THE LARGES
T S
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ANNUAL REPORT AND ACCOUNTS 2013
THE LARGES
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GENERAL
MERCHANTING
DIVISION
CONSUMER
DIVISION
CONTRACTS
DIVISION
Tile Giant
•
Toolstation
•
Wickes
BSS
•
CCF
•
Keyline
Benchmarx
•
Travis Perkins
East
•
Travis Perkins
North
•
Travis Perkins
West
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PLUMBING
AND HEATING
DIVISION
Birchwood Price
Tools
•
City Heating Spares
•
City Plumbing
•
Connections
•
DHS
•
F & P Wholesale
•
PTS
•
Solfex
This document is important and requires your immediate attention. If you are in any doubt as to what action you should take, you are recommended to seek your own
fi nancial advice from your stockbroker or other independent adviser authorised under the Financial Services and Markets Act 2000. If you have sold or transferred
all of your shares in Travis Perkins plc, please forward this document, together with the accompanying documents, as soon as possible either to the purchaser or
transferee or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.
CONTENTS
1
Overview
2
Financial and operating highlights
cOrpOrate gOvernance
56
Directors
Other inFOrmatiOn
138
Five year record
3
Financial summary
Strategic repOrt
5
Strategic report outline
6
Key performance indicators
8
Travis Perkins at a glance
12
Chairman’s statement
16
Business model –
what Travis Perkins does
17
The Group’s markets and its
market leading positions
20
Business review
25
Financial review
32
Evolution of the Group’s strategy
37
Strategic summary
39
Statement of principal risks
and uncertainties
42
Corporate responsibility statement
46
Stay safe report
50
Environmental report
52
Engaging people
58
Committees and
professional advisers
59
Corporate governance report
64
Audit committee report
68
Directors’ remuneration report
83
Nominations committee report
85
Directors’ report
88
Statement of directors’
responsibilities
Financial StatementS
89
Independent auditor’s report
92
Income statements
93
Statement of comprehensive
income
94
Balance sheets
96
Consolidated statement of
changes in equity
97
Statement of changes in equity
98
Cash flow statements
99
Notes to the financial statements
140
Notice of the Annual General
Meeting
142
Annual General Meeting –
explanatory notes to the
resolutions
144
Appendix to the notice of the
Annual General Meeting
146
Notes to the notice of the
Annual General Meeting
148
Directions to the Annual
General Meeting
149
Other shareholder Information
Forward looking statements: The Strategic
Report 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.
FiNaNCial
highlighTS
2
OPERaTiNg
highlighTS
REvENuE NOw OvER
£5BN wITh ANNuAl
GROwTh OF 6.3%,
5.0% ON A lIKE-FOR-
lIKE BASIS
OPERATING PROFIT uP
10% TO £330M
All DIvISIONS
AChIEvED REvENuE
GROwTh
STRONG OvERhEAD
CONTROl
ThROuGhOuT
ThE GROuP
ADjuSTED PROFIT
BEFORE TAx uP £35M
OR 12.4% TO £321M
OPERATING MARGIN
IMPROvED By 0.1PP
TO 6.8%
PROFIT AFTER TAx uP
£16M TO £265M
ADjuSTED EPS uP
14.3% TO 103.6
PENCE
43 NEw BRANChES
AND 15 IMPlANTS
OPENED, INCluDING
9 TOOlSTATION
OPENINGS wIThIN
wICKES
FINAl DIvIDEND uP
24% TO 21 PENCE,
GIvING Full yEAR
DIvIDEND OF 31 PENCE
NET DEBT REDuCED By
£104M TO £348M
ACquISITION OF
SOlFEx AND AN
ONlINE hEATING
PRODuCTS
DISTRIBuTION
BuSINESS
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 3
I
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v
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v
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FiNaNCial SUMMaRY
2013
£m
%
2012
£m
**(Restated)
Note
REvENuE
4
5,148.7
6.3
4,844.9
ADjuSTED:*
Operating profit
Profit before taxation
Profit after taxation
5a
5c
5c
347.6
6.7
321.1 12.4
249.5 15.6
Adjusted earnings per ordinary share (pence)
11b
103.6 14.3
STATuTORy:
Operating profit
Profit before taxation
Profit after taxation
5a
5c
5c
329.7 10.0
312.6
4.5
264.7
6.4
Basic earnings per ordinary share (pence)
11a
109.9
5.4
325.7
285.8
215.9
90.6
299.6
299.2
248.7
104.3
Total dividend declared per ordinary share (pence) 12
31.0 24.0
25.0
* Throughout this Annual Report the term ‘adjusted’ has been used to signify that the effects of exceptional items, amortisation of intangible assets and
the associated tax impacts have been excluded from the disclosure being made.
** The Group has adopted the requirements of IAS 19 (revised 2011) for the first time during 2013. As a result the 2012 comparative numbers have
been restated to ensure that 2012 and 2013 have been prepared on a comparable basis. Full details of the effect of applying IAS 19 (revised 2011)
are given in note 5e.
4
Brackmills
Distribution
Centre,
Northampton
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 5
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STRaTEgiC
REPORT
OUTliNE
The Directors of the Company have
prepared a Strategic Report for the year
ended 31 December 2013 which is set
out on pages 6 to 55. It encompasses
the following information:
Key performance indicators – page 6
Travis Perkins at a glance – page 8
Chairman’s statement – page 12
Business model – what Travis Perkins
does – page 16
The Group’s markets – page 17
Business review – page 20
Financial review – page 25
Evolution of the Group’s strategy – page 31
Strategic summary – page 37
Statement of principal risks and
uncertainties – page 39
Corporate responsibility statement – page 42
incorporating:
Stay safe report – page 46
Environmental report – page 50
Engaging people – page 52
The Strategic Report was approved by the
Board of Directors on 25 February 2014
and signed on its behalf by:
John Carter
Chief Executive Officer
25 February 2014
Tony Buffin
Chief Financial Officer
6
KEY PERFORMaNCE iNDiCaTORS
REvENuE
£5,149
MIllION
ADjuSTED
EBITA
£348
MIllION
lIKE-FOR-lIKE
SAlES GROwTh
5.0%
EARNINGS
PER ShARE
103.6
PENCE
The Group tracks its performance against eight financial and operating measures (KPIs) that it believes are the
key indicators of its progress. Further details can be found in the notes indicated above each KPI.
5,14920134,84520124,779201120132012201120132012201120132012201193.190.6103.63133263486.0-1.45.0Adjusted earningsper share (pence)Note 11bAdjusted EBITA (£m)Note 5aLike-for-like sales growth (%)Note 4Revenue (£m)Note 410.020139.820129.620112013201220112013201220112013201220116062643.5x3.3x3.0x294242240Colleague engagement (%)Page 52Lease adjusted netdebt to EBITDARNote 36Free cash flow (£m) Note 35Lease adjusted pre-taxreturn on capital (%)Note 37TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 7
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lEASE
ADjuSTED NET
DEBT TO EBITDAR
3.0x
COllEAGuE
ENGAGEMENT
64%
lEASE
ADjuSTED
PRE-TAx RETuRN
ON CAPITAl
10.0%
FREE
CASh FlOw
£240
MIllION
5,14920134,84520124,779201120132012201120132012201120132012201193.190.6103.63133263486.0-1.45.0Adjusted earningsper share (pence)Note 11bAdjusted EBITA (£m)Note 5aLike-for-like sales growth (%)Note 4Revenue (£m)Note 410.020139.820129.620112013201220112013201220112013201220116062643.5x3.3x3.0x294242240Colleague engagement (%)Page 52Lease adjusted netdebt to EBITDARNote 36Free cash flow (£m) Note 35Lease adjusted pre-taxreturn on capital (%)Note 37
8
TRaViS PERKiNS aT a glaNCE
A major plc, which can trace its roots back over 200
years, Travis Perkins is a leading company in the
builders’ merchant and home improvement markets,
and is the uK’s largest product supplier to the building
and construction market, one of the largest industries
in the uK. It operates 17 businesses from more than
1,900 sites across the uK and Ireland. In june 2013
it entered the FTSE 100 for the first time.
As explained on page 31 the Group has recently
refocused its strategic objectives to underpin
shareholders value creation in light of the emerging
economic recovery. As part of this review, and with
effect from 1 january 2014, the Group’s divisions
have been realigned. The financial and operating
sections of the Annual Report have been prepared
using the divisional structure in place throughout
2013. Further detail on the realigned divisional
structure is set out on page 31.
In 2013 Travis Perkins comprised a strong
portfolio of businesses which were organised into
four divisions, General Merchanting, Specialist
Merchanting, Consumer and Plumbing and heating.
the grOup’S BuSineSSeS in 2014
general Merchanting
is the Group’s core business operating under the
Travis Perkins fascia. It supplies products for all types
of repair, maintenance and improvement projects
(‘RMI’) as well as new builds. It has developed
exclusive own label products, the largest of which
is 4Trade. The customers of General Merchanting
businesses are primarily professional tradesman,
ranging from sole traders to national housebuilders
whose key requirements are product range and
availability, competitive pricing and customer service.
Travis Perkins is a leading
company in the builders’
merchant market, and is a
main supplier to the building
and construction trades.
Travis Perkins supplies more
than 100,000 product lines
to trade professionals and
self-builders.
Benchmarx Kitchen & joinery
was opened in 2006. It is a
trade only specialist outlet
supplying kitchens and joinery
products that meet the needs
of businesses of many sizes
from specialist joiners through
to local authorities and
national housebuilders.
INDuSTRy
General building
materials
POSITION
Number 1
BRANChES
643 around
the uK
INDuSTRy
Kitchen
specialists
POSITION
Number 2
BRANChES
85 around
the uK
the grOup’S miSSiOn
‘Continue to deliver better returns by putting in place
and growing the best businesses, with outstanding
people providing comprehensive building material
solutions to everyone, creating, maintaining, repairing
and improving the built environment… helping to
build Britain.’
General Merchanting Share of group EBIT Share of group revenue Specialist Merchanting Consumer Plumbing & Heating General Merchanting Specialist Merchanting Consumer Plumbing & Heating TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 9
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Contracts
has three main brands: Keyline, CCF and BSS and
these businesses are known for their knowledgable
staff and excellent delivery service.
Keyline is one of the largest
suppliers of civils, heavy
building materials and
drainage solutions in the uK
with a nationwide network
that delivers thousands
of product lines to trade
professionals and specialist
contractors.
CCF is one of the uK’s leading
distributors of interior building
products to the construction
industry. CCF has an
extensive product range from
ceilings, drywall and flooring,
to insulation, partitioning and
fire protection products which
can be supplied from stock
and delivered nationwide.
INDuSTRy
Civils, heavy building
materials and
drainage solutions
POSITION
Number 1
BRANChES
87 around
the uK
INDuSTRy
Interior building
solutions –
commercial offices,
residential, healthcare,
education, hotels,
airports, retail, food
POSITION
Number 2
BRANChES
31 around
the uK
INDuSTRy
Pipeline and heating
solutions
BSS Industrial Pipeline
& heating Solutions is
a specialist distributor
of pipeline, heating and
mechanical services
equipment serving customers
across all industrial sectors
within the uK and Ireland.
POSITION
Number 1=
BRANChES
64 around
the uK
Consumer
division supplies domestic building and decorative
materials through retail stores. It differentiates its
proposition through a higher proportion of own
brand products, low prices and good availability
supplemented by the key brands required by DIyers
and the trade.
wickes opened its first store
in 1972 and now has over
200 stores throughout the
uK. wickes was acquired by
the Group in February 2005.
There are currently 10,000+
products in the wickes
range which are available to
order in-store, online or by
telephone.
Toolstation is a rapidly
growing retailer, founded in
2003, operating from nearly
150 stores. Its fully integrated
multichannel operating
model is class leading and
enables the business to offer
the lowest prices and best
availability.
Tile Giant is one of the uK’s
fastest growing suppliers
of ceramic tiles which are
available to both the public
and the trade. Tile Giant was
founded in Staffordshire and
has grown to over 100 stores
nationwide. Tile Giant was
acquired by the Group
in 2007.
INDuSTRy
DIy and home
improvement
product retailer
POSITION
Number 2
STORES
229 around
the uK
INDuSTRy
Retailer of tools
and hardware
POSITION
Number 2
STORES
147 around
the uK
INDuSTRy
Retailer of
ceramic tiles
POSITION
Number 2
STORES
108 around
the uK
Plumbing and heating
supplies the trade with plumbing, heating, ventilation,
air conditioning and related products. Plumbing
Trade Supplies and City Plumbing Supplies are the
main brands in the division which supplies a wide
range of customers including domestic plumbers,
independent merchants, large contractors and
public services. It is the joint number 1 business in
its sector. As well as selling branded products the
division has developed very successful own brand
products such as BOSS and IFlO.
TRaViS PERKiNS aT a glaNCE
10
City Plumbing Supplies is a
major nationwide plumbing
and heating merchant serving
the contract market and the
general plumbing and heating
trades. The business offers
high quality products and
expertise to the trade.
Plumbing Trade Supplies
(‘PTS’) sells a wide range
of bathroom, heating and
plumbing products to both
the private and public
sectors, including national
housebuilders and sole
trading plumbers.
F & P wholesale is the leading
distributor of plumbing, heating
and bathroom products into
the independent merchant
sector and retailers of fires
and bathrooms. The business
distributes a wide range of
the uK’s leading brands plus a
number of popular own brands
including Pro (heating and
ancillary products) and Fresssh
(bathrooms).
Direct Heating Spares
Direct heating Spares (‘DhS’)
is a leading distributor of
domestic heating spares in
the uK with national coverage.
The business is focused on
improving the supply and
service of domestic heating
spares to the trade.
INDuSTRy
Plumbing
and heating
BRANChES
193 around
the uK
INDuSTRy
Plumbing
and heating
BRANChES
311 around
the uK
INDuSTRy
Plumbing, heating
and bathrooms
DISTRIBuTION
CENTRES
9 across
the uK
INDuSTRy
heating spares
lOCATIONS
1 unit
distributing
around the uK
INDuSTRy
Tools and hardware
wholesaler
lOCATIONS
3 distributing
around the uK
INDuSTRy
Plumbing
and heating
lOCATIONS
1 distributing
around the uK
INDuSTRy
heating spares
BRANChES
283 facias
around the uK
INDuSTRy
Renewables
technology
lOCATIONS
1 distributing
around the uK
Birchwood Price Tools (‘BPT’)
is a leading wholesaler of
power tools, hand tools and
site equipment as well as a
developer of products which
are sold within the Group
and to third parties. BPT was
formed in April 2009 as the
result of a merger between
Birchwood Products and Price
Tools and was acquired by the
Group in December 2010.
Connections was established
in the early 1980’s to supply
pre-packed plumbing fittings.
It currently has over 4,500
product lines sourced from
leading manufacturers around
the world.
City heating Spares (‘ChS’) is
a spares business launched
by the Group in 2010.
Trading from counters within
selected plumbing and
general merchanting branches
throughout the uK, ChS offers
its customers expert advice
and thousands of parts for
same day or first thing next
day delivery.
In 2013 the Group acquired
Solfex Energy Systems
limited, a distributor of
renewables technology. The
business trades from one site
in the north west of England.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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David wrafter,
branch manager,
Travis Perkins,
Rowley Regis
12
ChaiRMaN’S STaTEMENT
FOR ThE yEAR ENDED 31 DECEMBER 2013
intrODuctiOn
Although it is still early days for
the recovery, the outlook for the
building materials market continues
to improve. In 2013 the Group
finally saw its markets come out
of recession as confidence in the
building industry, driven partly by
the Government’s help-to-Buy
scheme, picked up. however, it’s
worth noting that the uK market for
building and construction materials
is still, at December 2013, 13%
below the peak levels of 2008.
Travis Perkins is led by an experienced board and
executive team that has adopted a measured
approach to trading and investment throughout the
last five years. It has a strong portfolio of businesses
that give it national reach, considerable product
breadth, a diversified customer base, a market
leading supply chain capability and leading positions
in each of its markets. Management’s track record
of successfully combining organic and acquisitive
growth has led to a consistent outperformance in
total returns to shareholders. Overall this means
the Group has a strong platform from which to
take advantage of the opportunities for sustainable
growth presented by the increasing confidence of
its customers.
Managing top management succession is the
most important task undertaken by the Board of
directors. working closely with Geoff Cooper, the
Board commenced over two years ago to plan
for orderly succession; in so doing, the aim was
Robert walker, Chairman
‘‘
The Group has a
strong platform
from which to
take advantage of
the opportunities
for sustainable
growth presented
by the increasing
confidence of its
customers.
‘‘
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 13
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to ensure ‘best in class’ practice and mitigate any
investor uncertainty.
Since early 2011, the Board has held frequent
Nominations Committee meetings; examined the
Company’s long term strategy to evaluate the need
for external or internal succession, and to clarify the
balance of complementary skills required at the top.
Investors were kept closely informed of the process,
and a clear succession process was initiated:
• In October 2012, Tony Buffin was announced as
the Group's new CFO, following Paul hampden
Smith's announcement of his intention to retire
after 17 years
• In july 2013, Geoff Cooper's retirement was
announced as CEO in December 2013 and
john Carter's appointment as CEO from
1 january 2014
• In September 2013, john Carter reorganised his
senior management team and announced the
new group structure
• Finally, in December 2013, the Group's new
executive team presented to the Capital Markets
its plans for leveraging the Group's position as the
largest supplier of building materials in the uK.
Details can be found on the Company’s website
and in the evolution of the Group’s strategy
section of this report on page 31
The aim throughout has been to mitigate investor
uncertainty around these changes and ensure that
our investors share our confidence in the future
prospects of Travis Perkins.
reSultS
Although the poor weather impacted the start to
the year, 2013 has been a successful year for the
Group. Revenue increased by 6.3% to £5.1bn
(2012: £4.8bn) whilst adjusted profit before tax rose
by £35m or 12.4% to £321m (2012: £286m).
Adjusted earnings per share rose by 14.3% to
103.6p (2012: 90.6p).
As the builders merchanting market starts to
grow, the Group’s working capital requirements
increase. Even so, despite increases in both capital
investment and returns to shareholders, the Group
continued its recent trend of reducing debt levels. At
31 December net debt was £348m, some £104m
lower than at the previous year-end (2012: £452m).
Expansion remains a cornerstone of the Group’s
strategy so the acquisitions of Solfex and an
online heating products distribution company
were welcome additions to the Group’s portfolio of
businesses. In addition a net 43 sites were opened
during the year increasing the number of trading
premises to 1,939 by the year-end.
DiviDenD
The Board remains confident about the Group’s
prospects, and believes that it should continue with
its progressive policy of increasing dividends at a
faster rate than the rate of increase in earnings to
achieve its re-stated target dividend cover ratio of
between 2.5x and 3.25x for 2014 and onwards.
Accordingly, the Board is pleased to recommend
a final dividend for 2013 of 21p per share, giving a
total dividend for the year of 31p (2012: 25p), an
increase of 24% over 2012. The final dividend will
be paid on 30 May 2014 to shareholders on the
register on 2 May 2014.
The total cash outflow for dividends declared in
2013 will be approximately £75m.
BOarD OF DirectOrS
As a fast moving trading business, operating in
competitive markets, the Group has benefited
significantly from having a very settled Board of
Directors to guide it through the difficult markets
it experienced over the last few years. The Board’s
directors have all had significant P&l and operating
experience, mostly either as CFOs or CEOs of
large businesses, so they bring to the Board table
a vast array of experience in dealing with most
business situations.
One of the key factors in the Group’s success
is Geoff Cooper who has led the Company with
considerable skill and expertise over the last nine
years, the results of which are that Travis Perkins is
now the largest supplier of building materials in the
uK and during 2013 it joined the FTSE 100 for the
first time in its history. I would like to place on record
my own thanks to Geoff for his leadership and
support and I am sure that shareholders, colleagues
and other stakeholders in the Group will join me in
wishing him well for the future.
john Carter, who became Chief Executive on
1 january, is an ideal replacement for Geoff. he has
extensive knowledge and experience of the building
14
ChaiRMaN’S S TaTEMENT
materials industry and is widely respected by his
peers. he has worked in the Travis Perkins group
for over 30 years having started out in the Group’s
Trainee Scheme and is ideally placed to take the
Group into the next phase of its development.
last year, the Board announced the impending
retirement of Chris Bunker. he stepped down
from the Board in November having served as a
non-executive director for a little over 9 years. Philip
jansen, who has been a director of the Company for
just over four years, retired from the Board in May
due to other commitments. Both Chris and Philip
have been constant sources of wise counsel to the
Board and will be missed. They retire with the thanks
of the Board.
Christopher Rogers joined the Board as a
non-executive director on 1 September 2013. he
has held senior positions in a number of companies
and so brings a wealth of experience to the Group.
A key challenge facing the Board in the coming
year is to ensure that we have an equally strong and
experienced group of non-executive directors, as
john Coleman and Andrew Simon complete their
nine years service, in 2014 and 2015 respectively.
emplOYeeS
The success of the Group is founded on the quality
of the people it employs. The results for 2013 are
testament once again to the many thousands of
colleagues who work throughout the Group. I would
like to thank them all for their commitment during
the year to the success of the business.
OutlOOK
The outlook for 2014 is encouraging. however, the
Board will continue to monitor the market carefully
for any sign that the recovery may be slowing.
lead indicators suggest that an improvement in
the level of housing transactions is well underway
with mortgage approvals increasing and consumer
confidence improving although still negative.
End-user markets are also showing improving signs
and our analysis suggests that in 2014 only new
build in the public sector will continue to contract.
After several years of following a policy of
targeting investment towards those projects with
very short payback periods and maintaining strong
control over costs the Board is now sufficiently
confident in the market’s prospects to increase
investment for the future. The Board therefore
expects capital expenditure to increase to around
£130m - £150m in 2014. This investment in
new stores, implants, supply chain and IT along
with the network restructuring in the P&h division
will also incur additional operating expenditure.
The Group will continue to devolve responsibility
to its divisions, whilst evolving the Group’s portfolio
model and increasing the focus on returns on capital
employed at divisional, business and branch level.
This approach should enable the Group to extend its
market leading positions.
For the coming year the Board is encouraged by
the many positive lead indicators for construction
and trade markets. however, it is also cognisant that
stimulus measures may be withdrawn and that retail
spending remains fragile with customers looking for
value when deciding to invest in their homes.
Robert Walker
Chairman
25 February 2014
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 15
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Kelly harris,
showroom
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City Plumbing
BUSiNESS MODEl –
WhaT TRaViS PERKiNS DOES
16
The Travis Perkins Group operates a diverse range
of uK-based building materials and products
distribution businesses. The businesses are organised
into four divisions; General Merchanting, Plumbing
and heating, Contracts and Consumer. The Group
supplies material through physical branches, stores
and increasingly online, provides nationwide delivery
services and has a broad range of businesses in
terms of scale and customers served.
The unique breadth of businesses in the Group
and diverse supply channels provide resilience
to future changes in customer buying behaviour.
wickes, Tile Giant and Toolstation are well placed to
benefit from the trend amongst smaller customers
seeking fixed prices and online convenience. Similarly,
BSS, CCF and Keyline provide the level of service
and bespoke framework agreements which are
increasingly important to larger contract customers.
The Group is organised by customer type, product
and operating model as follows:
Business portfolio
Consumer
Merchants
Contracts
Wickes,
Tile Giant
Toolstation
Travis
Perkins,
Benchmarx
CPS, PTS
F & P,
Spares
BSS, CCF,
Keyline
Small / Retail
Medium – Large Trade
Fixed
Variable by customer
to templates / guided
Mandated
Tendered
quote /
framework
agreements
Variable
35%
50%
85%
s
r
e
m
o
t
s
u
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n
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i
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P
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n
g
n
a
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y
r
e
v
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l
e
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The Group differentiates its customer proposition
through its:
Size and brand strength:
• The size of the Group allows it to benefit from
economies of scale in common and direct product
sourcing, selective centralised distribution and
access to property estate
• The Group trades through 17 well recognised
brands each of which has developed a unique
customer proposition and clearly defined brand
position
Product solutions:
• The range of businesses the Group operates
enables it to access and distribute products in
almost all building material product categories
• The Group is committed to buying products
commensurate with its customers’ needs from
ethically responsible manufacturers
• The Group has developed a wide range of own
brand products which supplement the supply of
branded goods
• Excellent relationships with suppliers ensure the
Group benefits from product innovation and keen
prices which it can pass through to its customers
Excellent availability and fast and efficient delivery:
• Nearly 70% of the Group’s sales are delivered to
customers with two thirds of these routed through
the branch network
• Over 1,650 colleagues, 192 lorries, 24 central
warehouses and 2,400 local delivery vehicles
enable the Group to operate an efficient delivery
service
• The operation of lightside primary distribution
centres, heavyside regional distribution centres and
dedicated retail supply chains mean the Group
can offer superior access to range and excellent
availability
• Telephone, mail order and internet ordering
channels enable customers to access the product
they need at their convenience
Excellent customer service:
• Each business has developed a proposition which
concentrates on availability, service, range and
value for money which fit with its customers’ needs
• The Group aims to employ, develop and retain the
best people in the sector
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ThE gROUP’S MaRKETS aND iTS
MaRKET lEaDiNg POSiTiONS
The total uK construction and home improvement
materials market is worth approximately £64bn.
Travis Perkins’ addressable market is £33bn which
excludes certain trade and DIy categories and direct
from manufacturer to end-user supplies.
Building materials market (£64bn)
Non-Addressable
trade market £6bn
Direct / contract
to trade £20bn
Non-Addressable
retail market £5bn
Addressable trade
market £26bn
Addressable
market
£33bn
Addressable retail
market £7bn
Source: i) Merchanting – Travis Perkins market analysis using BMF.
ii) DIY & Gardening – Verdict. iii) Adjacent markets – combination of public research
(e.g. AMA research) and Travis Perkins analysis.
Addressable market (£33bn) plus adjacent categories (£11bn)
Independents
£14bn
5,400 branches
Adjacent
categories
£11bn
Source: Travis Perkins analysis
Travis Perkins
£5bn
1,932 branches
Nationals
£14bn
5,000 branches
Many of the Group’s businesses hold market leading
positions, and those that do not are generally the
number two in their respective market. Therefore
the Group is well positioned to benefit from the uK’s
economic recovery that is underway and further
enhance shareholder returns.
The Group’s largest nationwide competitors
account for less than half the turnover in the Group’s
addressable markets. Independents and regional,
largely private, companies make up the remainder of
the market. There are categories with an addressable
market of approximately £11bn, in which the Group
does not currently operate. These categories provide
potential opportunities into which the Group may
extend its reach.
leaD inDicat OrS
The Group’s businesses supply greater volumes to
the more resilient RMI market, albeit with a small
but important component of group turnover coming
from the supply of material to the new build market.
Both new build and RMI markets saw a dramatic
contraction between 2007 and 2009. Market
volumes did not improve significantly between 2009
and 2012 however a meaningful recovery has
been underway since the first quarter of 2013. The
government’s action to encourage first-time house
buyers through initiatives such as the help-to-Buy
scheme, has helped ease credit supply with the result
that secondary housing transactions have shown
encouraging growth through the majority of 2013.
The Group tracks several market indicators from
the housing, retail and construction sectors in order
to determine levels of investment and inform the
Group’s trading stance. housing transactions and
consumer confidence remain the key indicators
that most closely correlate to future performance.
Traditionally there has been a lag of around nine
months between a change in those key indicators
and a corresponding uplift in demand volumes.
The most recent lead indicators suggest consistent
signs of improvement across all sectors in which
the Group operates. The Group is well placed to
benefit from the upturn in uK building activity and
in particular the strength of secondary housing
transactions. The Group’s businesses serving general
trade and plumbing and heating customers have
experienced the highest levels of improving demand,
however, consumer markets remain weak with
modest growth experienced only in the final quarter
of 2013.
whilst the lead indicators the Group monitors, and
industry body forecasts, indicate significant growth
across all new build and RMI channels, further
market shocks would inevitably change the pace
and shape of recovery. Risks and uncertainties are
discussed further on pages 39 to 41.
The following chart shows some of the key lead
indicators the Group tracks:
ThE gROUP’S MaRKETS aND iTS MaRKET lEaDiNg POSiTiONS
18
looking in more detail at a number of the lead
indicators the Group tracks, the chart below shows
the recent recovery in mortgage approvals. Despite a
modest improvement in mortgage approvals, owing
to easing credit supply, improvements in customer
confidence and the government’s help-to-Buy
scheme, approvals remain around 65% below the
levels achieved in 2007.
Consumer confidence, although still negative,
began to improve during the year. That said, the
return of confidence remains fragile with consumers
circumspect about how much they spend, and when
and where they invest in their homes. The following
chart sets out movements in consumer confidence
between 2004 and 2013.
Generally an upturn in mortgage approvals leads
to an increase in housing transactions. The increase
in secondary housing transactions in 2013 appears
to have followed this general trend. Similarly to
mortgage approvals, secondary housing transactions
remain well below the peak volumes achieved in
2006 and 2007.
marKet trenDS anD cuS tOmer
prOpOSitiOnS
Customers’ buying behaviours continually evolve and
it is important that the Group stays ahead of these
changes. End-users are becoming more confident
in challenging tradesmen on materials prices with
improvements in technology enabling increasing
levels of price transparency. In some of the Group’s
markets, in specific categories and for smaller
tradesmen, there is an emerging trend towards more
fixed rather than negotiated prices. larger customers,
quite rightly, continue to demand both increased
levels of service and better value.
Other Remortgages House purchases 40%belowpeak2006 2007 2008 2009 2010 2011 2012 2013 Source: Bank of England, October 2013 Source: HM Revenue & Customs, October 2013 & Travis Perkins analysis 2006 2007 2008 2009 2010 2011 2012 2013 Rolling 12 month property transactions Mortgage approvals 100 0 0 200 300 400 Thousands Housing transactions 600,000 1,000,000 1,400,000 1,800,000 65% belowpeak30% recovery Index figure Index annual moving average Consumer confidence 20132004(40)(30)(20)(10)01020052006200720082009201020112012Source: GFK UK Consumer Confidence Index, October 2013Northern Ireland Wales Scotland EnglandOther Remortgages House purchases 40%belowpeak2006 2007 2008 2009 2010 2011 2012 2013 Source: Bank of England, October 2013 Source: HM Revenue & Customs, October 2013 & Travis Perkins analysis 2006 2007 2008 2009 2010 2011 2012 2013 Rolling 12 month property transactions Mortgage approvals 100 0 0 200 300 400 Thousands Housing transactions 600,000 1,000,000 1,400,000 1,800,000 65% belowpeak30% recovery Index figure Index annual moving average Consumer confidence 20132004(40)(30)(20)(10)01020052006200720082009201020112012Source: GFK UK Consumer Confidence Index, October 2013Northern Ireland Wales Scotland EnglandOther Remortgages House purchases 40%belowpeak2006 2007 2008 2009 2010 2011 2012 2013 Source: Bank of England, October 2013 Source: HM Revenue & Customs, October 2013 & Travis Perkins analysis 2006 2007 2008 2009 2010 2011 2012 2013 Rolling 12 month property transactions Mortgage approvals 100 0 0 200 300 400 Thousands Housing transactions 600,000 1,000,000 1,400,000 1,800,000 65% belowpeak30% recovery Index figure Index annual moving average Consumer confidence 20132004(40)(30)(20)(10)01020052006200720082009201020112012Source: GFK UK Consumer Confidence Index, October 2013Northern Ireland Wales Scotland EnglandKey market indicators HousingtransactionsHousingpricesArchitectwork loadConstructionoutputTradeconfidenceExpectedworkloadNew constructionordersMortgageapprovalsSitereservationsSitevisitorsEquitywithdrawalRetail salesgrowthClimate forpurchasesConsumerconfidenceRETAILCONSTRUCTIONHOUSINGTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 19
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Staying ahead of changes in buying behaviour
UK DIY and gardening online penetration (currently 7%)
Online penetration (% of market)
8
6
4
2
0
2007
2009
2011
2013
2015
2017
Source: Conlumino, August 2013
Despite the expectation of relatively modest
growth in penetration of online sales, the Group
is cognisant of monitoring and responding to
the changes in technology, buying behaviour
and supply arrangements across the Group. The
Group’s acquisition of Toolstation in 2012 and
an online heating supplies business in 2013
alongside investment in new multichannel platforms
demonstrate the Group’s intention to ensure it retains
and enhances its market leading positions whatever
the customers’ channel of choice.
The Group will continue to monitor changes in
end-user and customer buying behaviour to ensure
that it is well placed to invest in and benefit from any
changes underway. Beyond changes to the channels
through which products are distributed the Group
has identified further outsourcing opportunities
where larger end-users, such as local authorities,
have requested full service supply agreements.
Wickes,
Tile Giant
Toolstation
Travis
Perkins,
Benchmarx
CPS, PTS,
F & P,
Spares
BSS, CCF,
Keyline
Fixed pricing
Variable pricing
Tendered
quote /
framework
agreements
Customer sizes:
Small: 1 – 2 employees
Medium: 2 – 15 employees
Large: 15+ employees
Smaller
customers
Medium
customers
Larger
customers
• Increasing price transparency
• End-users challenging tradesmen on material
prices
• jobbing tradesmen able to better compare prices
• lightside and high-value products
• large customers demanding increasing levels of
service and value
The Group’s assembly of businesses serving large
and small customers, across a broad range of
categories, through online and offline channels, and
its nationwide delivery capability means it is very well
placed to adapt to and benefit from any changes in
customer behaviour and buying patterns.
whilst the internet is having a profound effect
on the high Street, online penetration of building
material supply is around 3% and for DIy it is 7%.
Penetration is expected to grow, but the nature of
heavy and bulky goods supply means it is likely to
be weighted to lighter products or products with a
high unit value. The following charts describe the
historic and projected growth in online penetration,
from industry forecasts, of the DIy and building
products markets:
UK building products online market (estimated 3%)
Market size (£ billion)
4.1% CAGR
1.0
0.75
0.5
0.25
0.0
3.5% CAGR
2007
2009
2011
2013
2015
2017
Source: Conlumino, August 2013
20
BUSiNESS REViEW
The Group’s markets began to show consistent
growth in 2013 and contributed to another solid
year of performance. The merchanting business was
the first to experience an improvement in its markets
as they picked up during the second quarter. The
consumer markets remained subdued until towards
the end of the year when they also started to exhibit
modest signs of growth.
Turnover and operating margin both increased,
with costs being well controlled. Gross margins
reduced slightly due to a combination of some
targeted investment in prices to grow volumes,
changes in the mix of product sold and competitive
pricing. The Group also benefited from slightly
higher than expected property profits on disposals
completed at the end of the year, a number of
one-off sourcing gains and income from short-term
supply contracts.
In September 2013 a new divisional structure
was announced. The Group will report on the new
divisional basis from 1 january 2014. Accordingly
the results for 2013 are reported on the old
divisional basis.
revenue
general
Specialist
Merchanting Merchanting Consumer
%
%
%
6.7
-
9.5
(0.8)
4.7
(3.7)
Plumbing and
heating
%
5.2
Total
%
6.1
(0.4)
(1.1)
6.7
8.7
1.0
4.8
5.0
0.4
0.4
(0.3)
0.4
0.2
1.3
0.3
1.7
0.8
1.1
volume
Price / mix
like-for-like
per day
Trading day
impact
Expansion /
disposals
Total revenue
change
8.4
9.4
2.4
6.0
6.3
Total revenue grew by 6.3% driven by a combination
of a 5.0% increase in like-for-like (‘lFl’) sales,
continued network expansion and one extra trading
day in the merchanting and plumbing and heating
divisions.
After a slow start to the year, better weather
combined with an increasing level of confidence
saw sales improve from April. The trend continued
through the year owing in part to the Government’s
help-to-Buy scheme, but also to the sustained
increase in housing transactions and house prices.
By the final quarter of 2013 all divisions were
experiencing good volume growth.
The very weak market conditions experienced
in the first four months of the year created poor
conditions for passing through price increases from
suppliers resulting in product sales deflation for the
Group of approximately 1.5% in the first half. with the
exception of the Consumer division, where wickes
continued to invest in lower prices, and plumbing
and heating, which experienced intense competition
resulting in deflationary prices throughout the year,
the pricing outlook improved as the year went on. By
the end of the third quarter the general and specialist
merchanting businesses were seeing consistent
month-on-month selling price inflation.
Expansion into complementary business areas
continued to be an important part of the Group’s
strategy. In january, Solfex was acquired, distributing
sustainable solar and heating product installation
packages and in july the Group purchased a
51% stake in an online business distributing
heating products.
The Group continued to organically grow its
trading estate and by 31 December it operated
from 1,939 sites (2012: 1,896). The Group
accelerated its plans to intensify existing space
opening Toolstation concessions within wickes
stores, new Benchmarx kitchen implants in Travis
Perkins branches and introducing toolhire outlets in
BSS branches.
aDJuSteD Operating margin
The poor weather at the start of 2013 contributed
to aggressive price discounting in the critical first
quarter when customers’ annual contracts are
negotiated. Effective cost management helped to
offset gross margin declines for the Group as a
whole resulting in adjusted operating profit increasing
by 6.7% to £348m (2012: £326m) and the
related adjusted operating margins growing by 0.1
percentage point to 6.8% (2012: 6.7%).
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
general
Specialist
Merchanting Merchanting Consumer
%
%
%
Plumbing and
heating
%
2012
operating
margin
11.5
5.2
5.6
Gross margin
(0.2)
(1.5)
(1.1)
Overheads
(0.2)
Property profits 0.1
1.0
(0.1)
0.8
-
4.5
0.6
0.3
-
Total
%
6.7
(0.4)
0.5
-
2013
operating
margin
11.2
4.6
5.3
5.4
6.8
DiviSiOnal perFOrmance
general Merchanting
2013
2012
Change
Revenue
£1,579m £1,457m
lFl growth
Segment profit £176m
£167m
8.4%
6.7%
5.4%
Operating margin 11.2%
11.5%
(0.3)pp
New housing activity continued to drive market
volume growth coupled with improvements in
sentiment amongst the Group’s trade customers
during the second half of 2013. Sales price deflation
experienced in the first half, as expected, reversed
in the second half of the year. As the demand for
heavyside products improved, a number of brick
and block products experienced longer supply lead
times. These supply constraints added to second half
price inflation as manufacturers increased prices in
exchange for certainty of supply.
General Merchanting revenue grew by 8.4%,
6.7% on a like-for-like (‘lFl’) basis. Momentum
accelerated from 2.7% lFl in the first half to
10.1% in the second half. All product categories
contributed to this recovery, with particularly
strong performances in the lightside and tool-
hire categories. Gross margin improved in the
second half owing to effective price management
and growth in higher margin categories. Despite
robust cost management and operational gearing,
operating investments meant there was only a
modest reduction in the overhead to sales ratio for
the year as a whole.
Travis Perkins continued to develop and trial its new
branch format. The leamington and luton branches
were successfully moved and co-located with other
group businesses on two of the Group’s Trade Parks.
Timber, forest products and lightside categories
were reviewed during the year and the ‘Trade Offers’
21
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fixed price promotions continued to help improve
price perception. A new multi-channel IT platform
implemented across the Group will be extended to
Travis Perkins in 2014 and this should enable the
introduction of online product ordering to implement
the already well established telephone-based ordering
and local delivery infrastructure.
The extension of toolhire implants continued
with 14 new implants added in the year. Seven
new branches were opened along with two new
managed service outlets which operate solely to
service local authorities, registered social landlords
and their contractors. Towards the end of the year
the warrington Regional Distribution Centre (‘RDC’)
was successfully relocated with no service issues.
work started on the Cardiff RDC, which will come on
stream during the third quarter of 2014.
These RDCs will enable a wider range of heavyside
products to be made more readily available to
branches and thus customers.
The division’s senior commercial and operational
teams were re-organised in the latter part of the year
to bring clearer accountability for the improvement
programmes throughout the business and an
enhanced focus on operational performance.
The division continued to refine its zonal delivery
initiative to improve availability of transport to meet
customers’ requirements and new equipment and
in-branch practices were introduced to improve
safety for team members and their customers.
Specialist Merchanting
2013
2012
Change
Revenue
£660m
£604m
lFl growth
9.4%
8.7%
Segment profit
£30m
£32m
(4.1)%
Operating margin
4.6%
5.2%
(0.6) pp
The division made good progress improving the
depth of product range available to its customer base
which was rewarded with strong volume growth.
The division’s revenue grew by 9.4% owing to
range improvements, selective price investments
and the reduction in capacity from a significant
competitor failure. lack of product inflation,
particularly in the first half, competitor activity and a
change in sales mix resulted in a reduction in gross
margin. The reduction in gross margin was lower
in the second half with the onset of more positive
trading conditions. An improvement in the overhead
to revenue ratio mitigated some of the impact of the
decline in gross margin.
Despite the poor weather experienced in the first
quarter, Keyline’s range extension and customer
22
David johnson,
commercial
stock manager,
BSS, luton
Trading Park
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 23
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service focus enabled it to deliver double digit
revenue growth in both the first half and second half
of the year. Further specialisation improved sales but,
in part, resulted in more direct to site sales which
in turn attract a lower gross margin. Gross margins
improved slightly in the second half.
Investment in expertise to support market
specialisation was increased in order to access
the rail and utilities markets and in particular in
drainage and geotextile products. The expansion of
the contractor customer base and access to new
customers in the rail and utility markets provides a
solid base for future growth. levels of activity in the
new housing market were encouraging and resulted
in an increased level of demand by specialist
groundwork contractors.
After a sluggish first quarter, CCF’s revenue growth
improved in each successive quarter, recording double
digit growth in the second half and gaining market
share for the year. The development of new market
sectors for the business, such as the introduction of
the Sektor brand late in the internal partitions market,
and an improving product mix helped to offset gross
margin declines in commodity categories which faced
intense competitive discounting.
The opening of Belvedere branch, which has
performed in line with expectations, brought the
total network to 31 branches. The business’ online
presence continued to grow, albeit from a relatively
small base.
Benchmarx Kitchens and joinery completed
the restructuring of its customer proposition. The
end-to-end review of the customer experience,
product set and the supply chain started to yield
further improvements to profitability in the second
half. New standalone branches, which were opened
with significantly lower set up costs on the Group’s
Trade Park sites in luton and leamington, have
resonated well with customers. On 1 january
2014, twenty seven kitchen fascias in Travis Perkins
branches were re-branded Benchmarx. A new
website was also developed during the year with
encouraging results.
