whilst
management development programmes are used
to assist those identified for more senior positions.
Salaries and other benefits are benchmarked
annually to ensure that the Group remains
competitive.
Supplier dependency and direct sourcing
The Group is the largest customer of many of its suppliers.
In some cases, those suppliers are large enough to cause
significant difficulties to the Group if they become unable to
meet their supply obligations.
Alternative sourcing is available, but the volumes required and
the time it may take those suppliers to increase production
could result in significant stock-outs for some considerable
time.
We have rapidly expanded our direct sourcing capabilities,
which has increased the Group’s reliance on overseas factories
producing product. This increases the Group’s exposure to
sourcing, quality, trading, warranty and currency issues.
Potential for European anti-dumping legislation to be extended
to cover further Asian countries so increasing the cost of some
imported products.
Defined benefit pension scheme funding
The Group is required by law to maintain a minimum funding
level in relation to its on-going obligations to provide current
and future pensions for members of its pension schemes who
are entitled to defined benefits.
Some issues could adversely affect the funding of these
obligations including poor performance of the pension fund
investments and increasing longevity of pension scheme
members.
The level of contributions required from the Group to meet
the benefits promised in the final salary schemes will vary
depending upon the funding position of those schemes.
Adverse
effect on
financial
results.
Adverse
effect on the
Company’s
reputation.
The commercial and financial teams monitor the
financial position of the Group’s key suppliers.
Where possible, contracts exist with more than one
supplier for key products.
The Group has made a significant investment in
a new Far East infrastructure to support its direct
sourcing operation.
Comprehensive checks are undertaken on the
factories producing product, the quality and
suitability of that product before it is shipped to
the UK.
Adverse
effect on
financial
condition.
All of the Group’s final salary pension schemes are
closed to new members.
For the Travis Perkins scheme, pensionable salary
inflation has been capped at 3% per annum.
The scheme’s investment policy is kept under
regular review to ensure asset profiles are kept in
line with the profile of liabilities.
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Environmental Report
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 1 2
Introduction
In 2012, we were awarded Retro Expo’s Outstanding
Achievement Award in recognition of the positioning
work we have done to ensure we take advantage of the
low carbon construction economy. We have set targets
for 2020 and have invested to improve our analysis of
our supply chain carbon opportunities and liabilities.
The environmental impact of all group activities is
included in this report.
Process improvements and outside influences
Management systems
The Group’s certified Environmental Management System
now covers BSS and PTS, but does not yet fully cover
Toolstation or businesses not wholly owned by the Group.
The strategic management of our environmental
approach was improved in 2012 by adopting key
environmental metrics and targets out to 2020. We
regard responsible operations as both important and
financially prudent. Our zero waste to landfill ambition
has been transposed to a 2017 target. By 2020, we
expect to reduce our carbon dioxide intensity by 48%.
The effect of the law
What we do, and how we do it, is partially a response
to regulatory drivers. We estimate that it costs us
£2.2 million in direct fees to comply with current
environmental regulations. We have increased our
direct advocacy and interest in industry bodies like the
Construction Products Association (CPA), British Retail
Consortium (BRC) and the Green Building Council (GBC)
so we can help achieve better regulation.
Opportunities from environmental regulation such as
The Green Deal, which officially launched on January 28
2013, have yet to materialise – however, we expect this
to build gradually as consumers become more informed.
Travis Perkins and our Green Deal Provider Partner,
Toriga, were among the first organisations to create an
approved Green Deal Plan. The Travis Perkins Toriga
Green Deal proposition will allow customers to gain
access to this growing market opportunity as it develops
over the coming years.
The effect of stakeholder views
In 2012, excluding regular support for our contractor
customers tendering activities and routine dialogue
with WWF, CPA, BRC, GBC or our own environmental
advisory bodies, we spoke to approximately 200 people
or organisations about our environmental approach.
Regrettably, 28 of these (30 in 2011) were complaints.
We recognise that from time to time conflicts can arise
with neighbours, or we will have supplied materials
customers regard as lacking environmental credentials.
On each occasion we seek to listen, react and agree
changes where possible.
Encouragingly, we had a positive engagement with
investors in 2012 about our environmental approach
and this has improved the level of disclosure in this
report. Wherever possible, we now include absolute
levels of emissions or consumption and an indicator
stating the level of measured versus estimated data.
Our strategic priorities, themes and objectives
are formally reviewed regularly against solicited
or unsolicited commentary we receive about our
environmental approach along with the feedback from
our Non Executive Environmental Advisory Panel. We
believe this makes our approach more effective and
closer to stakeholder expectations.
What we report
For the 2013 calendar year we will report under the
proposed Green House Gas mandatory reporting rules
and restate comparatives to ensure consistency. For 2012
data we reviewed the calculations of our metrics, which
are produced by combining measured, estimated and
extrapolated data, but did not materially change them.
We have increased our content of environmental
information on the Web and in other publications and
have continued to have this report and its contents
verified by Lloyds Register of Quality Assurance. A copy
of the verification statement is downloadable from the
Travis Perkins plc. environment web pages.
Buying Responsibly
Timber and timber products
In 2012, we estimate that 90% by value of the timber
and timber products purchased by the Group was from
certified well managed or controlled forests.
Over 85% of the timber data comes from our central
sales records, with the remaining estimated.
All centrally purchased major timber product groups
are either fully certified or a plan for full certification
is underway. By Q2 of 2013, all materials we import
Wickes
Call Centre
Brackmills
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E N V I R O N M E N T A L R E P O R T
directly from outside of the EU, which are the focus
of the EU timber regulations (EUTR), will have the
assurance of full chain of custody from credible
certification schemes.
However, we are now faced with the prospect of
considerable supply uncertainty and significant
upheaval to our internal processes as the certification
bodies adapt from being a voluntary label of
environmental quality to a compliance tool under the
EUTR. Whilst we are confident the change will happen,
the timing and requirements are unclear, and therefore
we have chosen not to engage with colleagues and local
suppliers until we can communicate clear expectations.
This engagement is vital to achieve and sustain full
certification with 10% of timber still specified and
purchased locally by our merchant branch managers.
We have therefore reluctantly concluded that, given the
short amount of time remaining, we will not achieve
100% certified timber and timber product purchases
by 2014 as we had hoped. Our new target for 2014 is to
purchase 95% of timber and timber products by value
from credibly certified well managed or controlled
wood sources.
Resource efficiency
In 2012, we continued to source products with recycled
content and worked with our suppliers to reduce
packaging. Wickes has achieved the 15% packaging
reduction target under the WRAP Home Improvement
Sector Commitment.
We are currently examining the Construction
Excellence/WRAP construction product resource
efficiency plans to determine how we might act to
deliver the greatest leverage and resource efficiency gain
in 2013 and beyond.
We will measure our performance in this area with a
single resource efficiency target, which we are hoping to
set in 2013.
Embedded impacts
How we manage carbon emissions in our supply chain
represents a significant, sustainable competitive
advantage. In 2012, we embarked on a partnership
with Carbon River to model how much, and where,
carbon was being emitted in the entire value chain
of our products and bought in goods and services. We
propose to use this measure as a broad indicator of our
environmental health and robustness. We expect to
publish our initial findings in mid 2013.
Supply chain environmental management
We continue to scrutinise our supply chain for
environmental risk and require our partners to make
a commitment to environmental management. Our
figures suggest that approximately 66% by value of the
products our merchant division distributes come from
supply chains, which are regarded as responsible by
a BREEAM assessment, helping our customers meet
higher building codes.
Operating responsibly
Carbon dioxide intensity
In 2012, 101,954 tonnes of carbon dioxide were emitted
as a result of our consumption of energy (96,348 tonnes
in 2011) and 104,602 tonnes of carbon dioxide from our
transport activities (104,082 tonnes in 2011).
Over 95% of the data is from measured sources with the
remainder extrapolated from expenditure on fuel.
A combination of relatively benign temperatures,
more grid energy coming from renewable sources
and changing colleague behaviours has kept our
performance flat in 2012 despite increased vehicle miles
as a result of our supply chain network expansion.
Out of hours electricity useage within the Wickes
estate has fallen by a cumulative value of 7% in 2012
over 2011 as a result of our Environmental Improvement
Scheme. Approximately 400 branches now use route-
planning software to increase vehicle efficiency, leading
to fewer emissions. In total, we estimate that these
changes in behaviour have reduced carbon dioxide
emissions by 4,139 tonnes.
We have chosen to concentrate on changing
behaviours in the early part of our carbon strategy,
as a cost effective way of keeping emissions in check.
Addressing consumption choices will remain our priority
in 2013 and 2014, even if this means that progress will
be modest. Our previous targets were overambitious and
need to be revised. Our new target is for a 20% reduction
by 2014 (20% by 2013 previously). Our carbon strategy
is now based on achieving a 48% reduction in intensity
by 2020 (on our 2005 levels) with a 37% reduction by
2017 against the same baseline.
Waste
In 2012 we created 41,241 tonnes of waste with 31,805
tonnes, 77%, being diverted from landfill (60% in 2011).
Over 95% of the data provided by our waste contractors
are measured and the remainder extrapolated on an
average branch-tonnage basis.
In 2012, our waste to landfill intensity was at an all time
low at 2.9 tonnes per million pounds of yard and core
sales. We confirmed our zero waste landfill target for
2017 and introduced a further interim target of a 90%
reduction to landfill from 2005 levels by 2014.
We have achieved our leading performance in waste
management by having strong partnerships with waste
management companies, particularly in respect of
our customer waste offering, a service that now turns
over £4.1 million. Here, Hippo Waste Solutions have
been helpful and we have worked together to develop
recycling solutions for managed service customers and
our consumer kitchen and bathroom installer service.
More excitingly, our collaboration with Recipro in Wales
and the North West has enabled us to supply unwanted
stock to community projects,
More managers are choosing to introduce branch-
recycling zones, using the information provided by
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Waste tonnage
OECD sales deflated figures.
Tonnes waste per £m yard and
core sales.
CO2 emissions
OECD sales deflated figures.
Tonnes CO2 per £m group sales.
Timber certification
Timber purchased (£).
Environmental
incidents and
complaints
0
1
.
20
7
1
.
1
8 3
2
.
.
60
80
6
5
.
10
7
7
.
.
6
7
2
.
9
6
2
.
7
6
2
.
1
7
2
.
5
6
2
.
6
5
2
30
.
3
8
2
.
4
7
2
%
4
2
%
8
2
40
%
4
3
%
2
% 2
0
2
%
5
% 2
6
% 2
6
2
50
25
0
3
5
2
T
E
G
R
A
T
8
6
.
T
E
G
R
A
T
8
9
.
T
E
G
R
A
T
T
E
G
R
A
T
.
9
1
2
.
6
9
1
.
0
8
1
.
4
8
1
.
3
3
1
0
9
.
5
4
.
9
2
.
2
2
.
05
06 07 08 09 10 11 12 14
0
.
6
2
3
.
9
1
3
.
8
7
2
.
6
2
3
.
3
2
3
.
7
3
3
.
3
5
2
.
5
7
2
.
8
7
4
05 06 07 08 09 10 11 12 14
0
%
6
3
%
9
4
%
8
4
%
4
5
%
8
5
%
3
6
%
5
6
%
8
6
%
5
9
05 06 07 08 09 10 11 12 14
0
0
0 1
5 1
7
3
7
1
1
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0
5 5 6 4 3 5
5
2
8
1
0
1
05 06 07 08 09 10 11 12 14
Landfill
Diverted from landfill
Energy
Transport
FSC
Other certified schemes
Incidents
Complaints
The data for 2011 has been slightly amended
due to a small data error in the 2011 report.
The data for 2011 has been slightly amended
due to a small data error in the 2011 report.
2005 data excludes Wickes timber figures.
our Environmental Improvement Scheme. In 2013, we
are planning to introduce even more opportunities for
managers to increase recycling through segregation to
reduce still further the component of our waste that goes
to landfill.
Water
In 2012, we used 312,959 m3 of water.
Data provided by our energy bureau contractor
from invoices.
Our water consumption is equivalent to 85m3 for every
million pounds of sales. We continue to actively identify
irregular consumption patterns and address their causes
and through these actions believe we will achieve a 45%
reduction on 2008 levels by 2014.
Pollution prevention
Small oil and paint spills continue to number most
amongst environmental incidents we experience and we
have increased the priority accorded to dealing with these.
In 2012, we recorded 16 incidents of which 13 needed
reporting to the regulator because of a potential risk to
pollution of controlled environments. In each case the
regulator was satisfied with the remedial actions we
took and chose not to investigate further. We were not
prosecuted for any environmental offence in 2012.
In 2013, because we have raised the profile of effective
pollution prevention, we are targeting a reduction in the
total number of incidents to less than 10.
with the launch of a suite of new build and retrofit
construction plans, providing the construction industry
with easy to follow guidelines to meet the changing
requirements of building regulations and the Code for
Sustainable Homes. The SBS website now has over 400
pages of information on sustainable building, covering,
products, specifications and practical advice. In 2013
SBS will be heavily involved in delivering the Green Deal
and ECO home improvement measures, and continuing
to bring innovative products and services to the UK
construction market.
Selling certified timber and timber products
Our customers, both large and small, are increasingly
concerned about purchasing well-managed timber and
timber products and we anticipate this concern will only
grow with the introduction of the EUTR. We are well
placed to deal with such increased interest as we retain
one of the largest multi-site Chain of Custody certificates
in Europe, which means certified products are widely
available from our network.
We are really pleased that the UK Construction
Group has agreed a common position on both certified
material requirements and reporting, and welcome
the opportunity to work in partnership with our
customers on improving timber traceability in the
construction sector.
Selling responsibly
Sustainable building solutions
Sustainable Building Solutions (SBS), a business we
started in 2010, continued its development in 2012,
Geoff Cooper
Chief Executive
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Health and Safety Report
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 1 2
Our Stay Safe philosophy and objectives
Health and safety continues to be integral to everything
we do, from the Group Board right down to each
colleague in every branch, store, warehouse and
office. We believe that all injuries are avoidable, but
we appreciate that achieving a zero injury rate is a
major challenge to a business of our size and variety.
Nevertheless, we aim to be the leader in reducing and
eliminating workplace injuries in our industry, and this
is embodied in our ‘Stay Safe’ ethos. This will require
dedicated effort and perseverance before we can be even
slightly satisfied with our performance. It is vital that, as
an organisation, we recognise our room for improvement
and remain open to challenge on new ideas, equipment
and processes.
Underpinning our Stay Safe philosophy is the
importance of reporting; not just incidents that result
in injury, but near miss occurrences that we can learn
from and respond to with actions to prevent our people
getting hurt in the future. As a result, we have improved
both our online reporting tools and the subsequent
analysis and review of all incidents and near miss
occurrences. We have recently raised the bar in terms of
what we now classify as a safe branch - we only regard a
store or branch as a safe site if they report no incidents
of injury, but also report near miss occurrences and
receive a ‘green’ audit score for safety.
Background to our journey
Our journey to Stay Safe started in 2008 following two
very serious incidents in the previous two years.
The transition to adopting Stay Safe
1974: Health and Safety at Work Act
1974-2007: Reactive and stay legal approach
2006: Serious injury to one of our Keyline drivers
2006-2007: Review risk assessments and
safe working procedures
2007: Fatality of a building site labourer during a
site delivery
2008: Stay Safe vision and initiative created.
Start of new journey
Between 2008 and 2011: Significant reduction in
accident frequency rate
2012: Responsibility for Stay Safe
devolved to our divisions
Data trends
Whilst there is no excuse for accidents, the Group faces
many challenges: our 3,400 vehicles make 7.8 million
deliveries every year, travelling in excess of 100 million
miles. We would welcome any opportunity to refresh the
contacts we have had historically with our immediate
competitors and widen further this network in order to
engage in meaningful exchanges in relation to safety
best practice and innovations.
Group accident frequency rates
Our accident frequency rate (lost time injuries versus the
hours worked) initially fell then plateaued from 2009 to
2011. A slight rise in 2012 is not acceptable to us and so
we have adopted a new approach to the way we manage
safety throughout our Group.
The Board reviewing a re-enactment of a serious accident.
Trend in accident frequency rates
All Stay Safe activity is reviewed by the Plc Stay Safe
Committee, which comprises me as Chairman with
Group Board members Ruth Anderson, John Carter and
Robert Walker. The Committee met with representatives
of group management on three occasions during 2012
to discuss Stay Safe progress, and also visited several
sites, including one where we witnessed and reviewed a
re-enactment of a serious accident.
2009
2010
2011
2012
Hours worked (m) Accident frequency rate
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Lost time injuries in 2012
The type of lost time injuries we experienced has not
changed from 2011, despite our prioritising training
activity towards preventing the most frequently
occurring types of injury:
Over 40 senior managers are currently working
on Stay Safe projects as part of our senior manager
development programme, which is being run in
conjunction with Ashridge.
2012 Lost time injuries
4%
5%
4%
30%
11%
23%
23%
Injured while
manual handling
Hit by moving /
falling object
Slipped, tripped or
fell on the same level
Cuts and bruises
Hit something fixed
or stationary
Fell from a height
Other*
*Other includes: hit by a moving vehicle, contact with machinery or
material being machined, exposure to a harmful substance, injured by
an animal or physically assaulted by a person.
Non-colleague injuries during 2012
789 injuries to people not employed by the Group were
reported in 2012 (2011: 729) of which 64% occurred in
our Consumer division. The majority were minor (slips,
trips, falls and cuts), however two incidents resulted in
major injuries and one tragically resulted in a death in
one of our branches.
All of these very regrettable incidents have, or are
in the process of being thoroughly investigated; any
lessons learned will be acted upon.
Our organisation structure
In 2011 we improved our Stay Safe performance,
however we felt that next stage on our Stay Safe journey
was increased ownership of safety at the business level.
At the end of the first quarter of 2012, we reorganised
our group safety team to ensure their focus mirrored our
divisional structure and increase personal ownership
and accountability for Stay Safe amongst regional and
branch management teams. This move allows each of
our businesses to tailor health and safety actions to the
specific issues they face.
Support from our Stay Safe central team
Our divisions can still draw on the support of an expert
team of safety trainers within our operational training
function. During 2012, they have trained more than
1,000 managers in accident prevention and reporting,
risk assessment and on-site traffic management, as
well as promoting the adoption of a safety culture in
our branches.
A small central team provides expert health and
safety advice by telephone and online to more than
2,000 managers. The team also analyse all entries in our
online injury reporting system, identifying statistical
trends that help our divisions pinpoint and tackle key
safety issues.
The strategy behind our approach
Devolving responsibility and cultivating a more
committed level of ownership is underpinned by:
•
Leadership – our business leaders demonstrate that
they own and drive the Stay Safe message in their
business;
Personal responsibility and belief – all colleagues
believing that all injuries are preventable and acting
accordingly;
Stay Safe behaviour – our systems and safe operating
procedures being simple and realistic whilst being
understood and followed by us all.
•
•
We have worked hard to re-intone this philosophy in
all our communications. For instance at our Group
Conference in 2012, we presented all our business
leaders with a two minute video entitled ‘I am not a
number’, involving a large number of colleagues from
across the business with the simple message: ‘Safety is
not about numbers, but always about people’. The video
can be viewed on YouTube.com
Recent activities
Colleague opinions about safety
Our Stay Safe programme continues to yield high
levels of awareness and ‘buy in’ from our colleagues. All
our divisional colleague opinion surveys during 2012
recorded that over 90% of our colleagues ‘feel safe at
work’; that their manager genuinely cares about their
safety at work and that they have received the Stay Safe
training they need to do their jobs safely.
Differences in Stay Safe performance
across our divisions and brands
We recognise that when measured by their specific
accident frequency and severity rates some divisions
and brands are further ahead in their Stay Safe change
process than others. The main difference in many
cases is that some have been more successful at
engaging colleagues with the Stay Safe journey. Beyond
those differences in culture, values and attitudes, the
inconsistent approaches have been affected further by
the varying challenges each business has faced this
year in their trading patterns, resource levels, business
change projects – even the weather! Whilst our reporting
of, and learning from, actual accidents and from near
misses across all of our business continues to improve it
is frustrating that this is not translating into consistent
performance improvements.
We acknowledge that realising our Stay Safe Vision
consistently across all divisions will not be easy and will
demand leadership, consistency of focus and attention
to detail to instil the required behaviours, culture and
ways of working.
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H E A L T H A N D S A F E T Y R E P O R T
“Stay Safe
is not about
numbers, it’s
always about
people”
Innovations in Stay Safe during the year
We have introduced a number of Stay Safe innovations
in 2012:
•
Our group transport team has introduced a number of
initiatives to improve HGV vehicle safety including:
•
The introduction of bag nipping vehicle grabs on our
delivery lorries which removes the need to work at
height;
The trialling of CCTV in lorry cabs which we believe
will have a positive impact on driver behaviour;
The trialling of proximity sensors on vehicles to help
detect cyclists and more visible ‘yellow’ lorry wing
mirrors;
•
•
•
•
Our ‘Full Stop’ initiative where all Supply Chain sites
stopped work for an hour at 3 a.m. and 3 p.m. on the
same day in August whilst members of the senior team
walked around the site, discussing hazards;
Our Consumer division has introduced incident
simulations to learn what can be done to prevent
certain types of incidents;
•
•
Branch managers
are being issued
with a Stay Safe
wall planner aimed
at reminding them
of the key practical
things they should
be doing to maintain
a safe branch.
Supplier safety initiative
During the summer of 2012 we held our annual group-
suppliers’ conference. This year it focused on our Stay
Safe strategy in order to engage our suppliers in playing
a proactive and collaborative role in our
safety programmes. By making safety
integral to our commercial relationship,
our message to suppliers is that ‘Safe
Suppliers are the Best Suppliers’. A simple
but effective leaflet has also been produced
for issue to all suppliers to help them make
safe deliveries to our premises.
Looking ahead to 2013
We are encouraged that in 2012, 87% of our branches
were free from any reported lost time injuries. In 2013
we will encourage and recognise all such branches by
creating a new Stay Safe ‘high standard’ performance
measure, namely that of the ‘safe branch’.
To be identified as a safe branch at the end of the
year, that location has to satisfy three key criteria:
• No lost time injuries have been reported;
•
Near miss incidents are being reported using our
on-line reporting system;
The Group’s audit team has given its region a ‘green’
(i.e. good) audit score specifically for its safety
performance.
•
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In 2013 we will:
•
Continue our drive to win the hearts and minds of
colleagues, managers and business leaders in support
of our Stay Safe agenda;
Recognise safe behaviour wherever and whenever it
occurs;
Simplify and improve our systems and procedures
and make clear the outcomes of non compliance.
•
•
We are embarking on further research that will
explore the links between our colleague engagement
survey data, safety metrics and business performance
measures. We hope the findings will increase the focus
of our business leaders and managers on the additional
changes we need to adopt to deliver the improvements
and consistency in safety performance we seek.
Culture change and local empowerment approach
Expert
review
Organisation
cultural
Predictors
of accidents
Safety
culture
change
Organisation
focus –
systems
Embedding
safe behaviour
by aligning
‘systems’
to support
change
journey at a
local level
Safety
culture
change
Divisional
focus –
systems,
values,
beliefs, style
and staff
Specific
change
management
journeys
using ‘cultural
predictors’ at a
local level
We need to keep focusing on those areas which show
a strong link between organisational culture and injury
rates and where possible action further improvements.
With those in place, the resulting changes in behaviour
and culture will mean that our employees and
customers go home safely at the end of every day.
The business impact we are seeking will:
• I ncrease employee engagement, morale and
performance, and not only in those areas linked to
safety;
Increase our safety performance and enhance our
reputation as a safe place to work, to buy from and to
supply;
Reduce our long-term-injuries so we have fewer lost
working days, which will improve customer service.
•
•
Andrew Simon
Chairman, Plc Board Health & Safety Committee
Toolstation
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Directors
Robert Walker
Geoff Cooper
John Carter
Paul Hampden Smith
Deputy Chief Executive
John Carter joined Sandell Perkins as a management
trainee in 1978. He held a number of regional
management positions, before being appointed
Managing Director, Operations in 1996, and a director
of Travis Perkins plc in July 2001. He became Chief
Operating Officer in February 2005 and was appointed
Deputy Chief Executive in December 2011. He is a
trustee of the Building Research Establishment. He is a
member of the Health & Safety Committee.
Finance Director
Paul Hampden Smith served as Finance Director
throughout 2012 and retired from the Board on
28 February 2013.
Tony Buffin is to be appointed as Finance Director
on 8 April 2013. He is a chartered accountant and joins
us from the Coles Group in Australia where he was Chief
Financial Officer from 2009. He was formally Chief
Financial Officer of the Loyalty Management Group.
Chairman
Robert Walker was appointed as a non-executive
director in September 2009 and became Chairman in
May 2010. He is chairman of Enterprise Inns plc and
Americana International Holdings Ltd, and a senior
independent director of Tate & Lyle PLC He was
previously chairman of W H Smith PLC, Williams Lea
Group Ltd and BCA Europe and Group Chief Executive of
Severn Trent Plc. He spent over 30 years with Procter &
Gamble, McKinsey and PepsiCo and has also served as a
non executive director on a number of FTSE 100 and 250
boards. He is Chairman of the Nominations Committee
and a member of the Remuneration and Health & Safety
Committees.
Chief Executive
Geoff Cooper joined the Company in February 2005
and was appointed Chief Executive in March that year.
He is a chartered management accountant and had
a career in management consultancy before joining
Gateway 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, and Chairman of the Construction Products
Association. He is Chairman of the Executive Committee.
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Ruth Anderson
Chris Bunker
John Coleman
Philip Jansen
Andrew Simon O.B.E.
Ruth Anderson was appointed as a non-executive
director in 2011. She is a chartered accountant and held
a number of positions in KPMG (UK) from 1976 to 2009,
being a member of its board from 1998 to 2004 and Vice
Chair from 2005 to 2009. She is a non-executive director
of Ocado plc. She is a member of the Audit and Health &
Safety Committees.
Chris Bunker was appointed as a non-executive director
in 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 John Mowlem & Co plc,
Baltimore Technologies plc and Xansa PLC. He was the
Senior Independent Director until January 2013 and is
Chairman of the Audit Committee and a member of the
Nominations and Remuneration Committees. He will be
retiring from the Board in October 2013.
John Coleman was appointed as a non-executive
director in 2005. He is a chartered management
accountant and Chairman of AGA Rangemaster Group
plc. He has previously been Chairman of Holiday
Break plc, Chief Executive of House of Fraser plc and
Chief Executive of Texas Homecare and of a number
of businesses within Burton Group PLC. He succeeded
Chris Bunker as Senior Independent Director in January
2013, and is a member of the Remuneration, Audit and
Nominations Committees.
Philip Jansen was appointed as a non-executive
director in April 2009. He is Chairman of Brakes Group,
Group Chief Executive of Worldpay and a senior advisor
to Bain Capital,the private equity group. He is also a
trustee of the charity, Wellbeing of Women. He has
previously been Group Chief Operating Officer and Chief
Executive of Europe for Sodexo, Chief Operating Officer
of MyTravel plc and Managing Director, Consumer
Division of Telewest Communications PLC. He has
also held senior positions with Procter & Gamble
and Dunlop Slazenger Group. He is a member of the
Remuneration Committee. He will be retiring from the
board in May 2013.
Andrew Simon O.B.E. was appointed as a non-executive
director in 2006. He is a non-executive director of
Finning International Inc. (Canada), Management
Consulting Group plc, SGL Carbon SE (Germany),
Exova Group plc, Icon Infrastructure Management
Limited (Guernsey) and British Car Auctions. He was
previously Deputy Chairman of Dalkia plc, Chairman
and / or Chief Executive of Evode Group plc and has
also held non-executive directorships with Severn
Trent Plc, Ibstock PLC, Laporte Plc, Associated British
Ports Holdings PLC, and Brake Bros Holdings Ltd. He
is chairman of the Remuneration and Health & Safety
Committees.
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Corporate Responsibility Statement
FOR TH E YE AR ENDED 31 DEC EMBE R 20 1 2
The Company has not produced a separate corporate responsibility
statement in the report and accounts since it believes these
matters are sufficiently important to receive the personal attention
of individual 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
CEO, Geoff Cooper, responsibility - Environmental report on pages
46 to 49.
Health & safety
NED, Andrew Simon, responsibility - Health & Safety report on pages
50 to 52.
Supply chain
Deputy Chief Executive - John Carter’s review of the year.
Employees
Deputy Chief Executive, John Carter’s review of the year; and
Community relations
Chief Executive, Geoff Cooper’s review of the year.
The Board takes into account, environmental, 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
environmental, 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 2012.
Robert Walker
Chairman
Committees and Professional Advisers
Secretary:
A. S. Pike
Audit Committee:
C. J. Bunker (Chairman), R. Anderson, J. Coleman
Remuneration Committee:
A. H. Simon (Chairman), C. J. Bunker, J. Coleman, P. Jansen, R. Walker
Nominations Committee:
R. Walker (Chairman), C. J. Bunker, J. Coleman
Health & Safety Committee:
A. H. Simon (Chairman), R. Anderson, J. P. Carter, R. Walker
Executive Committee:
G. I. Cooper (Chief Executive and Committee Chairman)
J. P. Carter (Deputy Chief Executive)
A. Buffin (Finance Director) (with effect from 8 April 2013)
K. Appleton (Chairman, General Merchanting Division)
N. G. Bell (Group Development Director)
J. Bird (Chairman, Consumer Division)
A. J. Davidson (Chairman, Specialist Merchanting Division)
C. Kavanagh (Group HR Director)
M. R. Meech (Group Property Director)
A. S. Pike (Company Secretary & General Counsel)
R. D. Proctor (Group Supply Chain Director)
P. Tallentire (Chairman, Plumbing & Heating Division)
J. J. Van Oosten (Chief Information Officer)
Investment Bankers / Advisors:
HSBC Bank plc. Nomura International plc
Corporate Broker:
Citibank, Credit Suisse
Bankers:
The Royal Bank of Scotland plc. Barclays Bank plc
Lloyds TSB Bank plc
Solicitors:
Linklaters LLP, London. Clifford Chance LLP, London
Auditor:
Deloitte LLP, London
Registrars:
Capita Registrars, Beckenham
56
Corporate Governance
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
UK corporate governance code
We explain below how the company has applied the principles and
provisions of the UK corporate Governance code (‘the code’) in 2012.
