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7
Annual Report
& Accounts 2017
Front Cover:
Travis Perkins plc, Omega, Warrington, Distribution Centre
Right:
Colleagues – Travis Perkins, Salthouse Road
Jack Pickles – BSS, Leeds
Ian Ellis and Steve O’Toole – Keyline, Telford
CONTENTS
2.2%
increase in
full-year dividend
Revenue increased
3.5%
2
HIGHLIGHTS
3
STRATEGIC REPORT
Divisional structure
Chairman’s statement
How we create value
Chief Executive’s statement
4
6
8
12
14 Performance review
33
Statement of principal risks
and uncertainties
Our people
Keeping people safe
Environmental sustainability
41
44
46
49
GOVERNANCE
AND REMUNERATION
Corporate governance report
50 The board of directors
53
58 Audit committee report
64 Directors’ remuneration report
Nominations committee report
82
84 Directors’ report
87 Statement of directors’
responsibilities
89
FINANCIAL STATEMENTS
Independent auditor’s report
90
96 Financial statements
103 Notes to the financial statements
163
SHAREHOLDER
INFORMATION
164 Five-year summary
166 Other shareholder information
1
Travis Perkins plc Annual Report & Accounts 2017
HIGHLIGHTS
Solid execution and positioning the business for long-term growth
£m
Revenue
Like-for-like revenue growth(1)
Adjusted operating profit(1)
Adjusted operating profit excluding property(1)
Adjusted profit before taxation(1)
Adjusted earnings per share(1)
Net debt(1)
Dividend per share (pence)
Lease adjusted ROCE (%)
Operating profit
Profit before taxation
Basic earnings per share (pence)
Note
4
37
5a
5a
5c
11b
32
12
36
11a
Change
3.5%
(7.1)%
(10.5)%
(10.0)%
(8.3)%
£36m
2.2%
(0.8)ppt
2017
6,433
3.3%
380
351
343
110.4p
(342)
46.0p
10.1%
327
290
93.1p
2016
6,217
3.1%
409
392
381
120.4p
(378)
45.0p
10.9%
100
73
5.1p
(1) Alternative performance measures are used to provide a guide to underlying performance. Details of the calculations can be found in the notes indicated.
• Revenue growth of 3.5% in 2017, with like-for-like growth of 3.3%
• Full year total dividend of 46.0p, an increase of 2.2% reflecting
• Adjusted operating profit of £380m following investments
made to improve customer propositions
• Free cash flow generation of £407m, with strong cash
conversion of 107%
• Net debt reduced by £36m to £342m
strong cash performance
• Encouraging early signs from the Plumbing & Heating
transformation plan announced in August 2017. As previously
disclosed, an exceptional charge of £41m has been recognised
in connection with the plan
2
Travis Perkins plc Annual Report & Accounts 2017Strategic Report STRATEGIC
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
4 Divisional structure
6 Chairman’s statement
8 How we create value
12 Chief Executive’s statement
14 Performance review
33
Statement of principal risks and uncertainties
41
Our people
44 Keeping people safe
46
Environmental sustainability
Main image:
Oana Bizic
Travis Perkins,
Staples Corner
Bottom right:
Pete Groucott
City Plumping Supplies,
Shrewsbury
3
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report DIVISIONAL STRUCTURE
The Group’s businesses are organised and managed through four divisions.
General Merchanting
£2.1bn sales, 850 branches
The General Merchanting Division supplies products for all types of repair, maintenance and improvement projects (“RMI”) as
well as new residential and commercial construction. The customer base is largely made up of professional tradesmen, ranging
from sole traders to national housebuilders whose key requirements are locally stocked product ranges (immediately available
for collection or delivery), access to extended ranges (often delivered direct to site), competitive pricing, credit accounts and
problem solving expertise.
Market leading general merchant to trade customers
Kitchen distributor to trade
Consumer
£1.6bn sales, 666 stores
The Consumer Division supplies domestic building and decorative materials through its store network to DIY and trade
customers. It differentiates itself by aiming to provide the best value in each of its respective channels through operating
efficient stores and delivery services, a superior online proposition, high levels of availability of the brands and products that
customers demand in a modern customer shopping environment.
Toolstation has a rapidly growing European business, with 23 stores in the Netherlands and France and online businesses in
Belgium and Germany.
Fully integrated multichannel retailer
Fastest growing national DIY retailer
Tile retailer
4
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report More than 29,000 colleagues serving trade customers and retail customers from over 2,000 trading outlets throughout the UK.
Contracts
£1.4bn sales, 169 branches
The customers of the three large Contracts businesses, Keyline, BSS and CCF, are typically main contractors and sub-
contractors in the residential, infrastructure, commercial and industrial construction sectors. The products supplied from the
three main businesses are generally used in large construction projects ranging from new road and rail infrastructure, power
generation construction, public service infrastructure such as hospitals and schools, through to commercial and residential
construction and refurbishment.
Leading specialist distributor of civils, heavy building materials
and drainage
Specialist distributor of ceilings, insulation and drywall
Leading specialist distributors of pipeline and heating solutions
Plumbing & Heating
£1.4bn sales, 391 branches
The Plumbing & Heating Division delivers a coherent and consistent proposition to installer and contract customers through
an integrated branch network and online capacity, as well as being a leading wholesaler to trade distributors.
The Division has an extended category reach including its successful own brand products and leading renewable heating
distributors, enabling improved customer convenience.
Digital footprint
Physical network
Leading wholesaler to trade distributors
5
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report CHAIRMAN’S
STATEMENT
I am pleased to introduce the Company’s Annual Report for the year ended 31 December 2017,
a year in which the Group has continued to drive towards its longer term targets, but
has also needed to react to an increasingly uncertain macro-economic climate in the
UK. The Group is striking a balance between investing for future growth and delivering
positive short term financial performance, and it is pleasing to see our businesses
perform well in this challenging environment.
Group sales grew by 3.5% to £6.4 billion and
by 3.3% on a like-for-like basis.
Continued investment in the Group’s businesses to improve
customer service and propositions and build a sustainable
advantage over competitors, combined with significant operating
cost inflation over the course of the year led to a 7% reduction in
adjusted operating profit to £380m. Adjusted earnings per share
reduced to 110.4p compared with 120.4p in 2016.
The performance of the Group’s businesses results from a
combination of the strength/weakness of their end-market
performance and the level of investment in the business.
The three Contracts businesses, Keyline, BSS and CCF
performed particularly strongly, extending market share and
improving profitability. The Travis Perkins general merchant
business was impacted by a more challenging repairs,
maintenance and improvement market than in recent years,
combined with the increased costs of extending the heavyside
range centre network across all of England and Wales, and
increasing investments in digital capabilities, both of which will
be of great benefit to the business in the future.
The Wickes business continued to outperform its direct
competitors, but in a market that became increasingly difficult
as consumers saw their disposable income tighten through the
course of 2017 as higher inflation levels outpaced wage growth.
The Toolstation business continues to mature quickly, with
like-for-like growth increasing throughout 2017.
The review of the Plumbing & Heating business carried out in
the first half of the year led to a wide ranging restructuring plan,
and much has been achieved in the second half of the year.
Early signs are encouraging and significant improvements have
been made in customer propositions, supply chain structure and
customer relationships which are showing an improvement in
sales, and a significant reduction in the cost base has formed a
solid foundation for the recovery of this business going forwards.
6
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Strategy
The Group outlined a five year strategic plan in December 2013
setting out its ambition to deliver long-term, sustainable value to
shareholders through four levers of value creation. The Group has
invested in recent years in its proposition to offer market-leading
service to its customers. While the long-term fundamental drivers
remain favourable, the current macro-economic climate means
we must be even more focused on where we invest to deliver
growing returns. We have therefore set even tougher hurdles for
investment and would expect capital expenditure to slow further
in 2018.
During 2018, we will focus on refining the Group’s strategy
to create value for shareholders and will update the
market accordingly.
Dividend
The Board is taking a balanced view between the on-going level
of uncertainty and the resulting low growth environment in the
UK economy, and therefore the Group’s end markets, and the
continuing strong cash generation of the Group’s businesses.
Although absolute profitability declined modestly in 2017, the
Board recommend an increase of 2.2% in the full year dividend.
A final dividend of 30.5p, payable on 11 May 2018 to
shareholders on the register on 6 April 2018, will give a full
year dividend of 46p (2016: 45p). This moves the Group to just
outside its target dividend cover range of 2.5-3.25x, but reflects
the confidence in the on-going positive cash generation of the
Group even whilst funding the investment capital and reducing
the Group’s net debt position.
Employees
Our people are our greatest resource; at Travis Perkins we have
around 30,000 employees across the UK and we take our
responsibility to our colleagues very seriously. We continue to
be recognised by the Great Place to Work Institute, a significant
acknowledgement of the hard work and commitment of all
our colleagues, particularly across our branch network and the
supporting HR teams. We strive for continuous improvement in
the Group’s programmes which focus on colleague health and
safety, career development, diversity and flexible benefits.
I would like to take this opportunity, on behalf of the Board, to
thank all our colleagues for their commitment, energy and hard
work during the course of 2017.
Board of Directors
In November 2017, Robert Walker retired as Chairman of the
Board of Directors after eight years. On behalf of the Board,
the Management team and the wider Travis Perkins family, we
thank Robert for his diligent service to the company, and for his
guidance throughout his Chairmanship.
I joined the Board in September 2017, and succeeded Robert as
Chairman in November 2017.
Alan Williams joined the Board as an executive member as
Chief Financial Officer on 3 January 2017. Tony Buffin remains
on the Board, but changed roles to become Group COO.
There were no other Director changes in 2017. I will be leading
a review of Board composition at the Nomination Committee
during 2018 in order to plan the evolution of the Board and
to ensure that we continue to have the right balance of skills,
experience and diversity into the future.
Outlook
The UK economic environment continues to be challenging, with
the individual markets in which our businesses compete primarily
driven by the sentiment and financial spending power of UK
consumers. It remains difficult to predict how these markets will
progress in 2018.
Our management teams are highly experienced in operating
in a variety of market conditions and have taken appropriate
steps for their businesses to react to and take advantage of any
market changes.
The core foundations of long term demand for building materials
remain solid, with continued unmet demand for housing, and a
large and ageing housing stock requiring renovation. The majority
of our businesses also operate in fragmented market structures.
Against this backdrop, the investments we have made and will
continue to make to improve our customer propositions, optimise
our property network and modernise our legacy IT systems will
give us the base on which to build our profitable growth plans.
Stuart Chambers
Chairman
27 February 2018
7
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report HOW WE CREATE VALUE
The UK’s largest distributor of building materials with room to grow
Whilst the Group is the largest distributor of building materials in the UK, its businesses are not always the first choice for many of its
customers and many of the markets in which the Group operates remain fragmented. These opportunities present compelling routes
to improve and grow many of the Group’s businesses. The Group remains committed to building on its core expertise as a distributor
of building materials. Given the opportunities to grow, the UK will remain the key focus for the Group’s merchant businesses for the
foreseeable future. The Group has begun to diversify beyond the UK and this will continue with the organic expansion of its integrated
multichannel business Toolstation. The Group will only enter markets beyond the UK where one of the Group’s businesses has a
disruptive and compelling customer proposition and where strong returns can be generated.
Be the first choice distributor of building materials in the UK
First Choice
Distributor
The Group is the largest distributor of building materials,
but not the first choice for the majority of customers
With the exception of some minority investments the
Group is a distribution business with complementary
supply chains
Building Materials
UK
The products the Group sells are used in the repair,
maintenance or improvement of existing buildings and the
construction of new building and infrastructure projects
The advantages the Group and its businesses enjoy
are generally not scalable outside the UK
8
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Business model
The core of all of the Group’s businesses is distribution, meaning they are engaged in buying,
moving and selling building materials.
buy
move
sell
Source products from over
50 countries and over
9,000 suppliers
Distribute 400,000 product
lines from over 4 million ft2
distribution space using
4,000 delivery vehicles
Sell goods and services to over
280,000 account customers
and millions of cash customers
from more than 2,000 branches
The markets each of the Group’s businesses operate within
have distinct characteristics based on the type of customers
they serve, what products they sell, the basis of pricing and
the fulfilment channel. The Group organises its businesses
by customer group. Retail customers are served through the
Consumer division and large contract led customers are served
through the Contracts division. Customers who range from local
tradesmen through to national developers are served through
two merchant divisions; Travis Perkins and Benchmarx within the
General Merchanting division and specialist plumbing customers
through the Plumbing & Heating division.
Consumer
Merchants
Contracts
Wickes
Toolstation
Travis
Perkins
Benchmarx
PTS, CPS
F & P,
Connections,
Primaflow
Keyline,
BSS, CCF
Sales = £1.6bn
Sales = £2.1bn
Sales = £1.4bn
Sales = £1.4bn
Medium - large trade
Variable by customer to
templates / guided
Tendered /
framework
agreements
Customers
Small tradesperson / consumer
Pricing
Fixed
Ranging
Mandated
Delivery
35%
50%
Variable
85%
9
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report The Group’s ambition
Whilst demand in markets the Group’s businesses operate within remains a key driver of the volume of building materials sold
and in the Group’s continued success, the Group’s growth is not overly constrained by market growth. The Group has relatively low
market shares in many sectors, which presents an excellent opportunity for the majority of the Group’s businesses to gain market
share. These businesses are well positioned to take advantage of this opportunity to gain share because of the significant structural
advantages the Group enjoys, which include the scale of its buying, its distribution infrastructure and the breadth of its property portfolio,
enabling operating businesses to access good quality sites which other competitors may not be able to access, quickly and cost
effectively. In addition, each operating business is guided to develop superior customer propositions through better ranging, value for
money, convenience and advantaged delivery and service expertise.
Market
fragmentation
• The majority of the markets in which the Group competes are highly fragmented
• Proliferation of small family-owned businesses
• The Group’s businesses are no. 1 or no. 2 in each of their markets, but mostly with relatively low
market shares
Structural
advantages
• Sourcing & supply chain: sourcing terms, range, stocking and distribution efficiency
• Branch network: 2,000 locations in the UK with strong financial position underpinning tight rent yields
and site access
• IT: selective sharing of software platforms and volume hardware purchasing
Superior
propositions
• Range & value: improved promotions and KVI pricing, range extension, own label development, availability
• Space: new branch and store opening programme with implants intensifying space
• Channel, format and customer service: investment in online channels, new formats and better service
1
2
3
Fragmented markets + structural advantage +
superior proposition = sustainable market share gains
The Group set out its strategy in December 2013 and committed
itself to the following:
As a result of its strategic and structural advantages the
Group expects to outperform the underlying level of market
growth and furthermore to add additional capacity in selected
markets. The Group identifies opportunities to continue to
add capacity in Wickes, Toolstation, through online channels,
in Benchmarx, Keyline and selectively in Travis Perkins and
CCF. However, its ability to outperform the market is against
a backdrop of uncertainty in its markets, with difficult to forecast
price inflation and market volume. Price inflation and volume
are clearly linked and the Group will remain agile in its trading
approach in order to maximise its cash earning potential.
• Outperforming the market sales growth in these markets
• Growing operating margins in its Contracts and
Consumer divisions
• Maintaining its sector leading margins in the General
Merchanting division
• Delivering low double digit growth in EBITA per annum
in each of these divisions and increases in LAROCE of
200-300 basis points over the medium term, subject
to modest market growth
10
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Levers of value creation
In order to deliver its ambitions, the Group developed a strategy in 2013 which remains in place today with components of the strategy
being accelerated or moderated depending on market conditions and performance in each of its businesses.
The chart below sets out the levers the Group is using to create value for its shareholders.
Customer
Innovation
• Improved value
• Extended range
• Product development
• Format renewal
• Technology enabled
• Multi-channel
Optimising
Network
• TP expansion
and modernisation
• Wickes national footprint
• Plumbing & Heating
format clarity
Scale
Advantage
• Supply chain investment
• Leverage property
capability
• Group sourcing
benefits
• Shared technology
• Implants intensify returns
investment
• Trade parks
Enabled through people and evolution of unique culture
Portfolio
Management
• Streamlined central
functions
• Devolved management
responsibility
• Disciplined planning
and capital allocation
• Regular market
updates
Comparing performance
with strategy
The Group’s ambition is to deliver long term, sustainable value
to shareholders. There is a comrehensive series of financial
and non-financial measures which the Group tracks to monitor
operational performance. All of these indicators are aligned to
achieving the Group’s strategic ambition. The Group’s actual
performance for 2017 is shown in the performance review
sections on pages 14 to 31. Executive Director remuneration is
linked to strategy and performance, which is explained further in
the Director’s Remuneration Report on page 64.
Risks
The Statement of Principal Risks and Uncertainties on pages
33 to 39. sets out the key risk factors that are considered by the
Directors to be material to the business and may impact upon
the successful delivery of this strategy.
11
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report CHIEF
EXECUTIVE’S
STATEMENT
It has been a challenging year for the Group, and we have worked hard to strike
an appropriate balance between continuing to make investments to further improve
our competitive positioning for the medium and long term, and reacting to slowing
market volume growth in many of our end markets. A key focus of 2017 has been
to pass through the significant cost price inflation that was driven by the devaluation
of sterling in late 2016, and I am extremely impressed by how our businesses have
approached and successfully achieved this challenge.
As a Group, we continue to focus on our customers, and whilst
there is still much left to develop and improve, I am proud of
the feedback we receive from our customers, particularly with
respect to the investments we have already put in place. The
growing utilisation of our distribution network demonstrates how
customers value swift access to a broad range of products, and
the continuing growth of our online sales across the Group shows
that our customer base is ready to embrace digital solutions in
our markets.
For me, the most important investment programme in the Group
today is the replacement of our Merchanting ERP systems, which
stretches beyond an IT project, redefining our processes for how
we run our business. The change will allow our branch colleagues
to serve our customers more completely, far more quickly and
with much greater efficiency, and it will deliver considerably more,
higher quality data to our businesses which will improve our
decision making. It will also underpin our plans to enhance our
digital capabilities and enable a true multichannel solution for our
merchant customers.
Our business is built on the quality of our people, and it is
with great pride that I see how our people have reacted to the
challenges we currently face. We have added to our 30,000
strong team at all levels of the organisation, including our
apprenticeship scheme which was rebranded in 2017, and
gives apprentices opportunities at every level of the business.
Developing this strong pipeline of talent is vital to the on-going
success of Travis Perkins, and I am delighted with the progress
we are making. We have also made continued progress in
improving the diversity of our team, and our ‘Workforce with
a Difference’ programme making positive changes within
the Group.
Keeping people safe is a cornerstone of our business, and
through the rigorous efforts by our business leaders, line
managers, all colleagues and the Stay Safe function, I am pleased
to report a significant reduction in the number and frequency of
lost time accidents in 2017. We continue to make our sites safer
for all our stakeholders.
We have invested considerable capital in our businesses over the
last four years which has been used to expand and modernise
our branch network to create the only nationwide distribution
centre network for building materials and to develop transactional
digital platforms to provide a multichannel proposition for
our customers. Whilst our plans to invest in and improve our
propositions remain intact, the difficult market environment has
given us reason to pause on the pace of investment. In 2017 we
have focused capital investment on projects that are either vital
to the progress of the Group, such as the Merchant ERP system,
or which will deliver strong positive returns in the short-term,
such as the expansion of Toolstation. By maintaining strong
discipline about where capital is allocated we will weather the
current market uncertainty, defend or grow our market positions
and position the Group for a strong future.
12
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report The long-term drivers of our business remain favourable, and
I maintain confidence that the investments and progress we have
made to improve our businesses are the right ones, and that they
have put the Group in an excellent position to outperform our
markets over the medium term.
• We compete in fragmented markets where the majority of
players are small, independent businesses
• Our investments in recent years have built, and continue to
improve, a sustainable competitive advantage, with capabilities
beyond our peers
• We are developing superior customer propositions by providing
the right product range, at better value, through innovative
formats in both physical and virtual stores
Our businesses in 2017
General Merchanting
Over the last 4 years we have invested significant capital to
create our lightside and heavyside distribution centre network,
and 2017 saw the heavyside proposition extended to all
Travis Perkins branches in England and Wales. I am delighted
with how our branch staff are using this capability to offer our
customers unmatched access to over 30,000 products the next
day, and generating extended range sales for the business, as well
as supporting our transactional online platform which continues
to grow. In 2017, we also completed the roll-out of our new pricing
tools across all Travis Perkins branches, allowing our branch staff
to give customers more competitive and consistent pricing.
Our kitchen distribution business, Benchmarx, continued its
strong growth with a further 11 branches opened in 2017 taking
the overall network to 183 branches.
Plumbing & Heating
Whilst it is early days for the Plumbing & Heating transformation
plan, led by Tony Buffin in his role as Group COO, I am extremely
encouraged by the progress that has been made. The plan to
merge the City Plumbing Supplies and PTS branch networks into
a single trading entity has significantly simplified our relationships
with customers, and has allowed a material reduction in
overhead costs.
The team has carried out some promising activities to improve
the customer proposition across the Plumbing & Heating
businesses, improving the range and availability of products
in our branches, refining our promotional activities and
launching a transactional online platform. Whilst there is a
long way still to go the early signs have been very successful,
with positive sales growth in City Plumbing Supplies and the
F & P Wholesale business.