Sales improved throughout 2013 following the
protracted cold weather at the start of the year.
The improvements in gardening related sales in the
summer were however less marked in wickes given
its limited range in outdoor categories.
wickes continued to invest in lower prices through
its red pencil price reduction programme and
stronger promotional deals. wickes price investment
accelerated in the second half with volumes growing
as a result, however, gross margins were impacted
by these investments. Improvements in sourcing,
changes in the distribution of ordered bathrooms
and the removal of the Mycard reward programme
helped reduce the impact of the greater price
investment and deeper promotional offers.
wickes increased its focus in reducing operating
costs and in doing so reduced its cost to sales
ratio during the year. Good progress was made
in consolidating warehouse operations, improving
labour productivity following the introduction of auto-
replenishment systems and through the downsizing
and sub-letting of oversized shops. Four stores were
relocated or downsized during the year and two new
stores were opened. New web and mobile platforms
were introduced, offering customers a better online
shopping experience.
The significant investments in pricing and
promotional offers meant wickes’ 2013 profit
declined modestly compared to the prior year.
Toolstation had another encouraging year of sales
growth and network expansion. Double digit lFl
revenue growth was driven by a continued focus on
customer service, strong availability and investments
in ensuring the lowest prices in the market. 24 new
shops were opened during the year, including 9
implants in wickes.
Although it is still early in the development of the
proposition, Toolstation implants in wickes appear to
be resonating well with customers. Those implants
are helping wickes drive additional footfall and are
contributing to rent costs. Toolstation is benefiting
from wickes footfall thereby achieving profitability
faster than in many of its new standalone shops.
Consumer
Plumbing and heating
2013
2012
Change
2013
2012
Change
Revenue
£1,180m £1,152m
lFl growth
2.4%
1.0%
Revenue
£1,730m £1,632m
lFl growth
6.0%
4.8%
Segment profit
£63m
£65m
(2.7)%
Segment profit
£94m
£73m
28.8%
Operating margin 5.3%
5.6%
(0.3) pp
Operating margin 5.4%
4.5%
0.9pp
Revenue in the consumer division increased by
2.4% in the year despite a challenging customer
environment and inclement weather throughout the
first quarter.
The challenging trading conditions experienced
in 2012 continued into 2013 and were further
exacerbated by the poor weather in the first quarter.
however, trading conditions improved significantly
24
BUSiNESS REViEW
during the year resulting in sales growth of 6.0% and
lFl growth of 4.8%.
Demand for domestic plumbing and heating
products grew steadily during the year as
housebuilder activity increased. RMI activity also
increased and the government backed ECO (Energy
Company Obligation) schemes further assisted the
number of boiler installations. The ECO schemes will
continue through to 2014, but most likely at a lower
level of activity than experienced in 2013.
The commercial plumbing and heating market
displayed good growth during the summer months,
however, a number of project delays impacted
volumes towards the end of the year.
Despite the commercial and industrial market
sectors remaining weak, BSS performed well due
to an increased focus on the industrial market. lFl
growth was over twice that of the division as a whole.
Ten industrial centres of excellence were opened in
the year, stocking a wider range of products coupled
with greater service and technical expertise.
Gross margins for the division increased despite
market conditions and intense competitive pricing.
This was achieved through strong partnerships with
key suppliers, and improvements in sourcing and
product mix as well as a number of one-off short
term contract benefits which are not expected to
recur at the same level in 2014.
SupplY chain
For the third year running the innovation and
skills of our supply chain teams were recognised
by the industry. The supply chain team achieved
short-listings for awards in safety, innovation and
technology and one of our team members achieved
the award for rising star at the European Supply
Chain Excellence Awards.
These awards reflect the importance the Group
places on building supply chain skills. Over 100 of
our team members attended tailored courses at
Cranfield university. This investment in people skills
coupled with continued investment in the Group’s
supply chain systems and infrastructure are helping
to build the building materials sector’s most effective
and efficient supply chain. This will become more
important as customers increasingly adopt mobile
and other multi-channel technology.
During the year significant progress was made in
implementing the Group’s supply chain strategy:
• Consolidating one of the wickes warehouses into a
sister site
• Extending the reach of the warrington heavy side
RDC by relocating to a larger site
• Bringing our kitchen supply and distribution
in-house for Benchmarx
• Increasing capacity for Toolstation through a new
warehouse opening
Overheads were well controlled with the ratio
• Announcing the development of a second heavy
of cost to sales reduced during the year. The
improvement in the cost ratio was achieved despite
further investment in the expansion of toolhire in BSS,
and the continued roll out of new showrooms and
spares implants through the existing branch network.
Seven BSS toolhire implants opened in the year
bringing the total number of branches to 18. Seven
PTS and F & P sites were closed in the year with the
majority of business transferred to nearby locations.
Four new City Plumbing branches were opened and
are performing in line with the Group’s expectations.
within CPS, the very successful Endeavour
bathroom showroom offer was extended to 76
showrooms. In addition, the spares product category
delivered impressive growth and market share gains.
Spares service was extended with orders now being
taken up until 8pm for next day delivery.
The BSS industrial network has been expanded
during the year with the opening of two new concept
branches, one as an implant branch at a Keyline
site and one as a standalone small footprint branch.
These branches have traded well in the final quarter
of the year and give the Group confidence that these
formats could be extended into other catchments.
materials RDC in Cardiff
• Announcing the development of a new Primary
Distribution Centre (PDC) for lighter products,
which will open in warrington early in 2015
• Completing a tender for the development of our
new supply chain and warehouse systems
The supply chain team also achieved a further
30% reduction in time lost to injuries on top of an
excellent safety performance in 2012.
central ServiceS
The streamlining of central services has continued
through the devolution of more responsibility to
divisional management, whilst retaining the benefits
arising from the scale of the Group. Divisional
boards have been established and business
partnering from central teams implemented.
Projects have started which will see considerable
investment in the Group’s IT systems in the coming
years under two broad themes:
• Investing for the future: developing the Group’s
new web based trading platforms and other
systems to improve customer propositions
• Re-engineering and infrastructure: which will result
in the replacement of existing heritage platforms
that are approaching the end of their useful lives
and upgrading networks to support future growth
and capacity demands
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managing the grOup’S FinanceS
The Group undertook a review of its strategy
during the year which was presented at the
Capital Markets day in December 2013. The well
documented recovery in the Group’s end-user
markets means there are more opportunities to
invest for organic growth than has been the case
for a number of years.
As a result it was right that the Group’s financing
strategy be reviewed and financial targets and
metrics be modified to take account of these
investment opportunities. These investment
opportunities mean the business is likely to need
access to deeper pools of funding to implement
its strategy of expansion. To this end the Group
intends to run the business to investment grade
metrics. This is important as it will enable the Group
to access debt at reasonable cost, diversify its
sources of finance to avoid being overly reliant on
one form of financing, and improve its covenant in
negotiations with landlords, the pension schemes it
operates and suppliers.
Over recent years the Group has been reducing
on-balance sheet leverage as the availability of
bank and other credit has become both scarce
and relatively more expensive. This strategy of
deleveraging will continue until the Group has
access to sufficient capital at reasonable cost and
is confident that this position can be maintained. At
the same time the Group is cognisant of continuing
to provide strong returns to shareholders.
Balancing the desire to access capital at
reasonable cost to enable investment for growth,
whilst maintaining strong shareholder returns,
means the key financial metrics of the Group have
been modified. The Group’s ambition is to achieve
set targets over the next three years primarily as a
result of increasing the level of earnings.
The Group’s strategy is also clear in its ambition
to devolve more accountability to the management
teams in each business. This means management
teams taking a more active role in competing
for capital as well as driving earnings growth and
therefore it is important to place more weight on
lease adjusted return on capital (‘lAROCE’) than
operating margin as a measure of success than
has historically been the case. The revised financial
targets of the Group, which were announced on 3
December 2013, are set out as follows:
Measure
Current performance Medium term ambition
Adjusted earnings
per share (note 11b)
103.6p
Double digit
growth p.a.
lease adjusted ROCE (note 37) 10.0%
+200 – 300bps
lease adjusted debt
to EBITDAR (note 36)
Fixed charge cover (note 36)
Dividend cover (note 12)
3.0x
2.9x
3.3x
2.5x
3.5x
2.50x – 3.25x
The Group’s success is based on its people. Finance
is no different, and with the sharper focus on
lAROCE and competition for capital it is essential
to improve the quality of financial management
throughout the business and the strength of the
finance teams. This work is well underway.
Financial reSultS
The operating performance of the Group has been
laid out in the Business Review on pages 20 to 24
of this report. The key financial metrics and targets
have been set out above however the key income
statement metrics are shown below:
Revenue
Operating profit
Profit before tax
Tax
Profit after tax
Basic EPS
2013
£m
5,148.7
329.7
312.6
47.9
264.7
109.9p
%
6.3
10.0
4.5
(5.1)
6.4
5.4
2012
£m
4,844.9
299.6
299.2
50.5
248.7
104.3p
Throughout this annual report, consistent with the
approach in prior years, 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. The
adjusted operating profit and profit before tax are
shown below:
2013
£m
Adjusted operating profit
347.6
Adjusted profit before tax
321.1
Adjusted EPS
103.6p
%
6.7
12.4
14.3
2012
£m
325.7
285.8
90.6p
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FiNaNCial REViEW
amortisation of goodwill and intangible assets
The annual amortisation charge was £18m (2012:
£17m). International Accounting Standards require
the Group to conduct an annual review of the
carrying value of goodwill and intangible assets
to determine whether any impairment should be
recognised in the financial statements. As shown in
notes 13 and 14 the Directors have concluded that
the future cash flows of each business are sufficient
to support the balance sheet carrying value of
goodwill and intangible assets therefore no provision
for impairment is required.
Finance costs
Net finance costs, which comprise interest on debt,
mark-to-market fair value adjustments and other
financing type costs associated with pension schemes,
provision discounts, fund raising costs and interest on
tax were £26m, some £14m lower than last year
(2012: £40m).
Borrowing costs on outstanding debt were
£6m lower at £23m (2012: £29m) as a result
of reduced debt levels, repayment of $200m of
the Group’s private placement notes and lower
commitment fees following the reduction in the
Group’s bank facilities in April. The average interest
rate on the Group’s borrowings during the year was
3.6% (2012: 3.9%).
The mark-to-market impact of derivative contracts
outstanding at the year end was £4m lower in 2013
with a £1m gain being recorded (2012: £3m loss).
Other financing type costs were £4m lower at
£4m (2012: £8m).
Exceptional items
Reported profit before tax was £14m higher than
last year at £313m (2012: £299m) despite lower
net exceptional credits arising principally from the
fair value accounting treatment of the outstanding
Toolstation consideration which is due to be settled
during 2014.
Tax charges
The statutory tax charge for the year was £48m
(2012: £51m). The underlying tax charge before
exceptional items was £68m (2012: £66m),
which represents an effective rate of 22.4% (2012:
24.5%), which is slightly below the standard rate
of corporation tax of 23.25% (2012: 24.5%)
applicable to profits in the united Kingdom. The
difference is mainly due to the value of non-taxable
property profits exceeding the value of expenses not
deductible for tax purposes. A full reconciliation of
the actual to standard tax rates is included in note
10 to the accounts.
The difference between the actual and the
underlying tax charges is due to the impact of the:
• £20m (2012: £13m) exceptional deferred tax
credit caused by the 2% corporation tax rate
reduction from April 2014 and a further 1%
reduction from April 2015
• The £2m tax impact of the £9m (2012: £10m
tax impact of £39m) of non-taxable exceptional
items included within profit before tax
The Group’s balance sheet tax provision includes
£45m relating to an uncertain tax position currently
under discussion with h M Revenue and Customs
(hMRC), which arose in a prior period. Should the
Group’s filed tax position be agreed with hMRC
the tax charge in the group income statement
in a future period will be reduced by the release
of the £45m provision. If after concluding all
possible avenues available to the Group, it becomes
necessary to amend the Group’s filed tax position
then a tax payment of £45m will be made to
hMRC at that time.
Earnings per share
Profit after taxation rose by 6.4% to £265m (2012:
£249m) which resulted in basic earnings per share
growing 5.4% to 109.9 pence (2012: 104.3
pence). There is no significant difference between
basic and diluted basic earnings per share.
Adjusted profit after tax was £249m (2012:
£216m) which resulted in adjusted earnings per
share increasing by 14.3% to 103.6 pence (2012:
90.6 pence). The increase reflects the improvement
in trading profit, lower financing costs and the
reduction in the standard rate of corporation tax.
There is no significant difference between adjusted
and diluted adjusted earnings per share.
Capital employed and laROCE
Net assets at the end of 2013 were £2,515m
(2012: £2,256m), which contributed to capital
employed of £3,009m (2012: £2,878m) (note 37).
The Group’s adjusted (for exceptional items and
amortisation) pre-tax return on capital for the year
was 11.8%, (2012: 11.5%). After adjusting for
property leases at a rate of 8 times the annual lease
charge the lease adjusted return on lease adjusted
capital employed was 10.0%, (2012: 9.8%). On
both a reported and lease adjusted basis returns
are well above the Group’s weighted average cost of
capital of 9.7%.
The Group’s property team made a further
important contribution to profits by realising £17m of
gains (2012: £15m) from ten significant projects, the
largest of which was the final stage of the St. Pancras
branch development. This was better than anticipated
as a number of smaller projects were completed in
the final quarter of the year. Consistently delivering
property profits has become a feature of the Group’s
property management strategy and the intention is
to continue to manage the property estate to ensure
that the Group has access to the best operating
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 27
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sites whilst at the same time maximising value from
its property portfolio over time. At the year end, the
carrying value of the freehold and long-leasehold
estate was £309m (2012: £287m).
During the year, the daily closing share price
ranged between 1,088p (2012: 794p) and
1,872p (2012: 1,149p). The shares closed
the year at a price of 1,872p (2012: 1,088p),
increasing the Group’s market capitalisation over
the year by 74% to £4.62bn (2012 £2.66bn).
This represented 1.8 times shareholders funds (31
December 2012: 1.2 times).
Dividend
The proposed dividend for the year of 31 pence
represents a 24% increase compared to 2012
(2012: 25 pence). An interim dividend of 10
pence was paid to shareholders in November
2013 at a cost of £24.2m. If it is approved, the
proposed final dividend of 21 pence will be paid on
30 May 2014 and will cost the Group £51m.
A 31p full year dividend reduces dividend cover to
3.3 times (2012: 3.6 times) adjusted earnings per
share, bringing dividend cover closer to the Board’s
re-stated target cover of between 2.5x and 3.25x
from 2014.
Financing StrategY
Strong financial capital management is a
fundamental component of the overall group
strategy. 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 desire for an efficient cost of capital
• Generate sufficient free cash flow to enable the
Group to follow a progressive and sustainable
dividend policy through the cycle. Specifically this
will result in:
• A dividend cover range from 2014 of between
2.5x and 3.25x
• Moving towards the centre of the range over the
following 12 to 24 months
whilst the Group has brought down debt levels in
recent years deleveraging over the next two years
may be more modest given the Group’s:
• value adding investment plans
• Need to increase investment in working capital as
the Group expands
• Intention to operate a progressive dividend policy
The Group is also party to a large number of leases,
most of which relate to premises occupied by the
Group for trading purposes. The weighted average
duration (the time until the Group’s first opportunity
to exit the lease) is approximately 9.5 years.
At 31 December 2013, property leases
capitalised at 8x the annual rent roll were
approximately 81% of the Group’s combined on
and off balance sheet funding with an annual rent
roll of approximately £184m (2012: £175m). It
is likely that property leases will become a smaller
component of the Group’s financing structure in
future, nonetheless they will remain a significant
and important part of the Group’s funding structure.
In addition the Group paid approximately £12m
(2012: £14m) in respect of non-property
operating leases.
Note 30 gives further details about the Group’s
The current preferred capital structure of the
operating lease commitments.
Group consists of debt, which includes bank
borrowings and 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 and it is the intention to diversify
sources and maturities over the next two years.
The capital structure is formally reviewed by the
Board as part of its annual strategy review, but it is
kept under review throughout the year. As necessary,
the Group will rebalance its capital structure by
investing in the business, raising or repaying debt,
issuing equity or paying dividends.
The strategic capital management ambition of the
Group is to:
• Target investment grade credit metrics
• Diversify sources of debt to maintain an acceptable
maturity profile, whilst lowering overall funding costs
• Maintain group funding flexibility to allow for
property purchases and branch infill and category
acquisitions
• Balance the need to ensure available funding with
The capital structure of the Group at 31
December comprised:
Cash and cash equivalents
Bank loans
uS private placement notes at fair value
loan notes
Finance leases
liability to pension scheme
Net pension fund deficits
Goodwill written off
Exchange adjustment
2013
£m
(80)
235
129
3
24
37
57
93
2012
£m
(139)
264
261
3
26
37
97
93
(4)
(20)
Equity attributable to shareholders
2,515
Total balance sheet capital employed
3,009
Property operating leases (8x rentals)
1,474
Total lease adjusted capital employed
4,483
2,256
2,878
1,405
4,283
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FiNaNCial REViEW
net DeBt, FunDing anD liQ uiDitY
Strong working capital control in the final quarter of
the year enabled net debt to finish the year ahead of
the Group’s expectations at £348m (31 December
2012: £452m), a reduction of £104m (2012:
£131m). Adjusted free cash flow for the period was
£240m (2012: £242m) (note 35).
Despite the business tending to increase working
capital as trade sales grow, when compared with
2012, the net movement in debtors and creditors
is very similar. however, we have increased
stockholdings to ensure that availability, one of the
core pillars of our customer proposition, has been
further improved.
Gross capital and investment expenditure totalled
£119m (2012: £110m). Capital replacement
expenditure totalled £44m (2012: £54m) and
aggregate expansionary capital was £75m (2012:
£56m).
In addition to its equity, the Group is financed
through a combination of unsecured bank
borrowings and unsecured guaranteed uS senior
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 most reasonably
possible eventualities.
The Group has no immediate need to refinance
existing facilities however it will seek to diversify
funding sources over the next two years. At 31
December 2013 the Group’s committed funding
comprised:
• A revolving credit facility of £550m, which runs
until December 2016, advanced by a syndicate of
10 banks
• $200m of unsecured guaranteed $uS senior
notes due for repayment in january 2016
• A £50m bilateral revolving credit facility
committed to 31 March 2015
Since the year-end the Group has signed another
two bi-lateral agreements, each for a £50m revolving
credit facility which expire in March 2015.
The peak and minimum levels of daily drawn
borrowings on a cleared basis during the year
were £684m and £397m respectively (2012:
£827m and £468m). The maximum month end
cleared borrowings were £603m (2012: £682m).
At 31 December 2013, the Group had undrawn
committed facilities of £360m (2012: £475m).
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 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 bank 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 £116m
notional value of interest rate derivatives resulting
in interest rates being fixed on approximately 42%
(2012: 39%) of the Group’s cleared gross debt
(before cash and cash equivalents).
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 2013 the nominal
value of currency contracts, all of which were $uS
denominated, was $83m (2012: $113m), which
gave a 42% (2012: 57%) coverage of forecast
requirements for 2014 .
To fully protect itself against adverse currency
movements and enable it to achieve its desired
interest rate profile, the Group has entered into two
cross currency swaps and four forward currency
contracts in respect of its $200m of $uS private
placement notes.
The Group is a substantial provider of credit
to a large portfolio of small and medium size
businesses throughout the uK together with some
of the country’s largest companies. It manages its
exposure to credit risk through a strong credit control
function that works closely with the business and
its customers to ensure the Group offers credit
sufficient for the needs of those customers without
exposing the Group to excessive risk. The bad
debt charge in 2013 was approximately 0.35% of
credit sales, which is at the lower end of the scale
previously achieved by the Group.
In summary, the key aspects of the Group’s
financial risk management strategy are to:
• Target investment grade credit parameters
• Reduce the Group’s reliance on the bank market
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Carl Gooch, timber
products leader,
Travis Perkins
30
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for its funding by having a diverse mix of funding
sources with a spread of maturities
• Seek to maintain a strong balance sheet
• Accord a high priority to effective cash and
working capital management
• Maintain liquidity headroom of over £200m
and continue good relationships with the Group’s
bankers
• Manage counterparty risk by raising funds from
a syndicate of lenders, the members of which
maintain investment grade credit ratings
• Operate banking covenants within comfortable
margins:
• The ratio of net debt to adjusted EBITDA
(earnings before interest, tax, depreciation and
amortisation) has to be lower than 3.0x; it was
0.7x at the year-end (note 36)
• The number of times adjusted operating profit
covers interest charges has to be a least 3.5x
and it was approximately 18x at 31 December
2013 (note 9)
• have a conservative hedging policy that reduces
the Group’s exposure to currency and interest rate
fluctuations
taX StrategY anD taX riSK management
The Group’s objectives in managing and controlling
its tax affairs and related tax risks are as follows:
• Ensuring compliance with all applicable rules and
regulations under which the Group operates
• Maintaining an open and co-operative relationship
with the uK Tax Authorities to reduce its risk profile
Tax risks are assessed as part of the formal
governance process and are reviewed by the Chief
Financial Officer and reported to the Group’s Audit
Committee on a regular basis.
Significant tax risks, implications arising from these
risks and potential mitigating actions are considered
by the Board when strategic decisions are taken:
• The tax risks of proposed transactions or new
areas of business are fully considered before
proceeding
• The Group employs professional tax specialists
to manage tax risks and takes appropriate tax
advice from reputable professional firms where it
is considered to be necessary
penSiOnS
adjustments to prior period results
IAS 19 (revised 2011) and the related
consequential amendments have impacted the
accounting for the Group’s defined benefit schemes,
by replacing the interest cost and expected return
on plan assets with a net interest charge on the net
defined benefit scheme liability. The comparatives
for 2012 have been restated with the result that
profit before tax decreased by £14.1m and actuarial
losses in the statement of other comprehensive
income were reduced by £14.1m. The combined
net deficit of the schemes at 31 December 2012
was unaffected and there was no impact on
reported cash flows.
During 2013 the Financial Reporting Review
Panel issued guidance in respect of IFRIC 14
‘Prepayments of a Minimum Funding Requirement’.
This caused the Group to obtain further legal
advice, which has resulted in the Group amending
its accounting treatment of pension scheme
schedules of contributions. In these accounts the
Group has included the schedule of contributions
in its calculation of pension scheme liabilities
recognised in the balance sheet. Although the
change has resulted in a restatement of the pension
liabilities and associated deferred tax assets for
the Travis Perkins scheme for previous year-ends
(net adjustment 2012: £53m; 2011: £58m), the
change has not impacted upon reported profits or
cash flows. Further details are given in note 28.
Current funding position and contributions
At 31 December 2013 the combined accounting
gross deficit of the Group’s defined benefit pension
schemes, after allowing for the minimum funding
schedule of contributions, was £71m (2012:
£126m).
The Travis Perkins scheme saw a significant
improvement in its funding level as a result of strong
asset returns. At the year-end it was 99% funded
on a technical provisions basis, giving a gross deficit
of £6m (2012: £67m). Once the scheme is fully
funded, the Company will have no further obligation
to make minimum funding contributions unless
the funding level returns to below 100%, when the
value of contributions will depend upon the value
of the deficit, the Company’s investment rating and
dividend policy.
Following the Government’s decision to introduce
pension auto-enrolment for employees the Group
commenced its preparations in 2012. It set up a
new master trust and consolidated all its existing
defined contribution schemes into one.
The Group’s staging date was 1 March 2013.
On 1 june auto-enrolment commenced and
approximately 9,200 colleagues joined the scheme
with only 2% opting out.
The Group contributed £12m (2012: £7m) of
contributions to its defined contribution scheme
during the year.
Tony Buffin
Chief Financial Officer
25 February 2014
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EVOlUTiON OF ThE
gROUP’S STRaTEgY
Following the improving outlook for the overall market
and changes to the Group’s executive directors
the Group reviewed its strategy and presented it
to investors at a Capital Markets day in December
2013.
As explained on page 17, the Group’s markets
are showing signs of improvement. As many of the
Group’s businesses occupy market leading positions
they are well positioned to exploit opportunities
offered by improving markets.
The Group’s main aim over the last five years
has been to protect its margins through careful
management of prices, whilst holding volumes
generally stable. Its careful control of costs, working
capital and capital expenditure has helped maintain
the strength of the balance sheet. The improving
market conditions now give the Group the confidence
to modify its strategy through increasing its capital
investment programme to intensify sales and profit
densities from existing space, reinvest in its customer
propositions and continue to use its scale to improve
service to customers and returns to shareholders.
To enable the Group to deliver its strategy the
divisional structure was refined with effect from 1
january 2014. The most significant change was to
combine the three businesses that supply products
under contract arrangements to large construction
companies and project contractors into one contracts
division. In so doing, the division can better track
major project activity for all three businesses: Keyline,
BSS and CCF.
The financial and operating sections of the Annual
Report has, however, been prepared using the
divisional structure in place throughout 2013.
The diagram below shows the revised structure as
a result of the changes made on 1 january 2014.
Consumer
General
Merchanting
Wickes
Travis Perkins
Tile Giant
Benchmarx
Toolstation
Specialist
(2013)
Contracts
(2014)
CCF
Keyline
Benchmarx
Plumbing
and Heating
DHS
Solfex
PTS
BSS
City Plumbing
F & P Wholesale
City Heating Spares
BPT
BSS
the grOup’S mODiFieD Strateg Y
The refocused strategy is designed to deliver long
term sustainable value through the following levers
of value creation:
• Improved customer innovation
• Optimising the Group’s store and branch network
• Scale advantage
• Portfolio management
The levers of value creation and key components of
each lever are set out in the diagram below:
What
how
Scale
advantage
Supply chain
investment
leverage
property
capability
Group
sourcing
benefits
Shared
technology
investment
Portfolio
management
Streamlined
central
functions
Devolved
management
responsibility
Disciplined
planning
and capital
allocation
Regular
market
updates
Customer
innovation
Improved
value
Extended
range
Product
development
Format
renewal
Technology
enabled
Optimising
network
TP expansion
and
modernisation
wickes
national
footprint
Plumbing and
heating
format clarity
Implants
intensify
returns
Multi-channel
Trade parks
Enabled through people and evolution of unique culture
Portfolio management
Starting with the Group’s revised approach to
managing its portfolio of businesses, the Group has
developed a more robust planning approach enabling
it to allocate capital to the opportunities which are
expected to deliver the most material value for
shareholders. Aligned with this approach to managing
capital allocation is a revision to the metrics upon
which the Group is managed. Future lease-adjusted
return on capital will become an increasingly
important measure of success as the Group believes
it best aligns investment decisions with the ultimate
goal of shareholders; their return on equity.
In order to improve lease adjusted return on
capital management responsibility for both earnings
32
EVOlUTiON OF ThE gROUP’S STRa TEgY
and capital employed will be devolved further down
through the business. This greater accountability
and autonomy will be managed and monitored
through improved processes for governance. As
management in each of the businesses take more
control for managing returns, central functions will
be streamlined to ensure all teams are closer to the
businesses they support and ultimately customers.
This revised approach to capital allocation is creating
more competition for capital.
Capital expenditure is expected to increase in the
medium term to take advantage of development
opportunities in the market and will be tiered based
upon the risk and return profiles of the various
investment opportunities identified. The tiering of
capital spend will be managed under four broad
headings:
1. Extending the Group’s leadership: investment in
proven businesses delivering attractive returns
2. Investing to grow: investment in customer
propositions to adapt to changing customer needs
and cement the Group’s market leading positions.
3. Infrastructure investment: investment to enable
future outperformance
4. Divest: where there are better uses for capital to
grow or return to shareholders
Scale advantage
One of the key value creation levers is using the
Group’s scale to improve efficiency and deliver a
better customer proposition.
The Group’s supply chain ambition is to provide
branches and customers with easy access to the
broadest range of products, reliably, efficiently, safely
and on time:
• Ordering will be made simpler for branches
with improved range management tools and
automated stock replenishment systems
• The Group’s distribution centre (‘DC’) footprint will
undergo further change, increasing lightside DC
capacity and rolling out regional heavyside DCs
• Route planning tools and further optimisation
of the vehicle fleet will reduce the cost of, and
enhance, the local delivery proposition
The strength of the Group’s balance sheet enables
businesses within the Group to access properties
they would otherwise find it difficult to occupy.
Furthermore, by developing multi-fascia sites, the
Group is able to provide opportunities for the Group’s
smaller operating businesses to co-locate with the
Group’s larger businesses and benefit from greater
foot traffic.
The Group is also focused on using its buying
scale to source products directly from manufacturers
at lower cost and in creating more commonality in
product ranges such that it can further consolidate
volumes so reducing costs further.
For many years, the Group has benefited from
efficient, low-cost IT systems. These systems are
approaching the end of their useful life and, therefore,
a clear four point strategy has been developed to
ensure better IT systems capacity and flexibility in
the future.
• Delivering a common and shared trading platform
across the Group’s merchanting businesses
• Delivering an appropriate multi-channel presence
for each brand making it easier for customers to
order, buy and receive delivery
• Simplifying back office systems to enable
decoupling and enhance efficiency
• Increasing system usability and the experience for
colleagues and customers so that the Group is
easier to do business with
Customer innovation and optimising the
branch and store network
The underpinning activities to improving the
customer proposition and improve the network
including offering better value, extending range, better
availability, format renewal, modernising TP branches
and creating national networks in a number of the
Group’s businesses are included in the plans for each
of the divisions in the following sections.
general merchanting DiviSiOn Strateg Y
Travis Perkins is, and for the foreseeable future will
continue to be, the Group’s core business. It is the
Group’s largest business by sales, profitability and
one of the highest returning businesses operated
within the Group.
The business benefits from national coverage
with over 640 branches, an efficient lightside
central distribution network, access to a range
few competitors can match, a modern vehicle
delivery fleet and branch managers with an
unparalleled relationship with customers. Branch
manager incentives are based on return on capital
improvements setting the business apart from its
competitors which is a key component of Travis
Perkins’ market outperformance.
The following chart sets out the key components
of the plan to improve Travis Perkins, combining
both sales and profit drivers and investments in
enabling infrastructure.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 33
T
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Toolstation
implant in wickes,
Bicester, one of
nine opened
in 2013
EVOlUTiON OF ThE gROUP’S STRa TEgY
34
Expand the
network
s
r
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v
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t
i
f
o
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p
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n
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s
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a
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b
a
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Managed services
development
Modernising
formats
Toolhire
expansion
Category management
and pricing
Enhanced
CRM
Multi-channel
development
Enhanced IT
capacity
Regional
distribution
Invest in safety and
develop our people
There is significant scope for network expansion
and relocation. Travis Perkins is targeting 5-15
net new branches per annum and to increase
the number of Benchmarx Kitchens and Toolhire
equipment implants. Furthermore the Group
recognises the need to modernise the branch
network with plans underway to develop a new
branch format, ‘TP 2018’, alongside further
development of TP’s multi-channel proposition.
The plans to improve the TP multi-channel offer
are set out below:
1.
where
we are
now
2.
next
steps
Customer experience
infrastructure
• Clean and functional
• Passive
• Non-transactional
• Branch to site delivery for
heavyside
• Branch collection only for
lightside
• Branch acting as call centre
• Transactional capability
• Integration to pricing
systems
• Account management
• Click & collect
• heavyside distribution
improvements expanding
range and availability
• lightside range access from
DCs
• DC direct to site picking
3.
where
we will
get to
• leading online gateway
• Interactive and social
hub
• Seamless experience
across channels
• Integrated CRM
• Cross-channel fulfilment for
lightside
• CRM and account
management systems
development
• Contact centre coordination
In summary, the Group is confident that Travis
Perkins can maintain its market leading position
and further drive improvements to the customer
proposition and value to shareholders. The targets
for improvement are set out as follows:
Measure
Current
Medium term
ambition
Network
expansion
645 TP
branches
5-15 net new
branches p.a.
like-for-like sales
growth outperformance
Operating margin
improvement prospects
Capital expenditure
0-5%
Sector
leading
£44m*
1-4%
Sustain
£40-60m p.a.
lease adjusted ROCE
-
Add 200-300bps
*year ended 31 December 2013
Outperformance through:
• local customer relationships
• Consistent range and range extension
• Better availability
• Sourcing and own label development
• Product knowledge and ease of transactions
• Format improvements
• Network and multi-channel development
• Managed services expansion
plumBing anD heating DiviSiOn Strateg Y
The strategy for the Plumbing and heating division
has three key elements:
1. Developing clear propositions serving plumbing
and heating, bathroom installer and contract
customers: The focus on bathroom installers, local
plumbers and mid-sized plumbing contractors
will provide solid returns through effective pricing
and range substitution including through greater
penetration of the Group’s ‘iflo’ exclusive ranges.
2. Intensifying use of space through the Group’s
showroom concept and spares implants: The
new ‘Endeavour’ showrooms are designed to help
tradesmen win new business. New showrooms
have been opened in 69 locations and are
generating healthy returns. Approximately 40
new showrooms per annum are planned over the
medium term.
3. Developing multi-channel, sustainability and
own label product offerings: The acquisition of
an online heating equipment distributor gives
the P&h division access to growth in the online
channel. Furthermore, the division is developing
an additional multichannel capability to enable
ordering, account management, and online
transactions as well as providing enhanced
product information tools to its installer network.
Further work is underway to enhance the
exclusive brands the Group owns including
iflo and BOSS and to continue the progress
already made in launching ‘Sustainable Building
Solutions’ which accesses Government funding
for improvements in household energy efficiency.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
The plan for the P&h division is graphically
The key components of the strategy for the
represented as follows:
division are set out below.
Division-wide
property planning
Develop contract
business
More standalone
CPS branches
Better pricing
tools
Roll-out of
Endeavour & spares
Supply chain
efficiencies
Tailored multi-
channel capability
Stay Safe
Talent to lead UK’s
no.1 P&H business
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b
a
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Growth in
insulation
Develop BSS
Industrial offer
Major presence
in partitions
Category
expansion
Deepen sector &
category specialism
Whole
Contracts
Division
Contract pricing &
project management
Branch network
expansion
Excellent IT
Multi-channel
capability
s
r
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i
f
o
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p
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n
a
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s
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a
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s
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b
a
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E
Excellent IT
Market-leading
customer service
The targets for the division are shown below
alongside how the P&h division intends to
outcompete in its markets:
As with the other divisions, the Group has clear
performance targets for the division including
increasing the level of capital investment with the
ambition of outperforming market peers.
35
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Measure
Current
Medium term
ambition
Network
expansion
525
branches
~10 net new
branches p.a.
like-for-like sales
growth outperformance
0-3%
0-3%
Operating margin
improvement prospects
-
Good
Capital expenditure
£11m*
£10-20m p.a.
lease adjusted ROCE
-
Add 150-250bps
*year ended 31 December 2013
Outperformance through:
• Clarity of contracts and installer propositions
• Enhanced branch pricing tools
• Sourcing and own label development
• Spares implants
• CPS network expansion
• Endeavour showroom rollout
• Multi-channel establishment
• Sustainable solutions growth
cOntractS DiviSiOn Strateg Y
The Contracts Division was formed on 1 january
2014, bringing together the three businesses that
supply products to large construction companies
and project contractors. These businesses all track
major commercial and infrastructure projects and by
bringing them together into one division, this will assist
project tracking and selling into major contractors.
Measure
Current
Medium term
ambition
Network
expansion
181
branches
1-2% net new
space growth
like-for-like sales
growth outperformance
0-3%
1-3%
Operating margin
improvement prospects
-
Good
Capital expenditure
£12m*
£10-20m p.a.
lease adjusted ROCE
-
Add 200-300bps
*year ended 31 December 2013
Outperformance through:
• Deeper product knowledge and customer service
• Extended ranges
• Selective network expansion
• Category expansion
• Sourcing and own label development
cOnSumer DiviSiOn Strateg Y
The key elements of the consumer division’s
strategy are to:
• Enhance wickes proposition to tradesmen and
serious ‘DIyers’
• Gain nationwide coverage through wickes store
estate including renewing its store format
• Expand the Toolstation network through wickes
implants and standalone shops
• Continue multi-channel development
wickes’ ambition is to always offer lower prices than
its competitors alongside ranges, to include brands
that trade and serious DIyers demand, which enable
customers to complete any DIy or trade RMI project.
Plans are progressing to improve online and in-store
3636
EVOlUTiON OF ThE gROUP’S STRa TEgY
availability, improve ranges and enhance the level
of customer service. wickes already has a growing
multi-channel business which holds its fair share of
the online market, however, the Group believes there
is opportunity to further enhance sales through this
channel by adding additional ranges.
wickes plans to continue to expand its network by
between 5 and 10 new stores per year.
The early signs from the recent Toolstation store
implants in wickes have also been encouraging.
These implants contribute to wickes rental cost, are
driving additional footfall and producing solid returns
in their own right for the Toolstation business without
increasing the Group’s lease commitments.
The wickes plan is graphically represented below:
Enhanced customer
proposition
Convenient in
any channel
Better value for
tradesmen
Right stores, in
the right place
More efficient
distribution
Building the
right estate
Strong like-for-
like growth
LFL growth from
drive categories
More efficient
buying
Smarter support
Delivering
great service
Great engaged
people delivering
s
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a
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Smarter working
stores
Toolstation is planning to continue to open both
wickes implants and standalone stores with an
ambition to open approximately 100 shops in the
medium term. Toolstation’s fixed prices, excellent
availability, delivery promise and service proposition
are resonating strongly with jobbing tradesmen
and general DIyers who are not able to negotiate
larger volume discounts from trade outlets. The
performance of both standalone Toolstation stores
and wickes implants gives the Group confidence to
extend the rollout of new shops.
The performance targets for the Consumer
division are set out below:
Measure
Current
Network
expansion
227 wickes
108 Tile Giant
143
Toolstation
like-for-like sales
growth outperformance Flat
Operating margin
improvement prospects
-
Medium term
ambition
5-10 net new p.a.
implants
~20 p.a.
Above market
Good
Capital expenditure
£18m*
£30-40m p.a.
lease adjusted ROCE
-
Add 150-250bps
*year ended 31 December 2013
Outperformance through:
• Clearer and sharper pricing
• Catalogue and online range extension
• Improved availability in wickes
• Format renewal and network expansion
• Toolstation expansion and implants
• Tile Giant implants only
• Driving multi-channel harder
hOw perFOrmance will Be
cOmpareD tO StrategY
The Group’s ambition is to deliver long term,
sustainable value to shareholders. There are a series
of financial and non-financial measures which the
Group tracks to monitor performance.
The Group’s medium term KPIs are set out below:
Key performance indicator
Medium term target
Network expansion
20-35 net new branches p.a.
like-for-like sales
growth outperformance
Outperform industry sales
growth by 1-4 % p.a.
Operating
margin
improvement
Sustain sector leading margins
in General Merchanting.
Add 150bps to operating
margins in each of Consumer,
Contracts and Plumbing and
heating divisions.
lease adjusted return
on capital employed
Add 200-300 bps to
lease adjusted ROCE
Operationally, success is measured through a
comprehensive set of key performance indicators.
All of these indicators are aligned to achieving
the Group’s strategic ambition. The Group’s actual
performance against these key indicators for 2013
is shown in the divisional performance section on
pages 21 to 24 and in the Corporate Responsibility
section on pages 42 to 45.
riSKS
The Statement of Principal Risks and uncertainties
on pages 39 to 41 sets out the key risk factors that
are considered by the Directors to be material to
the business. These include those risks which are
deemed to be material and may impact upon the
successful delivery of this strategy. In addition there
are a number of risks which are set out in the table
below that are not deemed to be material to the
Group as a whole but are relevant when setting out a
balanced commentary on a divisional basis.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
37
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what
Division
Strategic intent
KPis
Risks
General
Merchanting
Plumbing
and
heating
Contracts
Consumer
Cementing mixed merchant leadership
through better prices, range available today
and extended ranges tomorrow,
on-time deliveries when customers need it.
Backed up by a fast and efficient
ordering process, credit for customers
and a reliable and consistent in-branch
experience.
To create the market leading domestic
plumbing and heating business built upon
customer focused and truly differentiated
propositions.
The plans build on the businesses’
recognised stay safe culture, high
employee engagement and development
of talent. In addition the division will
grow market leading positions in new
sectors, renewables, internet trading and
sustainable building solutions.
Grow business through network expansion
and selling of key products to targeted
customer segments with highly engaged
colleagues providing excellent customer
service.
Rebuilding wickes into the uK’s best ‘do
a house up’ store serving local tradesmen
and serious DIyers with the lowest priced
building materials for their projects.
Always in stock with delivery to home or
site when it suits the customer.
Network
expansion
like-for-like
sales growth
Operating
margin
Capital
expenditure
lease
adjusted
ROCE
• Rate of multi-channel migration
higher than assumed
• unable to source property to meet
expansion plans
• Pricing changes do not increase
volumes
• lack of available product to supply
• lack of suitable sites for expansion
plans
• Project delays
• Businesses not adapting to the
evolving customer
• lack of available product to supply
• lower prices and extended payment
terms to customer
• lower specification products offered
by competitors
• Disintermediation of customers by
manufacturers
• Consumers accelerate trend towards
fixed price merchanting and online
(positive)
• Competitor response
• Inability to secure stores for
relocations
how
group value
drivers
Customer
innovation
Optimising
network
Scale
advantage
Portfolio
management
STRaTEgiC SUMMaRY
The Group is well placed to benefit from the
upturn in uK building activity. housing transaction
growth should boost those businesses that serve
trade related customers whilst improving customer
confidence should benefit the consumer businesses.
however, the Group recognises that all customers
are searching for even greater value and it is
therefore imperative that the Group continues to
modify and modernise its customer propositions.
As many Travis Perkins businesses occupy market
leading positions it is well positioned to exploit new
opportunities. Its strategy is to ensure it delivers long
term, sustainable growth, which is achievable because:
• Market growth indicators are encouraging
• Market developments create compelling
opportunities
• The Group has an evolving portfolio model to
exploit opportunities
Its strategy is geared towards achieving long term
shareholder value with its medium term targets
fully aligned with this strategy. Group returns will be
improved by:
• Continuing to outperform in each of our markets
• Operating margin prospects:
• General Merchanting – sustain
• Plumbing and heating – good growth
• Contracts – good growth
• Consumer – good growth
• Targeting medium term double digit EBITA growth
p.a.