We do so by reference to the five main sections of the code. Where
practicable, we have complied early this year with changes to the
code, and with forthcoming regulations on executive remuneration
reporting, which will not technically apply to the company until next
year’s annual report.
1. Leadership
The company is governed by a board of directors, of which I am
chairman. In addition, there are three executive and five non-
executive directors. Geoff cooper is chief Executive. chris bunker
was the Senior Independent Director throughout 2012 and until
succeeded in that role in January 2013 by John coleman. Ruth
Anderson, Philip Jansen and Andrew Simon are also independent
non-executive directors.
The board has a schedule of matters reserved to it, which
is reviewed annually. No changes were made in 2012. Its key
responsibilities are for overall group strategy, policy on corporate
governance, approval of expansion plans and major capital
expenditure, consideration of significant financial and operational
matters and the company’s exposure to key risks. It also reviews
the strategy of the individual businesses, their annual budgets and
progress towards the achievement of those budgets and long-
term objectives. Legislative, environmental, health and safety and
employment issues are also considered. The board has also approved
a written statement of the division of key responsibilities between
myself, as chairman, and the chief Executive; again, we review this
annually and no changes were made in 2012.
The company maintains directors & officers’ insurance in respect
of the risk of claims against directors. This is reviewed annually.
All directors have direct access to the company Secretary and
may take independent professional advice in the furtherance of their
duties if necessary.
Communication
As chairman, I take care to ensure that each director is able to make
an effective contribution within an atmosphere of transparency
and constructive debate. I agree the agenda for board meetings in
conjunction with the chief Executive and the company Secretary.
Agendas are based upon an annual plan but also include matters of
particular interest or concern to the board at any particular time.
I discuss the meeting papers with any director who is unable to
attend a meeting, to obtain that director’s view prior to the meeting.
I also monitor the information provided to the board to ensure it is
sufficient, timely and clear, and the board reviews the adequacy of this
information as part of its annual evaluation process, described below.
I make a habit of contacting all the non-executive directors in
advance of board meetings, to suggest the key issues for discussion
during the meeting; this also helps the directors to prepare, during
their reading of the papers in advance of the meeting.
I maintain regular direct contact with the executive directors and
keep the non-executive directors informed of material developments
between board meetings. I have regular, mostly weekly meetings with
the Group chief Executive and meet from time to time throughout
the year with the Finance Director and Deputy chief Executive. I held
a number of meetings during the year with all the non-executive
directors, without the executive directors being present.
Board meetings
We held twelve board meetings in 2012 (two by conference call),
One meeting was dedicated to consideration of the company’s long-
term strategy. Nine meetings included either visits to parts of the
company’s operations, presentations by senior executives on their
areas of responsibility or, in one case, a visit to the factory of a major
supplier. The latter visit was prompted by a recommendation in the
previous year’s externally-conducted performance evaluation, in
which it was suggested the board have more contact with its wider,
external partners. Non-executive directors also made individual visits
to operational sites. In addition to the regular board meetings, key
financial information is circulated to directors outside of meetings.
The number of board and committee meetings attended by each
director (in whole or in part) during the year is detailed in the table
below. The larger number of Remuneration committee meetings is
unusual and was prompted by the need to give full consideration to
the Group’s proposed new replacement deferred share bonus plan
(see Remuneration Report, page 65).
PLc board
No.
Audit
No.
Remuneration
No.
Nomination
No.
Health & Safety
No.
Executive
No.
Number of meetings
Attendances:
R. Anderson
c. J. bunker
J. P. carter
J. coleman
G. I. cooper
P. N. Hampden Smith
P. Jansen
A. H. Simon
R. Walker
12
11
12
12
12
12
11
12
12
12
4
4
4
-
4
-
4
-
-
4
9
-
9
-
9
9
2
8
9
9
5
5
5
-
5
3
-
5
5
5
3
3
-
3
-
-
-
-
3
3
12
-
-
11
-
12
12
-
-
-
57
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
C o r p o rA tE G o vErN A N C E
Board committees
We have five board committees: the Audit committee, the
Remuneration committee, the Nominations committee, the Health
& Safety committee and the Executive committee, which operate
within defined terms of reference, which we review annually. These
are available on the company’s website or may be obtained from
the company Secretary. The minutes of committee meetings are
circulated to all the Directors.
The Executive committee is chaired by the Group cEO and its
members are listed on page 56. Other executives are invited to attend
from time to time in relation to specific matters. The main purpose of
this committee is to assist the executive directors in the performance
of their duties in relation in particular to:
• Strategy, operational plans, policies, procedures and budgets;
• The monitoring of operational and financial performance;
• The assessment and control of risk;
• The prioritisation and allocation of resources.
This committee is in the process of establishing a number of sub-
committees to carry out more detailed review in areas such as trading
performance or financial control, which will allow the committee to
focus on key strategic issues.
2. Effectiveness
The board is satisfied that I and the five non-executive directors are
all independent. In particular, none of the specific circumstances
set out in code provision b.1.1 apply. Appointments of new directors
are made by the board on the recommendation of the Nominations
committee. I chair that committee and all the other members are
independent non-executive directors. A report of the committee’s
work in 2012 is on page 75.
Appointments
With regard to the appointment of non-executive directors, our policy
is to recruit people of the highest calibre, with a breadth of skills
and experience appropriate for the company’s business. We support
the principles of the Davies Review and the need for a diverse range
of attributes among board members, although we do not intend to
commit to specific quotas. We use search firms who have committed
to abide by the voluntary code of conduct which followed the Davies
Review. We will establish a diversity policy during 2013 as required
by the code. We will report on this next year.
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
generally serve for six years (two three-year terms) and that any
term beyond this should be subject to a rigorous review. This review
takes into account the need for progressive refreshing of the board,
maintenance of a balance of skills and experience and the particular
requirements of the company at the time of the possible extension.
Non-executive directors do not have a service contract, but each has
received a letter of appointment. These appointments expire on the
following dates, and the length of service at that date is also shown.
Ruth Anderson
chris bunker
John coleman
Philip Jansen
Andrew Simon
Robert Walker
October 2014 (3 years)
October 2013 (9 years, 9 months)
February 2014 (9 years)
April 2015 (6 years)
February 2015 (9 years)
September 2015 (6 years)
The letters of appointment will be available for inspection at the
Annual General meeting.
chris bunker has now served on the board for over 9 years. However,
with the arrival of a new Finance Director in April 2013, and as the
board will be conducting a key strategic review in the Autumn of this
year, it was agreed that the board would greatly benefit from retaining
chris’ skills and experience for a few more months. He will therefore,
now retire from the board in October 2013. The chairman consulted
with major shareholders who were supportive of this extension.
Regrettably, because of the extent of his other executive
commitments, Philip Jansen has also decided to retire from the board
with effect from the end of the Annual General meeting in may 2013.
Induction
We have an induction process for new directors, which is facilitated
by the company Secretary. In particular, this includes a programme
of meetings with senior management in both operations and central
functions, and visits to a range of branches and stores. I ensure 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. Non-
executive directors are also regularly provided with information on
forthcoming legal and regulatory changes and corporate governance
developments, and briefings on the key risks facing the company,
including those identified in the corporate Responsibility statement
on page 56.
Executive mentoring by NEDs
Since 2011, and conscious of the potential impact of the Group’s
growth on communication between the board and senior
management, we have adopted a new approach to involving our
non-executive directors (including myself) more closely with the
individual businesses. Each non-executive director is allocated to
one or more of the Group’s businesses and one of the Group’s central
functions to mentor during the year. The precise process is left to
each non-executive director to decide, but involves a programme of
contact and meetings with the management of those businesses or
functions, and a number of site visits. The intention is to give the
non-executive directors a better understanding of our businesses
and functions, their people and strategies, while allowing them
to use their skills and experience to bring a fresh, independent,
viewpoint to those parts of the Group. This mentoring arrangement
will continue in 2013.
58
Evaluation of performance
During the year, the board undertook an evaluation of its
performance and the performance of its committees and the
individual directors. The board’s policy is to engage an external
facilitator to assist this process every three years, while recognising
the difficulty in finding fully capable expertise in this area. It
is a fact of life that new government regulations often spawn
new businesses and it has been board members’ experience
that individuals who set out to provide this service in the past
were simply not fit for purpose. Previously, the board has very
successfully utilised the service of Egon Zehnder, one of the largest
providers of board evaluation services in the UK, since there has
been no conflict of interest. Going forward, we are encouraged to see
the emergence in the past year or so of more professionally qualified
evaluation service providers
Having appointed an external facilitator in 2011, in 2012 the board
carried out an internal review of its performance. This entailed each
director and the company secretary completing a questionnaire
about the performance of the board and its committees, which
was followed by interviews with the chairman, who subsequently
prepared a report, which was presented to the board in December.
chris bunker, as senior independent director also conducted a review
of the performance of the chairman on which he reported separately
to the other directors. Having considered the outcome of these
reports, the board believes that it has operated effectively during
the year but it will focus on a number of areas in 2013 where it may
further improve its performance. Those areas are:
• Succession planning, including among non-executive directors;
•
Support for the further development of management development
programmes;
• The development of financial reporting to the Board;
•
Receiving independent views from external sources, whether
through discussions or site visits, to gain greater insight in to best
practice in a number of areas.
In 2013, the board will conduct an internal review of its performance.
re-election
At the AGm, all directors (except Philip Jansen) will submit
themselves for re-election. As a result of the board evaluation exercise,
as chairman I am satisfied that each director continues to show the
necessary level of commitment to the Group, and has sufficient time
available to fulfil his or her duties, to justify their re-election. The
other directors, in a process led by the Senior Independent Director,
have reached a similar view in regard to my own re-election, and in
particular have recognised that my appointment as chairman of
Enterprise Inns during 2012 has not affected my commitment to and
time available for my role at Travis Perkins.
The board believes that there is presently a blend of skills and
experience among the non-executive directors, which is appropriate
for the Group. The skills required for our board, include experience
in the merchanting and retail sectors, capital project and m&A
evaluation and experience of international markets, as well as
the essential understanding of financial controls and accounting
background. An understanding of information technology will
become increasingly important.
3. Accountability
A review of the performance of the Group’s businesses and the
financial position of the Group is included in the reports of the chief
Executive, the Deputy chief Executive and Finance Director set out
on pages 20 to 43. The board uses them, together with my statement
on pages 18 and 19 to present a full assessment of the company’s
position and prospects, its business model, and its strategy for
delivering that model. The Directors’ responsibilities for the financial
statements are described on page 80. Their consideration of the
Group as a going concern is dealt with in the Finance Director’s report
on page 43.
Internal control
The board is responsible for the Group’s system of internal control
and for reviewing its effectiveness. In the design of the system of
internal control, consideration has been given to the significant risks
to the business, the probability of these risks manifesting themselves
and the most cost effective means of controlling them. The threat
posed by those risks, and any perceived change in that threat, is
reviewed quarterly by both the Executive committee and the board.
The system manages rather than eliminates 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 is
delegated to executive directors and senior management, but the
effectiveness of the system is regularly reviewed by the Audit
committee and the board in a process that accords with the
Turnbull Guidance.
risk assessment
The board and the Executive committee receive reports on specific
areas of risk at each meeting, in accordance with a rolling timetable.
They also receive reports of Internal Audit reviews. If appropriate,
these reports include recommendations for improvement in controls
or for the management of those risks. measures to integrate risk
management processes into the Group’s operations, to extend
awareness of the importance of risk management and to ensure
that recommended improvements are implemented, are regularly
reviewed and refreshed. Senior executives are asked, each 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 directors and
to the external auditors. This process was extended further through
the management structure in 2012.
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, during the year and up until the date of
approval of this Annual Report.
59
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
C o r p o rA tE G o vErN A N C E
Audit committee and auditors
The board has established an Audit committee consisting of three
independent non-executive directors. Its key responsibilities and a
description of its work in 2012 are contained in its report, which is set
out on pages 61 to 63.
4. remuneration
The board has established a Remuneration committee consisting
of the chairman and four independent non-executive directors.
Its responsibilities include remuneration policy, a review of the
performance of executive directors prior to determining their
remuneration and the approval of incentive arrangements, including
performance criteria. The remuneration of the non-executive
directors is determined by the board as a whole, except that the
Remuneration committee makes a recommendation in respect of the
chairman’s fee. No director plays a part in the discussion about his
own remuneration.
The committee’s key responsibilities and a description of its work in
2012 are contained in its report, which is set out on pages 64 and 74.
5. relations with shareholders
The company encourages two-way communication with both its
institutional and private investors and responds promptly to all
enquiries received. In 2012, the chairman, the Senior Independent
Director and the executive directors, either separately or together,
attended a large number of meetings with analysts, and with
shareholders representing about 55% of the issued share capital. In
particular, three strategy presentations (including site visits), were
held for analysts and investors during the year. We also make it clear
that the Senior Independent Director is available as a direct contact
for shareholders, if they wish. 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 regards governance issues, the chairman aims to meet
with major shareholders shortly after the previous year’s annual
shareholders meeting. These meetings are deliberately timed early in
the year so that the board can consider and respond to shareholder
concerns well in advance of the following year’s annual report and
shareholder meeting. I normally contact our 20 largest shareholders
to ensure the widest consultation possible and particularly, given
market volatility, to ensure that the views of a shareholder who
substantially increases its stake during the year have been fully
taken into account.
As well as sending the annual report to shareholders, during the
year, the company published its interim results on its website,
issued two interim management statements, and one further trading
update. Shareholders receive at least twenty working days notice
of the Annual General meeting at which all directors are available
for questions and a short business presentation takes place. Each
substantive issue is the subject of a separate resolution. I announce
the numbers of proxy votes for and against each resolution at the
meeting, after the voting has taken place, and these numbers are
subsequently published on the company’s website.
Corporate governance compliance statement
I am pleased to report that the company has complied throughout the
year ended 31 December 2012 with the provisions set out in the code.
robert Walker
chairman
60
Audit Committee Report
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
As chairman of the Audit committee, I am pleased to report below on
the committee’s activities in 2012.
role of the audit committee
The committee is primarily responsible for:
•
The integrity of the financial statements of the Company and
any formal announcements relating to the company’s financial
performance, and reviewing significant financial reporting
judgments contained therein;
Reviewing the Company’s internal financial controls and its
internal control and risk management systems;
Monitoring and reviewing the effectiveness of the Company’s
internal audit function;
Reviewing the audit plans of the external auditors and for
monitoring the conduct of the audit;
Reviewing the external auditor’s independence and objectivity and
the effectiveness of the audit process, taking into consideration
relevant UK professional and regulatory requirements;
Reviewing and implementing 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;
Conducting any tender process for the provision of the external
audit, and making recommendations to the board, for a resolution
to be put to the shareholders in relation to the appointment and
remuneration of the external auditors.
•
•
•
•
•
•
Shortly after each meeting, I report to the board on the work of the
committee, identifying any matters where it considers that action or
improvement is needed, and make recommendations as to the steps
to be taken.
The committee’s full terms of reference are available on the
company’s website, or on request to the company Secretary.
Composition of the audit committee
I was chairman, and Ruth Anderson and John coleman were
members, of the committee throughout 2012. All members of the
committee are considered to be independent and have considerable
financial and commercial experience from a variety of corporate and
professional backgrounds. In particular, the board considers that
both I and Ruth Anderson have the recent and relevant financial
experience required by the UK corporate Governance code (see also
the board profiles on pages 54 and 55). The company Secretary is
secretary to the committee.
Meetings and attendance
The committee held four meetings during 2012, and attendance at
the meetings is shown on page 57. I also invited the Group chairman,
the chief Executive, the Finance Director, the Deputy chief Executive,
the Group Financial controller, the Director of business Risk and
Assurance and the external auditor to attend the meetings. At each
meeting I gave the external auditor and the Director of business
Risk and Assurance the opportunity to discuss with the committee,
any matters which they wished to raise without the presence
of management. In addition, during the year, I held a number of
meetings with the Director of business Risk and Assurance and
with the external auditors, without management being present.
committee members meet regularly with operational and functional
staff throughout the year and participate in relevant technical update
programmes. I am satisfied that the committee received sufficient,
reliable and timely information from management to enable it to
fulfil its responsibilities during the year.
Main activities of the committee during the year
At our meeting in February, the committee reviewed the annual
financial statements of the company. It took into account regular
management accounting information, a report from the internal
auditors on internal control matters and the external auditors’ report
on the conduct of their audit, their review of accounting policies and
areas of judgment in the financial statements and their comments on
statements concerning risk and internal control. A similar review was
undertaken at the July meeting when the interim statements were
considered. During the year the committee also reviewed:
•
Lessons learned from the process to integrate the BSS Group’s
financial systems, the costs of that integration, and the associated
exceptional items;
The impairment testing of goodwill and other non-monetary assets
and the accounting processes and disclosures related thereto;
The accounting treatment of the acquisition of the remaining share
capital in Toolstation in January 2012;
The progress of training on the Bribery Act;
The Company’s tax management and its compliance with
tax legislation, the tax impact of significant projects, and the
relationship with HmRc;
An evaluation of the Committee’s work carried out as part of the
board evaluation process referred to on pages 58 and 59.
I subsequently reported to the board on this evaluation;
The Committee’s terms of reference; changes were recommended
to the board in the light of changes to the UK corporate Governance
code;
Comments received on its 2011 report from institutional investor
bodies;
The effectiveness of the system of internal financial control and
the system for monitoring and reporting on risks faced by the
Group; the committee considered these systems to have been
effective during the year;
The terms of reference, strategy, staffing, processes and
effectiveness of the internal audit department, taking into account
the results of an exercise to benchmark its performance against
other companies;
The status of actions taken in response to recommendations
arising from internal and external audit work;
•
•
•
•
•
•
•
•
•
•
• The effectiveness of the Group’s ‘whistleblowing’ policy;
•
The policy on engagement of the external auditor for non-audit
work, as referred to below, and the policy on the employment of
anyone previously employed by the external auditor;
The plans presented by the external auditor for conduct of the
year-end audit and half-year review including the related risk
analyses, terms of engagement, fees and letters of representation;
•
61
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 AU D It C oM M It tE E r Ep o r t
•
The effectiveness, independence, and objectivity of the external
auditor, taking into account information and written assurances
provided by Deloitte LLP, on its quality and independence controls,
and its ethical standards, and reports of the FRc Audit Inspection
Unit;
• The security of the Group’s information technology systems;
•
The Group’s systems for ensuring the eligibility of employees to
work in the UK;
The Group’s accounting policies, forthcoming changes to
International Financial Reporting Standards and other regulations,
and the Financial Reporting council’s 2012 report and guidance
notes;
The effectiveness of the Group’s policies and processes for fraud
prevention.
•
•
No matters of material significance were identified by the auditors
during the year and there were no material audit-related matters that
were discussed with investors. Two members of the committee are
also members of the Remuneration committee. The Audit committee
is satisfied that the Group’s remuneration policies are compatible
with a robust control environment and good stewardship.
The key areas of risk and sensitivity, the major accounting
policies, and the principal assumptions with regard to fair values
are described in the Annual Report and notes to the accounts. The
committee reviewed these during the year and after taking into
account discussions with the Financial Reporting council’s conduct
committee about impairment calculations and disclosures (see note
13 to the annual report and accounts), and after including some
additional disclosures in the Group’s 2012 annual report and accounts
the committee was satisfied that they were appropriate.
External auditor
We place great importance on the effectiveness and independence
of the external auditor and, together with them, are careful to ensure
their objectivity is not compromised. At our October meeting, the
auditors presented their plans for the forthcoming audit together with
their proposed fees and information on how they ensure that their
objectivity and independence are not compromised. Deloitte LLP (or
its predecessor firms) is a leading international audit partnership,
and was first appointed as auditor to group companies more than 30
years ago. There are no contractual restrictions on the Group with
Permitted work
Audit related
Activities required by
law or legislation to
be undertaken by the
Auditors;
Reviews of interim
financial information;
managed service reports
to housing associations
and local authorities.
Non-audit related
Tax compliance services;
Tax advisory services;
Public reporting on investment
circulars and similar documents;
Private reporting to sponsors and
similar parties in connection with
investment circulars and similar
documents;
Employee benefit plan audits.
62
regard to their appointment. In accordance with current professional
standards, the partner responsible for the audit changes every 5
years; the last change occurred in 2010.
The committee considers that Deloitte provide a high quality,
efficient and cost effective audit service. Accordingly, following our
February 2013 meeting at which we reviewed the 2012 audit process,
the committee recommended to the board that resolutions be put to
shareholders at the Annual General meeting for the re-appointment
of the external auditor, and to authorise the Directors to fix their
remuneration. It is the Group’s intention to put the audit out to tender
at least every 10 years, in accordance with the recent change to the
UK corporate Governance code, and to do so in 2014, the last year
before the Deloitte audit partner is due to change. The tender process
will be completed in time for the 2015 year-end.
One of the committee’s responsibilities is to ensure compliance
with the board’s policy in respect of services provided by, and fees
paid to, the auditor. Audit fees, which are regularly compared with peer
companies by the committee, are initially negotiated by the Finance
Director, but are then approved by the committee. The policy in
relation to other services that could be provided by the external auditor,
which has been approved by the board, can be summarised as follows:
General principles
There is a presumption against the external auditor providing non-
audit services and they should only be chosen to carry out such work
where its nature makes it more cost effective and efficient to select
advisors who have a good understanding of the Group or the work is of
a particularly confidential or specialist nature. The external auditors
should not provide non-audit services where either the nature of the
work or the extent of such services might impair their independence
or objectivity in carrying out the audit. Any engagement of the
external auditor for non-audit work with a fee over £25,000 requires
my approval.
Areas of work
Our policy sets out certain non-audit services where it would be usual
to engage the external auditor because they are best placed to advise
the Group and their independence would not be compromised and
those where their engagement is not permitted. I am consulted in
relation to any proposed work not covered by the list below.
Prohibited work
book-keeping and work related to the preparation of accounting records;
Financial information system design or implementation;
Appraisal and valuation services;
Internal audit services;
Actuarial services;
Forensic work;
Recruitment services;
Secondment of staff to a supervisory or management position;
Provision of investment advice, broking or legal services.
value of work
Non-audit services require approval as follows:
•
Up to £5,000 – no formal approval is required provided the work is
permitted under the list referred to on the previous page;
• £5,000 to £25,000 – Finance Director;
• £25,000 to £50,000 – Finance Director and Committee Chairman;
£50,000 and above – Finance Director and Committee Chairman
•
following a competitive tender.
Formal approval by the committee is also required if the aggregated
level of forecast fees for non-audit services exceeds 50% of the
statutory audit fee.
reporting
The Finance Director reports twice yearly to the committee on fees
for non-audit services payable to the auditors.
As shown in note 5 to the accounts, during the year the Auditors were
paid £431k (2011; £401k) for audit-related work, and £129k (2011:
£299k) for non-audit work.
The principal items of non-audit fees related to reviewing the
Group’s interim announcement to shareholders and sundry tax
advice. In view of Deloitte’s detailed understanding of the Group’s
operations and accounting policies, and being mindful of future
Auditor reporting obligations, the Audit committee decided that it
was appropriate for Deloitte to undertake this work. In addition, £347k
(2011: £119k) of fees was paid to other accounting firms for non-audit
work, including advice to the Remuneration committee.
The committee understands that the total fees paid by the Group
to Deloitte in 2012 amount to less than, 0.03% of Deloitte’s UK fee
income and considers that the Auditors independence has not been
impaired by the non-audit fees paid in 2012.
Internal audit
As well as its reviews of the internal audit department’s strategy
and processes, as described above, during its meetings in 2012, the
committee received presentations from the Director of business
Risk and Assurance, about the results of work undertaken by the
department, and approved its risk-based plans for work in 2013. The
committee was satisfied with the overall effectiveness of the internal
audit function.
overview
As a result of our work during the year, and taking into account the
result of the board and committee evaluation process described on
page 59, the committee considers 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 committee has also concluded that the Group’s internal control
and risk management systems were effective during the year.
I will be available at the Annual General meeting to answer any
questions about the work of the committee.
Chris Bunker
chairman, Audit committee
63
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Directors’ Remuneration Report
FOR THE YEAR ENDED 31 DEcEmbE R 2 0 12
Introduction
This report sets out the Group’s remuneration policies for its directors
and senior executives and describes how those policies are applied in
practice.
Unaudited information
remuneration committee chairman’s statement
Dear Shareholder,
As an introduction to our remuneration report, I want to highlight the
key features of our remuneration policy and describe how these relate
to the strategic achievements of the Group. This executive summary
will fall into three parts; the context of our remuneration approach,
including strategic goals; pay and incentive challenges and outcomes
in the year; and future priorities.
Context
We remain committed to a remuneration policy that provides value for
shareholders whilst retaining and motivating top quality executives:
•
Remuneration should be competitive and contribute to the delivery
of short and long-term shareholder value;
Remuneration should contain significant performance related
incentive elements;
All colleagues should be able to share in the success of the Group
through participation in both annual bonus schemes and longer
term share plans.
•
•
•
•
•
The key strategic achievements which have driven the share price
from around £2.23 on 5 December 2008 to £12.52 at the time of
writing this report were:
•
Decisive and robust implementation of an emergency plan to
manage costs and trading margins through the worst downturn in
construction in living memory;
Transformation of the Group, through acquisitions and superior
organic growth, to become the largest UK distributor and retailer
of building materials from its previous number 3 position in the
market;
Development of a balanced business model, selling all main
material types to all main customer types, reducing segment risk;
Creation of market leading propositions in our trading businesses,
leading to market outperformance and providing a platform for
growth through network expansion;
Development of online trading capabilities through acquisition and
expansion of the fastest growing national lightside multi-channel
business, and use of this model to accelerate the multi-channel
propositions of core businesses;
Creation of value adding shared central functions that support
our trading businesses, capturing synergies across category
management, buying, finance, supply chain and technology;
Strengthening management capabilities through the recruitment
and development of members of the Group’s Executive committee
and middle management;
• Adjusted EPS growth of 2.1%;
• Free Cash flow generation of £242m.
•
•
•
Our short and long term incentive performance measures are
directly linked to driving and rewarding strategic growth initiatives
and include the following; EPS, TSR, cashflow, ROcE, and broader
64
goals such as market share and health & safety.
During the past 5 years, the basic salary increase of the executive
committee and executive directors (other than through promotion )
has averaged 2% p.a, in line with all other colleagues in the business.
Over the same period only 37% of variable pay potential has been
triggered, despite our management team’s superior performance
relative to competitors, which reflects the depressed state of the
construction market.
pay and incentive challenges and outcomes
2012 was a very busy year for the Remuneration committee. The
full review of executive remuneration I mentioned in my statement
last year was completed. As a result a number of changes were
contemplated and we undertook an extensive consultation exercise
with all our major shareholders. Further information on these
proposals is attached in the separate letter from our chairman. In
addition, the Remuneration committee needed to consider and
determine the appropriate salary increase to reflect the promotion
of John carter to Deputy chief Executive as well as remuneration
arrangements for Tony buffin, our new Group Finance Director who
joins in 2013, replacing Paul Hampden Smith who will retire from
the Group in September 2013. Again, we consulted with our major
shareholders on both matters and the outcomes are described below.
Deputy chief Executive Officer
As indicated in last year’s report, we commissioned specific external
benchmarking work to assist us in determining an appropriate
remuneration package for John carter’s new role. The committee
considered a number of factors including external market data from
independent experts and agreed that his base salary should increase
to £500,000 per annum with effect from the date of his appointment.
The structure of his total remuneration package will remain
unchanged. We consulted with our major shareholders on this matter
and again, we were pleased that a majority supported this decision.
New Group Finance Director
Tony buffin is due to join the company on 8 April 2013 as Group
Finance Director. He was previously employed by a company in
Australia and had significant awards of earned, but deferred, cash
compensation which he forfeited when he resigned.
The structure of his remuneration package with Travis Perkins
will be the same as other executive directors. The only addition
will be a special, one-off award of deferred shares granted to him
because they were vital in securing his services. He will be required
to invest from his own resources £500,000 in the company’s shares
and will, in return, receive a share award on a 2:1 basis, half of which
will vest after 1 year from the award date and the balance vesting 2
years from the award date, subject to continuing employment and
performance targets in relation to his function being met. Other
terms of the award, which will be granted pursuant to the authority
contained in Listing Rule 9.4.2 R(2), will reflect the terms of the
2007 Share matching Scheme. Full details of the award, as required
by Listing Rule 9.4.3, will be disclosed in the next year’s Directors’
Remuneration Report.
It is important to note that this one-off award only partially
compensates mr. buffin for the awards he has forfeited. major
shareholders consulted on this matter were generally very
supportive of this arrangement.
Other
In line with all other colleagues at management grades in the group,
Executive Directors were not awarded an increase in basic pay in
January 2013. This means that for the sixth successive year the same
basic salary increase percentage has been applied to all management
levels. The Remuneration committee has agreed to review the
position again in July 2013, when all management may become
entitled to an increase of 1.5%, being the award given to colleagues
below management grades in January 2013. Any increase made
during the year will not be backdated.