The decline in profitability has been arrested in the second half
of 2017, and I’m confident that we can deliver positive earnings
growth into 2018.
Contracts
The Contracts division delivered the stand-out trading
performance in 2017, with all three businesses, Keyline, BSS
and CCF, delivering above-market growth, and achieving good
operating leverage while doing so. All three businesses can
attribute their progress in recent years to the work undertaken to
fully understand our customers and their requirements, and the
fantastic level of customer service that they provide.
Although it can be difficult to predict exactly how the medium term
demand for commercial construction, infrastructure, residential
house building and industrial projects will develop, I remain very
confident that our Contracts businesses can continue to gain
market share and produce profitable growth in 2018.
Consumer
The UK DIY market continues to be extremely challenging with
consumer confidence having declined steadily throughout
the year. We invested in our cost base in 2017 with the aim
to continue the strong volume growth achieved since 2014,
unfortunately the tough market conditions, increased pricing
competition and a poor autumn Kitchen & Bathroom showroom
sale period meant we did not absorb those additional costs which
negatively impacted margins. Significant cost reduction activity
has reset the cost base for 2018, and I am encouraged by Wickes’
start to the year. We continue to make excellent progress on our
store refit programme, and our best-in-class online platform now
accounts for over £180m of sales every year.
Toolstation continues to go from strength to strength, with the
like-for-like growth rate accelerating and store expansion plan
moving at great pace. We opened our 300th UK store in February
2018 in Eastleigh, Hampshire, and sales topped £300m in 2017
for the first time.
The years ahead
It is a genuine privilege to be in my 40th year working for such a
fantastic company, surrounded by amazing people. I would like
to put on record my genuine thanks to all our colleagues across
the Group; they never stop inspiring me and our wider leadership
teams, and they are the defining difference as to how we serve
and satisfy our customers. During my tenure, I have seen the
business show incredible resilience in the face of disruptive
market conditions, and I have no doubt that our businesses will
navigate the current market challenges successfully.
Given the current UK macroeconomic environment the Group
needs to maintain its flexibility in order to be able to adapt
to swiftly changing end-market conditions. As we move into
2018 we are determined to maintain a tight control of the cost
base, finding an appropriate balance between making positive
cost investments to improve customer service and reducing
inefficiencies across the Group.
The investments we have made and continue to make to improve
the customer propositions delivered by our businesses will
provide us with a considerable competitive advantage over our
peers, and leave us well positioned to achieve sustainable growth
over the medium to long term.
John Carter
Chief Executive
27 February 2018
13
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report PERFORMANCE REVIEW
Key performance indicators (KPIs)
The Group tracks its performance using two operating KPIs, three financial KPIs and one funding target that the Board believes are key
indicators of its progress against its strategic and financial targets. In addition the Group has a number of guidance measures at a Group,
divisional and business level, details of which are set out in this section and in the financial performance section on pages 23 to 31.
These are non-GAAP measures, the derivation of which is shown in the notes to the financial statements referenced in the heading
to each measure. Where the Group’s KPI is based on a non-GAAP measure, rather than its GAAP equivalent, this is because in the
Directors’ view the non-GAAP measure provides them with a better indicator of the performance of the underlying business.
Operating key performance indicators
Financial key performance indicators
Like-for-like sales growth 3.3%
(Note 37)
Performance Trend
7.3
5.0
3.8
2.7
3.3
Lease adjusted return on capital employed* 10.1%
(Note 36)
Performance Trend
11.2
11.6
11.6
10.9
10.1
2013
2014
2015 2016
2017
2013
2014
Definition
Revenue growth adjusted for
new branches, branch closures
and trading day differences.
Revenue included in like-for-like
is for the equivalent periods in
both years under comparison.
Branches are included in
like-for-like sales once they
have traded for more than
12 months. When branches
close, revenue is excluded from
the prior year figures for the
number of months equivalent
to the post closure period in the
current year.
Reason
Calculating like-for-like sales
enables management to
monitor the performance trend
of the underlying business
year-on-year. It also gives
management a good indication
of the health of the business
compared to competitors.
Definition
Adjusted operating profit after
adding back 50% of annual
property lease rentals, divided
by the combined value of
balance sheet debt, equity and
eight times annual property
rental expense.
2017
2015 2016
Reason
This ratio allows management
to measure how effectively
capital is used in the business
to generate returns for
shareholders. It takes into
account both balance sheet
debt and off-balance sheet
long term obligations, being
principally property leases.
Adjusted operating profit £380m
(Note 5a)
Performance Trend
Adjusted earnings per share* 110.4p
(Note 11b)
Performance Trend
348
384
413
409
380
119.0
124.1
120.4
110.4
103.6
2013
2014
Definition
Profit before tax,
financing charges and
income, amortisation of
acquired intangibles and
exceptional items.
2017
2015 2016
Reason
Operating profit is adjusted
to exclude non-trading items,
such as exceptional items
and the amortisation of other
intangible assets arising on
the acquisition of a business,
so management can monitor
the Group’s underlying
trading performance.
14
2013
2014
Definition
Profit after tax, adjusted
to exclude the effects of
amortisation and exceptional
items, divided by the weighted
average number of shares in
issue during the period.
2017
2015 2016
Reason
Adjusted earnings per share
is an indicator of the Group’s
underlying profitability, which is
important in understanding the
earnings attributable to each
shareholder and in determining
the earnings available for
distribution via the dividend.
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Free cash flow £407m
(Note 34)
Performance Trend
Fixed charge cover 3.1 times
(Note 35c)
Performance Trend
436
407
3.2x
3.3x
3.3x
3.1x
2.9x
240
255
317
2013
2014
2015 2016
2017
2013
2014
2015 2016
2017
Definition
Net cash flow before dividends,
growth capital expenditure,
pension deficit repair
contributions, exceptional cash
flows and financing cash flows.
Reason
The Group needs to
generate strong free cash
flows to enable it to invest and
expand its operations, settle
financing charges from debt
providers, pay dividends to
shareholders and access the
best property locations.
Definition
The ratio of earnings after
adding back property lease
rentals, but before interest,
tax, depreciation, amortisation
and exceptional items,
to finance charges plus
property lease rentals.
Reason
Fixed charge cover is used
by management, lenders and
debt rating agencies when
determining the ability of the
Group to pay fixed financing
charges. The Group is targeting
a ratio of 3.5x.
Funding key performance indicator
Leverage ratio 2.7 times
(Note 35b)
Performance Trend
3.0x
2.8x
2.8x
2.7x
2.7x
2013
2014
2015 2016
2017
Definition
The ratio of lease adjusted
net debt to earnings before
tax, interest, depreciation,
amortisation, property lease
rentals and exceptional items
(“EBITDAR”).
Reason
The leverage ratio is an
indicator for management and
lenders of the Group’s ability
to support its debt. The Group
has a target of below 2.5x.
*KPIs marked * are measurements used in determining elements of director’s
remuneration, details of which are set out on pages 64 to 81.
15
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Business performance
Summary
The conditions across the Group’s end markets were mixed
throughout the course of 2017. Input cost inflation was high
across all businesses, driven primarily by the foreign exchange
impact of sterling weakening following the referendum vote
to leave the EU in June 2016 and commodity inflation on
specific product categories which is still working its way
through the supply chain. This cost inflation dictated that a
main focus for the year was how to pass this inflation through
into sales prices, protecting profitability in the short term. On
the whole, the Group’s businesses have passed this inflation
through successfully.
The key lead indicators for the Group’s end markets have
also remained mixed. Secondary housing transactions held
up better than expected, at 1.2m transactions, broadly similar
to 2016. However, the quality and type of transaction shifted
more towards first-time buyers supported by the help-to-buy
scheme, and reducing the direct read through to residential repair,
maintenance and improvement (RMI) market volumes.
Consumer confidence declined steadily through 2017. Whilst
employment levels remain strong, wage inflation has lagged
overall inflation, reducing consumer discretionary spending
power. Market evidence suggests that consumers remain willing
to spend, but with an increased focus on experiences over
material purchases and achieving value for money.
Given these market dynamics, Group revenues grew by £216m,
or 3.5%, to £6,433m, with like-for-like growth of 3.3%. Focus
in the first half of the year was on recovery of significant cost
price inflation, maintaining gross margins but at the expense
of volume as some competitors were slower to increase prices.
In the second half of the year, pricing pressure eased and the
Group generated like-for-like growth of 3.7%, with the combined
merchant businesses delivering like-for-like growth of 4.9%.
Adjusted operating profit declined in 2017 by £29m or
7.1%, due to a combination of higher operating costs in the
General Merchanting and Consumer divisions to strengthen
the proposition and the expected full-year profit decline in
Plumbing & Heating. Significantly higher central costs were
primarily driven by the investments the Group is making
in IT capabilities and digital platforms, and the cost of new
format experiments.
The Group continued to demonstrate strong cash generation
in 2017, with free cash flow of £407m, at a conversion rate of
107%. Net debt reduced by £36m to £342m, adding further to
the Group’s balance sheet strength and maintaining significant
liquidity headroom.
The board recommends a 46.0 pence full year dividend, which
reduces dividend cover to 2.4 times (2016: 2.7 times) adjusted
earnings per share, slightly below the lower limit of the Board’s
target range of 2.5x to 3.25x and reflecting the Board’s confidence
in the on-going strength of cash generation of the Group.
16
Progress on strategy
The Group’s strategic plan is focused on making investments
in the businesses that should deliver improving returns
throughout the economic cycle with a near-term focus on the
Plumbing & Heating transformation plan. Given the near-term
challenging economic environment in the UK the Group is further
increasing the discipline with which it assesses and makes
investments, limiting investments to those that will generate a
short-term positive return or which enable growth, particularly
through digital channels. On this basis, growth capital investment
in 2018 will be mainly focused on the on-going network
expansion of Toolstation, a limited number of store refits in
Wickes, and the on-going investments in digital platforms across
the business.
In General Merchanting, the investments made in supply chain
capability for lightside and heavyside product categories, the
improved level of customer service within branches and the
progress made on developing transactional digital platforms
have improved the customer proposition. The service of the
heavyside range centre network was extended in 2017 to cover
all Travis Perkins branches in England and Wales, with material
growth in the extended range of heavyside products and a
corresponding positive return on capital in line with expectations.
The General Merchanting market remains tough with limited
volume growth and tough pricing competition. The business
has however seen encouraging early results from using its new
pricing framework to make price investments in selective
product categories.
The transformation programme in Plumbing & Heating has
already made significant progress. The City Plumbing Supplies and
PTS branch networks have been combined under a single
management team with the net closure of 46 branches resulting
in a meaningful reduction in cost. Improvements to the proposition
including consistent branch ranges, better product availability,
greater promotional intensity, and further online growth have
delivered positive sales momentum and a return to profit growth in
the second half of the year. This momentum has carried through
into 2018.
The Contracts division continues to perform strongly, with all
three businesses outperforming their markets. Pass through
of cost price inflation, particularly on insulation products, was
achieved successfully, and the operating leverage achieved
on higher sales, together with overhead initiatives such as the
centralisation of administration activities in BSS generated
stronger profit growth in 2017.
The expansion of the Toolstation store network continued at pace, with
an additional 40 stores opened in the UK. Focused work to further
develop the proposition, including expansion of online ranges, the
introduction of a direct ship service to customers, extension of delivery
to 6 days per week and Click & Collect times reduced to 10 minutes,
all helped to accelerate the like-for-like sales growth rate through 2017.
In Wickes, the store refit programme continued with
27 stores updated to the new format bringing the total to 94.
The enhancements to the Kitchen and Bathroom showroom,
better laid out trade areas and improved product adjacency is
delivering a significant sales uplift compared with old format
stores. The plan to open more Wickes stores has been slowed,
given challenging UK DIY market conditions, with three additional
stores opened in 2017.
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report The positive momentum in the Contracts division is expected
to continue in 2018 further enhancing returns. Progress on the
Plumbing & Heating transformation plan has been encouraging
and we remain confident of further recovery in 2018.
Given current market conditions, the Group expects performance
in 2018 to be similar to 2017.
Technical guidance for 2018
The Group’s technical guidance for 2018 is as follows:
• Effective tax rate of around 19%
• Finance charges will be similar to 2017
• Capital expenditure of around £140m - £160m, excluding
investment in freehold property
• Property profits of around £20m
• Progressive dividend policy, underpinned by strong
cash generation
Outlook
The long term drivers of market growth remain favourable,
centred on the UK’s requirement for more homes and the
structural underinvestment in the repair, maintenance and
improvement (RMI) of existing dwellings and infrastructure.
Macroeconomic data has been difficult to read, and recent
lead indicators, including consumer confidence and housing
transactions, have painted a mixed picture for the near-term
performance of the Group’s end markets, which is expected to
continue in 2018.
Whilst the inflationary pressures suffered in 2017 were
primarily foreign exchange driven, and these changes have now
been cycled, inflation remains elevated, now driven by rising
commodity prices in specific product categories.
During the investment phase since 2014, the Group has added
significant cost into the business in order to improve the
customer proposition. These improvements give the Group a
sustainable competitive advantage, however the Group must
ensure an appropriate balance between managing the cost base
of the business whilst maintaining the strong proposition that has
been put in place.
Cost efficiency programmes have been put in place across the
Group, particularly in the General Merchanting and Consumer
divisions. In Wickes, a significant cost management exercise
was carried out in late 2017, to reset the cost base to an
appropriate level for 2018. Costs have already been reduced by
£8m, which accounts for around half of the profit reduction in
2017. A wider cost efficiency programme is extending into 2018
to reduce waste and cost in order to offset pressure from general
cost inflation.
In General Merchanting, there has been significant operating
cost investment in support of the capital investments made to
develop the distribution centre network, particularly in extending
the coverage of the heavyside range centre (HRC) network to all
branches in England and Wales and in improving the customer
proposition in branches and online. Whilst the operating cost
investments are well received by customers and are delivering a
positive return on investment, other operating cost pressure from
wages, rent, rates and depreciation is also increasing, and the lack
of sales volume progression makes it difficult to absorb these
extra costs in the short term. Actions have been taken to improve
productivity and efficiency across the business by reducing costs
in support functions and creating flexibility in the cost base. This
will remain a focus area throughout 2018.
17
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Operational highlights
• Cost price inflation was broadly recovered during H1 2017.
• The roll-out of the new pricing framework was completed
across the Travis Perkins branch network. The framework
allows branch staff to provide more competitive pricing to
customers on a much more consistent basis. Price changes are
being applied by product category or family through the course
of 2017 and 2018.
• The Travis Perkins transactional website continues to grow
strongly, with over £17m of online sales in 2017. The proposition
of an extensive online range, supported by the heavyside and
lightside distribution network, and delivered through a reliable
delivery service or through Click & Collect is receiving positive
feedback from customers.
• Results from an extensive customer survey carried out in 2017
show good progress in customer perception driven by the
investments made to improve the proposition of the business,
in particular around product range and availability, and branch
service levels.
• The heavyside range centres continue to mature, with good
growth in extended range sales in 2017. They are expected
to grow strongly again in 2018 with an extra 174 branches
serviced at the end of the year. From January 2018, the
business is supported by a dedicated Primary Distribution Hub
for lightside products, located in Northampton.
• The Benchmarx branch network growth continued with net
11 branches added in 2017, giving an overall network of 183 sites.
Divisional performance
General Merchanting
2017
2016
Change
Total revenue
£2,109m £2,073m
1.7%
1.2%
Like-for-like growth
Adjusted operating profit
excluding property
Adjusted operating margin
excluding property
LAROCE
Branch network
Financial performance
£183m
£193m
(5.2)%
8.7%
9.3%
(60)bps
14%
850
15%
833
(1)ppt
17
• Total revenue growth of 1.7% includes like-for-like growth of
1.2%. The like-for-like growth rate accelerated in the second
half of the year, at 2.5% versus (0.1)% in the first half.
• Like-for-like growth was predominantly driven by sales price
inflation throughout the year, and through volume growth from
price investments in selected product categories.
• Adjusted operating profit, excluding property, declined by £10m
to £183m, a reduction of 5.2%. This was primarily driven by
the higher operating costs required to extend the service of the
heavyside range centre network to all branches in England and
Wales, together with the costs of opening new branches and
increases in rent, rates and depreciation.
• Gross margin reduced modestly in the second half of the year
as the new pricing framework allowed selective pricing and
promotional activity across specific categories to improve price
perception and promote volume growth.
• Divisional LAROCE reduced by 1ppt to 14%, reflecting the lower
operating profit on a modestly higher capital base following
continued extension of the Benchmarx branch network and
relocation and refitting of Travis Perkins branches.
18
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report
Plumbing & Heating
Operational highlights
2017
2016
Change
• Although there remains much to do, the initial results from the
transformation programme have been very positive.
Total revenue
£1,366m £1,359m
0.5%
2.1%
Like-for-like growth
Adjusted operating profit
excluding property
Adjusted operating margin
excluding property
LAROCE
Branch network
Financial performance
£31m
£36m
(13.9)%
2.3%
2.6%
(30)bps
11%
391
10%
436
1ppt
(45)
• Plumbing & Heating revenues grew in absolute terms in 2017,
a turnaround on recent years. In the second half of the year, sales
grew by 2.5% through strong performances in the combined
branch network, online channels and the FPC wholesale business.
• Like-for-like sales growth momentum built throughout 2017,
reaching 6.1% in Q4, and this strong momentum has carried
through into 2018.
• Operating profits excluding property grew in the second half
of the year by over 8%. Gross margins reduced modestly with
gross profit broadly stable, mainly owing to a change in the mix
of business, with strong growth in the lower margin wholesale
business, as well as stronger promotional activity in the branch
network to drive volume growth. This gross margin dilution was
more than offset by the reduction in operating costs, primarily
achieved through the simplification of the divisional structure and
branch closures.
• LAROCE increased to 11% as the reduction in operating profit
was offset by a reduction in capital employed as 46 branches
were closed and capital investment was restricted to just £4m in
the year.
• Combining the City Plumbing Supplies and PTS branch
networks has been well received by customers, suppliers and
colleagues and enabled branch rationalisation and a lower cost
base, whilst continuing to grow sales.
• An effective promotional programme has enhanced value for
customers, with specific bathroom showroom offers targeting
end consumers which has driven additional installation
opportunities for our trade customers.
• Branch manager incentive schemes have been restructured to
better reward outperformance.
• Range standardisation has been improved, with all branches
now reliably stocking the 1,400 top selling products in depth.
• Creating a dedicated supply chain supporting Plumbing &
Heating branches and the online platform improved product
availability by 10%, enhancing customer service and this should
enable further cost efficiencies in 2018.
• A transactional City Plumbing Supplies website was developed
in the year with links to a number of specialist category web
businesses. Improvements to the specialist online platforms
included linking bathrooms.com to drive visits to the Group’s
bathroom showroom, and the introduction of mobile-enabled
websites in Direct Heating Spares, the Underfloor Heating Store
and PlumbNation. National Shower Spares was acquired in
October 2017, supplementing the spares offer to customers.
19
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report
Contracts
2017
2016
Change
Total revenue
£1,369m £1,267m
• The Group acquired TF Solutions in April, an air conditioning
specialist, which offers a complementary range to the BSS portfolio.
• The branch networks of Keyline, BSS and CCF will not require
significant further expansion; they already cover the whole
of the UK with a high proportion of sales delivered direct to
customers and so 2018 should see further enhancement
of returns.
8.1%
8.4%
Like-for-like growth
Adjusted operating profit
excluding property
Adjusted operating margin
excluding property
LAROCE
Branch network
Financial performance
£86m
£76m
13.2%
Consumer
6.3%
6.0%
30bps
14%
169
12%
167
2ppt
2
Total revenue
£1,589m £1,518m
2017
2016
Change
4.7%
3.0%
£82m
£101m
(18.8)%
5.2%
6.7%
(150)bps
7%
666
8%
617
(1)ppt
49
Like-for-like growth
Adjusted operating profit
excluding property
Adjusted operating margin
excluding property
LAROCE*
Branch network
Financial performance
• Revenue growth was strong across all three businesses in the
Contracts division, with total sales growth of £102m, up 8.1%,
and like-for-like growth of 8.4%. Following a very strong start
to 2017, like-for-like sales maintained a strong growth rate
in the second half of the year, with growth of 7.7% and 7.9%
in Q3 and Q4 respectively, even against strong comparators
from 2016.
• Sales growth was driven by both strong price inflation and
volume growth as the commercial construction, residential new
build and infrastructure markets remained resilient and CCF,
Keyline and BSS all increased market share through the year.
• Total sales growth of 4.7%, driven by the positive performance
of Wickes in the first half of the year, and by the continued
acceleration of Toolstation’s sales growth rate throughout 2017.
• The additional volume of sales achieved on a constant branch
• Toolstation sales grew to over £300m in 2017, with
network drove significant operating leverage, increasing
operating profit margin by 30bps. Successful pass through of
cost price inflation protected gross margins, and the growth
of BSS alongside Keyline and CCF maintained a positive mix
across the division.
• LAROCE grew by 2ppts in 2017, reflecting increased sales and
profit growth on a stable capital base.