• Adding 200–300bps to lease adjusted ROCE
over the medium term
• There are significant opportunities for structural
• Delivering strong and consistent growth in
growth
shareholder returns
38
Graham Sealby,
assistant branch
manager, Benchmarx
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 STaTEMENT OF PRiNCiPal RiSKS
aND UNCERTaiNTiES
FOR ThE yEAR ENDED 31 DECEMBER 2013
The Group operates in a market and an industry
which by their nature are subject to a number
of inherent risks. The Group is able to mitigate
those risks by adopting different strategies and
maintaining a strong system of internal control.
however, regardless of the approach that is taken,
the Group has to accept a level of risk in order to
generate suitable returns for shareholders.
Details of the Group’s risk management
processes are given in the Corporate Governance
report on page 59. The risk environment in which
the Group operates does not remain static. The
nature of risk is that its scope and potential impact
will change over time. As such the list below should
not be regarded as a comprehensive statement
of all potential risks and uncertainties that may
manifest themselves in the future. Additional risks
and uncertainties that are not presently known
to the Directors, or which they currently deem
immaterial, could also have an adverse effect
on the Group’s future operating results, financial
condition or prospects.
This section describes the current risk factors
that are considered by the Board to be material,
their potential impacts and the factors that mitigate
them. The inherent risk (before the operation of
control) is stated for each risk area together with an
indication of the current trend for that risk:
39
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Risk description
market conditions
impact
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.
Adverse
effect on
financial
results
Adverse
effect on
financial
results
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 users.
Inherent risk: ● ● ● Trend:
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.
Should market conditions deteriorate then the Board
has a range of options dependent upon the severity of
the change. historically these have included amending
the Group’s trading stance, cost reduction, lowering capital
investment and cutting the dividend.
Inherent risk: ● ● ● Trend:
Changes to market practice are tracked on an on-going
basis and reported to the Board each month.
The Group is building multi-channel capabilities so they
compliment its existing operations and provide its 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 improvements.
The Group continues to refine pricing strategies to ensure
it retains 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.
inherent risk: high ● ● ● Medium ● ● low ●
Trend: Increasing Static Reducing
STaTEMENT OF PRiNCiPal RiSKS aND UNCERTaiNTiES
Risk description
40
information technology
impact
Risk mitigation
Adverse
effect on
financial
results
Adverse
effect on
the Group’s
reputation
The operations of the Group depend on a wide
range of complex IT systems, both in terms of
the availability of hardware and the operation of
software operating efficiently and effectively.
The rapid expansion of the Group together with
an increasing demand for IT services, particularly
as the Group embraces modern platforms such
as multi-channel, could result in development
programmes being delayed.
Should the system become unavailable for
an extended period either through deliberate act
or through accidental failure it would impact the
businesses’ ability to trade.
Increasing levels of cyber crime represent
a significant threat to all businesses with the
potential to cause loss of system availability or
financial loss.
Inherent risk: ● ●
Trend:
The strategic demands of the business, the resources available
to IT, the performance levels of key systems and IT security are
kept under review by the Executive Committee.
Plans that require continual investment in the IT
infrastructure have been approved and are being
implemented. 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.
The Group’s 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. Arrangements
are in place for alternative data sites for both trade and
consumer businesses. Off-site back-up routines are in place.
A programme of risk oriented reviews is undertaken
to ensure the level of control around the IT systems
remains robust.
colleague recruitment, retention and succession
The ability to recruit, retain and motivate suitably
qualified staff is an important driver of the Group’s
overall performance.
The strength of the Group’s customer
proposition is underpinned by the quality of people
working throughout the Group. Many of them have
worked for Travis Perkins for some considerable
time, during which they have gained valuable
knowledge and expertise.
Ensuring proper development of employees and
the succession for key positions is important if the
Group is to continue to be successful in the future.
Inherent risk: ●
Trend:
Inability to
develop and
execute our
development
plans
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.
Competitive
disadvantage
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.
Adverse
effect on
financial
results
Adverse
effect on
the Group’s
reputation
Inherent risk: ●
Trend:
The commercial and financial teams have established strong
relationships with the Group’s key suppliers and work closely
with them to ensure the continuity of quality materials.
To spread the risk where possible contracts exist with
more than one supplier for key products.
The Group has made a significant investment in its Far
East infrastructure to support its direct sourcing operation
which allows the development of own brand product, which
reduces the reliance on branded suppliers.
Comprehensive checks are undertaken on the factories
producing product, the quality and suitability of that product
before it is shipped to the uK.
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 supply difficulties to
the Group if they become unable to meet their
supply obligations due to either economic or
operational factors.
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.
The Group has become more reliant on
overseas factories producing product as the
Group has rapidly expanded its direct sourcing
capabilities. This has increased the Group’s
exposure to sourcing, quality, trading, warranty and
currency issues.
There is a potential for European anti-dumping
legislation to be extended to encompass further
Asian countries which could increase the cost of
some imported products.
inherent risk: high ● ● ● Medium ● ● low ●
Trend: Increasing Static Reducing
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 41
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Risk description
impact
Risk mitigation
Adverse
effect on
financial
condition
Adverse
effect on
financial
results
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.
Future expansion
The Group’s strategic plans are predicated on the
continued expansion of its uK branch network.
large scale acquisitions in existing uK markets
are unlikely to be available to the Group due to the
concerns of the Office of Fair Trading to ensure
competitive markets. Therefore the Group will
rely on developing small scale opportunities, in
new catchment areas or within existing sites or on
expanding into adjacent markets in which it does
not have a presence.
The Group also needs to ensure that funding is
available to support its plans. The Group is reliant
on the bank market for funding, a market that
has contracted in recent years and which may
continue to contract in the future.
Inherent risk: ● ●
Trend:
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.
The Group has agreed deficit payment plans which
currently require it to pay up to £26m per annum to its
defined benefit pension schemes. The repayment plans will
remain in place until the next actuarial valuations, when in
conjunction with the scheme Trustees they will
be reassessed to take into account the circumstances at
the time.
Inherent risk: ●
Trend:
Responsibility for identifying opportunities to expand is given
to each of the divisional boards, with capital being deployed
to those giving the best return on capital.
The Group has identified a significant number of
opportunities for expansion throughout the uK and
continues to develop alternative formats that will open up
additional opportunities in future.
As part of its capital management strategy the Group
has developed plans and instituted a series of metrics that
are designed to provide opportunities to extend sources of
funding to reduce reliance on one principal source of funding
with generally short term durations.
inherent risk: high ● ● ● Medium ● ● low ●
Trend: Increasing Static Reducing
42
CORPORaTE RESPONSiBiliTY
STaTEMENT
FOR ThE yEAR ENDED 31 DECEMBER 2013
Travis Perkins understands that as a major uK plc it
has a responsibility to conduct its business in a way
that recognises its obligations to all its stakeholders
as well as to society as a whole. As such it actively
seeks to embed the principles of good corporate
responsibility in its day-to-day activities throughout
the Group.
health anD SaFetY
The continued health and safety of all people who
come into contact with Travis Perkins is given the
highest priority throughout the Group and is kept
permanently at the forefront of its activities. The
Group’s aim is to eliminate all health and safety
related incidents so that nobody is injured when
they are involved in any activity influenced by the
Group whether it is in its branches, at its customers’
premises or in the factories of suppliers of the
products it sells. Not only is this the morally correct
stance to take, but it also brings significant benefits
to the business.
The Group has an established health and
safety committee chaired by Andrew Simon, a
non-executive board director that sets standards
for health and safety throughout the Group and
regularly monitors progress made towards achieving
them. however, it is the Group’s philosophy that
whilst standards should be set at the highest level all
colleagues have a responsibility for ensuring there
is a safe working environment; they are expected to
adhere to the Group’s ‘Stay Safe’ philosophy.
‘Stay Safe’ continues to be the philosophy which
guides the Group’s approach to safety. In 2013, it
established a clear statistical link between aspects
of its organisational culture and injury rates. This has
helped it identify where the focus is needed, and
which new ways of working need to be introduced
to effectively and significantly improve safety
performance. It has also discovered that sharing best
practice quickly and positively has greater leverage in
its businesses, and helps it deliver more sustainable
safety improvements.
Safety, ultimately, is about making it easier to keep
everyone in the business safe, and this was part
of the rationale for placing responsibility for safety
closer to businesses. This divisional alignment has
resulted in more effective leadership, which owns
and drives the safety message into the businesses,
along with a greater sense of personal responsibility.
It’s also given the Group the opportunity to simplify
its message, its systems and procedures so they’re
better understood and easier to act on. And it seems
to be working.
In 2014, the Group will continue to embed this
approach to safety at branch and store level, moving
from compliance to proactive discretionary effort,
and safe behaviour. Branch and store managers will
be the local safety leaders, changing the culture by
demonstrating visible leadership and inculcating the
habits of regular safety conversations, safety ‘nudges’
and praise within branches and stores. The Group will
continue to seek external perspectives from experts
in this field, as it continues to strive for safety for all.
A report outlining the Group’s health and safety
activities is set out on pages 46 to 48.
envirOnmental
As the uK’s largest supplier of building materials
Travis Perkins has a significant environmental
footprint which it takes great care to try and
minimise. It is a business built on relationships, and
by sharing ideas and inspiring positive change, it
will make the biggest difference. The teamwork
across the organisation, the dialogue with customers
and the collaboration with key partners is proof
of this, and presents opportunities to adopt more
sustainable behaviours every day.
Profitability is no longer divorced from
responsibility, and it’s much easier to empower
people to demonstrate their commitment to a
sustainable agenda if they are also successful
business ambassadors. This combination creates a
win-win situation for both the business and for the
environment. Travis Perkins is committed, long-term,
to profitability and sustainability within a well-
governed framework.
As explained in the environmental report on
the group website at www.travisperkinsplc.co.uk/
citizenship/environment, which is summarised on
pages 50 to 51 of this report, targets have been set
and many initiatives have been underway for some
time to further lower the Group’s carbon footprint
by reducing its direct and indirect consumption of
energy, water and fuel.
Focus is also put on reducing the Group’s impact on
the local environments in which it operates. Pollution
and nuisance prevention is a key part of the Group’s
environmental agenda with the aim of avoiding any
reportable incidents or complaints from those people
that are affected by the Group’s activities.
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installed at
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Northampton
head office
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The last strand of the Group’s environmental efforts
concerns the products it sells. Customers of the
Group are becoming increasingly environmentally
aware so together with suppliers considerable effort is
expended trying to maximise the quantity of product
obtained from sustainable sources.
cOmmunitY engagement
The Group’s businesses and employees are
encouraged to support community activities in
the areas where they live, work and operate. They
are passionate about the charitable work they
undertake; the enthusiasm and commitment shown
by the Group’s employees as they fundraise is
something that inspires us all. Each of the Group’s
17 businesses, along with its central functions, has
a strong and extremely valuable partnership with a
number of British charities, each of which is selected
by employees. Their reach touches many, including
Parkinsons uK, Alzheimer’s Society, Mind, AgeuK and
the RNlI, amongst others.
cOlleague engagement
For the Travis Perkins Group, engagement is about
attracting, recruiting, developing and inspiring great
people, so they can make a difference, share in the
success of its businesses, and have some fun along
the way. As such, it has created an inclusive working
environment where everyone can contribute because
everyone is listened to, valued and respected.
The Group’s people strategy is a fundamental
part of what drives it forward. Every one of its
23,000 people is a direct contributor to whichever
of the 17 businesses they work in, and as such,
they are key to the Group’s success.
The ‘family feel’ of the business has created a
strong inclusive culture over many years, and that’s
something the Group strives to maintain by making
sure that people throughout the organisation feel
able to voice opinions and concerns and that their
views are respected. It is recognised throughout the
Group that people make all the difference.
The Group’s business goals and cultural values are
clearly defined and regularly shared with employees;
their feedback is regularly sought. The Group’s culture
is reinforced in all aspects of its recruitment, training
and development programmes, where behaviours,
practices and ways of working are clearly articulated,
brought to life and can be seen in practice.
Further details of the work undertaken by the
Group to recruit, retain and develop colleagues and
of their efforts to help the community are set out on
pages 52 to 54.
ethical pOlicieS
The Travis Perkins Group is a leading supplier
to Britain’s building construction and home
improvement industry. Its reputation for providing
excellent customer service with the highest integrity
is the direct result of the collective effort of its
employees, all of whom are caretakers of that
reputation. how the business conducts itself and how
it treats others, will continue to determine how the
world views Travis Perkins.
The Group has established clearly defined principles
aimed at helping all its employees to uphold the
highest ethical, legal and business standards across all
the business activities it is involved in.
Group colleagues are made aware of the
standards expected of them through the Group’s
‘Doing the Right Thing’ initiative which draws
together under a single umbrella three separate,
but closely related policies on business principles,
diversity and encouraging equal treatment.
The Group has clear policies that set out the
expectations that colleagues will not have any
involvement with acts of bribery, will avoid conflicts
of interest, will ensure they comply with all aspects
of all applicable laws when performing their duties
and will not become involved with any aspect of
insider dealing.
In summarising the Group’s commitment to
integrity, to acting honestly and ethically and to
complying with the law the initiative has provided a
one stop guide for colleagues when considering how
they interact with customers, suppliers, shareholders
and the communities in which they operate. In
essence it sets out the Group’s commitment to
‘Doing the Right Thing’.
eQual OppOrtunitieS anD DiverSitY
The Group is committed to promoting equality of
opportunity for all employees and job applicants.
Decisions relating to any aspect of employment are
based upon ability and potential rather than age, sex,
race, religion or belief, disability or sexual orientation,
gender reassignment, civil partnership status,
pregnancy or maternity.
The Group complies with national legal
requirements in respect of wages and working hours.
It supports the International labour Organisation’s
(‘IlO’) standards regarding child labour and
minimum age. It is also committed to working only
with suppliers who embrace standards of ethical
behaviour that are consistent with its own.
A workforce with a difference allows the Group
to maximise the unique and individual qualities of
its people. A diverse workforce is at the heart of a
strong business performance; it delivers increased
engagement, improves output and generates better
financial returns.
The Group employs 23,000 people in 17
different businesses across both the retail and
merchanting sectors.
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Around 40% of the work force in the Group’s retail
sector businesses is female; across the Group as a
whole it is 22% reflecting the fact that women find
the merchanting workplace less attractive than retail
or other areas of the Group’s business; although it
is worth noting that over half of these women are
in management positions. The following table sets
out more details of the mix of men and women
employed by the Group at the year-end.
Men
Women
Total
Number
%
Number
%
Number
%
Colleagues 13,280 75.9
4,225 24.1
17,505 100
Managers
4,803 85.6
811 14.4
5,614 100
18,083 78.2
5,036 21.8
23,119 100
The Group is hearing through its research that
more men than women like, and are interested
in bricks, blocks and timber. This has come from
women who have worked for it, or have considered
working for it and chosen not to. The Group will
however continue to work hard to create a working
environment which equally supports, develops and
recognises the contribution both men and women
make to its business.
At a senior leadership level 18% (2 out of 11) of
the operating Executive and 13% of the Board
(1 out of 8) are female.
John Carter
Chief Executive Officer
25 February 2014
luton trade park incorporating branches of Travis Perkins,
Benchmarx, City Plumbing and BSS, which opened in 2013
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STaY SaFE REPORT
FOR ThE yEAR ENDED 31 DECEMBER 2013
Our StaY SaFe philOSOphY anD
OBJectiveS
Our underlying philosophy is that all injuries are
avoidable and that everyone involved in our
business should return home safe and well at the
end of every day.
To achieve this we have devolved Stay Safe
responsibility to our business divisions, rather than
dictating a central approach. Devolving responsibility
to a divisional level has cultivated a more committed
level of ownership which is underpinned by:
• Effective leadership – that owns and drives the
Stay Safe message in each of our businesses
• Everyone taking personal responsibility for their
own actions and believing that our behaviour can
affect Stay Safe performance
• Simplifying safety systems and procedures so that
they are understood and respected by all
In line with our strategy, a particular emphasis of our
investment of time and effort this year has been
developing our safety leadership. we believe the
tone and culture created by each of our business
leaders – right down to store and branch level in
their businesses – has a key influence on overall
Stay Safe performance.
In 2013 we were able to actually confirm the
strong statistical link between elements of our
organisation culture (as measured by our employee
opinion survey, which includes a measure of
‘engagement’) and our injury rates. In doing so we
have helped our business leaders identify which
elements of culture may need to be focussed upon
to improve safety performance and reduce accidents
in their areas. In particular, the ways of working that
they establish as leaders, e.g. the challenge, meaning
and variety of work done by colleagues; the freedom
to express ideas; effective two-way communication
and conversations about safety, etc. can significantly
improve safety performance.
The bar chart shows that the more engaged
areas of our business have half the injury frequency
compared to areas where engagement is not so high.
The key message: More engaged businesses have
fewer injuries.
Injury frequency rate
12.3
12
8
4
0
6.1
High 76.5
Engagement %
Low 55.6
StaY SaFe gOvernance
Throughout 2013 all Stay Safe activity continued
to be reviewed by the Plc Stay Safe Committee
which comprises me as Chairman with Group Board
members Ruth Anderson, john Carter and Robert
walker. In addition Stay Safe performance is also
discussed at monthly Plc Board meetings.
Data trenDS FOr 2013
The graph below shows a ‘plateau’ effect in the lost
time frequency rates during most of 2013 for the
Group as a whole. whilst some Divisions are making
more progress, the combined effect for the Group
is not as positive as we had hoped. however, these
statistics will only reinforce our commitment to
increasing awareness and understanding as to the
kind of incidents that we should be reporting.
Health & safety frequency rates 2013 vs 2012
Lost time injuries per million hours worked
13
12
11
10
9
8
2012/2013 Rolling 12 month
2011/2012 Rolling 12 month
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
we have seen encouraging signs, particularly in
our Supply Chain function and retail businesses,
where we have achieved a 10% and an 11%
reduction respectively in lost time injuries when
compared with 2012 levels. This was achieved by
a reduction in manual handling-related injuries in
our Supply Chain areas and a reduction in ‘slips and
trips’ in our retail outlets.
More than 6,000 ‘near misses’ were recorded in
the Travis Perkins Group in 2013, and we believe
that by recording and learning from such incidents,
we are seeing a corresponding reduction in the
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
number of physical injuries across the Group.
Our firm view is that a focus on what is working
well has greater leverage as we seek to deliver
improvements in our safety performance, and
is a more powerful engagement tool than a
preoccupation with what has not worked or has failed.
As such, we are measuring and communicating the
‘safe branch concept’ in the Group.
SaFe BrancheS
During 2013 85.4% of our branches were free
from any reported lost time injuries. This means
that during this time, just over 1,500 branches
and stores covering 98.5% of our colleagues
did not report a lost time injury. however we are
disappointed that there were 257 which did report
a lost time injury and we shall be working closely
with those branches and stores to improve their
safety performance in 2014.
The ‘highest standard’ benchmark for all our
branches is to be recognised as a ‘safe branch’. In
achieving the status of being a safe branch three key
criteria have to be satisfied:
• No lost time injuries have been reported
• Near miss accidents are being reported using our
online reporting system
• The Group’s audit team has not given the branch a
red / amber rating on its most recent Stay
Safe audit
using this internal ‘stretch’ criteria only 39.1% of our
Group branches could truly call themselves a 100%
safe branch by the end of 2013. however some of
our Divisions do achieve higher levels (over 50%) of
safe branches against these stringent criteria.
Percentage of ‘Safe’ branches 2013
60%
50%
40%
30%
20%
10%
0%
General
Merchanting
Contracts
Consumer
Plumbing
and Heating
Overall
tYpe OF lOSt time inJurieS in 2013
The type and pattern of lost time injuries that we
are experiencing has not changed since 2011 with
manual handling contributing to most lost time injuries.
Therefore, in 2013 we targeted the most
commonly occurring lost time injuries, i.e. those
acquired during manual handling. During the year we
developed the ‘lift’ project with the assistance of the
strength and conditioning coaches at our partners,
Northampton Saints Rugby club.
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Lost time injuries 2013
Hit something fixed
or stationery
7%
34%
Injured while
manual handling
Hit by moving /
falling object
26%
Some other kind
of accident
21%
12%
Slipped, tripped
or fell on the
same level
lift is the Group’s newly
developed manual handling
programme launched during
the second half of 2013 to
improve lifting techniques of our
colleagues. It is designed to not
only tackle the actual lifting, but also the root cause
of manual handling problems.
To follow up in 2014 we will dedicate more time
to educating colleagues to think differently about
lifting. This will include implementing lift ‘champions’
in all branches who will carry out the practical
elements of lift including training and identifying
local issues (including storage) that present a risk of
manual handling injury.
Colleagues undergoing manual handling training
nOn-cOlleague inJurieS
There were 959 injuries to people not employed
by the Group reported in 2013 (2012: 789) of
which 59% were in our consumer businesses.
however with well over 30 million store visits in
those businesses during 2013 these regrettable
injury statistics can be viewed more in context. The
majority were hand cuts when handling products.
As is always the case for our colleagues, we do not
set out to injure our customers and all incidents are
thoroughly investigated and any lessons learned are
acted upon.
StaY SaFe innOvatiOnS in
Our DiviSiOnS in 2013
Empowering our divisions to develop Stay Safe
initiatives and activities that match their type of
business and calibre is a major part of our strategy.
It has allowed our Divisions and businesses to tailor
initiatives to the specific issues they face. listed
below are some examples of the innovations they
have introduced in 2013:
• In the General Merchanting and Contracts
divisions, the introduction of the new Pro Pole tool
48
STaY SaFE REPORT
(with its range of tool heads) for drivers eliminates
any reason for them to work on the flat-bed of
their vehicle. In another project, by working with
their supplier, TP Merchanting were able to reduce
the size of reinforcing mesh stocked to make it
easier and safer to be manually handled in the
branch and by our customers
• In our Transport function, the findings of a trial last
year confirmed that the introduction of CCTv into
vehicles made our drivers drive more safely. As a
result, we will be fitting 360 degree CCTv vision
cameras into all new vehicles. Also by investing
in more vehicle driver risk assessors, who coach
drivers about safety and risks, we have seen a
reduction in accident insurance claims which has
resulted in savings of circa £100k year-on-year,
and all this during a time we have 120 more
hGv trucks
• To promote the health of our supply chain
colleagues we have been trialling a personal fitness
trainer in one distribution site to raise engagement
levels and give colleagues access to personal
health and fitness assessments
• In wickes, we found that many employees did not
wear safety gloves because they could not easily
carry them around. The simple introduction of a
glove clip meant that gloves could be carried, were
always visible and managers could wear them
to show their support for the ‘Stay Safe’ initiative.
Following the full roll-out of glove clips by May
2013, wickes has achieved a 26% reduction in
cut injuries
• Our City Plumbing business produced the Stay Safe
8 aide-memoire card for all managers and leaders
SaFer rOaDS initiative
we have made a great start with our
Safer Roads campaign aimed at our
drivers and as a result, instances of
speeding by our drivers have dropped by
58%.
In 2013 the Group was a finalist in
four Motor Transport Industry Awards.
From a safety perspective we were
finalists for the Safety in Operation
Award. This was predominantly for our
brick grab modification to our crane fleet which
reduced the amount of times drivers had to get on
the bed of the vehicle and made delivery of bulk
bags much quicker and safer.
The Group were also finalists for the following
awards: Innovation Award, Best use of Technology;
Transport team of the year.
lOOKing aheaD tO 2014
In 2014 our aim is to build on the great progress
made in 2013 by continuing to drive forward the
embedding of grass roots behavioural safety at our
branch and store level – to move from compliance
to proactive discretionary effort, and safe behaviour.
we will target a branch ‘shop floor’ safety culture
through our branch managers to achieve this.
Through our branch managers we will focus on
ways of involving our people in developing safety
improvements and ensuring safety conversations
and observations are part of everyday life in our
branches and stores. Branch managers as safety
leaders, will be key to making this happen through
creating a just culture, showing visible leadership and
inculcating the habits of regular safety conversations,
safety ‘nudges’, praise etc. within the branch.
we will be engaging external safety experts to
assess and provide a fresh independent perspective
on where each of our Divisions (down to branch /
store level) has got to on their Stay Safe journey by
referencing where they are today on what experts
call ‘the safety culture ladder’.
This external safety expertise will conduct
qualitative research and assessment of ‘where we are
now’ and help point out to our leaders and managers
what needs to happen locally to nudge us forward
where needed beyond the ‘today’ position especially
where statistics suggest we have plateaued.
Safety culture ladder
GENERATIVE
(High reliability organisation) HSE is
how we do business round here
Increasingly
informed
PROACTIVE
Safety leadership and values drive
continuous improvement
CALCULATIVE
Safety leadership and values drive
continuous improvement
REACTIVE
Safety is important, we do a lot
every time we have an accident
Increasing trust /
accountability
PATHOLOGICAL
Who cares as long as we’re
not caught
I look forward over the coming years to reporting
on a real improvement in colleague and customer
safety statistics and I want to thank all colleagues
who are engaged in making improvements to their
own and others safety. I sincerely hope that the
excellent innovations and initiatives being taken
across the Group will result in a meaningful reduction
in the number of accidents next year and beyond.
andrew Simon
Chairman Plc Board health & Safety Committee
25 February 2014
SETTING THE STANDARDSOur drivers are superb and are a credit to our company. We now have over 3000 drivers working for us. The Group will soon be championing a ‘no speeding’ initiative to make us a beacon in the industry. We all know there’s no excuse for speeding. We hope that this programme, combined with data from our Masternaut trackers will help us to Stay Safe in our vehicle operations. Look out for more details on this programme... coming soonThe road safety charity.SAFER ROADS INITIATIVEBUILDING MATERIALSJB73016.02 06/133 Points is 3 PointsYour commercial vehicle and car licence are the sameREMEMBER THESE ARE LIMITS, NOT TARGETS!For more information visit: www.gov.uk/speed-limitsBUILT UP AREASSINGLECARRIAGEWAYDUALCARRIAGEWAYMOTORWAYCAR DERIVED VANS*UP TO 7.5T*OVER 7.5T* NOT TOWING TRAILERSVANS UP TO 7.5T & TOWING TRAILERSTravis Perkins Group - Proud Supporter ofTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 49
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Recycling centre
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FOR ThE yEAR ENDED 31 DECEMBER 2013
eSSential envirOnment
we break down our environmental approach into
3 areas, buying responsibly, operating responsibly
and selling responsibly; this generates a sustainable
competitive advantage. This is a summary of our
environmental performance in 20131. This summary
has been verified by the independent company
lRqA. More details about this verification and a copy
of the verification statement can be found at
www.travisperkinsplc.co.uk/citizenship/environment
leaDerShip
we have previously been given awards for innovation
and leadership for our environmental approach.
we have started 2014 with a new set of actions
that will deliver against our vision. we have adopted
leadership positions with Sustainable Building
Solutions (‘SBS’) and in making public our ‘other
indirect Greenhouse Gas (‘GhG’) emissions’ (known
as Scope 3)2 we will keep our actions and our
performance reporting meaningful by:
• Retaining the role of our Non-executive
Environmental Advisory Panel
• Continuing to talk and listen to a wide range of
stakeholder voices
BuYing reSpOnSiBl Y
Buying timber better
The 93% performance figure (a 3% increase on
last year) reflects improvements in the kitchen and
flooring categories in the Consumer division. we have
tightened our control on supply during 2013 and
have been working with suppliers to ensure they can
meet our requirements for legal and credibly certified
products. Availability of certain special orders can be
an issue, but there is no doubt that the 95% certified
level by the end of 2014 which was stated in last
year’s report is achievable.
Timber certification
2005 data excludes Wickes timber figures
Timber purchased (£)
FSC
Other certified
100%
80%
60%
40%
20%
0%
2005
2011
2012
2013
2014 Target
Emerging resource efficiency practice
we are examining whether a 5% consumption
decrease in materials, energy and water is achievable
in our supply chain. It may be possible to achieve
this order of reduction through collaboration and
knowledge sharing alone.
Operating reSpOnSiBl Y
Reducing our carbon footprint
we have considered direct GhG emissions (Scope
1) and indirect GhG emissions (Scope 2) from
all activities and operations where the Group has
operational control over the business. All emission
sources were analysed, including fugitive emissions
from domestic refrigeration, vehicle and building
air conditioning. however, as these emissions were
not material compared to our overall emissions
they have been excluded from this report. we have
reported on all of the emission sources required
under the Companies Act 2006 (Strategic Report
and Directors’ Reports) Regulations 2013.
Scope 1 and 2 emissions are calculated using the
uK Government Conversion Factors for Company
Reporting 2013. 95% of Scope 1 and 2 data
is from measured sources with the remainder
extrapolated from expenditure on fuel.
Carbon Dioxide Equivalent (CO2e)
Reporting
Reference
year 2013
year 2012
129,183
tonnes
136,614
tonnes
69,681
tonnes
68,904
tonnes
53.73
tonnes
54.36
tonnes
Scope 1
Direct emissions from
burning gas and solid fuel
for heating and from road
fuel use for distribution3
Scope 2
Indirect emissions from
our use of electricity.
Intensity
Tonnes of Co2e from
Scope 1 and 2 sources
per million pounds
of inflation adjusted sales.
we have recalculated 2012 emission data from tonnes of CO2
to tonnes of CO2e (equivalent).
Our scope 1 and 2 emissions are 1.1% more
carbon intensive in 2013 than in 2012, but nearly
5% less than our 2005 baseline year4,5. The main
1 This report excludes activities and data relating to Solfex Energy Systems ltd, Rinus Roofing Supplies ltd, The Mosaic Tile Company ltd and Toolstation sites in the Netherlands and the wickes
franchise in Ireland which ceased in Feb 2013. 2 Scope 3 emissions not verified by lRqA. 3 Scope 1 CO2e emissions include 27,291 from buildings and 109,323 from transport. 4 The 2005 baseline
year annual carbon dioxide emissions data is an estimate based upon financial information and not direct consumption data, unlike succeeding years. 5 In the absence of a CO2e conversion factor
for 2005 we have applied the 2009 CO2e conversion factor, the first year it was introduced.
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cause of the intensity change is a dramatic increase
in gas consumption (16%) which is likely to be
weather related. Our interim 2014 target of a 20%
decrease in intensity on 2005 levels looks beyond
us. however, the introduction of divisional cost
saving environmental improvement plans will ensure
sustained and deeper reductions in subsequent
years. Our ambition remains to almost halve (48%
reduction) our intensity by 2020 on 2005 levels.
CO2e emissions
OECD sales deflated figures
Tonnes CO2e per £m group sales
Transport
Energy
60
50
40
30
20
10
0
2005
2011
2012
2013
2014 Target
Waste
In 2013 we generated 34,069 tonnes of waste, a
17% reduction on 2012. we recycled or recovered
27,374 tonnes.
Our performance was achieved by reducing the
number of general waste collections at our branches
and increasing the number of dry mixed recycling
bins. we also continued our successful backhaul
operation where materials such as cardboard and
plastic are collected at our distribution centres and
sold to reprocessors.
we have exceeded our 2014 target of a 90%
reduction in the tonnage of waste per million pounds
of adjusted yard and core sales over 2005 a year
early and we still expect to be a ‘zero waste to landfill’
business by 2017.
Waste tonnage
OECD sales deflated figures
Tonnes of waste per £m of yard sales and core
Diverted from landfill
Landfill
30
20
15
10
5
0
2005
2011
2012
2013
2014 Target
Operational environmental management
Our Environmental Management System (‘EMS’)
was successfully re-certified to the ISO14001
standard in 2013.
we experienced 27 incidents in 2013 an increase
of 11 from the previous year, but only 12 were
reportable, one less than in 2012. The majority
relate to spillages of paint and oil in branches and
from our vehicles. we will be focusing on improving
our management of spillages in 2014 to reduce the
overall number of incidents.
we are in no ongoing conversations with
enforcement bodies where there is a risk or threat
of prosecution.
Environmental incidents and complaints
Complaints
Incidents
60
50
40
30
20
10
0
2005
2011
2012
2013
2014 Target
Selling reSpOnSiBl Y
Our ‘multi award’ winning SBS service continued
to develop a capability and capacity to train and
change the way people think about low impact
building. In the merchant and contract divisions, sales
of products with an in use environmental benefit
typically account for 15% of total sales. we are
expanding the range all the time and improving our
communication to customers on the benefits. Some
of our sanitaryware will, for example, be amongst the
first to carry new voluntary water efficiency labels.
we have detected a rise in demand for credibly
certified timber materials over the year and have
responded by reintroducing chain of custody controls
into Keyline branches so that they could service
customer requirements. we plan to introduce similar
controls into CCF and Benchmarx over 2014.
riSKS anD OppOrtunitieS
Our new environmental approach sets out clear
areas where sustainable competitive advantage can
be gained. Environmental improvement measures
netted more than £9m and sales of products
which have an in use environmental benefit were c.
£330m in 2013. There is more growth potential in
both these areas.
we have not identified any high unmitigated risk
to the business from environmental issues. we have
been recognised by CDP giving clear consideration
to identifying the issues, risks and opportunities
around climate change.
John Carter
Chief Executive Officer
25 February 2014
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ENgagiNg PEOPlE
FOR ThE yEAR ENDED 31 DECEMBER 2013
The Group’s unique approach to its people has
been a key factor in its successful record of
growth. The Travis Perkins Group is committed to
empowering those who work in its businesses and
central functions, providing a collaborative, learning
environment in which they can develop, rewarding
them fairly and creatively, and supporting charitable
activity that links its businesses to their communities.
BecOming an even Better place
tO wOrK
Engaged employees are a vital part of any successful
company, and the Group recognises that its people
are central to the fundamental objective that drives
its business – serving its customers as best they can.
Travis Perkins works hard to attract and retain the
best people, creating opportunities so everyone can
make a difference as they work to contribute to the
success of each of the businesses and the Group.
That focus helps drive employee engagement, which
in turn helps to make the Group an even better
place to work.
The Group regularly undertakes surveys to
measure how employee engagement is changing.
Colleagues are regarded as engaged if they respond
positively to each of four questions they are asked:
• would they recommend the Group as a good
place to work to people outside the business?
• would they recommend the Group’s products and
services to people outside work?
• Are they proud to work for the business?
• Are they motivated to perform well in their job?
Colleague engagement is one of the Group’s key
performance indicators; the three year engagement
trend is shown on page 6.
Recognising and rewarding our people
People who are happy and engaged in their work
do a better job, which ultimately makes it easier
for them to delight customers with better, faster,
more responsive service. The Group is full of
those who go the extra mile with the range of their
achievements and successes being recognised in a
number of ways:
a. industry-leading compensation and benefits
The Group’s Sharesave scheme continues to be a
great success. In 2013 around 1,750 employees
shared close to £20m of gains from three and five
year schemes which matured at the end of the
year. Following the invitation for the new Sharesave
plan, more than 8,500 employees are now active
Sharesave participants (2012: 7,500).
During the year, the implementation of pension
auto-enrolment to bring all eligible employees into
a retirement benefit arrangement was completed,
with the hugely encouraging outcome that 19,000
employees are now pension plan members.
Opportunities to bring engaging and innovative
benefits to colleagues are continually being sought. In
2013, the PERKS brand for employee benefits was
launched and in 2014, it is planned to launch a new
online benefit offering under the ‘myPERKS’ banner,
which will provide everyone with an increasing range
of benefits and greater flexibility to select benefits
which best suit their requirements.
b. individual awards and recognitions
In addition to its extremely popular Sharesave and
pension schemes, the Group has a reward system
which recognises hard work and commitment
as colleagues all strive to deliver business goals;
everyone is able to qualify for the ‘all colleague bonus’.
Recognising those who ‘go that extra mile’ is
also important. Simon Kemp, a yard supervisor in
the Keyline business, received a ‘hero award’ in the
summer of 2013, thanks to his constant drive for
improvement and innovation at our Milton Keynes
branch. Credit Control Manager, Ann Green, has
been recognised for long service and loyalty to the
Group having delivered outstanding support to the
businesses from her Group central function role.
Travis Perkins businesses can probably claim
the highest long service total of any group in the
uK, and the Group is enormously proud that many
people make working in the Group their life’s work.
Their contribution is recognised in many ways, but
one that really generates traction is the ‘long service
award’ system, which recognises long service at
key milestones and rewards with badges as well
as financial incentives. The badges are something
people are proud to wear and strive to achieve.
The wickes business encourages employees to
submit ideas and suggestions via a ‘Bright Sparks’
initiative, a mechanism which certainly generates
interest and engagement. It can also generate
£500 for the employee if their idea is introduced
into the business.
‘Getting it Right’ awards are also a feature of
the Group’s business life, and the scheme allows
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 employees to be recognised at a local level for
making a difference to customers, their colleagues or
the performance of the business. line managers are
encouraged to present colleagues with a £50 high
Street voucher; examples range from exceptional
customer service to contributing to remerchandising
a branch after a refit.
c. External recognition
In 2013, the Group hR team, led by Group hR
Director, Carol Kavanagh, reached the final of the
‘hR Team of the year’ award at the Personnel
Today awards. This leading industry award is
highly regarded, and the Group was delighted that
judges recognised the ‘Impressive, cost-effective
deployment of hR business partners and reduction
in hR costs as a percentage of sales’ that the
Group’s sustainable hR model has delivered, a
model which has contributed to an improvement,
year-on-year, in the Group’s employee engagement
score. This hR business partner model also better
supports the Group’s divisions and its businesses,
by identifying best practices, cost-efficiencies, and
improvements in the areas of talent management,
reward and communication.
.
the law OF attractiOn… anD retentiOn
The success of the Group and the shape of its
businesses are shaped by the people who work in
them. Indeed, it’s driven by them, and it’s a privilege
that the Group is able to attract the most talented,
committed, hard-working people in the building
materials sector. The Group’s diverse culture is
something it’s enormously proud of, and it’s that
diversity of backgrounds, of skills, of expertise
and experience that can be drawn on, developed,
moulded and encouraged at every level of the Group.
a. New ways of engaging people
The changing face of recruitment has probably
been a surprise to some, but for Travis Perkins it
has represented an opportunity and a challenge
it has been quick to embrace. It has made a
significant investment in linkedIn and is actively
encouraging employees to develop their networks
through this platform which, in turn, gives the
Group’s resourcing function better access to key
talent at no or low cost.
b. Developing people and careers
The Group constantly checks and benchmarks
itself to ensure it is better positioned to stay ahead
of its competitors, as each tries to attract and retain
the best people in the market. During the year a
review has been undertaken of the effectiveness
of the structure of the resourcing and succession,
leadership and training and development functions,
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which has identified a number of significant
improvement opportunities. This has led to new
approaches being developed in the following areas:
• Product knowledge, sales and service skills, so
colleagues can provide even better customer
service
• Apprenticeships, group management trainee
schemes and graduate programmes, so the early
careers of the young entrants brought into the
business can be accelerated
• qualifications in leadership development, to help
managers get the best from their people
• Fast track development programmes to
strengthen the Group’s talent pipeline as it grows.
People are able to move between brands sharing
best practice and great ideas
• Tailored safety development to keep colleagues
and customers safe
• A new in-house search company that helps line
managers make excellent recruitment decisions
Management trainee course in progress
an incluSive culture
Internal communications activity regularly shares
group-wide, divisional and business specific
information with employees, using numerous print,
digital and face-to-face channels and mechanisms.
The Group has recently ‘gone google’ and so now
colleagues have a number of google plus social
media channels to draw upon. The Group’s intranet
is widely used and is currently being redesigned to
make it even better.
charitieS anD cOmmunitieS –
a cOllective reSpOnSiBilitY
During the year colleagues across the Group have
engaged in a wide variety of community and
charitable activities. here are just a few examples:
ENgagiNg PEOPlE
54
a. Engaging with communities
• 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. It has also donated part of its branch
in vauxhall, london, to house a new live Train
training centre
• wickes continued its support of the vIy (‘volunteer
It yourself’) project, which combines volunteering
and DIy by challenging young people aged
14-17 to learn trade and building skills on the
job by committing to repair local youth club and
community centre buildings.
• In September, colleagues from wickes’ Tottenham
store joined 40 tradespeople and 270 young
people in a vIy Challenge weekend in September
to renovate four community spaces across london.
The store contributed materials and store manager
Raj Patel supported the Selby Trust Community
Centre in Tottenham with his leadership skills,
helping to coordinate participating tradespeople in
mentoring young people on the job
b. Charity partnerships
• Those who work for City Plumbing Supplies
have stepped up their fundraising activities in
2013 in support of their new partner Teenage
Cancer Trust. Scott hurcombe, manager at City
Plumbing Gloucester described running the
london Marathon this year as ‘the greatest and
most rewarding achievement of my life.’ Scott
raised over £5,000, and is one of many across
the Group who have either trekked across the
highlands, jumped out of planes, ‘broken out of
jail’, climbed mountains, tackled challenge events,
entered our TP’s Got Talent competition or simply
baked cakes
• The Olympic legacy left by Great Britain’s cycling
team has inspired many employees to fundraise
through pedal power this year. In August, 14
Travis Perkins branch colleagues completed the
famous 300 mile london to Paris cycle ride,
raising a staggering £22,000, while colleagues
from Tile Giant conquered the 103 mile trek
along hadrian’s wall to raise £8,300, and eight
people from our Group Property & Environment
team completed the 55 mile london to Brighton
bike ride raising £4,500
Internally, 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, the Group is pleased
to have donated more than £1.9m (2012: £2.1m)
through Group activities, including £142,212
(2012: £165,716) 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.
John Carter
Chief Executive Officer
25 February 2014
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janie Bungey,
sales assistant,
Keyline,
Northampton
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DiRECTORS
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, Americana International
holdings ltd and Somerset-ladbroke Investments
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 other FTSE 100 and 250 boards. he is
Chairman of the Nominations Committee and a
member of the Remuneration and health & Safety
Committees.
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 Deputy Chief Executive in December
2011. he was appointed Chief Executive on
1 january 2014. he is a trustee of the Building
Research Establishment. he is a member of the
health & Safety Committee and Chairman of the
Executive Committee.
chief Financial Officer
Tony Buffin was appointed as Chief Financial
Officer on 8 April 2013. he is a chartered
accountant and was previously with the Coles
Group in Australia where he was Chief Financial
Officer from 2009. Prior to that he was Chief
Executive Officer of the loyalty Management
Group. he is member of the Executive Committee.