The committee is delighted that more than 1,300 colleagues
benefited from another pay-out under the Group’s Sharesave Scheme.
In addition to this, executives benefited from the partial vesting of
awards under the Performance Share Plan (‘PSP’) and, for the first
time, full vesting of awards under the Share matching Scheme (‘SmS’).
Our executive directors are entitled to awards of up to 27% of their
maximum opportunity under the Annual bonus Plan as a result
of the Group partially meeting the targets set for 2012 (which are
described in more detail later in this report). These targets were set at
a more stretching level in 2012, evaluated by considering the likely
value of risks and opportunities pertaining to the Group’s annual
budget. In 2012, the net risks were valued at the outset of the year at
a higher level than in previous years. In 2013, the level of stretch has
increased yet further.
•
Annual bonuses for Executive Directors are linked to performance
on EPS, ROcE and strategic developments. The relevant strategic
achievements during 2012 were: Successful delivery against plans
for the second year of integration of the bSS businesses, including
over achievement of synergy targets and design and initial
implementation of new IT systems based on Travis Perkins’ proven
merchanting technology;
Continued growth and roll out of the Toolstation business and
branch network following acquisition of the remaining 70% of
Toolstation’s equity in January 2012;
Further growth and deployment of Category Management, Global
Sourcing and Supply chain activities, achieving gross margin
benefits ahead of plan, offsetting some margin pressure from an
increasingly tough trading environment as the year progressed;
Development of strategic partnerships and investment in activities
to position the Group strongly as a provider of sustainable building
retrofit solutions ahead of the launch of the ‘Green Deal’;
Successfully trialling and launching a pilot for co-ordinated national,
regional and area distribution facilities to support the phased
introduction of multi-channel trading for all Group businesses.
•
•
•
•
stretching targets on metrics for health and safety, and cash flow
return on invested capital. Executives are awarded a bonus within the
range determined by the Remuneration committee, with the position
in the range determined by the behaviour and attitude displayed by
each individual, as assessed by their superior and reviewed by the
cEO, Deputy cEO and Group HR Director.
Future priorities
We intend to maintain a strong correlation between the strategic
drivers for shareholder value creation and the metrics used for long
term and short term incentive schemes. We will continuously seek
to improve our communication with shareholders both through
learnings and guidance from the final bIS proposals as well as the
open dialogue with shareholders which has been very helpful in
shaping our thinking over the last 12 months.
Following the successful integration of the bSS group of
companies, it was necessary to plan for the next stage of our
development to ensure that remuneration continues to support
our aim to build sustainable shareholder value and give our senior
managers opportunities to share in our success.
After a period of extensive consultation both internally and
externally with our major shareholders, the eventual proposal was
as follows:
“One change is proposed for variable pay. We plan to replace
the current Annual Deferred bonus Plan with a revised plan which
does not increase the level of cash bonus potential, but provides an
opportunity for an increased deferred share bonus. A material further
condition that would be applied is that if the total shareholder return
fails to meet future targets, that part of the bonus being delivered as a
deferred share award would be subject to forfeiture conditions.
Under our proposal, the executives cannot benefit from this
element of annual bonus unless shareholders have the opportunity to
benefit at the same time. We believe that these proposals represent a
significantly more stringent and shareholder-oriented approach than
found elsewhere.
The remainder of the remuneration package will remain
unchanged, although a significantly increased shareholding
requirement for the executive directors is proposed of two times basic
salary up from the current one times salary policy.”
The full remuneration package is detailed in the policy table shown
on pages 66 and 67.
The committee believes that the proposals, outlined above and
in full detail in the separate chairman’s letter, will support the
company achieving its goals and we are pleased that a majority of the
shareholders we consulted gave their support.
In all, we had 30 discussions (either in person or teleconference)
with 14 major shareholders and representative bodies.
A proportion (20% of total bonus opportunity) of Executive Directors’
and other senior managers’ bonuses are based on achievement
of quantified targets on a balanced scorecard covering financial
metrics, relative performance on sales, market share and returns,
potential for growth, business capabilities and business quality. This
scorecard identifies annual targets that lead to a five-year ambition
for development and performance of the business. The Remuneration
committee judged that management achieved performance on
this scorecard at 60% of potential, with particular shortfalls against
our remuneration policy
Our Remuneration Policy is first and foremost designed to support
the group goal of creating shareholder value through consistently
outperforming in our markets. With this in mind, we continue to
focus our efforts on achieving the right blend of fixed and variable
remuneration and ensuring that our senior executives are paid at
a level appropriate to the size of our group. We are mindful of our
responsibilities to other stakeholders, especially employees, and
65
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 DIrE Ct o r s ’ r E M U N ErA
tIoN r Ep o r t
take into account remuneration elsewhere in the Group when setting
pay for senior executives. A key principle applied for directors and
colleagues throughout the Group is that base salaries should be
competitive and set at the median for the relevant comparator group.
Appropriate levels of incentives are just as important. External
guidance received indicates that over the longer term, more than 50%
of total remuneration should be performance related. The framework
we now have in place means that if all incentives vested at their
maximum, 80% of total remuneration would be performance related.
In determining our policy, all associated risks are considered, so that
the overall remuneration structure and targets in incentive schemes
do not give rise to any undue risk taking.
We believe that it is important for all our most senior executives
to build up a shareholding in the company and so going forward we
are increasing this requirement for Executive Directors to two times
basic salary. Participation in our long term incentive schemes will be
restricted or withdrawn if the required shareholding is not acquired
and maintained. At 31 December 2012 all senior executives had
exceeded their target level of holdings.
We take into account a number of factors when setting targets for
our incentive schemes. Taken together, they represent a balance that
means executives should not be unduly rewarded for one-off, short
term factors. Instead, performance over and above stretching targets
should result in greater shareholder value and, in turn, higher rewards
for executives.
remuneration elsewhere in the Group
The committee takes into account remuneration packages available
to all colleagues when considering executive pay. As with many
companies, senior management participate in a wider rage of
incentives than the majority of colleagues. We recognise that we have
to operate on this basis to attract and retain high-quality managers.
All colleagues are entitled to a competitive remuneration package
that includes basic pay, bonus, pension, Sharesave, buy as You
Earn shares, colleague discount, a range of ‘voluntary benefits’, tax-
efficient childcare vouchers and paid annual leave. We have recently
taken steps to ensure that all colleagues will have life insurance
cover in 2013.
The Group operates a number of pension schemes and is in the
process of streamlining these arrangements as pensions auto-
enrolment approaches. Over 10,000 colleagues are active members
of a Group pension scheme. contribution rates made by the Group
range from 1% to 20% of salary under the defined contribution
scheme whilst over 2,400 colleagues are active members of a defined
benefit scheme where company contribution rates will be 10.3%
for the bSS Group scheme and 13.1% for the Travis Perkins scheme.
None of the executive directors are active members of a company
pension scheme, primarily as a consequence of recent changes in
tax rules. Instead, the company pays a gross cash allowance at 25%
of salary. As this allowance is fully taxed, unlike the contributions to
an approved pension scheme, the equivalent net benefit for executive
directors is currently 12% of salary.
Key elements of remuneration
PURPOSE AND
LINK TO STRATEGY
OPERATION
PERFORmANcE mETRIcS
66
Core element of total package, essential to support recruitment and retention of top quality executives.Maintain competitive package with range of benefits for the director and their familyHelp executives provide for retirement. Aids retention.Reviewed annually as at 1 January. Factors influencing decisions include:· Role, experience and individual performance;· Total group salary budgets;· Pay awards elsewhere in the Group;· External market; · General economic environment.Benchmarked against FTSE 75-125 companies and sector.Directors are entitled to:· Private medical insurance ;· Income protection;· Annual leave – 28 days;· Fully expensed company car, or cash alternative;· Life insurance at 5 times salary.No director actively participates in a defined benefit pension scheme. A cash allowance at 25% (gross) of base salary is paid to each director. This is subject to statutory deductions and results in a net benefit of 12% of salary.Base salaryBenefitsPensionNone.None.None. PURPOSE AND
LINK TO STRATEGY
OPERATION
PERFORmANcE mETRIcS
67
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012Rewards achievement of annual financial and key business strategy objectives.Rewards personal performance measured against key objectives.Deferred element encourages longer term shareholding. Clawback and forfeiture provisions discourage excessive risk taking and short term outlook ensuring that executive and shareholder interests are aligned.Targets are set annually in line with the performance metrics (see aside).Relative weighting of metrics subject to discretion of Committee annually.Total bonus level is determined after the year end, based on achievement of targets.50% of the total bonus will be paid in cash within 4 months of the year end.Remainder of total bonus deferred in share bonus bank. No withdrawals from bonus bank until after year 2.From year 3, annual withdrawal of 50% of shares held in bonus bank.Shares in bonus bank subject to clawback and forfeiture. For 2013 the maximum opportunity will beCEO 180%DCEO 150%GFD 150%There will be no increases to these percentages in future years without prior shareholder approval.Deferred share bonus planBonus measures and weightings:EPS 50%ROCE 30%Business strategy 20%Financial targets based on group Annual Operating Plan (‘AOP’) with no bonus paid if outcome is less than 95% of AOP.The target bonus levels are 50% of the maximum.Shares held in the bonus bank are subject to forfeiture if target share prices are not achieved. Target share prices are based upon the average share price during the bonus year inclusive of a compounded long-term equity rate of return (currently 8%).The banked shares are split into two equal tranches. Tranche 1 vests if after one year, by comparison to the highest 30 day average share price during the period, the target share price is met. If the target share price is not met 50% of tranche 1 is forfeited. Tranche 2 vests if after two years, by comparison to the highest 30 day average share price during the period, the target share price is met. If the target share price is not met at the end of two years 50% of tranche 2 is forfeited. In determining achievement of target share prices dividends paid per share during the period will be added.Incentivises participants to deliver key financial targets over a longer term.Helps retain top quality executives.Encourages participants to build up a shareholding in the company.Incentivises participants to deliver key financial targets over a longer term.Helps retain top quality executives.Aligns the interests of executives and shareholders.Awards, in the form of nil-cost options, are made annually to participants.Awards vest after 3 years subject to achievement of performance measures (see aside).Participants will only participate if they meet the shareholding requirements set by the Committee.The maximum annual award for all executive directors is 150% of salary.Participants are invited to participate annually.Each participant buys shares from their own resources with a value of up 50% of their post-tax base salary.Matching share award on a 2:1 basis made to each participant.Matching share award is in the form a nil-cost option which will vest after 3 years subject to achievement of performance target (see aside).Formal requirements (not voluntary guidelines) apply to directors and senior executives.Participation in long-term incentives will be scaled back, or withheld, if the requirements are not met and maintained.From 2013, executive directors are required to hold shares valued at two times salary within 5 years.Performance share planShare matching schemeShareholding requirementsNone.Performance measures and weightings are: EPS growth 40%Aggregate cashflow 40%Relative TSR 20%Cashflow targets are set for each award based on the Group’s projections for the next 3 years. From 2013 TSR awards made will be measured against the FTSE 50 to 150 index better reflecting the position of the business. EPS growth has to be a minimum of 3% p.a. in addition to RPI over 3 years with full vesting at 10% p.a. plus RPI.Performance target is Cash Return on Capital Employed (CROCE).Vesting range is based on company’s projections for next 3 years. DIrE Ct o r s ’ r E M U N ErA
tIoN r Ep o r t
remuneration in 2012
Annual bonus
The performance measures were the same as for 2011. The targets and results are as follows:
measure
EPS
ROcE
Personal objectives*
Weighting
50%
30%
20%
Target range
95% - 105%
95% - 105%
0% - 20%
Achieved
15%
Nil
12%
*The evaluation of personal objectives involved the Remuneration committee considering personal development and performance by the Executive
Directors on a balanced scorecard of measures, including the following main topics:
• Market outperformance;
• Risk monitoring;
• Health and safety;
• Integration of BSS;
• Global sourcing initiatives;
• Category management capability;
• Supply chain optimisation;
• Succession.
The Remuneration committee assessed the specific achievements against these objectives by reviewing the detailed measures attached to each
one as well as reviewing the performance of each director overall. more detail on the specific achievements and shortfalls was described earlier in
the Remuneration Report. The annual bonus for each of the executive directors is as follows:
John carter
Geoff cooper
Paul Hampden-Smith
% bonus
27%
32.4%
27%
Full bonus
£135,000
£211,312
£105,867
cash bonus
£101,250
£158,484
£79,400
Deferred in shares
33,750
52,828
26,467
Long term incentives
This is the first time for five years where all employees participating in share plans have been able to share in the Group’s success through
achieving stretching performance targets and delivering increased shareholder value.
Performance share plan
The targets set in 2009 were met partially and 80.0% of the awards vested in 2012. This is the first time such awards have vested in the last five
years.
Share matching scheme
There was full vesting of the awards made in 2009. This is the first full vesting of these awards in the last five years.
All employee share plans
Over 1,300 colleagues shared a pay-out of approximately £6m under the Sharesave scheme. None of the executive directors received this benefit
as their savings and share options under the scheme do not mature until December 2013.
remuneration for 2013
As described above, the only significant change to the remuneration structure is the Replacement Deferred Share bonus Plan. Full details of the
new scheme are set out in a separate resolution 14.
Basic salaries
basic salaries are reviewed annually for each director and are normally set with reference to individual performance, experience and contribution
together with developments in the relevant employment market, internal relativities and reference to the general economic environment; it is this
last point which has outweighed all others in determining pay awards for 2013.
68
From 1 January 2013, the executive directors’ salaries remain unchanged from 2012:
• John Carter £500,000;
• Geoff Cooper £652,200;
• Paul Hampden Smith £392,100.
As described in the introduction to this report, the position will be reviewed in July 2013, but any increase at that time will not exceed 1.5% and
will not be backdated.
Annual bonus
As described in detail above, the executive directors will participate in the Replacement Deferred Share bonus Plan. The maximum award will
be 180% for the cEO and 150% for the other executive directors. 50% of the full bonus will be paid in cash after the year end and the remainder
will be held in shares deferred for at least 2 years and subject to a total shareholder return target. The new plan will be extended to the Executive
committee members in 2014.
performance share plan
The maximum award levels will be 150% of basic salary for each of the executive directors. The performance targets will again be Aggregate
cashflow, Relative Total Shareholder Return (‘TSR’) and adjusted Earnings per Share (‘EPS’) with the same relative weighting as last year.
measure
EPS growth
Rationale
A reasonable and well understood proxy for an increase in shareholder value
for the benefit of all shareholders, provided undue leverage is controlled.
Aggregate cashflow
Reinforces importance of cash generation at a time when the Group
wishes to reduce the financial leverage taken on in respect of acquisitions.
Relative TSR
External measure of shareholder value.
measure
EPS growth
Target Detail
RPI + 3% p.a.
RPI + 10% p.a.
Straight-line between these points
Aggregate cashflow over
three years up to 2015
Three aggregate cash flow targets
No vesting below lower target
Straight line increase until full vesting at upper target
company TSR relative to Upper (top 50%)
FTSE 50 - 150 Index
Upper quartile (top 25%)
Straight-line between these points
Weighting
40%
40%
20%
Range
30% vests
100% vests
£766.7m - £847.4m
30% vests
100% vests
The earnings per share targets are calculated on a compound annual basis and include the increase in the Retail Prices Index (‘RPI’). Increases in
RPI have been well above 3% in recent years and the outlook remains uncertain. If RPI reduces to average 3% over the next 3 years, the aggregate
EPS growth will have to be 44% in 3 years time for this part of the award to vest in full. Given the current economic climate, this would represent
an outstanding achievement.
The three-year targets for aggregate cash flow and cROcE below reflect a poorer market outlook for construction than the prior year. However,
the targets require a more stretching performance when taken into account as part of the 3 year rolling forecast targets.
share matching scheme
Once again the maximum investment will be 50% of post-tax salary and the other features of the scheme will also be unchanged. The performance
target will be cash Return on capital Employed (‘cROcE’).
measure
cROcE
Rationale
Range
matching ratio
Reinforces importance of cash generation and
Return on capital employed
8.68% - 9.60%
0.6 for 1
2 for 1
Straight-line between the two
69
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
DIrE Ct o r s ’ r E M U N ErA
tIoN r Ep o r t
Expected value of total remuneration package
The following charts show the split between fixed and variable remuneration excluding benefits in kind for ‘on-target’ performance and
‘maximum’ performance.
CEO – target
CEO – maximum
DCEO/FD – target
DCEO/FD – max
Fixed
28%
19%
30%
20%
cash bonus
13%
17%
11%
15%
LTIPs
59%
64%
59%
65%
Non-executive directors
The remuneration of the non-executive directors is determined by the board (in the case of the chairman, on the recommendation of the
Remuneration committee). Each non-executive director receives an annual fee. In addition, chris bunker receives additional fees for chairing the
Audit committee and until 8th January 2013 for the role of Senior Independent Director in which he was succeeded by John coleman. Andrew
Simon also receives fees for chairing the Remuneration and Health & Safety committees. The fees were last reviewed in 2011 and were set as:
• Base fee – £50,000 p.a.
• Additional fee for Senior Independent Director – £7,000 p.a.
• Additional fee for committee chairmanship – £10,000 p.a.
• Additional fee for second committee chairmanship – £4,000 p.a.
We plan to review non-executive directors’ fees during 2013.
Non-executive directors do not receive any other benefits (other than a staff discount card for purchasing products) 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.
Who attends remuneration committee meetings?
During the year the committee comprised Andrew Simon (chairman), chris bunker, John coleman, Philip Jansen and Robert Walker all of whom
are independent non-executive directors.
The committee met 9 times in 2012. Attendance at the meetings is shown on page 57.
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 share schemes. The committee’s terms of reference are available on our website or from the company Secretary.
Pwc LLP was appointed by the committee to provide it with advice during the year on executive remuneration. A different specialist area of Pwc
LLP provided advice in connection with the Toolstation brand valuation. In addition, Geoff cooper (chief Executive), Paul Hampden Smith (Finance
Director), Andrew Pike (Group company Secretary), carol Kavanagh (Group Human Resources Director) and Stella Girvin (Deputy company
Secretary) have assisted the committee in its work, but never in respect of their own remuneration. The committee keeps itself fully informed of
relevant developments and best practice in remuneration matter and seeks advice where appropriate from external advisors.
total shareholder return
150%
100%
50%
0%
2007
2008
2009
2010
2011
2012
Travis Perkins plc
FTSE 250
Audited information
Contracts of executive directors
Each of the executive directors has a service contract, the date of which is shown below, which will be available for inspection at the Annual
General meeting. These contracts provide for six month’s notice from the directors and 12 month’s notice from the company. They do not specify
any particular level of compensation in the event of termination or change of control.
John carter
Geoff cooper
Paul Hampden Smith
6 August 2001
1 February 2005
8 October 1996 (retired on 28 February 2013)
70
In addition, Tony buffin has a service contract which will take effect from 8 April 2013.
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).
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 directors’ remuneration
are set out in the table below.
basic salary
2012
£’000
Annual bonus
2012
£’000
benefits in kind
2012
£’000
Executive
Geoff cooper1
Paul Hampden Smith2
John carter3
Non-executive
Ruth Anderson
chris bunker
John coleman
Philip Jansen
Andrew Simon
Robert Walker
652
392
500
50
67
50
50
64
200
211
106
135
-
-
-
-
-
-
164
116
159
-
-
-
-
-
-
Total remuneration
2012
£’000
1,027
614
794
50
67
50
50
64
200
2011
£’000
1,389
756
807
9
67
50
50
64
200
2,025
452
439
2,916
3,392
Notes:
1. Highest paid director - benefits include a cash allowance of £163,050 (2011: £159,851) in lieu of pension accrual. This does not count when calculating annual bonus and
granting share incentives. Geoff cooper also received, and retained, in 2012, £100,000 (2011: £100,000) in respect of his non-executive chairmanship of Dunelm Group Plc.
2. benefits include a £16,000 ‘cash for car’ allowance, a £1,500 fuel allowance and £98,025 cash allowance in lieu of pension accrual, which do not count when calculating
annual bonus and granting share incentives. Paul Hampden Smith also received, and retained, in 2012, £41,250 (2011: £45,000) in respect of his non-executive directorship
of Redrow plc.
3. benefits include a cash allowance of £125,000 in lieu of pension accrual which does not count when calculating annual bonus and granting share incentives.
4. Gains on options exercised during 2012 were: Paul Hampden Smith £210,328.05, John carter £177,787.51. Gains on options exercised during 2011 were: Paul Hampden
Smith £277,140.72, John carter £77,430.00, Geoff cooper £135,504.36.
Directors’ pension entitlements
Pension entitlements of the executive directors during the year were as follows:
Age at 31 December 2012
John carter
51
Paul Hampden Smith
52
Accrued pension at 31 December 2011 including revaluation if applicable
Accrued pension at 31 December 2012 including revaluation if applicable
Increase in accrued pension in 2012
Real increase in accrued pension in 2012
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 2011
Transfer value of benefits accrued at 31 December 2012
£’000
258
264
6
-
-
-
-
49
5,089
5,138
£’000
83
87
4
-
-
-
-
17
1,642
1,659
Geoff cooper
58
£’000
5
5
-
-
-
5
-
9
135
144
Notes:
1. Geoff cooper ceased future accrual on 5 April 2006, but benefits up to that date retain a link to current salary.
2. John carter ceased future accrual on 31 December 2010. benefits on leaving were calculated using a 3 year averaging of pensionable salaries.
3. Paul Hampden Smith ceased future accrual on 31 march 2011. benefits on leaving were calculated using a 3 year averaging of pensionable salaries.
4. Any pensions paid on early retirement are subject to abatement.
71
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
DIrE Ct o r s ’ r E M U N ErA
tIoN r Ep o r t
travis perkins’ share price information
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
2012
1,088p
1,149p
1,024p
794p
2011
796p
1,127p
928p
711p
Directors’ shareholdings
The Directors’ holdings of ordinary 10p shares of Travis Perkins plc at 27 march 2013, 31 December 2012 and 31 December 2011 were as follows:
Director
Ruth Anderson
chris bunker
John carter
John coleman
Geoff cooper
Paul Hampden Smith
Philip Jansen
Andrew Simon
Robert Walker
Interest
beneficial owner
beneficial owner
beneficial owner
beneficial owner
beneficial owner
beneficial owner
beneficial owner
beneficial owner
beneficial owner
2013
27 march*
No.
1,000
11,900
73,837
2,465
120,570
53,916
-
3,400
82,333
2012
31 December
No.
2011
31 December
No.
1,000
11,900
73,436
2,465
132,190
99,944
-
3,400
82,333
-
11,900
61,918
2,465
195,053
283,933
-
3,400
80,595
*The figures for P. Hampden Smith are as at 28 February 2013, the date of his resignation as a director.
share matching scheme
Participation by directors in investment matching shares is as follows:
Grant date
Geoff cooper
1 April 2008
19 may 2009
16 march 2010
15 march 2011
14 march 2012
Paul Hampden Smith
1 April 2008
19 may 2009
16 march 2010
15 march 2011
14 march 2012
John carter
19 may 2009
16 march 2010
15 march 2011
14 march 2012
4 December 2012
Outstanding
1 January 2012
No.
Granted
during year
No.
Outstanding
31 December 2012
No.
Vested
during year
No.
53,033
157,785
71,853
65,580
-
37,121
110,450
50,296
39,424
-
63,974
50,296
39,424
-
-
-
-
-
-
60,536
-
-
-
-
36,396
-
-
-
36,396
9,676
53,033
157,785
71,853
65,580
60,536
37,121
110,450
50,296
39,424
36,396
63,974
50,296
39,424
36,396
9,676
-
157,785
-
-
-
-
110,450
-
-
-
63,974
-
-
-
-
Notes:
1. Vesting is on the third anniversary of the grant date.
2. Award/purchase prices (restated for the rights issue as appropriate) are: 19 may 2009, 553p, 16 march 2010, 740p, 15 march 2011, 968p, 14 march 2012 1,069p
3. Performance criteria apply. For the share matching shares granted in 2009, which vested during 2012, minimum vesting required cROcE of 6.45%, and full vesting required
8.82%. The Award vested in full. For investment matching shares granted in 2010, 2011 and 2012 a condition based on a three-year average of cash return on capital
employed (‘cROcE’) applies as described on page 69. For 2010 the target range was 7.5% - 9.0%, for 2011 the target range was 10.75% to 11.89% and for 2012 the target
range was 9.53% to 10.53%.
4. The 4 December 2012 grant in respect of John carter related to the backdated pay increase as described on page 64.
72
performance share plan
Participation by directors is as follows:
Grant date
Geoff cooper
23 June 2009
5 march 2010
4 march 2011
4 April 2011
2 march 2012
Paul Hampden Smith
23 June 2009
5 march 2010
4 march 2011
4 April 2011
2 march 2012
John carter
23 June 2009
5 march 2010
4 march 2011
4 April 2011
2 march 2012
4 December 2012
Outstanding
1 January 2012
No.
Granted
during year
No.
Lapsed
during year
No.
Outstanding
31 December 2012
No.
Vested
during year
No.
131,289
92,437
75,224
18,605
-
76,585
53,921
37,686
18,642
-
76,585
53,921
37,686
18,642
-
-
-
-
-
-
90,082
-
-
-
-
54,157
-
-
-
-
54,157
14,548
(26,258)
-
-
-
-
(15,317)
-
-
-
-
(15,317)
-
-
-
-
-
105,031
92,437
75,224
18,605
90,082
61,268
53,921
37,686
18,642
54,157
61,268
53,921
37,686
18,642
54,157
14,548
105,031
-
-
-
-
61,268
-
-
-
-
61,268
-
-
-
-
-
Notes:
1. Vesting is on the third anniversary of the grant date.
2. Award prices (restated for the 2009 rights issue as appropriate) are: 23 June 2009, 473p, 5 march 2010, 695.5p, 4 march 2011, 1,020p, 4 April 2011, 1,031p. 2 march 2012,
1,085p, 4 December 2012, 1,121p
3. Performance criteria apply. For performance shares granted in 2009, vesting was at 80%. Performance conditions for the 2010 award are: vesting is at 30% if EPS exceeds
inflation by 3% a year, TSR is in the top 50% of the FTSE 250 and Aggregate cashflow is at least £470m, vesting is at 100% if EPS exceeds inflation by 10% a year, TSR is in
the top 25% and Aggregate cash flow is at least £520m. There is a straight-line vesting between these points. conditions for the 2011 and 2012 award performance were the
same as 2010 except the range for Aggregate cash flow is £844m to £977m for 2011 and £761m to £841m for 2012.
4. The 4 December 2012 grant in respect of John carter related to the backdated pay increase as described on page 64.
Deferred share bonus plan
Participation by directors is as follows:
Geoff cooper
3 march 2010
2 march 2011
2 march 2012
Paul Hampden Smith
3 march 2010
2 march 2011
2 march 2012
John carter
3 march 2010
2 march 2011
2 march 2012
Outstanding
1 Jan 2012
No.
Granted
During year
No.
Outstanding
31 Dec 2012
No.
19,862
16,729
-
11,586
9,496
-
11,586
9,496
-
-
-
18,180
-
-
8,626
-
-
9,106
19,862
16,729
18,180
11,586
9,496
8,626
11,586
9,496
9,106
Notes:
1. Vesting is on the third anniversary of the grant date.
2. The award price for the 3 march 2010 grant was 801.1667p,for the 2 march 2011 grant was 987.3p and for the 2012 grant was 800.9737p.
73
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
DIrE Ct o r s ’ r E M U N ErA
tIoN r Ep o r t
Executive share options
Participation by directors in the 2001 Executive Share Option Scheme is as follows:
.
Geoff cooper
Paul Hampden Smith
John carter
share award for John Carter
Grant date
10 November 2009
Outstanding
1 Jan 2012
No.
Exercised
during year
No.
Outstanding
31 Dec 2012
No.
Exercise price
Exercise period
17,980
39,368
51,994
23,787
10,489
37,296
41,594
22,058
10,487
-
(39,368)
(51,994)
-
-
(37,296)
(41,594)
-
-
17,980
-
-
23,787
10,489
-
-
22,058
10,487
1,320p
845p
841p
1,033p
1,320p
845p
841p
1,033p
1,320p
Anytime until 31/3/15
Anytime until 15/3/14
Anytime until 31/3/15
Anytime until 15/3/14
Anytime until 31/3/15
Outstanding 1 Jan and 31 Dec 2012
No.
47,612
Notes:
1. The one off Award structured as a nil cost share option was made following consultation with principal shareholders in 2009.
2. The Award vests in equal tranches after completion of years four, five and six, the first year being 2009.
3. The performance conditions are linked to procurement improvement initiatives agreed annually by the Remuneration committee together with delivery of John carter’s
objectives as part of Travis Perkins’ strategic plan.
sharesave options
Participation by directors in the 2002 Travis Perkins’ Sharesave Scheme is as follows:
Geoff cooper
Paul Hampden Smith
John carter
Outstanding 1 Jan and 31 Dec 2012
No.
3,670
3,670
3,670
Notes:
1. No performance conditions apply.
2. All options are exercisable from 1 December 2013 to 31 may 2014 at a price of 442p (restated for the 2009 rights issue).
share dilution
At 31 December 2012, shares under grant for executive share schemes over a 10 year period represented 2.82% of issued share capital and shares
under grant for all employee share schemes over the previous 10 years represented 5.37%. There were 5,024,649 (2.05% of issued share capital)
unallocated shares and 289,142 allocated shares (0.12%) held in the employee trust.
shareholders’ approval
The directors confirm that this report has been drawn up in accordance with the requirements of the companies Act 2006 and the UK corporate
Governance code.