Operational highlights
• Keyline achieved strong like-for-like sales growth throughout
2017, demonstrating further market share gains as the business
continues to focus on a specialised heavy civils and drainage
product range to a specific customer base. The roll out of the
low-cost Keyline branch format continued, with the third trial
branch opened in Telford.
accelerating like-for-like sales growth in the second half and
this strong momentum has continued into 2018.
• Conversely, Wickes like-for-like sales growth slowed through
the course of 2017 as the UK DIY market became increasingly
challenging and the business had a disappointing autumn
Kitchen & Bathroom (K&B) showroom promotional period.
• Following strong sales performance, particularly in K&B
showroom, in recent years, Wickes invested significantly in
additional capability to service continued growth in 2017. In the
first half of the year this momentum continued, with strong K&B
sales offsetting a challenging core DIY market. The application
of a different promotional methodology for the autumn K&B
showroom sales period between September and November
was unsuccessful, and the level of expected sales growth was
not achieved over this period.
• BSS sales grew in 2017, driven by both increasing commodity
• Given the higher operating cost base in Wickes in 2017, the
prices on copper and steel, and by outperforming a market that
remains challenging, particularly in the public sector. Overheads
have been materially reduced in BSS as the administration
teams have been centralised, reducing required headcount and
saving c.£1.5m per year in costs.
• In a highly competitive market, CCF has focused on passing
through significant cost price inflation on specific insulation
products. The business is generating good operating leverage
as the new branches opened in late 2015 reach maturity.
Differentiation, and therefore market outperformance, is
driven by the development of a deeper understanding of
customer requirements, and in so doing, forming closer
customer relationships.
division experienced negative operating leverage, resulting in a
fall in operating profit before property profits of £19m, to £82m
(2016: £101m), and a 150bps decline in operating margin,
excluding property, to 5.2%.
• Significant cost reduction activity was carried out in Wickes in
late 2017 to right-size the cost base to volume achieved, with
£8m of costs eliminated by the year end and more to do in
2018. This has resulted in a more appropriate cost base for
2018, but it was too late to offset the additional costs that had
been built into the business in 2017.
• Additionally, K&B showroom promotional activity has now been
refined, including extra training for design consultants. This has
resulted in a stronger start to 2018.
20
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report
Operational highlights
Property
The Group continued to leverage its property portfolio with
selected investment in freeholds combined with a disciplined
disposal programme to realise embedded value in fully
developed properties.
The Group invested £35m in the purchase of new freehold
properties and a further £20m in the construction of operating
sites on new and existing freehold sites across the UK. In addition,
the Group invested £6m to purchase the freehold rights on
three existing, high-performing branches which are strategically
important bringing certainty to future operations and the potential
to further develop the sites by adding additional Group branches.
The programme to recycle existing property continued, with sale
and lease back activity, predominantly on retail sites, realising
£54m of cash and £8m of property profits. The relocation
strategy to place operating branches in the best locations within a
catchment allowed the sale of £59m worth of sites, offsetting the
purchase of new sites.
Given the low growth situation in the General Merchanting
market, it was decided to delay the opening of the fourth range
centre until 2020. A favourable opportunity arose to dispose
of the site that had previously been purchased to develop the
range centre.
Overall the Group recognised profits on the disposal of properties
of £29m (2016: £17m), with a net release of cash after new
freehold acquisitions and construction of £52m.
Wickes
• The store refit programme continued at pace, with 27 additional
stores bringing the total refitted to 94 by the end of 2017. With
the benefit of an enhanced K&B showroom, better laid out
trade areas and better category adjacency the refitted stores
show a significant performance improvement over those stores
remaining in the old format.
• The programme to open additional stores and refit existing
ones has been slowed in 2018 given a challenging UK
DIY market.
• A cost efficiency programme is in place for 2018 to tightly
control overhead costs with the aim of offsetting operating cost
pressure from wages, rates and depreciation.
• The TradePro card was launched in Q3, giving trade customers
specific trade deals, including regular discounts on Mondays.
Early customer reaction has been positive, with an uplift in trade
sales and the attraction of new customers.
Toolstation
• The focus over the last three years has been to rapidly grow
the store network whilst delivering a superior value proposition
to customers.
• In 2017, a further 40 stores were opened in the UK, taking the
total to 295 at the end of the year, with a further 40 planned in
2018. In February 2018, the business opened its 300th UK store
in Eastleigh.
• Enhancements to the customer proposition accelerated in the
second half of 2017, focusing on:
• Stronger promotional and marketing programmes
• The introduction of front-of-counter ranges
• Further online range extension, including the roll out of
“drop-ship” delivery direct from suppliers. In 2017, 2,800
additional products were added to the product range, with
further extension planned in 2018
• Improvements to delivery service, increasing capability from
5 day to 6 day delivery, and moving to 7 day delivery in 2018,
combined with later order cut-off times and click & collect
times reducing to 10 minutes
• A third replenishment distribution centre which will open in
mid-2018 increasing capacity to support 500 branches.
• Like-for-like growth of over 30% in the Group’s associate
company in the Netherlands, both through the online channel
and the branch network was very encouraging. New store
openings brought the network to 20, and strong like-for-like
growth provides the confidence to open a new distribution
centre and double the number of branches in 2018.
• A three branch trial around the new distribution centre in
Lyon, France commenced in Q4 2017 and is progressing well.
Revenue growth continues to build through the online platforms
in France, and in Belgium and Germany which are serviced
from the existing distribution centre in the Netherlands.
21
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Main image:
Mark Potter - Keyline, Telford
From top to bottom:
Brendan Cowlain – BSS, Leeds
Sophie Hayes - Wickes, Rugby
22
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Financial performance
Revenue
Group revenue growth was solid in 2017, with absolute growth of 3.5%, and 3.3% on a like-for-like basis.
Volume, price and mix analysis
Total revenue
Volume
Price and mix
Like-for-like revenue growth
Network expansion and acquisitions
Trading days
Total revenue growth
General
Merchanting
(%)
Plumbing
& Heating
(%)
Contracts
(%)
Consumer
(%)
(1.4)
2.6
1.2
0.9
(0.4)
1.7
(1.6)
3.7
2.1
(1.2)
(0.4)
0.5
2.7
5.7
8.4
0.1
(0.4)
8.1
0.3
2.7
3.0
2.3
(0.6)
4.7
Group
(%)
(0.2)
3.5
3.3
0.6
(0.4)
3.5
New branch and net store openings contributed 0.4% to revenue
growth, with a further 0.2% added through acquisitions. There
was one fewer trading day in the Merchant businesses in
2017 compared with 2016, as well as two fewer in Consumer
businesses, with a combined impact of (0.4)% on Group sales.
Across the Group, volumes were broadly flat, with all of the
3.3% like-for-like growth coming from price increases and
mix changes. This was in line with expectations as the Group’s
businesses were broadly successful in mitigating the impact of
cost price inflation.
Quarterly like-for-like revenue analysis
Like-for-like revenue growth
General
Merchanting
(%)
Plumbing
& Heating
(%)
Contracts
(%)
Consumer
(%)
Group
(%)
Q1 2017
Q2 2017
Q3 2017
Q4 2017
H1 2017
H2 2017
FY 2017
(0.3)
0.3
2.4
2.6
(0.1)
2.5
1.2
(1.1)
(1.9)
5.4
6.1
(1.2)
5.8
2.1
12.1
6.4
7.7
7.9
9.1
7.7
8.4
2.9
6.5
2.4
(2.6)
4.7
0.1
3.0
2.7
2.7
4.1
3.2
2.7
3.7
3.3
In the first half of 2017, like-for-like sales in General Merchanting
were broadly flat, as the early drive to pass through price
increases led to lower volumes as competitors were slower to
raise prices. In the second half of 2017, this volume pressure
eased and the like-for-like growth rate represented the increase
in sales price, with volumes broadly stable.
In Plumbing & Heating, the activities of the transformation
programme to improve ranging, promotional activity and pricing
helped to drive strong like-for-like growth in the second half of
the year. Around 2ppts of the like-for-life growth in the second
half came from around 50% of the sales lost from the closure of
46 branches being captured by the remaining branch network.
The Contracts division had another strong year in 2017 with
like-for-like sales of 8.4% representing excellent pass through
of price inflation and continued outperformance of the market.
Trading conditions in the UK DIY market became increasingly
tough as 2017 progressed. Whilst Toolstation continued its
recent trend of accelerating like-for-like growth rates and total
sales growth driven by network expansion and proposition
improvements, Wickes experienced a more difficult second
half. Trading in core DIY categories was challenging throughout
2017, with increased pricing competition in the market and
disappointing performance in K&B showroom in Q4. Whilst
Wickes retained its position as the value leader, the differential
to its major competitors reduced.
23
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report
Operating profit and margin and profit before tax
£m
General Merchanting
Plumbing & Heating
Contracts
Consumer
Property
Unallocated costs
Adjusted operating profit
Amortisation of acquired intangibles
Impairment
Exceptional items
Operating profit
2017
183
31
86
82
29
(31)
380
(12)
-
(41)
327
(5.2)%
(13.9)%
13.2%
(18.8)%
70.6%
(121.4)%
(7.1)%
2016
193
36
76
101
17
(14)
409
(17)
(235)
(57)
100
Operating profit increased to £327m (2016: £100m), with
profit before tax increasing to £290m (2016: £73m), with both
primarily due to the impairment taken against goodwill and
intangible assets in 2016.
Adjusted operating profit reduced by 7.1% to £380m (2016: £409m).
Profit growth in Contracts and through property transactions was
offset by a decline in profits in General Merchanting and Consumer,
along with the expected decline in Plumbing & Heating. Unallocated
costs increased by £17m to £31m, driven by the investments the
Group is making in IT capabilities and digital platforms, and the cost
of new format experiments.
General
Merchanting
(%)
Plumbing
& Heating
(%)
Contracts
(%)
Consumer
(%)
Group
(%)
FY 2016 adjusted operating margin
(excluding property profits)
Change in gross margin
Margin impact of change in operating costs
FY 2017 adjusted operating margin
(excluding property profits)
Margin impact of change in property profits
FY 2017 adjusted operating margin
(including property profits)
9.3
(0.2)
(0.4)
8.7
2.6
(0.8)
0.5
2.3
6.0
0.6
(0.3)
6.3
6.7
(0.3)
(1.2)
5.2
6.3
(0.2)
(0.6)
5.5
0.4
5.9
Group adjusted operating margins declined by 80bps to 5.5%
(2016: 6.3%), primarily due to an increase in operating costs from
investments in the Group’s customer propositions, together with a
20bps decline in gross margins.
• General Merchanting operating margin fell to 8.7% for the
full year, with a reduction to 8.2% in the second half of 2017.
Operating costs increased reflecting the additional costs
required to extend the service coverage of the three heavyside
range centres and opening of net 17 new branches, in addition
to cost inflation from salaries increases to rent and rates, and
rising distribution costs. Gross margins reduced by 50bps in
the second half of the year as the new pricing framework was
used to reset pricing levels in some specific product categories
to increase volume and improve overall price perception.
Initial outcomes have been encouraging, with some categories
showing demonstrable volume uplift within a couple of months
of the pricing review.
• In the Contracts division, gross margin improved as pass
through of cost price inflation was successfully achieved with
a focus on taking business at acceptable margins.
• Plumbing & Heating margins reduced by 30bps across the
whole year, but increased by 10bps in the second half as the
improvements from the transformation programme started
to take effect. Gross margins reduced due largely to business
mix as much of the volume growth came through the lower
margin wholesale business, as well as investment in price
across the business through increased promotional activity.
This reduction was more than offset in the second half of the
year by the savings achieved in operating costs through a
significantly simplified organisational structure, and the closure
of 46 underperforming branches.
24
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report
• Margins in Consumer were significantly impacted by the poor
sales performance in Wickes in Q4. The additional costs that
had been built into the business to service volume growth
were not justified, and the reduction in K&B showroom sales
negatively impacted the overall mix of business. Toolstation
maintained its operating margin despite further significant
investment in network expansion, although additional costs
are required in 2018 to open a fourth distribution centre to
maintain sales growth momentum and support the branch
opening programme.
S
i
t
r
a
t
e
g
c
R
e
p
o
r
t
Exceptional items
In August 2017; the Group announced a comprehensive strategic
review of the Plumbing & Heating division. As stated in note 5,
this has resulted in exceptional charges to the income statement
of £40.9m which comprised:
• £12.0m of property, redundancy and other cost associated with
the close of 46 branches.
• £19.1m of costs arising from the separation and rationalisation
of the Plumbing & Heating supply chain. The costs comprised
property-related costs, redundancy and reorganisation costs
and inventory write-downs.
• £9.8m of central and divisional costs, including representing
people, consultancy and other restructuring costs.
Main image:
Darren Hawksworth - Wickes, Rugby
Left image:
Craig Sharples & Sharon Walrong
- Travis Perkins plc, Warrington
25
Travis Perkins plc Annual Report & Accounts 2017Strategic Report
Finance charges
Reconciliation of reported to adjusted earnings
Net finance charges, shown in note 9, were £35m (2016: £28m).
Interest costs on borrowings were £26m (2016; £24m), with the
first full year of coupon payments on the 2023 £300m sterling
bond issued in May 2016 partially offset by lower borrowings on
the revolving credit facility.
The impact of marking-to-market currency forward contracts
used to hedge commercial transactions, which remained
outstanding at the year-end increased finance charges by £2.9m
(2016: £0.3m gain). Other finance related costs were broadly
similar to last year at £4.3m (2016: £4.4m).
The average interest rate on the Group’s borrowings during the
year was 4.3% (2016: 3.4%) with the increase primarily due to the
full year of interest on the 2023 £300m public bond.
Taxation
The underlying tax charge, excluding the effect of exceptional
items and impairments, was £64m (2016: £77m), which
represents an effective rate of 19.2% (2016: 21.2%). This is broadly
in line with the standard rate of corporation tax for the year of
19.25% (2016: 20.0%) applicable to profits in the United Kingdom.
Earnings per share
Profit after taxation increased to £234m (2016: £14m) resulting in
basic earnings per share increasing to 93.1 pence (2016: 5.1 pence).
The increase is primarily due to the 2016 results being impacted
by the impairment of goodwill and intangible assets. There is no
significant difference between basic and diluted basic earnings
per share.
Adjusted profit after tax reduced by 8.0% to £277m (2016: £301m)
resulting in adjusted earnings per share (note 11) decreasing by
8.3% to 110.4 pence (2016: 120.4 pence). There is no significant
difference between adjusted basic and adjusted diluted earnings
per share.
2017
2016
Earnings
(£m)
EPS
(pence)
Earnings
(£m)
EPS
(pence)
233
93.1
13
5.1
12
19
10
-
-
4.8
17
6.8
7.6
30
12.0
4.0
4
1.7
-
-
235
94.4
6
2.5
12
4.8
17
6.6
(2)
(0.8)
(3)
(1.2)
(8)
(3.1)
(15)
(6.1)
-
-
(4)
(1.4)
276
110.4
300
120.4
Basic earnings
and EPS attributable
to shareholders
Exceptional items:
Branch closure
programme
Supply chain
restructure
Central restructuring
costs
Impairment of acquired
intangible assets
Write off of amounts
held in current assets
Amortisation
of acquired
intangibles
Tax on amortisation
of acquired
intangibles
Tax on
exceptional items
Effect of reduction
in corporation tax on
deferred tax
Adjusted earnings
and EPS attributable
to shareholders
26
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report
Free cash flow
The Group generated strong free cash flow of £407m, at a
conversion rate of 107%.
(£m)
EBITA
Depreciation of PPE and other
non-cash movements
Disposal proceeds in excess
of property profits
Change in working capital*
Maintenance capital expenditure
Net interest
Tax paid
Adjusted free cash flow
One-off tax payment
Free cash flow
2017
380
2016
409
130
124
83
(54)
(48)
(27)
(57)
407
-
407
25
13
(50)
(22)
(63)
436
(42)
394
Underlying cash conversion rate
107%
107%
* 2017 change in net working capital figure excludes £22m (2016: £8m) in relation
to the development of cloud-based software because in the opinion of the Directors
it is capital in nature and so treated as such in this table (see note 13).
On a modestly lower earnings figure, the strong free cash flow of
£407m was helped by the scale of property transactions carried
out in the year which contributed positive cash flow of £83m
(2016: £25m).
Inventories increased modestly, maintaining stock turnover on
broadly flat sales, but reflecting significant cost price inflation.
An increase in trade receivables was partially offset by growth in
trade payables, but also reflecting progress in reducing overdue
customer debt positions. Further opportunities exist to improve
working capital, including enhanced debtor management using
new systems launched in late 2017, better management of
inventory by leveraging the Group’s distribution infrastructure and
increasing “drop-ship” capabilities direct from suppliers.
Maintenance capex was £48m, including investments made in
replacement vehicles which will enhance delivery efficiency and
improve overall safety within the branches and on customer
sites. This is slightly lower than in 2016 (£50m) but is in line
with expectations.
Additional cash contributions to the defined benefit pension
schemes above the Income Statement charge were £11m
(2016: £14m). The cash cost of 2017 exceptional items and
utilising exceptional provisions was £20m.
Net debt and funding
Net debt of £342m at 31 December 2017 was a reduction of
£36m from the end of December 2016, reflecting the strong
cash generation and tighter control on capital investment.
At 31 December 2017 the Group’s committed funding of
£1,100m comprised:
• £250m guaranteed notes due September 2021, listed on the
London Stock Exchange
• £300m guaranteed notes due September 2023, listed on the
London Stock Exchange
• A revolving credit facility of £550m, refinanced in December
2015, which runs until December 2020, advanced by a
syndicate of 8 banks.
At the end of 2017, the Group had undrawn committed facilities
of £550m (2016: £550m) and deposited cash of £215m.
The Group’s credit rating, issued by Standard & Poor’s, was
maintained at BB+ stable following its review in April 2017.
The Group has a policy of funding through floating interest rate
facilities owing to the significant implicit fixed interest charges
within its leases. However, owing to the uncertainty surrounding
the UK’s decision to leave the EU and historically low fixed
interest rates achieved on its bonds, it took a decision in 2016
to fix all of its interest rate costs other than the rates it receives
through drawings on its revolving credit facility, which were nil as
at 31 December 2017.
The Group’s lease debt increased modestly, up £22m from the
end of 2016, reflecting the sale and lease back activity on retail
properties where availability remains good and rental inflation
pressure is modest. Lease adjusted net debt modestly reduced
compared with 31 December 2016 as the increased cash position
outweighed the additional lease obligations.
Details of non-statutory disclosures are shown in notes 32 to 37.
Medium
Term
Guidance
2017
2016
Change
£342m
£378m
£1,525m £1,506m
£(36)m
£19m
£1,866m £1,884m
£(18)m
42.6%
45.3% (270)bps
3.5x
2.5x
3.1x
2.7x
3.3x
(0.2)x
2.7x
-
Net debt
Lease debt
Lease adjusted
net debt
Lease adjusted
gearing
Fixed charge
cover
LA net debt:
EBITDAR
Lease adjusted gearing (note 33b) reduced by 2.7ppts in 2017 to
42.6%, primarily due to lease adjusted equity increasing following
further investment in the business and a lower lease adjusted
debt figure.
The Group’s fixed charge cover ratio (note 35c) fell to 3.1x,
primarily driven by lower earnings on a stable interest charge with
a modestly higher rent charge. The LA net debt/EBITDAR ratio
(note 35) was stable year on year, at 2.7x.
M&A activity
Net cash invested in acquisitions in the year was £10m
(2016: £3m). In April 2017 the Group acquired TF Solutions,
a ventilation and air conditioning distributor adding adjacent
product categories to the BSS business in the Contracts
division. The Group also acquired National Shower Spares, a
bolt on acquisition in the Plumbing & Heating division which
brings a complementary range of spares products to the
existing spares business, fulfilled both online and through the
Plumbing & Heating branch network.
27
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report
The branch network expansion of Toolstation UK and Benchmarx
continued, with 51 net new stores opened in 2017 between the
two businesses. Store openings in Travis Perkins and Wickes were
curtailed, with a greater focus on refitting existing stores, which
delivers a much faster return on the investment. Twenty-seven
Wickes stores were refitted in 2017, bringing the total to 94. Trial
refits of Travis Perkins branches have shown a good pick up in
volumes with further trials to be run in 2018.
New property purchases and construction costs were down
slightly on 2016, and included the freehold purchase of three
existing operating sites where leases were due for renewal or
expiry on sites that are strategically important in the long term.
This gives the business certainty of tenure for the long term,
reduces the current rent inflation risk on industrial sites and
reduces the Group’s overall lease obligations.
Dividend
In 2016, the Group announced that future dividend increases
would be more in line with underlying earnings growth, whilst
also reflecting the medium term expectations for strong cash
generation. The proposed dividend for the full year 2017 of
46.0 pence (2016: 45.0 pence) results in a 2.2% increase
(2016: 2.3% increase). An interim dividend of 15.5 pence was
paid to shareholders in November 2017 at a cost of £38m. If
approved, the proposed final dividend of 30.5 pence per share
will be paid on 11 May 2018, the cash cost of which will be
approximately £75m.
A 46.0 pence full year dividend reduces dividend cover to
2.4 times (2016: 2.7 times) adjusted earnings per share, slightly
below the lower limit of the Board’s target range of 2.5x to 3.25x.
This reflects the Board’s confidence in the on-going strength of
cash generation of the Group.