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non-executive Directors
Ruth anderson was appointed as a non-executive
director in 2011. She is a non-executive director
of Ocado plc, Coats plc, The Royal Parks – an
executive agency of the Department of Culture,
Media and Sport and a trustee of the charity the
Duke of Edinburgh’s Award. 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 Chairman
of the Audit Committee and a member of the
health & Safety Committee.
John Coleman was appointed as a non-executive
director in 2005. he is a chartered management
accountant and Chairman of AGA Rangemaster
Group plc and a non-executive director of
Bonmarche holdings 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 became Senior
Independent Director in january 2013, and
is a member of the Remuneration, Audit and
Nominations Committees.
Christopher Rogers was appointed as a
non-executive director on 1 September 2013.
he is a chartered accountant, Managing Director
of Costa Coffee and a director of whitbread PlC,
of which he was Group Finance Director from
2005 to 2012. he was Group Finance Director
of woolworth Group PlC from 2001 to 2005
and previously held senior roles in both finance
and commercial functions in Comet Group PlC
and Kingfisher PlC. he was also a non-executive
director of hMv Group PlC from 2006 to 2012.
he is a member of the Audit Committee.
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 llP (Guernsey), Icon
1A GP ltd, British Car Auctions and Gulf Keystone
Petroleum ltd (Bermuda). 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 and a member of the
Nominations Committee.
COMMiTTEES aND
PROFESSiONal aDViSERS
58
cOmmitteeS
Secretary
Deborah Grimason
Audit Committee
Ruth Anderson (Chairman), john Coleman, Christopher Rogers
Remuneration Committee
Andrew Simon (Chairman), john Coleman, Robert walker
Nominations Committee
Robert walker (Chairman), john Coleman, Andrew Simon,
Christopher Rogers, Ruth Anderson
health & Safety Committee
Andrew Simon (Chairman), Ruth Anderson, john Carter, Robert walker
Executive Committee
john Carter (Chief Executive and Committee Chairman)
Tony Buffin (Chief Financial Officer)
Norman Bell (Group Development Director)
Arthur Davidson (Divisional CEO, General Merchanting Division)
Frank Elkins (Divisional CEO, Contracts Division)
Deborah Grimason (Company Secretary & General Counsel)
Carol Kavanagh (Group hR Director)
Martin Meech (Group Property Director)
Ian Preedy (Group Buying Director)
Robin Proctor (Group Supply Chain Director)
Paul Tallentire (Divisional CEO, Plumbing and heating Division)
prOFeSSiOnal aD viSerS
Investment Bankers / Advisors: hSBC Bank plc, Nomura International plc
Corporate Broker:
Citibank, Credit Suisse
Bankers:
Solicitors:
Auditor:
Registrars:
The Royal Bank of Scotland plc, Barclays Bank plc, lloyds Bank plc
linklaters llP, london; Clifford Chance llP, london
Deloitte llP, london
Capita Asset Services
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEmBER 2013
Uk Corporate GovernanCe Code
In the following pages, we explain how the Company has
applied the principles and provisions of the UK Corporate
Governance Code (‘the Code’) during 2013. Since
inevitably, and despite our best efforts, the following pages
can make fairly turgid reading and might appear somewhat
‘boilerplate’, I would like to make the following points by way
of introduction:
• The Board considers that the Company has complied
with the provisions set out in the Code
• The Board invested considerable time and effort to
ensure Geoff Cooper’s retirement as Group Chief
Executive and John Carter’s appointment as Geoff’s
successor was properly planned and executed
• Our initiative of involving our non-executive directors
more extensively in the Group’s businesses has continued
successfully, although rotating businesses among them
has been delayed due to current and future changes in
our non-executive bench
The Board’s 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 Group’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 approved a written statement of the
division of key responsibilities between the Chairman,
and the Chief Executive. This is reviewed annually and no
changes were made in 2013.
The Company maintains directors & officers’ insurance
in respect of the risk of claims against directors. This is
reviewed annually and has been increased for 2014.
All directors have direct access to the Company Secretary
/ General Counsel and may take independent professional
advice in the furtherance of their duties if necessary.
• Although I conducted an internal evaluation of the Board’s
I agree the agenda for board meetings in conjunction with
performance this year, additional steps were taken to
ensure Board performance was kept up to date with best
practice externally. John Coleman (Senior Independent
Director) and I held a separate meeting with Egon
Zehnder (who have conducted over 400 external board
reviews) to compare best practice
• We welcome extensive and regular shareholder
engagement. Each year, we aim to engage early and with
as wide a range of shareholders as possible. We do this to
ensure that we have sufficient time to address significant
shareholder concerns
The following pages summarise the Company’s governance
practices by reference to the five main sections of the Code.
1. Leadership
At 31 December 2013 the Board was made up of five
non-executive directors (including myself as Chairman)
and three executive directors. John Coleman is the Senior
Independent Director. The Board has a schedule of matters
reserved to it, which is reviewed annually. Four items were
added in December 2013:
• Any decision likely to have a material impact on the
Group from any perspective including strategic, financial
or operational
• Approval of a conflicts of interest policy, and authorisation
of any conflicts
• Policies on bribery prevention
• Processes for ensuring a satisfactory dialogue with
shareholders
the Chief Executive and the Company Secretary / General
Counsel. Agendas are based upon an annual plan, but also
include matters of particular interest or concern to the Board
at any particular time.
I monitor the information provided to the Board to ensure
it is sufficient, timely and clear.
I generally contact all the non-executive directors in
advance of Board meetings, to suggest the key issues for
discussion. In particular I discuss the meeting papers with
any director who is unable to attend, to obtain that director’s
views. At the meetings, as Chairman, I ensure that each
director is able to make an effective contribution within an
atmosphere of transparency and constructive debate.
Between board meetings I maintain frequent direct
contact with the executive directors and keep the
non-executive directors informed of material developments.
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 ten Board meetings in 2013 (one 2-day meeting
and one by conference call). Two meetings considered the
Group’s long-term strategy. Eight meetings included either
visits to parts of the Group’s operations or presentations
by senior executives on their areas of responsibility.
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 on the next page.
CORPORATE GOVERNANCE REPORT
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PLC Board
No.
Audit
No.
Remuneration
No.
Nomination Health & Safety
No.
No.
Executive
No.
Number of meetings
Attendances:
Ruth Anderson
Tony Buffin1
Chris Bunker2
John Carter
John Coleman
Geoff Cooper
Paul Hampden Smith3
Philip Jansen4
Christopher Rogers5
Andrew Simon
Robert. Walker
10
10
8
7
10
10
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1
3
4
9
10
4
4
3
3
3
4
-
1
-
1
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4
5
2
1
3
2
5
3
-
1
-
5
5
3
3
2
3
2
3
3
-
2
-
3
3
3
2
-
-
3
-
-
-
-
-
3
3
7
-
5
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7
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1
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1 Appointed April 2013, 2 Retired September 2013, 3 Retired February 2013, 4 Retired may 2013, 5 Appointed September 2013
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 58. 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
On occasions during 2013, sub-committees of the
Executive Committee met to carry out more detailed
reviews of particular areas.
2. effeCtiveness
The Board is satisfied that I and the 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
2013 is on pages 83 to 84.
Appointments 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. The Group’s businesses, both trade and
retail, are trading businesses. Given the highly competitive
and fast moving nature of the markets in which the Group
operates, our preference in seeking future non-executives,
is to attract individuals who have had significant Profit and
Loss experience as CFOs or CEOs; additional expertise in
areas relevant to the Group’s businesses is also valuable.
We support the principles of the Davies Review and the
need for a diverse board, although we do not intend to
commit to specific quotas. We use search firms who will
abide by the voluntary code of conduct which followed the
Davies Review. Our diversity policy is summarised in the
Nominations Committee Report.
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
John Coleman
October 2014 (3 years)
February 2014 (9 years)
Christopher Rogers
August 2016 (3 years)
Andrew Simon
Robert Walker
February 2015 (9 years)
September 2015 (6 years)
The letters of appointment will be available for inspection at
the Annual General meeting.
During 2013 Christopher Rogers joined the Board.
Christopher had most recently been Group CFO at
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Whitbread plc, and is currently Chief Executive of Costa
Coffee, part of Whitbread. In view of the pending retirement
over the next three years of three of our four non-executive
directors, and in order to secure continuity during this period
of change, John Coleman’s appointment was extended
beyond his normal retirement date of February 2014. This
extension will be for a maximum of one year and major
shareholders were consulted on this well in advance.
Induction
We have an induction process for new directors, which is
facilitated by the Company Secretary / General Counsel.
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 Statement of
Principal Risks and Uncertainties on pages 39 to 41.
Executive mentoring by non-executive directors
Each non-executive director is allocated to one or more
of the Group’s businesses and one of the Group’s central
functions. The precise mentoring process is for each
non-executive director to decide, but involves contact and
meetings with the management of the allocated businesses
or functions, and 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 2014.
Evaluation of board performance
Each year, the Board undertakes an evaluation of its
performance and the performance of its committees and
individual directors. The Board’s policy is to engage an
external facilitator to assist this process every three years. In
2007 and 2011, the Board’s performance was reviewed
externally by Egon Zehnder. The Board had no conflict
of interest with Egon Zehnder, who have conducted over
400 external reviews, significantly more than most other
comparable practitioners. In the Board’s experience, finding
qualified practitioners in this area has been particularly
challenging. many companies have emerged to provide this
service, with little or no experience in boardroom practice
and little demonstrable value added; in a sense “taking your
watch to tell you what the time is”. We welcome the recent
initiative to develop a code of practice in this area, although
the first draft circulated in February 2014 is unsatisfactory.
In 2012, the Board carried out an internal review of its
performance. Reviewing the actions identified at that time,
the Board has generally performed well on most, if not all,
items. Executive succession has been comprehensively
managed and progress is underway on future non-executive
succession. Considerable time was invested in group and
individual strategic business initiatives including an externally
facilitated process of challenge; this led to a Capital
markets day presentation on 3 December 2013. Further
streamlining our financial reporting for the Board remains
a work in progress, but should be completed this may. As a
Board, we still need to spend more time on management
succession and development beyond the senior team.
Finally, we continued to involve appropriate and challenging
external expertise in Board discussions.
Turning to 2013, when we once again conducted an
internal performance review. This entailed each director and
the Company Secretary completing a questionnaire about
the performance of the Board and its committees, followed
by individual interviews with myself. Following a separate
meeting with Egon Zehnder to compare best practice,
and referred to above, I prepared a report for the Board in
December. Additionally, the Senior Independent Director also
conducted a review of my own performance.
As a result, the Board determined that it had effectively
managed the achievement of the Company’s objectives
during the year, that the mix of knowledge and skills among
Board members were appropriate, and that the Board
worked cohesively.
For 2014, the following areas for focus, among others,
were identified:
• Continuing to manage non-executive succession
• Honing board processes
• Refreshing the Company’s risk processes
In 2014, an external review of the Board’s performance will
be conducted.
Re-election
At the AGm, all directors 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.
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
is 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
Strategic Report on pages 20 to 30. The Board uses the
Strategic Report to present a full assessment of the Group’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 88.
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.
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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
• Group management’s ability to successfully manage the
principal risks and uncertainties outlined on pages 39 to
41 during periods of uncertain economic outlook and
challenging macro economic conditions
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
It is the responsibility of the Board to establish the risk
framework within which the Group operates. 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 and
managers 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 auditor.
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.
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 2013 are
contained in its report, which is set out on pages 64 to 67.
4. remUneration
The Board has established a Remuneration Committee
consisting of the Chairman and two 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 their own remuneration.
The Committee’s key responsibilities and a description of
its work in 2013 are contained in its report, which is set out
on pages 68 to 82.
5. reLations with sharehoLders
The Company encourages two-way communication with
both its institutional and private investors and responds
promptly to all enquiries received. Each year, the Company
reviews its strategy for engaging with shareholders. In 2013,
the Senior Independent Director, the executive directors and
I, either separately or together, attended a large number of
meetings with analysts, and with shareholders representing
about 50% of the issued share capital.
In December we held our Capital markets day, which was
attended by more than 100 investors and analysts as well
as a number of representatives from the Group’s banks.
The executive directors together with members of our
Executive Committee outlined the Group’s future strategy
for creating shareholder value, our divisional plans and our
capital management strategy. A copy of the presentation is
available in the investor section of our website at
www.travisperkinsplc.co.uk
We make the Senior Independent Director 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, I aim 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 Group published its interim results on its
website and issued two interim management statements.
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.
the board’s fair , baLanCed and
UnderstandabLe deCLaration
At the board meeting during which the Group’s results for
the year were presented by the Chief Executive Officer
and the Chief Financial Officer, the Board also considered
whether the Annual Report and Accounts, when taken as a
whole, present a fair, balanced and understandable overview
of the Group and its performance.
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After:
• Hearing from the executive directors
• Receiving a report from the Chairman of the Audit
Committee on that Committee’s meeting to discuss
the preparation and content of the year end financial
statements and the audit conducted upon them
• Discussing the contents of the Annual Report and
Accounts
• Recognising that the Auditor has stated in their audit
report on pages 89 to 91
“We are required to consider whether we have
identified any inconsistencies between our knowledge
acquired during the audit and the directors’ statement
that they consider the annual report is fair, balanced
and understandable and whether the annual report
appropriately discloses those matters that we
communicated to the audit committee which we
consider should have been disclosed. We confirm that
we have not identified any such inconsistencies or
misleading statements.”
the Board concluded that the Annual Report and Accounts
are fair, balanced and understandable and accordingly the
Directors declaration to that effect can be found in the
Statement of Directors Responsibilities on page 88.
Corporate GovernanCe CompLianCe
statement
I am pleased to report that the Company has complied
throughout the year ended 31 December 2013 with the
provisions set out in the Code.
Robert Walker
Chairman
25 February 2014
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AUDIT COMMITTEE REPORT
FOR THE YEAR ENDED 31 DECEmBER 2013
As Chairman of the Audit Committee, I am pleased to
report below on the Committee’s activities in 2013.
roLe of the a Udit Committee
The Committee is primarily responsible for:
• The integrity of the financial statements of the Group
and any formal announcements relating to the Group’s
financial performance, and reviewing significant financial
reporting judgments contained therein
• Reviewing the Group’s internal financial controls and its
internal control and risk management systems
• monitoring and reviewing the effectiveness of the Group’s
internal audit function and approving its work plans
• 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 Group’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 (which are
reviewed annually and were last updated in December
2013) are available on the Group’s website
(www.travisperkinsplc.co.uk), or on request to the Company
Secretary / General Counsel.
Composition of the a Udit Committee
Chris Bunker was Chairman of the Committee until July
when I assumed the chairmanship. He remained a member
of the Committee until 30 September when he retired
as a Director of the Group. Christopher Rogers joined the
Committee following his appointment as a non-executive
director with effect from 1 September 2013. Christopher is
a chartered accountant and was previously Group Finance
Director at both Whitbread PLC and Woolworth Group
PLC. John Coleman was a member of the Committee
throughout 2013.
All members of the Committee are considered to
be independent and have considerable financial and
commercial experience gained through a variety of
corporate and professional appointments. In particular, the
Board considers that Chris Bunker had, and Christopher
Rogers and I have, the recent and relevant financial
experience required by the UK Corporate Governance
Code (see also the board profiles on pages 56 to 57).
The Company Secretary was secretary to the Committee
throughout 2013.
meetinGs and attendanCe
The Committee held four meetings during 2013 and
attendance at the meetings is shown on page 60. The
Group Chairman, the Chief Financial Officer, the Deputy
Chief Executive, the Group Financial Controller, the Director
of Business Risk and Assurance and the external auditor
also attended most meetings. At each meeting attended,
the external auditor and the Director of Business Risk and
Assurance were given the opportunity to discuss with the
Committee any matters which they wished to raise without
the presence of management. In addition, during the year,
there were a number of meetings between the Chairman
of the Committee and the Director of Business Risk and
Assurance and between the Chairman of the Committee and
the external auditors, without management being present.
work of the Committee
The meetings were arranged to fit around the Group’s half
year and full year financial reporting requirements. The
following areas were covered during the year:
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Financial reporting
Consideration of annual report and accounts
Consideration of interim results
Review of the impact of accounting and governance developments
Internal audit
Terms of reference review
Annual activity plan and resource allocation
Activity review
Appraisal of effectiveness
Systems of internal controls review
External audit
Auditor’s report on their activities
Auditor’s independence and quality control processes
Review of effectiveness of the External Auditors
Review of interim / annual terms of engagement
Review of year-end audit plan
Review of audit and non-audit fees
Risk management
Review of risk management framework
Consideration of fraud, bribery and whistleblowing report
Systems of internal controls review
Audit Committee governance
Terms of reference review
Review of the Committee’s effectiveness
February
May
July
November
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Key topics covered at the meetings and not commented on
elsewhere in this report, were:
• The security of the Group’s information technology
systems
• Restructuring the finance department to reflect the
increasing decentralisation of operating and financial
responsibility throughout the Group
• The impact of decentralisation on the Group’s financial
systems, financial analysis systems and the availability of
management information
In addition to attending the formal Audit Committee
meetings, during the year the Committee members regularly
met with operational and finance staff and received a
number of technical updates.
I am satisfied that the Committee received sufficient,
reliable and timely information from management to enable
it to fulfil its responsibilities during the year.
siGnifiCant issUes reLated
to the finanCiaL statements
The Audit Committee received papers from the Group’s
management team and from the Group’s Auditors that
provided details of the significant financial reporting
estimates and judgements made during the preparation and
presentation of the Group’s interim and annual accounts.
No matters of material significance were identified by the
external auditors during the year and there were no material
audit-related matters that were discussed with investors.
The key issues in respect of the annual accounts
considered by the Committee were the:
• Potential for an impairment to the carrying value of
goodwill and other intangible assets. A number of
judgements are made by management when determining
their estimates of the future cash flows of businesses in
the Group. Those judgements included revenue growth
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rates, on-going margins, overhead increases and the level
of investment required to maintain the individual business’
operating capability. Additionally the rate chosen by
management at which to discount future cash flows and
the allocation of assets and operations to cash generating
units can significantly impact any calculations.
In arriving at its conclusion that no impairment
had occurred, the Committee reviewed the board
approved forecasts, challenged management on the
key assumptions and questioned the Auditors about
management’s application of the accounting rules.
• Systems, processes and controls involved in determining
the value of supplier rebate income recognised in the
accounts. Supplier rebate agreements can be extremely
complicated and are not always coterminus with the
Group’s accounting year-end. As a result, judgements are
made to forecast turnover for those deals where the rate
at which rebate is earned varies dependent upon the
volume or value purchased.
The Committee concluded, following presentations
from management and the Auditors, that rebate income
had been properly reflected in the accounts.
• Application of pension accounting rules to the Group’s
three defined benefit pension schemes. The complex
calculation of pension scheme funding position
undertaken by the Scheme Actuary is dependent upon
key assumptions made by management in respect of
future rates of inflation, investment income, interest rates,
scheme member mortality and contributions in respect of
historical deficits. In addition the FRRP issued guidance on
the application of the IFRIC 14 during the year.
After considering benchmarking information
provided by the Auditors, and updated legal advice
about the rights of the Group in respect of any surplus
in the Travis Perkins defined benefit pension scheme
the Committee decided that management’s pension
scheme assumptions, calculations and disclosures were
acceptable.
• Level of provisioning for liabilities, which included
insurance, warranties, property leases, bad debts, stock
and tax. In determining the values of provisions required
at the year-end, management had to make judgements,
often based upon previous experience, about the future
recoverability of assets or the likelihood of successful
claims to be made against the Group.
In each case management presented to the
Committee the basis of the provision and the key
assumptions applied when quantifying it. In addition
the Committee sought the views of the auditors before
arriving at the conclusion that provisions were fairly stated
in the annual accounts.
externaL aUditor
Appointment and performance
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 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.
In accordance with the recent change to the UK
Corporate Governance Code, it is the Group’s intention to
put the audit out to tender at least every 10 years. The
Committee decided it was not necessary to tender the audit
in 2013, but intends to do so and the tender process will be
completed in time for the 2015 year-end at the latest.
During the year the Committee reviewed the following in
respect of the external auditor:
• 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 the
conduct of the year-end audit and half-year review
including the related risk analyses, terms of engagement,
fees and letters of representation
• 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 Committee specifically discussed the effectiveness
of the external audit process at its meetings of February
and November 2013 and again at its meeting in February
2014. In each case the Committee obtained input from
the Company’s finance team. In particular the Committee
considered the audit of the 2012 report and accounts, the
audit plan for 2013 and the audit of the 2013 report and
accounts, the risk identification process and the future impact
of the divisional reporting structure. The Committee was
satisfied of the effectiveness of the external audit process.
Independence and objectivity
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 external auditor. There has
been no change to this policy, which is summarised below
and is included on the Group’s website at
www.travisperkinsplc.co.uk.
General principle for non-audit work
The external auditors should only be chosen to carry out
non-audit work where its nature makes it more effective
for the work to be carried out by auditors who have existing
knowledge of the Group. The external auditors should
not provide non-audit services where it might impair their
independence or objectivity in carrying out the audit.
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Areas of work
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
Permitted work – 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
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:
• £5,000 to £25,000: Chief Financial Officer
• £25,000 to £50,000: Chief Financial Officer and
Committee Chairman
• £50,000+: Chief Financial Officer 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 Chief Financial Officer reports twice annually to the
Committee on fees for non-audit services payable to the
auditors.
As shown in note 5a to the accounts, during the year
the Auditors were paid £442,000 (2012: £431,000) for
audit-related work, and £188,000 (2012: £129,000) 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,
£837,000 (2012: £347,000) of fees were 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 2013 amount to less than 0.01%
of Deloitte’s UK fee income and considers that the Auditor’s
independence and objectivity has not been impaired by the
non-audit fees paid in 2013.
risk manaGement and internaL ControLs
The Committee reviewed the Group’s internal financial
controls and its internal control and risk management
systems in February 2014. The Committee considered
these systems to have been effective during the year.
Additionally the Executive Committee risk sub group met
ten times during 2013 to consider risk related matters.
There is an intention to review the risk management
systems in 2014 to more closely align them with the
Group’s strategy and corporate plans.
internaL aUdit
The Committee continued to review the plans for work in
2013 throughout the first part of the year and increased
the emphasis on finance matters. At each Committee
meeting the results of internal audits were considered and
the Committee reviewed progress on meeting agreed
recommendations. Risk based plans for work in 2014 were
agreed by the Committee in November 2013.
The Committee, working with the Chief Financial Officer,
reviewed the effectiveness of the internal audit department
and, as a result, the team will be restructured and
strengthened in 2014 through recruitment and the use of
external resources for some specialist area audits.
The Committee was satisfied with the overall
effectiveness of the internal audit function.
overview
As a result of its work during the year, and taking into
account the result of the Board and Committee evaluation
process described on page 61, 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.
Ruth Anderson
Chairman, Audit Committee
25 February 2014
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REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEmBER 2013
This report sets out the Group’s remuneration policies for its
directors and senior executives and how these policies will
be applied in practice. The policy is available to view on the
Company’s website in the investor centre.
UnaUdited information
1. remUneration Committee Chairman’s
statement
Dear Shareholder,
2013 was a year of transition for the reporting of
directors’ remuneration, following the introduction of the
new government regulations on executive remuneration
disclosure. Historically we have always sought to be
transparent in our disclosures and consulted widely with
shareholders on our remuneration proposals and we
have embraced the new regulations as we believe they
will help us to continue to deliver clear and easy to read
remuneration reports.
The policy on directors’ remuneration will be subject to a
binding shareholder resolution at the forthcoming Annual
General meeting (‘AGm’) and every three years thereafter.
The Annual Report on remuneration which describes how
the policy has been applied during the year will be subject to
an advisory resolution at the forthcoming AGm.
In addition we are seeking support via a separate
resolution for the renewal of part of our long term incentive
arrangements. During consultations last year shareholders
were supportive of our remuneration package for directors
and a key element of the package is our co-investment
share matching scheme (‘SmS’). Participants invest in
company shares using their own funds and are eligible for
a matching grant which vests subject to achievement of
cash return on capital employed targets. It is for this scheme
renewal we seek support.
In this, our first report under the regulations, I want to
explain the context of our remuneration philosophy both in
terms of our recent performance but also in relation to our
future business strategy.
remUneration phiLosophy
We remain committed to a remuneration policy that
balances long term shareholder value creation with the
need to motivate, reward and retain high calibre executives.
The principles of our remuneration policy remain unchanged
from previous years.
• Remuneration should be competitive and contribute to
the delivery of short and long-term superior financial
results for shareholders
• Remuneration should contain significant performance
related incentive elements
• Reward mechanisms ensure that a significant proportion
of variable pay is delivered in deferred shares with
clawback provisions ensuring that executives retain a
meaningful personal stake in the Group’s success
• 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 approach to basic salary increases should be
consistent across all colleagues including no pay
increases for mergers and acquisitions activity
performanCe oUtComes
As the Chairman’s report indicated, the strong business
performance in the second half of the year driven by the
delivery of a number of management’s strategic initiatives
resulted in very good full year results. Adjusted EPS was
up 14%, debt levels lower by £104m, and the share price
increased from £12.52 at the time of writing last year’s
report to £18.72 by the end of 2013. We have continued
our progressive dividend policy - this year declaring a full
year dividend of 31.0p, a 24% increase on the previous
year. Over the longer term the Group’s outperformance
has been reflected in the TSR increase from 100% to
742% over 5 years and our move into the FTSE 100,
during 2013. This compares favourably to the market TSR
increase from 100% to 200% over the same period.
This performance is reflected in the remuneration received
by the executive directors for the year under review. Annual
bonus awards for executive directors have been determined
by the Committee based on a rounded assessment of
financial and personal performance. There will be an annual
incentive payout for executive directors and central function
managers of typically 60-65% of the maximum bonus
opportunity. This reflects the fact that whilst performance
in the second half of the year was very strong the tough
conditions in the first half meant that the EPS and ROCE
targets set for 2013 were only partially met. These results
are set out separately in this report on page 26.
As part of determining the 60-65% bonus payment
level the Committee reviewed management’s performance
against a range of strategic objectives which account for up
to 20% of the maximum bonus. These include measures
relating to people and process capability, health and safety
improvements, market competitiveness, business quality,
growth potential and financial performance. Overall the
Remuneration Committee has judged these objectives as
75% achieved with particular success in relation to TSR and
incremental value of investments but with some work to do
against stretching targets for customer engagement, multi-
channel and safe sites.
Levels of bonus awarded therefore reflect actual
performance relative to both annual and longer term
expectations.
Half of the annual bonus earned has been deferred into
shares which are subject to forfeiture if target share prices
are not achieved over the next two years. This mechanism
ensures that there is a meaningful deferral of variable pay
on an ‘at risk’ basis.
We are delighted that across our businesses the majority
of colleagues in our merchanting divisions and central
support functions will also receive a bonus in respect of
2013 performance.
Both short and long term incentive performance
measures are directly linked to driving and rewarding
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REMUNERATION REPORT
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strategic growth initiatives, whilst efficiently managing capital
expenditure, operating expenditure, costs and cash flows.
The performance measures include the following; EPS, TSR,
cashflow, ROCE and broader goals such as market share,
sales growth, colleague engagement and health and safety
improvements. We believe that this balanced basket of
measures, which management find easy to relate to, has
ensured a clear focus on the activities which have driven the
Group’s current position as the largest supplier of building
materials in the UK. Over the last three years the share price
has increased from £10.58 to £18.72 with a 34% increase
in EPS over the same time period. This has been balanced
with an investment and focus on longer term development
areas such as IT, health and safety and training where we
plan to increase levels of investment in the future. The
consistent outperformance in total returns to shareholders
has been achieved through management’s track record of
successfully combining organic and acquisitive growth which
is measured and rewarded through the basket of measures.
The Committee is delighted that this superior longer
term performance resulted in a maximum payment under
the three year individual investment linked share award
measured on CROCE and a 60.7% payout on the measures
linked to the Performance Share LTIP for the awards which
vested in march 2013. Around 200 senior managers
participate in at least one of these plans.
Last year I referred to the Committee’s decision to defer
its decision in relation to the January 2013 management
annual pay review until July 2013 due to the market and
trading performance uncertainty at that time. As a result
of the stronger business performance as the business
approached the second half of the year, it was agreed that
in line with all other management employees, the executive
directors would receive the same 1.5% increase to basic
salary in July 2013 (delayed from January 2013), but this
was not backdated.
In respect of the January 2014 pay review an award
of 2% was agreed reflecting the more positive trading
environment and outlook. This is the seventh successive
year in which the same pay increase has applied to all
employees other than for promotion. The average pay
increase over the last seven years has been 2.2%.
remUneration poLiCy
Our Remuneration Policy is first and foremost designed to
support the Group goal of creating and maintaining long
term shareholder value and returns 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 take this into
account when reviewing 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. Bonus
schemes are designed to incentivise and reward both
individual and team performance.
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,
between 75%-80% of total remuneration for the executive
directors 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 of our most senior
executives to build up a shareholding in the Company
and so we have implemented an increased requirement
for executive directors to hold shares to the value of two
times basic salary to be built up over a five year period.
Participation in our long term incentive schemes will be
restricted or withdrawn if the required shareholding is not
acquired and maintained. At 31 December 2013 both John
Carter and Geoff Cooper had exceeded their target level of
holdings. Tony Buffin has already built up a shareholding of
over 100% of basic salary.
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, high rewards
for executives.
Shareholder consultation
The Remuneration Committee consulted shareholders
during the year on some of the key challenges it faced and
was pleased to gain a high level of support for the decisions
made in a year of major change as outlined in this report,
namely;
• The ‘one off’ share award in relation to securing the
appointment of Tony Buffin as Chief Financial Officer
• The basic salary implemented on the appointment of
John Carter as Chief Executive Officer
• The increase to the fee levels for the roles of
non-executive director and chairman
Remuneration challenges and outcomes
2013 has been a busy year of leadership change and
transition for the Group. Whilst this has presented a number
of challenges the principle guiding both the Remuneration
and Nominations’ committees has been to ensure that the
decisions made by them in all related matters resulted in
continued outperformance of total returns to shareholders
and eliminated risk. In turn this has fully tested the degree
to which our remuneration philosophy, policy and approach
works in practice.
The Committee carefully considered these matters,
consulting shareholders and taking external advice where
necessary, and dealt with each of the matters within the
remuneration policy framework set out on page 71.
The challenges and outcomes can be summarised
as follows:
Recruitment of our Chief Financial Officer
As I set out in last year’s remuneration report, in order to
secure Tony Buffin as Group Chief Financial Officer, it was
necessary to compensate him for part of the significant
cash awards earned at his previous employer, but not yet
paid, which he forfeited on his resignation. The ‘one off’
award was structured on a co-investment basis whereby
Tony Buffin invested £500,000, from his own resources,
purchasing 32,902 Company shares and will, in turn,
receive 65,804 Company shares, half in June 2014 and
half in June 2015 subject to him continuing to be employed
by the Company and also achieving a number of personal
70
DIRECTORS’ REMUNERATION REPORT
objectives in relation to changes and improvements agreed
for the finance function and management information
provision. He will not be able to sell any of these shares until
he has achieved a shareholding of at least two times basic
salary. Full details of the award are detailed on page 79.
Ensuring a smooth transition of the Group’s
finance leadership
As the precise timing of Tony Buffin’s commencement date
could not be confirmed quickly due to his previous employer’s
notice period restrictions it was essential to retain the
services of Paul Hampden Smith for longer than envisaged
under his original retirement timetable. It was agreed that
he would continue in employment until September 30th
2013 to ensure a smooth handover could take place. In
recognition of his commitment and support in this matter
as well as recognising his significant contribution to the
Group’s growth and shareholder returns over the previous
20 years, (demonstrated by the rise in EPS from 21.4p in
1994 to 103.6p), the Remuneration Committee exercised
their discretion in relation to the vesting of his 2012 LTIP
awards. This means that the awards will still be subject to
performance target testing in the normal way, but will not be
time prorated.
Retirement of our Group Chief Executive Officer
As previously communicated to shareholders, Geoff Cooper
confirmed his decision to retire on his 60th birthday,
6 march 2014, and, as part of the succession planning
process, stepped down from his position as CEO on 31
December 2013, the date of John Carter’s appointment as
Chief Executive Officer. All elements of remuneration will be
enacted in line with the remuneration policy applicable to
retirement with no discretions exercised in his favour. Geoff
has agreed to continue as an advisor to John Carter and the
Board for a further 12 months specifically in relation to the
Toolstation business.
The salary agreed for his new advisory role is £100,000
per annum. He will not be eligible for any bonus payments
and no new LTIP awards will be granted during this
transitional period. He will continue to retain awards granted
to him prior to his stepping down from his position as CEO
until his cessation of employment at which point any vesting
of awards will be dependent on the rules of the relevant
scheme for cessation due to retirement.
Appointment of our Group Chief Executive Officer
We commissioned external benchmarking work to assist
us in determining the base salary level for John Carter’s
promotion to Chief Executive Officer. Our main focus was
to ensure we identified the right salary level for John given
that bonus and LTIP levels are already established for the
Chief Executive Officer position and had been approved
by shareholders at the 2013 AGm. In doing this we took
into account not only key market indicators but also John’s
experience, both in the industry and in senior roles in Travis
Perkins, and the rigorous selection process which ultimately
led to his appointment. We were pleased that the majority of
our major shareholders confirmed their support to both the
salary level of £660,000 per annum and the rationale for it.
Whilst some shareholders indicated a general preference for
substantial pay increases to be implemented in two stages
there was recognition that this appointment had been
planned and managed over a few years as demonstrated
by John’s increased responsibilities in the role of Deputy
Chief Executive Officer; this approach ensured that John
Carter ‘hit the ground running’ and the high level of investor
support we received was an important endorsement of the
final appointment decision.
As we do not plan to replace John’s previous role as
Deputy CEO there will be a significantly reduced overall total
board remuneration cost.
Review of fee levels for the Chairman and
non-executive directors
The Board commissioned a review of the Chairman’s and
non-executive directors’ fees which had not been increased
for three years. Based on the independent benchmarking a
decision was made by the appropriate directors to increase
the fee levels to a market median competitive level with a
minimum of 25% of the fee level being paid in shares as
outlined on page 74. We believe that this achieves a better
alignment of interests between non-executive directors and
shareholders and were pleased to receive shareholder support
for this recommendation and also to the decision to bring the
future review timetable in line with all other employees.
forward LookinG
On 3 December 2013 the Company held a Capital
markets day and presented its revised corporate plan
to investors. The plan reflected a significant shift in the
investment strategy of the business compared to the prior
plan. Over recent years the Company strategy has been to
protect returns, achieved through judicious operational cost
and capital control. The 2013 corporate plan recognises
that to exploit the significant growth opportunities over
the next 5 years, a significant cash investment within the
business system infrastructure and the respective network
portfolio would be required in 2014 and 2015. The plan
was well received and endorsed by investors and analysts.
Targets confirmed in last year’s Annual Report for
long term incentives awarded in march 2013 (just prior
to the corporate plan review) were based upon ranges
of 95-105% of planned cashflow and CROCE targets
reflecting the prior business plan. The new corporate plan
and the significant investment in growth outlined therein
means that the cashflow and CROCE ranges for 2013
and beyond need to be amended. The revised 2013 and
the 2014 cashflow and CROCE targets and range are
detailed in the annual report on remuneration. The levels of
investment which give rise to the necessity to adjust these
targets will be closely monitored by the Remuneration and
Audit Committees to ensure that they are satisfied that the
adjustment remains valid and justified. LTI grants made
prior to 2013 will not be revisited.
The adjustment agreed reflects the changes to the
investment profile supported by analysts and shareholders
and ensures that the management group affected (circa 200
employees) are in the same position as they would have
been had the original plan and targets remained unchanged.
The Committee is satisfied that the adjusted targets
are no less demanding than the targets agreed under the
previous corporate plan. These will be reviewed and the
outcomes reported to shareholders at the time the relevant
performance measures are tested in 2015/2016.
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
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 71
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participate in a wider range 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, life
assurance cover, Sharesave, Buy as You Earn shares,
colleague discount, tax-efficient benefits such as childcare
vouchers and the cycle-to-work scheme, a range of
‘voluntary benefits’, and paid annual leave.
In order to improve the accessibility, understanding
and take up of these benefits we launched our colleague
benefits brand PERKS during the year. It has provided
improved communication opportunities and helps
colleagues view and value their total employment
remuneration in the round. We intend to expand this
initiative during 2014, increasing the range of benefits on
offer and further enhancing how these are communicated
and delivered to our colleagues.
Over 19,000 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 2,300 colleagues are
active members of a defined benefit scheme where
company contribution rates are currently 8.8% for the
BSS Group scheme and 12.1% for the Travis Perkins
scheme. Other than Tony Buffin, the executive directors
are not 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
of 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
13.25% of salary. The allowance is not considered as
salary for the purposes of any benefits or incentive plans.
Tony Buffin receives paid pension contributions and paid
allowances totalling 25% of salary.
Our Sharesave scheme continues to be a great success.
In 2013 around 1,750 colleagues shared close to £20m
of gains from five and three year schemes which matured
at the end of the year. The gain for each employee vesting
at the maximum level in the five year scheme was around
£50,000. Following the invitation for the new 2013
Sharesave plan over 8,500 (2012: 7,500) colleagues are
active Sharesave participants.
It only remains for me to thank all the shareholders we
have connected with over the last year for their time and
input to the main change issues we consulted them on and
which are described above. I hope that by listening and
carefully considering the range of different views expressed
we have reached a mutually acceptable outcome for 2013
which our shareholders feel able to support.
Andrew Simon
Chairman, Remuneration Committee
25 February 2014
2. poLiCy report
Our remuneration policies are not unique to our directors.
The same principles underpin how we reward and
compensate all our colleagues. We aim to provide base
pay to all colleagues that is market competitive. We provide
all colleagues with the opportunity to share in our success
through a variety of bonuses and incentive schemes where
return on capital employed measures aligns colleagues
from store and branch operations to the CEO. We provide
all colleagues with the opportunity to prepare for retirement
through participation in our pension plan and our PERKS
colleague benefit brand launched in 2013, covering flexible
benefits, employee discounts, health and welfare benefits
and risk and insurance benefits is all inclusive.
How our policies specifically apply to directors is detailed
below. Subject to shareholder approval these policies will
apply from 28 may 2014. It is intended that the policies will
apply for three years from the date of approval.
fUtUre poLiCy tabLe
Link to
strategy
Operation
remuneration element – base salary
Core element
of total
package,
essential
to support
recruitment
and retention
of high calibre
executives.
Reviewed annually as at 1 January.
Factors influencing decision include:
• Role, experience and individual
performance
• Pay awards elsewhere in the Group
• External market (benchmarked
against the FTSE 75-125
companies)
• General economic environment
Maximum
potential value
Performance
metrics
Remuneration
Committee discretion
None
The Remuneration
Committee (‘The
Committee’) normally
considers the relevant
market median as the
maximum salary level
required.
In the normal course
of events the maximum
salary increase for
executive directors will be
in line with the general
employee increase.
The Committee
retains discretion
to award salaries
of above median
levels or increases
in excess of the
general population
where necessary to
attract high calibre
candidates, to
reflect performance
and recognise
changes in roles and
responsibilities.
The Committee
retains discretion
to review the
appropriate peer
comparator
group used for
benchmarking.
DIRECTORS’ REMUNERATION REPORT
72
Link to
strategy
Operation
remuneration element – benefits
Maximum
potential value
Performance
metrics
Remuneration
Committee discretion
maintain
competitive
package
with range of
benefits for the
director and
their family.
Directors are currently entitled to:
• Private medical insurance
• Income protection
• Annual leave – up to 30 days
• Fully expensed company car (or cash
alternative)
• Life insurance of up to 5 times salary.
remuneration element – pension
Helps
executives
provide for
retirement and
aids retention.
No director actively participates in a
defined benefit pension scheme. Up
to 25% of salary is provided either as
a cash allowance or as part allowance
and part pension contribution. Cash
allowances are paid gross and after
statutory deductions provide a net
benefit of 13.25% of salary.
Pension allowances will not be
included in the salary figure to be used
to calculate bonus or the level of award
under long term incentive plans.
remuneration element – deferred share bonus plan
Rewards
achievement
of annual
financial and
key business
strategy
objectives.
Rewards
personal
performance
measured
against key
objectives.
Deferred
element
encourages
longer term
shareholding
and aligns
reward to
shareholder
interests.
Claw-back
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).
Total bonus level is determined after
the year end, based on achievement of
targets.
50% of the total bonus is paid in
cash within 4 months of the year end.
The remainder of the bonus is deferred
as shares.
Bonus deferred as shares is 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 deferred shares are split into two
equal tranches. Tranche 1 vests if after
1 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 during the
period will be added.
Dividend equivalents on vesting
shares may be paid.
None
Benefit levels reflect
those typically available
to senior managers within
the Group and may be
subject to minor change.
The maximum potential
value being the cost to
the Company to provide
those benefits.
25% allowance or
contribution.
None
-
-
maximum bonus
opportunity under the
plan is 180% of annual
salary.
Bonus measures
include:
• Financial targets
relating to profitability
and return on capital
• Individual or group
targets pertaining
to delivery of the
business strategy
Financial targets are
based on the Group’s
Annual Operating
Plan (‘AOP’) with the
bonus threshold and
maximum bonus set
equidistantly around
AOP. Threshold will
be a maximum of 5%
below AOP.
Performance below
threshold results in
zero bonus. Bonus
earned rises from 0%
to 100% of maximum
bonus opportunity for
levels of performance
between threshold and
maximum targets.
Performance
conditions and
weightings are set out
in the Statement of
Implementation of the
Remuneration Policy in
2014.
The Committee
retains the
discretion to review
the weighting of
measures and to set
the performance
targets and ranges
for each metric
(including the long-
term equity rate
of return which
determines the
rate of vesting of
the deferred bonus
element).
For financial
targets the
Committee will
determine the
amount of bonus
which can be earned
for achievement
of the AOP. This
determination will
be based upon an
assessment of the
degree of difficulty in
achieving the AOP
taking into account
market conditions,
improvement
on prior year
performance
required, and other
relevant factors.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
Link to
strategy
Operation
Maximum
potential value metrics
Performance
remuneration element – performance share plan
Incentivises
participants
to deliver key
financial targets
over a longer
term, with
particular focus
on shareholder
return and the
generation of cash
to fund investment
in growth and long
term sustainability.
Helps retain
high performing
executives.