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
74
Nominations Committee Report
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
Just as the Audit committee is responsible for monitoring the
performance and condition of the Group’s financial and physical
assets, so the Nominations committee is responsible for monitoring
the performance, appropriateness and future succession of the
Group’s executive and board talent. Reflecting this importance, the
Nominations committee has met as frequently as the board’s other
major committees over the past two years. The committee met five
times in 2012 and comprises myself as chair, chris bunker and John
coleman, although all the other Non-Executive Directors also came
to the meetings. Frequent attendees at the meetings were the Group’s
chief Executive and Group HR Director, depending on the relevance of
the issues under discussion.
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. Of course, these days it is more and more
important to plan for board and executive succession well in advance,
in order to ensure smooth succession and ensure that the Group’s
board and executive leadership skills are fully aligned to the Group’s
long term strategy.
•
•
•
In planning these appointments, the Nominations committee will:
Prepare a full description of the role, skills and capabilities
required;
Appoint external search firms, each time reviewing alternative
options, and ensuring that the chosen firm has signed up to the
relevant industry codes, for example, on diversity;
Engage with the Group’s major shareholders on future skill
requirements and ideas for potential candidates.
A further important role for the committee is to ensure that there
is a continuous pipeline of high performing and executive talent
at the two levels below executive director. These discussions
would normally take place at least once a year. In this sense, the
Nominations committee has a broader HR function.
•
The focus of the committee’s work in 2012 was on four topics:
The search for a high calibre candidate to succeed Paul Hampden
Smith as Group cFO, given his intention to retire. Russell Reynolds
was chosen, after considering a number of alternatives, to
conduct the search and was given a wide remit and demanding
specification, covering both the UK and international markets,
•
•
•
private equity as well as plc companies. We were delighted to
announce the appointment of Tony buffin, who will join the Group
on April 8 2013; Tony was previously Group cFO at the £20bn
revenue coles Group in Australia;
Detailed plans for the further personal development of John
carter, following his appointment as Deputy chief Executive.
All our Non Executive Directors were individually and
collectively involved in contributing to John’s development,
as well as specifically tailored courses;
A performance review of new hires and new appointments to the
Group below executive director level and the available pipeline of
internal talent feeding into those management levels;
Approval for future use of new service contracts that take into
account recent legal and corporate governance developments.
In the coming year, the focus of the committee’s work will switch to
planning the future Non Executive membership of the board. This
is because three of our current NEDs are due for retirement in the
next three years and in addition, Philip Jansen has decided to retire
from the board after the Annual General meeting because of his
other executive commitments. We plan to conduct a comprehensive
assessment of the board’s skills, given our long-term strategy, to
ensure that our future NEDs are fully able to complement and
support the executive leadership. In leading this process on the
Nominations committee, I will be discussing this skills assessment
with each of our major investors, seeking their input and where
possible their suggestions as to possible nominees.
Importantly, we will also continue the development work
undertaken in 2012 on preparing for future senior executive
succession.
As chairman of the committee, I will be available at the Annual
General meeting to answer any questions about the committee’s work.
robert Walker
chairman
75
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
Directors’ Report
FOR THE YEAR ENDED 31 DEcEmbE R 2 0 12
The Directors present their annual report and audited accounts
for the year ended 31 December 2012. The corporate Governance
statement on pages 57 to 60 forms part of the Directors’ report.
principal activities
Travis Perkins is one of the largest builder’s 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 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.
Business review
A review of the Group’s position, developments and future prospects
is contained in the chairman’s statement on pages 18 and 19, the
chief Executive’s review of the year on pages 20 to 28, the Deputy
chief Executive’s review of the year on pages 30 to 36 and the Finance
Director’s review of the year on pages 38 to 43. A review of the Group’s
environmental performance is on pages 46 to 49.
results and dividends
The Group results for the year ended 31 December 2012 and dividends
for the year ending 31 December 2012 are set out on page 82. If
approved, the final dividend will be paid on 30 may 2013 to those
shareholders on the register at the close of business on 3 may 2013.
Balance sheet and post balance sheet events
The balance sheet on pages 84 and 85 shows the Group’s financial
position. No significant events have occurred since the balance
sheet date.
principal risks and uncertainties
A review of the Group’s principal risks and uncertainties are on pages
44 and 45.
Financial risk management
Details of the Group’s approach to capital management and the
alleviation of risk through the use of financial instruments are
given in the Finance Director’s Review of the Year on pages 38 to
43. Specific quantitative information on borrowings and financial
instruments is given in notes 23 and 24 on pages 112 to 118 of the
annual financial statements.
Directors and their interests
In accordance with the company’s Articles of Association, Tony
buffin will be standing for election by shareholders at the Annual
General meeting, having been appointed to the board since the last
Annual General meeting. The board believes that Tony buffin’s
exceptionally strong track record in financial management, corporate
finance and in creating and achieving organic growth strategies will
greatly benefit the company, complement the skills of the other
board members, and make him an excellent choice as Group Finance
Director. His biographical details are set out on page 54.
The UK corporate Governance code (‘the code’) requires that
all directors of FTSE 350 companies are subject to re-election at
the company’s Annual General meeting each year, and therefore
executive directors, Geoff cooper and John carter, and non executive
directors Robert Walker, chris bunker, John coleman, Andrew
Simon and Ruth Anderson will all seek re-election at the Annual
General meeting. Philip Jansen will not seek re-election because as
explained on page 58 he will be retiring from the board at the end of
the meeting.
After 22 years in senior finance roles, including the last 17 years
as the company’s Group Financial Director, Paul Hampden Smith
resigned as a director on 28 February 2013. He has agreed to continue
in our employment until September 2013, to ensure a smooth and
complete handover to his successor, Tony buffin.
The names of the Directors at 31 December 2012, together with
their biographical details are set out on pages 54 and 55. All of these
Directors held office throughout the year. Tony buffin was appointed
with effect from 8 April 2013. The executive directors have rolling 12
month notice periods in their contracts. The non executive directors
do not have service contracts. In the light of the formal evaluation of
their performances as a result of the process described on page 58,
Robert Walker, chairman, confirms on behalf of the board that all
directors continue to be effective in, and committed to, their roles.
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 140 of the
company’s Articles of Association, the Directors have the benefit of
an indemnity, to the extent permitted by the 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 140(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 (and during the period of 30 minutes prior to) 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 practice
on approval of directors’ conflicts of interests in accordance with the
company’s Articles of Association. These provisions have operated
effectively. 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 2012,
including holdings, if any, of spouses and of children aged under 18,
were as detailed in the Directors’ Remuneration Report on pages 72
to 74.
76
Nominations committee report. The company has an equal
opportunities policy aimed at ensuring that employment decisions
are based on ability and potential regardless of gender, race, colour,
ethnic origin, 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 designed 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 Directors’
Remuneration Report.
political donations
The Group did not give any money for political purposes nor did it
make any donations to political organisations or incur any political
expenditure during the year.
supplier payment policy
The Group’s policy is to pay all of its suppliers in accordance with
established terms. Group trade creditors at 31 December 2012
represented 53 days (31 December 2011: 57 days) of average
purchases of goods and services. The company’s trade creditors at 31
December 2012 represented 30 days (2011: 30 days).
Auditor
Resolutions to re-appoint Deloitte LLP as the company’s auditor and
to authorise the Directors to fix the auditor’s remuneration will be
proposed at the Annual General meeting.
statement on disclosure of information to the auditor
Each of the persons who is a director at the date of approval of this
report confirms that:
•
So far as the director is aware, there is no relevant audit
information of which the company’s auditor is unaware; and
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 auditor is
aware of that information.
substantial shareholdings
As at 31 December 2012, the company had been notified of the
following interests amounting to 3% or more of the voting rights in
the issued ordinary share capital of the company.
Number
%
Scottish Widows Investment Partnership Ltd 14,858,234
6.08%
Sprucegrove Investment management Ltd
13,506,856
5.53%
Pzena Investment management LLc
10,080,127
4.13%
Investec Ltd.
Dimensional Fund Advisors LP
9,159,663
3.75%
9,022,439
3.69%
Sanderson Asset management Ltd
8,926,940
3.65%
Legal & General Investment
management Ltd (UK)
Standard Life Investments Ltd
AXA Investment managers UK
8,735,399
3.57%
7,891,153
3.23%
7,559,946
3.09%
As at 27 march 2013, the company had been notified of the
following interests amounting to 3% or more of the voting rights in
the issued ordinary share capital of the company.
Number
%
Scottish Widows Investment Partnership Ltd 16,068,747
6.56%
Sprucegrove Investment management Ltd
13,413,946
5.48%
TIAA Group
10,058,410
4.11%
Pzena Investment management LLc
9,298,675
3.80%
Dimensional Fund Advisors LP
9,097,983
3.71%
Sanderson Asset management Ltd
8,949,207
3.65%
Legal & General Investment
management Ltd (UK)
AXA S.A.
Investec Ltd
morgan Stanley & co Inc
8,569,743
3.50%
8,404,654
3.43%
7,751,263
3.16%
7,435,324
3.04%
Close company status
The close company provisions of the Income and corporation Taxes
Act 1988 do not apply to the company.
•
Employees and charitable donations
Statements on these matters are contained in the chief Executive’s
review of the year on pages 20 to 28 and in the Deputy chief
Executive’s review of the year on page 35.
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. Its approach
to the matter of diversity on company boards is set out in the
This confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the companies Act 2006.
share capital and change of control
As at 31 December 2012 the company had an allotted and fully paid
share capital of 244,853,057 ordinary shares of 10 pence each, with
an aggregate nominal value of £24,485,306 (including shares owned
by the employee share ownership trust). The ordinary shares are
77
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
DIrE Ct o r s ’ r Ep o r t
listed on the London Stock Exchange. All the shares rank pari passu.
The rights and obligations attaching to the shares are set out in the
company’s Articles of Association. 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 the share capital during the year are also included in note 20 to the
financial statements.
As at 31 December 2012 The Travis Perkins Employee Share
Ownership Trust owned 5,313,791 shares in the company (2.17%
of issued share capital) for use in connection 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 issue shares and to purchase its
own shares and is seeking renewal of these powers at the forthcoming
Annual General meeting in accordance with the restrictions and
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 significant in the context of the company as a whole.
forthcoming Annual General meeting. The board considers that all of
the resolutions proposed are in the best interests of the company and
of its shareholders as a whole and unanimously recommends that
shareholders vote in favour of all resolutions put before the Annual
General meeting.
resolution 13:
Directors’ remuneration report
In accordance with the section 439 of the companies Act 2006,
this resolution seeks shareholders’ approval of the Directors’
Remuneration Report as set out on pages 64 to 74. This vote is
advisory and the directors’ entitlement to receive remuneration is not
conditional on it
resolution 14:
replacement deferred share bonus plan amendments
This resolution seeks shareholder approval of the replacement
Deferred Share bonus Plan (amending the existing Plan following the
review of executive remuneration referred to on page 65). A description
of the Plan is set out in the chairman’s letter which has been sent to
shareholders with the notice of the Annual General meeting.
resolution 15:
renewal of 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 £8,166,764 (representing 81,667,644 ordinary shares of 10 pence
each). This amount represents approximately one-third of the issued
ordinary share capital of the company as at 27 march 2013, the latest
practicable date prior to publication of this Notice.
There are no agreements providing for compensation for Directors
In line with guidance issued by the Association of british Insurers
or employees on change of control. As set out in the Directors
Remuneration Report on page 70, 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.
Annual general meeting
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 23 may 2013 at 12.00
noon. A buffet lunch will be available. In addition to the resolutions
to approve the receipt of the company’s annual accounts, the
declaration of a final dividend, the appointment and re-appointment
of the company’s directors, the re-appointment of the company’s
auditor and to give the directors authority to fix the auditor’s
remuneration, the following items are to be proposed at the
(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 £16,333,529 (representing 163,335,288 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 27 march 2013, the latest
practicable date prior to publication of this Notice. The authorities
sought under paragraphs (a) and (b) of this resolution will expire at
the earlier of 30 June 2014 (the last date by which the company must
hold an annual general meeting in 2014) and the conclusion of the
annual general meeting of the company held in 2014. 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. It is now our
practice to propose all directors for annual re-election at each Annual
General meeting in accordance with the code.
The Directors have no present intention to exercise either of the
authorities sought under this resolution, except, under paragraph (a), to
satisfy options under the company’s employee share option schemes.
78
resolution 16:
Limited authority to allot shares for cash
This resolution would give the Directors the authority to allot
ordinary 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 £1,225,015
(representing 12,250,147 ordinary shares). This aggregate nominal
amount represents approximately 5% of the issued ordinary share
capital of the company as at 27 march 2013, 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 cumulative 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.
Allotments made under the authorisation in paragraph (b) of
resolution 15 would be limited to allotments by way of a rights
issue only (subject to the right of the board to impose necessary
or appropriate limitations to deal with, for example, fractional
entitlements and regulatory matters).
The authority will expire at the earlier of 30 June 2014 (the last
date by which the company must hold an Annual General meeting
in 2014) and the conclusion of the Annual General meeting of the
company held in 2014. Any issue of shares for cash will, however, still
be subject to the requirements of the UK Listing Authority.
resolution 17:
Notice of meetings
The companies Act 2006 requires that the notice period for general
meetings of a company is 21 days unless certain requirements are
satisfied, including that shareholders approve a shorter notice period,
which cannot be less than 14 clear days. At the Annual General
meeting held in 2012, shareholders approved a notice period for
general meetings (other than AGms) of not less than 14 clear days
effective until the AGm to be held in 2013. This resolution is proposed
to allow the company to continue to call general meetings (other
than AGms) on 14 clear days notice. The Directors believe it is in the
best interests of the shareholders of the company to preserve the
shorter notice period and accordingly are putting this resolution,
to be proposed as a special resolution to the meeting. The shorter
notice period would not be used as a matter of routine for general
meetings, but only where the flexibility is merited by the business
of the meeting and is thought to be to the advantage of shareholders
as a whole. Examples of when it might be appropriate to call a
general meeting at 14 days notice include when emergency capital
raising proposals or other price sensitive transactions are being put
to shareholders for approval. The approval will be effective until the
company’s Annual General meeting in 2014, when it is expected that
a similar resolution will be proposed. Under the companies Act 2006
in order to be able to call a general meeting on less than 21 clear
days notice, the company must make a means of electronic voting
available to all shareholders.
resolution 18:
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 resolution, which
is set out in full in the Notice of Annual General meeting on page
132, will be proposed 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 2006. The
authority limits the number of shares that could be purchased to a
maximum of 24,500,293 (representing 10% of the issued ordinary
share capital of the company as at 27 march 2013) and sets
minimum and maximum prices. This authority will expire no later
than 30 June 2014.
The Directors consider that it is in the best interests of
the company to have available this authorisation, in case of
circumstances 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 27 march 2013, there were options over 12,485,868 ordinary
shares in the capital of the company, which represent 5.1% 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 5.66% of the
company’s issued ordinary share capital (excluding any treasury
shares). As at 27 march 2013, 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
3 April 2013
79
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Statement of Directors’ Responsibilities
FOR THE YEAR ENDED 31 DEcEmbE R 2 0 12
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors’ responsibility statement
We confirm that to the best of our knowledge:
1. The financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial position
and profit or loss of the company and the undertakings included in
the consolidation taken as a whole; and
2.. The management report, which is incorporated into the Directors’
report, includes a fair review of the development and performance
of the business and the position of the company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
by order of the board
Geoff Cooper
chief Executive
John Carter
Deputy chief Executive
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations.
company law requires the Directors to prepare such financial
statements for each financial year. Under that law the Directors are
required to prepare the group financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and Article 4 of the IAS Regulation and have
also chosen to prepare the parent company financial statements
under IFRSs as adopted by the European Union. Under company
law the Directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period.
In preparing these financial statements, International Accounting
Standard 1 requires that directors:
• Properly select and apply accounting policies;
•
Present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and
Make an assessment of the Company’s ability to continue as a
going concern.
•
•
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the companies Act 2006. They
are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
80
Independent Auditor’s Report to the Members of Travis Perkins plc
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
We have audited the financial statements of Travis Perkins plc
for the year ended 31 December 2012 which comprise Group
and Parent company Income Statements, the Group and Parent
company Statements of comprehensive Income, the Group and
Parent company balance Sheets, the Group and Parent company
Statements of changes in Equity, the Group and Parent company
cash Flow Statements and the related notes 1 to 37. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union.
This report is made solely to the company’s members, as a body,
in accordance with chapter 3 of Part 16 of the companies Act 2006.
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 auditor’s 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.
respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices board’s Ethical Standards for
Auditors.
scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s and the Parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and
the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the
annual report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
opinion on financial statements
In our opinion:
•
The financial statements give a true and fair view of the state of
the Group’s and of the Parent company’s affairs as at 31 December
2012 and of the Group’s and the Parent company’s profit for the
year then ended;
The financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union; and
•
•
The financial statements have been prepared in accordance with
the requirements of the companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
separate opinion in relation to IFrss as issued by the IAsB
As explained in note 1 to the group financial statements, the Group
in addition to complying with its legal obligation to apply IFRSs as
adopted by the European Union, has also applied IFRSs as issued by
the International Accounting Standards board (IASb).
In our opinion the group financial statements comply with IFRSs
as issued by the IASb.
opinion on other matters prescribed by the Companies Act 2006
In our opinion:
•
The part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the companies Act
2006; and
The information given in the Directors’ Report for the financial year
for which the financial statements are prepared is consistent with
the financial statements.
•
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the companies Act 2006 we are required to report to you if,
in our opinion:
•
Adequate accounting records have not been kept by the Parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
The Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
Certain disclosures of directors’ remuneration specified by law are
not made; or
We have not received all the information and explanations we
require for our audit.
•
•
•
Under the Listing Rules we are required to review:
•
The Directors’ statement, contained within the Finance Director’s
review of the year, in relation to going concern;
The part of the Corporate Governance Statement relating to
the company’s compliance with the nine provisions of the UK
corporate Governance code specified for our review; and
Certain elements of the report to shareholders by the Board on
directors’ remuneration.
•
•
Colin Hudson FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
chartered Accountants and Statutory Auditor
London, United Kingdom
3 April 2013
81
GOVERNANCETRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Income Statements
FOR THE YEAR ENDED 31 DEcEmbE R 2 0 12
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
––––––––––––––––––––––––––––––––––––––––––––––––––––
Pre-exceptional
items
£m
Notes
Exceptional
items
£m
Total
£m
Pre-exceptional
items
£m
Exceptional
items
£m
Total
£m
4,844.9
-
4,844.9
4,779.1
-
4,779.1
Revenue
Operating profit before amortisation
Amortisation of intangible assets
Operating profit
Exceptional investment income
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
4
5
5
9
9
10
Earnings per ordinary share
11
basic
Diluted
Total dividend declared
per ordinary share
12
313.2
(12.9)
300.3
-
22.4
(38.9)
283.8
(74.5)
209.3
326.6
(17.4)
309.2
-
13.8
(40.5)
282.5
(69.2)
213.3
(8.7)
-
(8.7)
39.5
-
-
30.8
15.5
46.3
317.9
(17.4)
300.5
39.5
13.8
(40.5)
313.3
(53.7)
259.6
108.9p
105.0p
25.0p
All results relate to continuing operations. Details of exceptional items are given in notes 5, 9 and 10.
Revenue
Operating profit
Exceptional investment income
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Notes
4
5
5
9
9
10
All results relate to continuing operations.
82
(9.8)
-
303.4
(12.9)
(9.8)
290.5
-
-
(4.4)
(14.2)
17.3
3.1
-
22.4
(43.3)
269.6
(57.2)
212.4
90.3p
87.3p
20.0p
THE cOmPAN Y
–––––––––––––––––––––––––––
2012
£m
82.1
62.3
37.4
3.7
(50.8)
52.6
13.2
65.8
2011
£m
86.0
68.9
-
19.5
(39.8)
48.6
10.1
58.7
Statements of Comprehensive Income
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
THE GROUP
––––––––––––––––––––––––––
THE cOmP ANY
–––––––––––––––––––––––––––
Notes
Profit for the year
Items that will not be reclassified subsequently to profit and loss
Actuarial losses on defined benefit pension schemes
Deferred tax rate change
Income tax relating to items not reclassified
28
10
10
Items that may be reclassified subsequently to profit and loss
cash flow hedges:
Losses arising during the year
Reclassification adjustments for losses included in profit
movement on cash flow hedge cancellation payment
Income tax relating to items that may be reclassified
10
Other comprehensive income for the year net of tax
Total comprehensive income for the year
2012
£m
259.6
(45.8)
(5.5)
10.4
(40.9)
(8.5)
8.8
4.1
(0.9)
3.5
(37.4)
222.2
2011
£m
212.4
(49.8)
(4.9)
12.6
(42.1)
(4.6)
2.8
4.2
(0.6)
1.8
(40.3)
172.1
2012
£m
65.8
-
-
-
-
(8.5)
8.8
4.1
(0.9)
3.5
3.5
69.3
2011
£m
58.7
-
-
-
-
(4.6)
2.8
4.2
(0.6)
1.8
1.8
60.5
83
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
Balance Sheets
AS AT 31 DEcEmbER 2 0 12
THE GROUP
–––––––––––––––––––––––––––––
THE cOmPAN Y
–––––––––––––––––––––––––––––
Assets
Notes
2012
£m
2011
£m
2012
£m
-
-
0.2
12.8
-
6.2
2011
£m
-
-
0.2
40.3
-
58.5
3,572.9
2,872.8
-
-
14.2
-
-
9.9
1,807.5
1,706.2
424.8
578.4
12.8
0.4
6.7
-
2.4
1.6
-
388.9
562.6
40.3
0.4
51.3
-
1.5
19.3
-
2,834.6
2,770.5
3,606.3
2,981.7
637.1
733.7
12.7
139.1
596.0
743.0
3.1
78.6
1,522.6
1,420.7
-
180.7
12.7
74.0
267.4
-
214.1
3.1
-
217.2
4,357.2
4,191.2
3,873.7
3,198.9
NON-cURRENT ASSETS
Goodwill
Other intangible assets
Property, plant and equipment
Derivative financial instruments
Investment property
Interest in associates
Investment in subsidiaries
Available-for-sale investments
Retirement benefit asset
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
13
14
15
24
16
17
17
17
28
26
18
24
19
84
Equity and liabilities
cAPITAL AND RESERVES
Issued capital
Share premium account
merger reserve
Revaluation reserve
Hedging reserve
Own shares
Accumulated profits
Total equity
NON-cURRENT LIAbILITIES
Interest bearing loans and borrowings
Derivative financial instruments
Retirement benefit obligations
Long-term provisions
Long term other payables
Amounts due to subsidiaries
Deferred tax liabilities
Total non-current liabilities
cURRENT LIAbILITIES
Interest bearing loans and borrowings
Trade and other payables
Derivative financial instruments
Tax liabilities
Short-term provisions
Total current liabilities
Total liabilities
Total equity and liabilities
THE GROUP
–––––––––––––––––––––––––––––
THE cOmP ANY
–––––––––––––––––––––––––––––
Notes
2012
£m
2011
£m
20
22
22
22
22
22
22
23
24
28
25
29
26
23
27
24
25
24.5
487.2
326.5
20.1
(1.6)
(62.4)
1,513.8
2,308.1
195.2
4.9
59.1
20.0
47.0
-
85.0
411.2
396.1
1,107.6
2.6
74.8
56.8
24.4
480.8
326.5
20.8
(5.1)
(75.2)
1,335.6
2,107.8
598.2
5.9
65.0
28.9
-
-
97.4
795.4
63.6
1,088.3
-
75.9
60.2
1,637.9
1,288.0
2,049.1
2,083.4
4,357.2
4,191.2
2012
£m
24.5
486.1
326.5
-
(1.6)
(62.4)
204.0
977.1
134.9
4.9
-
-
47.0
2,243.4
-
2011
£m
24.4
479.7
326.5
-
(5.1)
(75.2)
192.5
942.8
592.8
5.9
-
-
-
1,563.5
-
2,430.2
2,162.2
444.9
18.9
2.6
-
-
466.4
2,896.6
3,873.7
74.9
19.0
-
-
-
93.9
2,256.1
3,198.9
The financial statements of Travis Perkins plc, registered number 824821, were approved by the board of Directors on 3 April 2013 and
signed on its behalf by:
Geoff Cooper
chief Executive
John Carter
Deputy chief Executive
85
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DEcEmbE R 2 0 12
THE GR OUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Issued
share
capital
£m
Share
premium
account
£m
merger Revaluation
reserve
reserve
£m
£m
Hedging
reserve
£m
Own
shares
£m
Retained
earnings
£m
Total
equity
£m
24.2
471.5
325.9
21.3
(6.9)
(83.4)
1,199.2
1,951.8
At 1 January 2011
Profit for the year
Other comprehensive income
for the period net of tax
Total comprehensive income for the year
Dividends
Issue of share capital
-
-
-
-
-
-
-
-
-
-
-
-
0.2
9.3
0.6
Realisation of revaluation reserve in
respect of property disposals
Difference between depreciation of assets on
a historical basis and on a revaluation basis
Deferred tax rate change
Foreign exchange differences
Tax on share based payments (note 10)
credit for equity-settled share based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.1)
(0.3)
0.9
-
-
-
-
1.8
1.8
-
-
-
-
-
-
-
-
-
-
-
-
212.4
212.4
(42.1)
(40.3)
170.3
172.1
(38.8)
(38.8)
8.2
(7.1)
11.2
-
-
-
-
-
-
1.1
0.3
-
(0.1)
(3.2)
13.9
-
-
0.9
(0.1)
(3.2)
13.9
24.4
480.8
326.5
20.8
(5.1)
(75.2)
1,335.6
2,107.8
At 31 December 2011
Profit for the year
Other comprehensive income for the
period net of tax
Total comprehensive income for the year
Dividends
-
-
-
-
-
-
-
-
Issue of share capital
0.1
6.4
Realisation of revaluation reserve in
respect of property disposals
Difference between depreciation of assets on
a historical basis and on a revaluation basis
Deferred tax rate change
Tax on share based payments (note 10)
credit for equity-settled share based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.4)
(0.2)
0.9
-
-
-
3.5
3.5
-
-
-
-
-
-
-
-
-
-
-
259.6
259.6
(40.9)
(37.4)
218.7
222.2
(51.2)
(51.2)
12.8
(10.4)
8.9
-
-
-
-
-
1.4
0.2
-
4.3
-
-
0.9
4.3
15.2
15.2
At 31 December 2012
24.5
487.2
326.5
20.1
(1.6)
(62.4)
1,513.8
2,308.1
86
Statement of Changes in Equity
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
THE cOmPA NY
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Issued
share
capital
£m
Share
premium
account
£m
merger
reserve
£m
Hedging
reserve
£m
Own
shares
£m
Retained
earnings
£m
Total
equity
£m
24.2
470.4
325.9
(6.9)
(83.4)
178.7
908.9
-
-
-
-
-
-
-
-
-
-
-
-
0.2
9.3
0.6
-
-
-
-
-
-
-
1.8
1.8
-
-
-
-
-
-
-
-
8.2
-
-
58.7
-
58.7
58.7
1.8
60.5
(38.8)
(38.8)
(7.1)
(4.1)
5.1
11.2
(4.1)
5.1
24.4
479.7
326.5
(5.1)
(75.2)
192.5
942.8
-
-
-
-
-
-
-
-
0.1
6.4
-
-
-
-
-
-
-
-
-
-
-
-
3.5
3.5
-
-
-
-
-
-
-
-
12.8
-
-
65.8
-
65.8
(51.2)
(10.4)
3.0
4.3
65.8
3.5
69.3
(51.2)
8.9
3.0
4.3
At I January 2011
Profit for the year
Other comprehensive income for the period net of tax
Total comprehensive income for the year
Dividends
Issue of share capital
Tax on share based payments (note 10)
credit for equity-settled share based payments
At 31 December 2011
Profit for the year
Other comprehensive income for the period net of tax
Total comprehensive income for the year
Dividends
Issue of share capital
Tax on share based payments (note 10)
credit for equity-settled share based payments
At 31 December 2012
24.5
486.1
326.5
(1.6)
(62.4)
204.0
977.1
87
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
Cash Flow Statements
FOR THE YEAR ENDED 31 DEcEmbE R 2 0 12
THE GROUP
–––––––––––––––––––––––––––––
THE cOmPAN Y
–––––––––––––––––––––––––––––
Operating profit before amortisation and exceptional items
Adjustments for:
Depreciation of property, plant and equipment
Other non cash movements
Losses of associate
2012
£m
326.6
69.4
15.2
0.3
Gain on disposal of property, plant, equipment and investments
(17.1)
Operating cash flows before movements in working capital
Increase in inventories
Decrease / (increase) in receivables
(Decrease) / increase in payables
Payments on exceptional items
Pension payments 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
Proceeds on disposal of property, plant, equipment and investments
Purchases of property, plant and equipment
Interest in associate
Disposal of business
Investments in subsidiaries
Provision of funding to subsidiary undertaking
Acquisition of businesses net of cash acquired
Net cash used in investing activities
Financing activities
Net proceeds from the issue of share capital
bank facility fees paid
Net movement in finance lease liabilities
Decrease in loans
Dividends paid
Net cash from financing activities
Net increase / (decrease) in cash and cash equivalents
cash and cash equivalents at beginning of year
cash and cash equivalents at end of year (note 19)
394.4
(19.2)
5.1
(25.0)
(4.7)
(23.0)
327.6
(27.4)
(64.5)
235.7
0.1
32.6
(82.3)
(2.9)
-
-
-
(24.5)
(77.0)
8.9
-
5.7
(61.6)
(51.2)
(98.2)
60.5
78.6
139.1
2011
£m
313.2
63.9
13.9
0.6
(17.6)
374.0
(36.1)
(62.0)
107.1
(17.8)
(20.1)
345.1
(24.2)
(26.3)
294.6
0.7
15.0
(109.2)
(2.3)
26.9
-
-
(9.9)
(78.8)
10.6
(6.1)
(1.6)
(152.2)
(38.8)
(188.1)
27.7
50.9
78.6
2012
£m
62.3
-
4.3
-
-
66.6
-
81.8
682.8
-
-
831.2
(41.2)
-
790.0
0.1
-
-
(2.2)
-
(600.6)
-
-
(602.7)
8.9
-
-
(70.0)
(51.2)
2011
£m
68.9
-
5.1
-
-
74.0
-
1.5
231.9
(5.4)
-
302.0
(29.2)
-
272.8
11.6
-
(0.1)
(2.3)
-
-
(168.2)
(1.6)
(160.6)
10.6
(6.1)
-
(90.0)
(38.8)
(112.3)
(124.3)
75.0
(1.6)
73.4
(12.1)
10.5
(1.6)
88
Notes to the Financial Statements
FOR T HE YEAR E NDE D 31 DEcEmbE R 2 0 12
1. General information
overview
Travis Perkins plc is a company incorporated in the United Kingdom
under the companies Act 2006. The address of the registered office is
given on page 137. The nature of the Group’s operations and its principal
activities are set out in the chief Executive’s review of the year, the
Deputy chief Executive’s review of the year and the Finance Director’s
review of the year on pages 38 to 43.