Capital investments
The strategy to make investments which will provide best-in-
class customer propositions continued in 2017.
(£m)
Maintenance (including vehicles)
IT - including Merchant ERP /
digital capabilities*
Growth capex - including new stores /
store refits
Base capital expenditure
Freehold property - including new
freehold sites / existing leases
Gross capital expenditure
Property disposals
Net capital expenditure
2017
(48)
2016
(50)
(49)
(40)
(69)
(166)
(71)
(161)
(61)
(68)
(227)
(229)
113
(114)
43
(186)
* IT investments exclude prepayments in relation to the development of cloud based
software (2017: £22m, 2016: £8m)
Digital investments accounted for around £50m of the Group’s
capex spend, and this level is likely to continue until 2020. The
programme to deliver a new ERP system to support the Group’s
merchant businesses is continuing at pace, and has entered the
testing phase. The initial launch of the new platform will take
place in the BSS business in the second half of 2018, with the
main roll out to the remaining merchant businesses continuing
through 2019 and into 2020. Under accounting practices for the
cloud based systems a portion of the costs are expensed leading
to the higher unallocated central costs, with the remainder
capitalised or treated as a prepayment.
In addition to the ERP programme, a number of investments
were made in digital platforms across the Group, including a
new warehouse management system for the lightside primary
distribution hub (PDH) in General Merchanting, the transactional
City Plumbing Supplies website, finance systems to manage
credit collections and rebates, and the on-going improvements to
the Wickes and Toolstation digital platforms.
Growth capex spend of £69m was slightly lower than in 2016
(£71m), and reflects a tighter approach to investing new capital
during a period where market volume growth is weak. This
additional discipline and scrutiny of potential investments will be
stronger in 2018, with overall growth capex likely to be lower than
in 2017.
28
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Return on capital measures
Pensions
Net assets at the end of 2017 were £2,860m (2016: £2,656m),
which contributed to capital employed of £3,225m (2016: £3,136m).
The Group made £11m (2016: £14m) of additional cash
contributions to its defined benefit schemes during the year.
(£m)
Cash and cash equivalents
£250m sterling bond
£300m sterling bond
Finance leases
Liability to pension scheme
Pension fund deficits
Finance charges netted off debt
2017
(277)
263
300
28
34
23
(6)
2016
(251)
266
300
34
35
103
(7)
Equity attributable to shareholders
2,860
2,656
Total balance sheet capital employed
Property operating leases (8x rentals)
3,225
1,525
3,136
1,506
Total lease adjusted capital employed
4,750
4,642
Lease adjusted ROCE (note 36), decreased to 10.1% from 10.9%.
The reduction was largely driven by on-going capital investment
across the business which is expected to underpin growth in
returns over the medium and longer term, in particular the
investments in freehold sites. A number of these sites are not yet
contributing to earnings, but they will, pending development, as
they become operational over the next 12 to 18 months.
At 31 December 2017, the combined gross accounting deficit
for the Group’s final salary pension schemes was £28m
(31 December 2016: £127m), which equated to a net deficit
after tax of £23m (31 December 2016: £103m). The reduction
in the deficit was primarily due to strong returns on plan assets,
favourable changes in demographic assumptions, a £30m
benefit from a change in the methodology used to determine the
discount rate (note 27). together with a change in gilt yields which
reduced scheme liabilities.
Supplier income
Fixed price discounts, volume rebates, customer sales support
and similar promotional arrangements (“Supplier Income”) are
a common component of trading agreements in the building
product supply industry. As part of its on-going business
activities, the Group has entered into such arrangements with
a significant number of its goods for resale suppliers.
Only two of the Group’s Supplier Income arrangements are not
co-terminus with the Group’s year end, which reduces the level
of judgement required when determining the value of income
to be recognised in any year.
The overwhelming majority of Supplier Income, in excess of
85% by value, is determined by reference to fixed supplier price
discounts on actual purchases, with approximately 4% being
volume rebates that are subject to stepped targets for actual
purchases, the net rebate percentage increasing as values or
volumes purchased reach pre-agreed targets. However, by the
year-end the Group knows whether those targets were reached.
Fixed price discounts and rebates on purchases that remain in
stock are deducted from the cost of inventory, so reducing cost of
sales in the income statement in the period in which the inventory
is expensed. Due to the complexity of the terms of some
supplier arrangements and the number of products affected,
some judgement is required to determine the amount of fixed
price discount and rebate applicable to each product that is due
from the supplier at the year-end and the value that should be
deducted from the gross value of inventory held at the balance
sheet date. The methodologies applied by the Group are well
established and consistently applied from year-to-year.
29
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report In summary, the key aspects of the Group’s financial risk
management strategy are to:
• Run the business to investment grade credit parameters
• Reduce the Group’s reliance on the bank market for its funding
by having a diverse mix of funding sources with a spread
of maturities
• Seek to maintain a strong balance sheet
• Place a high priority on effective cash and working
capital management
• Maintain liquidity headroom of over £250m and build and
maintain good relationships with the Group’s banking syndicate
• Manage counterparty risk by raising funds from a syndicate
of lenders, the members of which maintain investment grade
credit ratings
Operate banking covenants attached to the Group’s revolving
credit facilities 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 0.6x (2016; 0.7x) at the year-end (note 35)
• The number of times operating profit covers interest
charges has to be a least 3.5x and it was approximately
16x at 31 December 2017 (31 December 2016: 20x)
• Have a conservative hedging policy that reduces the Group’s
exposure to currency fluctuations, whilst allowing it to benefit
from low interest rates
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, legislation and
regulations under which it operates
• Maintaining an open and co-operative relationship with the
UK Tax Authorities to reduce its risk profile
• Paying the correct amount of tax as it falls due
Tax policies and 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. In particular 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.
The Group’s tax strategy is published on its website.
The Group also receives customer sales support which equates
to approximately 10% of total Supplier Income (i.e. payments
that are made entirely at the supplier’s option, that are requested
by the Group when a specific product is about to be sold to
a specific customer and for which payment is only received
after the sale has been completed). These are recognised as
a deduction from cost of sales when the sale to the third party
takes place and do not require any judgement to be made.
Supplier income
Other receivables
Inventory
Trade payables
Net balance sheet position
2017
(£m)
288
(210)
66
144
2016
(£m)
272
(199)
52
125
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 and
treasury risks within a framework of policies and operating
parameters reviewed and approved annually by the Board of
Directors. The Group does not enter into speculative transactions.
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.
Following the UK vote to leave the European Union, the Group
reassessed its interest hedging policy in the light of possible
trends for inflation and interest rates. It decided that the potential
downside of a significant interest rate increase is now far more
likely than any limited upside arising from rate reductions in the
medium term. Accordingly the Group has moved to a strategy
of maintaining its outstanding £250m and £300m bonds on
fixed coupons.
At the year-end the Group had no interest rate derivatives and its
borrowings were fixed on 100% of the Group’s cleared gross debt
(before cash and cash equivalents).
The Group settles its currency denominated purchases using
a combination of currency purchased at spot rates and currency
bought in advance on forward contracts. It purchases forward
contracts for approximately 90% of its committed requirements
six months forward based on the firm placement of forward
stock purchases. At 31 December 2017 the nominal value of
currency forward contracts, all of which were $US denominated,
was $76m (2016: $63m).
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 construction 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 2017 was approximately
0.4% (2016: 0.3%) of credit sales, which is at the lower end of
results previously achieved by the Group.
30
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report The Corporate Plan which is prepared annually on a rolling basis
considers the Group’s future profitability, cash flows, liquidity
headroom, availability of funds and covenant compliance.
For the purposes of the viability review, the Board has performed
a robust sensitivity analysis to stress test the downside scenario
based upon falls in revenue and gross margin akin to those
experienced in the 2008/2009 financial crisis and the mitigating
actions that were adopted at that time. These were the worst
reductions in revenue and gross margin experienced by the
business in its long history and the mitigating actions adopted
remain relevant now and in the near future. These mitigating
actions include reducing costs, capital and revenue investment
and payments to shareholders.
Based upon the assessment undertaken, the Directors confirm
that they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall
due over the three year period of their assessment.
Viability assessment
In accordance with provision C2.2 of the UK Corporate
Governance Code, published by the Financial Reporting Council
in September 2014, the Board of Directors has undertaken an
assessment of the viability of the Group.
As part of its deliberations the Board undertook a robust review
of the Principal Risks and Uncertainties facing the Group, how
they are managed and the actions that could be taken to mitigate
their effect or avoid them altogether. The resulting disclosures,
which include those risks that could threaten the Group’s
business model, performance, solvency and liquidity are shown
on pages 33 to 39 of the Annual Report. The Board believes the
Group is well placed to manage those risks successfully.
The Board has decided that it is appropriate to assess the
performance of the Group over a three year period from
28 February 2018, the month end date closest to the approval of
the 2017 annual results. Three years has been chosen because
the Board believes that is the period of the Group’s approved
Corporate Plan that it is reasonably possible to forecast forward
with a degree of accuracy and because the Group is subject to
the vagaries of the economic cycle and property market which
cannot reasonably be forecast with certainty further than three
years forward. Whilst the Board has no reason to believe the
Group not will remain viable over a longer period, the inherent
uncertainty involved, particularly in the light of the UK referendum
vote, means three years is the most appropriate period over
which to give users of the Annual Report a reasonable degree
of confidence.
31
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Main image:
Francesco (Nino) Lobozzo - Travis Perkins, Gowerton Road
Top right:
Paul Parker - Travis Perkins, Shrewsbury
32
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report STATEMENT OF
PRINCIPAL RISKS
AND UNCERTAINTIES
FOR THE YEAR ENDED 31 DECEMBER 2017
The Group operates in markets and an industry which by their
nature are subject to a number of inherent gross risks. The Group
is able to mitigate those risks by adopting different strategies
and by maintaining a strong system of internal control. However,
regardless of the approach that is taken, the Group must accept
a certain level of risk in order to generate suitable returns for
shareholders, and for that reason the risk management process is
closely aligned to the Group’s strategy.
The Board has a risk reporting framework that ensures it has
visibility of the Group’s key risks, the potential impacts on the
Group and how and to what extent those risks are mitigated.
As part of its risk management process, the principal risks stated
in the Group’s risk register are reviewed, challenged and updated
by the Board and monitored throughout the year. Each operating
business within the Group monitors a separate risk register.
These risk registers are used to determine strategies adopted by
the Group’s various businesses to mitigate the identified risks and
are embedded in their operating plans.
Details of the Group’s risk management processes are given in
the Corporate Governance report on page 56.
In common with most large organisations the Group is subject
to general commercial risks: for example, political and economic
developments, changes in the cost of goods for resale,
increased competition in its markets and the threat of emerging
and disruptive competitors, material failures in the supply
chain, failure to secure supply of goods for resale and / or on
competitive terms, cyber-security breaches and failure of our
IT infrastructure.
The risk environment in which the Group operates does not
remain static. During the year, the Directors have reviewed the
Group’s principal risks and have concluded that as the nature
of the business and the environment in which it operates
remain broadly the same, the principal risks it faces are largely
unchanged. However, some previously identified risks in respect
of business transformation, including performance improvement
in the Plumbing & Heating businesses, have considerable overlap
and so they have been combined, whilst the Directors have also
concluded that with so many stakeholders interacting with the
Group’s operations, health and safety risk should be described
separately from other legislative risk. Finally, the resolution of
some of the Group’s tax disputes with HMRC means that the
Board no longer believes that this area represents a principal risk.
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.
The table on pages 34 to 39 sets out, in no particular order, the
current principal risks that are considered by the Board to be
material, their potential impacts, the factors that mitigate them
and those areas of the businesses’ strategies they potentially
impact. 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.
33
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Inherent Risk and Trend
Risk Description
Impact
Risk Mitigation
Changing Customer and
Competitor Landscape
Inherent Risk: l l l
Trend:
Strategy: A B E
The Group sells and distributes building materials through a number of channels. The number
of outlets and channels where building materials can be purchased continues to grow with new
competitors also entering the market. These new entrants may operate business models which
differ significantly from the traditional merchanting and retail and online formats from which the
Group operates and may take market share.
At the same time, customer purchasing habits are evolving with increasing online transactions.
Customers’ preference for purchasing materials through a range of supply channels and not just
through the Group’s traditional competitors may affect the Group’s performance and adversely
impact the profitability of branch based operations.
Increasing price transparency could lead to a perception that the Group is less price competitive
leading to downward pressure on price and margins.
Colleague recruitment,
retention and succession plans
do not deliver the required skills
and experience
Inherent Risk: l
Trend:
Strategy: A D
The ability to recruit, retain and motivate suitably qualified staff is an important driver of the
Group’s overall performance. The Group may also be exposed to skills shortages in certain
areas which can result in salary cost pressures.
The strength of the Group’s customer proposition is underpinned by the quality of people
working throughout the Group, particularly in customer facing roles. Many of them have
worked for Travis Perkins for some considerable time, during which they have gained valuable
product and customer knowledge and expertise.
The Group faces competition for the best people from other organisations. Ensuring the
retention, proper development of employees and that robust succession plans exist for key
positions is important if the Group is not to suffer an adverse effect on its prospects.
Supplier dependency,
relationships and disintermediation
leading to adverse impacts on
ranging and price
Inherent Risk: l l
Trend:
Strategy: A C E
Unsafe practices result in harm
to colleagues, customers, suppliers
or the public
Inherent Risk: l l
Trend: ▼
Strategy: C D E
The Group is the largest customer to a number of its suppliers. In some cases, those suppliers
are large enough to cause significant supply difficulties to the Group if they are unable to meet
their supply obligations due to either economic or operational factors.
Alternative sourcing may be 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 leading to poor customer service.
The Group has increased the sourcing of products from overseas factories. This has increased
the Group’s exposure to sourcing, quality, trading, warranty and currency issues, which again
may lead to an adverse impact on customer service.
Manufacturers of building materials sold by the Group may also look to sell their products
directly to end customers in the future diminishing the role of distributors such as merchanting
and retail distribution businesses.
Keeping the Group’s colleagues, customers, suppliers and the public safe is a cornerstone
of the business. The Group operates over two thousand sites, many with complex and busy
yards. It also operates one of the largest vehicle fleets in the UK, distributing heavy and bulky
materials. Poorly implemented safety practices could result in significant harm to people which
would damage the company’s reputation and could impact trading performance.
Inherent risk: High ••• Medium •• Low •
Trend: Increasing
Static
Reducing
34
Adverse effect
on financial results.
each month.
Changes to market practice are tracked on an on-going basis and reported to the Board
The Group is building multi-channel capabilities that complement its existing operations and
provide its customers with the opportunity to transact with the Group through channels that
best suit their needs.
existing branches.
The Group’s strategy allows it to use sites flexibly. Alternative space utilisation models
are possible, including maintaining smaller stores and implanting additional services into
The development of new, innovative and competitive supply solutions is a key strength of
the Group. It works closely with customers and suppliers on a programme of continuous
improvement designed to improve its customer proposition.
Pricing strategies across the Group are regularly reviewed and where necessary refined to
ensure they remain competitive.
Inability to develop and
execute development
and succession plans.
The Group’s employment policies and practices are kept under regular review.
Staff engagement and turnover by job type is reported to the Executive Committee regularly
and to the Board. Succession plans are established for the most senior positions within the
Competitive disadvantage.
Group and these are reviewed annually.
Adverse effect on
financial results.
Adverse effect
on reputation.
Adverse effect on
financial results.
Adverse effect
on reputation.
The Group’s reward and recognition systems are actively managed to ensure high levels of
employee engagement.
senior positions.
A wide range of training programmes are in place to encourage staff development,
whilst management development programmes are available to those identified for more
Salaries and other benefits are benchmarked regularly to ensure that the Group remains
competitive and the Group operates incentive structures to ensure that high performing
colleagues are adequately rewarded and retained.
Making decent returns is one of the Group’s cornerstones which requires it to treat both
customers and suppliers fairly. The commercial and financial teams have established strong
relationships with the Group’s key suppliers and work closely with them to ensure contracts
that are beneficial to both parties and 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 products, thereby reducing the
reliance on branded suppliers.
Comprehensive checks are undertaken on the factories producing products and the quality
and the suitability of those products before they are shipped to the UK.
The Group continues to challenge its thinking and approach to improving its safety
performance through its now well established ‘Stay Safe’ brand.
Stay Safe performance is reviewed at all Plc Board Meetings, by the Executive Committee and
during the Group’s regular Divisional leadership meetings.
Incidents are monitored, investigated and corrective action taken to reduce the likelihood of
similar incidents in future.
De-risking the Group’s operations, improving health and safety awareness and implementing
improved ways of working are at the forefront of the Group’s activities. Further information on
progress made during 2017 can be found in the Health and Safety report on pages 44 to 45.
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Changing Customer and
Competitor Landscape
The Group sells and distributes building materials through a number of channels. The number
of outlets and channels where building materials can be purchased continues to grow with new
competitors also entering the market. These new entrants may operate business models which
Inherent Risk: l l l
differ significantly from the traditional merchanting and retail and online formats from which the
Group operates and may take market share.
Trend:
Strategy: A B E
At the same time, customer purchasing habits are evolving with increasing online transactions.
Customers’ preference for purchasing materials through a range of supply channels and not just
through the Group’s traditional competitors may affect the Group’s performance and adversely
impact the profitability of branch based operations.
Increasing price transparency could lead to a perception that the Group is less price competitive
leading to downward pressure on price and margins.
Colleague recruitment,
The ability to recruit, retain and motivate suitably qualified staff is an important driver of the
retention and succession plans
Group’s overall performance. The Group may also be exposed to skills shortages in certain
do not deliver the required skills
areas which can result in salary cost pressures.
The strength of the Group’s customer proposition is underpinned by the quality of people
working throughout the Group, particularly in customer facing roles. Many of them have
worked for Travis Perkins for some considerable time, during which they have gained valuable
product and customer knowledge and expertise.
The Group faces competition for the best people from other organisations. Ensuring the
retention, proper development of employees and that robust succession plans exist for key
positions is important if the Group is not to suffer an adverse effect on its prospects.
Supplier dependency,
The Group is the largest customer to a number of its suppliers. In some cases, those suppliers
relationships and disintermediation
are large enough to cause significant supply difficulties to the Group if they are unable to meet
leading to adverse impacts on
their supply obligations due to either economic or operational factors.
Alternative sourcing may be 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 leading to poor customer service.
The Group has increased the sourcing of products from overseas factories. This has increased
the Group’s exposure to sourcing, quality, trading, warranty and currency issues, which again
may lead to an adverse impact on customer service.
Manufacturers of building materials sold by the Group may also look to sell their products
directly to end customers in the future diminishing the role of distributors such as merchanting
and retail distribution businesses.
Unsafe practices result in harm
Keeping the Group’s colleagues, customers, suppliers and the public safe is a cornerstone
to colleagues, customers, suppliers
of the business. The Group operates over two thousand sites, many with complex and busy
yards. It also operates one of the largest vehicle fleets in the UK, distributing heavy and bulky
materials. Poorly implemented safety practices could result in significant harm to people which
would damage the company’s reputation and could impact trading performance.
and experience
Inherent Risk: l
Trend:
Strategy: A D
ranging and price
Inherent Risk: l l
Trend:
Strategy: A C E
or the public
Inherent Risk: l l
Trend: ▼
Strategy: C D E
Inherent Risk and Trend
Risk Description
Impact
Risk Mitigation
Adverse effect
on financial results.
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 that complement its existing operations and
provide its customers with the opportunity to transact with the Group through channels that
best suit their needs.
The Group’s strategy allows it to use sites flexibly. Alternative space utilisation models
are possible, including maintaining smaller stores and implanting additional services into
existing branches.
The development of new, innovative and competitive supply solutions is a key strength of
the Group. It works closely with customers and suppliers on a programme of continuous
improvement designed to improve its customer proposition.
Pricing strategies across the Group are regularly reviewed and where necessary refined to
ensure they remain competitive.
The Group’s employment policies and practices are kept under regular review.
Staff engagement and turnover by job type is reported to the Executive Committee regularly
and to the Board. Succession plans are established for the most senior positions within the
Group and these are reviewed annually.
The Group’s 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 available to those identified for more
senior positions.
Salaries and other benefits are benchmarked regularly to ensure that the Group remains
competitive and the Group operates incentive structures to ensure that high performing
colleagues are adequately rewarded and retained.
Making decent returns is one of the Group’s cornerstones which requires it to treat both
customers and suppliers fairly. The commercial and financial teams have established strong
relationships with the Group’s key suppliers and work closely with them to ensure contracts
that are beneficial to both parties and 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 products, thereby reducing the
reliance on branded suppliers.
Comprehensive checks are undertaken on the factories producing products and the quality
and the suitability of those products before they are shipped to the UK.
The Group continues to challenge its thinking and approach to improving its safety
performance through its now well established ‘Stay Safe’ brand.
Stay Safe performance is reviewed at all Plc Board Meetings, by the Executive Committee and
during the Group’s regular Divisional leadership meetings.
Incidents are monitored, investigated and corrective action taken to reduce the likelihood of
similar incidents in future.
De-risking the Group’s operations, improving health and safety awareness and implementing
improved ways of working are at the forefront of the Group’s activities. Further information on
progress made during 2017 can be found in the Health and Safety report on pages 44 to 45.