Awards are granted
in the form of nil cost
options (or a mix of
nil cost options and
approved options at
market price), annually
to participants.
Awards vest after
3 years subject to
achievement of
performance measures
(see aside).
Participation may
be scaled back where
the shareholding
requirement set by the
Committee is not met.
Dividend equivalents
on vesting shares may
be paid.
The
maximum
annual
award for
all executive
directors is
150% of
salary.
Performance measures are:
• EPS Growth
• Aggregate cash-flow
• Relative TSR
Vesting criteria for aggregate cash-flow is set
against a range based on threshold and maximum
performance levels determined by the Group’s
projections for the next 3 years.
TSR awards are measured against an
appropriate peer group.
EPS growth targets are set as a % growth range
(in addition to RPI) over 3 years.
Performance below threshold levels results in
zero vesting. At threshold the amount of the award
vesting rises from 30% to 100% of maximum
bonus opportunity for levels of performance
between threshold and maximum targets.
Performance conditions and weightings are set
out in the Statement of Implementation of the
Remuneration Policy in 2014.
Remuneration
Committee discretion
The Committee
retains discretion
to review the
weighting applied
to measures, and
to set the target
ranges for each
measure.
In addition the
Committee will
review and select
the appropriate
comparator group
for the TSR, or
similar, measures.
73
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remuneration element – share matching scheme
Encourages
a mutual
commitment
whereby
participants
build up a
shareholding in
the Company and
are incentivised
to deliver key
financial targets
over a longer term.
Helps retain high
calibre executives.
Participants are invited
to participate annually.
Each participant buys
shares from their own
resources.
A matching share
award in the form of nil
cost options is made to
each participant, which
vests after 3 years
subject to achievement
of performance target.
Dividend equivalents
on vesting shares may
be paid.
Participants
may invest
up to 50%
of their post
tax salary.
maximum
matching is
2:1 (100%
of salary).
Performance target is Cash Return on Capital
Employed (‘CROCE’).
Vesting range is based on threshold and
maximum performance levels based upon the
Company’s business plan and projections for the
next 3 years.
Performance below the threshold results in zero
vesting. At threshold the amount of the award
vesting rises from 30% to 100% of maximum
bonus opportunity for levels of performance
between threshold and maximum targets.
Performance conditions are set out in the
Statement of Implementation of the Remuneration
Policy in 2014.
The Committee
retains discretion
to review the
weighting applied
to measures, and
to set the target
ranges for each
measure.
remuneration element – special award for John Carter
A one-off award
made following
consultation
with principal
shareholders in
2009
Structured as a nil cost
share option. The award
vests in equal tranches
after completion of years
four, five and six the first
year being 2009.
The award
was made
over
47,612
shares.
The performance conditions which have
been achieved, were 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.
remuneration element – co-investment special award for tony buffin
A one-off award
made following
consultation
with principal
shareholders in
2013 reflecting
compensation
forfeited on
appointment to
Travis Perkins.
Investment of own funds
to acquire £500,000 of
Company shares.
A matching share
award in the form of nil
cost options is made
half vesting 12 months
from grant, half vesting
24 months from grant.
The award
was made
over
65,804 co-
investment
shares.
Fulfilment of specific functional objectives
as defined by the CEO and assessed by the
Remuneration Committee.
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DIRECTORS’ REMUNERATION REPORT
74
Link to
strategy
Operation
remuneration element – all employee share plans
HmRC SAYE and BAYE plans.
Share plans available
to all employees to
encourage wider
share ownership
and engagement
amongst colleagues
Maximum
potential value metrics
Performance
Remuneration
Committee discretion
None
-
In line with
HmRC
and all
colleague
plan limits.
remuneration element – shareholding requirements
Aligns the interests
of executives and
shareholders.
Formal requirement (not voluntary guidelines) applies
to directors and senior executives. Participation in long-
term incentives may be scaled back or withheld if the
requirements are not met or maintained.
For the purposes of assessing compliance with the
shareholding requirement vested, but unexercised awards
will be considered.
-
Executive
directors are
required to hold
shares valued at
two times salary
within 5 years.
The Committee
retains discretion
to increase
shareholding
requirements.
In considering appropriate performance metrics the
Committee seeks to incentivise and reinforce delivery of the
Company’s strategic objectives achieving a balance between
delivering annual return to shareholders and ensuring
sustainable long term profitability and growth. measures
will therefore reflect a balance of direct shareholder value,
such as TSR and those which reflect appropriate investment
strategies, for example, CROCE.
The Committee calibrates these targets by due reference
to general and bespoke market intelligence, lead indicators
and other indicators of the economic environment to ensure
targets represent relative, as well as absolute, achievement.
disCretion
The Committee has discretion in several areas of policy
as set out in this report. The Committee may also exercise
operational and administrative discretions under relevant
plan rules approved by shareholders as set out in those
rules. In addition, the Committee has the discretion to
amend policy with regard to minor or administrative
matters where it would be, in the opinion of the Committee,
disproportionate to seek or await shareholder approval.
The Committee retains discretion in exceptional
circumstances to change performance measures and
targets and the weightings attached to performance
measures part-way through a performance year if there
is a significant and material event which causes the
Committee to believe the original measures, weightings
and targets are no longer appropriate. Any exercise of
this discretion will be explained in full to shareholders.
Discretion may also be exercised in cases where the
Committee believe that the outcome is not a fair and
accurate reflection of business performance.
It is the Committee’s intention that commitments made
in line with its policies prior to the date of the 2014 AGm
will be honoured, even if satisfaction of such commitments
is made post the AGm and may be inconsistent with the
above policies. Such commitments include, but are not
limited to:
• Awards under the Deferred Share Bonus Plan
• Awards under the Performance Share Plan
• Awards under the Share matching Plan
Such commitments remain subject to the share plan rules
and terms and conditions under which they were granted.
non-exeCUtive direCtors’ fees
Non-executive directors’ fees are positioned in line with the
same peer comparator group used for executive directors
at median level. The following fees were reviewed in 2013,
and notwithstanding peer group comparison, will normally
be reviewed on an annual basis in line with inflation and
general movement of pay within the Company.
Fee type
Chairman
Fee
£270,000
Basic fee for other non-executive directors
£55,000
Chair of Audit Committee
Chair of Remuneration Committee
Chair of Health & Safety Committee
Senior Independent Director
£12,000
£12,000
£4,000
£10,000
A minimum of 25% of non-executive director fees are paid
in shares. 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 plans.
reCrUitment remUneration
It is our policy to recruit the best candidate possible for any
executive board position. We seek to avoid paying more
than necessary to secure the candidate and will have regard
to guidelines and shareholder sentiment when formulating
the remuneration package.
Generally we structure salary, incentives and benefits for
candidates in line with the above remuneration policy and
accordingly participation in short and long term incentives
will be on the same basis as existing directors. In all cases we
commit to providing shareholders with timely disclosure of
the terms of any new executive hires including the approach
taken to determine a fair level of compensation. The table on
the next page outlines our normal recruitment policy:
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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Base salary and benefits
The pay of any new recruit would be assessed following
the principles set out in the remuneration policy table.
Pension
The appointee will be able to receive either a contribution
to a personal pension scheme or cash allowance in lieu
of pension benefits in line with the Company’s policy as
set out in the remuneration policy table.
Annual bonus
The appointee will be eligible to participate in
the Deferred Share Bonus Plan as set out in the
remuneration policy table. Awards may be granted up to
the maximum opportunity allowable in the remuneration
policy table at the Remuneration Committee’s discretion.
Long-term incentives
The appointee will be eligible to participate in the
Company’s 2013 Long-Term Incentive Plans (PSP
and SmS) as set out in the remuneration policy table.
Awards may be granted up to the maximum opportunity
allowable under scheme rules at the Remuneration
Committee’s discretion.
Sign-on payments
The Group’s policy is not to provide sign-on payments.
However, in exceptional cases payments to an appointee
may be made when the Committee deem it to be in the
best interests of the Company and shareholders. In such
exceptional circumstances the business reason will be
explained to shareholders at the time of appointment
and put to shareholders at the next AGm. Where
required, a payment can be made in cash or shares and
may be subject to performance conditions and/or a
holding period. Any sign-on payment will be limited to a
value equal to twice annual salary.
Share buy-outs / replacement awards
The Group’s policy is not to provide buy-out as a matter
of course. However, should the Committee determine
that the individual circumstances of recruitment
justified the provision of a buyout, the value of any
incentives that will be forfeited on cessation of a
director’s previous employment will be calculated taking
into account the following:
• The proportion of the performance period completed
on the date of the director’s cessation of employment
• The performance conditions attached to the vesting
of these incentives and the likelihood of them being
satisfied
• Any other terms and conditions having a material
effect on their value (‘lapsed value’)
The Committee may then grant up to the equivalent
value as the lapsed value, where possible, under the
Company’s incentive plans. To the extent that it was
not possible or practical to provide the buyout within
the terms of the Company’s existing incentive plans, a
bespoke arrangement would be used.
Relocation
Where we require a candidate to relocate in order
to take up an executive position or take up changed
responsibilities we will normally reimburse the
reasonable costs of the relocation.
Where an internal candidate is promoted to an executive
position we will honour any contractual commitments made
through their employment prior to the promotion.
Recruitment remuneration for non-executive directors
would be assessed following the principles set out in the
policy for non-executive director fees.
serviCe ContraCts
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 or at the Company’s registered
office. These contracts provide for 6 months’ notice from the
Directors and 12 months’ notice from the Company. They do
not specify any particular level of compensation in the event
of termination or change of control.
• John Carter – 1 January 2014
• Tony Buffin – 8 April 2013
Non-executive directors do not have a service contract, but
each has received a letter of appointment which will be
available for inspection at the AGm or at the Company’s
registered office. These appointments expire on the
following dates:
Director
Expiry of appointment letter
Ruth Anderson
October 2014
John Coleman
February 2014
Christopher Rogers
August 2016
Andrew Simon
February 2015
Robert Walker
September 2015
No compensation is payable on termination of the
employment of non-executive directors, which may be with
or without notice.
poLiCy on p ayment for direCtors
LeavinG empLoyment
Contractual notice periods for directors are normally set at
6 months’ notice from the director and 12 months’ notice
from the Company and the Company would normally
honour contractual commitments in the event of the
termination of a director. Notwithstanding this approach it is
company policy to seek to minimise liability in the event of
any early termination of an executive director’s contract.
We classify terminations of employment arising from
death, ill health, disability, injury, retirement with company
agreement, redundancy or the transfer from the Group of
the employing entity as ‘good leaver’ reasons. In addition the
Committee retains discretion under incentive plan rules to
determine ‘good leaver’ status. In the event such discretion
is exercised, for example, recognising significant long term
contribution to achievement of strategic objectives, a full
explanation will be provided to shareholders.
Leaver reason may impact the treatment of the various
remuneration elements as follows:
DIRECTORS’ REMUNERATION REPORT
76
Remuneration element
Good leaver reason
Salary
Ceases on cessation of employment (salary may be paid in lieu of
notice) unless a pre-existing contractual term applies.
Bonus including
Deferred Share
Bonus Plan*
Unpaid bonus from the period prior to cessation will be paid in full.
A pro-rata bonus may be paid, subject to normal performance
conditions, for the period in which cessation occurs.
Bonus earned and deferred from 2013 onwards will vest at the
normal vesting date on a pro-rata basis.
Bonus earned and deferred prior to 2013 will vest in full at
cessation.
Other leaver reason
Ceases on cessation of employment (salary
may be paid in lieu of notice) unless a
pre-existing contractual term applies.
All unpaid bonus payments lapse.
Deferred bonus payments also lapse.
Benefits
PSP*
SmS*
Provision or accrual of benefits will cease on cessation of
employment.
Provision or accrual of benefits will cease
on cessation of employment.
Normal vesting on a pro-rata basis (full vesting in the event of the
ill health, injury, disability or death of the executive.)
Participation lapses at cessation of
employment.
Vests on a pro-rata basis in year of leaving based on performance
in that period.
Participation lapses at cessation of
employment.
*Leaver vesting provisions are fully defined in the appropriate plan documents
Exceptional circumstances may arise where the Committee
considers it appropriate to exercise discretion in relation
to the terms afforded to departing directors and allow for
pro-rata vesting to be calculated on a basis other than the
director’s leaving date but normal performance conditions
will always apply (other than for the events described in the
table above) and the application of discretion will not be
used to bring forward vesting.
The Committee reserves the right to make additional
payments where such payments are made in good faith
in discharge of an existing legal obligation (or by way of
damages for breach of such an obligation); or by way of
settlement or compromise of any claim arising in connection
with the termination of a director’s office or employment.
In reporting payments to leaving or past directors we
will not normally report payments below a de minimis level
of £5,000.
Illustration of the application of the remuneration policy
Chief Executive Officer
Remuneration (£’000)
Long term variable remuneration
Annual variable remuneration
Fixed remuneration
4,000
3,000
2,000
1,000
0
48%
18%
34%
100%
53%
24%
23%
Minimum
In line with expectations
Maximum
Chief Financial Officer
Remuneration (£’000)
Long term variable remuneration
Annual variable remuneration
Fixed remuneration
3,000
2,000
1,000
0
50%
15%
35%
55%
21%
24%
100%
Minimum
In line with expectations
Maximum
Fixed remuneration includes basic salary, pension provision and other benefits.
Annual variable remuneration includes annual bonus potential under the
Deferred Share Bonus Plan, and includes that part of the bonus which is
deferred as shares and may be subject to malus, but not subject to further
performance targets. Long term variable remuneration includes potential
awards under the Performance Share Plan and Share matching Scheme
as well as that part of the bonus which is deferred as shares and subject to
performance testing. Performance ‘in line with expectations’ assumes, for
annual variable remuneration, performance in line with annual operating plan.
For long-term variable remuneration it assumes mid-range performance
relative to the targets set for each plan. maximum performance means
performance at or in excess of maximum performance targets.
reLationship to CoLLea GUe pay
Pay levels for employees at all levels across the Group are
determined in relation to a number of factors including
economic conditions, affordability, colleague feedback and
market practice. market practice is determined by reference
to relevant market benchmark data, and for all employees
we benchmark at market median for base salary. Recent
executive salary increases have mirrored those increases
applied to our colleagues as a whole.
We do not directly consult with employees when
formulating directors’ remuneration policy, however we are
kept informed of general remuneration feedback from
across the Group and in particular output from employee
opinion surveys and consultation groups.
sharehoLder feedba Ck
We consult widely and in detail with shareholders on our
remuneration policy and its execution. We welcome their
constructive feedback and use this to effectively shape our
approach. During 2013 we consulted widely and actively on
the following issues:
• The appropriate salary on appointment of the new Chief
Executive Officer
• Review of the Chairman of the Board’s annual fee
• The one-off share matching award made to the newly
appointed Chief Financial Officer in recognition of forfeited
cash incentives relating to his previous employment
The 2012 remuneration report received a 77.1% vote in
support at the AGm.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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aUdited information
3. annUaL report on remUneration
Single total figure of remuneration
Salary
2013
£’000
Salary Benefits Benefits
2012 20137
£’000
£’000
Bonus
2012 20138
£’000
£’000
Bonus
LTI
2012 20139
£’000
£’000
LTI Pension Pension
2012
£’000
2013
£’000
Other
2012 201310
£’000
£’000
Total
Other
2012
2013
£’000 £’000
Total
2012
£’000
Geoff
Cooper1
John
Carter
Paul
Hampden
Smith2
Tony
Buffin3
Ruth
Anderson
Chris
Bunker4
John
Coleman
Philip
Jansen5
Christopher
Rogers6
Andrew
Simon
Robert
Walker
657
652
1
1
375
211 1,795 2,478
165
164
-
- 2,993 3,506
504
500
33
34
239
135 1,418 1,604
126
125
17
- 2,337 2,398
294
392
14
18
222
106 1,185 1,620
74
98
21
- 1,810 2,234
365
-
16
59
50
44
67
61
50
29
50
18
-
69
64
235
200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
177
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
91
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
649
59
44
61
29
18
-
50
67
50
50
-
69
64
235
200
Total
2,335 2,025
64
53 1,013
452 4,398 5,702
456
387
38
- 8,304 8,619
1 Geoff Cooper also received, and retained, in respect of his non-executive
9 LTIPs vesting in 2013 were under the Performance Share Plan (PSP), Share
chairmanship of Dunelm plc £110,000 (2012: £100,000) and £66,667
in respect of his non-executive directorship of Bourne Leisure Holdings Ltd.
2 Paul Hampden Smith stood down as Finance Director on 28 February
2013, remaining as a paid employee of the Company until 30 September
2013. Paul Hampden Smith also received, and retained, £30,507 in
respect of non-executive directorship of Pendragon plc and £21,458 for 5
months at Bellway plc.
3 Tony Buffin appointed CFO on 8 April 2013.
4 Chris Bunker retired from the Board on 30 September 2013.
5 Philip Jansen retired from the Board 23 may 2013.
6 Christopher Rogers appointed non-executive director from 1 September
2013.
7 Benefits for 2013 for John Carter, Paul Hampden Smith and Tony Buffin
include private medical insurance and provision of company car or car
allowance. For Geoff Cooper benefits include private medical insurance.
8 For Geoff Cooper, John Carter and Tony Buffin, 2013 bonus payment
reflects half of the bonus earned. The remaining half of the bonus is
deferred under the Deferred Share Bonus Plan (as detailed in the future
policy table) and will be included on vesting. Bonus payments made in
respect of the 2013 financial year reflected an achievement of:
a.
b.
c.
76% achievement of EPS maximum target (achieved 103.6p, plan
101p, maximum 106p) - weighted at 50% of bonus
33% achievement of ROCE maximum target (achieved 11.8%, plan
12%, maximum 12.6%) - weighted at 30% of bonus
75% achievement of Individual targets set against group strategic
objectives (including measures relating to people and process capability,
market competitiveness, business quality, growth potential and financial
performance) reviewed and assessed by the Remuneration Committee
(20% weighting). Any greater disclosure of strategic tracker objectives
would be commercially sensitive and could provide advantage to our
competitors
matching Scheme (SmS) and Sharesave (SAYE).
a. There were three vesting targets under the PSP:
i. Aggregate Cash Flow (40% weighting) – for this element to vest in
full, aggregate cash flow had to exceed £632m. The outcome over
the three years was £718m so this element vested in full
ii. Total Shareholder Return (40% weighting) - during the three year
period the increase in share price, in combination with the dividends
paid, resulted in Travis Perkins being ranked 124th of the companies
in the FTSE 250, just inside the median quartile which resulted in a
12.4% vesting
iii. Earnings per Share (20% weighting) - this is an absolute target
measure (rather than relative to AOP). Over the 3 year period EPS
growth exceeded the minimum target of RPI plus 3% compounded by
3.9%, which was sufficient for an 8.3% vesting. The maximum target
was RPI plus 10% compounded
b.
For the co-investment share matching plan the performance target was
average CROCE for 2010, 2011 and 2012 which needed to be over
8.69% for full vesting. The average achieved was 9.28%.
c.
Awards vesting were as follows:
i. For Geoff Cooper 56,109 shares vested under the PSP, 71,853
shares under the SmS and 3,670 shares under SAYE
ii. For John Carter 32, 730 shares vested under the PSP, 50,296 shares
under the SmS, 3,670 shares under SAYE and 15,870 shares under
the terms of his special share award
iii. For Paul Hampden-Smith 32,730 shares vested under the PSP,
50,296 shares under the SmS and 3,670 shares under SAYE
d.
Vesting LTIPS also includes, where relevant, de minimis vesting of awards
under the all employee Sharesave plan.
10 Other payments includes dividend equivalents arising on exercise of LTIP
awards which vested in prior years for John Carter and Paul Hampden
Smith. For 2013 onwards dividend equivalents are included in the values
for vesting LTIPS.
DIRECTORS’ REMUNERATION REPORT
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direCtors’ pension entitLements
The Company’s defined benefit schemes are closed to new members. Geoff Cooper ceased accrual on 5 April 2006, but
benefits up to that date retain a link to pensionable salary. John Carter ceased accrual on 31 December 2010 and Paul
Hampden Smith ceased accrual on 31 march 2011. The value of the pension under the defined benefit scheme is calculated
using the HmRC method.
A gross cash allowance of 25% of salary was paid to Geoff Cooper, John Carter and Paul Hampden Smith in lieu of
continued accrual. Tony Buffin has received 25% of salary paid as a mix of pension contributions to the defined contribution
scheme and a cash allowance.
Geoff Cooper
£’000
John Carter
£’000
Paul Hampden Smith
£’000
Tony Buffin
£’000
271
60 years
89
60 years
N/A
65 years
Accrued DB pension at 31 December 2013
including revaluation if applicable
5
Normal retirement age
60 years
Additional value of pension on early retirement 0
Pension value in the year from DB scheme
(HmRC method)
Pension value in the year from company
contributions to DC scheme
Pension value in year from cash allowance
Total pension benefit accrued in 2013
1
N/A
164
165
0
N/A
N/A
126
126
0
N/A
N/A
74
74
share interests awarded dUrinG the finanCiaL year
Performance share plan
Type of Award
Basis
Geoff Cooper
Performance shares
John Carter
Tony Buffin
Performance shares
Performance shares
150% of salary
150% of salary
150% of salary
Measure
EPS Growth
Aggregate Cash
Flow over three years
up to 2016
Weighting
Target detail
40%
RPI+ 9.27% over the vesting period
RPI+ 33.1% over the vesting period
Pro-rata vesting between these points
40%
£664m - £734m1
Face value
£978,288
£749,990
£749,991
Vesting range
30% Vests
100% Vests
No Vesting below lower target
30% vests at lower target
Full vesting at upper target
Pro-rata vesting between these points
Company TSR
relative to FTSE 50-
150 Index
20%
Upper half (top 50%)
Upper quartile (top 25%)
Pro-rata vesting between these points
30% Vests
100% Vests
1 The aggregate cash flow target range for the 2013 PSP grant has been adjusted from £767m - £847m to £664m - £734m. This reflects the new corporate plan,
and the significant investment in growth outlined therein, as detailed in the ‘forward looking’ section of the Chairman of the Remuneration Committee statement. All
other plan terms and conditions remain unchanged.
Share matching plan
Type of award
Basis
Geoff Cooper
matching shares
up to 2:1 matching of shares purchased
John Carter
matching shares
up to 2:1 matching of shares purchased
Face value
£647,633
£496,474
Measure
Weighting
Target detail
Matching range
Cash Return on Capital
Employed (CROCE)
100%
7.51% - 8.51%1
0.6:1 matching at lower target
2:1 matching at upper target
Pro-rata matching between these points
1 The CROCE target range for the 2013 SmS grant has been adjusted from 8.64% - 9.64% to 7.51% - 8.51%. This reflects the new corporate plan, and the
significant investment in growth outlined therein, as detailed in the ‘forward looking’ section of the Chairman of the Remuneration Committee statement. All other plan
terms and conditions remain unchanged.
N/A
N/A
37
54
91
Vesting period
Three years
Three years
Three years
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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Deferred share bonus plan
During 2013 a quarter of the bonuses earned in 2012 were issued as deferred shares as follows:
Geoff Cooper
John Carter
Type of award
Basis
Shares
Shares
25% of 2012 bonus
25% of 2012 bonus
Face value
£52,820
£33,748
Shares vest three years from grant, subject to normal leaver provisions.
Special share matching award
In June 2013, in connection with his appointment, Tony Buffin was granted an award to acquire 65,804 shares. Prior to the
grant Tony Buffin pledged to acquire and hold shares to the value of £500,000 by investing his own funds. Half of the award
will vest 12 months after grant and the remaining half 24 months after the date of grant. In both cases vesting is subject to the
maintenance of the investment Tony Buffin has made as well as the fulfilment of specific functional objectives set by the CEO
and assessed by the Remuneration Committee.
Sharesave scheme
John Carter also took up maximum opportunity under the all employee Sharesave (SAYE) plan.
payments to past direCtors
Paul Hampden Smith stepped down as director in 28 February 2013, but continued to be paid while he supported the new
Group Chief Financial Officer, Tony Buffin, up until his retirement on 30 September 2013. The full extent of his remuneration
has been reported in the above Single Total Figure of Remuneration table.
payments for LeavinG direCtors
No payments for loss of office were made during 2013.
Discretion was exercised in relation to the vesting of Performance Share Plan grants made to Paul Hampden Smith in 2011
(56,328 shares, the amount to vest is subject to normal performance conditions and based on current forecasts between
30% - 40% may vest) and 2012 (54,157 shares, the amount vesting is subject to normal performance conditions and based
on current forecasts between 30%-40% may vest). Full performance criteria will apply, however vesting will not be adjusted in
relation to service for the plan years. In applying its discretion the Committee took into account not only that
Paul Hampden Smith agreed to continue in employment whilst he ensured a smooth and complete handover to his successor
when a commencement date had not been confirmed at the time, but also that he had given outstanding service to the
Company over twenty years and had been part of the management team that had overseen an increase in EPS, from 21.4p in
1994 to 103.6p in 2013, through organic growth and acquisitions.
During the year the Company announced the retirement of Geoff Cooper as CEO of the Group and as a director of the
Board from 6 march 2014, with the appointment of John Carter as his successor. Geoff Cooper will remain in the Company’s
employment until 6 march 2015 as a senior management adviser to the new management team. The transition arrangements
are such that our normal policy for good leavers will apply to Geoff Cooper and as such no discretion was applied by the
Committee. Full details will be formally reported in the 2014 remuneration report.
direCtors’ sharehoLdinGs and share interests
Formal shareholding requirements (not voluntary guidelines) apply to executive directors and senior executives. Participation in
long-term incentives may be scaled back or withheld if the requirements are not met or maintained. Executive directors are required
to hold shares valued at two times salary within 5 years. Both Geoff Cooper and John Carter meet the requirement. Tony Buffin is in
the first year of the five years allowed to build up the shareholding and currently meets approximately 60% of the requirement.
Directors’ shareholding and share interests as at 31 December 2013 was as follows:
Executive
director
Beneficial
owner
Conditional
shares granted
under LTI Plans1,2
Unconditional
shares granted
under LTI Plans
Geoff Cooper 81,206
John Carter 168,382
Tony Buffin
33,113
429,462
319,205
118,306
-
-
-
Vested but
unexercised
options
465,461
10,487
-
Total Interests
Exercised
during 2013
976,129
498,074
151,419
19,862
261,452
-
1 Includes awards made under Deferred Share Bonus Plan, Performance Share Plan, Share matching Scheme and Sharesave (SAYE).
2 Vesting of shares subject to plan performance conditions.
Non-executive director
Ruth Anderson
John Coleman
Christopher Rogers
Andrew Simon
Robert Walker
Shareholding
1,231
2,669
111
3,653
84,646
DIRECTORS’ REMUNERATION REPORT
80
historiC Ceo p ay
2009
2010
2011
Single figure remuneration (£’000)
£1,412
£1,423
£1,938
Annual bonus payout (% of maximum)
100%
100%
75.9%
Vesting of share options (% of maximum)
Vesting of Performance Share Plan (% of maximum)
0%
-
Vesting of Share matching Scheme (% of maximum)
0%
-
0%
0%
-
0%
51%
UNAUDITED INFORmATION
ChanGe in remUneration of direCtor UndertakinG the roLe of Ceo
2012
Percentage change
in salary earned
(2013 full year compared
to 2012 full year)
£600m
Percentage change in
bonus opportunity earned
(2013 full year forecast
compared to 2012 full year)
£400m
CEO
Comparative employee group*
0.8%
1.3%
35.9%
£200m
17.9%
2012
£3,506
27.0%
-
80.0%
100%
2013
£2,993
62.9%
-
60.7%
100%
Percentage change in
taxable benefits received
(2013 full year compared
to 2012 full year)
0%
4.6%**
622.3
* Comparative group is all colleagues within the Travis Perkins merchanting Division. This division is the largest division within the Group, covers roles at all levels of
the organisation, and has wide geographic coverage within the UK and consequently provides a broad and diverse basis for comparison. Comparative group data is
provided on a per capita basis. **Average based on ‘like-for-like’ comparison (i.e. colleagues employed and in receipt of taxable benefits in both periods).
For all employees in the comparative group the increase was 1.1%.
Distribution
to shareholders
Employee
remuneration
Corporation
tax
Capex
82.3
51.2
59.2
0
reLative importanCe of spend on p ay
2012
£600m
£400m
£200m
2013
£600m
£400m
£200m
622.3
654.0
0
51.2
Distribution
to shareholders
82.3
Capex
59.2
Corporation
tax
Employee
remuneration
0
65.1
Distribution
to shareholders
107.2
Capex
64.5
Corporation
tax
Employee
remuneration
Capital expenditure is shown, for comparison, as an indicator of investment by the Company in future growth. It includes
funds invested in the purchase of property, plant and equipment. Corporation tax is included as an indicator of the wider
societal contribution facilitated by the Company’s operations and is the actual amount of corporation tax paid in the relevant
2013
reporting periods.
£600m
performanCe Graph and tabLe
For comparative purposes the FTSE 100 index has been selected as this is the index of which the Company is a member.
£400m
654.0
800%
£200m
Travis Perkins plc
FTSE 100
600%
0
65.1
Distribution
to shareholders
107.2
Capex
64.5
Corporation
tax
Employee
remuneration
400%
200%
0%
2008
2009
2010
2011
2012
2013
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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statement of impLementation of the remUneration poLiCy in 2014
In 2014 the Company will implement the remuneration policy outlined above in the future policy table using the following
measures, weightings and targets:
Plan
Individual maximum
opportunity in 2014
Measures and
weighting
Target
Deferred Share
Bonus Plan
CEO - 180%
CFO - 150%
• EPS 50%
• LAROCE 30%
• Business strategy
Targets are determined in line with the Annual
Operating Plan for 2014.
Thresholds for EPS and LAROCE are set at 95% of
20%
AOP.
Performance
Share Plan
CEO - 150%
CFO - 150%
• EPS Growth -
40%
• Aggregate Cash-
flow - 40%
• Relative TSR -
20%
Performance below threshold results in zero bonus.
Bonus earned rises from 0% to 100% of maximum
bonus opportunity for levels of performance between
threshold and maximum targets (105% of AOP).
For achievement of AOP for these measures 50% of
bonus potential can be earned1.
EPS - threshold of 3% p.a. in addition to RPI over 3 years
with full vesting at 10% plus RPI.
The Aggregate Cash-flow range is £802m - £887m
Relative TSR - relative position in FTSE 50 - 150
• Threshold is median relative position
• maximum is upper quartile relative position
For each target performance below threshold levels
results in zero vesting. At threshold the amount of the
award vesting rises from 30% to 100% of maximum
bonus opportunity for levels of performance between
threshold and maximum targets.
Share matching
Scheme
2:1 matching of amount
invested by the executive
from their own resources.
The amount invested
being limited to 50% of
post tax annual salary.
Performance target
is Cash Return on
Capital Employed
(‘CROCE’)
CROCE range is 8.37% - 9.37%.
Performance below threshold levels results in zero
vesting. At threshold the amount of the award vesting
rises from 30% to 100% of maximum bonus opportunity
for levels of performance between threshold and
maximum targets.
1 Specific targets are commercially sensitive, and disclosure of such may provide an unfair advantage to the Company’s competitors. However targets, and the
corresponding level of vesting or bonus earned, will be disclosed retrospectively, in the relevant reporting period.
In relation to salaries and fees:
Salary / fee adjustment
Executive directors
Non-executive directors
Following wide consultation with shareholders John Carter’s salary was increased to
£660,000 p.a. with effect from 1 January 2014 on his appointment to the role of CEO
(2013 - £507,500 p.a., post deferred salary increase effective 1 July 2013).
Tony Buffin’s salary was increased to £510,000 p.a. with effect from 1 January 2014
(2013 - £500,000 p.a.) in line with the general 2% increase awarded to colleagues.
Non-executive directors’ fees were reviewed in 2013, having last been reviewed in 2010.
Following shareholder consultation fees were increased to:
• Chairman - £270,000 p.a. (2013: £200,000 p.a.)
• Non-executive director basic fee - £55,000 p.a. (2013: £50,000 p.a.)
• Chairs of Audit and Remuneration Committees - £12,000 p.a. (2013: £10,000 p.a.)
• Senior Independent Director - £10,000 p.a. (2013: £7,000 p.a.)
• Chair of Health & Safety Committee - £4,000 p.a. (2013: £4,000 p.a.)
DIRECTORS’ REMUNERATION REPORT
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Consideration by the direCtors of matters reLatinG to direCtors’ remUneration.
The Remuneration Committee is responsible for the executive remuneration policy and the remuneration of executives within
the Company. It determines all aspects of the remuneration of executive directors and reviews with the Chief Executive the
remuneration of other senior executives. It also oversees the administration of the Company’s share plans. The Committee’s
terms of reference are available on the Company website or from the Company Secretary.
In 2013 the Remuneration Committee met four times. The Committee discussed amongst other items the following
matters:
Month
February
June
October
December
Key issues considered
Bonuses:
• Review of achievement against 2012 targets
• Revised Deferred Share Bonus Plan
LTIP Awards:
• Review of performance conditions and grants for 2013
• Review of awards vesting in 2013
Review of executive shareholding requirement
Deferred salary and fee review
Leaving arrangements for retiring CEO
Appointment compensation for CEO
Company pay review 2014
Initial review of 2013 remuneration report format
Adjustment of 2013 LTIP awards following significant investment changes in the new corporate plan
Initial review of Executive Committee performance against strategic objectives
Approach to 2013 remuneration report
Discussion on targets for 2014 plans
Extension of the new annual bonus plan to other senior managers
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. PWC LLP was appointed by the Committee to provide it with
advice during the year on executive remuneration. PWC were selected on the basis of their track record of providing robust,
salient and independent advice in matters pertaining to executive remuneration. PWC is a member of the Remuneration
Consultants Group and abides by its code. Fees are determined on a time and materials basis at prevailing market rates
(£14,569 in 2013).
PWC provide additional services to the Company in relation to remuneration including support in developing and
implementing remuneration proposals, compensation benchmarking and other tax and consulting services.
In addition Geoff Cooper (CEO), Tony Buffin (Chief Financial Officer), Andrew Pike (Company Secretary), Carol Kavanagh
(Group Human Resources Director), Stella Girvin (Deputy Company Secretary) and Paul Nelson (Group Head of Reward) have
assisted the Committee in its work, but never in respect of their own remuneration.
sharehoLder votinG
At the last AGm the following resolutions in relation to remuneration were put by the Company:
Resolution
Votes for
% For
Votes against
% Against
Votes withheld % Withheld
Approval of the Annual
Remuneration Report
To approve the replacement
Deferred Share Bonus Plan and to
authorise directors to make
modifications to the Plan
132,598,424 77.1%
35,232,528
20.5%
4,130,032
2.4%
151,206,378 88.0%
20,702,242
12.0%
52,363
0.0%
Approved by the Board and signed on its behalf by:
Andrew Simon
Chairman, Remuneration Committee
25 February 2014
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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NOMINATIONS
COMMITTEE REPORT
FOR THE YEAR ENDED 31 DECEmBER 2013
Dear Fellow Shareholder
In introducing my report for the financial year ending
2013, I thought it would be worthwhile highlighting a
couple of points.
Firstly, successfully managing Chief Executive succession
is probably the most important task facing any nominations
committee or board of directors. At Travis Perkins, we have
sought to manage this issue meticulously over the past two
years. Our overriding objective has been to mitigate any
investor uncertainty surrounding this important decision. To
achieve this, we have:
• Agreed the Company’s long term strategy and the
corresponding need for internal or external succession
• Debated and agreed the balance of skills required
between CEO and CFO
• Announced the appointment of Tony Buffin as CFO,
following Paul Hampden Smith’s decision to retire
• Established a comprehensive development programme
for John Carter, involving each non-executive, and
external facilitation
• Announced Geoff Cooper’s retirement in July 2013 to
allow for orderly succession
• Enabled John to announce his senior executive team in
September 2013, and finally
• Held a Capital markets day presentation of future Group
strategy in December 2013
Throughout these two years, we have sought to keep
our investors fully informed of the process, both to seek
feedback and allay any concerns.
Secondly, and as we look ahead, the key task of the
Nominations Committee for 2014 will be to plan for the
rotation of two non-executives, John Coleman in 2014 and
Andrew Simon in 2015. Both have been key members of
a Board that has served the Company so well.
In seeking to plan for their succession, we are very
clear about the skills and experience required, operating
as we do in fast moving, highly competitive trading and
retailing businesses. We believe our Board is best served
by individuals who have demonstrated a track record of
success in leading such businesses, either as CEOs or CFOs.
managing this succession process will be a key challenge
over the next two years and we plan, as before, to keep our
shareholders fully informed of the process.
roLe
The Committee’s principal responsibility is to ensure that
the Board comprises individuals with the most appropriate
balance of experience, skills and knowledge to help, develop
and support the Company strategy. In order to achieve
this, the Committee requires procedures to be in place that
enable the nomination, selection and succession of the
most capable directors and senior executives.
The Committee is also responsible for considering, and
making recommendations to the Board on succession
planning for directors and other senior executives; in this
sense the Nominations Committee provides a broader role.
The Nominations Committee comprises all the
non-executive directors and is chaired by me other than
when it is dealing with matters in relation to me or the
chairmanship of the Company. The Chief Executive, Chief
Financial Officer and Human Resources Director are invited
to attend when appropriate.
eLeCtion of direCtors
A rigorous selection process precedes the appointment of
all directors by the Board, and their recommendation by the
Nominations Committee.
The performance of each director, the Board and each
sub-committee is reviewed annually as part of the board
evaluation process and I am pleased to confirm that the
Board recommends the election and re-election of all
directors who are standing for election and re-election at our
2014 AGm.
aCtivities in 2013
The Committee operates under formal terms of reference
and met four times during the year. The principal matters
discussed at the meetings were:
• Succession planning for the Board and senior executives
• The management changes following the decisions by
Paul Hampden Smith to retire and leave the business in
2013 and Geoff Cooper to step down as Group Chief
Executive and retire on his 60th birthday, 6 march 2014
• The search process and the appointment of Group Chief
Executive Officer
• Considering and making recommendations to the
Board for the appointment of two new directors and for
changes to the membership of the Committees
• The ‘on-boarding’ process for Tony Buffin, on his
commencement as Group Chief Financial Officer
• Examining the operations of the Committee and
reviewing its terms of reference
board sUCCession
As mentioned in my introductory note (above), the two
key tasks facing the Committee during 2013 were to
successfully manage the succession process, and the
appointment of a new non-executive director, following
the resignation and retirement of Philip Jansen and Chris
Bunker, respectively. In both cases, and after considering
alternatives, the Committee appointed Russell Reynolds
as external independent search consultants. I confirm
that Russell Reynolds have no other relationship with the
Company and have signed up to the voluntary code of
conduct covering board appointments, following the
Davis Review.
John Carter, as Deputy Chief Executive, was the
leading internal candidate to succeed Geoff Cooper
as Group Chief Executive. After considering the needs
of the Company’s five year strategy, extensive external
benchmarking and a structured development programme
specifically designed for John Carter, the Committee
decided to recommend John’s appointment as Group Chief
Executive in July 2013.
84
NOMINATIONS COMMITTEE REPORT
John Carter’s appointment as Group Chief Executive was
announced in July 2013. In order to assist with the smooth
transition following his retirement and stepping down as
a director on 6 march 2014, Geoff Cooper agreed to
continue as an advisor to John Carter on Toolstation Europe
for a further 12 month period.
The Committee also reviewed and approved changes to
John Carter’s future senior management team that were
announced internally in September 2013.
As mentioned above, the search for a new non executive
director was also conducted by Russell Reynolds. The brief
was to attract a proven, successful candidate with broad
experience as a CFO and, if possible, as a general manager.
We were delighted to announce the appointment of
Christopher Rogers, previously CFO of Whitbread PLC and
currently managing Director of Costa Coffee, in July 2013.
Finally, and as a result of Chris Bunker stepping down
from the Board after nine years service, the Nominations
Committee made the following appointments:
• John Coleman as Senior Independent director with effect
from January 2013
• Ruth Anderson as Chair of the Audit Committee with
effect from July 2013
• Christopher Rogers as a member of the Audit Committee
with effect from September 2013
The individuals involved did not participate in discussions
about their appointments.
To support our new executives in getting to know the
business quickly we launched a new Executive On-Boarding
framework aimed at accelerating performance in role.
2014 obJeCtives
As previously outlined, the Committee’s focus in 2014
will be on succession planning in relation to non-executive
directors who are due to step down from the Board as a
result of their length of service.
boardroom diversity
It is our firm belief that having executives and
non-executives on the Board that are diverse in age,
experience, nationality or gender, provides us with different
perspectives. This does not just make good commercial
and business sense, but it is good for our colleagues and
our customers as well.
In addition, we have a clear preference for non-executives
of whatever background, who have demonstrated success
as CFOs or CEOs.
As a result, our job specifications, search processes and
selection criteria are focused on appointing candidates that
not only meet the criteria for the role, but who could also
offer different perspectives. Therefore, diversity, including
gender diversity, was actively considered during the year,
and this will continue to be reflected in future activities.
We are committed to appointing the best people and
ensuring all employees are able to develop their careers
within the Group and therefore do not believe it is
appropriate to set targets in this area.
At our most senior director / manager level we have one
female board director (13%). We currently have 18% of
women on our operating executive. Further details of our
workforce diversity are set out in the Equal Opportunities,
Human Rights and Diversity section of the Corporate
Responsibility Statement on pages 44 and 45.
I will be available at the Annual General meeting to
answer any questions about the work of the Committee.
Robert Walker
Chairman
25 February 2014
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 85
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEmBER 2013
The Directors present their annual report and audited
accounts for the year ended 31 December 2013. The
Corporate Governance statement on pages 59 to 63 forms
part of the Directors’ report.
bUsiness review
A review of the Group’s position, developments and future
prospects can be found in the Strategic report on pages 5
to 55. Whilst the Group operates predominately in the UK
it does have a few branches in the Isle of man, Northern
Ireland and the Republic of Ireland.