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 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.
In the current financial year, the Group has adopted the following,
IAS 1 amendments Presentation of financial statements
which did not have a material impact:
•
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:
• IAS 19 (revised) Employee benefits;
• IAS 27 (revised) Separate Financial Statements;
• IAS 28 (revised)Investments in Associates and Joint Ventures (2011);
• IAS 32 (amended) Offsetting Financial Assets and Liabilities;
• IFRS 9 Financial Instruments (2009);
• IFRS 10 Consolidated Financial Statements;
• IFRS 11 Joint Arrangements;
• IFRS 12 Disclosure of Interests in Other Entities;
• IFRS 13 Fair Value Measurement.
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 except as follows:
As the Group has always recognised actuarial gains and losses
immediately, there will be no effect on the defined benefit obligation of all
defined benefit schemes and consequently no effect on the balance sheet
disclosures. IAS 19 revised requires interest cost and return on scheme
assets calculated under the previous version of IAS 19 to be replaced with
a net interest amount calculated by applying a discount rate to the net
defined liability or asset. The impact of this revision on profit before tax in
2012 would be to lower profit before tax by approximately £12m.
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 affect 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.
A detailed consideration of going concern, risks and uncertainties is
provided in the Finance Director’s review of the year on pages 38 to 43.
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. significant accounting policies
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. For the Parent company, revenue comprises management
charges receivable and dividend income received.
Exceptional items
Exceptional items are those items of income and expenditure that
by reference to the Group are material in size or 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
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,
significant restructurings, onerous contracts, write-downs or impairments
of current and non-current assets, the costs of acquiring and integrating
businesses, gains or losses on disposals of businesses and investments,
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 and pension scheme curtailment gains.
Business combinations and goodwill
All business combinations are accounted for using the acquisition
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. The acquiree’s identifiable assets, liabilities
and contingent liabilities that meet the conditions for recognition under
IFRS 3 (2008) are recognised at their fair value at the acquisition date
except that:
•
Deferred tax assets or liabilities and liabilities or assets related to
employee benefit arrangements are recognised and measured in
accordance with IAS 12 Income Taxes and IAS 19 Employee benefits
respectively;
Liabilities or equity instruments related to the replacement by the
Group of an acquiree’s share-based payment awards are measured in
accordance with IFRS 2 Share-based Payment;
•
89
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 •
Assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that
Standard
Where a business combination is achieved in stages, the Group’s
previously held interests in the acquired entity are remeasured to fair
value at the acquisition date and the resulting gain or loss, if any, is
recognised in the income statement.
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 or groups of cash generating units that are expected to
benefit from the synergies of the combination, 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.
Liabilities for contingent consideration are classified as fair value
through profit and loss.
Investments in associates
An associate is an entity over which the Group has significant influence,
but not control or joint control through participation in the financial
and operating policy decisions of the investee. The results, assets, and
liabilities of associates are incorporated in these financial statements
using the equity method of accounting. Investments in associates are
carried in the balance sheet at cost as adjusted by post acquisition
changes in the Group’s share of the net assets of the associate, less any
impairment in the value of individual investments.
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.
Assets held for sale
Assets held for sale are measured at the lower of carrying amount and fair
value less costs to sell. Assets are held for sale if their carrying amount
will be recovered through a sale transaction rather than continuing use.
This condition is regarded as met only when the sale is highly probable
and the asset is available for sale in its present condition.
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:
•
Buildings - 50 years or if lower, the estimated useful life of the building
or the life of the lease;
• Plant and equipment - 4 to 10 years;
• 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 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 on a straight line
basis over the life of the lease.
Impairment of tangible and intangible assets excluding goodwill
The carrying amounts of the Group’s tangible and intangible assets
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 a 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.
90
NOTES TO THE FINANCIAL STATEMENTS 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 by either 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 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 not designated effective hedges
are marked to market at the balance sheet date, with any gains or losses
being taken through the income statement.
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’ and trade and other payables.
The Group has defined the classes of financial assets to be other
financial assets, cash and borrowings and derivative financial
instruments.
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 it:
Has been acquired principally for the purpose of selling or of disposal
•
in the near future; or
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
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.
91
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
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.
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 finance income or 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 comprehensive income.
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). 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.
provisions
A provision is recognised in the balance sheet when the Group has a
present legal or constructive obligation because 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 shareholders’ equity. Where such shares vest to employees under
the terms of the Group’s share incentive schemes 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. Critical judgements and
key sources of estimation and uncertainty
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 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 frequently
re-evaluate these significant factors and make 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.
Income taxes
The Group is subject to the income tax laws of the United Kingdom. These
92
NOTES TO THE FINANCIAL STATEMENTS 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 affect the Group’s effective tax rate and
the results of operations in a given period. Accordingly, potentially
significant tax benefits will not be recognised until there is sufficient
certainty that they will be accepted by HmRc.
Cash generating units
The Directors consider that individual assets do not generate cash
flows that are largely independent of those from other assets and
consequently that, for the purposes of impairment testing, each branch
in the Group is a cash generating unit. Impairment testing of property
plant and equipment is carried out at individual branch level. Goodwill
and other intangibles impairment testing is carried out at brand level as
described in note 13.
Goodwill and intangible assets
In testing for impairment, the recoverable amount of goodwill and
intangible assets is determined by reference to the value in use of the
cGU grouping to which they are attributed. In addition the Directors
have made certain assumptions concerning discount rates and the
future development of the business that are consistent with its five-year
plan. Whilst the Directors consider their assumptions to be realistic,
should actual results, including those for market volume changes, be
different from expectations, for instance due to a worsening of the UK
economy, then it is possible that the value of goodwill and intangible
assets included in the balance sheet could become impaired.
The pre-tax discount rate is derived from the Group’s weighted
average cost of capital (‘WAcc’) calculated by the Group’s advisors. The
WAcc is based upon the risk free rate for ten-year UK gilts, adjusted
for the UK market risk premium, which reflects the increased risk of
investing in UK equities and the relative volatilities of the equity of the
Group compared to the market as a whole. In arriving at the discount
rate the Directors have applied an adjustment to reflect their view of the
relative risk of the Group’s operations. Further details concerning the
judgements made by the Directors in respect of goodwill and intangible
assets and the impairment testing thereof, are given in note 13.
toolstation consideration
The final consideration for Toolstation will be determined by reference
to a multiple of the EbITDA of the business in 2013. At the balance
sheet date, the Directors have estimated Toolstation’s 2013 EbITDA
from which they have calculated an estimated creditor for the final
consideration payable and included it in the balance sheet. Should
the company’s 2013 EbITDA change from that estimated, the final
consideration will be different, but in the opinion of the directors any
difference is unlikely to be material.
pension assumptions
The Group has chosen to adopt assumptions that the Directors believe
are generally in line with the median for comparable companies. If the
future return on equities is lower than anticipated, which from 2013, will
be equal to the discount rate applied to the pension scheme liability,
or if the difference between actual inflation and the actual increase
in pensionable salaries is greater than that assumed, or if long term
interest rates were lower than 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 property owner and to local authorities and
amounts expected to be received 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 will take longer (or in some cases less time) to dispose of leases
than they anticipate. As a result, the provisions may be mis-stated, 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
crystallise, therefore the Directors have to estimate the value of
provisions to hold in the balance sheet in respect of historical 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 historical 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.
93
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 4. revenue
Sale of goods
management charges
Dividends from subsidiaries
Other operating income
Finance income
5. profit
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
Add back exceptional items
Add back amortisation of intangible assets
Adjusted operating profit
Exceptional items
bSS integration costs
Onerous lease provision release
Toolstation investment fair value adjustment
Toolstation consideration fair value adjustment
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
4,844.9
-
-
4,844.9
19.3
13.8
4,878.0
2011
£m
4,779.1
-
-
4,779.1
20.5
22.4
4,822.0
2012
£m
-
7.9
74.2
82.1
-
3.7
85.8
2011
£m
-
6.9
79.1
86.0
-
19.5
105.5
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
4,844.9
(3,381.1)
1,463.8
(907.8)
(274.5)
19.3
(0.3)
300.5
8.7
17.4
326.6
2011
£m
4,779.1
(3,355.8)
1,423.3
(882.1)
(270.6)
20.5
(0.6)
290.5
9.8
12.9
313.2
2012
£m
82.1
-
82.1
-
(19.8)
-
-
62.3
-
-
62.3
2012
£m
(14.7)
6.0
35.3
4.2
30.8
2011
£m
86.0
-
86.0
-
(17.1)
-
-
68.9
-
-
68.9
2011
£m
(9.8)
-
-
-
(9.8)
The Group incurred £14.7m of exceptional operating charges in 2012 (2011: £9.8m) as a result of integrating bSS into the Group. The charges arose mainly
as a result of the on-going programme to integrate bSS colleagues, systems and processes into the Group, although in 2011 there was a £2.2m charge due
to the closure and disposal of businesses that were determined to be non-core to the Group’s operations.
The Group released £6.0m through operating profit as exceptional items for onerous lease provisions that are no longer required because properties have
been sublet.
The Group recognised £35.3m of exceptional fair value gains in investment income when the requirements of IFRS 3 (2008) business combinations were
applied to the investments held in Toolstation. This acquisition has resulted in the Group’s existing 30% associate interest being re-measured to its fair
value at the acquisition date. The exceptional item recognised by the Group was £2.1m higher due to the revaluation of the intra-group loan.
In accordance with IAS 39 the contingent consideration payable in respect of Toolstation has been reassessed at 31 December 2012 and as a result
the discounted amount previously recognised of £51.2m has been reduced to £47.0m with the difference of £4.2m being credited to income statement as
exceptional investment income.
To enable readers of the financial statements to obtain a clear understanding of underlying trading, the Directors have shown the exceptional items
separately in the group income statement.
94
NOTES TO THE FINANCIAL STATEMENTS
5. Profit continued
Operating profit has been arrived at after charging / (crediting):
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
movement of provisions against inventories
cost of inventories recognised as an expense
Pension costs included in cost of sales
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
Rental income
Hire of vehicles, plant and machinery
Other leasing charges – property
Amortisation of intangible assets
Auditor remuneration for audit services
2012
£m
(0.4)
3,381.5
0.5
4.1
12.6
69.4
605.1
(17.1)
(4.2)
34.0
175.6
17.4
0.4
2011
£m
(0.3)
3,356.1
0.5
1.4
10.9
63.9
579.7
(16.3)
(4.2)
33.4
164.3
12.9
0.4
During the year the Group incurred the following costs for services provided by the company’s auditor:
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor for the audit of the company’s subsidiaries
Fees paid to the company’s auditor for other services:
Audit related assurance services
Other services relating to taxation – advisory
2012
£m
-
-
-
0.4
-
-
11.5
-
-
-
-
-
0.1
2011
£m
-
-
-
0.4
-
-
12.4
-
-
-
-
-
0.1
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£000
106
325
73
56
560
2011
£000
104
297
107
192
700
Audit related assurance services includes £18,000 (2011: £17,000) which was paid to the auditor 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 61 to 63, and includes an explanation of how auditor
objectivity and independence is safeguarded when non-audit services are provided by the auditor.
b. Adjusted profit before and after tax
Profit before tax
Exceptional items
Amortisation of intangible assets
Adjusted profit before tax
Profit after tax
Exceptional items
Amortisation of intangible assets
Tax on exceptional items and amortisation
Effect of reduction in corporation tax rate on deferred tax
Adjusted profit after tax
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£m
313.3
(30.8)
17.4
299.9
2011
£m
269.6
14.2
12.9
296.7
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£m
259.6
(30.8)
17.4
(6.1)
(13.3)
226.8
2011
£m
212.4
14.2
12.9
(7.9)
(12.6)
219.0
95
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
5. Profit continued
c. Adjusted operating margin
General
merchanting
––––––––––––––––––––––
2012
£m
2011
£m
Specialist
merchanting
––––––––––––––––––––––
2012
£m
2011
£m
consumer
––––––––––––––––––––––
2012
£m
2011
£m
Plumbing
& Heating
––––––––––––––––––––––
2012
£m
2011
£m
Revenue
1,456.7 1,443.3
603.6
582.2
1,152.5 1,017.8
1,632.1 1,735.8
Unallocated
––––––––––––––––––––––
2011
£m
2012
£m
-
Group
––––––––––––––––––––––
2012
£m
2011
£m
-
4,844.9 4,779.1
Segment result
Amortisation of
intangible assets
Exceptional items
Adjusted segment
result
Adjusted operating
167.3
164.6
31.3
25.3
65.8
46.0
45.8
63.6
(9.7)
(9.0)
300.5
290.5
-
-
-
5.9
-
0.2
-
0.6
4.9
(6.0)
-
-
12.5
14.5
12.9
3.3
-
-
-
-
17.4
8.7
12.9
9.8
167.3
170.5
31.5
25.9
64.7
46.0
72.8
79.8
(9.7)
(9.0)
326.6
313.2
margin
11.5%
11.8%
5.2%
4.4%
5.6%
4.5%
4.5%
4.6%
-
-
6.7%
6.6%
Segmental information is shown in note 6. As outlined in note 6, on 1 January 2012 the Group was reorganised into four divisions, General merchanting,
Specialist merchanting, consumer and Plumbing and Heating.
6. Business and geographical segments
As required by IFRS 8 the operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief Executive to assess their performance. On 1 January 2012, the Group was reorganised into four divisions, General merchanting, Specialist
merchanting, consumer and Plumbing and Heating. Prior year figures have been restated to reflect the new segments. All four divisions sell building
materials to a wide range of customers, none of which are dominant, and operate almost exclusively in the United Kingdom and consequently no
geographical information is presented.
Segment profit represents the profit earned by each segment without allocation of certain central costs, finance income and costs and income tax
expense. Unallocated segment assets and liabilities comprise financial instruments, current and deferred taxation, cash and borrowings and pension
scheme assets and liabilities.
Inter-segment sales are eliminated. During 2012 and 2011 there were no impairment losses or reversals of impairment losses recognised in profit or loss
or in equity in any of the reportable segments.
2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
General
merchanting
£m
Specialist
merchanting
£m
1,456.7
603.6
consumer
£m
1,152.5
Plumbing
& Heating
£m
1,632.1
Unallocated
£m
Eliminations
£m
consolidated
£m
-
(9.7)
-
13.8
(40.5)
(36.4)
(53.7)
(90.1)
-
-
-
-
-
-
-
-
4,844.9
300.5
39.5
13.8
(40.5)
313.3
(53.7)
259.6
65.8
39.5
-
-
105.3
-
105.3
45.8
-
-
-
45.8
-
45.8
1,653.4
1,166.6
179.3
(1,233.5)
4,357.2
(415.5)
(232.4)
(1,961.3)
1,233.5
(2,049.1)
1,237.9
934.2
(1,782.0)
(6.0)
17.8
4.9
17.8
14.5
11.0
12.5
9.7
-
-
-
-
-
-
-
-
-
2,308.1
8.7
84.5
17.4
69.4
167.3
31.3
-
-
-
167.3
-
167.3
2,121.7
(659.7)
1,462.0
-
44.2
-
33.6
-
-
-
31.3
-
31.3
469.7
(13.7)
456.0
0.2
11.5
-
8.3
Revenue
Result
Segment result
Exceptional investment income
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Segment assets
Segment liabilities
consolidated net assets
Exceptional items
capital expenditure
Amortisation
Depreciation
96
NOTES TO THE FINANCIAL STATEMENTS
6. business and geographical segments continued
2011
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
General
merchanting
£m
Specialist
merchanting
£m
1,443.3
582.2
consumer
£m
1,017.8
Plumbing &
Heating
£m
1,735.8
Revenue
Result
Segment result
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Segment assets
Segment liabilities
consolidated net assets
Exceptional items
capital expenditure
Amortisation
Depreciation
164.6
-
-
164.6
-
164.6
2,096.3
(655.6)
1,440.7
5.9
58.1
-
32.6
25.3
-
-
25.3
-
25.3
457.9
(17.6)
440.3
0.6
14.8
-
7.7
Unallocated segment assets and liabilities comprise the following:
Assets
Interest in associates
Financial instruments
cash and cash equivalents
Retirement benefit asset
Unallocated corporate assets
Liabilities
Financial instruments
Tax liabilities
Deferred tax liabilities
Retirement benefit obligations
Interest bearing loans, borrowings and loan notes
Intra-group creditors
Unallocated corporate liabilities
Unallocated
£m
Eliminations
£m
consolidated
£m
-
(9.0)
22.4
(43.3)
(29.9)
(57.2)
(87.1)
-
-
-
-
-
-
-
4,779.1
290.5
22.4
(43.3)
269.6
(57.2)
212.4
46.0
-
-
46.0
-
46.0
63.6
-
-
63.6
-
63.6
1,520.3
1,145.2
198.7
(1,227.2)
4,191.2
(398.7)
1,121.6
3.3
25.8
-
13.9
(288.9)
(1,949.8)
1,227.2
(2,083.4)
856.3
(1,751.1)
-
9.3
12.9
9.7
-
0.1
-
-
-
-
-
-
-
2012
£m
6.7
25.5
139.1
1.6
6.4
179.3
(7.5)
(74.8)
(85.0)
(59.1)
(591.3)
(1,124.2)
(19.4)
(1,961.3)
2,107.8
9.8
108.1
12.9
63.9
2011
£m
51.3
43.4
78.6
19.3
6.1
198.7
(5.9)
(75.9)
(97.4)
(65.0)
(661.8)
(1,026.8)
(17.0)
(1,949.8)
97
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
7. staff costs
a. The average monthly number of persons employed (including executive directors)
Sales
Distribution
Administration
b. Aggregate remuneration
Wages and salaries
Share based payments (note 8)
Social security costs
Other pension costs (note 28)
8. share-based payments
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
No.
16,150
3,138
2,599
21,887
2011
No.
15,923
3,240
2,260
21,423
2012
No.
-
-
50
50
2011
No.
-
-
42
42
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
541.5
15.2
48.4
17.2
622.3
2011
£m
519.0
13.9
46.8
12.8
592.5
2012
£m
6.5
4.3
0.7
0.4
11.9
2011
£m
6.7
5.1
0.6
0.4
12.8
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. The probability of the
performance conditions being achieved was included in the fair value calculations. The inputs into the model for options granted in the year expressed as
weighted averages are as follows:
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
––––––––––––––––––––––––––––––––––––––
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 (%) –
Executive
options
912
806
912
806
53.0%
3.0
1.0%
SAYE
1,114
818
1,114
818
38.4%
3.3
0.4%
Group and company
1.7%
2.3%
Nil price
options
1,062
-
1,062
-
40.9%
3.0
0.5%
2.3%
SAYE
833
657
833
657
48.6%
3.5
0.9%
1.8%
Nil price
options
975
-
975
-
61.4%
3.0
1.7%
1.9%
Volatility was based on historic share prices over a period 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 three times.
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.
SAYE options were granted on 27 September 2012. The estimated fair value of the shares at that date was £5.4m for the Group and £0.1m for the
company.
Shares were granted under the share-matching scheme on 14 march 2012 and 9 may 2012. The estimated fair value of the shares at those dates was
£5.1m for the Group and £2.4m for the company.
Shares were granted under the performance share plan on 2 march 2012, 20 April 2012 and 22 August 2012. The estimated fair value of the shares at
those dates was £7.4m for the Group and £2.5m for the company.
Shares were granted under the deferred share bonus plan on 2 march 2012. The estimated fair value of the shares at that date was £1.1m for the Group
and £0.6m for the company.
The Group charged £15.2m (2011: £13.9m) and the company charged £4.3m (2011: £5.1m) to the income statement in respect of equity-settled share-
based payment transactions.
98
NOTES TO THE FINANCIAL STATEMENTS
8. Share-based payments continued
The number and weighted average exercise price of share options is as follows:
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Weighted
average
exercise price
p
636
598
552
839
695
792
Number
of
options
No.
8,050
(536)
(1,379)
1,583
7,718
1,227
Number
of nil price
options
No.
Weighted
average
exercise price
p
Number
of options
No.
Number
of nil price
options
No.
4,875
(92)
(500)
1,416
5,699
1,540
582
778
392
657
636
718
8,917
(1,290)
(2,473)
2,896
8,050
1,656
4,454
(712)
(248)
1,381
4,875
-
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
Share options were exercised on a regular basis throughout the year. The weighted average share price for options exercised during the year was 1,037
pence (2011: 837 pence).
Details of the options outstanding at 31 December 2012 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)
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Executive
options
201-1,611
880
1,499
0.7
4.9
SAYE
442-1,114
651
6,220
2.1
2.6
Nil price
options
-
-
5,699
0.9
7.7
Executive
options
201-1,611
733
1,992
0.7
5.3
SAYE
442-1,114
604
6,058
2.6
3.1
Nil price
options
-
-
4,874
1.2
8.2
If all 1.5 million outstanding executive options vest and then are exercised on the date of vesting, or in the case of SAYE all 6.2 million shares are acquired
on the first possible day, 7.7 million of shares will be issued for a consideration of £53.7m in the years ending 31 December:
31 December
2013
2014
2015
2016
2017
Options
SAYE
No.
m
1.2
1.9
Value
£m
10.4
9.5
No.
m
0.2
2.1
Value
£m
1.4
13.8
No.
m
0.1
1.4
Value
£m
1.4
11.2
No.
m
-
0.6
Value
£m
-
4.1
No.
m
-
0.2
Value
£m
-
1.9
The table above shows theoretical amounts. For the company to receive the cash indicated in the periods shown, the following must occur:
• All performance conditions on executive share options must be fully met;
• Options must be exercised on the day they vest (option holders generally have a 7 year period post vesting to exercise the option);
• The share price at the exercise date for SAYE options must exceed the exercise price and every holder must exercise;
• All option/SAYE holders must remain with the Company, or leave on good terms.
If none of the requirements are met then the company will receive no consideration.
The number and weighted average exercise price of share options is as follows:
In thousands of options
Outstanding at the beginning of the period
Forfeited during the period
Exercised during the period
Transferred from other group companies
Granted during the period
Outstanding at the end of the period
Exercisable at the end of the period
T HE cOmPA NY
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Weighted
average
exercise price
p
Number
of
options
No.
Number
of nil price
options
No.
Weighted
average
exercise price
p
Number
of options
No.
Number
of nil price
options
No.
606
746
372
746
918
756
784
111
(96)
(44)
317
12
300
219
2,197
-
(15)
80
575
2,837
126
698
362
952
-
657
606
713
473
(55)
(318)
-
11
111
33
2,166
(361)
(168)
-
560
2,197
-
99
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
8. Share-based payments continued
Details of the options outstanding at 31 December 2012 were as follows:
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Executive
options
201 - 1,611
806
241
0.3
4.0
SAYE
442 - 1,114
548
58
1.5
2.0
Nil price
options
-
-
2,837
0.7
7.5
Executive
options
201 - 1,611
700
54
1.0
6.0
SAYE
442 - 1,114
516
56
2.2
2.7
Nil price
options
-
-
2,196
1.1
8.1
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)
9. Net finance costs
Interest on bank loans and overdrafts*
Interest on obligations under finance leases
Unwinding of discounts
Amortisation of cancellation payment for swaps accounted for as cash flow hedges
Other interest
Net loss on settlement of private placement
Net loss on re-measurement of derivatives at fair value
Finance costs
Other finance income - pension scheme
Amortisation of cancellation receipt for swap accounted for as fair value hedge
Net gain on re-measurement of derivatives at fair value
Interest receivable
Finance income
Net finance costs
Adjusted interest cover
*Includes £1.2m (2011: £3.1m) of amortised bank finance charges.
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
Pre-exceptional
items
£m
2011
Exceptional
items
£m
(26.6)
(1.2)
(5.7)
(4.2)
(1.2)
-
-
(38.9)
11.8
1.1
5.1
4.4
22.4
-
-
-
-
-
(4.4)
-
(4.4)
-
-
-
-
-
(16.5)
(4.4)
2012
£m
(24.7)
(1.1)
(5.0)
(4.1)
(1.7)
-
(3.9)
(40.5)
11.1
1.0
1.3
0.4
13.8
(26.7)
13.1x
2011
Total
£m
(26.6)
(1.2)
(5.7)
(4.2)
(1.2)
(4.4)
-
(43.3)
11.8
1.1
5.1
4.4
22.4
(20.9)
15.4x
Adjusted interest cover is calculated by dividing, adjusted operating profit of £326.6m (2011: £313.2m) less £1.5m (2011: £1.5m) of specifically excluded
IFRS adjustments, by the combined value of interest on bank loans and overdrafts (excluding amortised bank finance charges), other interest payable and
interest receivable, which total £24.8m (2011: £20.3m).
The pre exceptional unwinding of the discounts charge arises principally from the property provisions created in 2008 and the liability to the pension
scheme associated with the SPV.
During 2011 the Group repaid $125m of the bSS unsecured senior notes and terminated the associated derivatives. This resulted in a net loss of £4.4m,
which was shown as exceptional.
100
NOTES TO THE FINANCIAL STATEMENTS
9. Net finance costs continued
Interest on bank loans and overdrafts*
Interest payable to group companies
Amortisation of cancellation payment for swaps accounted for as cash flow hedges
Other interest
Net loss on re-measurement of derivatives at fair value
Finance costs
Amortisation of cancellation receipt for swap accounted for as fair value hedge
Net gain on re-measurement of derivatives at fair value
Interest receivable from group companies
Interest receivable
Finance income
Net finance costs
*Includes £1.2m (2011: £3.1m) of amortised bank finance charges.
10. tax
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 HE GRO UP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
Pre-exceptional
items
£m
2012
Exceptional
items
£m
2012
Total
£m
2011
Pre-exceptional
items
£m
68.0
(1.1)
66.9
1.6
0.7
2.3
69.2
(2.2)
-
(2.2)
(13.3)
-
(13.3)
(15.5)
65.8
(1.1)
64.7
(11.7)
0.7
(11.0)
53.7
72.5
(1.1)
71.4
2.8
0.3
3.1
74.5
2011
Exceptional
items
£m
(3.3)
(1.4)
(4.7)
(12.6)
-
(12.6)
(17.3)
2011
Total
£m
69.2
(2.5)
66.7
(9.8)
0.3
(9.5)
57.2
T HE cOmPA NY
––––––––––––––––––––––––––––––––––––––
2012
£m
(25.5)
(15.6)
(4.1)
(1.7)
(3.9)
(50.8)
1.0
1.3
1.0
0.4
3.7
2011
£m
(26.4)
(6.4)
(4.2)
(1.2)
(1.6)
(39.8)
1.1
5.1
-
13.3
19.5
(47.1)
(20.3)
T HE cOmPAN Y
–––––––––––––––––––––––––––––––––
2012
2011
£m
£m
(13.5)
2.5
(11.0)
(2.3)
0.1
(2.2)
(8.1)
(1.4)
(9.5)
(0.6)
-
(0.6)
(13.2)
(10.1)
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:
T HE GRO UP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
––––––––––––––––––––––––––––––––––––––
2011
––––––––––––––––––––––––––––––––––––––
Profit before tax
Tax at the UK corporation tax rate
Tax effect of expenses / credits that are not deductible /
taxable in determining taxable profit
Depreciation of non-qualifying property
Exceptional valuation gain not taxable
Exceptional fair value movement not taxable
Deferred tax rate change
Property sales
Exceptional prior period adjustment
Prior period adjustment
Tax expense and effective tax rate for the year
£m
313.3
76.7
1.1
2.8
(8.6)
(1.0)
(13.3)
(3.6)
-
(0.4)
53.7
%
24.5
0.4
0.9
(2.7)
(0.3)
(4.4)
(1.2)
-
(0.1)
17.1
£m
269.6
71.4
1.9
2.3
0.5
-
(12.6)
(4.1)
(1.4)
(0.8)
57.2
%
26.5
0.7
0.8
0.2
-
(4.7)
(1.5)
(0.5)
(0.3)
21.2
101
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
10. Tax continued
The tax rate for the year of 24.5% is a blended rate of 26% up to 1 April 2012 and 24% thereafter. The tax charge for 2012 includes an exceptional credit
of £13.3m arising from the reduction in the rate of UK corporation tax from 25% to 23% on 1 April 2013. Future changes reducing the corporation tax rate
by 2% to 21% on 1 April 2014 and a further 1% to 20% on 1 April 2015 have been announced, but not substantively enacted and therefore have not been
taken into account.