Inability to develop and
execute development
and succession plans.
Competitive disadvantage.
Adverse effect on
financial results.
Adverse effect
on reputation.
Adverse effect on
financial results.
Adverse effect
on reputation.
Link to strategy: A - Customer innovation B – Optimising network C – Scale advantage D – Portfolio management E – Financial strength
35
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Inherent Risk and Trend
Risk Description
Impact
Risk Mitigation
The Group allocates capital
inefficiently or under invests in
advantaged businesses and does
not achieve desired returns
The Group operates a number of different businesses in the UK which operate in different,
but complementary channels. As the Group’s markets continue to develop, it is investing
to enhance its existing businesses and also to develop new propositions to better serve
its customers.
Inherent Risk: l l
Trend:
Strategy: A B E
While the Group operates a disciplined capital allocation process, there is a risk that it may be
over-investing in channels which may decline or that it may not be allocating sufficient capital
to new propositions resulting in sub-optimal returns on capital.
Business transformation projects,
turnaround projects and M&A
activity fail to deliver the expected
benefits, cost more or take longer
to implement than anticipated
Inherent Risk: l l
Trend:
Strategy: A B E
The Group undertakes a variety of projects throughout its business in order to generate
returns for its shareholders. These projects are intended to transform the Group’s core
IT systems, to develop its supply chain operations and its branch and store networks and to
materially improve performance in certain businesses which have underperformed in recent
years. The Group also undertakes acquisition and disposal activity to optimise its portfolio
of businesses.
By their nature, such strategic projects are often complicated, interlinked and may result in
a high level of change and require considerable resource to deliver them. As a result, the
expected benefits and the costs of implementation of each project may deviate from those
anticipated at their outset.
Market conditions leading
to demand uncertainty
Inherent Risk: l l l
Trend: ▲
Strategy: A B E
Uncertainty caused by
the UKs decision to leave
the European Union
Inherent Risk: l l l
Trend: ▲
Strategy: A B E
The Group’s products are sold to businesses, tradesmen and retail customers for a broad
range of end uses in the built environment. The Group’s markets are cyclical in nature and
the performance of those markets is affected by general economic conditions and a number
of specific drivers of construction, RMI and DIY activity, including mortgage availability
and affordability, housing transactions and the timing and nature of government activity to
stimulate activity, net disposable income, house price inflation, consumer confidence, interest
rates and unemployment.
A significant downturn in economic conditions or alternatively major uncertainty about the
future outlook could affect the levels of construction activity in the Group’s markets and the
confidence levels of the Group’s customers, which could reduce their propensity to purchase
products and services from the Group’s businesses.
The result of the UK vote to leave the European Union has caused considerable market
uncertainty. This has made the economic outlook more difficult to predict in the short term
and has resulted in significant volatility in the value of sterling against the principal currencies
used by the Group to pay for imported goods.
Future trading relationships with foreign markets have yet to be determined and these may
result in higher tariffs or duties on imports of construction products as well as extended lead
times on imported supplies or result in the need to source some products elsewhere. The
construction industry and the distribution and logistics markets employ a significant number of
non-UK nationals and the UK may become a less attractive place for them to work resulting in
labour shortages and consequent salary cost pressures.
The effect on the Group’s operations is unlikely to become clear until the UK’s future trading
relationships are determined.
Inherent risk: High ••• Medium •• Low •
Trend: Increasing
Static
Reducing
36
Adverse effect on
financial results.
Adverse effect on
financial results.
Adverse effect on
shareholder value.
Return on capital is one of the Group’s key performance indicators as shown on page 14.
Responsibility for identifying and implementing opportunities to expand, improve or modify
the Group’s operations rests with each of the divisional boards, with capital being deployed or
re-deployed by the Group to those projects expected to achieve the best return on capital.
Major projects are kept under review to monitor progress and ensure the deployment of capital
remains appropriate.
Post implementation reviews are undertaken of all major projects and returns are monitored
on an ongoing basis to ensure that the expected returns are achieved, but also to allow the
Group to modify its capital allocation when appropriate.
All potentially significant projects are subject to detailed investigation, assessment and
approval prior to commencement.
Dedicated teams, including financial resource, are allocated to each project, with additional
expertise being brought into the Group to supplement existing resource when necessary.
All strategic projects are closely monitored by the Executive Committee with regular reporting
to the Board.
Adverse effect on
financial results.
The Board conducts an annual review of strategy, which includes an assessment of likely
competitor activity, market forecasts and possible future trends in products, channels of
distribution and customer behaviour.
Adverse effect on
financial results.
It is still too early to determine the full impact of the decision to leave, but the Board is closely
monitoring market conditions and will react accordingly.
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 CEO.
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.
The Board has already taken steps to reduce some costs, but is carefully balancing the current
needs of the business against what may or may not occur in the future.
The Group continues to invest in the business where those investments are expected to
realise acceptable returns, but it is prepared to reduce activity levels should market conditions
so dictate.
Where the cost of goods increases due to the exchange rate deteriorating or additional tariffs
and duties, the Group will seek to pass those price increases through to its customers, but its
ability to do so will depend upon market conditions at the time.
The processes in place around the recruitment and retention of people are set out in the
principal risk pertaining to such matters on page 34.
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Inherent Risk and Trend
Risk Description
Impact
Risk Mitigation
The Group allocates capital
The Group operates a number of different businesses in the UK which operate in different,
inefficiently or under invests in
but complementary channels. As the Group’s markets continue to develop, it is investing
advantaged businesses and does
to enhance its existing businesses and also to develop new propositions to better serve
not achieve desired returns
its customers.
Inherent Risk: l l
Trend:
Strategy: A B E
While the Group operates a disciplined capital allocation process, there is a risk that it may be
over-investing in channels which may decline or that it may not be allocating sufficient capital
to new propositions resulting in sub-optimal returns on capital.
Business transformation projects,
The Group undertakes a variety of projects throughout its business in order to generate
turnaround projects and M&A
returns for its shareholders. These projects are intended to transform the Group’s core
activity fail to deliver the expected
IT systems, to develop its supply chain operations and its branch and store networks and to
benefits, cost more or take longer
materially improve performance in certain businesses which have underperformed in recent
to implement than anticipated
years. The Group also undertakes acquisition and disposal activity to optimise its portfolio
of businesses.
Inherent Risk: l l
Trend:
Strategy: A B E
Market conditions leading
to demand uncertainty
Inherent Risk: l l l
Trend: ▲
Strategy: A B E
Uncertainty caused by
the UKs decision to leave
the European Union
Inherent Risk: l l l
Trend: ▲
Strategy: A B E
By their nature, such strategic projects are often complicated, interlinked and may result in
a high level of change and require considerable resource to deliver them. As a result, the
expected benefits and the costs of implementation of each project may deviate from those
anticipated at their outset.
The Group’s products are sold to businesses, tradesmen and retail customers for a broad
range of end uses in the built environment. The Group’s markets are cyclical in nature and
the performance of those markets is affected by general economic conditions and a number
of specific drivers of construction, RMI and DIY activity, including mortgage availability
and affordability, housing transactions and the timing and nature of government activity to
stimulate activity, net disposable income, house price inflation, consumer confidence, interest
rates and unemployment.
A significant downturn in economic conditions or alternatively major uncertainty about the
future outlook could affect the levels of construction activity in the Group’s markets and the
confidence levels of the Group’s customers, which could reduce their propensity to purchase
products and services from the Group’s businesses.
The result of the UK vote to leave the European Union has caused considerable market
uncertainty. This has made the economic outlook more difficult to predict in the short term
and has resulted in significant volatility in the value of sterling against the principal currencies
used by the Group to pay for imported goods.
Future trading relationships with foreign markets have yet to be determined and these may
result in higher tariffs or duties on imports of construction products as well as extended lead
times on imported supplies or result in the need to source some products elsewhere. The
construction industry and the distribution and logistics markets employ a significant number of
non-UK nationals and the UK may become a less attractive place for them to work resulting in
labour shortages and consequent salary cost pressures.
The effect on the Group’s operations is unlikely to become clear until the UK’s future trading
relationships are determined.
Adverse effect on
financial results.
Adverse effect on
financial results.
Adverse effect on
shareholder value.
Return on capital is one of the Group’s key performance indicators as shown on page 14.
Responsibility for identifying and implementing opportunities to expand, improve or modify
the Group’s operations rests with each of the divisional boards, with capital being deployed or
re-deployed by the Group to those projects expected to achieve the best return on capital.
Major projects are kept under review to monitor progress and ensure the deployment of capital
remains appropriate.
Post implementation reviews are undertaken of all major projects and returns are monitored
on an ongoing basis to ensure that the expected returns are achieved, but also to allow the
Group to modify its capital allocation when appropriate.
All potentially significant projects are subject to detailed investigation, assessment and
approval prior to commencement.
Dedicated teams, including financial resource, are allocated to each project, with additional
expertise being brought into the Group to supplement existing resource when necessary.
All strategic projects are closely monitored by the Executive Committee with regular reporting
to the Board.
Adverse effect on
financial results.
The Board conducts an annual review of strategy, which includes an assessment of likely
competitor activity, market forecasts and possible future trends in products, channels of
distribution and customer behaviour.
The Group maintains a comprehensive tracking system for lead indicators that influence the
market for the consumption of building materials in the UK.
Significant events including those in the supply chain that may affect the Group are monitored
by the Executive Committee and reported to the Board monthly by the Group CEO.
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.
Adverse effect on
financial results.
It is still too early to determine the full impact of the decision to leave, but the Board is closely
monitoring market conditions and will react accordingly.
The Board has already taken steps to reduce some costs, but is carefully balancing the current
needs of the business against what may or may not occur in the future.
The Group continues to invest in the business where those investments are expected to
realise acceptable returns, but it is prepared to reduce activity levels should market conditions
so dictate.
Where the cost of goods increases due to the exchange rate deteriorating or additional tariffs
and duties, the Group will seek to pass those price increases through to its customers, but its
ability to do so will depend upon market conditions at the time.
The processes in place around the recruitment and retention of people are set out in the
principal risk pertaining to such matters on page 34.
Link to strategy: A - Customer innovation B – Optimising network C – Scale advantage D – Portfolio management E – Financial strength
37
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Inherent Risk and Trend
Risk Description
Impact
Risk Mitigation
Defined benefit pension scheme
funding requirements could increase
Inherent Risk: l l
Trend:
Strategy: D E
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 defined benefit
pension schemes.
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.
While the Group has taken actions to manage the future cost, the cash funding of pension
obligations could increase significantly due to a number of factors including poor performance
of the pension fund investments, falling corporate bond and gilt yields and increasing longevity
of pension scheme members.
Data security
Inherent Risk: l l
Trend: ▲
Strategy: A E
Incidents of sophisticated cyber-crime represent a significant and increasing threat to all
businesses including the Group. A major breach of system security could result in system
disruption to both customer facing and financial systems and / or the theft and misuse of
confidential data with consequential impacts on the Group’s reputation or ability to trade.
The changing regulatory
framework, including GDPR
and new building regulations,
increase the risk of non-
compliance and fines
The Group is subject to a broad range of existing and evolving governance, environmental,
health and safety and other laws, regulations, standards and best practices which affect
the way the Group operates and give rise to significant compliance costs, potential legal
liability exposure for non-compliance and potential limitations on the development of the
Group’s operations.
Inherent Risk: l l
Trend:
Strategy: A B C D E
Inherent risk: High ••• Medium •• Low •
Trend: Increasing
Static
Reducing
38
Adverse effect
on financial condition.
Adverse effect
on financial results.
Adverse effect on
the Group’s reputation.
Adverse effect on the
Company’s reputation.
Adverse effect on
branch operations.
Adverse effect
on performance.
All the Group’s final salary pension schemes are closed to new members, although they remain
open to accrual. Since 2015 individual employee contribution rates have been more closely linked to
the cost of accrual which has resulted in the current service contribution of the Group being capped.
For the Travis Perkins scheme, pensionable salary inflation has been capped at 3% per annum.
The schemes’ investment policies are kept under regular review by the trustees in conjunction
with the Group to ensure asset portfolios produce the desired level of return within an
acceptable risk profile.
being put in place.
In 2017 an investment de-risking plan established in 2015 was completed with hedging
strategies designed to limit the Schemes’ exposure to inflation and interest rate fluctuations
Notwithstanding this the Group remains exposed to movements in member longevity, the
value of pension scheme investments and falling corporate bond and gilt rates.
The Group has agreed deficit reduction payment plans for each of its defined benefit pension
schemes with the Trustees of the schemes. The repayment plans will remain in place until the
next actuarial valuation, when in conjunction with the Scheme Trustees they will be reassessed
to take into account the circumstances at the time.
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 with responsibility for
monitoring and maintaining cyber security delegated to a data security committee.
Investments in best of breed solutions are made that continually adapt to mitigate the risk
associated with the most advanced threats.
Cyber security controls are in place to protect IT systems and data including firewalls, virus
protection and penetration testing. A programme of risk oriented reviews is undertaken to
ensure the level of control around IT systems remains robust.
An IT disaster recovery plan exists together with a 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.
affect the business.
The Group’s legal team is responsible for monitoring changes to laws and regulations that
The Group has policies in place that set out the ways employees and suppliers are expected to
conduct themselves. Those expectations are widely disseminated using a range of methods to
ensure colleagues and suppliers understand their responsibilities to comply with the law and
other regulations affecting the Group at all times.
The Board and the Executive Committee regularly monitor compliance with laws
and regulations.
The Group operates a whistleblowing process that allows the anonymous reporting of
non-compliance with health and safety, environmental, bribery and other laws and regulations.
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Inherent Risk and Trend
Risk Description
Impact
Risk Mitigation
Defined benefit pension scheme
The Group is required by law to maintain a minimum funding level in relation to its
funding requirements could increase
on-going obligations to provide current and future pensions for members of its defined benefit
Adverse effect
on financial condition.
Inherent Risk: l l
Trend:
Strategy: D E
pension schemes.
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.
While the Group has taken actions to manage the future cost, the cash funding of pension
obligations could increase significantly due to a number of factors including poor performance
of the pension fund investments, falling corporate bond and gilt yields and increasing longevity
of pension scheme members.
Data security
Inherent Risk: l l
Trend: ▲
Strategy: A E
Incidents of sophisticated cyber-crime represent a significant and increasing threat to all
businesses including the Group. A major breach of system security could result in system
disruption to both customer facing and financial systems and / or the theft and misuse of
confidential data with consequential impacts on the Group’s reputation or ability to trade.
Adverse effect
on financial results.
Adverse effect on
the Group’s reputation.
All the Group’s final salary pension schemes are closed to new members, although they remain
open to accrual. Since 2015 individual employee contribution rates have been more closely linked to
the cost of accrual which has resulted in the current service contribution of the Group being capped.
For the Travis Perkins scheme, pensionable salary inflation has been capped at 3% per annum.
The schemes’ investment policies are kept under regular review by the trustees in conjunction
with the Group to ensure asset portfolios produce the desired level of return within an
acceptable risk profile.
In 2017 an investment de-risking plan established in 2015 was completed with hedging
strategies designed to limit the Schemes’ exposure to inflation and interest rate fluctuations
being put in place.
Notwithstanding this the Group remains exposed to movements in member longevity, the
value of pension scheme investments and falling corporate bond and gilt rates.
The Group has agreed deficit reduction payment plans for each of its defined benefit pension
schemes with the Trustees of the schemes. The repayment plans will remain in place until the
next actuarial valuation, when in conjunction with the Scheme Trustees they will be reassessed
to take into account the circumstances at the time.
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 with responsibility for
monitoring and maintaining cyber security delegated to a data security committee.
Investments in best of breed solutions are made that continually adapt to mitigate the risk
associated with the most advanced threats.
Cyber security controls are in place to protect IT systems and data including firewalls, virus
protection and penetration testing. A programme of risk oriented reviews is undertaken to
ensure the level of control around IT systems remains robust.
An IT disaster recovery plan exists together with a 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.
The Group is subject to a broad range of existing and evolving governance, environmental,
health and safety and other laws, regulations, standards and best practices which affect
the way the Group operates and give rise to significant compliance costs, potential legal
liability exposure for non-compliance and potential limitations on the development of the
Group’s operations.
The changing regulatory
framework, including GDPR
and new building regulations,
increase the risk of non-
compliance and fines
Inherent Risk: l l
Trend:
Strategy: A B C D E
Adverse effect on the
Company’s reputation.
The Group’s legal team is responsible for monitoring changes to laws and regulations that
affect the business.
Adverse effect on
branch operations.
Adverse effect
on performance.
The Group has policies in place that set out the ways employees and suppliers are expected to
conduct themselves. Those expectations are widely disseminated using a range of methods to
ensure colleagues and suppliers understand their responsibilities to comply with the law and
other regulations affecting the Group at all times.
The Board and the Executive Committee regularly monitor compliance with laws
and regulations.
The Group operates a whistleblowing process that allows the anonymous reporting of
non-compliance with health and safety, environmental, bribery and other laws and regulations.
Link to strategy: A - Customer innovation B – Optimising network C – Scale advantage D – Portfolio management E – Financial strength
39
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Main image:
Adam Buttigieg – Toolstation, Wellingborough
Bottom right:
Simona Platekova - Travis Perkins plc, Warrington
40
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report OUR PEOPLE
The Group’s success is the result of the hard work and commitment of all its
colleagues across its businesses, who are dedicated to meet the changing
demands of its customers.
Recruiting the best and building
a diverse workforce
2017 has seen further change to the Group’s in-house resourcing
model which was established in 2015. The new approach
consists of focused candidate attraction campaigns delivered
by in-house recruiters who consistently create new ways of
attracting the best people in the market.
As part of the Group’s Early Careers programme we work
with Schools, Colleges and Universities to raise awareness
around the variety of career paths on offer in the Group
businesses, and to recruit into its multi-award winning UK wide
apprenticeship scheme.
Since the start of 2017, approximately 275 service leaders have
been recruited across the Group via a proactive Ex-Armed Forces
recruitment programme. More recently the Group had the great
honour of being recognised for its work supporting the Armed
Forces with a Defence Employer Recognition Scheme (ERS)
Silver award granted in recognition of the Group’s approach to
recruiting and developing Armed Forces personnel.
Developing to accelerate performance
and strengthening succession
Leadership
Developing the best leaders to lead through change is a key
enabler of performance for the Group. Leaders are challenged
to not tolerate average, to lead by example, to be fanatical about
customers, adapt at pace and identify creative ways to grow the
Group’s businesses whilst simultaneously challenging costs.
The Group 10 leadership development programmes were
updated in 2017 to deliver new characteristics and capabilities.
The Group’s business unit specific and central leadership
succession processes and assessments were adapted to both
strengthen the Group leadership pipeline and to proactively foster
a more diverse leadership population.
41
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report Pipeline
In 2017 the Group apprenticeship programmes were transformed
under the brand ‘LEAP’ (Learn As You Earn Apprenticeship
Programmes); so apprentices are offered the opportunity to work
in all areas of the business at many levels, and gain qualifications
from GCSE to MBA. The launch of new apprenticeships will
develop circa 2,000 younger and more diverse people at each
level of the pipeline in the next two years.
The Group’s branches and functions offer 15 places a year for
young women to attend the Duke of Edinburgh’s award scheme.
This is designed to support the personal development of
ambitious women starting their careers with Travis Perkins and to
accelerate their progression in the construction industry. In 2017
five women have successfully graduated with the Gold award and
twenty more have signed up for the next programme.
Workforce with a Difference
Travis Perkins strongly believes that a ‘Workforce with a Difference’
doesn’t just make good commercial and business sense, it’s good
for its people and customers.
The number of women in leadership positions overall has
increased by 9% to over 19% in 2017. The Group’s workforce now
includes seven female Managing Directors, and over 160 female
Branch/Store Managers and over 47% of new talent into the
pipeline through the apprenticeship programme is female.
The Group’s internal ‘Workforce with a Difference’ digital
community has over 1,500 members who actively contribute to,
and drive change in the business. Improvements have occurred
in areas such as uniform, working hours, language in company
documentation and general policies. Colleagues have also
tackled banter in local branches, whilst unconscious bias training
and changes to recruitment advertising are now commonplace.
Listening to colleagues
The Group values honesty and fosters an environment of
listening and allowing others to speak up. In 2017 there were
a number of examples of this:
• The Group carried out 9 engagement surveys across
its businesses.
• Colleagues were encouraged to use Google+ communities
and forums to have two way conversations. For instance,
formal consultative groups for organisational changes, elected
representative groups and more informal listening groups led
by Directors for specific topics.
In 2017 ‘My People Services’ launched a new telephone service
and portal, accessible to 29,000 colleagues, which provides
advice and guidance on dealing with issues that cannot be
resolved locally. This is in addition to the separate, independent,
whistle blowing hotline.