GreenhoUse G as emissions reportinG
Details of our green house gas emissions can be found in
the Environmental Report on pages 50 to 51.
resULts and dividends
The Group results for the year ended 31 December 2013
and dividends for the year ending 31 December 2013 are
set out on page 92. If approved, the final dividend will be
paid on 30 may 2014 to those shareholders on the register
at the close of business on 2 may 2014.
baLanCe sheet and post baLanCe
sheet events
The balance sheet on pages 94 and 95 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 is
on pages 39 to 41.
finanCiaL risk mana Gement
Details of the Group’s approach to capital management
and the alleviation of risk through the use of financial
instruments are given in the Financial Review on pages 28
to 30. Specific quantitative information on borrowings and
financial instruments is given in notes 23 and 24 on pages
121 to 127 of the annual financial statements.
direCtors and their interests
In accordance with the Company’s Articles of Association,
Christopher Rogers 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 Christopher Rogers strong
general management and financial background coupled
with his experience in a number of operational roles will
greatly benefit the Company, complement the skills of the
other Board members, and make him an ideal choice as a
non-executive director.
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, John
Carter and Tony Buffin, and non-executive directors Robert
Walker, John Coleman, Andrew Simon and Ruth Anderson
will all seek re-election at the Annual General meeting.
Chris Bunker will not seek re-election because as explained
on page 14 he retired from the Board on 30 September
2013. Likewise Geoff Cooper will not seek re-election
because, as explained on page 13, after 9 years as Chief
Executive Officer, Geoff Cooper retired as a director on
31 December 2013. However he will remain as a part
time senior management adviser, with a particular brief
to assist with the further development of the Group’s
successful Toolstation business, for a period of 12 months
from his retirement.
The names of the Directors at 31 December 2013,
together with their biographical details are set out on pages
56 and 57. All of these Directors held office throughout the
year, except Christopher Rogers who was appointed with
effect from 1 September 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 pages 60 and 61 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.
DIRECTORS’ REPORT
86
The disclosable interests of Directors at 31 December
2013, including holdings, if any, of spouses and of
children aged under 18, were as detailed in the Directors’
Remuneration Report on page 79.
sUbstantiaL sharehoLdinGs
As at 31 December 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 (as at this date no other such notification from
any other shareholder had been received by the Company):
Number
%
Sprucegrove Investment management 13,740,380 5.57%
BlackRock Inc
12,660,084 5.13%
Scottish Widows Investment Partnership 11,149,896 4.52%
UBS
AXA Group
10,447,348 4.23%
9,192,393 3.72%
Pzena Investment management
7,967,518 3.23%
Legal & General Investment management 7,862,297 3.19%
As at 25 February 2014, 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 (as at this date no other such notification from
any other shareholder had been received by the Company):
Number
%
Sprucegrove Investment management
13,734,600 5.56%
Scottish Widows Investment Partnership 10,412,245 4.22%
Axa Framlington Asset management
8,845,432 3.44%
Legal & General Investment management 7,844,251 3.18%
CLose Company statUs
The close company provisions of the Income and
Corporation Taxes Act 1988 do not apply to the Company.
empLoyees
Statements on employee matters are contained in the
Corporate Responsibility Statement on pages 42 to 45.
Details of the number of employees and related costs can
be found in note 7 to the annual 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 Nominations Committee report on page
84 and in the Corporate Responsibility Statement on pages
44 and 45. 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 or sexual orientation, age or disability. In
particular, applications for employment by disabled persons
are always fully considered, bearing in mind the aptitudes
of the person concerned. In the event of a member of staff
becoming disabled, every effort is made to ensure that their
employment with the Group continues and that appropriate
training is arranged. It is the policy of the Company that the
training, career development and promotion of disabled
persons should, as far as possible, be identical to that of
other employees.
The Group’s policies and practices have been 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.
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 themself
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information
This confirmation is given and should be interpreted in
accordance with the provisions of s.418 of the Companies
Act 2006.
share CapitaL and ChanGe of ControL
As at 31 December 2013 the Company had an allotted
and fully paid share capital of 246,786,289 ordinary
shares of 10 pence each, with an aggregate nominal
value of £24,678,628.90 (including shares owned by the
employee share ownership trust). The ordinary shares are
listed on the London Stock Exchange. All the shares rank
pari passu. The rights and obligations attaching to the 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 annual financial statements.
As at 31 December 2013 the Travis Perkins Employee
Share Ownership Trust owned 3,459,161 shares in
the Company (1.40% 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
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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.
There are no agreements providing for compensation
for directors or employees on change of control. As set
out in the Directors’ Remuneration Report on page 75,
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.
By order of the Board,
Deborah Grimason
Company Secretary and General Counsel
25 February 2014
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STATEMENT OF DIRECTORS’
RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEmBER 2013
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
• 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.
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 strategic 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.
deCLaration
The Directors consider that the Annual Report and
Accounts, when taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Group’s performance, business
model and strategy.
By order of the Board
John Carter
Chief Executive Officer
25 February 2014
Tony Buffin
Chief Financial Officer
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 89
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INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS OF
TRAVIS PERKINS PLC
FOR THE YEAR ENDED 31 DECEmBER 2013
opinion on finanCiaL statements of
travis perkins pLC
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 2013
and of the Group’s and the Parent company’s profit for the
year then ended
• Have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union
• 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
The financial statements comprise the 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 IFRSs
as adopted by the European Union.
separate opinion in reLation to ifrss
as issUed by the iasb
As explained in note 1 to the group financial statements,
in addition to complying with its legal obligation to apply
IFRSs as adopted by the European Union, the Group 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.
GoinG ConCern
As required by the Listing Rules we have reviewed the
directors’ statement contained within the Corporate
Governance Statement, that the Group is a going concern.
We confirm that:
• We have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate; and
• We have not identified any material uncertainties that
may cast significant doubt on the Group’s ability to
continue as a going concern
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.
oUr assessment of risks of materiaL
misstatement
The assessed risks of material misstatement described
below are those that had the greatest effect on our audit
strategy, the allocation of resources in the audit and directing
the efforts of the engagement team:
Risk
How the scope of our audit responded to the risk
Carrying value of goodwill and intangible assets
management are required to undertake an annual
impairment review, which incorporates judgments
based on assumptions of future cash flows, including
assumptions around revenue growth, margins and
forecast cash flows, the selection of appropriate
discount rates and the assessment of the Group’s
cash-generating units.
We challenged management’s assumptions used in the impairment
model for goodwill and intangible assets, including specifically
the determination of cash-generating units, the forecast cash flow
projections for each cash-generating unit and the discount rates,
particularly with respect to the Consumer operating segment. In
making this critical assessment of the cash flow projections we
assessed historical forecasting accuracy and compared forecast
profit margins to historical margins and benchmarked the discount
rate and growth rates employed to available market data. We critically
assessed management’s position as to whether or not a reasonably
possible change to key assumptions could result in an impairment.
In doing so we considered the sensitivity of the asset valuations to
adverse outturn versus the forecasts, in particular adverse changes
in the long term growth rate assumed and like-for-like sales. We also
specifically challenged and considered the appropriateness of the
disclosures set out in note 13 and note 14 to the accounts detailing
the point at which the valuation of goodwill and intangibles would
equal their carrying amounts.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TRAVIS PERKINS PLC
90
Risk
Accounting for recognition of supplier rebate income
The Group has entered into certain supplier rebate
arrangements, which include provisions that vary
the amount of rebate due to the Group in line with
volumes purchased or other parameters over periods
that are not necessarily coterminous with the Group’s
financial year. These arrangements are complex and
therefore management judgement is necessary in
relation to recognition of the associated income.
How the scope of our audit responded to the risk
We tested the operating effectiveness of the controls in the supplier
rebate cycle in both 2012 and 2013. A key focus of our work was
on the controls to ensure new agreements entered into during the
year are appropriately captured by management’s reporting systems.
We circularised a sample of suppliers to confirm rebate terms and
balances, verified post year-end cash receipts to assess recoverability
and validity of the amount recognised as receivable at year end. We
also reviewed and challenged management’s calculations to estimate
the impact of rebate agreements on purchases of items held in stock
at year end.
Inventory valuation
Inventory valuation, including recognition at cost after
appropriate adjustment for supplier rebates, and
allowances to recognise inventories at the lower of
cost and net realisable value.
We performed substantive audit testing over the valuation of inventory
balances, including attendance at inventory counts. We critically
assessed and challenged the adjustments made to gross inventory
balances, including adjustments for stock handling costs, supplier
rebates and slow moving/obsolete stock to determine that the
provisions recorded were appropriate.
Provisions for liabilities
The Group incurs certain liabilities in the normal
course of business where assessment of the related
provision requires the exercise of judgement, including
in respect of self-insurance and property leases.
Income taxes
The Group is required to consider the extent to
which the impact of uncertain tax positions should
be recognised within the current and deferred
taxation charge for the year and related current and
deferred taxation assets and liabilities in the financial
statements.
We assessed the Group’s provisions for self-insurance in light of
evidence from the Group’s insurance advisors and critically assessed
the appropriateness of the assumptions by the Group’s property
specialists applied in determining the level of property provisions
recognised in the financial statements. We assessed and challenged
the assumptions around the length for which properties are expected
to remain vacant, the judgments around sub-letting, and the cost
assumptions applied throughout the onerous periods.
We challenged management’s determination of the Group’s
accounting for income taxes, using our taxation specialists to assess
the judgements made, including the level of provision maintained
for any uncertain tax positions, in light of evidence that included
correspondence with the relevant tax authorities.
The Audit Committee’s consideration of these risks is set out
on pages 65 and 66.
Our audit procedures relating to these matters were
designed in the context of our audit of the financial
statements as a whole, and not to express an opinion on
individual accounts or disclosures. Our opinion on the
financial statements is not modified with respect to any of
the risks described above, and we do not express an opinion
on these individual matters.
oUr appLiC ation of materiaLity
We define materiality as the magnitude of misstatement
in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person
would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the
results of our work.
We determined materiality for the group to be £22
million, which is below 7.5% of pre-tax profit.
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess of
£0.3 million, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. We
also report to the Audit Committee on disclosure matters
that we identified when assessing the overall presentation of
the financial statements.
an overview of the sCope of oUr a Udit
Our group audit was scoped by obtaining an understanding
of the Group and its environment, including group-wide
controls, and assessing the risks of material misstatement at
the group level. The senior statutory auditor was involved in
all decisions including the risk assessment and approach to
group-wide controls testing. Based on that assessment, we
focused our group audit scope primarily on the Group’s four
principal divisions. These principal divisions are the Group’s
four operating segments and represent 99% of the Group’s
net assets, the Group’s revenue and the Group’s profit
before tax. Our statutory audits were executed at levels of
materiality applicable to each individual entity, which were
much lower than group materiality.
At the parent entity level we also tested the consolidation
process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material
misstatement of the aggregated financial information of
the remaining components not subject to audit or audit of
specified account balances.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 91
S
T
N
E
m
E
T
A
T
S
L
A
I
C
N
A
N
I
F
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 Strategic Report and 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
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• We have not received all the information and explanations
we require for our audit; or
• 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 are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required
to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the
Directors’ Remuneration Report to be audited is not in
agreement with the accounting records and returns. We
have nothing to report arising from these matters.
Corporate governance statement
Under the Listing Rules we are also required to review the
part of the Corporate Governance Statement relating to
the Company’s compliance with nine provisions of the UK
Corporate Governance Code. We have nothing to report
arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland),
we are required to report to you if, in our opinion, information
in the annual report is:
• materially inconsistent with the information in the audited
financial statements; or
• Apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in
the course of performing our audit; or
• Otherwise misleading
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge
acquired during the audit and the directors’ statement
that they consider the annual report is fair, balanced and
understandable and whether the annual report appropriately
discloses those matters that we communicated to the
Audit Committee which we consider should have been
disclosed. We confirm that we have not identified any such
inconsistencies or misleading statements.
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.
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.
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 and to identify any information that is apparently
materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Colin Hudson FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
25 February 2014
Income statements
FOR THE YEAR ENDED 31 DECEmBER 2013
92
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––
Pre-exceptional
items
Exceptional
items
Notes
£m
£m
Total
£m
Pre-exceptional
items
*(Restated)
£m
Exceptional
items
Total
£m
*(Restated)
£m
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
Attributable to:
Owners of the Company
Non-controlling interests
Earnings per ordinary share
Basic
Diluted
Total dividend declared
per ordinary share
4
5
5a
5d
9
9
10a
11a
11b
12
5,148.7
347.6
(17.9)
329.7
-
3.7
(30.2)
303.2
(68.0)
235.2
-
-
-
-
9.4
-
-
9.4
20.1
29.5
5,148.7
4,844.9
-
4,844.9
347.6
(17.9)
325.7
(17.4)
(8.7)
317.0
-
(17.4)
329.7
308.3
(8.7)
299.6
9.4
3.7
(30.2)
312.6
(47.9)
264.7
-
2.7
(42.6)
268.4
(66.0)
202.4
39.5
-
-
30.8
15.5
46.3
39.5
2.7
(42.6)
299.2
(50.5)
248.7
235.1
29.5
264.6
202.4
46.3
248.7
0.1
-
0.1
-
-
-
235.2
29.5
264.7
202.4
46.3
248.7
109.9p
105.7p
31.0p
104.3p
100.6p
25.0p
All results relate to continuing operations. Details of exceptional items are given in notes 5d and 10.
* Where on the following pages it refers to a restatement, that is in respect of the movement in the pension liability recognised due to minimum
funding requirements (note 28) and / or, as in the case of the income statement and statement of comprehensive income, is due to the adoption of
the new International Financial Reporting Standard IAS 19 (revised 2011) (note 5e).
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
Income statements continued
FOR THE YEAR ENDED 31 DECEmBER 2013
Revenue
Operating profit
Exceptional investment income
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Notes
4
5a
5d
9
9
10a
All results relate to continuing operations. Details of exceptional items are given in note 5d.
THE COmPANY
––––––––––––––––––––––––
93
2013
£m
129.0
102.9
9.4
4.0
2012
£m
82.1
62.3
37.4
3.7
(45.2)
(50.8)
71.1
14.1
85.2
52.6
13.2
65.8
Statements of comprehensive income
FOR THE YEAR ENDED 31 DECEmBER 2013
THE GROUP
––––––––––––––––––––––––––
2013
Notes
£m
2012
*(Restated)
£m
THE COmPANY
––––––––––––––––––––––––––
2013
2012
£m
£m
Profit for the year
264.7
248.7
85.2
65.8
Items that will not be reclassified subsequently to profit and loss
Actuarial gains / (losses) on defined benefit pension schemes
Deferred tax rate change on actuarial movement
Income tax relating to items not reclassified
28g
10b
10b
34.0
(11.5)
(7.0)
(22.1)
(7.1)
5.1
15.5
(24.1)
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
10b
(5.0)
6.1
0.8
(0.3)
1.6
(8.5)
8.8
4.1
(0.9)
3.5
Other comprehensive income for the year net of tax
17.1
(20.6)
-
-
-
-
(5.0)
6.1
0.8
(0.3)
1.6
1.6
-
-
-
-
(8.5)
8.8
4.1
(0.9)
3.5
3.5
Total comprehensive income for the year
281.8
228.1
86.8
69.3
FINANCIAL STATEMENTS
Balance sheets
AS AT 31 DECEmBER 2013
94
Assets
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
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
Notes
13
14
15
24
16
17
17
17
26
18
24
19
THE GROUP
––––––––––––––––––––––––––
2013
£m
2012
(Restated)
£m
THE COmPANY
––––––––––––––––––––––––––
2013
2012
£m
£m
1,813.9
1,807.5
409.8
609.9
9.3
0.4
7.3
-
2.7
-
424.8
578.4
12.8
0.4
6.7
-
2.4
-
-
-
0.1
9.3
-
7.7
-
-
0.2
12.8
-
6.2
3,588.8
3,572.9
-
-
18.2
14.2
2,853.3
2,833.0
3,624.1
3,606.3
687.7
822.9
-
637.1
733.7
12.7
79.8
139.1
-
-
133.1
180.7
-
7.3
12.7
74.0
1,590.4
1,522.6
140.4
267.4
4,443.7
4,355.6
3,764.5
3,873.7
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
Equity and liabilities
CAPITAL AND RESERVES
Issued capital
Share premium account
merger reserve
Revaluation reserve
Hedging 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
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
Notes
20
22
22
22
22
22
22
22
23
24
28
25
27
26
23
27
24
25
THE GROUP
––––––––––––––––––––––––––
2013
£m
2012
(Restated)
£m
THE COmPANY
––––––––––––––––––––––––––
2013
2012
95
£m
£m
24.7
498.0
326.5
18.4
-
24.5
487.2
326.5
20.1
(1.6)
(40.6)
(62.4)
(1.7)
-
24.7
496.9
326.5
-
-
(40.6)
-
24.5
486.1
326.5
-
(1.6)
(62.4)
-
1,689.9
1,461.3
214.3
204.0
2,515.2
2,255.6
1,021.8
977.1
421.6
195.2
363.9
134.9
4.5
71.4
20.7
1.9
-
4.9
125.9
20.0
47.0
-
4.5
4.9
-
-
-
-
1.9
47.0
2,308.0
2,243.4
61.3
69.1
-
-
581.4
462.1
2,678.3
2,430.2
5.8
396.1
1,218.1
1,107.6
1.8
73.2
48.2
2.6
74.8
56.8
3.2
59.4
1.8
-
-
444.9
18.9
2.6
-
-
1,347.1
1,637.9
64.4
466.4
1,928.5
2,100.0
2,742.7
2,896.6
Total equity and liabilities
4,443.7
4,355.6
3,764.5
3,873.7
The financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on
25 February 2014 and signed on its behalf by:
John Carter
Chief Executive Officer
Tony Buffin
Chief Financial Officer
FINANCIAL STATEMENTS
Consolidated statement of changes in equity
FOR THE YEAR ENDED 31 DECEmBER 2013
96
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Issued
share
capital
£m
Share
premium
account
£m
merger Revaluation
reserve
reserve
£m
£m
Hedging
reserve
£m
Own
shares
£m
Accumulated
profits
£m
Other
£m
Total
equity
£m
Previously reported at
1 January 2012
24.4 480.8 326.5
20.8
(5.1)
(75.2)
- 1,335.6 2,107.8
Prior period restatement (note 5e)
-
-
-
-
-
-
-
(58.4)
(58.4)
At 1 January 2012 (restated)
24.4 480.8 326.5
20.8
(5.1)
(75.2)
- 1,277.2 2,049.4
Profit for the year (restated)
Other comprehensive income
for the period net of tax (restated)
Total comprehensive income
for the year (restated)
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 10c)
Credit for equity-settled share
based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.4)
(0.2)
0.9
-
-
-
3.5
3.5
-
-
-
-
-
-
-
-
-
-
-
12.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
248.7
248.7
(24.1)
(20.6)
224.6
228.1
(51.2)
(51.2)
(10.4)
8.9
1.4
0.2
-
4.3
-
-
0.9
4.3
15.2
15.2
At 31 December 2012 (restated)
24.5 487.2 326.5
20.1
(1.6)
(62.4)
- 1,461.3 2,255.6
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
10.8
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 10c)
Foreign exchange
Fair value of put option (note 29)
Credit for equity-settled share
based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2.8)
(0.2)
1.3
-
-
-
-
At 31 December 2013
24.7 498.0 326.5
18.4
-
1.6
1.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21.8
-
-
-
-
-
-
-
0.1
264.6
264.7
-
15.5
17.1
0.1
280.1
281.8
-
-
-
-
-
-
-
(1.8)
(65.1)
(65.1)
(18.9)
13.9
2.8
0.2
-
15.7
0.1
-
-
-
1.3
15.7
0.1
(1.8)
-
13.7
13.7
(40.6)
(1.7) 1,689.9 2,515.2
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
Statement of changes in equity
FOR THE YEAR ENDED 31 DECEmBER 2013
At 1 January 2012
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
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
THE COmPANY
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
97
Issued
share
capital
£m
Share
premium
account
£m
merger
reserve
£m
Hedging
reserve
£m
Own Accumulated
profits
£m
shares
£m
Total
equity
£m
24.4
479.7
326.5
(5.1)
(75.2)
192.5
942.8
-
-
-
-
-
-
-
-
0.1
6.4
-
-
-
-
-
-
-
-
-
-
-
-
3.5
3.5
-
-
-
-
-
-
-
-
65.8
65.8
-
3.5
65.8
69.3
(51.2)
(51.2)
12.8
(10.4)
-
-
3.0
4.3
8.9
3.0
4.3
24.5
486.1
326.5
(1.6)
(62.4) 204.0
977.1
-
-
-
-
-
-
-
-
0.2
10.8
-
-
-
-
-
-
-
-
-
-
-
-
1.6
1.6
-
-
-
-
-
-
-
-
-
85.2
85.2
-
1.6
85.2
86.8
(65.1)
(65.1)
21.8
(18.9)
13.9
-
-
5.3
3.8
5.3
3.8
(40.6) 214.3 1,021.8
At 31 December 2013
24.7
496.9
326.5
FINANCIAL STATEMENTS
Cash flow statements
FOR THE YEAR ENDED 31 DECEmBER 2013
98
Operating profit before amortisation and exceptional items
347.6
325.7
102.9
THE GROUP
––––––––––––––––––––––––––––––
THE COmPANY
––––––––––––––––––––––––––––
2013
£m
2012
(Restated)
£m
2013
2012
£m
Adjustments for:
Depreciation of property, plant and equipment
Other non cash movements
Losses of associate
Gain on disposal of property, plant and equipment
Operating cash flows before movements in working capital
Increase in inventories
(Increase) / decrease in receivables
Increase / (decrease) 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 and equipment
Purchases of property, plant and equipment
Interest in associate
Investments in subsidiaries
Acquisition of businesses net of cash acquired (note 29)
Net cash used in investing activities
Financing activities
Net proceeds from the issue of share capital
Net movement in finance lease liabilities
Decrease in loans and liabilities to pension scheme
Dividends paid
Net cash from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
71.3
13.7
2.5
(18.1)
417.0
(48.5)
(83.6)
61.5
(4.6)
(22.6)
319.2
(21.0)
(59.2)
239.0
0.5
16.9
(107.2)
(2.9)
-
(9.3)
(102.0)
13.9
(2.1)
(143.0)
(65.1)
(196.3)
(59.3)
139.1
69.4
16.1
0.3
(17.1)
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
Cash and cash equivalents at end of year (note 19)
79.8
139.1
£m
62.3
-
4.3
-
-
66.6
-
81.8
682.8
-
-
831.2
(41.2)
-
0.1
3.8
-
-
106.8
-
41.6
63.8
-
-
212.2
(21.9)
-
190.3
790.0
-
s-
(0.1)
(1.3)
0.1
-
-
(2.2)
(13.2)
(600.6)
-
-
(14.6)
(602.7)
13.9
-
(190.6)
(65.1)
8.9
-
(70.0)
(51.2)
(241.8)
(112.3)
(66.1)
73.4
7.3
75.0
(1.6)
73.4
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
99
Notes to the financial statements
FOR THE YEAR ENDED 31 DECEmBER 2013
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 149. The nature of the Group’s operations and its
principal activities are set out in the Strategic Report on pages 6 to 55.
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 (‘IASB’). 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 over the investee
• Is exposed or has rights to a variable return from the involvement
with the investee
• Has the ability to use its power to affect its returns
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 IAS 19 (as
revised in June 2011) retrospectively and in accordance with the
transitional provisions. As the Group has always recognised actuarial
gains and losses immediately there is no effect on the prior year
defined benefit obligation and balance sheet disclosure arising from
this change. 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 is
shown in note 5e.
The following new and revised Standards and interpretations
have been adopted in the current year. Their adoption has not had
any significant impacts on the amounts reported in these financial
statements although disclosures have been amended to reflect new
requirements:
• IAS 27 (revised) Separate Financial Statements
• IAS 28 (revised) Investments in Associates and Joint Ventures
• IFRS 10 Consolidated Financial Statements
• IFRS 11 Joint Ventures
• IFRS 12 Disclosure of Interests in Other Entities
• IFRS 13 Fair Value measurements
At the date of the approval 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:
• IFRS 9 Financial Instruments
• IAS 32 (amended) Offsetting Financial Assets and Financial
Liabilities
• IFRS 7 (amended) Disclosures – Offsetting Financial Assets and
Financial Liabilities
• IAS 36 (amendments) Recoverable Amount Disclosures for
Non-Financial Assets
• IAS 39 (amendments) Novation of Derivatives and Continuation of
Hedge Accounting
• Improvements to IFRSs – minor amendments
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.
The Directors are currently of the opinion that the Group’s forecasts
and projections show that the Group should be able to operate within
its current facilities and comply with its banking covenants. The Group
is, however, exposed to a number of significant risks and uncertainties,
which could affect the Group’s ability to meet management’s 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.
Detailed considerations of going concern, risks and uncertainties
are provided in the Corporate Governance Report and in the Strategic
Report on pages 61 and 62 and pages 39 to 41 respectively.
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 and the effect of changes in corporation tax
rates on deferred tax balances.
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
FINANCIAL STATEMENTS
100
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.
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
The carrying amounts of the Group’s tangible and intangible assets
with a definite useful life 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. The recoverable amount of an asset is the greater
of its fair value less disposal cost and its value in use (the present
value of the future cash flows that the asset is expected to generate).
In determining value in use the present value of future cash flows is
discounted using a pre tax discount rate that reflects current market
assessments of the time value of money in relation to the period of the
investment and the risks specific to the asset concerned.
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. When the reasons for a write down no longer exist
except in the case of goodwill the write down is reversed in the income
statement up to the net book value that the relevant asset would have
had if it had not been written down and if it had been depreciated.
For intangible assets that have an indefinite useful life the recoverable
amount is estimated at each annual balance sheet date.
Inventories
Inventories, which consist of goods for resale, are stated at the lower
of average weighted cost and net realisable value. Cost comprises
direct materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories to their
present location and condition. Net realisable value is the estimated
selling price less the estimated costs of disposal.
Financial instruments
Financial assets and liabilities are recognised in the balance sheet
when the Group becomes a party to the contractual provisions of
the instrument.
Trade receivables
Trade receivables are measured at amortised cost, which is carrying
amount less provision for irrecoverable amounts. Allowances for the
estimated irrecoverable amounts are made in the income statement
when the receivable is considered to be uncollectible.
Impairment of financial assets
Financial assets are treated as impaired when in the opinion of the
Directors, the likelihood of full recovery is diminished by either events or
change of circumstance.
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 101
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.
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
FINANCIAL STATEMENTS 102
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.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
recognised as an expense when employees have rendered services
entitling them to the contributions.
For defined benefit schemes, the cost of providing benefits is
determined using the projected unit credit method with actuarial
valuations being carried out at the end of each reporting period.
Re-measurement comprising actuarial gains and losses, the effects
of asset ceilings and minimum funding payments and the return
on scheme assets (excluding interest) are recognised immediately
in the balance sheet with a charge or credit to the statement of
comprehensive income. Re-measurement recorded in the statement
of comprehensive income is not recycled. Net interest is calculated by
applying a discount rate to the net defined benefit liability or asset. Net
interest expense or income is recognised within finance costs.
Where the Group is committed to pay additional contributions under
a minimum funding arrangement and it has no unconditional right
to receive any surplus in a winding up of the scheme, the pension
obligation recognised in the financial statements is the higher of the
IAS 19 (revised 2011) obligation or the net present value of future
minimum funding payments, discounted using the IAS 19 (revised
2011) discount rate, to which the Group is unconditionally committed.
Employee share incentive plans
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.
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
Equity instruments represent the ordinary share capital of the Group
and are recorded at the value of 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 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 other 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 strategic 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.
Pension assumptions
The Group has chosen to adopt assumptions that the Directors believe
are generally in line with comparable companies. If the future return
on equities, applied to the pension scheme liabilities, is lower than
anticipated, or if the difference between actual inflation and the actual
increase in pensionable salaries is greater than that assumed, or if
long term interest rates were lower than assumed, or if the average life
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 expectancy of pensioners increases, then the pension deficit would be
greater than currently stated in the balance sheet. Where the pension
obligation is included in the balance sheet at the net present value of
the minimum funding payments then the impact on the balance sheet
of changes in these assumptions is reduced.
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.
103
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.
4. Revenue
Sale of goods
management charges
Dividends from subsidiaries
Other operating income
Finance income
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
5,148.7
-
-
5,148.7
4.9
3.7
5,157.3
4,844.9
-
-
4,844.9
4.3
2.7
4,851.9
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
2013
£m
-
8.0
121.0
129.0
-
4.0
133.0
£m
-
7.9
74.2
82.1
-
3.7
85.8
Like-for-like sales are a measure of underlying sales performance for two successive periods. Branches contribute to like-for-like sales once they have
been trading for more than 12 months. Revenue included in like-for-like is for the equivalent times in both years being compared. When branches
close, revenue is excluded from the prior year figures for the months equivalent to the post closure period in the current year.
5. Profit
a. Operating profit
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administrative expenses
Profit on disposal of properties
Other operating income
Share of results of associate
Operating profit
Add back exceptional items
Add back amortisation of intangible assets
Adjusted operating profit
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
5,148.7
(3,616.6)
1,532.1
(941.5)
(280.7)
17.4
4.9
(2.5)
329.7
-
17.9
347.6
4,844.9
(3,381.1)
1,463.8
(907.8)
(275.4)
15.0
4.3
(0.3)
299.6
8.7
17.4
325.7
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
2013
£m
129.0
-
129.0
-
(26.1)
-
-
-
102.9
-
-
102.9
£m
82.1
-
82.1
-
(19.8)
-
-
-
62.3
-
-
62.3
FINANCIAL STATEMENTS
104
5. Profit continued
Operating profit has been arrived at after charging / (crediting):
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
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
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’s remuneration for audit services
(3.0)
3,619.6
0.5
6.7
14.9
71.3
631.8
(18.1)
(5.0)
35.8
184.1
17.9
0.5
(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
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
-
-
-
0.3
-
-
12.1
-
-
-
-
-
0.1
-
-
-
0.4
-
-
11.5
-
-
-
-
-
0.1
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£000
2013
£000
107
335
94
94
630
106
325
73
56
560
Audit related assurance services includes £21,328 (2012: £18,000) 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 64 to 67, and includes an explanation of how
auditor objectivity and independence is safeguarded when the auditor provides non-audit services.
b. Adjusted operating margin
General
merchanting
––––––––––––––––––––––
2012
2013
Specialist
merchanting
––––––––––––––––––––––
2012
2013
Consumer
––––––––––––––––––––––
2012
2013
Plumbing
and Heating
––––––––––––––––––––––
2012
2013
£m
£m
£m
£m
£m
£m
£m
£m
2013
Unallocated
––––––––––––––––––––––
2012
(Restated)
£m
£m
Group
––––––––––––––––––––––
2012
(Restated)
2013
£m
£m
Revenue
1,578.4 1,456.7
660.3 603.6 1,179.8 1,152.5 1,730.2 1,632.1
-
- 5,148.7 4,844.9
Segment result
Amortisation of
intangible assets
Exceptional items
Adjusted segment
176.4 167.3
30.2
31.3
58.0
65.8
80.8
45.8
(15.7)
(10.6)
329.7 299.6
-
-
-
-
-
-
-
0.2
4.9
-
4.9
(6.0)
13.0
-
12.5
14.5
-
-
-
-
17.9
-
17.4
8.7
result
176.4 167.3
30.2
31.5
62.9
64.7
93.8
72.8
(15.7)
(10.6)
347.6 325.7
Adjusted operating
margin
11.2% 11.5%
4.6%
5.2%
5.3%
5.6%
5.4%
4.5%
-
-
6.8%
6.7%
Segmental information including the definition of segment result is shown in note 6.
c. Adjusted profit before and after tax
Profit before tax
Exceptional items
Amortisation of intangible assets
Adjusted profit before tax
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
(Restated)
2013
£m
312.6
(9.4)
17.9
321.1
299.2
(30.8)
17.4
285.8
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
5. Profit continued
Profit after tax
Exceptional items
Amortisation of intangible assets
Tax on exceptional items and amortisation
Income effect of reduction in corporation tax rate on deferred tax
Adjusted profit after tax
d. Exceptional items
BSS integration costs
Onerous lease provision release
Toolstation investment fair value adjustment
Toolstation consideration fair value adjustment
105
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
(Restated)
2013
£m
264.7
(9.4)
17.9
(3.6)
(20.1)
249.5
2013
£m
-
-
-
9.4
9.4
248.7
(30.8)
17.4
(6.1)
(13.3)
215.9
2012
£m
(14.7)
6.0
35.3
4.2
30.8
In accordance with IAS 39 the contingent consideration payable in respect of Toolstation has been reassessed at 31 December 2013 and as a result
the discounted amount previously recognised of £47.0m (2011: £51.2m) has been reduced to £37.6m (2012: £47.0m) with the difference of
£9.4m (2012: £4.2m) being credited to income statement as exceptional investment income.
The Group incurred £14.7m of exceptional operating charges in 2012 as a result of the programme to integrate BSS colleagues, systems and
processes into the Group.
In 2012, the Group released £6.0m through operating profit as an exceptional item for onerous lease provisions that were no longer required
because properties had been sublet.
In 2012, 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 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 than the Company due to the
revaluation of the intra-group loan.
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.
e. Prior period restatement
IAS 19 (revised 2011) and the related consequential amendments have impacted the accounting for the Group’s defined benefit schemes, by
replacing the combined interest cost on liabilities and expected return on plan assets with a net interest charge on the net defined benefit liability. Prior
year comparatives have been restated with an increase in the net finance cost of £13.2m in the year ended 31 December 2012. Administration
expenses for the schemes, totalling £0.9m, have been deducted from operating profit for the year ended 31 December 2012 and actuarial losses
in the statement of other comprehensive income have been reduced by £14.1m for the same period. The combined net deficit of the schemes at
31 December is unaffected. There is no impact on cash flows.
Following recent guidance from the FRRP regarding the treatment of a schedule of contributions in relation to a minimum funding requirement
under IFRIC 14, the Group has reconsidered the appropriate accounting treatment for its pension fund obligations. In respect of the Travis Perkins
defined benefit pension scheme the pension obligation in the balance sheet has been restated at 1 January 2012 and 31 December 2012 with
consequent adjustments to deferred tax. For the BSS scheme, no restatement is required however the 31 December 2013 closing balance sheet
position is impacted. Details of the liabilities arising in respect of minimum funding requirements are set out in note 28.
Further details of the impact of the prior period restatements are given in the tables below. The impact of IAS 19 (revised 2011) is restricted to
the income statement and statement of comprehensive income. The impact of the reinterpretation of IFRIC 14 affects the balance sheet, statement
of comprehensive income and statement of changes in equity.
i. Impact on income statement
Revenue
Adjusted operating profit
Exceptional items and amortisation
Operating profit
Exceptional investment income
Finance income
Finance costs
Profit before tax
Tax
Profit after tax
Year ended 31 December 2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
As restated
As previously stated
£m
£m
Prior period adjustment
£m
4,844.9
326.6
(26.1)
300.5
39.5
13.8
(40.5)
313.3
(53.7)
259.6
-
(0.9)
-
(0.9)
-
(11.1)
(2.1)
(14.1)
3.2
(10.9)
4,844.9
325.7
(26.1)
299.6
39.5
2.7
(42.6)
299.2
(50.5)
248.7
FINANCIAL STATEMENTS
106
5. Profit continued
ii. Impact on adjusted profit before tax
Profit before tax
Exceptional items and amortisation
Adjusted profit before tax
iii. Impact on adjusted profit after tax
Profit after tax
Exceptional items and amortisation
Adjusted profit after tax
iv. Impact on statement of comprehensive income
Profit after tax
Items that will not be reclassified subsequently to profit and loss
Actuarial losses on defined benefit pension schemes
Deferred tax rate change
Income taxes relating to items not reclassified
Items that may be reclassified subsequently to profit and loss
Total comprehensive income
v. Impact on earnings per share
Basic
Adjusted basic
Diluted
vi. Impact on group balance sheet
Deferred tax liability
Retirement benefit obligation
Other liabilities
Total liabilities
Accumulated profits
Other capital and reserves
Total equity and liabilities
Deferred tax liability
Retirement benefit obligation
Other liabilities
Total liabilities
Accumulated profits
Other capital and reserves
Total equity and liabilities
Year ended 31 December 2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
As restated
As previously stated
£m
£m
Prior period adjustment
£m
313.3
(13.4)
299.9
259.6
(32.8)
226.8
(14.1)
-
(14.1)
(10.9)
-
(10.9)
299.2
(13.4)
285.8
248.7
(32.8)
215.9
Year ended 31 December 2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
As restated
As previously stated
£m
£m
Prior period adjustment
£m
259.6
(45.8)
(5.5)
10.4
(40.9)
3.5
222.2
(10.9)
23.7
(1.6)
(5.3)
16.8
-
5.9
248.7
(22.1)
(7.1)
5.1
(24.1)
3.5
228.1
Year ended 31 December 2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
As restated
As previously stated
Prior period adjustment
108.9p
95.1p
105.0p
(4.6)p
(4.5)p
(4.4)p
104.3p
90.6p
approx
Year ended 31 December 2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
As restated
As previously stated
£m
£m
Prior period adjustment
£m
85.0
59.1
1,905.0
2,049.1
1,513.8
794.3
4,357.2
(15.9)
66.8
-
50.9
(52.5)
-
(1.6)
69.1
125.9
1,905.0
2,100.0
1,461.3
794.3
4,355.6
Year ended 31 December 2011
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
As restated
As previously stated
£m
£m
Prior period adjustment
£m
97.4
65.0
1,921.0
2,083.4
1,335.6
772.2
4,191.2
(19.6)
58.7
-
39.1
(58.4)
-
(19.3)
77.8
123.7
1,921.0
2,122.5
1,277.2
772.2
4,171.9
As required by IFRS 8 the operating segments are identified on the basis of internal reports about components of the Group that are regularly
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
6. Business and geographical segments
107
reviewed by the Chief Executive to assess their performance. All four divisions sell building materials to a wide range of customers, none of which are
dominant, and operate almost exclusively in the United Kingdom and consequently no geographical information is presented.
Segment result 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 2013 and 2012 there were no impairment losses or reversals of impairment losses recognised in profit or loss or in equity in any of the
reportable segments.
2013
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
General
merchanting
£m
Specialist
merchanting
£m
1,578.4
660.3
Consumer
£m
1,179.8
Plumbing and
Heating
£m
1,730.2
Unallocated
£m
Eliminations
£m
Consolidated
£m
-
176.4
30.2
-
-
-
176.4
-
176.4
-
-
-
30.2
-
30.2
58.0
9.4
-
-
67.4
-
67.4
80.8
(15.7)
-
-
-
80.8
-
80.8
-
3.7
(30.2)
(42.2)
(47.9)
(90.1)
-
-
-
-
-
-
-
-
5,148.7
329.7
9.4
3.7
(30.2)
312.6
(47.9)
264.7
Revenue
Result
Segment result
Exceptional investment income
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Segment assets
Segment liabilities
2,246.5
497.2
1,696.5
1,218.0
96.7
(1,311.2)
4,443.7
(724.3)
(14.8)
(413.4)
(239.7)
(1,847.5)
1,311.2
(1,928.5)
Consolidated net assets
1,522.2
482.4
1,283.1
978.3
(1,750.8)
Capital expenditure
Amortisation
Depreciation
83.8
-
35.1
6.8
-
9.1
12.7
4.9
17.4
8.2
13.0
9.7
-
-
-
-
-
-
-
2,515.2
111.5
17.9
71.3
2012 (Restated)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
General
merchanting
£m
Specialist
merchanting
£m
1,456.7
603.6
Consumer
£m
1,152.5
Plumbing and
Heating
£m
1,632.1
Unallocated
(Restated)
£m
-
Revenue
Result
Segment result
167.3
31.3
Exceptional investment income
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
-
-
-
167.3
-
167.3
-
-
-
31.3
-
31.3
65.8
39.5
-
-
105.3
-
105.3
45.8
-
-
-
45.8
-
45.8
(10.6)
-
2.7
(42.6)
(50.5)
(50.5)
(101.0)
Eliminations
£m
-
-
-
-
-
-
-
-
Consolidated
(Restated)
£m
4,844.9
299.6
39.5
2.7
(42.6)
299.2
(50.5)
248.7
Segment assets
2,121.7
469.7
1,653.4
1,166.6
177.7
(1,233.5)
4,355.6
Segment liabilities
(659.7)
(13.7)
(415.5)
(232.4)
(2,012.2)
1,233.5
(2,100.0)
Consolidated net assets
1,462.0
456.0
1,237.9
934.2
(1,834.5)
Exceptional items
Capital expenditure
Amortisation
Depreciation
-
44.2
-
33.6
0.2
11.5
-
8.3
(6.0)
17.8
4.9
17.8
14.5
11.0
12.5
9.7
-
-
-
-
-
-
-
-
-
2,255.6
8.7
84.5
17.4
69.4
FINANCIAL STATEMENTS
108
6. Business and geographical segments continued
Unallocated segment assets and liabilities comprise the following:
Assets
Interest in associates
Financial instruments
Cash and cash equivalents
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
7. Staff costs
a. The average monthly number of persons employed (including executive directors)
2013
£m
7.3
9.3
79.8
0.3
96.7
(6.3)
(73.2)
(61.2)
(71.4)
(427.4)
(1,186.6)
(21.4)
(1,847.5)
2012
(Restated)
£m
6.7
25.5
139.1
6.4
177.7
(7.5)
(74.8)
(69.1)
(125.9)
(591.3)
(1,124.2)
(19.4)
(2,012.2)
Sales
Distribution
Administration
b. Aggregate remuneration
Wages and salaries
Share-based payments (note 8)
Social security costs
Other pension costs (note 28b)
8. Share-based payments
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
No.
2013
No.
15,747
3,350
2,840
21,937
15,865
3,042
2,725
21,632
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
No.
2013
No.
-
-
46
46
-
-
50
50
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m.
2013
£m
565.2
13.7
52.9
22.1
653.9
541.5
15.2
48.4
17.2
622.3
7.6
3.8
0.7
0.3
12.4
6.5
4.3
0.7
0.4
11.9
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:
Share price at grant date (pence)
Option exercise price (pence)
Volatility (%)
Option life (years)
Risk-free interest rate (%)
Expected dividends as a dividend yield (%)
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Executive
options
1,463
1,453
32.3%
3.0
0.6%
2.2%
SAYE
1,648
1,274
36.3%
3.5
1.0%
2.0%
Nil price
options
1,373
-
33.0%
3.0
0.5%
2.3%
Executive
options
912
806
53.0%
3.0
1.0%
1.7%
SAYE
1,114
818
38.4%
3.3
0.4%
2.3%
Nil price
options
1,062
-
40.9%
3.0
0.5%
2.3%
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
8. Share-based payments continued
109
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 (within the Board’s
target range).