If the government announced plans are fully enacted then the statutory rate of corporation tax will fall to 23.25% in 2013, 21.5% in 2014 and 20.25% in
2015.
In addition to the amount charged to the income statement the following amounts relating to tax have been recognised in other comprehensive income:
Deferred tax
cash flow hedge movement
Actuarial movement
Rate change
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
(0.9)
10.4
(5.5)
4.0
2011
£m
(0.6)
12.6
(4.9)
7.1
2012
£m
(0.9)
-
-
(0.9)
2011
£m
(0.6)
-
-
(0.6)
In addition to the amounts charged to the income statement and other comprehensive income, the following amounts relating to tax have been recognised
directly in equity:
current tax
Excess tax deductions related to share based payments on exercised options
Deferred tax
Rate change on revaluation reserve
Share based payments
Profit before tax
Intercompany dividends
Loss before tax and dividends received
Tax at the UK corporation tax rate of 24.5% / 26.5%
Tax effect of expenses / credits that are not deductible /
taxable in determining taxable profit
Prior period adjustment
Deferred tax rate change
Exceptional valuation gain not taxable
Exceptional fair value movement not taxable
Receipts in subsidiary taxable in company
Tax expense and effective tax rate for the year
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
1.4
0.9
2.9
5.2
2011
£m
1.0
0.9
(4.2)
2.3
2012
£m
-
-
3.0
3.0
2011
£m
-
-
(4.1)
(4.1)
T HE cOmPA NY
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
––––––––––––––––––––––––––––––––––––––
2011
––––––––––––––––––––––––––––––––––––––
£m
52.6
(74.2)
(21.6)
(5.3)
(1.7)
2.6
0.4
(8.2)
(1.0)
-
(13.2)
%
(24.5)
(7.9)
12.0
1.9
(38.0)
(4.6)
-
(61.1)
£m
48.6
(79.1)
(30.5)
(8.1)
(1.5)
(1.4)
0.6
-
-
0.3
%
(26.5)
(5.0)
(4.6)
2.0
-
-
1.0
(10.1)
(33.1)
102
NOTES TO THE FINANCIAL STATEMENTS
11. Earnings per share
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
Weighted average number of shares for the purposes of basic earnings per share
Dilutive effect of share options on potential ordinary shares
2012
£m
2011
£m
259.6
212.4
No.
238,388,160
8,809,106
No.
235,151,104
8,057,058
Weighted average number of ordinary shares for the purposes of diluted earnings per share
247,197,266
243,208,162
At 31 December 2012, 692,839 (2011: 796,390) share options had an exercise price in excess of the market value of the shares on that day. As a result, these
share options are excluded from the calculation of diluted earnings per share.
b. Adjusted earnings per share
Adjusted earnings per share is calculated by excluding the effect of the exceptional items and amortisation 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
Amortisation of intangible assets
Tax on amortisation of intangible assets
Tax on exceptional items
Effect of reduction in corporation tax rate on deferred tax
Adjusted earnings
Adjusted earnings per share
Adjusted diluted earnings per share
12. Dividends
Amounts were recognised in the financial statements as distributions to equity shareholders as follows:
Final dividend for the year ended 31 December 2011 of 13.5p (2010: 10.0p) per ordinary share
Interim dividend for the year ended 31 December 2012 of 8.0p (2011: 6.5p) per ordinary share
Total dividend recognised during the year
2012
£m
259.6
(30.8)
17.4
(4.0)
(2.1)
(13.3)
226.8
95.1p
91.7p
2012
£m
32.1
19.1
51.2
2011
£m
212.4
14.2
12.9
(3.2)
(4.7)
(12.6)
219.0
93.1p
90.0p
2011
£m
23.5
15.3
38.8
The company is proposing a final dividend of 17.0p in respect of the year ended 31 December 2012.
Adjusted dividend cover of 3.8x (2011: 4.7x) is calculated by dividing adjusted earnings per share (note 11) of 95.1p (2011: 93.1p) by the total dividend
for the year of 25.0p (2011: 20.0p).
There are no income tax consequences in respect of the dividends declared, but not recognised in the financial statements.
The dividends declared for 2012 at 31 December 2012 and for 2011 at 31 December 2011 were as follows:
Interim paid
Final proposed
Total dividend for the year
The anticipated cash payment in respect of the proposed final dividend is £40.7m (2011: £32.1m).
2012
Pence
8.0
17.0
25.0
2011
Pence
6.5
13.5
20.0
103
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
13. Goodwill
cost
At 1 January 2011
Recognised on acquisitions during the year
At 1 January 2012
Recognised on acquisitions during the year (note 29)
Adjustment to Tile Giant consideration
At 31 December 2012
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
P&H
£m
consumer
£m
General
merchanting
£m
Specialist
merchanting
£m
367.2
-
367.2
-
-
367.2
719.9
8.4
728.3
102.9
(2.2)
829.0
465.6
-
465.6
0.6
-
466.2
145.1
-
145.1
-
-
145.1
Total
£m
1,697.8
8.4
1,706.2
103.5
(2.2)
1,807.5
There has been no impairment to the carrying value of goodwill. The company has no goodwill.
The Group has recently concluded discussions with the Financial Reporting council’s conduct committee (‘FRccc’) with regard to certain aspects of its
asset impairment testing process. As a result, the Group has (i) amended its definition of a cash generating unit so that non-monetary assets are reviewed
for impairment at a branch level, rather than at a brand level; (ii) refined its calculation of the pre-tax discount rate; and (iii) restated and extended the
comparative sensitivity disclosures made below in respect of 2011.
The changes agreed with the FRccc have not impacted the income statement, balance sheet or cash flow statement for 2011 or 2012; the Directors’
original assessment that no impairment had occurred to goodwill, other intangible assets or other non-monetary assets remains unchanged. Further
details are given below.
cash Generating Units
The Directors consider that each branch in the Group is an individual cash Generating Unit (‘cGU’). Goodwill and intangible assets have been allocated
and monitored for impairment testing purposes to groups of individual cGUs within the same brand. The following analyses goodwill and intangible
assets with indefinite useful lives by cGU grouping.
cGU Grouping
Specialist merchanting
ccF
Keyline
Generalist merchanting
Travis Perkins
consumer
Tile Giant
Toolstation
Wickes
Plumbing and Heating
PTS
bSS Industrial
city Plumbing Supplies
F&P
Other
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Intangibles
(Note 14)
£m
Goodwill
£m
Total
£m
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Intangibles
(Note 14)
£m
Goodwill
£m
Total
£m
-
-
-
-
-
162.5
40.9
49.3
-
8.5
3.9
43.6
101.5
43.6
101.5
466.2
466.2
24.6
102.9
701.5
133.7
27.8
175.4
30.3
-
24.6
102.9
864.0
174.6
77.1
175.4
38.8
3.9
-
-
-
-
-
162.5
40.9
49.3
-
8.5
3.9
43.6
101.5
465.6
26.8
-
701.5
133.7
27.8
175.4
30.3
-
43.6
101.5
465.6
26.8
-
864.0
174.6
77.1
175.4
38.8
3.9
265.1
1,807.5
2,072.6
265.1
1,706.2
1,971.3
measuring recoverable amounts
The Group tests goodwill and other non-monetary assets for impairment annually or more frequently if there are indications that impairment may have
occurred. The recoverable amounts of the goodwill and other non-monetary assets are determined from value in use calculations.
The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and like-for-like market volume changes which
impact sales and therefore cash flow projections. management estimates pre-tax discount rates that reflect current market assessments of the time value
of money and the risks specific to the cGU groupings that are not reflected in the cash flow projections.
At the beginning and end of the financial period the fair value of goodwill and intangible assets in all segments was in excess of their book value. The
Directors’ calculations have shown that no impairments have occurred. The key variables applied to the value in use calculations were:
• Cash flow forecasts, which were derived from the most recent board approved five-year plans;
104
NOTES TO THE FINANCIAL STATEMENTS
13. Goodwill continued
•
•
•
The sales market volume assumptions underlying the cash flow forecasts are the directors’ estimates of likely future changes based on historic
performance and the current outlook for both the UK economy and the UK building materials industry. This is viewed as the key operating assumption
because the state of the building materials market determines the directors’ approach to margin and cost maintenance;
A risk adjusted pre tax discount rate is calculated by reference to the weighted average cost of capital (‘WACC’) of the Group. For 2012, the discount
rate was 8.8% (2011: 8.6% restated see below), which is not significantly different for any individual cGU or cGU grouping. That is because each cGU
operates in the same market, selling the same product types to the same end users and so the risk profiles are not dissimilar;
For 2012, cash flows beyond the five-year plan (2018 and beyond) have been determined using a growth rate of 2.1%, which is the average long-term
forecast GDP growth outlined in the Economic and Fiscal Outlook report produced by the Office for budget Responsibility in December 2012. The
directors believe this is the most appropriate indicator of long-term growth rates that is available (2011 growth rate : 2.5%).
Sensitivity of results to changes in assumptions
Whilst management believe the assumptions are realistic, it is possible that an impairment would be identified if any of the above key assumptions were
changed significantly. For instance factors which could cause an impairment are:
• Significant underperformance relative to the forecast results;
• Changes to the way the assets are used or changes to the strategy for the business;
• A further deterioration in the UK economy.
The impairment review calculations are based upon anticipated discounted future cash flows. For most of the cGU groupings, given the prudence already
built into the Group’s five-year plans and the level of headroom they show, the Directors do not envisage reasonably possible changes to the key operating
assumptions that are sufficient to generate a different outcome to the impairment calculations undertaken. However for the cGU groupings listed in the
table below this is not the case as the Directors consider that reasonably possible changes in key assumptions could result in discounted future cash flows
being insufficient to allow full recovery of the carrying value of the cGUs’ goodwill and other intangible assets.
The Directors have conducted a sensitivity analysis to determine the specific value for each assumption, all other assumptions remaining the same, that
would result in the carrying value of goodwill and other intangible assets equalling their recoverable amounts and these are shown in the tables below.
31 December 2012
cGU
Grouping
Tile Giant
Wickes
PTS
F&P
Headroom
Assumption
Sensitivity
Assumption
Sensitivity
Like-for-like market volume
(Average % per annum)
Discount rate %
£24m
£146m
£64m
£38m
0.0%
0.8%
(1.6)%
1.8%
(2.7)%
0.2%
(2.8)%
(2.6)%
8.8%
8.8%
8.8%
8.8%
13.9%
9.9%
11.0%
12.8%
Long term growth rate %
Assumption
Sensitivity
2.1%
2.1%
2.1%
2.1%
(6.0)%
0.7%
(1.1)%
(4.1)%
31 December 2011
During the year the calculation of the discount rate used in the impairment calculations was reviewed and as a result the methodology was slightly amended.
To show a meaningful comparison to the 2012 impairment sensitivity table, the 2011 discount rate was recalculated using the same methodology, which
resulted in an increase from 6.9% to 8.6%. Had this change been made in 2011, the Directors’ conclusion that there was no impairment to the carrying value
of goodwill and intangible assets at 31 December 2011 would not have changed.
cGU
Grouping
Tile Giant
Wickes
PTS
F&P
Headroom
Assumption
Sensitivity
Assumption
Sensitivity
Like-for-like market volume
(Average % per annum)
Discount rate %
£30m
£30m
£39m
£47m
1.7%
(1.6)%
1.5%
1.7%
(1.7)%
(1.7)%
0.7%
(2.9)%
8.6%
8.6%
8.6%
8.6%
14.7%
8.8%
9.8%
13.7%
Long term growth rate %
Assumption
Sensitivity
2.5%
2.5%
2.5%
2.5%
(7.5)%
2.3%
0.9%
(5.7)%
The sales market volume assumption is the average annual change incorporated in five-year plans of each cGU grouping.
105
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
14. other intangible assets
cost or valuation
At 1 January 2011
Disposals
At 1 January 2012
Recognised on aquisition (note 29)
At 31 December 2012
Amortisation
At 1 January 2011
charged to operating profit in the year
Disposals
At 1 January 2012
charged to operating profit in the year
At 31 December 2012
Net book value
At 31 December 2012
At 31 December 2011
cost of brands with an indefinite useful life (note 13)
cost of brands being amortised
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
brand
£m
275.3
(6.6)
268.7
29.5
298.2
-
0.3
-
0.3
1.8
2.1
296.1
268.4
computer
software
£m
customer
relationships
£m
9.9
(1.5)
8.4
8.7
17.1
8.1
0.4
(0.4)
8.1
0.9
9.0
8.1
0.3
135.0
(2.5)
132.5
15.1
147.6
0.2
12.2
(0.1)
12.3
14.7
27.0
120.6
120.2
2012
£m
265.1
33.1
298.2
Total
£m
420.2
(10.6)
409.6
53.3
462.9
8.3
12.9
(0.5)
20.7
17.4
38.1
424.8
388.9
2011
£m
265.1
3.6
268.7
Where a brand, which is a leading brand in its sector and has significant growth prospects, has not been established for a significant period of time, the
Directors do not have sufficient evidence to support a contention that it will have an indefinite useful life. Accordingly for Toolstation and certain product
related brands the Directors have decided it is appropriate to amortise their cost over their estimated useful lives.
The Directors consider that the other brands, which are also all leading brands in their sectors with significant histories and significant growth prospects
have an indefinite useful life. They are reviewed annually for impairment; details of impairment testing are shown in note 13, but no impairment was
identified in either year.
Acquired customer relationships are amortised over their estimated useful lives, which range from 5 to 15 years.
The company has no intangible assets.
106
NOTES TO THE FINANCIAL STATEMENTS
15. property, plant and equipment
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––-–––––––––––––––––––––
cost or valuation
At 1 January 2011
Additions
Reclassifications
Disposals
At 1 January 2012
Additions
Additions from acquired businesses
Reclassifications
Disposals
At 31 December 2012
Accumulated depreciation
At 1 January 2011
charged this year
Disposals
At 1 January 2012
charged this year
Disposals
At 31 December 2012
Net book value
At 31 December 2012
At 31 December 2011
Freehold
£m
Long
leases
£m
Short
leases
£m
Plant and
equipment
£m
274.6
28.2
1.5
(3.1)
301.2
10.0
-
0.9
(3.5)
308.6
35.1
4.5
(0.7)
38.9
4.6
(0.4)
43.1
265.5
262.3
27.7
1.3
(0.9)
-
28.1
-
-
(0.9)
-
27.2
4.6
0.6
0.2
5.4
0.6
-
6.0
21.2
22.7
121.0
9.4
9.5
(5.4)
134.5
9.0
4.5
-
(3.0)
145.0
41.7
10.1
(3.1)
48.7
11.4
(1.3)
58.8
86.2
85.8
457.3
69.2
(10.1)
(29.6)
486.8
65.5
3.2
-
(44.1)
511.4
272.1
48.7
(25.8)
295.0
52.8
(41.9)
305.9
205.5
191.8
Total
£m
880.6
108.1
-
(38.1)
950.6
84.5
7.7
-
(50.6)
992.2
353.5
63.9
(29.4)
388.0
69.4
(43.6)
413.8
578.4
562.6
Plant and
equipment
£m
0.6
0.1
-
-
0.7
-
-
-
-
0.7
0.5
-
-
0.5
-
-
0.5
0.2
0.2
The cost element of the fixed assets carrying value is analysed as follows:
At valuation
At cost
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––-–––––––––––––––––––––
Freehold
£m
63.8
244.8
308.6
Long
leases
£m
6.1
21.1
27.2
Short
leases
£m
1.9
143.1
145.0
Plant and
equipment
£m
-
511.4
511.4
Total
£m
71.8
920.4
992.2
Total
£m
-
0.7
0.7
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.
Included within freehold property is land with a value of £117.7m (2011: £115.0m) which is not depreciated. No assets are pledged as security for the
Group’s liabilities.
The carrying amount of assets held under finance leases is analysed as follows:
2012
2011
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––-–––––––––––––––––––––
Long
leases
£m
0.8
0.8
Short
leases
£m
9.4
10.7
Plant and
equipment
£m
7.0
-
Total
£m
17.2
11.5
Total
£m
-
-
107
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
15. Property, plant and equipment continued
comparable amounts determined according to the historical cost convention:
cost
Accumulated depreciation
Net book value
At 31 December 2012
At 31 December 2011
16. Investment property
cost
At 1 January
Accumulated depreciation
At 1 January
Net book value
At 31 December
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
T HE cOmPANY
––-–––––––––––––––––––––
Freehold
£m
304.1
(59.2)
244.9
241.8
Long
leases
£m
25.8
(7.2)
18.6
20.2
Short
leases
£m
153.5
(64.7)
88.8
88.6
Plant and
equipment
£m
511.3
(305.8)
205.5
191.8
Total
£m
994.7
(436.9)
557.8
542.4
Total
£m
0.7
(0.5)
0.2
0.2
T HE GR OU P
––––––––––––––––––––––––––––––––––––––
2012
£m
0.5
(0.1)
0.4
2011
£m
0.5
(0.1)
0.4
Investment property rental income totalled nil (2011:nil). 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.
No external valuation has been performed and therefore, the Directors have estimated that the fair value of investment property equates to its carrying value.
The company has no investment property.
17. Investments
a. Interest in associates and joint ventures
Equity investment
Loan facility
Interest on loan facility
Share of losses
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
1.5
5.3
0.2
(0.3)
6.7
2011
£m
18.0
30.3
10.3
(7.3)
51.3
2012
£m
0.7
5.3
0.2
-
6.2
2011
£m
17.9
30.3
10.3
-
58.5
Travis Perkins plc holds a 49% investment in The mosaic Tile company Limited and a 25% investment in Rinus Roofing Limited. In 2012 Travis Perkins plc
acquired a 50% interest in Travis Perkins bridge Properties LLP for a consideration of £0.7m.
b. Shares in group undertakings
At 1 January
Reclassification of loans and receivables
Additions
Adjustment to consideration on acquisition of Tile Giant
At 31 December
Provision for impairment
Net book value at 31 December
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
2,889.8
-
702.3
(2.2)
3,589.9
(17.0)
3,572.9
2011
£m
2,714.8
173.8
1.2
-
2,889.8
(17.0)
2,872.8
On 3 January 2012, Travis Perkins plc acquired the remaining 70% of the issued share capital of Toolstation Ltd. for a consideration of £24.2m (note 29).
108
NOTES TO THE FINANCIAL STATEMENTS
17. Investments continued
The principal operating subsidiaries of the Group at 31 December 2012 are as follows:
Subsidiary
Travis Perkins Trading company Limited*
Keyline builders merchants Limited*
Wickes building Supplies Limited
city Plumbing Supplies Holdings Limited
ccF Limited*
Travis Perkins (Properties) Limited*
benchmarx Kitchens and Joinery Limited
Tile Giant Limited
Travis Perkins P & H Partner Limited
Toolstation Limited*
PTS Group Limited
*Direct subsidiary of Travis Perkins plc
(builders merchants)
(builders merchants)
(DIY retailers)
(Plumbers merchants)
(ceiling and dry lining distribution)
(Property management company)
(Specialist distribution)
(ceramic tile merchants)
(Sole corporate partner in plumbing and heating merchants)
(DIY retailers)
(Plumbing and heating merchants)
The registered office for all the subsidiaries listed above is Lodge Way House, Harlestone Road, Northampton, NN5 7UG except for Keyline builders
merchants Limited, for which the registered office is Suite S3, 8 Strathkelvin Place, Kirkintilloch, Glasgow, G66 1XT and Toolstation Limited for which the
registered office address is 16 -18 Whiteladies Road, clifton, bristol, b58 2LG.
The Directors have applied s409 to s410 of the companies Act 2006 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 eight dormant companies, which are registered and incorporated in Scotland, city Investments Limited, which is registered and incorporated in Jersey
and two dormant companies registered and incorporated in Northern Ireland.
c. Available-for-sale investments
Fair value investment
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
2.4
2011
£m
1.5
2012
£m
-
2011
£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.
d. Subsidiaries not requiring an audit
An audit exemption is likely to be taken for the following subsidiaries of the Group
Subsidiary Name
Travis Perkins Acquisitions company Limited
Travis Perkins Finance company Limited
Travis Perkins Financing company No.2 Limited
Travis Perkins Financing company No.3 Limited
Registered Number
06500018
06500008
06755439
07180292
If this occurs then Travis Perkins plc will be legally required to put in place a guarantee in respect of any external liabilities that existed at 31 December
2012. At that date none of the above companies had ever transacted outside of the Group and so no guarantee will be necessary.
109
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
18. trade and other receivables
Trade receivables
Allowance for doubtful debts
Amounts owed by subsidiaries
Other receivables, prepayments and accrued income
Trade and other receivables
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
578.3
(48.3)
530.0
-
203.7
733.7
2011
£m
585.7
(54.5)
531.2
-
211.8
743.0
2012
£m
-
-
-
174.6
6.1
180.7
2011
£m
-
-
-
208.1
6.0
214.1
The Group’s trade and other receivables at the balance sheet date comprise principally of amounts receivable from the sale of goods, together with amounts
due in respect of rebates and sundry prepayments. The Directors consider the only class of asset containing significant credit risk is trade receivables. The
average credit term taken for sales of goods is 59 days (2011: 55 days). The allowance for doubtful debts is 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. The business has provided fully for all receivables outstanding for more than 90 days beyond agreed terms. Trade receivables
not receivable for up to 90 days are specifically provided for based on estimated irrecoverable amounts. 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 between 2% to 4% above the clearing bank base rate per annum on the outstanding balance.
movement in the allowance for doubtful debts
At 1 January
Amounts written off during the year
Increase in allowance recognised in the income statement
At 31 December
T HE G ROU P
––––––––––––––––––––––––––––––––––––––
2012
£m
54.5
(21.7)
15.5
48.3
2011
£m
44.4
(10.2)
20.3
54.5
In determining the recoverability of the trade receivables, the Group considers any change in the credit quality of the trade receivable that may have
occurred between the date credit was initially granted and 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 debtors unprovided against with a carrying amount of £57.4m (2011: £65.9m) 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 and therefore there is no allowance for doubtful debts. 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 HE G ROU P
––––––––––––––––––––––––––––––––––––––
2012
£m
44.5
8.6
4.3
57.4
2011
£m
53.0
9.2
3.7
65.9
Included in the allowance for doubtful debts are specific trade receivables with a balance of £27.2m (2011: £30.7m) 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.
19. Cash and cash equivalents
cash and cash equivalents comprise cash held by the Group and company net of overdrafts. The carrying amount of these assets approximates their fair
value.
110
NOTES TO THE FINANCIAL STATEMENTS
20. share capital
Ordinary shares of 10p
At 1 January 2011
Allotted in respect of acquisition of bSS
Allotted under share option schemes
At 1 January 2012
Allotted under share option schemes
At 31 December 2012
T HE GRO UP A ND THE cOmPANY
–––––––––––––––––––––––––––––––––––––––––––––––––––
Issued and fully paid
–––––––––––––––––––––––––––––––––––––––––––––––––––
£m
No.
241,701,917
67,351
2,047,265
243,816,533
1,036,524
244,853,057
24.2
-
0.2
24.4
0.1
24.5
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 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.
21. own shares
At 1 January
Re-issued during the year
At 31 December
Allocated to grants of executive options
Not allocated to grants of executive options
T HE GRO UP AN D T HE cOmPAN Y
–––––––––––––––––––––––––––––––––––––––––––––––––––
2011
No.
2012
No.
6,305,367
(991,576)
6,961,930
(656,563)
5,313,791
6,305,367
289,142
5,024,649
289,142
6,016,225
5,313,791
6,305,367
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.
22. reserves
Details of all movements in reserves for both the Group and company are shown in the Statement of changes in Equity. A description of the nature and
purpose of each reserve is given below.
• The revaluation 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 (net of tax) 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 merger reserve represents the premium on equity instruments issued as consideration for the acquisition of BSS.
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.
111
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
23. Borrowings
A summary of the Group objectives policies procedures and strategies with regard to financial instruments and capital management can be found in the
Finance Director’s review of the year on pages 38 to 43. At 31 December 2012 all borrowings were made in Sterling except for the unsecured senior notes
(note 23 (i)).
a. Summary
Unsecured senior notes
Liability to pension scheme (note 28)
bank loans (note 23c)*
bank overdraft*
Finance leases (note 23d)
Loan notes (note 23e)
Finance charges netted off bank debt*
current liabilities
Non-current liabilities
*These balances together total the amounts shown as bank loans in note 23(b).
b. Analysis of borrowings
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
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
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
261.1
36.9
264.4
-
25.9
3.3
(0.3)
591.3
396.1
195.2
591.3
2011
£m
279.3
37.2
323.2
-
20.3
3.3
(1.5)
661.8
63.6
598.2
661.8
2012
£m
261.1
-
315.0
0.7
-
3.3
(0.3)
579.8
444.9
134.9
579.8
2011
£m
279.3
-
385.0
1.6
-
3.3
(1.5)
667.7
74.9
592.8
667.7
T HE GRO UP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
bank loans and overdrafts
––––––––––––––––––––––––––––––––––––––
Other borrowings
––––––––––––––––––––––––––––––––––––––
2012
£m
264.1
-
-
-
264.1
2011
£m
58.8
262.9
-
-
321.7
2012
£m
132.0
2.7
144.9
47.6
327.2
2011
£m
4.8
138.5
147.2
49.6
340.1
T HE cOmPAN Y
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
bank loans and overdrafts
––––––––––––––––––––––––––––––––––––––
Other borrowings
––––––––––––––––––––––––––––––––––––––
2012
£m
315.4
-
-
315.4
2011
£m
71.6
313.5
-
385.1
2012
£m
129.5
-
134.9
264.4
2011
£m
3.3
136.9
142.4
282.6
112
NOTES TO THE FINANCIAL STATEMENTS
23. borrowings continued
c. Facilities
At 31 December 2012, the following bank facilities were available:
Drawn facilities
5 year term loan
Unsecured senior notes
bank overdrafts
Undrawn facilities
5 year revolving credit facility
bank overdrafts
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
264.4
261.1
-
525.5
475.0
40.0
515.0
2011
£m
323.2
279.3
-
602.5
475.0
40.0
515.0
2012
£m
315.0
261.1
0.7
576.8
475.0
39.3
514.3
2011
£m
385.0
279.3
1.6
665.9
475.0
38.4
513.4
The 5 year revolving credit facility and 5 year term loan, both mature on 4 April 2013. $200m of the unsecured loan notes were repaid on 28 January 2013
with the remaining $200m falling due on 26 January 2016. On 14 December 2011 the Group signed a new £550m forward start banking agreement with a
syndicate of banks. The £550m revolving credit facility, which runs until December 2016, can be drawn from 4 April 2013, the expiry date of the Group’s
existing £739m facility agreement.
The disclosures in note 23(c) do not include finance leases, loan notes, or the effect of finance charges netted off bank debt.
d. Obligations under finance leases
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
T HE GRO UP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
minimum
lease payments
––––––––––––––––––––––––––––––––––––––
Present value of
minimum lease payments
––––––––––––––––––––––––––––––––––––––
2012
£m
3.8
16.5
19.0
39.3
(13.4)
25.9
2011
£m
2.7
10.0
21.3
34.0
(13.7)
20.3
2012
£m
2.5
12.7
10.7
25.9
-
25.9
(2.5)
23.4
2011
£m
1.5
6.4
12.4
20.3
-
20.3
(1.5)
18.8
The Group considers certain properties to be subject to finance leases. Excluding 999-year leases, the average loan term for these properties is 49 years and
the average borrowing rate has been determined at the inception of the lease to be 9.0%. 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 one year are £3.3m (2011: £3.3m) of loan notes issued as consideration for the acquisition of broombys Limited in 1999.
They are redeemable at the option of the holder on 30 June and 31 December each year until the final redemption date of 30 June 2015.
f. Interest
The weighted average interest rates paid were as follows:
Unsecured senior notes
bank loans and overdraft
Other borrowings
2012
%
5.8
2.2
6.0
2011
%
5.8
1.8
6.0
113
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
23. borrowings continued
bank term loans and revolving credit facilities of £739m (2011: £798m) were arranged at variable interest rates. The $400m unsecured Travis Perkins 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 24, to
manage the risk the Group enters into interest rate derivatives arrangements, which for 2012, fixed interest rates on an average of £221m of borrowing. For
the year to 31 December 2012, this had the effect of increasing the weighted average interest rates paid by 0.5 %.
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.
Unsecured senior notes
Unsecured variable rate bank facilities
Loan notes
Unsecured senior notes
Unsecured variable rate bank facilities
Loan notes
bank overdraft
g. Fair values
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
20 12
Effective
interest rate
6 months or less
£m
–––––––––––––––––––––––––––––––––––––––––––––––––
20 11
Effective
interest rate
6 months or less
£m
5.8%
2.3%
6.0%
261.1
264.4
3.3
528.8
5.8%
2.3%
6.0%
279.3
323.2
3.3
605.8
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
20 12
–––––––––––––––––––––––––––––––––––––––––––––––––
20 11
Effective
6 months or less
interest rate
Effective
£m
6 months or less
interest rate
5.8%
2.3%
6.0%
2.3%
261.1
315.0
3.3
0.7
580.1
5.8%
2.3%
6.0%
2.3%
279.3
385.0
3.3
1.6
669.2
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 of the fair values of derivatives are given in note 24.
h. Guarantees and security
There are cross guarantees on the overdrafts between group companies.