Group Headcount
Age Bands
= 29,776
Under 25
26-39
40-59
Males
22,168
Females
7,608
60 and over
1,941
Women in Senior Management
Ethnicity
Flexible Work
Patterns
Full Time
5,577
10,345
11,913
Part Time
24,249
5,527
21,215
3,343
5,218
%
0
2
%
3
2
%
7
2
%
8
2
2014
2015
2016
2017
White British
Non-white
British
Non British/
Unknown
42
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Gender diversity reporting 2017
Director
Manager
Colleague
Total
Central services
Consumer division
Contract Merchanting division
General Merchanting division
Plumbing & Heating division
Total
F
F
Number
4
274
7,330
7,608
Number
680
4,128
643
1,379
778
7,608
M
Total
%
17
28
25
26
%
47
37
19
14
19
26
Number
19
703
21,446
22,168
M
Number
763
6,943
2,832
8,343
3,287
22,168
%
83
72
75
74
%
53
63
81
86
81
74
Number
23
977
28,776
29,776
Total
Number
1,443
11,071
3,475
9,722
4,065
29,776
%
100
100
100
100
%
100
100
100
100
100
100
Charities and communities
The Group is incredibly proud of how it supports the charities
and communities around it. It continues to empower each of the
Group’s businesses to support different charities which mean
something special to them and enter into a partnership, usually
for three years or more. In 2017 the General Merchanting division
extended its corporate charity partnership with Macmillan Cancer
Support by a further two years.
The business raised more than £1 million in 2017 through a
variety of activities principally driven and supported by Group
colleagues, customers and local communities.
Group colleagues also support charitable activity through
Payroll giving and via a Colleague Lottery. The popularity of these
schemes remains undiminished, and in 2018, the Group will be
looking at ways to make these schemes even more accessible
to colleagues.
Our shared successes – charity partnerships
General Merchanting
Contracts
Consumer
Plumbing & Heating
43
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report KEEPING PEOPLE SAFE
The Group’s approach
Keeping people safe is a cornerstone of the business. The Group’s
underlying philosophy that ‘all those affected by our business
should return home safe and well at the end of every day’
remains unchanged.
Travis Perkins recognises that good safety and good business
leadership behaviours are indistinguishable from each other.
Through the well established ‘Stay Safe’ brand, it continues to
challenge its thinking and approach in order to deliver continuous
improvement to the Group’s safety performance.
Stay Safe governance
Throughout 2017 Stay Safe performance was reviewed at
Travis Perkins plc Board Meetings, by the Executive Committee
and also as part of regular Divisional leadership meetings.
The Travis Perkins plc Stay Safe Committee continued to monitor
performance, by reviewing the risk profile of the business and
progress against 2017 objectives relating to:
• Continued implementation of Divisional Stay Safe strategy,
aligned to the Group Stay Safe Vision
• Further de-risking of the Group’s operations
• Workplace transport and driver behaviour
• Safety training delivery and effectiveness measures for
all colleagues including occupational drivers, front line
management and senior management.
Progress against these objectives forms part of the Remuneration
Committee’s overall assessment of executive performance.
In addition to the Group’s internal governance process, an
independent external audit of safety strategy, planning and
internal assurance processes was commissioned towards the end
of 2017. A technical review of the Group’s Safety Management
System by its Primary Authority was also completed to determine
the adequacy of the Group’s policy and processes in meeting
statutory requirements and in effectively managing its risks.
Stay Safe performance
When launching its revised Stay Safe strategy in 2015, the Group
recognised that cultural change takes time and its expectations
were that it would take a minimum of two years to make a
discernable improvement to performance. As a result of the
concerted efforts of everybody in the Group to focus on doing
the right thing, it is pleasing to report a significant reduction in the
number and frequency of lost time accidents.
2017 saw 408 lost time accidents compared to 469 in 2016,
correlating to an overall decrease in Group LTI frequency rate of
18% from 9.17 in 2016 to 7.57. The Group’s Severity Rate remains
flat at 0.13, the same as 2016. Near miss reporting continues to
go from strength-to-strength, increasing by 100%
on 2016 to over 44,000 reports.
Underlying the headline figures, the performance of the Group’s
operational divisions and businesses improved, with all except
Plumbing & Heating showing reductions in the number and the
frequency rate of lost time incidents. Frequency rates improved
as follows: General Merchanting 14%, Contract Merchanting 12%,
Supply Chain 33%, Wickes 17% and Tile Giant 28%. Plumbing &
Heating saw its frequency rate increase by 8%, reflecting work to
improve its reporting culture.
Consensus from the Divisions, Executive and Board is that
the Stay Safe strategy and plan remains sound. It targets the
principal causes of accidents, a revised risk assessment process,
learning from accidents through application of the Just Culture
model, as well as continuing to tackle the low frequency, high
impact events related to traffic management.
The most significant challenge is the Group’s ability to engage
colleagues, particularly against a backdrop of wider organisational
change and transformation. Accordingly it is the Group’s aim for
2018 to stay on course and not be tempted to try a new approach
before fully embedding the changes made to date.
The Group continues to lead the transport arena, maintaining
accreditation as part of the Fleet Operators Recognition
Scheme (FoRS) for the seventh consecutive year. It continues to
champion the Construction Logistics and Cycle Safety (CLOCS)
programme which brings together developers, construction
companies, operators, vehicle manufacturers and regulatory
bodies to ensure a road safety culture is embedded across the
construction industry.
44
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report Group Lost Time Injury Frequency Rate
Group Injury Severity Rate
R
F
T
L
I
12
11
10
9
8
7
6
R
S
0.25
0.25
0.20
0.20
0.15
0.15
0.10
0.10
0.05
0.05
0.00
0.00
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Innovation & collaboration
The Group’s businesses continue to take the Stay Safe
philosophy and translate it into specific actions that are tailored to
their operations and the safety issues that they face.
During 2017 the Group has undertaken a number of projects in
the health and safety arena. These include:
• All divisions have implemented the new Safety Management
System (SMS), the Group’s one stop shop for all policy and
process relating to health and safety.
• Complementing the launch of a new SMS has been the roll
out of the Group’s 3 lines of defence assurance programme,
seeing robust first line self assessment and review by managers
and regional leaders, second line independent assessment of
compliance and performance by the Stay Safe function and
third line external review via external audit and the Group’s
Primary Authority.
• General Merchanting has piloted ‘Backtrack’, wearable
technology to help improve manual handling techniques
in branch as well as to help rehabilitate those with existing
health conditions or injuries. Benefits have included increased
engagement with colleagues regarding manual handling
behaviour and a 73% reduction in unsafe lifting techniques.
• To help drivers keep themselves and customers safe at the
point of delivery, during 2017 the Group delivered internally
created training accredited by the Joint Approvals Unit for
Periodic Training targeting safe loading and delivery and a new
dynamic risk assessment approach.
• In 2017, Travis Perkins and DHL (the Group’s primary supply
chain delivery partner) conducted a driver fatigue trial using
sleep data collected via wearable technology. Working with
research partners Sleep and Fatigue Research (SaFR), the
Group has collated some good data. Its challenge now is to
understand if and how, through complex analysis, it can predict
and influence specific driver behaviours and what additional
internal systems and controls may be appropriate.
• Following the implementation of new national industry
standards for the practical assessment of Fork Lift Truck (FLT)
operators, the Group took this opportunity to work with it’s
FLT training provider, Mentor Training, and adopted an industry
leading enhanced practical assessment process exceeding the
new standards.
Further projects are planned to build on the work undertaken in
2017. These include:
• 2018 will be the third year for the Group’s traffic management
and workplace transport risk profiling activity, seeking to
continuously improve driver and pedestrian safety in branches.
• Improvements from safety by design will also continue as part
of the Group’s ongoing investment programme in new branches
and refurbishment.
• Building on the ‘Backtrack’ technology pilot, 2018 will see
further testing of wearable manual handling technology.
• The Group will continue to develop its broader health and
wellbeing programme, continuing to evolve its ‘My Worklife’
wellbeing benefits offering, and a focus on stress management,
developing personal resilience and helping colleagues
cope with change. The Contract Merchanting division will
be taking part in a programme to understand the ‘demand’
from colleagues for wellbeing as well as developing a clear
wellbeing strategy.
45
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report ENVIRONMENTAL
SUSTAINABILITY
Environmental essentials
The Group continues to engage, shape and influence practices
and programmes that reduce the life cycle environmental impact
of construction.1 During the year, the Group:
• Was recognised for innovation in commercial renewable power
installation by being an Edie Sustainability Leadership Finalist
• Joined the Supply Chain Sustainability School as a Partner
• Retained a managed rating (B) from CDP for carbon
and forest products
• Retained the Three Trees designation from WWF for
management and performance in responsible timber buying
• Operated for the 16th consecutive year with ISO 14001
compliant management system controls.
Materiality and context
The Group carried out an extensive stakeholder survey in 2017
to identify social, environmental and ethical issues that have a
material bearing on the Group’s continued success. The survey
identified energy and carbon, material consumption and waste as
being materially important as well as air pollution from vehicles.
Key performance indicators
Carbon
Carbon emissions associated with extracting raw materials,
manufacturing products and disposing of products at the end
of their useful life continue to account for 98%2 of the Group’s
carbon footprint and it remains committed to increasing the
use of environmental performance disclosures to highlight
opportunities for collaboration in reducing this impact.
In direct operations, the Group’s vehicle fleet is large and growing,
so its efficient deployment and use remained a challenge in 2017.
Long opening hours and relatively bright retail environments
make the 3rd largest contribution to the Group’s carbon footprint;
so 29 LED retrofits were carried out.
The amount of energy (electricity & gas) the Group used in 2017
was almost 3% higher than in 2016 with much of this increase
being accounted for by an increase in the number of operating
sites. However, primarily because of grid decarbonisation and
decoupled business growth, the Group’s carbon emissions
associated with energy and transport fell by c.5%. The Group
expects a slowing of this rate of reduction in 2018 with some
distribution restructuring impacting emissions, however, the
Group remains confident of achieving its 2020 ambition of
reducing its combined energy and transport intensity by 28%
of 2013 levels.
The Group has reported on all of the emissions 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 20173 on an operational control basis.
95% of Scope 1 and 2 data is from measured sources4 with the
remainder extrapolated from expenditure on fuel.
Travis Perkins plc Greenhouse Gas Emissions5
s
e
l
a
s
d
e
t
a
fl
e
d
m
£
r
e
p
e
2
O
C
s
e
n
n
o
T
40
30
20
10
0
18.50
18.76
2020
Target
21.11
18.58
14.70
12.78
2013
Transport
2016
Energy
2017
1 This report includes data for companies where Travis Perkins plc has operational control.
2 Not verified by Lloyds Register Quality Assurance.
3 Fugitive emissions from domestic refrigeration, vehicles and building air conditioning have been excluded in 2013 and 2017,
but they were not material to the Group’s overall emissions.
4 6% of the energy data is estimated due to supplier data provision issues.
5 2017 data is Office of National Statistics deflated figures. It uses best available financial data at the time the report was produced.
46
Travis Perkins plc Annual Report & Accounts 2017Strategic Report Travis Perkins plc Annual Report & Accounts 2017Strategic Report
Mandatory carbon report table
Waste
Carbon Dioxide Equivalent
(CO2e) Tonnes
Comparison
year 2016
Reporting
year 2017
139,434
138,160
65,381
57,205
33.2
31.6
Scope 1
Direct emissions from
burning gas and solid fuel for
heating and from road fuel
use for distribution6
Scope 2
Indirect emissions from
the use of electricity
Intensity7
Tonnes of CO2e from
scope 1 and 2 sources per
million pounds of inflation
adjusted sales
Timber
The Group successfully procured over 97% of timber and
timber products resold as either FSC or PEFC certified.
The Group ambition remains that all timber and timber products
are sourced responsibly, and without causing deforestation
or degradation.
Travis Perkins plc Timber and Timber Products for Resale
d
e
s
a
h
c
r
u
P
r
e
b
m
T
%
i
100
75
50
25
0
18%
75%
16%
81%
18%
79%
2013
Other certified
2016
FSC
2017
The Group still sends 2,765 tonnes of waste to landfill, 6% of
the 48,439 tonnes of used materials created, and is committed
to continuing its journey towards diverting zero waste to landfill
in 2018.
12
10
8
6
4
2
0
s
e
l
a
s
e
r
o
c
d
n
a
s
e
l
a
s
d
r
a
y
f
o
m
£
r
e
p
e
t
s
a
w
f
o
s
e
n
n
o
T
Travis Perkins plc Waste Tonnage8
9.2
1.0
6.1
1.5
2013
2016
Diverted from landfill
8.5
0.5
2017
Landfill
The Group recognises that much of its impact on raw material
use and waste is due to, both how the products it sells are made
and how they are disposed of after their useful life. The Group
collaborated with its copper fitting suppliers in 2017 to identify
material savings of up to 10% and believes similar approaches
are scalable with other suppliers over the next 18 months.
Meanwhile the General Merchanting division continued to
successfully take back packaging waste from selected customers
and Wickes ensured 225 tonnes of material was reused. This is
another area where the Group has further opportunity to increase
its activities in the future.
Air pollution
The Group operates over 3,300 vehicles which collectively are
driven over 150 million miles a year. The combined effect of
these on urban air quality is rightly under close scrutiny and so
the Group has plans to ensure that all its HGV fleet is less than
10 years old by 2020.
6 Scope 1 CO2e emissions include 21,969 tonnes from buildings and 116,192 tonnes from transport.
7 Carbon intensity is referenced to turnover, which is adjusted to allow for inflation, relative to baseline year.
It uses best available financial data at the time the report was produced.
8 2017 data is Office of National Statistics deflated figures. It uses best available financial data at the time the report was produced.
A proportion of the Group’s waste data is estimated.
47
Strategic ReportTravis Perkins plc Annual Report & Accounts 2017Strategic Report
Strategic report approval
The Strategic Report on pages 3 to 48 was approved by the
Board of Directors and signed on its behalf by:
John Carter
Chief Executive
27 February 2018 27 February 2018
Alan Williams
Chief Financial Officer
Incidents
In 2017 there were 3 permitted operations and 4 consents from
environmental regulators for discharges to air or controlled
waters at the Group’s 2,076 sites. The majority of the Group’s
sites operate under waste exemptions in order to responsibly
handle and process Group and customer waste.
The Group’s ISO 14001 certified environmental management
system assures compliance and pollution prevention in the event
of incidents. In 2017 the system followed up 25 non-reportable
incidents and 10 incidents or complaints meeting internal
guidelines as being reportable to competent authorities. Of the
reported incidents, 9 were of spillages involving fuel, hydraulic
oil or paint all less than 100 litres and where small amounts may
have entered controlled waters. The Group received one noise
complaint from early morning activity at one of its retail sites.
Travis Perkins plc Recorded Incidents and Complaints
12
27
10
25
11
20
40
30
20
10
0
i
s
t
n
a
l
p
m
o
c
d
n
a
s
t
n
e
d
c
n
i
I
2013
2016
Reportable incidents
and complaints
2017
Non-reportable incidents
and complaints
There are no current or ongoing investigations by regulators
regarding these reported incidents and no part of the Group was
either prosecuted or in receipt of a civil sanction in 2017.
Assurance
The content of this report (with the exception of the supply chain
carbon emissions values used to calculate the proportion of the
Group’s Footprint coming from its purchased goods) has been
assured against LRQA verification procedure which is based on
AA1000AS (2008) and ISAE3000. A copy of their verification
statement is available at:
http://www.travisperkinsplc.co.uk/responsibility/environment-
hub/resource-library1.aspx
48
Travis Perkins plc Annual Report & Accounts 2017Strategic Report
GOVERNANCE
& REMUNERATION
50 The board of directors
53 Corporate governance report
58 Audit committee report
64 Directors’ remuneration report
82 Nominations committee report
84 Directors’ report
87 Statement of directors’ resposibilities
Main image:
George Brown & David Harris – Keyline, Telford
From top left to bottom right:
Emma Walmsley – BSS, Leeds
Adam Raspass - Benchmarx, Luton
49
Governance & Remuneration THE BOARD
OF DIRECTORS
Stuart Chambers
Non-executive Chairman
Nationality
British
John Carter
Chief Executive
Nationality
British
Appointment date
Non-executive Director – 1 September 2017
Chairman from 7 November 2017
Appointment date
Executive Director – 1 July 2001
Chief Executive from 1 January 2014
Tony Buffin
Group Chief Operating Officer
Nationality
British
Appointment date
Chief Financial Officer – 8 April 2013
Group Chief Operating Officer from
1 March 2017
Committee membership
Executive Committee Chairman and
Stay Safe Committee
Committee membership
Executive Committee
Skills and experience
John joined Travis Perkins plc in 1978
as a Management Trainee. With over
39 years experience in the business,
John has held various senior strategic roles
in Sales, Marketing and Operations and
has managed sector-leading functions
such as Procurement, Supply Chain,
International Sourcing and Category
Management. During his career John has
headed up the integration of key strategic
acquisitions for the Group including Keyline
in 1999, Wickes in 2005 and BSS Group in
2010. John is a Non-executive Director of
McCarthy & Stone plc.
Skills and experience
Prior to joining the Group, Tony was
CFO of the Coles Group, the leading
Australian grocery retailer, where he was
accountable for finance, property,
IT, strategy and the Group online, financial
services and hotel businesses. Prior to
this Tony was the CFO and then CEO
of the Loyalty Management Group and
held senior finance roles at The Boots
Group plc after qualifying as a chartered
accountant at Ernst & Young. Tony has
been a Non-executive Director on the
Dyson Shareholder Board since 2013.
Committee membership
Nomination Committee Chairman,
Remuneration Committee
and Stay Safe Committee
Skills and experience
Stuart Chambers is currently Chairman of
Anglo American plc and a member of the
UK Takeover Panel.
Stuart was Chairman of Rexam plc
from 2012 to 2016 and ARM Holdings
plc from 2014 to 2016. He served as a
non-executive director on the Boards
of Tesco plc, Tesco Bank, Manchester
Airport Group, Smiths Group plc and
Associated British Ports Holdings plc.
His executive career included 10 years
with Shell and 10 years with the Mars
Corporation. Stuart then joined Pilkington
plc in 1996, where he was appointed
Group Chief Executive in 2002. Pilkington
was acquired by Nippon Sheet Glass in
2006 and Stuart became Group Chief
Executive of the new combined Group
until 2010.
50
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Alan Williams
Chief Financial Officer
Nationality
British
Appointment date
3 January 2017
Committee membership
Executive Committee
Skills and experience
Prior to joining the Group, Alan served as
CFO at Greencore Group plc for 6 years.
Alan also previously worked at Cadbury
plc in a variety of financial roles in the UK,
France and the USA. Alan is a qualified
accountant and treasurer and has a
strong background in leading strategic
initiatives, mergers and acquisitions,
integration and business transformation.
Ruth Anderson
Non-executive Director
Nationality
British
Appointment date
24 October 2011
Committee membership
Audit Committee Chairman,
Nominations Committee and
Stay Safe Committee
Skills and experience
Ruth is a non-executive director
of Ocado plc, Coats Group plc,
The Royal Parks which is a charitable
public corporation 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
Chairman from 2005 to 2009.
Coline McConville
Non-executive Director
Nationality
Australian
Appointment date
1 February 2015
Committee membership
Remuneration Committee Chair, Audit
Committee and Nominations Committee
Skills and experience
Coline is currently a non-executive
director of TUI AG, Inchcape plc and
Fevertree Drinks plc and was formerly a
non-executive director of UTV Media plc,
Wembley National Stadium Limited, Shed
Media PLC and HBOS plc, and a global
advisor and director of Grant Thornton
International Limited. Prior to that, Coline
was Chief Operating Officer and Chief
Executive Officer Europe of Clear Channel
International Limited. She holds an MBA
from Harvard Business School, where she
was a Baker Scholar.
51
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017
Governance & Remuneration
Pete Redfern
Non-executive Director
Nationality
British
Appointment date
1 November 2014
Committee membership
Stay Safe Committee Chairman,
Nominations Committee and
Remuneration Committee
Skills and experience
Pete is a Chartered Surveyor, as well
as a Chartered Accountant and is
currently Chief Executive of Taylor
Wimpey plc. He was previously Chief
Executive of George Wimpey plc and
prior to that, successively held the
posts of Finance Director and Chief
Executive of George Wimpey’s UK
Housing business. Pete is also a Trustee
of the homelessness charity Crisis and
Chairman of the Youth Adventure Trust.
Christopher Rogers
Senior Independent Non-executive Director
John Rogers
Non-executive Director
Nationality
British
Appointment date
1 September 2013
Nationality
British
Appointment date
1 November 2014
Committee membership
Audit Committee, Nominations Committee
and Remuneration Committee
Committee membership
Audit Committee and
Nominations Committee
Skills and experience
Chris is currently Chairman of Rush Hair
Group Limited a business backed by
Lloyds Development Capital and
a visiting fellow at Durham University.
Prior to this, Chris was Managing
Director of Costa Coffee from 2012 to
2016 and a director of Whitbread PLC
from 2005 to 2016 where he served as
Group Finance Director. He was Group
Finance Director of Woolworth Group
PLC and Chairman of the Woolworth
Entertainment businesses from 2001 to
2005 and previously held senior roles in
both finance and commercial functions
in Comet Group plc and Kingfisher plc.
Chris was also a non-executive director of
HMV Group plc from 2006 to 2012.