The expected life of options 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 2013. The estimated fair value of the shares under option at that date was £8.0m for the Group
and £0.1m for the Company.
Shares were granted under the share-matching scheme on 14 march 2013 and 17 June 2013. The estimated fair value of the shares under
option at those dates was £5.2m for the Group and £3.0m for the Company.
Shares were granted under the performance share plan on 11 march 2013, 19 April 2013, 23 August 2013 and 18 October 2013. The
estimated fair value of the shares under option at those dates was £8.6m for the Group and £3.2m for the Company.
Shares were granted under the deferred share bonus plan on 2 April 2013. The estimated fair value of the shares at that date was £0.6m for
the Group and £0.2m for the Company.
The Group charged £13.7m (2012: £15.2m) and the Company charged £3.8m (2012: £4.3m) to the income statement in respect of equity-
settled share-based payment transactions.
The number and weighted average exercise price of share options is as follows:
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Number
Number
Weighted
of nil price
average
of
options
options
exercise price
No.
p
No.
5,699
7,718
695
(598)
(503)
763
(1,434)
(2,366)
600
1,104
1,373
1,287
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Number
Weighted
of nil price
average
options
exercise price
No.
p
4,875
636
(92 )
598
(500)
552
1,416
839
Number
of options
No.
8,050
(536)
(1,379)
1,583
856
794
6,222
662
4,771
1,193
695
792
7,718
1,227
5,699
1,540
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Share options were exercised on a regular basis throughout the year. The weighted average share price for options exercised during the year was
1,606 pence (2012: 1,037 pence).
Details of the options outstanding at 31 December 2013 were as follows:
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Nil price
Executive
options
options
SAYE
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Executive
options
Nil price
options
SAYE
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)
201-1,745 442-1,274
837
5,329
2.0
2.5
963
893
0.9
5.1
-
-
4,771
0.9
7.5
201-1,611 442-1,114
651
6,220
2.1
2.6
880
1,499
0.7
4.9
-
-
5,699
0.9
7.7
If all 0.9 million outstanding executive options vest and then are exercised on the date of vesting, or in the case of SAYE all 5.3 million shares are
acquired on the first possible day, 6.2 million of shares will be issued for a consideration of £53.2 million in the years ending 31 December:
2014
–––––––––––––––––––––––
2015
–––––––––––––––––––––––
2016
–––––––––––––––––––––––
2017
–––––––––––––––––––––––
2018
–––––––––––––––––––––––
No.
m
0.7
2.1
Value
£m
5.9
13.3
No.
m
0.1
1.2
Value
£m
1.3
9.9
No.
m
0.1
1.5
Value
£m
1.4
15.6
No.
m
-
0.2
Value
£m
-
1.7
No.
m
-
0.3
Value
£m
-
4.1
Options
SAYE
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.
FINANCIAL STATEMENTS
110
8. Share-based payments continued
The number and weighted average exercise price of share options is as follows:
THE COmPANY
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
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.
756
630
695
-
795
873
790
300
(8)
(126)
-
20
186
125
2,837
(200)
(796)
-
489
2,331
727
606
746
372
746
918
756
784
111
(96)
(44)
317
12
300
219
2,197
-
(15)
80
575
2,837
126
In thousands of options
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Transferred from other group companies
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Details of the options outstanding at 31 December 2013 were as follows:
THE COmPANY
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Nil price
Executive
options
options
SAYE
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Executive
options
Nil price
options
SAYE
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)
201-1,745 442-1,274
841
34
1.9
2.4
880
152
0.4
3.7
-
-
2,331
0.8
7.4
201-1,611 442-1,114
548
58
1.5
2.0
806
242
0.3
4.0
-
-
2,837
0.7
7.5
9. Net finance costs
Interest on bank loans and overdrafts*
Interest on obligations under finance leases
Unwinding of discounts – property provisions
Unwinding of discounts – SPV loan
Amortisation of cancellation payment for swaps accounted for as cash flow hedges
Other interest
Other finance costs – pension scheme
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
Finance income
Net finance costs
*Includes £1.5m (2012: £1.2m) of amortised bank finance charges.
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
(19.4)
(1.3)
(1.5)
(2.5)
(0.8)
(1.8)
(2.1)
(0.8)
(30.2)
1.0
1.9
0.8
3.7
(24.7)
(1.1)
(2.5)
(2.5)
(4.1)
(1.7)
(2.1)
(3.9)
(42.6)
1.0
1.3
0.4
2.7
(26.5)
(39.9)
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
Interest on bank loans and overdrafts
Amortised bank finance charges
Other interest
Interest receivable
Interest for covenant purposes
Adjusted interest cover for covenant purposes
(19.4)
1.5
(1.8)
0.8
(18.9)
18.3x
(24.7)
1.2
(1.7)
0.4
(24.8)
13.1x
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
9. Net finance costs continued
111
Adjusted interest cover is calculated by dividing adjusted operating profit of £347.6m (2012: £325.7m) less £1.0m (2012: £1.5m) of specifically
excluded IFRS adjustments, by the interest for covenant purposes.
Interest on bank loans and overdrafts
Interest on obligations under finance leases
Unwinding of discounts SPV loan
Loan note interest (included in other interest)
Interest for fixed charge ratio purposes
(19.4)
(1.3)
(2.5)
(0.2)
(23.4)
(24.7)
(1.1)
(2.5)
(0.2)
(28.5)
The 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 (note 28).
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
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
10. Tax
a. Tax charge in income statement
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
(19.4)
(22.4)
(0.8)
(1.8)
(0.8)
(45.2)
1.0
1.9
0.8
0.3
4.0
(25.5)
(15.6)
(4.1)
(1.7)
(3.9)
(50.8)
1.0
1.3
1.0
0.4
3.7
(41.2)
(47.1)
THE COmPANY
–––––––––––––––––––––––––––––––––
2013
2012
2013
Pre-exceptional
items
2013
Exceptional
items
£m
£m
2013
2012
Total Pre-exceptional
items
(Restated)
£m
£m
2012
Exceptional
items
2012
Total
(Restated)
£m
£m
£m
£m
Current tax
UK corporation tax
– current year
– prior year
Total current tax
Deferred tax
– current year
– prior year
Total deferred tax
Total tax charge
68.9
(1.0)
67.9
1.1
(1.0)
0.1
68.0
-
-
-
(20.1)
-
(20.1)
(20.1)
68.9
(1.0)
67.9
(19.0)
(1.0)
(20.0)
47.9
68.0
(1.1)
66.9
(1.6)
0.7
(0.9)
66.0
(2.2)
-
(2.2)
(13.3)
-
(13.3)
(15.5)
65.8
(1.1)
64.7
(14.9)
0.7
(14.2)
50.5
(15.4)
0.3
(15.1)
1.0
-
1.0
(13.5)
2.5
(11.0)
(2.3)
0.1
(2.2)
(14.1)
(13.2)
FINANCIAL STATEMENTS
112
10. Tax continued
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:
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
Prior period adjustment
Tax expense and effective tax rate for the year
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
––––––––––––––––––––––––––––––––––––––
%
£m
2012 (Restated)
––––––––––––––––––––––––––––––––––––––
%
£m
312.6
72.8
1.4
2.1
-
(2.2)
(20.1)
(4.0)
(2.1)
47.9
23.3
0.4
0.7
-
(0.7)
(6.4)
(1.3)
(0.7)
15.3
299.2
73.3
1.1
2.8
(8.6)
(1.0)
(13.3)
(3.6)
(0.2)
50.5
24.5
0.4
0.9
(2.7)
(0.3)
(4.4)
(1.2)
(0.1)
17.1
The tax rate for the year of 23.25% is a blended rate of 24% up to 1 April 2013 and 23% thereafter. The tax charge for 2013 includes an
exceptional credit of £20.1m arising from the reduction in the rate of UK corporation tax from 23% to 21% on 1 April 2014 and a further reduction
of 1% to 20% from 1 April 2015.
b. Tax charge in statement of comprehensive income
In addition to the amounts charged to the income statement the following amounts relating to tax have been recognised in other comprehensive
income:
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
Deferred tax
Items that may be reclassified
Cash flow hedge movement
Items that may not be reclassified
Deferred tax rate change on actuarial movement
Actuarial movement
(0.3)
(11.5)
(7.0)
(18.8)
(0.9)
(7.1)
5.1
(2.9)
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
2013
£m
£m
(0.3)
-
-
(0.3)
(0.9)
-
-
(0.9)
c. Tax credited directly to equity
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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
10.4
1.3
5.3
17.0
1.4
0.9
2.9
5.2
-
-
5.3
5.3
-
-
3.0
3.0
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
10. Tax continued
Profit before tax
Intercompany dividends
Loss before tax and dividends received
Tax at the UK corporation tax rate
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
Tax credit and effective tax rate for the year
11. Earnings per share
a. Basic and diluted earnings per share
THE COmPANY
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
––––––––––––––––––––––––––––––––––––––
%
£m
2012
––––––––––––––––––––––––––––––––––––––
%
£m
113
71.1
(121.0)
(49.9)
(11.6)
(1.5)
0.3
0.9
-
(2.2)
(14.1)
23.3
3.0
(0.6)
(1.8)
-
4.4
28.3
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
Earnings
Earnings for the purposes of basic and diluted earnings per share
being net profit attributable to equity holders of the Parent Company
Weighted average number of shares for the purposes of basic earnings per share
Dilutive effect of share options on potential ordinary shares
Weighted average number of ordinary shares for the purposes of diluted earnings per share
2013
£m
2012
(Restated)
£m
264.6
248.7
No.
240,829,833
9,428,138
No.
238,388,160
8,809,106
250,257,971
247,197,266
16,833 (2012: 692,839) share options had an exercise price in excess of the average market value of the shares during the year. As a result, these
share options were excluded from the calculation of diluted earnings per share.
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 2012 of 17.0p (2011: 13.5p) per ordinary share
Interim dividend for the year ended 31 December 2013 of 10.0p (2012: 8.0p) per ordinary share
Total dividend recognised during the year
2013
£m
264.6
(9.4)
17.9
(3.6)
-
(20.1)
249.4
103.6p
99.7p
2012
(Restated)
£m
248.7
(30.8)
17.4
(3.9)
(2.2)
(13.3)
215.9
90.6p
87.3p
2013
£m
40.9
24.2
65.1
2012
£m
32.1
19.1
51.2
FINANCIAL STATEMENTS
114
12. Dividends continued
The Company is proposing a final dividend of 21.0p in respect of the year ended 31 December 2013.
Adjusted dividend cover of 3.3x (2012: 3.6x) is calculated by dividing adjusted earnings per share (note 11) of 103.6p (2012 (restated): 90.6p)
by the total dividend for the year of 31.0p (2012: 25.0p).
There are no income tax consequences in respect of the dividends declared, but not recognised in the financial statements.
The dividends declared for 2013 at 31 December 2013 and for 2012 at 31 December 2012 were as follows:
Interim paid
Final proposed
Total dividend for the year
The anticipated cash payment in respect of the proposed final dividend is £51.1m (2012: £40.7m).
2013
Pence
10.0
21.0
31.0
2012
Pence
8.0
17.0
25.0
13. Goodwill
Cost
At 1 January 2012
Recognised on acquisitions during the year
At 1 January 2013
Recognised on acquisitions during the year
At 31 December 2013
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
General
merchanting
£m
Specialist
merchanting
£m
Consumer
£m
Plumbing and
Heating
£m
465.6
0.6
466.2
0.2
466.4
145.1
-
145.1
-
145.1
728.3
100.7
829.0
0.5
829.5
367.2
-
367.2
5.7
372.9
Total
£m
1,706.2
101.3
1,807.5
6.4
1,813.9
There has been no impairment to the carrying value of goodwill. The Company has no goodwill.
Cash Generating Units
The Directors consider that each branch in the Group is an individual Cash Generating Unit (‘CGU’). Goodwill and intangible assets with indefinite
useful lives 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
Plumbnation
Solfex
F & P
Other
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Intangibles
(Note 14)
£m
Goodwill
£m
Total
£m
2012
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Intangibles
(Note 14)
£m
Goodwill
£m
-
-
-
43.6
101.5
43.6
101.5
466.4
466.4
-
-
162.5
24.6
103.4
701.5
40.9
49.3
-
-
-
8.5
3.9
133.7
27.8
175.4
1.7
4.0
30.3
-
24.6
103.4
864.0
174.6
77.1
175.4
1.7
4.0
38.8
3.9
-
-
-
-
-
162.5
40.9
49.3
-
-
-
8.5
3.9
Total
£m
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
265.1
1,813.9
2,079.0
265.1
1,807.5
2,072.6
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
13. Goodwill continued
115
measuring Recoverable Amounts
The Group tests goodwill and other non-monetary assets with indefinite useful lives 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 with indefinite useful lives
are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth
rates and like-for-like market volume changes which impact sales and therefore cash flow projections. 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 year the recoverable amount of goodwill and intangible assets with indefinite useful lives in all segments
was in excess of their book value. In the absence of a binding agreement to sell the assets and active reference market on which fair value can be
determined the recoverable amount of the goodwill and intangible assets with indefinite useful lives was determined according to value in use. 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 strategic plans
• The sales market volume assumptions underlying the cash flow forecasts are the Directors’ estimates of likely future changes based on historic
performance (excluding future investment and enhancements) 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 2013, the
discount rate was 9.7% (2012: 8.8%), 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 therefore the risk profiles are not dissimilar
• For 2013, cash flows beyond the five-year plan (2019 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
2013. The Directors believe this is the most appropriate indicator of long-term growth rates that is available (2012 growth rate: 2.1%)
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 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 CGU’s 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 2013
CGU
grouping
Tile Giant
Wickes
PTS
F & P
Headroom
£20m
£194m
£37m
£32m
31 December 2012
CGU
grouping
Tile Giant
Wickes
PTS
F & P
Headroom
£24m
£146m
£64m
£38m
Like-for-like market volume
(Average % per annum)
Sensitivity
Assumption
0.7%
1.8%
0.8%
0.8%
(1.3)%
0.7%
(0.1)%
(1.9)%
Like-for-like market volume
(Average % per annum)
Sensitivity
Assumption
0.0%
0.8%
(1.6)%
1.8%
(2.7)%
0.2%
(2.8)%
(2.6)%
Discount rate %
Assumption
Sensitivity
Long term growth rate
Assumption
Sensitivity
9.7%
9.7%
9.7%
9.7%
14.9%
11.2%
11.2%
15.2%
2.1%
2.1%
2.1%
2.1%
(6.5)%
(0.1)%
(0.1)%
(7.4)%
Discount rate %
Assumption
Sensitivity
Long term growth rate
Assumption
Sensitivity
8.8%
8.8%
8.8%
8.8%
13.9%
9.9%
11.0%
12.8%
2.1%
2.1%
2.1%
2.1%
(6.0)%
0.7%
(1.1)%
(4.1)%
The sales market volume assumption is the average annual change incorporated in five-year plans of each CGU grouping.
FINANCIAL STATEMENTS
116
14. Other intangible assets
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Cost or valuation
At 1 January 2012
Recognised on acquisition
At 31 December 2012
Recognised on acquisition (note 29)
At 31 December 2013
Amortisation
At 1 January 2012
Charged to operating profit in the year
At 31 December 2012
Charged to operating profit in the year
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
Cost of brands with an indefinite useful life (note 13)
Cost of brands being amortised
Brand
£m
268.7
29.5
298.2
2.9
301.1
0.3
1.8
2.1
2.0
4.1
297.0
296.1
Computer
software
£m
Customer
relationships
£m
8.4
8.7
17.1
-
17.1
8.1
0.9
9.0
0.9
9.9
7.2
8.1
132.5
15.1
147.6
-
147.6
12.3
14.7
27.0
15.0
42.0
105.6
120.6
2013
£m
265.1
36.0
301.1
Total
£m
409.6
53.3
462.9
2.9
465.8
20.7
17.4
38.1
17.9
56.0
409.8
424.8
2012
£m
265.1
33.1
298.2
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, Plumbnation,
Solfex and certain product related brands the Directors have decided it is appropriate to amortise their cost over their estimated useful lives. The
useful lives of those brands being amortised ranges from 10 to 20 years while the remaining lives range from 7 to 17 years.
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 remaining lives of amortised
customer relationships range from 2 to 12 years.
The Company has no intangible assets.
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
15. Property, plant and equipment
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Cost or valuation
At 1 January 2012
Additions
Additions from acquired businesses
Reclassifications
Disposals
At 1 January 2013
Additions
Additions from acquired businesses
Disposals
At 31 December 2013
Accumulated depreciation
At 1 January 2012
Charged this year
Disposals
At 1 January 2013
Charged this year
Disposals
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
Freehold
£m
301.2
10.0
-
0.9
(3.5)
308.6
32.3
0.3
(6.5)
334.7
38.9
4.6
(0.4)
43.1
5.2
(0.9)
47.4
287.3
265.5
Long
leases
£m
28.1
-
-
(0.9)
-
27.2
1.0
-
-
28.2
5.4
0.6
-
6.0
0.5
-
6.5
21.7
21.2
Short
leases
£m
Plant and
equipment
£m
134.5
9.0
4.5
-
(3.0)
145.0
9.3
-
(7.1)
147.2
48.7
11.4
(1.3)
58.8
11.6
(6.4)
64.0
83.2
86.2
486.8
65.5
3.2
-
(44.1)
511.4
68.9
0.1
(31.6)
548.8
295.0
52.8
(41.9)
305.9
54.0
(28.8)
331.1
217.7
205.5
Total
£m
950.6
84.5
7.7
-
(50.6)
992.2
111.5
0.4
(45.2)
1,058.9
388.0
69.4
(43.6)
413.8
71.3
(36.1)
449.0
609.9
578.4
117
THE COmPANY
––-–––––––––––––––––––––
Plant and
equipment
£m
0.7
-
-
-
-
0.7
0.1
-
(0.1)
0.7
0.5
-
-
0.5
0.1
-
0.6
0.1
0.2
The cost element of the fixed assets carrying value is analysed as follows:
At valuation
At cost
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
THE COmPANY
––-–––––––––––––––––––––
Freehold
£m
59.9
274.8
334.7
Long
leases
£m
6.1
22.1
28.2
Short
leases
£m
1.9
145.3
147.2
Plant and
equipment
£m
-
548.8
548.8
Total
£m
67.9
991.0
1,058.9
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 £133.8m (2012: £117.7m) 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:
2013
2012
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
THE COmPANY
––-–––––––––––––––––––––
Long
leases
£m
0.8
0.8
Short
leases
£m
8.3
9.4
Plant and
equipment
£m
6.1
7.0
Total
£m
15.2
17.2
Total
£m
-
-
FINANCIAL STATEMENTS
118
15. Property, plant and equipment continued
Comparable amounts determined according to the historical cost convention:
Cost
Accumulated depreciation
Net book value
At 31 December 2013
At 31 December 2012
16. Investment property
Cost
At 1 January
Accumulated depreciation
At 31 December
Net book value
At 31 December
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
THE COmPANY
––-–––––––––––––––––––––
Freehold
£m
332.8
(63.9)
268.9
244.9
Long
leases
£m
26.8
(7.6)
19.2
18.6
Short
leases
£m
155.8
(70.0)
85.8
88.8
Plant and
equipment
£m
Total
£m
548.7
(331.0)
1,064.1
(472.5)
217.7
205.5
591.6
557.8
Total
£m
0.7
(0.6)
0.1
0.2
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
0.5
(0.1)
0.4
0.5
(0.1)
0.4
Investment property rental income totalled nil (2012: £nil).
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
Equity investment
Loan facility
Interest on loan facility
Share of losses
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
0.6
9.1
0.4
(2.8)
7.3
1.5
5.3
0.2
(0.3)
6.7
0.6
6.7
0.4
-
7.7
0.7
5.3
0.2
-
6.2
Travis Perkins plc holds a 49% investment in The mosaic Tile Company Limited and a 25% investment in Rinus Roofing Limited.
b. Investment in subsidiaries
At 1 January
Additions
Adjustment to consideration on acquisition of Tile Giant
At 31 December
Provision for impairment
Net book value at 31 December
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
3,589.9
15.9
-
3,605.8
(17.0)
3,588.8
2,889.8
702.3
(2.2)
3,589.9
(17.0)
3,572.9
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
119
17. Investments continued
The principal operating subsidiaries of the Group at 31 December 2013 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
Solfex Energy Systems 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 & dry lining distribution)
(Property management company)
(Specialist distribution)
(Distributor of renewables technology)
(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 , Toolstation Limited for which the
registered office address is 16 -18 Whiteladies Road, Clifton, Bristol, B58 2LG and Solfex Energy Systems Limited for which the registered office is
Units 3 – 5 Charnley Fold Industrial Estate, Off School Lane, Bamber Bridge, Preston, Lancashire, PR5 6PS.The Directors have applied s409 to s410
of the Companies Act 2006 and therefore list only significant subsidiary companies.
All subsidiaries, with the exception of Plumbnation Limited which is 51% owned, are 100% owned. Each company is registered and incorporated
in the United Kingdom and represented 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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
2.7
2.4
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£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 to its fair value.
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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
619.1
(33.9)
585.2
-
237.7
822.9
578.3
(48.3)
530.0
-
203.7
733.7
-
-
-
133.1
-
133.1
-
-
-
174.6
6.1
180.7
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 55 days (2012: 59 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% per annum above the
clearing bank base rate on the outstanding balance.
FINANCIAL STATEMENTS
120
18. Trade and other receivables continued
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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
48.3
(26.0)
11.6
33.9
54.5
(21.7)
15.5
48.3
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 £62.3m (2012: £57.4m) 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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2013
£m
44.2
10.7
7.4
62.3
2012
£m
44.5
8.6
4.3
57.4
Included in the allowance for doubtful debts are specific trade receivables with a balance of £11.9m (2012: £27.2m) 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 balances and cash deposits with an original maturity of three months or less held by the Group and
Company, net of overdrafts. The carrying amount of these assets approximates their fair value.
20. Share capital
Ordinary shares of 10p
At 1 January 2012
Allotted under share option schemes
At 1 January 2013
Allotted under share option schemes
At 31 December 2013
THE GROUP AND THE COmPANY
–––––––––––––––––––––––––––––––––––––––––––––––––––
Issued and fully paid
–––––––––––––––––––––––––––––––––––––––––––––––––––
£m
No.
243,816,533
1,036,524
244,853,057
1,933,232
246,786,289
24.4
0.1
24.5
0.2
24.7
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.
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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
121
THE GROUP AND THE COmPANY
–––––––––––––––––––––––––––––––––––––––––––––––––––-
2012
No.
2013
No.
5,313,791
(1,854,630)
6,305,367
(991,576)
3,459,161
5,313,791
166,069
3,293,092
3,459,161
289,142
5,024,649
5,313,791
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 their respective Statements of changes in equity. A description
of the nature and purpose of each reserve is given below.
• The merger reserve represents the premium on equity instruments issued as consideration for the acquisition of BSS
• The revaluation reserve represents the revaluation surplus that arises 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 other reserve represents anticipated gross outflow on potential exercise of the put option held over the non-controlled 49% shareholding in
Plumbnation
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.
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 review within the Strategic Report on pages 27 to 30. At 31 December 2013 all borrowings were denominated in sterling except for
the unsecured senior notes.
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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
128.7
36.5
240.0
-
23.8
3.2
(4.8)
427.4
5.8
421.6
427.4
261.1
36.9
264.4
-
25.9
3.3
(0.3)
591.3
396.1
195.2
591.3
128.7
-
240.0
-
-
3.2
(4.8)
367.1
3.2
363.9
367.1
261.1
-
315.0
0.7
-
3.3
(0.3)
579.8
444.9
134.9
579.8
*These balances together total the amounts shown as bank loans in note 23b.
FINANCIAL STATEMENTS
122
23. Borrowings continued
b. Analysis of borrowings
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Bank loans and overdrafts
––––––––––––––––––––––––––––––––––––––
2012
£m
Other borrowings
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
2013
£m
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
-
50.0
185.2
-
235.2
264.1
-
-
-
264.1
5.8
4.7
135.9
45.8
192.2
132.0
2.7
144.9
47.6
327.2
THE COmPANY
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Bank loans and overdrafts
––––––––––––––––––––––––––––––––––––––
2012
£m
Other borrowings
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
2013
£m
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
c. Facilities
At 31 December 2013, the following bank facilities were available:
Drawn facilities
5 year committed revolving credit facility
15 month committed facility
Unsecured senior notes
Bank overdrafts
Undrawn facilities
5 year committed revolving credit facility
Bank overdrafts
-
50.0
185.2
235.2
315.4
-
-
315.4
3.2
-
128.7
131.9
129.5
-
134.9
264.4
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
190.0
50.0
128.7
-
368.7
360.0
40.0
400.0
264.4
-
261.1
-
525.5
475.0
40.0
515.0
190.0
50.0
128.7
-
368.7
360.0
40.0
400.0
315.0
-
261.1
0.7
576.8
475.0
39.3
514.3
The 5 year revolving credit facility and 5 year term loan both matured on 4 April 2013. On 14 December 2011, the Group signed a new £550m
forward start banking agreement with a syndicate of banks, which commenced on 4 April 2013 and runs until December 2016. $200m of the
unsecured loan notes were repaid on 28 January 2013 with the remaining $200m falling due on 26 January 2016. On the 23 December 2013,
the Company entered into a £50m bilateral facility with a syndicate bank, which matures in march 2015.
The disclosures in note 23c do not include finance leases, loan notes, liability to pension scheme, 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 one year (shown under current liabilities)
Amount due for settlement after one year
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
minimum
lease payments
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
Present value of
minimum lease payments
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
3.6
14.9
16.9
35.4
(11.6)
23.8
3.8
16.5
19.0
39.3
(13.4)
25.9
2.6
11.8
9.4
23.8
-
23.8
(2.6)
21.2
2.5
12.7
10.7
25.9
-
25.9
(2.5)
23.4
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
23. Borrowings continued
123
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 is £3.2m (2012: £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
2013
%
5.8
2.6
6.0
2012
%
5.8
2.2
6.0
Bank revolving credit facilities outstanding at the year end of £550m (2012: £739m) and bank loans of £50m (2012: £50m) were arranged at
variable interest rates. The $200m unsecured Travis Perkins senior notes were issued at fixed rates of interest and $90m is 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 2013, fixed interest rates on an average of £110m of borrowing. For the year to 31 December 2013, this had the effect of
increasing the weighted average interest rates paid by 0.4%.
In respect of income earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest rates at the
balance sheet date. All assets and liabilities except for loan notes reprice within six months.
Unsecured senior notes
Unsecured variable rate bank facilities
Loan notes
Unsecured senior notes
Unsecured variable rate bank facilities
Loan notes
Bank overdraft
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––
2012
Effective
interest rate
5.9%
2.0%
6.0%
£m
128.7
240.0
3.2
371.9
Effective
interest rate
5.8%
2.3%
6.0%
£m
261.1
264.4
3.3
528.8
THE COmPANY
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
2013
–––––––––––––––––––––––––––––––––––––––––––––––––
2012
Effective
interest rate
5.9%
2.0%
6.0%
-
£m
128.7
240.0
3.2
-
371.9
Effective
interest rate
5.8%
2.3%
6.0%
2.3%
£m
261.1
315.0
3.3
0.7
580.1
The US private placement carries fixed rate coupons of between 130 bps and 140 bps over US treasuries.
g. Fair values
For both the Group and the Company the fair values of financial assets and liabilities have been calculated by discounting expected cash flows
at prevailing rates at 31 December. There were no significant differences between book and fair values on this basis and therefore no further
information is disclosed.
Details 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, Toolstation Limited and Solfex Energy Systems Limited, together with Wickes Limited and Travis Perkins Plumbing and Heating LLP are
guarantors of the following facilities advanced to Travis Perkins plc:
• £50m term loan
• £550m revolving credit facility
• $200m unsecured senior notes
• 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 £20m (2012: £16m).
FINANCIAL STATEMENTS
124
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.
b. The carrying value of categories of financial instruments
Financial assets
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)
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
9.3
821.1
2.7
833.1
42.1
4.8
427.4
962.7
25.5
804.7
2.4
832.6
49.6
4.9
591.3
888.7
1,437.0
1,534.5
9.3
133.1
-
142.4
42.1
4.8
367.1
20.7
434.7
25.5
180.7
-
206.2
49.6
4.9
579.8
18.9
653.2
Loans and receivables exclude prepayments of £81.6m (2012: £68.1m). Trade and other payables exclude taxation and social security and accruals
and deferred income totalling £216.7m (2012: £218.9m). Deferred consideration payable totalling £38.7m included in trade and other payables
is included in financial liabilities designated as fair value through profit and loss. 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. The Group has considered the impact of
credit risk on its financial instruments and because the counterparties are banks with a high credit rating considers its impact to be immaterial.
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)
• 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
Level 2
Cross currency interest rate swaps designated and effective as hedging
instruments carried at fair value
Current assets
Non-current assets
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
9.3
-
9.3
9.3
25.5
12.7
12.8
25.5
9.3
-
9.3
9.3
25.5
12.7
12.8
25.5
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
24. Financial instruments continued
Included in liabilities
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
125
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
1.5
4.5
-
0.3
40.6
46.9
40.5
6.4
46.9
0.7
3.7
1.9
1.2
47.0
54.5
2.6
51.9
54.5
1.5
4.5
-
0.3
40.6
46.9
40.5
6.4
46.9
0.7
3.7
1.9
1.2
47.0
54.5
2.6
51.9
54.5
d. Interest risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the
Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts and forward interest
rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal hedging strategies
are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.
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 £50m 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.
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 2013 the fair value of interest rate derivatives, all of which terminate before one year from the balance sheet date, to which the
Group and the Company were parties was estimated at £(0.3)m (2012: £(3.1)m). This amount is based on market values of equivalent instruments
at the balance sheet date. Interest rate swaps are designated and effective as cash flow hedges and the fair value thereof has been deferred in equity.
A credit of £1.9m (2012: £1.3m) 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 non-amortising interest rate swap with a call option
matured on 3 October 2013.
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
Under 1 year
1 to 2 years
Average contract
fixed interest rate
––––––––––––––––––––––––––––––––––––––
2012
2013
%
%
-
1.71
1.71
-
Notional principal
amount
––––––––––––––––––––––––––––––––––––––
2012
2013
£m
£m
-
50.0
125.0
-
50.0
125.0
Fair value
––––––––––––––––––––––––––––––––––––––
2012
£m
-
(1.2)
2013
£m
(0.3)
-
(0.3)
(1.2)
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 current interest rate swap contracts, 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.
FINANCIAL STATEMENTS
126
24. Financial instruments continued
e. Cross currency swaps and currency forward contracts
In order to eliminate the currency risk associated with the $200m unsecured senior notes the Group and Company has two cross currency swaps
of £23m and £29m to fix the exchange rate at £1 equal to $1.73 for the entire lives of $90m of the unsecured loan notes.
The forward options fixed the notional amount receivable and payable in respect of the unsecured senior notes to £52m as well as fixing the
exchange rate applicable to future coupon payments. The two currency swaps convert the borrowing rates on US$50m and 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. The currency swaps settle on a half-
yearly basis. The Group will settle the difference between the fixed and floating interest on a gross 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 £3.5m (2012: £14.4m), 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
Less than 1 year
2 to 5 years
Average contract floating interest rate
––––––––––––––––––––––––––––––––––––––––––––––––––––––
2013
%
-
1.4%
2012
%
1.9%
1.9%
Notional principal amount
––––––––––––––––––––––––––––––––––––––
2012
2013
£m
£m
115.6
-
52.0
52.0
52.0
167.6
Fair value
––––––––––––––––––––––––––––––––––––––
2012
£m
12.7
12.8
2013
£m
-
9.3
9.3
25.5
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 2013 the fair value of these
forward contracts was estimated at £(4.5) m (2012: £(3.7) m). These contracts are designated 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$83.0m (2012: US$120.3m). The fair value of these derivatives is £(1.5)m (2012: £(0.7) m). These contracts are not designated cash flow
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 with the total credit to income statement being £1.0m (2012: £1.0m).
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.
2013
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Total
£m
2-5 years
£m
1-2 years
£m
5+ years
£m
0-1year
£m
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
1.8
(0.4)
1.4
(51.8)
(50.4)
(0.2)
(50.6)
(10.3)
(38.7)
(962.7)
(3.6)
(1,065.9)
3.2
(0.8)
2.4
-
2.4
-
2.4
(57.1)
-
-
(6.4)
(61.1)
55.9
(52.4)
3.5
-
3.5
-
3.5
(313.9)
(2.4)
-
(8.5)
(321.3)
-
-
-
-
-
-
-
(36.5)
-
-
(16.9)
(53.4)
60.9
(53.6)
7.3
(51.8)
(44.5)
(0.2)
(44.7)
(417.8)
(41.1)
(962.7)
(35.4)
(1,501.7)
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
24. Financial instruments continued
2012
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
127
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)
g. Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative financial
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming 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 2013 would have decreased / increased by £2.5m (2012: increased / decreased by
£1.7m) including £nil (2012: £0.3m) of movement on interest rate swaps with options
• Net equity would have decreased / increased by £0.1m (2012: increased / decreased by £0.6m) mainly because of the changes in the fair value
of interest rate derivatives
25. Provisions
At 31 December 2012
Additional provision charged to income statement
Exceptional provision released in the year
Utilisation of provision
Unwinding of discount
At 31 December 2012
Additional provision (released) / charged to income statement
Utilisation of provision
Unwinding of discount
At 31 December 2013
Included in current liabilities
Included in non-current liabilities
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Total
Property
£m
£m
89.1
50.7
3.5
3.1
(6.0)
(6.0)
(12.3)
(7.7)
2.5
2.5
Insurance
£m
35.5
0.4
-
(4.4)
-
Other
£m
2.9
-
-
(0.2)
-
42.6
(0.4)
(7.1)
1.4
36.5
15.8
20.7
36.5
31.5
2.6
(4.2)
-
29.9
29.9
-
29.9
2.7
-
(0.2)
-
2.5
2.5
-
2.5
76.8
2.2
(11.5)
1.4
68.9
48.2
20.7
68.9
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.
FINANCIAL STATEMENTS
128
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.
0-1year
£m
1-2 years
£m
2-5 years
£m
5+ years
£m
16.5
29.9
2.5
48.9
22.3
31.5
2.7
56.5
2.9
-
-
2.9
4.7
-
-
4.7
8.1
-
-
8.1
9.4
-
-
9.4
25.9
-
-
25.9
14.5
-
-
14.5
Total
£m
53.4
29.9
2.5
85.8
50.9
31.5
2.7
85.1
2013
Property
Insurance
Other
2012
Property
Insurance
Other
The Company has no provisions.
26. Deferred tax
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.
(Asset) / liability
Capital allowances
Trading losses
Revaluation on property
Share-based payments
Provisions
Derivatives
Business combinations
Brand
Pension scheme liability
Deferred tax
Capital allowances
Trading losses
Revaluation
Share-based payments
Provisions
Derivatives
Business combinations
Brand
Pension scheme liability
Deferred tax
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
31 Dec 2013
Recognised
in equity
Recognised
in income
At
1 Jan 2013
(Restated)
£m
5.7
(4.5)
10.2
(13.3)
(10.2)
(0.3)
12.2
98.2
(28.9)
69.1
£m
(2.7)
2.7
-
1.0
1.5
-
(2.5)
(16.4)
(3.6)
(20.0)
£m
-
-
(1.3)
(5.3)
-
0.3
-
-
18.5
12.2
£m
3.0
(1.8)
8.9
(17.6)
(8.7)
-
9.7
81.8
(14.0)
61.3
Acquired
in year
THE GROUP
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
Recognised
31 Dec 2012
in income
(Restated)
(Restated)
£m
£m
5.7
(0.2)
(4.5)
2.1
10.2
-
(13.3)
(2.3)
(10.2)
1.2
(0.3)
-
12.2
(2.2)
98.2
(12.9)
(28.9)
0.1
Recognised
in equity
(Restated)
£m
-
-
(0.9)
(2.9)
-
0.9
-
-
2.0
At
1 Jan 2012
(Restated)
£m
6.2
-
11.1
(8.1)
(11.4)
(1.2)
14.4
97.8
(31.0)
(0.3)
(6.6)
-
-
-
-
-
13.3
-
77.8
6.4
(14.2)
(0.9)
69.1
At the balance sheet date the Group had unused capital losses of £47.4m (2012: £47.4m) available for offset against future capital profits. No
deferred tax asset has been recognised because it is improbable 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.
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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
Deferred consideration payable
Other payables
Accruals and deferred income
Trade and other payables
129
THE COmPANY
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
1 Jan 2013
£m
Recognised
in income
£m
Recognised
in equity
£m
At
31 Dec 2013
£m
(13.4)
(0.3)
(0.5)
(14.2)
1.0
-
-
1.0
(5.3)
0.3
-
(5.0)
(17.7)
-
(0.5)
(18.2)
THE COmPANY
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At
1 Jan 2012
£m
Recognised
in income
£m
Recognised
in equity
£m
At
31 Dec 2012
£m
(8.1)
(1.2)
(0.6)
(9.9)
(2.3)
-
0.1
(2.2)
(3.0)
0.9
-
(2.1)
(13.4)
(0.3)
(0.5)
(14.2)
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
737.9
76.0
-
150.8
142.9
2013
£m
781.2
78.7
38.7
181.5
138.0
1,218.1
1,107.6
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
-
-
-
18.9
-
2013
£m
-
-
38.7
20.7
-
59.4
18.9
The Group
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. 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.
Deferred consideration payable of £1.9m (2012: £47.0m) is included in long-term other payables.
The Company
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying
amount of trade payables approximates to their fair value.
Deferred consideration payable of £1.9m (2012: £47.0m) is included in long-term other payables.
28. Pension arrangements
Restatements
IAS 19 (revised 2011) and the related consequential amendments have impacted the accounting for the Group’s defined benefit schemes, by
replacing the combined interest cost on liabilities and expected return on plan assets with a net interest charge on the net defined benefit liability.
Prior year comparatives have been restated as set out in note 5e.
Following recent guidance from the FRRP regarding the treatment of a schedule of contributions in relation to a minimum funding requirement
under IFRIC 14, the Group has reconsidered the appropriate accounting treatment for its pension funding obligations.
The Group is party to deficit repair schedules in respect of both the Travis Perkins Pension and Dependants Benefit Scheme (‘the TP scheme’)
and the BSS Pension Benefit Scheme (‘BSS scheme’). Under the terms of the agreement with the Trustees of the TP scheme dated 16 June 2010
and amended in December 2012 and August 2013, the Group is committed to a series of annual payments to make good a historic shortfall as
assessed on an actuarial basis.
The restated Group balance sheets at 1 January 2012 and 31 December 2012 reflect the present value of payments due under the schedule as
at those dates. The agreement provides for the suspension of the payment in the event that the scheme is 100% funded on an actuarial basis, and
the funding position is monitored on a quarterly basis. At 31 December 2012 the scheme was 91% funded on an actuarial basis but had reached
99% funded at 31 December 2013.
FINANCIAL STATEMENTS
130
28. Pension arrangements continued
The liability reported as at 31 December 2013 of £5.6m is the net present value of payments due as at that date, which are required before the
scheme becomes fully funded and payments are suspended. The liabilities reported as at 31 December 2012 and 1 January 2012 do not assume
suspension on the basis that the actuarial shortfall at those dates exceeded the total payments due under the schedules.
During the year, the Group agreed a revised schedule of deficit repair contributions with the Trustees of the BSS scheme. The net present value of
the payments due under this arrangement exceed the IAS19 liability by £25.0m as at 31 December 2013 and an additional liability for this amount
has been recorded.
Full details of both restatements is provided in note 5e.
Defined benefit schemes
The Group operates three final salary schemes being the TP scheme, the BSS scheme and the BSS Ireland defined benefit scheme. All defined
benefit schemes are closed to new members. The TP scheme is for the majority of members 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 2013 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 obligations were carried out at 1 June 2012 for the UK
and the Irish schemes. The present value of the defined benefit obligations, 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 TP 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.
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
At 31 December At 31 December
2012
2.25%
2.5%
4.6%
3.0%
2013
2.65%
2.50%
4.70%
3.40%
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 2013:
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
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
Administration expenses
Net interest income / (expense)
Total pension charge
male Years
22.1
23.9
22.4
24.4
Female Years
24.2
26.2
25.2
27.1
TP Scheme
BSS Schemes
2013 Group
£m
(7.7)
(0.8)
0.4
(8.1)
£m
(2.6)
-
(2.5)
(5.1)
£m
(10.3)
(0.8)
(2.1)
(13.2)
2012 Group
(Restated)
£m
(10.0)
(0.9)
(2.1)
(13.0)
The total charge to the profit and loss account disclosed in note 7 of £22.1m (2012: £17.2m) comprises defined benefit scheme current and past
service costs of £10.3m (2012: £10.0m) and £11.8m (2012 £7.2m) 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 ongoing
contributions required to repay the deficit, of £23m to the TP scheme and £13m to the BSS schemes in 2014.
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 2014, the excess of funding over the on-going service contributions will be £25m in total for the Group.