The companies listed in note 17, with the exception of benchmarx Kitchens and Joinery Limited, Travis Perkins P&H Partner Limited, Tile Giant Limited
and Toolstation Limited, together with Wickes Limited and Travis Perkins Plumbing and Heating LLP are guarantors of the following facilities advanced
to Travis Perkins plc:
• £264m term loan;
• £475m revolving credit facility;
• $400m unsecured senior notes (note 23(i));
• Interest rate and currency derivatives, (note 24).
The group companies have entered into other guarantee and counter-indemnity arrangements in respect of guarantees issued in favour of group companies
by the clearing banks amounting to approximately £16m (2011: £16m).
i. Unsecured senior notes
The US private placement carries fixed rate coupons of between 130 bps and 140 bps over US treasuries.
24. Financial instruments
a. 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.
114
NOTES TO THE FINANCIAL STATEMENTS
24. Financial instruments continued
b. 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 (note 23a)
Trade and other payables at amortised cost (note 27)
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
-
25.5
804.7
2.4
832.6
49.6
4.9
591.3
888.7
2011
£m
3.1
40.3
753.5
1.5
798.4
3.3
2.6
661.8
872.7
1,534.5
1,540.4
2012
£m
-
25.5
180.7
-
206.2
49.6
4.9
579.8
18.9
653.2
2011
£m
3.1
40.3
214.1
-
257.5
3.3
2.6
667.7
19.0
692.6
Loans and receivables exclude prepayments of £68.1m (2011: £68.1m). Trade and other payables exclude taxation and social security, accruals and deferred
income totalling £218.9m (2011: £215.6m). 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.
c. Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
• Foreign currency forward contracts are measured using quoted forward exchange rates;
• Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from
quoted interest rates.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to
3 based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or
liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
There were no transfers between levels during the year.
Included in assets
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
Level 2
Foreign currency forward contracts at fair value through profit and loss
Foreign currency forward contracts designated and effective as hedging
instruments carried at fair value
cross currency interest rate swaps designated and effective as hedging
instruments carried at fair value
current assets
Non-current assets
2012
£m
-
-
25.5
25.5
12.7
12.8
25.5
2011
£m
3.1
0.1
40.2
43.4
3.1
40.3
43.4
2012
£m
-
-
25.5
25.5
12.7
12.8
25.5
2011
£m
3.1
0.1
40.2
43.4
3.1
40.3
43.4
115
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
24. Financial instruments continued
Included in liabilities
Level 2
Foreign currency forward contracts at fair value through profit and loss
Foreign currency forward contracts designated and effective as
hedging instruments carried at fair value
Interest rate swaps at fair value through profit and loss
Interest rate swaps designated and effective as cash hedging instruments
Level 3
Deferred consideration at fair value through profit and loss
current liabilities
Non-current liabilities
d. Interest risk management
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
0.7
3.7
1.9
1.2
7.5
47.0
54.5
2.6
51.9
54.5
2011
£m
-
-
3.3
2.6
5.9
-
5.9
-
5.9
5.9
2012
£m
0.7
3.7
1.9
1.2
7.5
47.0
54.5
2.6
51.9
54.5
2011
£m
-
-
3.3
2.6
5.9
-
5.9
-
5.9
5.9
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.
Interest rate swap contracts
The Group adopts a policy of ensuring that its exposure to changes in interest rates on borrowings is on either 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 swap contracts.
contracts with notional values of £125m are designated as cash flow hedges with fixed interest payments at an average rate of 1.71% for periods up until
may 2014 and have floating interest receipts equal to 1 month LIbOR. During the period the cash flow hedges were 100% effective in hedging the exposure
to interest rate movements. The Group and the company also are party to one non-amortising interest rate swap with a call option which has a notional
value of £50m with fixed interest payments at a rate of 4.595% for periods up until October 2013 and has floating interest payments equal to 6 month LIbOR.
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.
At 31 December 2012 the fair value of interest rate derivatives, all of which terminate before three years from the balance sheet date, to which the Group
and the company were parties was estimated at £3.1m (2011: £5.9m). 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. A credit of £1.3m (2011: £0.9m) 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 Group has not applied hedge accounting.
The following table details the notional principal amounts and remaining terms of interest rate swap contracts accounted for as cash flow hedges at the
reporting date:
Cash flow hedges – outstanding receive floating pay fixed contracts
Average contract
fixed interest rate
––––––––––––––––––––––––––––––––––––––
Notional principal
amount
––––––––––––––––––––––––––––––––––––––
Fair value
––––––––––––––––––––––––––––––––––––––
1 to 2 years
2 to 5 years
2012
%
1.71%
-
2011
%
-
1.71%
2012
£m
125.0
-
125.0
2011
£m
-
200.0
200.0
2012
£m
(1.2)
-
(1.2)
2011
£m
-
(2.6)
(2.6)
The interest rate swaps settle on a monthly basis. The floating rate on the interest rate swaps is 1 month LIbOR. The Group will settle the difference between
the fixed and floating interest rate on a net basis. All interest rate swap contracts, excluding those with a call option, which exchange 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 the income statement over the period that the floating rate interest payments on debt affect profit or loss.
116
NOTES TO THE FINANCIAL STATEMENTS
24. Financial instruments continued
e. cross currency swaps and currency forward contracts
In order to eliminate the currency risk associated with the $400m unsecured senior notes described in note 23(i) the Group and company has four cross
currency swaps in varying amounts between £23m and £58m to fix the exchange rate at £1 equal to $1.73 for the entire lives of $290m of the unsecured
loan notes. The forward options fixed the notional amount receivable and payable in respect of the unsecured senior notes to £168m 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 issued on 26 January 2006. There are two currency swaps of £58m that convert the borrowing rate on $200m of debt from 5.77% to a
variable rate based 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 two currency swaps of £29m and £23m convert the borrowing rates on US$50m, US$40m of debt from 5.89% to a variable rate based on six month
LIbOR plus basis point increment of 86.5 and 86.7 respectively. At 26 January 2006, the variable rates were at weighted average 5.47%. The currency swaps
settle on a half-yearly basis. The Group will settle the difference between the fixed and floating interest on a net basis.
currency 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 £14.4m (2011: £36.9m), which was included in the income statement at the same time that the fair value of the interest rate swap was
also included in the income statement.
The following table details the notional principal amounts and remaining terms of currency swap contracts accounted for as fair value hedges as at the
reporting date:
Fair value hedges – outstanding receive fixed pay floating contracts
Average contract floating interest rate
––––––––––––––––––––––––––––––––––––––––––––––––––––––
Notional principal amount
––––––––––––––––––––––––––––––––––––––
Fair value
––––––––––––––––––––––––––––––––––––––
Less than 1 year
1 to 2 years
2 to 5 years
2012
%
1.9%
-
1.9%
2011
%
-
1.9%
1.9%
2012
£m
115.6
-
52.0
167.6
2011
£m
-
115.6
52.0
167.6
2012
£m
12.7
-
12.8
25.5
2011
£m
-
23.5
16.7
40.2
The Group and the company have three currency forward contracts with a notional value of $30m each and one with a notional value of £20m to hedge
$110m of unsecured senior notes. These contracts have a maturity date of January 2016. At 31 December 2011 the fair value of these forward contracts was
estimated at £(3.7)m (2011: £0.1m). These contracts are designated as cash flow hedges.
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$112.8m (2011:
US$120.3m). The fair value of these derivatives is £(0.7)m (2011: £3.1m). These contracts are not designated as hedges and accordingly the fair value
movement has been reflected in the income statement.
During 2010 the Group and company novated one cross currency interest rate swap with a notional value of $110m and a sterling equivalent of £63m
for total proceeds of £13.7m in the Group and £16.3m in the company. The proceeds are being amortised to the income statement over the remaining life
of the unsecured senior notes.
f. Liquidity analysis
The following table details the Group’s liquidity analysis for its derivative financial instruments and other financial liabilities. The table has been drawn
up based on the undiscounted net cash flows on the derivative instrument that settle on a net basis and the undiscounted gross flows 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.
2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
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
Deferred consideration
Other financial liabilities (note 27)
Finance leases (note 23d)
Total financial instruments
0-1year
£m
1-2 years
£m
2-5 years
£m
5+ years
£m
130.6
(117.6)
13.0
(70.5)
(57.5)
(2.8)
(60.3)
(404.4)
-
(888.7)
(3.8)
(1,357.2)
6.6
(1.8)
4.8
-
4.8
(0.2)
4.6
(7.3)
(51.1)
-
(3.8)
(57.6)
57.3
(52.6)
4.7
-
4.7
-
4.7
(142.2)
-
-
(12.7)
(150.2)
-
-
-
-
-
-
-
(36.9)
-
-
(19.0)
(55.9)
Total
£m
194.5
(172.0)
22.5
(70.5)
(48.0)
(3.0)
(51.0)
(590.8)
(51.1)
(888.7)
(39.3)
(1,620.9)
117
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
24. Financial instruments continued
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
Other financial liabilities (note 27)
Finance leases (note 23d)
Total financial instruments
g. Interest rate sensitivity analysis
2011
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
0-1year
£m
1-2 years
£m
2-5 years
£m
5+ years
£m
10.9
(3.3)
7.6
(77.3)
(69.7)
(1.4)
(71.1)
(77.0)
(872.7)
(2.7)
(1,023.5)
139.3
(118.9)
20.4
-
20.4
(0.6)
19.8
(407.3)
-
(2.7)
(390.2)
63.0
(53.8)
9.2
(0.1)
9.1
-
9.1
(157.4)
-
(7.3)
(155.6)
-
-
-
-
-
-
-
(37.2)
-
(21.3)
(58.5)
Total
£m
213.2
(176.0)
37.2
(77.4)
(40.2)
(2.0)
(42.2)
(678.9)
(872.7)
(34.0)
(1,627.8)
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 that 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:
•
Profit before taxation for the year ended 31 December 2012 would have decreased / increased by £1.7m (2011: increased / decreased by £2.1m) including
£0.3m (2011: £0.7m) of movement on interest rate swaps with options;
Net equity would have decreased / increased by £0.6m (2011: increased / decreased by £0.6m) mainly because 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.
25. provisions
At 1 January 2011
Additional provision charged to income statement
Utilisation of provision
Unwinding of discount
At 31 December 2011
Additional provision charged to income statement
Exceptional provision released in the year
Utilisation of provision
Unwinding of discount
At 31 December 2012
Included in current liabilities
Included in non-current liabilities
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Property
£m
Insurance
£m
56.3
1.8
(10.4)
3.0
50.7
3.1
(6.0)
(7.7)
2.5
42.6
22.6
20.0
42.6
31.5
8.8
(4.8)
-
35.5
0.4
-
(4.4)
-
31.5
31.5
-
31.5
Other
£m
3.0
-
(0.1)
-
2.9
-
-
(0.2)
-
2.7
2.7
-
2.7
Total
£m
90.8
10.6
(15.3)
3.0
89.1
3.5
(6.0)
(12.3)
2.5
76.8
56.8
20.0
76.8
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.
Should a provision ultimately prove to be unnecessary then it is credited back into the income statement. Where the provision was originally established
as an exceptional item, any release is shown as an exceptional credit.
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.
118
NOTES TO THE FINANCIAL STATEMENTS
25. Provisions continued
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.
2012
Property
Insurance
Other
2011
Property
Insurance
Other
The company has no provisions.
26. Deferred tax
0-1year
£m
1-2 years
£m
2-5 years
£m
5+ years
£m
22.3
31.5
2.7
56.5
16.1
35.5
2.9
54.5
4.7
-
-
4.7
7.5
-
-
7.5
9.4
-
-
9.4
15.4
-
-
15.4
14.5
-
-
14.5
21.4
-
-
21.4
Total
£m
50.9
31.5
2.7
85.1
60.4
35.5
2.9
98.8
The following are the major fully recognised deferred tax liabilities and assets recognised by the Group and movements thereon during the current and
prior reporting periods.
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
capital allowances
Trading losses
Revaluation
Share based payments
Provisions
Derivatives
business combinations
brand
Pension scheme surplus
Pension scheme liability
Deferred tax
capital allowances
Revaluation
Share based payments
Provisions
Derivatives
business combinations
brand
Pension scheme surplus
Pension scheme liability
Deferred tax
At
1 Jan 2012
£m
Acquired
in year
£m
Recognised
in income
£m
Recognised
in equity
£m
At
31 Dec 2012
£m
6.2
-
11.1
(8.1)
(11.4)
(1.2)
14.4
97.8
4.9
(16.3)
97.4
(0.3)
(6.6)
-
-
-
-
-
13.3
-
-
6.4
(0.2)
2.1
-
(2.3)
1.2
-
(2.2)
(12.9)
2.1
1.2
(11.0)
-
-
(0.9)
(2.9)
-
0.9
-
-
(6.6)
1.7
(7.8)
5.7
(4.5)
10.2
(13.3)
(10.2)
(0.3)
12.2
98.2
0.4
(13.4)
85.0
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
1 Jan 2011
£m
Recognised
in income
£m
Recognised
in equity
£m
At
31 Dec 2011
£m
6.6
12.0
(11.6)
(11.9)
(1.9)
16.7
108.4
8.6
(16.4)
110.5
(0.4)
-
(0.7)
0.5
-
(2.3)
(10.6)
2.9
1.1
(9.5)
-
(0.9)
4.2
-
0.7
-
-
(6.6)
(1.0)
(3.6)
6.2
11.1
(8.1)
(11.4)
(1.2)
14.4
97.8
4.9
(16.3)
97.4
At the balance sheet date the Group had unused capital losses of £47.4m (2011: £56.0m) 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.
119
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
26. Deferred tax continued
Share based payments
Derivatives
Other timing differences
Share based payments
Derivatives
Other timing differences
27. other financial liabilities
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Trade and other payables
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
1 Jan 2012
£m
(8.1)
(1.2)
(0.6)
(9.9)
Recognised
in income
£m
(2.3)
-
0.1
(2.2)
Recognised
in equity
£m
(3.0)
0.9
-
At
31 Dec 2012
£m
(13.4)
(0.3)
(0.5)
(2.1)
(14.2)
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
1 Jan 2011
£m
(11.5)
(2.5)
(0.7)
(14.7)
Recognised
in income
£m
(0.7)
-
0.1
(0.6)
Recognised
in equity
£m
4.1
1.3
-
5.4
At
31 Dec 2011
£m
(8.1)
(1.2)
(0.6)
(9.9)
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
737.9
76.0
150.8
142.9
2011
£m
740.7
76.2
132.0
139.4
1,107.6
1,088.3
2012
£m
-
-
18.9
-
18.9
2011
£m
-
-
19.0
-
19.0
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 53 days (2011: 57 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 (2011: 30 days). The Directors consider that the carrying amount of trade payables approximates to their fair value.
28. pension arrangements
Defined benefit schemes
The Group operates three final salary schemes. All defined benefit schemes are closed to new members. The Travis Perkins Pensions and Dependants
benefit Scheme (‘the TP scheme’), which for the majority of members is a 1/60th scheme. 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.
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.
A full actuarial valuation of the TP scheme was carried out on 30 September 2011. The IAS 19 valuation has been based upon the results of the 30
September 2011 valuation, and then updated to 31 December 2012 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.
Following the acquisition of The bSS group plc the Group, operated three additional defined benefit pension schemes (‘the bSS schemes’) based on final
pensionable salary. On 6 April 2012 the defined benefit section of the Tricom Retirement and Death benefits scheme was transferred to the TP scheme. The
bSS Ireland scheme is immaterial.
The assets of the bSS schemes are held separately from those of the Group in funds under the control of the schemes’ trustees. . The most recent actuarial
valuations of the bSS schemes assets and the present value of the defined benefit obligation were carried out at 1 June 2009 for the UK and the Irish
schemes. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected
unit method with a control period equal to the future working lifetime of the active members.
In June 2010, an agreement was reached with the trustees of the Travis Perkins final salary pension scheme to fund £34.7m of the deficit using a group
controlled special purpose vehicle. The pension scheme will be entitled to receive the income of the SPV for a period of up to 20 years, subject to funding
levels. This income is backed by the security of 16 Travis Perkins freehold properties. As the SPV is consolidated into the Travis Perkins plc group accounts
advantage has been taken of Regulation 7 of The Partnership (Accounts) Regulations 2008 and accounts for the SPV will neither be audited or filed.
120
NOTES TO THE FINANCIAL STATEMENTS
28. Pension arrangements continued
Gross deficit at 1 January
Service costs charged to the income statement
Other finance income
contributions received by the scheme
Actuarial losses recognised in the statement of comprehensive income
Gross deficit at 31 December
Deferred tax
Net deficit at 31 December
a. major assumptions used by the schemes actuaries 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
All Schemes
––––––––––––––––––––––––––––––––––––––
2012
£m
(45.7)
(10.0)
11.1
32.9
(45.8)
(57.5)
13.0
(44.5)
2011
£m
(27.9)
(7.1)
11.8
27.3
(49.8)
(45.7)
11.4
(34.3)
At 31 December
2012
2.25%
At 31 December
2011
2.25%
2.5%
4.6%
3.0%
2.5%
4.9%
3.1%
In respect of longevity, the valuation adopts the SN1A year of birth 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 2012:
Member age 65 (current life expectancy) – TP Scheme
Member age 45 (life expectancy on reaching age 65) – TP Scheme
Member age 65 (current life expectancy) – BSS Schemes
Member age 45 (life expectancy on reaching age 65) – BSS Schemes
male Years
Female Years
22.1
23.9
22.4
24.3
24.2
26.2
25.1
26.9
b. Amounts recognised in income in respect of the defined benefit schemes
current and past service costs charged to operating profit in the income statement
Interest cost
Expected return on scheme assets
Total pension income / (charge)
TP Scheme
£m
bSS Schemes
£m
2012 Group
£m
2011 Group
£m
(7.2)
(31.3)
41.1
2.6
(2.8)
(10.8)
12.1
(1.5)
(10.0)
(42.1)
53.2
1.1
(7.1)
(44.7)
56.5
4.7
The total charge to the profit and loss account disclosed in note 7 of £17.2m (2011: £12.8m) comprises defined benefit scheme current and past service
costs of £10.0m (2011: £7.1m) and £7.2m (2011: £5.7m) of contributions made to the defined contribution schemes.
The directors have agreed with the Schemes’ Actuaries and the Trustees to pay total contributions, including the amounts in excess of on-going
contributions required to repay the deficit, of £23m to the TP scheme and £13m the bSS schemes in 2013.
Note 5 shows where pension costs have been charged in the income statement. Actuarial gains and losses have been included in the Statement of
comprehensive Income.
In 2013, the excess of funding over the on-going service contributions will be £28m in total for the Group.
c. Assets and liabilities in the schemes and the expected rate of return (net of allowance for administration expenses)
TP Scheme
Equities
bonds, gilts and cash
Pensions SPV
Property
Total fair value of assets
Actuarial value of liability
Surplus in scheme
Related deferred tax liability
Net pension asset
At 31 December 2012
––––––––––––––––––––––––––––––––––––––
At 31 December 2011
––––––––––––––––––––––––––––––––––––––
Expected return
Fair value £m
Expected return
Fair value £m
8.0%
3.95%-4.2%
4.2%
5.2%
8.0%
4.0%
3.7%
5.2%
359.5
276.7
42.0
59.8
738.0
(736.4)
1.6
(0.4)
1.2
335.2
215.0
44.0
58.0
652.2
(632.9)
19.3
(4.9)
14.4
121
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
28. Pension arrangements continued
bSS Schemes
Equities
bonds, gilts and cash
Property
Total fair value of assets
Actuarial value of liability
Deficit in schemes
Related deferred tax asset
Net pension liability
Actual return on scheme assets
TP Scheme
bSS Schemes
At 31 December 2012
––––––––––––––––––––––––––––––––––––––
At 31 December 2011
––––––––––––––––––––––––––––––––––––––
Expected
return
8.0%
4.0%
5.2%
Fair value
£m
153.9
16.2
1.7
171.8
(230.9)
(59.1)
13.4
(45.7)
Expected
return
8.0%
3.95%-4.2%
5.2%
Fair value
£m
145.1
17.2
4.1
166.4
(231.4)
(65.0)
16.3
(48.7)
20 12
––––––––––––––––––––––––––––––––––––––
20 11
––––––––––––––––––––––––––––––––––––––
£m
63.8
17.4
%
8.6
10.1
£m
5.0
(5.3)
%
0.8
(3.1)
d. The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit schemes and the movements during the
year
At 1 January
Income / (expense) recognised in the income statement
Transfer of liability
contributions from sponsoring companies
Actuarial losses
At 31 December
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
TP Scheme
£m
bSS Schemes
£m
19.3
2.6
(1.4)
26.9
(45.8)
1.6
(65.0)
(1.5)
1.4
6.0
-
(59.1)
Group
£m
(45.7)
1.1
-
32.9
(45.8)
(57.5)
TP Scheme
£m
bSS Schemes
£m
31.7
7.4
-
19.5
(39.3)
19.3
(59.6)
(2.7)
-
7.8
(10.5)
(65.0)
Group
£m
(27.9)
4.7
-
27.3
(49.8)
(45.7)
e. movements in the present value of defined benefit obligations in the current period
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At 1 January
Service cost
Interest cost
Transfer of liability
contributions from scheme members
Actuarial (losses) / gains
Foreign exchange
benefits paid
TP Scheme
£m
bSS Schemes
£m
(632.9)
(7.2)
(31.3)
(13.9)
(5.0)
(68.5)
-
22.4
(231.4)
(2.8)
(10.8)
13.9
(0.1)
(5.3)
0.1
5.5
Group
£m
(864.3)
(10.0)
(42.1)
-
(5.1)
(73.8)
0.1
27.9
At 31 December
(736.4)
(230.9)
(967.3)
TP Scheme
£m
bSS Schemes
£m
(611.7)
(3.5)
(32.5)
-
(5.2)
(0.9)
-
20.9
(632.9)
(229.1)
(3.6)
(12.2)
-
(0.1)
7.9
0.2
5.5
(231.4)
Group
£m
(840.8)
(7.1)
(44.7)
-
(5.3)
7.0
0.2
26.4
(864.3)
122
NOTES TO THE FINANCIAL STATEMENTS
28. Pension arrangements continued
f. movements in the present value of fair value of scheme assets in the current period
2012
2011
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
TP Scheme
£m
bSS Schemes
£m
Group
£m
818.6
53.2
28.0
-
32.9
5.1
(0.1)
(27.9)
166.4
12.1
5.3
(12.5)
6.0
0.1
(0.1)
(5.5)
171.8
909.8
At 1 January
Expected return of scheme assets
Actuarial gains / (losses)
Transfer of assets
contributions from sponsoring companies
contributions from scheme members
Foreign exchange
benefits paid
At 31 December
652.2
41.1
22.7
12.5
26.9
5.0
-
(22.4)
738.0
g. cumulative actuarial gains and losses recognised in equity
TP Scheme
At 1 January
Net actuarial losses recognised in the year
At 31 December
bSS Schemes
At 1 January
Net actuarial losses recognised in year
At 31 December
h. History of experience gains and losses
TP Scheme
Fair value of scheme assets (£m)
Present value of scheme obligations (£m)
Surplus / (deficit) in the scheme (£m)
Experience adjustments on scheme liabilities
Amounts (£m)
Percentage of scheme liabilities (%)
Experience adjustments on scheme assets
Amounts (£m)
Percentage of scheme assets (%)
bSS Scheme
Fair value of scheme assets (£m)
Present value of scheme obligations (£m)
Deficit in the schemes (£m)
Experience adjustments on scheme liabilities
Amounts (£m)
Percentage of scheme liabilities (%)
Experience adjustments on scheme assets
Amounts (£m)
Percentage of scheme assets (%)
2012
738.0
(736.4)
1.6
21.5
2.9%
22.7
3.1%
2011
652.2
(632.9)
19.3
-
-
38.4
6.0%
TP Scheme
£m
bSS Schemes
£m
643.4
43.4
(38.4)
-
19.5
5.2
-
(20.9)
652.2
169.5
13.1
(18.4)
-
7.8
0.1
(0.2)
(5.5)
166.4
2012
£m
(221.4)
(45.8)
(267.2)
2012
£m
(10.5)
-
(10.5)
2009
528.1
(571.1)
(43.0)
-
-
62.3
11.8%
2011
166.4
(231.4)
(65.0)
7.9
3.4%
(18.4)
(11.1)%
2010
643.4
(611.7)
31.7
-
-
34.5
5.4%
2012
171.8
(230.9)
(59.1)
(3.8)
1.6%
5.3
3.1%
Group
£m
812.9
56.5
(56.8)
-
27.3
5.3
(0.2)
(26.4)
818.6
2011
£m
(182.1)
(39.3)
(221.4)
2011
£m
-
(10.5)
(10.5)
2008
420.7
(490.6)
(69.9)
13.4
2.7%
(157.2)
(37.4%)
2011
169.5
(229.1)
(59.6)
39.4
17.2%
3.4
2.1%
123
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
28. Pension arrangements continued
i. Sensitivities
The estimated effects of changing the key assumptions (discount rate, inflation and life expectancy) on the IAS19 balance sheet position as at
31 December 2012
Assumption
Discount rate
Inflation
Longevity
Increase of 0.1%
Decrease of 0.1%
Increase of 0.1%
Decrease of 0.1%
Increase of 1 year
Decrease of 1 year
TP Scheme effect on 2012
balance sheet position
bSS Schemes effect on 2012
balance sheet position
14.6
(14.9)
(8.3)
8.5
(17.2)
17.2
4.1
(4.5)
(3.0)
3.3
(6.2)
6.0
Defined contribution schemes
The Group operates five defined contribution schemes for all qualifying employees. The pension cost, which represents contributions payable by the
Group, amounted to £7.2m (2011: £5.7m).
29. Acquisition of businesses
a. Toolstation Limited
On the 3 January 2012 the Group acquired the remaining 70% of the issued share capital of Toolstation Limited. The Group had previously acquired 30%
in April 2008 which included an option to purchase the remaining 70%. The acquisition was accounted for using the acquisition method of accounting. In
accordance with the requirements of the acquisition method of accounting the existing 30% holding has been re-valued to fair value which realised a gain
of £35m which has been credited to the income statement as an exceptional item. The aggregate consideration paid following the payment on 3 January
was £41.5m. On 3 January 2012, future consideration dependent upon future performance and expansion of the business over the period to December 2013
was estimated to be £65m. The deferred consideration is payable in 2014 and consequently the deferred consideration has been discounted over a two year
period from acquisition to final settlement.
Fair values ascribed to identifiable assets as at 3 January 2012 are shown in the table below
Property, plant and equipment
Identifiable intangible assets
cash at bank
Inventories
Trade and other receivables
Trade and other payables
Deferred tax liabilities
Loan repayable to Travis Perkins plc
Goodwill
Satisfied by:
cash paid in prior periods
cash paid in current period
contingent consideration
Revaluation of pre existing equity holding
Discount on contingent consideration
Losses previously recognised
124
2012
Fair value acquired
£m
7.7
53.3
0.8
21.4
4.3
(25.8)
(6.4)
(39.6)
15.7
102.9
118.6
17.3
24.2
65.0
106.5
33.1
(13.8)
(7.2)
118.6
NOTES TO THE FINANCIAL STATEMENTS
29. Acquisition of businesses continued
Toolstation Limited contributed £135.3m revenue and £6.5m to the Group’s operating profit for the period between the date of acquisition and the balance
sheet date. This period also comprises the Group’s financial year.
Goodwill recognised is driven from significant value in forecast growth, forecast new customers and the value of the assembled workforce. None of the
goodwill is expected to be deductible for tax purposes.
The fair value of the acquired receivables is £0.4m. All acquired receivables are expected to be collected in full.
Acquisition costs included in administration expenses amount to £0.3m.
In accordance with IAS 39 the contingent consideration payable has been reassessed at 31 December 2012 and as a result the amount previously
recognised of £65m, discounted to £51.2m, has been reduced to £47.0m with the difference of £4.2m being credited to the income statement as exceptional
investment income.
b. Other acquisitions
In addition to the acquisition of Toolstation the Group acquired 5 other businesses for a total consideration of £1.1m resulting in goodwill of £0.6m.
30. operating lease arrangements
The Group leases a number of trading properties under operating leases. The leases, at inception, 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.
a. The Group as lessee
minimum lease payments under operating leases recognised in income for the year
2012
£m
189.0
2011
£m
176.0
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
b. The Group as lessor
2012
£m
181.0
619.2
1,085.2
1,885.4
2011
£m
173.3
599.9
1,194.4
1,967.6
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
£4.2m (2011: £4.1m).
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. Capital commitments
contracted for but not provided in the accounts
2012
£m
4.1
14.2
21.1
39.4
2011
£m
3.6
12.6
17.3
33.5
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
T HE cOmPAN Y
––––––––––––––––––––––––––––––––––––––
2012
£m
12.2
2011
£m
15.6
2012
£m
-
2011
£m
-
125
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
32. related party transactions
The Group has a related party relationship with its subsidiaries its directors and with its pension schemes (note 28). 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 70 to 74.
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
2012
£m
7.9
4.4
12.3
2011
£m
7.3
4.9
12.2
Providing day-to-day funding from its UK banking facilities;
The company undertakes the following transactions with its active subsidiaries:
•
• Paying interest to members of the Group totalling £15.6m (2011: £6.4m);
• Levying an annual management charge to cover services provided to members of the Group of £7.9m (2011: £6.9m);
• Receiving preference dividends totalling £nil (2011: £9.2m);
• Receiving annual dividends totalling £74.2m (2011: £79.1m).