Skills and experience
John Rogers is currently Chief Executive
Officer of Sainsbury’s Argos and a
member of the J Sainsbury’s plc Board
and Sainsbury’s Bank plc Board. Prior to
his appointment as CEO of Sainsbury’s
Argos, John was Chief Financial Officer
of J Sainsbury plc for six years and during
his career at Sainsbury’s he also held the
posts of Property Director, Director of
Group Finance and Director of Corporate
Finance. Before joining Sainsbury’s, John
held a variety of financial, operational and
strategy roles.
52
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Travis Perkins plc Annual Report & Accounts 2017
Governance & Remuneration
CORPORATE
GOVERNANCE
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
G
o
v
e
r
n
a
n
c
e
&
R
e
m
u
n
e
r
a
t
i
o
n
2017 has seen a significant change in the composition of the Board. On 6 November 2017
we said farewell to Robert Walker, after eight years of dedicated service to our Company,
of which he served more than seven years as Chairman. During his tenure Robert led the
Board in overseeing the business make several major acquisitions including the BSS Group
and Toolstation and saw Group revenues double.
It is now four months since I took over the role of Chairman and
I am pleased to have the opportunity to report on our approach
to corporate governance, and our key activities in this area.
Good governance is essential to the way in which our business
operates on a day-to-day basis, and the Board remains
committed to ensuring the highest standards. As your new
Chairman, I am responsible for leading the Board in promoting
effective governance across the Group, an activity which I believe
is critical in underpinning our ability to deliver our strategy and
to create long-term value for our shareholders. Details of the
principal activities of the Board and its committees throughout
2017, and how the Company has complied with the UK Corporate
Governance Code can be found on pages 54 to 57.
Although we were due to carry out an external Board evaluation in
2017, due to the timing of my appointment, we decided to defer this
to 2018 when I will have greater knowledge of the requirements for
the Board and the attributes of each of the members. An internal
evaluation of the Board’s performance was conducted this year,
in a fully open and transparent process. The conclusions and
recommended actions from the review are summarised on page 56.
The Board plays an important role in setting the Group’s
culture and, in my initial months, it is clear that the Board and
colleagues across the Group demonstrate the Group’s core
values, the Cornerstones. Throughout the year, the Board has
worked effectively and guided the Group forward in the face of
some challenging market conditions. The Board is visible within
the business and visited a number of the Group's sites during
the year. As part of my induction, I have also spent time in the
Group's businesses and have found this a very useful way of
developing my understanding of the Group.
The AGM this year will be held on 27 April 2018 at the Saints
Rugby Football Club in Northampton. I look forward to meeting
shareholders at the AGM, where your Board and I will be available
to answer any questions.
Stuart Chambers
Chairman
27 February 2018
53
UK Corporate Governance Code
This part of the Annual Report describes the principal activities
of the Board and its committees throughout the year and how the
Company has complied with the UK Corporate Governance Code
(the "Code") by reference to its five main sections. A copy of the
Code can be found on the Financial Reporting Council's website
www.frc.org.uk
Simon King
Managing Director, Wickes
Martin Meech
Group Property Director
Cheryl Millington
Chief Digital Officer
Paul Tallentire
CEO, General Merchanting Division
Alan Williams
Chief Financial Officer
Throughout the year ended 31 December 2017, the Company was
in full compliance with the provisions set out in the Code with the
exception of Code provision B.6.2, which requires that the Board
undertakes an external evaluation every three years, as explained
in the Chairman's introduction.
Other colleagues are invited to attend Executive Committee
meetings from time to time in relation to specific matters.
The main purpose of the Executive Committee is to assist the
Executive Directors in the performance of their duties, particularly
in relation to:
• Development and implementation of 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
All Directors have direct access to the Company Secretary and
General Counsel and may take independent professional advice
in the furtherance of their duties if required. The Company
maintains director's & officer's insurance in respect of the risk of
claims against directors which is reviewed annually.
Board meetings
The Board held nine scheduled meetings in 2017. Regular
items at Board meetings included detailed updates on health
and safety, reports on progress towards strategic objectives,
reviews of the Company’s financial position and performance
against KPIs. Other topics considered included strategic reviews
of business divisions, funding, capital expenditure, investor
feedback, risk and governance. During the year, the Board visited
a number of operational sites and held a strategy offsite meeting.
The agenda for meetings is agreed by the Chairman in
conjunction with the Chief Executive and the Company Secretary
and General Counsel. Agendas are based on an annual plan, and
also include topical items and matters of particular interest or
concern to the Board.
Key financial and other relevant information is circulated to the
Directors outside of formal meetings. The Chairman monitors
the information provided to the Board both at, and outside of
meetings to ensure it is sufficient, timely and clear.
Between board meetings the Chairman maintains frequent direct
contact with the Executive Directors and keeps the Non-executive
Directors informed of material developments. At the meetings
the Chairman ensures that each Director is able to make an
effective contribution within an atmosphere of transparency and
constructive debate.
The Company liaises closely with the Non-executive Directors to
ensure as far as possible that clashes with external appointments
are avoided. Directors are able to attend meetings by video or
telephone conference if there is an issue with location or travel.
The number of Board and Committee meetings attended by each
Director during the year is detailed in the following table.
1. Leadership
Structure of the Board and Committees
The Board is responsible for the long-term success of the
Company and is accountable to shareholders for ensuring that
the Group is appropriately managed and governed. Principally
this is achieved through:
• Setting the overall Group strategy
• Setting the the tone and approach to 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
The roles of the Chairman and Chief Executive are split and the
Board has approved a written statement of the division of key
responsibilities between the Chairman and the Chief Executive
and a statement of the role of the Senior Independent Director.
These are reviewed annually and are available on the Group's
corporate website www.travisperkinsplc.co.uk.
The Board also has a schedule of matters reserved to it, which
is reviewed annually. Revisions were made in December 2016
to reflect latest best practice and the operations of the Group.
The schedule of matters reserved to the Board is available on
the Group's corporate website www.travisperkinsplc.co.uk.
In line with the UK Corporate Governance Code, certain Board
responsibilities are delegated to the Board’s Committees, which
play an important role in supporting the Board. The Board has four
Committees: Audit, Nominations, Remuneration and Stay Safe.
All committees operate within defined terms of reference which
are reviewed annually and these are available on the Company’s
website www.travisperkinsplc.co.uk. The minutes of all committee
meetings are circulated to all Directors.
The Board has delegated responsibility for the execution of
the Group’s strategy and the day-to-day management and
operation of the Group’s business to the Executive Committee.
The Executive Committee is chaired by the Chief Executive and
its members are:
John Carter
Chief Executive Officer
Tony Buffin
Group Chief Operating Officer
Frank Elkins
Divisional CEO,
Contract Merchanting Division
Deborah Grimason Company Secretary and General Counsel
Andrew Harrison
Deputy CEO, Plumbing and Heating Division
Carol Kavanagh
Group Human Resources Director
54
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Number of meetings
Attendance:
Ruth Anderson
Tony Buffin
John Carter
Stuart Chambers
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Robert Walker
Alan Williams
Plc
Board
9
9/9
9/9
9/9
3/3
9/9
7/9
9/9
9/9
8/8
9/9
Audit
Committee
Nominations
Committee
Remuneration
Committee*
Stay Safe
Committee
Overall
attendance (%)
5
5/5
-
-
-
4/5
-
5/5
5/5
-
-
5
5/5
-
-
1/1
5/5
5/5
1/1
4/5
-
-
4
-
-
-
1/1
4/4
4/4
2/2
2/2
3/3
-
3
3/3
-
3/3
-
-
3/3
-
-
2/3
-
97
100
100
100
100
96
90
100
95
93
100
*John Rogers served on the Remuneration Committee until 25 May 2017 and Christopher Rogers joined the Remuneration Committee on 26 May 2017.
Six out of ten Directors had full attendance and the average
attendance for the Board and Committees combined was 97%.
Robert Walker and Christopher Rogers were not invited to the
Nominations Committee meetings in February, March and April
as the meetings were primarily concerned with the Chairman’s
succession. Coline McConville missed the July Audit Committee
meeting due to a prior commitment with another company.
Pete Redfern missed the Board meetings in August and
September due to prior commitments with the Taylor Wimpey plc
Board. John Rogers missed the March Nominations Committee
meeting due to a travel problem getting to the venue.
2. Effectiveness
As at 31 December 2017 the Board comprised six Non-executive
Directors and three executive Directors. Stuart Chambers replaced
Robert Walker as Chairman on 7 November 2017. Christopher
Rogers is the Senior Independent Non-executive Director.
The biographies for the Board are listed on pages 50 to 52.
Appointment of directors
The composition of the Board is kept under regular review by
the Nominations Committee and the Committee considers that
the Board has the appropriate balance of skills, experience,
independence and knowledge to meet the needs of the business.
Appointments of new Directors are made by the Board on
the recommendation of the Nominations Committee. The
Chairman normally chairs the Nominations Committee and
all other members are independent Non-executive Directors.
The Committee’s report can be found on page 82.
The Group's policy is to recruit people of the highest calibre, with
a breadth of skills and experience appropriate for the business.
The Group supports the principles of the Davies Review and
the Hampton Alexander Review and the need for a diverse
board, although it does not intend to commit to specific quotas.
The Board diversity policy is summarised in the Nominations
Committee Report.
Non-executive Directors have letters of appointment and are
appointed for a period until the third AGM following their election,
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.
The tenure of each director is shown below:
Expiry Date
Length of service
at expiry date
Ruth Anderson
2018 AGM
6 years 6 months
Stuart Chambers
2021 AGM
3 years 7 months
Coline McConville
2018 AGM
3 years 3 months
Pete Redfern
2018 AGM
3 years 6 months
Christopher Rogers
2020 AGM
6 years 8 months
John Rogers
2018 AGM
3 years 6 months
All Non-executive Directors are required to allocate sufficient
time to the Company to discharge their responsibilities effectively
and the time commitment expected is set out in their letter of
appointment. The letters of appointment will be available for
inspection at the Annual General Meeting.
Induction and development
The Group has an induction process for new Directors, which is
facilitated by the Company Secretary and General Counsel.
This includes a programme of meetings with senior management
in both operations and central functions, and visits to a range of
branches and stores. The Chairman ensures that all Directors receive
an appropriate induction on appointment and then subsequent
development and training as required, taking into account the need
to update their skills and their knowledge of the Company’s business.
The Board as a whole is also regularly provided with information
on forthcoming legal and regulatory changes, 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 33 to 39.
The Directors may take independent professional advice at the
Company’s expense at any time.
55
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Evaluation of Board performance
The Board considers on an annual basis the time commitments
of each Non-executive Director and whether each remains
independent in character and judgement in light of any
relationships or circumstances which are likely to affect each
Director’s judgement. None of the circumstances set out in Code
provision B.1.1. apply and the Board is satisfied that all Directors
remain independent and have sufficient time available to fulfil
their duties.
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 2017, due to the timing of the
appointment of the Group's new Chairman, the Board carried out
an internal evaluation which included each Director completing
a questionnaire about the performance of the Board and its
Committees followed by individual discussions with the outgoing
Chairman and an independent review of the findings by an external
party. There was generally a high level of satisfaction with the
Board's effectiveness and performance with transparency and
openness, independence and freedom to contribute, relationships
and standards of governance all highly rated. Looking forward,
the Board agreed the following priorities:
• Increasing focus on the articulation and delivery of strategy and
value creation
• Understanding and shaping strategy to adapt to the changing
customer landscape
• Future proofing the Board and growing diversity of thought
through the ongoing Board refreshment programme
The evaluation of the outgoing Chairman’s performance was led
by the Senior Independent Director.
Each Director has confirmed that they are willing to stand for
re-election at the next AGM. In light of the Board’s assessment
that all Directors continue to perform and provide a valuable
contribution to the Board and its Committees, all Directors will
submit themselves for re-election at the 2018 AGM.
An externally facilitated evaluation will be undertaken in 2018.
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 4 to 48. The Board uses it 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 87.
Going concern
After reviewing the Group’s forecasts and risk assessments and
making other enquiries, the Board has 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 12 months from the date of signing this Annual Report and
Accounts. For this reason, the Board continues to adopt the going
concern basis in preparing the financial statements.
In arriving at their opinion the Directors considered:
• The Group’s cash flow forecasts and revenue projections
• Reasonably possible changes in trading performance
• The committed facilities available to the Group and the
covenants thereon
• The Group’s robust policy towards liquidity and cash
flow management
• The Group management’s ability to successfully manage the
principal risks and uncertainties outlined on pages 33 to 39
during periods of uncertain economic outlook and challenging
macroeconomic conditions
Risk management and 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 half yearly 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 Audit Committee review and discuss internal controls on a
regular basis. The system of internal controls is reviewed by the
Board in a process that accords with the Financial Reporting
Council guidance on Risk Management, Internal Control and
Related Financial and Business Reporting.
It is the responsibility of the Board to establish the risk framework
within which the Group operates. The Board and the Executive
Committee review the risk register and risk appetite at least
once each year. Members of the Audit Committee 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.
As part of its viability review, the outcome of which is set
out on page 31, the Board considered the principal risks and
uncertainties and mitigating factors set out on pages 33 to 39.
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 four
independent Non-executive Directors. Its key responsibilities and
a description of its work in 2017 are contained in its report, which
is set out on pages 58 to 63.
56
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration 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 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. 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,
Annual General Meeting
Shareholders receive more than twenty working days’ notice of
the Annual General Meeting ("AGM") at which all Directors are
available for questions and a short business presentation takes
place. Each substantive issue considered at the AGM is the
subject of a separate resolution. The numbers of proxy votes for
and against each resolution are announced at the meeting and
the final votes are subsequently published on the Company’s
website. Last year the majority of resolutions were passed with
over 90% in favour, with only the disapplication of pre-emption
rights in limited circumstances below this level at 88.5%.
The Governance Report has been approved by the Board of
Directors and is signed on its behalf by:
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
Director's Responsibilities on page 87.
Stuart Chambers
Chairman
27 February 2018
4. Remuneration
The Board has established a Remuneration Committee
consisting of three independent Non-executive Directors and the
Chairman of the Board. Its responsibilities include setting the
Company’s remuneration policy, approving the remuneration
of Executives and reviewing the performance against targets
prior to determining the pay-outs on incentive arrangements.
The remuneration of the Non-executive Directors other than
the Chairman is determined by the Chairman and the Executive
Directors. The Remuneration Committee determines the
Chairman’s fee. No Director plays a part in the discussion about
his or her own remuneration.
The Committee’s key responsibilities and a description of its
work in 2017 are contained in its report, which is set out on
pages 64 to 81.
5. Relations with shareholders
The Company encourages two-way communication with both
its institutional and private investors and responds promptly to
all enquiries received. The Board receives regular updates on
the shareholder register and the views of shareholders. At least
once each year, the Company reviews its strategy for engaging
with shareholders to ensure that their needs are being met. The
Board also reviews reports discussing governance matters and
engages with governance bodies to contribute to the debate and
development of good governance practices.
In 2017 the Executive Directors attended a large number of
meetings. The Group held two briefings on results which were
attended by shareholders, equity analysts and debt holders.
Copies of these presentations are available on the investor
relations section of the Group’s corporate website at
www.travisperkinsplc.co.uk
The Chairman is always available to the Group's shareholders
if they have any issues they wish to discuss and the Senior
Independent Director is also available as a direct contact for
investors and shareholders, if they wish. During the year the former
Chairman, Robert Walker, met with a number of shareholders to
discuss governance matters and the Senior Independent Director,
Christopher Rogers, joined a number of these meetings.
57
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017
Governance & Remuneration
AUDIT
COMMITTEE
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Dear Shareholders,
As Chairman of the Audit Committee, I am pleased to present
the Audit Committee’s report for 2017. The Committee has
continued to play a key role within the Group’s governance
framework in respect of internal financial control, risk
management, financial reporting and significant estimates and
judgements, as well as overseeing the internal and external
audit processes.
The external auditor, KPMG, has now completed its third audit
of the Company’s accounts and the audit process is running
smoothly. During the year the Audit Quality Review team ("AQR")
from the Financial Reporting Council undertook an inspection of
KPMG’s audit of the Group’s 2016 financial statements.
The AQR's final report was released earlier this month,
with findings of four key areas for improvement, which KPMG
has accepted and implemented during its audit of the 2017
financial statements.
In 2017, the Committee continued to focus on internal financial
controls, particularly in respect of the significant systems
programmes under development across the Group. This work
will continue through 2018.
I will be available at the Annual General Meeting to answer
any questions.
Ruth Anderson
Chairman, Audit Committee
27 February 2018
58
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Role of the Audit Committee
The key responsibilities of the Committee are to:
• Monitor the integrity of the financial statements of the Company
and any formal announcements relating to the Company’s
financial performance, reviewing significant financial reporting
judgements contained in them
• Review the Company’s internal financial controls and the systems
of internal control and risk management
• Monitor and review the effectiveness of the Company’s internal
audit function
• Maintain an appropriate relationship with the Company’s external
auditors and review the independence, objectivity and effectiveness
of the audit process, taking account of relevant professional,
regulatory and ethical guidance
The Committee's terms of reference are reviewed annually, were
last updated in December 2017 and are available on the Group's
corporate website www.travisperkinsplc.co.uk
Committee membership and
meeting attendance
Ruth Anderson, who chaired the Committee, Coline McConville,
Christopher Rogers and John Rogers were members of the
Committee throughout 2017.
All members are independent Non-executive Directors. Three
of the members have recent and relevant financial experience
and all members have expertise relevant to the Company’s
sector, gained through a variety of corporate and professional
appointments as required by the UK Corporate Governance Code
(see biographies on pages 51 and 52).
The Deputy Company Secretary was Secretary to the Committee
throughout 2017.
The Committee held five formal meetings during 2017. The
Group Chairman, Chief Executive and Chief Financial Officer,
General Counsel & Company Secretary, Group Financial
Controller, Head of Internal Audit and external auditors also
attended the Committee’s meetings at the invitation of the
Committee. Separate meetings with the Head of Internal
Audit and with the external auditors without the presence of
management were also held with the Committee Chairman and
with the Committee.
As well as attending the Audit Committee meetings, the
Committee members met with operational and finance team
members during the year.
Work of the Committee
The Audit Committee adheres to an annual work plan which
is regularly reviewed by the Committee to ensure that it
encompasses all matters the Committee needs to consider to
fulfil its corporate governance responsibilities.
The Committee gives due consideration to the annual report
and accounts, and the results announcements prepared by
management and issued at the half-year and year-end. In
discharging its financial reporting responsibilities, the Committee
reviewed accounting policies and compliance with accounting
standards, going concern and viability assumptions, significant
financial reporting estimates and areas of judgement made during
the preparation of the Group’s interim and annual accounts.
During the year, the Committee reviewed:
• The Group’s systems of internal control, the effectiveness
of financial controls and management’s continuing control
improvement programme
• The Group’s key risks and the effectiveness of the risk
management framework
• Accounting policies and the management’s response
to accounting developments including the impact of
IFRS 9, IFRS 15 and IFRS 16 and the Group’s readiness for
their implementation
• The external audit plan, audit conduct and audit findings
• The internal audit plan and internal audit resourcing
• The Group’s tax strategy and compliance
• The effectiveness of Internal Audit, the external auditors and of
the Committee itself.
In addition, a number of standing agenda items were considered
at each of the Committee’s meetings:
• Internal Audit activity and findings
• Reports on criminal activity investigations, bribery,
whistleblowing, and cyber security
• Progress on implementing recommendations arising from
internal and external audit work
• Non-audit fees paid to the auditor and other accountancy firms.
In carrying out these activities, the Committee places reliance
on regular reports from management, Internal Audit and the
external auditors. The Committee is satisfied that it received
sufficient, reliable and timely information to enable it to fulfil its
responsibilities during the year.
The Board is updated on key matters and recommendations
following each Audit Committee meeting.
Committee effectiveness review
The effectiveness of the Audit Committee was evaluated this
year as part of the Board evaluation process. Further details
can be found on pages 60 and 61. The review found that the
Committee was operating effectively and that its role and remit
remained appropriate for the current needs of the business. The
Committee discussed the findings of the evaluation process to
identify opportunities for further improvement.
Significant issues related to the
financial statements
The Audit Committee has assessed whether suitable accounting
policies have been adopted by the Group and has reviewed the
key judgements and estimates made by management.
The following table sets out the key judgements associated
with the Group’s financial statements for the year-ended
31 December 2017 that were considered by the Audit Committee.
It does not contain a list of all accounting issues, estimates and
policies, just those the Audit Committee believes are the most
significant ones.
In reaching its conclusions about the reasonableness of the
assumptions and judgements underlying the accounting issues
the Committee considered papers and explanations provided
59
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration by management, discussed each matter in detail, challenged
assumptions and judgements made and sought clarification
where necessary. It also held in depth discussions with the
external auditors about their report to the Committee on the
work undertaken to arrive at the conclusions set out in their
audit report on pages 90 to 95.
The Group is currently in the process of replacing the ageing
systems in its major businesses with new core systems, the
implementation of which is due to commence in 2018 and then
continue through to 2020.
Accounting for a number of the matters discussed below
is impacted by these ageing systems and the surrounding
environment which were initially developed many years ago when
the business was significantly smaller, less complicated and the
quantum and nature of transactions considerably fewer and simpler.