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
28. Pension arrangements continued
131
c. The amount included in the balance sheet arising from the Group’s obligations in respect of all of its defined benefit schemes and the movements
during the year
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2012 (Restated)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Fair value of plan assets
Present value of defined benefit obligations
Actuarial surplus / (deficit)
Restriction an asset recognised
Additional liability recognised for minimum
funding requirements
Total pension liability
Deferred tax asset
Net liability at 31 December
At 1 January actuarial asset / (deficit)
Additional liability recognised for minimum
funding requirements
Service costs charged to the income statement
Administration expenses
Net interest income / (expense)
Transfer of liability
Contributions from sponsoring companies
Return on plan assets (excluding amounts
included in net interest )
Actuarial losses arising from changes in
financial assumptions
Actuarial losses arising from experience adjustments
Reduction / (increase) in minimum funding
requirement liability
At 31 December actuarial deficit
TP Scheme BSS Schemes
£m
206.1
(246.9)
£m
821.1
(780.0)
Group
£m
1,027.2
(1,026.9)
TP Scheme BSS Schemes
£m
171.8
(230.9)
£m
738.0
(736.4)
41.1
(41.1)
(5.6)
(5.6)
(40.8)
-
(25.0)
(65.8)
0.3
(41.1)
(30.6)
(71.4)
14.0
(57.4)
1.6
(1.6)
(66.8)
(66.8)
(59.1)
-
-
(59.1)
Group
£m
909.8
(967.3)
(57.5)
(1.6)
(66.8)
(125.9)
28.9
(97.0)
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
(57.5)
(59.1)
£m
1.6
2012 (Restated)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
(45.7)
(65.0)
£m
19.3
(68.4)
(66.8)
(7.7)
(0.8)
0.4
-
22.7
-
(59.1)
(2.6)
-
(2.5)
-
11.0
(68.4)
(125.9)
(10.3)
(0.8)
(2.1)
-
33.7
(78.0)
(58.7)
(7.2)
(0.9)
1.2
(1.4)
26.9
-
(65.0)
(2.8)
-
(3.3)
1.4
6.0
(78.0)
(123.7)
(10.0)
(0.9)
(2.1)
-
32.9
46.3
21.7
68.0
32.2
10.5
42.7
(21.4)
-
21.7
(5.6)
(9.3)
-
(25.0)
(65.8)
(30.7)
-
(3.3)
(71.4)
(47.0)
(21.5)
9.6
(66.8)
(5.9)
-
(52.9)
(21.5)
-
9.6
(59.1)
(125.9)
d. major categories and fair value of plan assets
The major categories and fair values of plan assets at the end of the reporting period for each category are as follows:
Level 1
Domestic equities
Overseas equities
Fixed interest government bonds
Index linked government bonds
Corporate bonds
Diversified growth fund
Liability driven investment
Level 3
Property
SPV asset
Cash and other
At 31 December 2013
–––––––––––––––––––––––––––––––––––––––––––––––––––
TP Scheme
£m
BSS Schemes
£m
At 31 December 2012
–––––––––––––––––––––––––––––––––––––––––––––––
BSS Schemes
TP Scheme
£m
£m
200.8
235.7
32.0
38.5
108.0
120.2
7.1
32.3
36.1
10.4
821.1
13.1
114.8
-
-
15.3
61.4
-
-
-
1.5
206.1
165.6
193.9
41.9
38.3
106.0
79.9
-
59.8
42.0
10.6
738.0
61.3
92.4
-
-
15.8
-
-
2.3
-
-
171.8
FINANCIAL STATEMENTS
132
28. Pension arrangements continued
Actual return on scheme assets
TP Scheme
BSS Schemes
e. movements in the fair value of scheme assets in the current period
2013
––––––––––––––––––––––––––––––––––––––
£m
80.3
29.7
9.8%
14.4%
2012
––––––––––––––––––––––––––––––––––––––
£m
64.7
17.4
8.8%
10.1%
At 1 January
Interest on scheme assets
Return on scheme assets not included above
Administration expenses
Transfer of assets
Contributions from sponsoring companies
Contributions from members
Foreign exchange
Benefits paid
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
909.8
171.8
42.0
8.0
68.0
21.7
(0.8)
-
-
-
33.7
11.0
5.1
0.1
-
-
(30.6)
(6.5)
£m
738.0
34.0
46.3
(0.8)
-
22.7
5.0
-
(24.1)
2012 (Restated)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
818.6
166.4
39.4
6.9
42.7
10.5
(0.9)
-
-
(12.5)
32.9
6.0
5.1
0.1
(0.1)
(0.1)
(27.9)
(5.5)
£m
652.2
32.5
32.2
(0.9)
12.5
26.9
5.0
-
(22.4)
At 31 December
821.1
206.1
1,027.2
738.0
171.8
909.8
f. movements in the present value of defined benefit obligations in the current period
At 1 January
Service cost
Interest cost
Transfer of liability
Contributions from members
Actuarial losses
Foreign exchange
Benefits paid
At 31 December
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
(967.3)
(230.9)
(10.3)
(2.6)
(44.1)
(10.5)
-
-
(5.1)
(0.1)
(30.7)
(9.3)
-
-
30.6
6.5
£m
(736.4)
(7.7)
(33.6)
-
(5.0)
(21.4)
-
24.1
2012 (Restated)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
(864.3)
(231.4)
(10.0)
(2.8)
(41.5)
(10.2)
-
13.9
(5.1)
(0.1)
(74.4)
(5.9)
0.1
0.1
27.9
5.5
£m
(632.9)
(7.2)
(31.3)
(13.9)
(5.0)
(68.5)
-
22.4
(780.0)
(246.9)
(1,026.9)
(736.4)
(230.9)
(967.3)
g. Amounts recognised in the statement of other comprehensive income are as follows
2013
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
£m
2012 (Restated)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Group
TP Scheme BSS Schemes
£m
£m
£m
Return on plan assets (excluding amounts
included in net interest)
Actuarial losses arising from changes in
financial assumptions
Actuarial losses arising from experience adjustments
movements on restrictions in asset recognised
Reduction / (increase) in minimum funding
requirement liability
Re-measurement of net defined pension liability
46.3
21.7
68.0
32.2
10.5
42.7
(21.4)
-
(39.5)
61.2
46.6
(9.3)
-
-
(25.0)
(12.6)
(30.7)
-
(39.5)
36.2
34.0
(47.0)
(21.5)
17.7
(8.1)
(26.7)
(5.9)
-
-
-
4.6
(52.9)
(21.5)
17.7
(8.1)
(22.1)
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
28. Pension arrangements continued
133
h. Sensitivities
The estimated effects of changing the key assumptions (discount rate, inflation and life expectancy) on the IAS19 (revised 2011) balance sheet
position as at 31 December 2013.
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
£m
15.7
(16.3)
(8.5)
10.1
(17.6)
17.8
BSS Schemes
£m
4.5
(4.7)
(4.1)
3.9
(7.0)
7.0
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 £12.0m (2012: £7.2m).
29. Acquisition of businesses
On the 30 January 2013 the Group acquired 88.2% of the issued share capital of Solfex Energy Systems Limited (‘Solfex’). Solfex is a specialist
distributor of renewables technology. The Group acquired the remaining 11.8% on 31 July 2013.
On the 24 July 2013 the Group acquired 51.0% of the issued share capital of Plumbnation Limited (‘Plumbnation’). Plumbnation is an online
heating products distribution business. The Group has options to acquire the remaining 49.0% during the period until October 2016 and consequently
a financial liability of the expected value of the put option of £1.8m has been recognised. The call option currently has no fair value. Plumbnation will
prepare its financial statements to a 30 June year end.
The Group paid £0.3m for further immaterial acquisitions during the year and made fair value adjustments on prior year acquisitions resulting in
further additions to goodwill of £0.7m.
All acquisitions were accounted for using the purchase method of accounting. Provisional fair values ascribed to identifiable assets as at the date
of acquisition are shown in the table below:
Property, plant and equipment
Identifiable intangible assets
Inventories
Trade and other receivables
Cash at bank
Trade and other payables
Goodwill – addition during the period
Satisfied by:
Cash paid
Contingent consideration
Fair value acquired
0.4
2.9
1.8
1.6
4.0
(2.7)
8.0
6.4
14.4
13.3
1.1
14.4
Contingent consideration payable in 2014 and 2015 is calculated by reference to a multiple of EBITDA which is dependent upon future performance
and expansion of the Solfex business over the period to December 2015. After taking into account the requirements of the purchase and sale agreement
the total cash payment is expected to be £1.3m.
International Financial Reporting Standard (‘IFRS’) 3 (2008) requires the consideration transferred in a business combination to be measured at fair
value and therefore the future cash consideration has been discounted by £0.2m. If the actual consideration paid in the earn out years differs from the
current estimate of £1.1m, then IFRS 3 (2008) will require the difference to pass through the income statement. Given any such difference will not relate
to trading, we anticipate it will be shown as an exceptional item.
In addition, it is currently expected that, dependent on future profits, a further £2.1m will be paid to the previous majority shareholders of the
businesses who are still employed by the Group. As required by IFRS 3 (2008), this will be treated as remuneration and charged to the income
statement as it is earned.
Total revenue and operating profit for the businesses acquired for the period from acquisition, total £19.8m and £0.8m respectively. If the acquisitions
had been completed on the first day of the financial year, group revenues would have been £5,159.0m and the Group’s operating profit before amortisation
would have been £347.9m.
Goodwill recognised consists of the benefits from forecast growth and the assembled workforce. None of the goodwill recognised is expected to be
deductible for income tax purposes. Acquisition costs charged in administration expenses in the period to 31 December 2013 amounted to £0.4m. The
fair value of the acquired receivables is £1.6m and all acquired receivables are expected to be collected in full.
FINANCIAL STATEMENTS
134
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
2013
£m
195.6
2012
£m
189.0
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
2013
£m
172.0
600.7
1,042.5
1,815.2
2012
£m
181.0
619.2
1,085.2
1,885.4
b. The Group as lessor
The Group sublets a number of ex-trading properties to third parties. Property rental income earned during the year in respect of these properties
was £4.5m (2012: £4.2m).
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
32. Related party transactions
2013
£m
5.1
18.1
23.7
46.9
2012
£m
4.1
14.2
21.1
39.4
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
12.2
2013
£m
34.0
THE COmPANY
––––––––––––––––––––––––––––––––––––––
2012
£m
-
2013
£m
-
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 77 to 82.
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
2013
£m
9.2
3.4
12.6
2012
£m
7.9
4.4
12.3
The Company undertakes the following transactions with its active subsidiaries:
• Providing day-to-day funding from its UK banking facilities
• Paying interest to members of the Group totalling £22.4m (2012: £15.6m)
• Levying an annual management charge to cover services provided to members of the Group of £8.0m (2012: £7.9m)
• Receiving annual dividends totalling £121.0m (2012: £74.2m)
Details of balances outstanding with subsidiary companies are shown in note 18 and in the Balance Sheet on page 95.
Other than the payment of remuneration there have been no related party transactions with directors.
The Group advanced a total of £2.9m (2012: £2.9m) to all the Group’s associate companies in 2013. Operating transactions with the associates
during the year were not significant.
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
33. Analysis of changes in net debt
THE GROUP
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
135
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 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
At 1 January 2013
Cash flow
Exchange movement
Fair value movement
Finance charges movement
Amortisation of swap cancellation receipt
Discount unwind on liability to pension scheme
31 December 2013
Balances at 31 December comprise:
(78.6)
(60.5)
-
-
-
-
-
-
(139.1)
59.3
-
-
-
-
-
(79.8)
Cash and cash equivalents
Non-current interest bearing loans and borrowings
Current interest bearing loans and borrowings
Net debt
34. Lease adjusted gearing
Reported net debt
Property operating lease rentals x8
Lease adjusted net debt
Property operating lease rentals x8
Total equity
Lease adjusted equity
Gearing
20.3
5.7
-
-
-
-
(0.1)
-
25.9
(2.1)
-
-
-
-
-
23.8
325.0
(58.8)
-
-
1.2
-
-
-
267.4
(24.5)
-
-
(4.5)
-
-
238.4
279.3
-
(2.7)
(14.4)
-
(1.1)
-
-
261.1
(115.6)
(1.7)
(14.1)
-
(1.0)
-
128.7
37.2
(2.8)
-
-
-
-
-
2.5
36.9
(2.9)
-
-
-
-
2.5
36.5
Total
£m
583.2
(116.4)
(2.7)
(14.4)
1.2
(1.1)
(0.1)
2.5
452.2
(85.8)
(1.7)
(14.1)
(4.5)
(1.0)
2.5
347.6
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
2013
£m
79.8
(421.6)
(5.8)
(347.6)
139.1
(195.2)
(396.1)
(452.2)
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
347.6
1,474.4
1,822.0
1,474.4
2,515.2
3,989.6
45.7%
452.2
1,404.8
1,857.0
1,404.8
2,255.6
3,660.4
50.7%
FINANCIAL STATEMENTS
136
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
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
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
£m
(583.2)
(452.2)
2013
£m
(452.2)
(347.6)
104.6
65.1
63.2
9.3
(1.0)
2.5
4.6
2.9
(13.9)
(15.8)
(4.5)
22.6
239.6
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
36 Leverage ratios
Adjusted ratio of net debt to earnings before interest, tax and depreciation (‘EBITDA’) is derived as follows:
Profit before tax
Net finance costs
Depreciation and amortisation
EBITDA
Exceptional operating items
Exceptional investment income
Adjusted EBITDA
IFRS adjustments required for covenant calculations
Adjusted EBITDA under covenant calculations
Net debt under covenant calculations
Adjusted net debt to EBITDA under covenant calculations
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
299.2
39.9
86.8
£m
312.6
26.5
89.2
428.3
-
(9.4)
418.9
(2.6)
416.3
292.8
0.70x
425.9
8.7
(39.5)
395.1
(2.6)
392.5
374.5
0.95x
Adjusted ratio of net debt to earnings before interest, tax, depreciation and operating lease rentals (‘EBITDAR’) is derived as follows:
Adjusted EBITDA
Property operating lease rentals
Adjusted EBITDAR
Reported net debt
Property operating lease rentals x8
Lease adjusted net debt
Lease adjusted net debt to adjusted EBITDAR
418.9
184.3
603.2
347.6
1,474.4
1,822.0
3.0x
395.1
175.6
570.7
452.2
1,404.8
1,857.0
3.3x
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
NOTES TO THE FINANCIAL STATEMENTSTRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
36 Leverage ratios continued
Fixed charge cover is derived as follows:
Adjusted EBITDAR
Property operating lease rentals
Interest for fixed charge calculation (note 9)
Fixed charge cover
37. Return on capital ratios
Group return on capital employed is calculated as follows:
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
Group lease adjusted return on capital employed is calculated as follows:
Adjusted operating profit
50% of property operating lease rentals
Lease adjusted operating profit
Average capital employed
Property operating lease rentals x8
Lease adjusted capital employed
Lease adjusted return on capital employed
137
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
570.7
£m
603.2
184.3
23.4
207.7
2.9x
175.6
28.5
204.1
2.8x
2013
THE GROUP
––––––––––––––––––––––––––––––––––––––
2012
(Restated)
£m
£m
329.7
17.9
-
347.6
2,255.6
97.0
92.7
452.2
(19.5)
2,878.0
2,515.2
57.4
92.7
347.6
(3.7)
3,009.2
2,943.6
11.8%
347.6
92.2
439.8
2,943.8
1,474.4
4,418.2
10.0%
299.6
17.4
8.7
325.7
2,049.4
92.7
92.7
583.2
(36.6)
2,781.4
2,255.6
97.0
92.7
452.2
(19.5)
2,878.0
2,829.7
11.5%
325.7
87.8
413.5
2,829.7
1,404.8
4,234.5
9.8%
FINANCIAL STATEMENTS
Five year record
138
Consolidated income statement
Revenue
5,148.7
4,844.9
4,779.1
3,152.8
2,930.9
2013
£m
2012
(Restated)
£m
2011
£m
2010
£m
2009
£m
Operating profit before amortisation and exceptional items 347.6
(17.9)
Amortisation
-
Exceptional items
Operating profit
Exceptional investment income
Net finance costs
Profit before tax
Income tax expense
Net profit
Adjusted return on capital
Basic earnings per share
Adjusted earnings per share
325.7
(17.4)
(8.7)
299.6
39.5
(39.9)
299.2
(50.5)
248.7
313.2
(12.9)
(9.8)
290.5
-
(20.9)
269.6
(57.2)
212.4
239.0
(0.2)
(19.0)
219.8
-
(23.0)
196.8
(55.5)
141.3
329.7
9.4
(26.5)
312.6
(47.9)
264.7
11.8%
11.5%
11.3%
12.2%
109.9p
103.6p
104.3p
90.6p
90.3p
93.1p
20.0p
69.6p
77.2p
15.0p
224.6
-
32.7
257.3
-
(44.6)
212.7
(55.3)
157.4
10.9%
88.4p
75.2p
-
Dividend declared per ordinary share (pence)
31.0p
25.0p
Number of branches at 31 December
(Includes branches of associates)
1,939
1,896
1,868
1,813
1,238
Average number of employees
21,937
21,632
21,423
15,792
14,528
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
movement on finance lease liabilities
Repayment of unsecured loan notes
Liability to pension scheme
Decrease in bank loans
Net (decrease) / increase in cash and cash equivalents
Net debt at 1 January
Non cash adjustment
Cash flow from debt and debt acquired
Net debt at 31 December
Free cash flow
2013
£m
319.2
(20.5)
-
(59.2)
(90.3)
(2.9)
-
(9.3)
13.9
(65.1)
-
(2.1)
-
-
(143.0)
(59.3)
(452.2)
18.8
145.1
(347.6)
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
(452.2)
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
(583.2)
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)
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
(467.2)
239.6
241.8
293.5
277.8
294.4
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
Consolidated balance sheet
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
139
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N
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2013
£m
2012
(Restated)
£m
2011
(Restated)
£m
2010
£m
2009
£m
609.9
2,223.7
9.3
7.3
-
3.1
-
687.7
822.9
-
79.8
578.4
2,232.3
12.8
6.7
-
2.8
-
637.1
746.4
-
139.1
562.6
2,095.1
40.3
51.3
-
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
4,443.7
4,355.6
4,171.9
4,096.9
3,142.8
24.7
498.0
326.5
(40.6)
16.7
1,689.9
24.5
487.2
326.5
(62.4)
18.5
1,461.3
2,515.2
2,255.6
421.6
4.5
71.4
22.6
61.3
195.2
4.9
125.9
67.0
69.1
5.8
1.8
1,218.1
73.2
48.2
396.1
2.6
1,107.6
74.8
56.8
1,928.5
2,100.0
24.4
480.8
326.5
(75.2)
15.7
1,277.2
2,049.4
598.2
5.9
123.7
28.9
77.8
63.6
-
1,088.3
75.9
60.2
2,122.5
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
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
Total equity and liabilities
4,443.7
4,355.6
4,171.9
4,096.9
3,142.8
NOTICE OF ANNUAL
GENERAL MEETING
140
Notice is hereby given that the fiftieth Annual General
meeting of Travis Perkins plc will be held at Northampton
Rugby Football Club, Franklin’s Gardens, Weedon Road,
Northampton, NN5 5BG on Wednesday 28 may 2014 at
12.00 noon for the purposes set out below:
To consider and, if thought fit, to pass the following
Resolutions, of which Resolutions 1 to 15 (inclusive) will be
proposed as ordinary resolutions and Resolutions 16 to 18
(inclusive) will be proposed as special resolutions.
1.
To receive the Company’s Annual Report and Accounts
and the Auditor’s Report thereon for the financial year
ended 31 December 2013.
To receive and approve the Remuneration Policy
set out on pages 69 and 70 of the Directors’
Remuneration Report contained within the Annual
Report and Accounts for the financial year ended
31 December 2013.
To receive and approve the Directors’ Remuneration
Report (other than the Remuneration Policy referred
to in Resolution 2 above) contained within the Annual
Report and Accounts for the financial year ended
31 December 2013.
To declare a final dividend for the financial year ended
31 December 2013 of 21 pence per ordinary share,
payable to shareholders on the register at the close of
business on 2 may 2014.
To appoint Christopher Rogers as a non-executive
director of the Company. Biographical details of
Christopher Rogers appear on page 57.
To re-appoint John Coleman as a non-executive
director of the Company. Biographical details of John
Coleman appear on page 57.
To re-appoint Andrew Simon as a non-executive
director of the Company. Biographical details of
Andrew Simon appear on page 57.
To re-appoint Ruth Anderson as a non-executive
director of the Company. Biographical details of Ruth
Anderson appear on page 57.
To re-appoint Tony Buffin as a director of the Company.
Biographical details of Tony Buffin appear on page 56.
2.
3.
4.
5.
6.
7.
8.
9.
10. To re-appoint John Carter as a director of the
Company. Biographical details of John Carter appear
on page 56.
11. To re-appoint Robert Walker as a director of the
Company. Biographical details of Robert Walker appear
on page 56.
12. 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.
13. To authorise the Directors to fix the remuneration of
Deloitte LLP.
14. That the rules of the Travis Perkins Share matching
Scheme 2014 (the ‘Scheme’) be approved and the
Directors be authorised to:
a. make such modifications to the Scheme as they
may consider appropriate to take account of
the requirements of best practice and for the
implementation of the Scheme and to adopt the
Scheme as so modified and to do all such other
acts and things as they may consider appropriate to
implement the Scheme; and
b. establish further schemes based on the Scheme
but modified to take account of local tax, exchange
control or securities laws in overseas territories,
provided that any shares made available under
such further schemes are treated as counting
against the limits on individual or overall
participation in the Scheme.
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 shares in the Company or grant rights to subscribe
for or to convert any security into shares in the
Company:
a. up to an aggregate nominal amount of
£8,229,844.90 (such amount to be reduced by
the aggregate nominal amount allotted or granted
under paragraph (b) of this Resolution 15 in excess of
£8,229,845; and
b. comprising equity securities (as defined in section
560(1) of the Companies Act 2006) up to an
aggregate nominal amount of £16,459,689.90 (such
amount to be reduced by the aggregate nominal
amount allotted or 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 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 2015) 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. References in this
Resolution 15 to the nominal amount of rights to
subscribe for or to convert any security into shares
(including where such rights are referred to as
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
141
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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 24,689,534
(representing approximately 10% of the issued share
capital of the Company as at 25 February 2014);
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 shall not exceed the
higher of (i) 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 contracted to be purchased; and
(ii) an amount equal to the higher of the price of an
ordinary share quoted for the last independent trade
and the highest current independent bid for an ordinary
share on the trading venues where the purchase is
carried out;
d. this authority (unless previously renewed, varied or
revoked by the Company in general meeting) expires
at the conclusion of the next Annual General meeting
of the Company or 30 June 2015, 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
Deborah Grimason
Company Secretary and General Counsel
Lodge Way House, Harlestone Road,
Northampton NN5 7UG
25 February 2014
Registered in England No. 824821
equity securities as defined in section 560(1) of the
Companies Act 2006) are to the nominal amount of
shares that may be allotted pursuant to the rights.
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 defined in section 560(1) of the Companies Act
2006) for cash pursuant to the authority granted by
Resolution 15 and/or pursuant to section 573 of the
Companies Act 2006 to sell ordinary shares held by
the Company as treasury shares for cash, 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 and sale of
treasury shares for cash in connection with an offer
of, or invitation to apply for, 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 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 sale of treasury shares for cash (in each
case otherwise than in the circumstances set out in
paragraph (a) of this Resolution.16) up to a nominal
amount of £1,234,476.70 calculated, in the case of
equity securities which are rights to subscribe for, or
to convert securities into, ordinary shares 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 2015) 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.
ANNUAL GENERAL MEETING –
EXPLANATORY NOTES
TO THE RESOLUTIONS
142
The Annual General meeting of the Company will be held
at Northampton Rugby Football Club, Franklin’s Gardens,
Weedon Road, Northampton, NN5 5BG on Wednesday 28
may 2014 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
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.
Resolutions 2 and 3: Directors’ Remuneration Report
(including the Remuneration Policy)
New requirements came into force on 1 October 2013
in relation to the content and approval of the Directors’
Remuneration Report.
In accordance with the new requirements, the Directors’
Remuneration Report (which is set out on pages 68 to 82)
contains (i) the Remuneration Policy; (ii) the Annual Report
on remuneration; and (iii) the annual statement by the
Chairman of the Remuneration Committee.
Resolution 2 seeks shareholder approval for the
Remuneration Policy, which can be found on pages 69
and 70. The Remuneration Policy sets out the Company’s
future policy on directors’ remuneration and is subject to
a binding shareholder vote by ordinary resolution at least
every three years.
If Resolution 2 is approved, the Remuneration Policy will
take effect from the end of the AGm, with the intention
that it will remain in place for three years. If the Company
wishes to change the Remuneration Policy within that three
year period, it will submit a revised remuneration policy to
shareholders for approval.
Once the Remuneration Policy is approved, all payments
by the Company to current, prospective or former directors
(in their capacity as directors) will be made in line with
the Remuneration Policy or following specific approval by
shareholder resolution.
Until the Remuneration Policy takes effect, payments will
continue to be made to directors and former directors (in
their capacity as directors) in line with existing contractual
arrangements until that date.
Resolution 3 is an ordinary resolution which seeks
shareholder approval for the Directors’ Remuneration Report
(other than the part containing the Remuneration Policy),
which can be found on pages 68 to 82 and gives details of
the implementation of the Company’s current remuneration
policy during the year ended 31 December 2013.
The vote upon this resolution is advisory. The vote is
not specific to individual levels of remuneration and the
directors’ entitlement to remuneration is not conditional on it.
Resolution 14: Share Matching Scheme 2014
The Company’s existing 2004 Share matching Scheme
will expire in April 2014. Consequently, the Remuneration
Committee of the Board has undertaken a review of the
Company’s long-term incentive provision, in conjunction with
its regular review of the Company’s overall senior executive
remuneration policy. The Remuneration Committee
believes that the Share matching Scheme encourages the
Company’s senior management to commit to building up
a shareholding in the Company whilst being incentivised to
deliver key financial targets over the longer term, thereby
creating a genuinely strong alignment of interests between
management and investors.
This resolution therefore seeks approval to renew the
2004 Share matching Scheme once it expires. The new
Share matching Scheme will be renewed on the same
terms as the 2004 Scheme but with certain amendments
to reflect current corporate governance requirements (such
as the introduction of clawback, where the Remuneration
Committee may recover amounts paid out under the new
Scheme in certain adverse circumstances) and to assist
with the operation and administration of the new Share
matching Scheme.
It is intended that the first awards under the new Scheme
will be made in 2015.
The main terms of the new Travis Perkins Share matching
Scheme 2014 are summarised in the Appendix to this
Notice on pages 144 to 145.
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 £8,229,844.90 (representing 82,298,449
ordinary shares of 10 pence each). This amount represents
approximately one-third of the issued ordinary share
capital of the Company as at 25 February 2014, the latest
practicable date prior to publication of this Notice.
In line with guidance issued by the Association of British
Insurers (the ‘ABI’), paragraph (b) of this resolution would give
the directors authority to allot ordinary shares in connection
with a rights issue in favour of ordinary shareholders up to
an aggregate nominal amount equal to £16,459,689.90
(representing 164,596,899 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
25 February 2014, 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 2015 (the last date by which the
Company must hold an Annual General meeting in 2015)
and the conclusion of the Annual General meeting of the
Company held in 2015. 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
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 143
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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.
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 £1,234,476.70
(representing 12,344,767 ordinary shares). This
aggregate nominal amount represents approximately 5%
of the issued ordinary share capital of the Company as
at 25 February 2014, 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 2015
(the last date by which the Company must hold an Annual
General meeting in 2015) and the conclusion of the Annual
General meeting of the Company held in 2015. 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 2013,
shareholders approved a notice period for general meetings
(other than AGms) of not less than 14 clear days effective
until the Annual General meeting to be held in 2014. This
resolution is proposed to allow the Company to continue to
call general meetings (other than Annual General meetings)
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 proposing
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 clear 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
2015, 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 141, 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 24,689,534 (representing
approximately 10% of the issued ordinary share capital of
the Company as at 25 February 2014) and sets minimum
and maximum prices. This authority will expire no later than
30 June 2015.
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 25 February 2014, there were options over
10,558.638 ordinary shares in the capital of the Company,
which represent 4.28% of the Company’s issued ordinary
share capital (excluding any treasury shares). If the full
authority to purchase own shares were to be used, and the
shares cancelled, these outstanding options would represent
approximately 4.75% of the Company’s issued ordinary
share capital (excluding any treasury shares) as at that
date. As at 25 February 2014, the Company did not hold
any treasury shares in the Company and no warrants over
ordinary shares in the capital of the Company existed.
Directions to Northampton Rugby Football Club can be
found on page 148.
APPENDIX TO NOTICE OF
ANNUAL GENERAL MEETING
144
Summary of principal terms of the Travis Perkins Share
matching Scheme 2014 (the ‘Scheme’)
participant (or his/her spouse) and will not be subject to
forfeiture under the Scheme.
Operation
The remuneration committee of the board of directors of the
Company (the ‘Committee’) will supervise the operation of
the Scheme.
Eligibility
Any employee of the Company and its subsidiaries will be
eligible to participate in the Scheme at the discretion of
the Committee.
Grant of awards
The Committee may grant awards to acquire ordinary
shares in the Company (‘Shares’) within six weeks following
the Company’s announcement of its results for any period.
The Committee may also grant awards within six weeks
of shareholder approval of the Scheme or at any other
time when the Committee considers there are exceptional
circumstances which justify the granting of awards. It is
intended that the first awards under the Scheme will be
made in 2015.
The Committee may grant awards as conditional shares,
a nil (or nominal) cost option or as forfeitable shares. The
Committee may also decide to grant cash-based awards
of an equivalent value to share-based awards or to satisfy
share-based awards in cash, although it does not currently
intend to do so.
An award may not be granted more than three years after
shareholder approval of the Scheme.
No payment is required for the grant of an award other
than the investment of funds in Shares as described below.
Awards are not transferable, except on death. Awards are
not pensionable.
Investment Shares
An award will be made in conjunction with the investment of
an individual’s funds (from any source) in Shares (‘Investment
Shares’). The maximum amount which an individual may
invest in Investment Shares in any financial year is 50% of
their post-tax salary.
After the Investment Shares have been purchased, the
Company will grant an award over a number of Shares
which shall not exceed two times the number of Investment
Shares grossed up for income tax at a rate of 45% or such
other rate as the Committee may determine.
Once purchased, the participant may transfer the
ownership of their Investment Shares to his/her spouse or
civil partner (‘spouse’).
The Investment Shares will either be held by a nominee
on behalf of the participant or his/her spouse or the
participant will allow their holding of Investment Shares
(including any Investment Shares held by his/her spouse) to
be monitored by the Company.
Investment Shares will remain the property of the
Performance conditions
The vesting of awards will be subject to performance
conditions set by the Committee.
The first awards to be granted under the Scheme in
2015 will be based on the average cash return on capital
employed (‘CROCE’) of the Company over a performance
period of three financial years. The extent to which the
2015 awards will vest will be based on threshold and
maximum performance levels determined in accordance
with the Company’s three year business plan and projections.
If performance is below threshold, the award will lapse.
At threshold performance, 30% of the award will vest.
This increases to 100% vesting for maximum levels of
performance, with straight-line vesting in between these points.
There will be no retesting of the performance condition
and the awards will lapse to the extent that the performance
condition is not met at the end of the performance period.
The Committee can set different performance conditions
from those described above for future awards provided that,
in the reasonable opinion of the Committee, the new targets
are not materially more or less difficult to satisfy than the
original conditions were considered to be at the date of grant
of the awards.
The Committee may also vary the performance
conditions applying to existing awards if an event has
occurred which causes the Committee to consider that it
would be appropriate to amend the performance conditions,
provided the Committee considers the varied conditions
are fair and reasonable and not materially more or less
challenging than the original conditions would have been but
for the event in question.
Vesting of awards
Awards normally vest three years after grant to the extent
that the applicable performance conditions (see above) have
been satisfied, the Investment Shares have been retained by
the participant (or his / her spouse) and provided they are
still employed in the Company’s group. Awards in the form
of options are then usually exercisable up until the tenth
anniversary of grant unless they lapse earlier.
On the vesting of an award, the participant (or his/
her spouse) will be able to sell or otherwise transfer his/
her related Investment Shares, subject to any shareholding
requirement which may apply to him/her.
If a participant transfers, charges or otherwise disposes
of their Investment Shares before the vesting of the award
associated with those Investment Shares, then that award will
lapse pro-rata to the number of related Investment Shares
so treated.
Dividend equivalents
The Committee may decide that participants will receive a
payment (in cash and/or Shares) on or shortly following the
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 145
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vesting or exercise of their awards, of an amount equivalent
to the dividends that would have been paid on those
Shares between the time when the awards were granted
and the time when they vest. This amount may assume
the reinvestment of dividends. Alternatively, the Committee
may determine on or before grant that participants may
have their awards increased as if dividends were paid on
the Shares subject to their award and then reinvested in
further Shares.
Leaving employment
As a general rule, an award will lapse upon a participant
ceasing to hold employment or be a director within the
Company’s group. However, if a participant ceases to be an
employee or a director because of death, ill-health, injury,
disability, retirement, redundancy, their employing company
or the business for which they work being sold out of the
Company’s group or in other circumstances at the discretion
of the Committee, then their award will vest.
Unless the Committee determines otherwise, the date on
which, and the extent to which, an award will vest in these
circumstances will depend upon two factors: (i) the extent
to which the performance condition has been satisfied up to
the end of the financial year in which the participant leaves;
and (ii) the pro-rating of the award to reflect the reduced
period of time between its grant and the date of cessation of
the participants employment or office.
Corporate events
In the event of a takeover or winding up of the Company
(not being an internal corporate reorganisation) all awards
will vest early subject to: (i) the extent that the performance
conditions have been satisfied at that time; and (ii) the
pro-rating of the awards to reflect the reduced period of time
between their grant and vesting, although the Committee
can decide not to pro-rate an award if it regards it as
inappropriate to do so in the particular circumstances.
In the event of an internal corporate reorganisation awards
will be replaced by equivalent new awards over shares in a
new holding company unless the Committee decides that
awards should vest on the basis which would apply in the
case of a takeover.
Clawback
The Committee may decide, before or within three years of
vesting, that a participant’s award will be subject to clawback
where there has been a misstatement of the Company’s
financial results, an error in assessing any applicable
performance condition or if the participant’s employment
is terminated for gross misconduct. The Committee
may require the satisfaction of the clawback by way of a
reduction in future bonuses, the vesting of any subsisting or
future awards granted under the Scheme or under certain
other share incentive plans and/or a requirement to make a
cash payment.
Participants’ rights
Awards of conditional shares and options will not confer
any shareholder rights until the awards have vested or the
options have been exercised and the participants have
received their Shares. Holders of awards of forfeitable
Shares will have shareholder rights from when the awards
are made except they may be required to waive their rights
to receive dividends.
Rights attaching to Shares
Any Shares allotted when an award vests or is exercised
will rank equally with Shares then in issue (except for rights
arising by reference to a record date prior to their allotment).
Variation of capital
In the event of any variation of the Company’s share capital
or in the event of a demerger, payment of a special dividend
or similar event which materially affects the market price of
the Shares, the Committee may make such adjustment as it
considers appropriate to the number of Shares subject to an
award and/or the exercise price payable (if any).
In relation to Investment Shares, a participant will be
treated on the same terms as any other shareholder and,
in the event of a variation of the Company’s share capital,
the participant (or his/her spouse) may, if appropriate,
increase the number of his/her Investment Shares by
adding any further Shares acquired by virtue of his/her
holding of Investment Shares. The number of Shares in any
corresponding award may be adjusted accordingly.
Overall Scheme limits
The Scheme may operate over new issue Shares, treasury
Shares or Shares purchased in the market.
In any ten calendar year period, the Company may not
issue (or grant rights to issue) more than:
a. 10 per cent of the issued ordinary share capital of the
Company under the Scheme and any other employee
share scheme adopted by the Company; and
b. 5 per cent of the issued ordinary share capital of the
Company under the Scheme and any other executive
share scheme adopted by the Company.
Treasury Shares will count as new issue Shares for the
purposes of these limits unless institutional investors decide
that they need not count.
Alterations to the Scheme
The Committee may, at any time, amend the Scheme in any
respect, provided that the prior approval of shareholders is
obtained for any amendments that are to the advantage of
participants in respect of the rules governing eligibility, limits
on participation, the overall limits on the issue of Shares or
the transfer of Treasury Shares, the basis for determining a
participant’s entitlement to, and the terms of, the Shares or
cash to be acquired and the adjustment of awards.
The requirement to obtain the prior approval of
shareholders will not, however, apply to any minor
alteration made to benefit the administration of the
Scheme, to take account of a change in legislation or to
obtain or maintain favourable tax, exchange control or
regulatory treatment for participants or for any company
in the Company’s group. Shareholder approval will also
not be required for any amendments to any performance
condition applying to an award.
Overseas schemes
The shareholder resolution to approve the Scheme will
allow the Board to establish further schemes for overseas
territories, any such scheme to be similar to the Scheme,
but modified to take account of local tax, exchange control
or securities laws, provided that any Shares made available
under such further schemes are treated as counting
against the limits on individual and overall participation in
the Scheme.
NOTES TO THE NOTICE
OF ANNUAL GENERAL MEETING
146
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 notes 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,
Franklin’s Gardens, Weedon Road, Northampton, NN5
5BQ at 12.00 noon on Wednesday 28 may 2014
and any adjournment(s) thereof must be returned to
Capita Asset Services at PXS, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU, by 12.00 noon on 26
may 2014. Alternatively you may submit your proxy
form online by accessing the Share Portal at www.
travisperkins-shares.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 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 26 may 2014).
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.
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 147
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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
(excluding any part of a day that is not a working day)
before the time appointed for holding the meeting or
any adjournment thereof.
total voting rights in the Company as at 25 February
2014 was 246,895,349.
11 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.
12 Under section 527 of the Companies Act 2006
7
8
9
Only those members entered on the register of
members of the Company as at 6.00 pm on 26 may
2014 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.
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 11.45am 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 Travis Perkins Share
matching Scheme 2014. Copies will also be available
for inspection at the offices of New Bridge Street (a
trading name of Aon Hewitt Limited), 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.
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.
13 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.
10 At 25 February 2014 (being the latest practicable
14 A copy of this Notice, and other information required
date before publication of this notice) the issued share
capital of the Company consisted of 246,895,349,
ordinary shares, carrying one vote each. Therefore, the
by section 311A of the Companies Act 2006, can be
found in the Investor Centre at
www.travisperkinsplc.co.uk.
DIRECTIONS TO NORTHAMPTON
RUGBY FOOTBALL CLUB
148
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).
Y
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JUNCTION 16
W E E D O N R O A D A 4 5
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BP
CINEWORLD
SIXFIELDS
NORTHAMPTON
TOWN FOOTBALL CLUB
TGI FRIDAYS
TO M1
JUNCTION 15A
A
4
5
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.
DUSTON ROAD
W E E DON ROAD A4500
BEACON BINGO
R B R I D GE ROAD A4500
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NORTHAMPTON
RUGBY FOOTBALL
CLUB
VIP CAR PARK
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RAILWAY STATION
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D A428
TO NORTHAMPTON
TOWN CENTRE
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 (approximately 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. 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:
Google maps (www.google.co.uk/maps)
The AA (www.theaa.com)
The RAC (www.rac.co.uk)
For further details about the venue:
www.northamptonsaints.co.uk
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013
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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 Asset Services
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 shareholderenquiries@capita.co.uk
finanCiaL diary
Ex-dividend date
Record date
Annual General meeting
Payment of final dividend
Announcement of 2014
interim results
Interim management Statement
Announcement of 2014
30 April 2014
2 may 2014
28 may 2014
30 may 2014
30 July 2014
17 October 2014
annual results
26 February 2015
annUaL GeneraL meetinG – C aterinG
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.
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.birchwoodpricetools.com
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.sektorinteriors.co.uk
www.selfbuildgroup.co.uk
www.southern-darwent.co.uk
www.sustainablebuildingsolutions.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.vanvasult.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 CommUniC ation
In accordance with the Companies Act 2006 and the
Company’s Articles of Association, the Company is allowed
to use its website to publish statutory documents and
communications to shareholders, such as the Annual
Report and Accounts and the Notice of the AGm. You can
therefore view or download a copy of the Annual Report
and Accounts and the Notice of the AGm by going to our
website at www.travisperkinsplc.com (see section called
‘Investor Centre’). If you received a hard copy of this report in
the post then you will not have consented to this method of
publication. Should you now wish to consent to this method
of publication, you should contact
Capita Asset Services,
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
150
OTHER SHAREHOLDER INFORMATION
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.travisperkins-shares.com,
and follow the instructions (see Registrar’s On-Line Service
below).
Please telephone Capita Asset Services 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 asset serviCes
The Company’s registrars, Capita Asset Services (‘Capita’),
provide a number of services that, as a shareholder, might
be useful to you:
Registrar’s on-line service
By logging onto www.travisperkins-shares.com (‘the Share
Portal’) 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 Asset Services. 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.
You can sign up for this service on the Share Portal (by
clicking on ‘reinvest dividends’ and following the on screen
instructions). 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 open from 9.00 am to 5.30 pm monday – Friday.
If Non-UK +44 208 639 3402. Email shares@capita.co.uk
or visit www.capitaassetservices.com. Please note that this
facility is only available to shareholders with an address in
the UK or EEA. The value of shares and income from them
can fall as well as rise and you may not recover the amount
of money you invest.
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 has partnered with Deutsche Bank 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 local bank account, or
alternatively, you can be sent a currency draft.
You can sign up for this service on the Share Portal (by
clicking on ‘your dividend options’ and following the on
screen instructions) or by contacting the Customer Support
Centre. Further details are available from Capita Asset
Services: by telephone UK: 0871 664 0385 (UK calls
cost 10p per minute plus network extras). From overseas:
+44 20 8639 3405. Lines are open 9.00am to 5.30pm,
monday to Friday, excluding public holidays.
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share deaLinG serviCes
Capita and Stocktrade 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 £21.00, maximum £125.00)
and for the telephone service, Capita’s commission rates
are 1.50% of the value of the deal (minimum £28.50,
maximum £175.00).
Stocktrade
Stocktrade offer a telephone share dealing service which
is available by telephoning +44 131 240 0508 and
quoting reference ‘Travis Perkins Dial and Deal’. 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 a
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.
share fraUd - warninG to sharehoLders
In recent years, share fraud has been increasing, with
shareholders receiving unsolicited correspondence
concerning investment matters. Fraudsters use persuasive
and high-pressure tactics to lure investors into scams;
offering to sell shares that turn out to be worthless or
non-existent, or to buy shares at an inflated price in return
for an upfront payment. Sometimes these individuals imply
that they represent Travis Perkins, but in fact they have no
connection with the Company and have no authority to
claim or imply that they are.
If you are approached by fraudsters, please tell the
Financial Conduct Authority using the share fraud reporting
form at www.fca.org.uk/scams, where you can also find out
more about investment scams.
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SHAREHOLDER NOTES
TRAVIS PERKINS PLC ANNUAL REPORT AND ACCOUNTS 2013 Designed by RWH Design Consultants, Photographed by Charles Ward
Printed by Jones and Palmer
Travis Perkins plc · Lodge Way House · Harlestone Road · Northampton NN5 7UG · Telephone 01604 752 424
www.travisperkinsplc.com