Details of balances outstanding with subsidiary companies are shown in note 18 and on the balance Sheet on page 85.
There have been no material related party transactions with directors.
The Group advanced a total of £2.9m (2011:£2.3m) to all the Group’s associate companies in 2012. Operating transactions with the associates during the
year were not significant.
33. Analysis of changes in net debt
T HE GRO UP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
cash and cash
equivalents
£m
Finance
leases
£m
Term loan
and revolving
credit facility
and loan notes
£m
Unsecured
senior US$
loan notes
£m
Liability to
pension
scheme
£m
At 1 January 2011
cash flow
Fair value of bSS loan
Exchange movement
Fair value movement
Finance charges amortised
Amortisation of swap cancellation receipt
Discount unwind on liability to pension scheme
At 1 January 2012
cash flow
Exchange movement
Fair value movement
Finance charges amortised
Amortisation of swap cancellation receipt
Lease surrendered
Discount unwind on liability to pension scheme
31 December 2012
(50.9)
(27.7)
-
-
-
-
-
-
(78.6)
(60.5)
-
-
-
-
-
-
(139.1)
21.8
(1.5)
-
-
-
-
-
-
20.3
5.7
-
-
-
-
(0.1)
-
25.9
400.6
(78.7)
-
-
-
3.1
-
-
325.0
(58.8)
-
-
1.2
-
-
-
267.4
366.0
(72.2)
(12.4)
0.5
(1.5)
-
(1.1)
-
279.3
-
(2.7)
(14.4)
-
(1.1)
-
-
261.1
36.1
(1.4)
-
-
-
-
-
2.5
37.2
(2.8)
-
-
-
-
-
2.5
36.9
Total
£m
773.6
(181.5)
(12.4)
0.5
(1.5)
3.1
(1.1)
2.5
583.2
(116.4)
(2.7)
(14.4)
1.2
(1.1)
(0.1)
2.5
452.2
126
NOTES TO THE FINANCIAL STATEMENTS
33. Analysis of changes in net debt continued
balances at 31 December comprise:
cash and cash equivalents
Non-current interest bearing loans and borrowings
current interest bearing loans and borrowings
Net debt
34. Gearing
Net debt under IFRS
IAS 17 finance leases
Unamortised swap cancellation receipt
Liability to pension scheme
Fair value adjustment to debt
Finance charges netted off bank debt
Net debt under covenant calculations
Total equity
Gearing
35. Free cash flow
Net debt at 1 January
Net debt at 31 December
Decrease in net debt
Dividends paid
Net cash outflow for expansion capital expenditure
Net cash outflow for acquisitions
Disposal of business
bank fees paid
Amortisation of swap cancellation receipt
Discount unwind on liability to pension scheme
cash impact of exceptional items
Interest in associate
Shares issued and sale of own shares
Decrease in fair value of debt and exchange
movement in finance charges netted off bank debt
Special pension contributions
Free cash flow
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£m
139.1
(195.2)
(396.1)
(452.2)
2011
£m
(78.6)
598.2
63.6
583.2
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£m
(452.2)
18.7
2.9
36.9
19.5
(0.3)
(374.5)
2,308.1
16.2%
2011
£m
(583.2)
20.3
4.0
37.2
36.6
(1.5)
(486.6)
2,107.8
23.1%
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£m
(583.2)
(452.2)
131.0
51.2
27.9
24.5
-
-
(1.1)
2.5
4.7
2.9
(8.9)
(17.1)
1.2
23.0
241.8
2011
£m
(773.6)
(583.2)
190.4
38.8
54.4
9.9
(26.9)
6.1
(1.1)
2.5
17.8
2.3
(10.6)
(13.3)
3.1
20.1
293.5
127
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
No tEs t o tH E F I N A N C I A L s t
A tE M E Nt s
36a. Adjusted ratio of net debt to earnings before interest, tax and depreciation
Profit before tax
Net finance costs
Depreciation and amortisation
EbITDA under IFRS
Exceptional operating items
Exceptional investment income
IFRS adjustments not included in covenant calculations
Adjusted EbITDA under covenant calculations
Net debt under covenant calculations
Adjusted net debt to EbITDA
T HE G ROU P
––––––––––––––––––––––––––––––––––––––
2012
£m
313.3
26.7
86.8
426.8
8.7
(39.5)
(2.6)
393.4
374.5
0.95x
2011
£m
269.6
20.9
76.7
367.2
9.8
-
(2.7)
374.3
486.6
1.30x
36b. Lease adjusted ratio of net debt to earnings before interest, tax , depreciation and operating lease rentals
EbITDA under IFRS
Operating lease rentals
EbITDAR
Net debt under covenant calculations
Operating lease rentals x8
Lease adjusted net debt
Lease adjusted net debt to EbITDAR
T HE G ROU P
––––––––––––––––––––––––––––––––––––––
2012
£m
393.4
189.0
582.4
374.5
1,512.0
1,886.5
3.2x
2011
£m
374.3
176.0
550.3
486.6
1,408.0
1,894.6
3.4x
128
37. Adjusted pre-tax return on capital
Operating profit
Amortisation of intangible assets
Exceptional items
Adjusted operating profit
Opening net assets
Net pension deficit
Goodwill written off
Net borrowings
Exchange adjustment
Opening capital employed
closing net assets
Net pension deficit
Goodwill written off
Net borrowings
Exchange adjustment
closing capital employed
Average capital employed
Adjusted pre–tax return on capital
T HE GRO UP
––––––––––––––––––––––––––––––––––––––
2012
£m
300.5
17.4
8.7
326.6
2,107.8
34.3
92.7
583.2
(36.6)
2,781.4
2,308.1
44.5
92.7
452.2
(19.5)
2,878.0
2,829.7
11.5%
2011
£m
290.5
12.9
9.8
313.2
1,951.8
20.1
92.7
773.6
(52.2)
2,786.0
2,107.8
34.3
92.7
583.2
(36.6)
2,781.4
2,783.7
11.3%
129
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
Five Year Record
consolidated income statement
2012
£m
2011
£m
2010
£m
2009
£m
2008
£m
Revenue
4,844.9
4,779.1
3,152.8
2,930.9
3,178.6
Operating profit before amortisation and exceptional items
Amortisation
Exceptional items
Operating profit
Exceptional investment income
Net finance costs
Profit before tax
Income tax expense
Net profit
Adjusted pre-tax return on capital
basic earnings per share
Adjusted earnings per share
Dividend declared per ordinary share (pence)
326.6
(17.4)
(8.7)
300.5
39.5
(26.7)
313.3
(53.7)
259.6
11.5%
108.9p
95.1p
25.0p
branches at 31 December (No.) Includes branches of associates
1,896
313.2
(12.9)
(9.8)
290.5
-
(20.9)
269.6
(57.2)
212.4
11.3%
90.3p
93.1p
20.0p
1,868
239.0
(0.2)
(19.0)
219.8
-
(23.0)
196.8
(55.5)
141.3
12.2%
69.6p
77.2p
15.0p
1,813
Average number of employees (No.)
21,887
21,423
15,792
basic and adjusted earnings per share for 2008 have been restated for the impact of the rights issue.
consolidated cash flow statement
cash generated from operations
Net interest paid
Swap cancellation receipt / (payment)
Income taxes paid
Net purchases of investments, property and plant
Interest in associates
Disposal of businesses
Acquisition of businesses net of cash acquired
Proceeds from issuance of share capital
Dividends paid
bank facility finance charges
Net movement in finance lease liabilities
Repayment of unsecured loan notes
Liability to pension scheme
Decrease in bank loans
Net increase / (decrease) in cash and cash equivalents
Net debt at 1 January
Non cash adjustment
cash flow from debt and debt acquired
2012
£m
327.6
(27.3)
-
(64.5)
(49.7)
(2.9)
-
(24.5)
8.9
(51.2)
-
5.7
-
-
(61.6)
60.5
(583.2)
14.6
55.9
2011
£m
345.1
(23.5)
-
(26.3)
(94.2)
(2.3)
26.9
(9.9)
10.6
(38.8)
(6.1)
(1.6)
-
-
(152.2)
27.7
(773.6)
8.9
153.8
Net debt at 31 December
Free cash flow
(452.2)
(583.2)
241.8
293.5
2010
£m
282.3
(16.0)
13.7
(42.4)
(35.4)
(12.5)
-
(294.9)
0.3
(10.1)
-
(1.3)
(0.6)
34.7
(214.1)
(296.3)
(467.2)
(3.1)
(7.0)
(773.6)
277.8
224.6
-
32.7
257.3
-
(44.6)
212.7
(55.3)
157.4
10.9%
88.4p
75.2p
-
1,238
14,528
2009
£m
319.8
(29.0)
(28.7)
(27.3)
(7.8)
(12.9)
-
(1.0)
300.3
-
-
(1.5)
(0.1)
-
(160.0)
351.8
(1,017.4)
36.8
161.6
271.5
-
(56.2)
215.3
-
(69.0)
146.3
(44.4)
101.9
12.9%
68.6p
96.9p
14.5p
1,223
15,414
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
(467.2)
(1,017.4)
294.4
185.3
130
consolidated balance sheet
2012
£m
2011
£m
2010
£m
2009
£m
2008
£m
ASSETS
NON-cURRENT ASSETS
Property, plant and equipment
Goodwill and other intangible assets
Derivative financial instruments
Interest in associates
Retirement benefit assets
Investment property and other investments
Deferred tax asset
cURRENT ASSETS
Inventories
Trade and other receivables
Assets held for resale
cash and cash equivalents
Total assets
cAPITAL AND RESERVES
Issued capital
Share premium account
merger reserve
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 and other payables
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
4,357.2
4,191.2
578.4
2,232.3
12.8
6.7
1.6
2.8
-
637.1
746.4
-
139.1
562.6
2,095.1
40.3
51.3
19.3
1.9
-
596.0
746.1
-
78.6
527.1
2,109.7
57.0
45.7
31.7
1.9
-
571.4
687.2
2.3
62.9
499.0
1,515.3
44.7
31.7
-
4.8
12.0
312.7
375.4
-
347.2
534.5
1,513.9
80.3
19.6
-
5.4
19.5
321.9
388.6
-
7.7
4,357.2
4,191.2
4,096.9
3,142.8
2,891.4
24.5
487.2
326.5
(62.4)
18.5
1,513.8
24.4
480.8
326.5
(75.2)
15.7
1,335.6
2,308.1
2,107.8
195.2
4.9
59.1
67.0
85.0
396.1
2.6
1,107.6
74.8
56.8
2,049.1
598.2
5.9
65.0
28.9
97.4
63.6
-
1,088.3
75.9
60.2
2,083.4
24.2
471.5
325.9
(83.4)
14.4
1,199.2
1,951.8
760.9
4.2
59.6
36.0
110.5
75.6
2.5
1,004.5
36.5
54.8
2,145.1
4,096.9
20.9
471.2
-
(83.7)
9.2
1,042.8
1,460.4
739.1
6.1
43.0
43.7
62.8
75.3
-
638.7
28.1
45.6
1,682.4
3,142.8
12.3
179.5
-
(83.7)
6.0
904.1
1,018.2
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
131
FINANCIALSTATEMENTSTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012
Notice of Annual General Meeting
Notice is hereby given that the forty-ninth 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 23 may 2013 at 12.00 noon.
a. shares (as defined in section 540 of the companies Act 2006)
or grant rights to subscribe for or to convert any security into
shares up to an aggregate nominal amount of £8,166,764; and
b. equity securities (as such phrase is to be interpreted in
3.
4.
2.
the resolutions
Resolutions 1 to 15 (inclusive) will be proposed as ordinary
resolutions. Resolutions 16 to 18 (inclusive) will be proposed as
special resolutions.
1.
To receive the company’s annual accounts for the financial year
ended 31 December 2012, together with the Directors’ report, the
Directors’ remuneration report and the Auditor’s report on those
accounts and on the auditable part of the Directors’ remuneration
report.
To declare a final dividend for the financial year ended
31 December 2012 of 17 pence per ordinary share, payable to
shareholders on the register at the close of business on 3 may
2013.
To appoint Tony buffin as a director of the company.
biographical details of Tony buffin appear on page 54.
To re-appoint chris bunker as a non-executive director of the
company. biographical details of chris bunker appear on page 55.
To re-appoint John coleman as a non-executive director of the
company. biographical details of John coleman appear on
page 55.
To re-appoint Andrew Simon as a non-executive director of the
company. biographical details of Andrew Simon appear on
page 55.
To re-appoint Ruth Anderson as a non-executive director of the
company. biographical details of Ruth Anderson appear on
page 55.
To re-appoint Geoff cooper as a director of the company.
biographical details of Geoff cooper appear on page 54.
To re-appoint John carter as a director of the company.
biographical details of John carter appear on page 54.
10. To re-appoint Robert Walker as a director of the company.
biographical details of Robert Walker appear on page 54.
6.
5.
9.
7.
8.
11. To re-appoint Deloitte LLP, chartered Accountants, as auditor 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.
12. To authorise the Directors to fix the remuneration of Deloitte LLP.
13. That the Directors’ Remuneration Report for the financial year
ended 31 December 2012 set out on pages 64 to 74 be approved.
14. That the replacement Deferred Share bonus Plan (the ‘Plan’)
produced in draft to this meeting and, for the purposes of
identification, initialled by the chairman, be approved and the
Directors be authorised to make such modifications to the Plan as
they may consider appropriate.
15. That, in substitution for all existing authorities, the Directors be
generally and unconditionally authorised in accordance with
section 551 of the companies Act 2006 to exercise all the powers
of the company to allot:
132
accordance with section 560 of the companies Act 2006) up to
an aggregate nominal amount of £16,333,529 (such amount
to be reduced by the aggregate nominal amount of shares
allotted or rights to subscribe for or to convert any security into
shares in the company granted under paragraph (a) of this
resolution 15) in connection with an offer by way of a rights
issue:
i. to ordinary shareholders in proportion (as nearly as may be
practicable) to their existing holdings; and
ii. to holders of other equity securities (as defined in section
560(1) of the companies Act 2006) 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
2014) but, in each case, so that the company may make
offers and enter into agreements before the authority expires
which would, or might, require shares to be allotted or rights
to subscribe for or to convert any security into shares to be
granted after the authority expires and the Directors may allot
shares or grant such rights under any such offer or agreement
as if the authority had not expired.
16. That, in substitution for all existing powers and subject to the
passing of resolution 15, the Directors be generally empowered
pursuant to section 570 of the companies Act 2006 to allot equity
securities (as such phrase is to be interpreted in section 560
of the companies Act 2006) for cash pursuant to the authority
granted by resolution 15 and/or where the allotment constitutes
an allotment of equity securities by virtue of section 560(3) of the
companies Act 2006, in each case free of the restriction in section
561 of the companies Act 2006, 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 15, such
power shall be limited to the allotment of equity securities in
connection with an offer by way of a rights issue only):
i. to ordinary shareholders in proportion (as nearly as may be
practicable) to their existing holdings; and
ii. to holders of other equity securities (as defined in section
560(1) of the companies Act 2006), 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; and
b. to the allotment of equity securities pursuant to the authority
granted by paragraph (a) of resolution 15 and/or an allotment
which constitutes an allotment of equity securities by virtue
of section 560(3) of the companies Act 2006 (in each case
otherwise than in the circumstances set out in paragraph (a)
of this resolution 16) up to a nominal amount of £1,225,015
calculated, in the case of equity securities which are rights
to subscribe for, or to convert securities into, ordinary shares
(as defined in section 560(1) of the companies Act 2006) 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 2014); 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.
17. That a general meeting other than an annual general meeting
may be called on not less than 14 clear days notice.
18. That the company be and is hereby generally and
unconditionally authorised to make one or more market
purchases (within the meaning of section 693(4) of the
companies Act 2006) of ordinary shares of 10 pence each in the
capital of the company (‘ordinary shares’), provided that:
a. the maximum aggregate number of ordinary shares authorised
to be purchased is 24,500,293 (representing 10% of the issued
share capital of the company as at 27 march 2013);
b. the minimum price (exclusive of expenses) which may be paid
for an ordinary share is its nominal value of 10 pence;
c. 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;
d. this authority expires at the conclusion of the next Annual
General meeting of the company or 30 June 2014, whichever is
the earlier; and
e. 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
3 April 2013
Registered in England No. 824821
Directions to Northampton Rugby Football club can be found on
page 136.
133
SHAREHOLDERINFORMATIONTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Notes to the Notice of Annual General Meeting
1.
2.
3.
4.
5.
A form of proxy is enclosed and instructions for its use are shown
on the form. The appointment of a proxy will not prevent a
member from subsequently attending, voting and speaking at the
meeting in person, in which case any votes of the proxy will be
superseded.
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.
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
instructions being given. All forms must be signed and should be
returned together in the same envelope.
The right to appoint a proxy under note 1 and 2 above does
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.
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 12.00 noon on Thursday 23 may
2013 and any adjournment(s) thereof must be returned to capita
Registrars, PXS, 34 beckenham Road, beckenham, Kent, bR3 4TU,
by 12.00 noon on 21 may 2013. 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 or dividend tax
voucher), family name and post code (if resident in the UK).
6.
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, regardless of whether it constitutes
the appointment of a proxy or an amendment to the instruction
given to a previously appointed proxy must, in order to be valid, be
transmitted so as to be received by the company’s agent (ID RA10)
by the latest time(s) for receipt of proxy appointments (12.00
noon on 21 may 2013). 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. After this time, any
change of instructions to proxies appointed through cREST should
be communicated to the appointee through other means.
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 cREST manual can be reviewed at www.euroclear.
com/cREST.
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.
7.
Only those members entered on the register of members of
the company as at 6.00 pm on 21 may 2013 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 rights of any person to attend or vote at the
meeting.
134
8.
9.
Reference to the register means the issuer register of members and
the Operator register of members maintained in accordance with
Regulation 20 of the Uncertificated Securities Regulations 2001.
The following documents will be available for inspection at the
Registered Office of the company during usual business hours on
any weekday (Saturdays, Sundays and public holidays excluded)
from the date of this Notice to the date of the meeting and at
Northampton Rugby Football club from 12.00am on the day of
the meeting until the conclusion of the meeting.
• Copies of contracts of service of directors and non–executive
directors’ letters of appointment with the company, or with any
of its subsidiary companies.
• The register of directors’ interests kept by the Company.
• A copy of the Company’s Articles of Association.
• A statement giving particulars of directors’ relevant
transactions.
• A copy of the draft rules of the replacement Deferred Share
bonus Plan. copies will also be available for inspection at the
offices of Aon Hewitt, 10 Devonshire Square, London, Ec2m 4YP
during usual business hours on any weekday (Saturdays and
English public holidays excepted) from the date of this notice
until the conclusion of the meeting.
10. At 27 march 2013 (being the latest practicable date before
publication of this notice) the issued share capital of the
company consisted of 245,002,932 ordinary shares, carrying one
vote each. Therefore, the total voting rights in the company as at
27 march was 245,002,932.
11. A person to whom this Notice is sent who is a person
nominated under section 146 of the companies Act 2006 to
enjoy information rights (a ‘Nominated Person’) may, under
an agreement between him/her and the shareholder by whom
he/she was nominated, have a right to be appointed (or to
have someone else appointed) as a proxy for the meeting. If a
Nominated Person has no such proxy appointment right or does
not wish to exercise it, he/she may, under any such agreement,
have a right to give instructions to the shareholder as to the
exercise of voting rights.
12. The statement of the rights of members in relation to the
appointment of proxies in paragraphs 1 to 6 above does not apply
to a Nominated Person. The rights described in these paragraphs
can only be exercised by registered members of the company.
13. Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all of
the same powers as the corporation could exercise if it were an
individual member.
14. Under section 527 of the companies Act 2006 members
meeting the threshold requirements set out in that section
have the right to require the company to publish on a website
a statement setting out any matter relating to: (i) the audit of
the company’s accounts (including the auditor’s report and the
conduct of the audit) that are to be laid before the meeting; or (ii)
any circumstance connected with an auditor of the company
ceasing to hold office since the previous meeting at which annual
accounts and reports were laid in accordance with section 437
of the companies Act 2006. The company may not require the
shareholders requesting any such website publication to pay its
expenses in complying with sections 527 or 528 of the companies
Act 2006. Where the company is required to place a statement on
a website under section 527 of the companies Act 2006, it must
forward the statement to the company’s auditor not later than the
time when it makes the statement available on the website. The
business which may be dealt with at the meeting includes any
statement that the company has been required under section 527
of the companies Act 2006 to publish on a website.
15. Under section 338 and section 338A of the companies Act 2006,
members meeting the threshold requirements in those sections
have the right to require the company (i) to give, to members of
the company entitled to receive notice of the meeting, notice of
a resolution which may properly be moved and is intended to
be moved at the meeting and/or (ii) to include in the business to
be dealt with at the meeting any matter (other than a proposed
resolution) which may be properly included in the business. A
resolution may properly be moved or a matter may properly be
included in the business unless (a) (in the case of a resolution
only) it would, if passed, be ineffective (whether by reason of
inconsistency with any enactment or the company’s constitution
or otherwise), (b) it is defamatory of any person, or (c) it is
frivolous or vexatious. Such a request may be in hard copy form or
in electronic form, must identify the resolution of which notice is
to be given or the matter to be included in the business, must be
authorised by the person or persons making it, must be received
by the company not later than 10 April 2013, being the date six
clear weeks before the meeting, and (in the case of a matter to
be included in the business only) must be accompanied by a
statement setting out the grounds for the request.
16. Shareholders and their proxies will have the opportunity to ask
questions at the meeting. When invited by the chairman, if you
wish to ask a question, please wait for a company representative
to bring you a microphone. It would be helpful if you could
state your name before you ask your question. Questions may
not be answered at the meeting if they are deemed not to be in
the interests of the company, or the good order of the meeting,
would interfere unduly with the preparation for the meeting or
involve the disclosure of confidential information, or if the answer
has already been given on a website. The chairman may also
nominate a company representative to answer a specific question
after the meeting or refer the response to the company’s website.
17. A copy of this Notice, and other information required by section
311A of the companies Act 2006, can be found in the Investor
centre at www.travisperkinsplc.com.
135
SHAREHOLDERINFORMATIONTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Directions to the Annual General Meeting
The Travis Perkins Annual General meeting is to be held in
The captains Lounge and The Rodber Suite,
Northampton Rugby Football club,
Franklin’s Gardens,
Weedon Road,
Northampton NN5 5bG.
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
DUSTON ROAD
Y
A
W
E
T
A
G
L
L
O
T
W E E D O N R O A D A4500
NORTHAMPTON
RUGBY FOOTBALL
CLUB
BEACON BINGO
U
P
T
O
N
W
A
Y
BP
CINEWORLD
SIXFIELDS
NORTHAMPTON
TOWN FOOTBALL CLUB
TGI FRIDAYS
R B R I D GE ROAD A4500
A
4
2
8
E
C
SP E N
VIP CAR PARK
S
T
J
A
M
E
S
R
RAILWAY STATION
O
A
D A428
TO NORTHAMPTON
TOWN CENTRE
A
4
5
TO M1
JUNCTION 15A
Directions
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 two roundabouts (Sainsbury’s is on the left before the first
roundabout and Wickes on the right after the second 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). Turn left at the cineworld roundabout then continue
as from the South.
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. The 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
136
Other Shareholder Information
shareholder enquiries
Shareholder enquiries should be directed to the company Secretary
at the company’s registered office:
Travis Perkins plc
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
The Registry, 34 beckenham Road, beckenham, Kent, bR3 4TU
Telephone 0871 664 0300
(calls cost 10p per minute plus network extras; lines are open 8.30am
to 5.30pm, Monday – Friday)
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.
Financial diary
Ex-dividend date
Record date
Annual General meeting
Payment of final dividend
Announcement of 2013 interim results
Announcement of 2013 annual results
1 may 2013
3 may 2013
23 may 2013
30 may 2013
July 2013
February 2014
Annual general meeting – catering arrangements
It has always been the company’s custom to provide a light luncheon
for shareholders following the AGm, and a buffet luncheon will be
available (you need not notify the company in advance if you would
like lunch).
Internet
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.ccfltd.co.uk*
www.4tradeproducts.co.uk
www.benchmarxkitchens.co.uk
www.benchmarxshowroom.co.uk (end user site)
www.birchwoodpricetools.com
www.bmpublicsector.co.uk
www.bssindustrial.co.uk
www.buytiles.co.uk
www.cityheatingspares.co.uk
www.cityplumbing.co.uk*
www.connectionsaml.co.uk
www.defenderpower.com
www.dhsspares.co.uk
www.fponlineordering.co.uk
www.fpwholesale.co.uk
www.fressshbathrooms.co.uk
www.havelockcontrols.co.uk
http://hire.travisperkins.co.uk/hire*
www.iflo.co.uk
www.insulationgiant.co.uk
www.keyline.co.uk*
http://hire.keyline.co.uk/hire/*
www.mispares.com
www.pro-heat.co.uk
www.ptsonlineordering.co.uk
www.ptsplumbing.co.uk
www.ptsrenewables.co.uk
www.scruffs.com
www.selfbuildgroup.co.uk
www.southern-darwent.co.uk
www.sustainablebuildingsolutions.co.uk
www.thedoorscollections.co.uk
www.tilegiant.co.uk*
www.tilehq.co.uk
www.tilemagic.co.uk
www.timberdirect.co.uk
www.toolstation.co.uk*
www.tpcareers.co.uk
www.tpmanagedservices.co.uk
www.trademate.co.uk*
www.travisperkins.co.uk*
www.travisperkinsplc.com (investor relations site)
www.vanvault.co.uk
www.wickes.co.uk*
www.wickescareers.co.uk
www.wickeskitchens.co.uk
*These sites allow credit account holders to order on-line through
Trademate, with the exception of the Wickes, Tile Giant and ToolStation
sites which allow on-line ordering by secure card transaction.
most 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.
Electronic communication
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
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SHAREHOLDERINFORMATIONTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 otH Er s H ArE HoL D Er IN Fo rM A
tIoN
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, Freepost RLYX-GZTU-KRRG, SAS,
The Registry, 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 e-mail, you should register
at www.capitashareportal.com, and follow the instructions (see
Registrar’s On-Line Service below).
Please telephone capita Registrars on 0871 664 0300 (within the
UK), calls cost 10p per minute plus network extras; lines are open
9.00am to 5.30pm, monday - Friday or +44 20 8639 3399 (Non-UK) if
you have any queries.
Notes
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.
2. 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.
3. 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 it
considers it necessary or desirable to do so.
Capita registrars
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 (IVc),
which can be found on your share certificate, proxy card or dividend
tax voucher.
Dividend re-investment plan (‘DrIp’)
This is a scheme which allows you to use your dividends to buy
further shares in Travis Perkins. For any shareholders who wish to
re-invest dividend payments in the company, a facility is provided by
capita IRG Trustees Ltd in conjunction with capita Registrars. Under
this facility, cash dividends are used to purchase additional shares.
Shares are bought 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. Any shareholder requiring further
information should contact capita on 0871 664 0381 (calls cost 10p
per minute plus any network extras from within the UK); lines are
138
open from 9.00 am to 5.30 pm Monday – Friday. If Non-UK +44 208
639 3399. Fax 0208 639 1023. E-mail shares@capitaregistrars.com or
visit www.capitaregistrars.com. Please note that this facility is only
available to shareholders with an address in the UK or EEA.
Duplicate 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, in conjunction with Western Union, are able to provide you
with a service that will convert your sterling dividends into your local
currency at a competitive rate. You can choose to receive payment
directly into your bank account, or you can be sent a draft in your
local currency. Further details are available from
capita Registrars,
Freepost RLYX-GZTU-KRRG, SAS, The Registry,
34 beckenham Road, beckenham, Kent bR3 9ZA
Telephone UK: 0871 664 0385
(calls cost 10 pence per minute plus network extras; lines are open to
9.00am to 5.30pm, monday - Friday) or +44 208 639 3405 (Non UK) or
by logging on to www.international.capitaregistrars.com
share dealing services
There are two share dealing services that you may wish to use to buy
or sell shares in Travis Perkins.
Capita
capita offers an on-line and telephone share dealing service which
is available by logging on to www.capitadeal.com or telephoning
0871 664 0346 (calls cost 10p per minute plus network extras;
lines are open 8.00am to 4.30pm, Monday – Friday). For the on-line
service, capita’s commission rates are 1% of the value of the deal
(minimum £20, maximum £75) and for the telephone service, capita’s
commission rates are 1.50% of the value of the deal (minimum £25,
maximum £102.50).
stocktrade
Stocktrade offer a telephone share dealing service which is available
by telephoning 0845 6010 995 (non-UK +44 131 240 0414) and
quoting reference ‘Low cost 335’. Stocktrade’s commission will be
0.5%, to deals up to the value of £10,000 and 0.2% on the excess
thereafter, subject to minimum of £17.50. Please note that UK share
purchases will be subject to 0.5% stamp duty. There will also be a
PTm (‘Panel for Takeovers and mergers’) levy of £1 for single trades in
excess of £10,000. When buying shares you will be required to pay for
your transaction at the time of the deal by debit card, and you should
ensure that you have sufficient cleared funds available in your debit
card account to pay for the shares in full.
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SHAREHOLDERINFORMATIONTRAVIS PERKINS ANNUAL REPORT AND ACCOUNTS 2012 Shareholder Notes
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TRAVIS PERKINS PLC
Travis Perkins plc · Lodge Way House · Harlestone Road · Northampton NN5 7UG · Telephone 01604 752 424
www.travisperkinsplc.com