Impact on Financial
Information and Disclosure
in the Financial Statements
Further information is given in the
balance sheet on pages 98 and
99, and in the financial statements:
• note 2 covering significant
accounting policies,
• note 3 detailing critical
judgements and estimates
Further information is given in
the financial review on pages 29
and 30, note 2 to the financial
statements covering significant
accounting policies and note 3
detailing critical judgements and
estimates.
Issue and Nature
of Judgement
Factors Considered and
Conclusions Reached
To meet customer
expectations the Group
carries a wide range of stock
in over 2,000 locations.
Stock should be included
in the balance sheet at the
lower of cost or net realisable
value. At 31 December stock
was valued at £0.8bn.
The determination of cost is
complicated by the ageing
accounting systems and
also by material rebate
and fixed price discount
agreements, so requiring
regular reconciliations in areas
such as goods received not
invoiced accruals.
During the year management regularly
reported on stock valuation and
provisioning to the Committee and did
so again at its meeting to discuss the
year-end annual report and accounts.
The Committee reviewed and discussed
the information presented about gross
stock values and the adjustments
made by management to reduce stock
carrying values to allow for rebates
and fixed price discounts attributable
to inventory and provisions to reflect
obsolescence or slow moving inventory.
The Committee assessed the
judgements made by management
and concluded from the information it
had received and its discussions with
management and the Auditors that stock
was fairly stated in the balance sheet.
The terms of supplier
agreements result in a
significant value of Supplier
Income being received by
the Group. The calculation
of the value receivable and
the value deferred into
stock is complicated due
to the number, nature and
structure of the agreements
in place and the age of
the systems. However,
only two agreements are
not co-terminous with the
Group’s accounting year end.
Furthermore, approximately
80% of amounts due to
the Group are received
during the course of the
year. Therefore the key
judgements relate to the
calculation of the total value
of rebates and fixed price
discounts still to be received
at the year-end and the value
of fixed price discounts and
rebates to be set against the
gross value of inventory in
the balance sheet.
During the year the Committee discussed
reports presented by management about
the progress of improvements to systems,
controls and processes which included
the implementation of a new deal tracking
and rebate management system. It also
received reports that enabled it to monitor
Supplier Income collection rates and
compare them with the prior year and it
discussed the Group’s adherence to its
accounting policies and procedures.
A summary of supplier income received
during the year and amounts included
in the balance sheet at 31 December
2017 was given to the Committee at
the meeting held to consider the year-
end results. The Committee reviewed
management’s judgements regarding
the estimates of supplier income and
amounts included in the balance sheet.
The Committee concluded that the
controls over recognising and recovering
Supplier Income were appropriate, that
the £344m of supplier income included
in debtors or offset against creditors was
recoverable and that the amount set
against the gross carrying value of stock
was appropriate.
Area
Accounting for
inventory and
inventory valuation
Accounting for
rebate income and
fixed price discounts
(“Supplier Income”)
60
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Impact on Financial
Information and Disclosure
in the Financial Statements
Further information is given in
the financial statements:
• note 2 covering significant
accounting policies,
• note 3 detailing critical
judgements and estimates,
• notes 13 and 14 set out details
of intangible assets and goodwill
and outline the results of the
Group’s annual impairment tests.
Area
The carrying value
of goodwill and other
intangibles and tangible
fixed assets
Issue and Nature
of Judgement
Factors Considered and
Conclusions Reached
The cash flow forecasts used for
impairment considerations are
prepared from the strategic business
plans presented to, and approved by,
the Board of Directors annually.
Management presented the Committee
with papers setting out the results of the
work done, the assumptions made and
the conclusions reached. They explained
to the Committee how the cash flow and
discount rate calculations were prepared,
the key assumptions and judgements
that were made and how sensitive those
cash flows were to changes in the key
assumptions.
After reviewing management’s papers,
and obtaining further explanation
where necessary, the Committee
concluded that management had taken
a consistent, balanced and reasoned
approach to preparing its calculations
and that the judgements made were
acceptable. It noted that the value in use
model used by management showed all
material cash generating units except for
Wickes had significant headroom, but
concluded that, whilst the headroom was
limited for the Wickes cash generating
unit, there was no impairment.
The Committee also discussed the
calculations supporting the carrying
value of investments in the parent
Company and concurred with
management’s conclusions.
The Group balance sheet
contains £1.7bn of goodwill
and other intangible assets
with indefinite useful lives
that arose from historical
acquisitions and £0.9bn of
tangible fixed assets.
The Directors are required
to determine annually
whether those assets have
suffered any impairment.
They do so by comparing
the present value of future
cash flows for each cash
generating unit with the
carrying value of assets.
In addition, the Company
balance sheet contains
£3.8bn of investments in
subsidiaries. The directors
compare the net present
values of future cash flows
from each investment
to the carrying value of
the investment in the
balance sheet.
The calculations undertaken
to help arrive at a conclusion
incorporate a consideration
of the risks associated
with each cash generating
unit and are based upon
forecasts of their long
term future cash flows,
which by their nature
require judgement to be
exercised and are subject to
considerable uncertainty.
61
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Internal audit
During 2017, Internal Audit continued to focus on reviewing
financial controls in areas which the Audit Committee considered
higher risk as well as in other areas of high risk included in the
Group risk register or highlighted by Internal Audit evaluation or
from consultation with the Executive Committee. All core key
financial control areas are audited regularly including balance sheet
control accounts, statements by the divisions on their compliance
with internal financial controls and key controls in the rebates and
fixed price discounts processes.
Audits were undertaken both by the in-house Internal Audit
team and the Group’s co-source partners. The allocation of work
was dependent on the specialist skills required, particularly in
areas such as IT, data protection, tax and treasury, as well as on
available resource.
The Committee reviewed and approved the 2017 internal audit
plan and at each Committee meeting considered reports from
Internal Audit setting out the findings from the audits which
it had carried out. It also continued to review the effective
implementation of recommendations agreed by management,
through an Internal Audit system which tracks activity on all
active recommendations by age and level of risk to the business.
Following the successful trial in 2016 to move branch and store
compliance teams from within the Internal Audit function to the
control of Contract Division management, the approach was
rolled out to the other divisions in 2017.
An effectiveness review of the Internal Audit function was
carried out by an independent assessor in February 2017 which
included considering the team’s conformance to the Institute of
Internal Audit’s International Professional Practice Framework,
comparing the function’s activities against best practice and
assessing the impact of internal audit on the organisation. The
review concluded that the Internal Audit function generally
conforms to the Standards of the Institute of Internal Auditors.
A number of actions were agreed as a result of the review and
are in the process of being implemented. Taking this, along with
the performance of the Internal Audit team into account, the
Committee was satisfied with the overall effectiveness of the
Internal Audit function during the year.
Risk management and internal controls
The risk management process facilitates the identification
and control of risks. Details of risks faced by the Group are
maintained in Group and business unit risk registers. Those risks
are regularly reviewed by the Executive Committee and the Board
to assess the likelihood of occurrence and potential impact, after
taking into account the operation of key controls and mitigating
factors. Additional mitigating actions are identified where
necessary and agreed with relevant business owners.
Risks are managed at a Group level or within the business
units. The principal risks and uncertainties are set out on
pages 33 to 39, together with information on how those risks
are mitigated.
The Audit Committee monitors the key elements of the
Company’s internal control framework throughout the year and
has conducted a review of the effectiveness of the Company’s
risk management and internal controls. The internal control
framework is intended to manage rather than eliminate the
risk of failure to achieve business objectives and can only
provide reasonable and not absolute assurance against material
misstatement or loss.
The Group’s control framework has developed over many years
and there are a significant number of IT systems upgrades
and replacements underway. The changes will improve control
processes and ensure greater consistency across the control
environment but, in the meantime, manual controls are put in
place to supplement existing systems controls.
Management continued its programme of work to improve
the control environment throughout 2017 and this will carry
on through 2018. The Audit Committee will monitor progress
during the year and, given the level of change, reviewing these
programmes will also be an area of focus for Internal Audit.
62
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration External auditor
KPMG LLP has been the external auditor since 2015. There
are no contractual restrictions on the Group with regard to this
appointment. In accordance with current professional standards,
the partner responsible for the audit will change every 5 years.
In future, the Company will re-tender the external audit in
accordance with the timescales set out in Financial Reporting
Council guidance.
Audit scope and effectiveness
The scope of the external audit of the 2017 Annual Report
and Accounts was presented by the external auditor to the
Committee in September 2017 so the Committee had the
opportunity to discuss and challenge the audit plan in order to
gain a good understanding of the key elements.
The Committee considers the effectiveness of the external
auditor during the year and, with input from management, carries
out a formal review of its performance after the year end audit
has been completed.
In undertaking this assessment, the Committee considers:
• the experience and expertise of the auditor;
• the completion of the agreed external audit plan;
• the content, quality of insights and added value of
external audit reports;
• the robustness and perceptiveness of the external auditor in
their handling of key accounting and audit judgements;
• the interaction between management and the auditor; and
• the provision of non-audit services.
This year, the Committee also considered the findings of the
Financial Reporting Council's Audit Quality Review team and the
actions being taken by KPMG to address the matters raised.
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. The policy, which was reviewed
by the Committee during the year, sets out the work that is
permitted to be performed by the external auditor and the work
which is prohibited.
The Committee oversees the process for approving all
non-audit work undertaken by the external auditor in order to
safeguard the auditor’s objectivity and independence. Prior to
approval, consideration is given to whether it is in the interests
of the Company that the services are purchased from KPMG
rather than another supplier. When KPMG is chosen, it is due
to their detailed knowledge of the Group’s business and them
demonstrating that they have the necessary expertise and
capability to undertake the work cost effectively.
Value of work
Non-audit fees require approval and the amount payable to the
external auditor in any particular year cannot exceed 70% of the
average of the current and prior two years audit fee.
Reporting
The Chief Financial Officer reports to the Committee on fees
for non-audit services payable to the external auditor at every
meeting. As shown in note 5 to the accounts, during the year
the Auditors were paid £935,000 (2016: £900,000) for audit-
related work, and £120,000 (2016: £242,000) for non-audit
work. The principal items of non-audit fees paid to the external
auditors relate to the interim announcement review and the
provision and maintenance of the Group’s employee benefits
system, MyPerks. In addition, £3.7m (2016: 3.0m) of fees were
paid to other accounting firms for non-audit work. The total fees
paid by the Group to KPMG LLP in 2017 amount to less than
0.05% of KPMG’s UK fee income.
Assessment of the external auditor
Having considered the external auditor’s performance, the
report from the Audit Quality Review Team into KPMG’s 2016
audit, and representations from the auditors about their internal
independence processes, the Committee concluded that it was
satisfied with the independence, objectivity and effectiveness
of the external auditor and recommended to the Board that it
recommend KPMG to be reappointed by shareholders at the
Annual General Meeting on 27 April 2018.
The Audit Committee Report has been approved by the
Board of Directors and is signed on its behalf by:
Ruth Anderson
Chairman, Audit Committee
27 February 2018
63
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017
Governance & Remuneration
DIRECTORS’
REMUNERATION
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Dear Shareholders,
As Chairman of the Remuneration Committee I am very pleased
to introduce the 2017 Directors’ Remuneration Report.
No changes to remuneration policy
During 2016 the Committee undertook a review of the Group’s
executive remuneration framework and, following extensive
shareholder consultation, it submitted a new policy to the
2017 AGM which was approved by 97% of shareholders.
The overall reward framework remained the same, but
certain changes were made to simplify the framework and to
enhance alignment with shareholders which I described in my
letter last year. The Committee continues to believe that this
framework supports the link between strategy and reward as
illustrated below:
Strategy
Financial
Ambition
Customer
Innovation
Double digit
EBITA growth
Annual
Incentive
EBITA
Optimise Network
Scale Advantage
Portfolio
Management
Investment grade
credit metrics
150-250 bps
LAROCE
improvement over
medium term
(3-5 years)
Prospective
dividend growth
to within 2.5-3.25x
cover
Co-investment
Plan
PSP
EPS
Aggregate
cash flow
LAROCE
CROCE
TSR
Strategic
objectives aligned
to operational
delivery
No changes are proposed to policy or the approach to implementation (including quantum and metrics) this year.
64
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Link between pay and performance
The Group’s previously stated ambition to deliver long term
sustainable value to shareholders remains at the heart of the
Committee’s approach to executive remuneration. A fundamental
aspect of this is the link between the Group’s strategy and
remuneration with each part of the remuneration package playing
a role in driving performance beyond the short and medium
terms to deliver the Group's long-term ambition and improve
shareholder returns.
The Committee believes there has been good alignment between
the Group’s incentive payouts and its performance and the
value created for shareholders in recent years. This alignment is
illustrated in the following charts:
Historical annual bonus, PSP and CIP vesting as a percentage
of maximum for the CEO
%
100
80
60
40
20
0
2010
2011
2012
2013
2014
2015
2016
2017
Avg
Annual
Bonus
PSP
Co-Investment Plan
TSR and Adjusted EPS performance (p)
)
p
(
S
P
E
d
e
t
s
u
d
A
j
140
120
100
80
60
40
20
0
2010
2011
2012
2013
2014
2015
2016
2017
EPS
TSR
300%
250%
200%
150%
100%
50%
0%
e
c
n
a
m
r
o
f
r
e
p
R
S
T
Salary review
With effect from 1 January 2018 salaries across the Group were
typically increased by 1.5%. John Carter, Tony Buffin and
Alan Williams declined the proposed increase to their annual
salaries and consequently their annual salaries remain at the
1 January 2017 levels of £690,131, £533,283 and £500,000
respectively. The Remuneration Committee agreed with and
welcomed this decision.
Similarly Non-executive Directors’ fees remain at the 2017 levels.
2017 Remuneration outcomes
The Group has delivered solid financial performance in the face
of market headwinds, flat property transactions and declining
consumer confidence and delivered ahead of our financial budget
at the start of the year. Performance against key financial
objectives is as follows:
• EBITA of £380m (2016: £409m)
Good progress was also made on key strategic initiatives,
most notably in the areas of online sales growth and
customer satisfaction.
• LAROCE of 10.1% (2016:10.9%)
The outcome of the EU referendum and the subsequent
triggering of article 50 in March 2017 has resulted in considerable
market uncertainty, especially for domestic UK businesses
heavily exposed to the economic cycle such as Travis Perkins.
The decline in the value of sterling resulted in significant import
cost inflation which the Group has had to recover during 2017.
Property transactions remained flat in 2017 suggesting weak
activity for private house repairs, maintenance and improvement
work which represents a significant proportion of the Group's
activity . Similarly, modest house price growth suggests weaker
appetite to invest in the home, leading to lower activity levels.
Consumer confidence has also declined significantly during 2017.
All of these factors have impacted volumes in the construction
and housing markets.
The Committee set bonus targets for 2017 in this context based on
the financial budget for 2017, approved by the Board in December
2016. In determining the appropriate budget and incentive targets
the Committee took into account the prevailing market conditions
as well as the range of analyst expectations for 2017 performance.
The targets set recognised that earnings would likely be lower in
2017 than those delivered in 2016, but the Committee believed
these continued to be stretching for management and would
represent value for shareholders if delivered. A maximum bonus
could only be earned in the unlikely scenario of maintaining EBITA
flat on the prior year.
300%
2017 bonus payout
Bonuses for Executive Directors are based on EBITA (60%),
LAROCE (20%) and performance against our strategic tracker
(20%). The Group EBITA achievement of £380m resulted in a
payout of 69.1% of maximum bonus potential for this element
and LAROCE of 10.1% led to a 100% payment reflecting strong
cash control throughout the year.
Performance against the strategic tracker has continued to be
strong during 2017. Targets in relation to online sales growth,
Stay Safe and customer satisfaction were met, whilst colleague
engagement and delivery of IT project targets were met in part.
Further details are provided on pages 71 to 72. The strategic
tracker is an important part of the short term incentive. It focuses
management effort towards delivering strategic goals which are
considered critical for delivering sustainable growth in returns
over the long-term but which may require short-term investment.
It is closely aligned to the corporate plan and the levers of value
creation and so provides an important bridge from annual bonus to
long term incentive plans. Payout against the strategic tracker was
assessed by the Committee to be 50%.
65
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
These results have generated bonuses of 71.5% of maximum for
the Executive Directors. For the CEO this equates to 129% of salary
and for the COO and CFO 107% of salary. Half of this bonus will
be paid in cash following the year end. The remaining half will be
deferred as shares, which will vest after three years.
The Committee considered that this levels of bonus was
appropriate reflecting reasonable progress against strategic
objectives and resilient financial performance in a challenging
economic environment and that the targets set achieved the
appropriate mix of stretch challenge and motivation for the
Executive Directors.
Long-term incentives
Vesting of 2015 long term incentive awards reflect the impact of
current market uncertainty following the UK’s decision to leave
the European Union. In this context, EPS growth and relative
total shareholder return targets have not been achieved. Against
this backdrop however the cash generation has remained robust
supporting strong CROCE performance. Further details on each
element of the long-term incentives is provided below:
Deferred share bonus plan awards vesting
The share price growth targets attached to the deferred share
award relating to bonus earned in respect of 2015 were not
achieved and accordingly these awards will lapse.
2015 PSP vesting
PSP awards granted in 2015 were subject to achieving Adjusted
EPS (40%), TSR (20%) and cash flow (40%) performance targets.
Both the Adjusted EPS performance and the TSR performance
were below the trigger required for any vesting of these elements
of the award. Aggregate cash flow over the three year period was
£1,069m which was above the maximum target and resulted in
the full 40% of the cash flow element vesting. Overall 40% of
PSP awards granted in 2015 vested.
2015 co-investment awards
The CEO and COO invested the maximum amount possible
under the Co-Investment Plan in 2015 and awards were made
under the plan of twice the gross value of the investments made.
These awards were subject to CROCE performance. CROCE
performance over the three year period was 10.72% reflecting
strong cash generation underpinned by improvements in working
capital, judicious capital expenditure and asset recycling. This
performance was above the maximum target set and resulted in
100% of awards vesting.
The Committee will be submitting its remuneration report to
the 2018 AGM where the report will be subject to an advisory
shareholder vote. We look forward to receiving your support.
Coline McConville
Remuneration Committee Chairman
27 February 2018
66
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Remuneration policy report
The Group’s Directors’ Remuneration Policy (the ‘Policy’)
was approved by 97% of shareholders at the AGM held on 24
May 2017. The Policy can be found on pages 77 to 85 of the
2016 Annual Report & Accounts which are available on the
company website. A summary of the Policy is also provided
below in the section entitled the ‘Statement of implementation of
Remuneration Policy in 2018’.
For executive directors
Annual remuneration report
The following pages set out the Group’s Annual Remuneration
Report for 2017 which includes details of how its policy was
implemented in 2017 and how it intends to implement its policy
in 2018. This report shall be subject to an advisory shareholder
vote at the 2018 AGM.
Statement of implementation of the
Remuneration Policy in 2018
The following provides a summary of the Group’s remuneration
policy and how the Group intends to implement the policy
during 2018.
Individual Maximum
Opportunity in 2018
Measures
and Weighting
Operation
Plan
Base Salary
n/a
CEO – £690,131
(2017: £690,131)
COO – £533,283
(2017: £533,283)
CFO – £500,000
(2017: £500,000
Benefits
n/a
n/a
Pension
Annual Bonus
25% of salary, allowance
or contribution
n/a
Maximum annual bonus
opportunity:
CEO – 180% of salary
COO – 150% of salary
CFO – 150% of salary
The 2018 bonus will be
based on the following
measures:
• EBITA 60%
• LAROCE 20%
• Business strategy
20%
John Carter, Tony Buffin and Alan Williams declined the
salary increase due to take effect from 1 January 2018
and therefore their salaries remained at the 2017 levels set
out here. The Remuneration Committee agreed with and
welcomed this decision.
Directors continue to be entitled to benefits in-line with policy
(including private medical insurance, income protection,
annual leave, company car (or cash alternative), life insurance
of up to 5 times salary and participation in all employee
share plans operated such as SAYE and BAYE).
Directors participate in a defined contribution arrangement or
receive a cash allowance.
Targets are determined in relation to the Group’s Annual
Operating Plan (AOP).
Threshold payment is made for performance just below
AOP with maximum only being made for performance in
excess of AOP. Performance below threshold results in
zero bonus.
For 2018 the strategic tracker includes measures related
to the Group’s people, customers, multi-channel, cost
management and IT systems strategic objectives.
50% of bonus earned is deferred as shares for three years.
Malus and clawback provisions apply.
67
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Plan
Individual Maximum
Opportunity in 2018
Measures
and Weighting
Operation
Performance
Share Plan
Maximum annual award
of 150% of base salary
The 2018 PSP award
will be based on the
following measures:
Awards are subject to performance over a three year
performance period. Awards that vest are subject to a further
2 year holding period.
• Adjusted EPS
growth - 40%
• Aggregate cash
flow - 40%
• Relative
TSR - 20%
Co-Investment
Plan
The 2018 co-investment
matching award will be
based on Cash Return
on Capital Employed
(CROCE)
Participants may invest
up to 50% of their
net salary
Maximum matching
awards of twice the
gross salary equivalent
of the amount invested
(i.e. 100% of gross
salary)
Performance below threshold results in zero vesting.
From the threshold level the amount of the award vesting
rises from 25% to 100% of maximum opportunity for levels
of performance between threshold and maximum.
2018 awards will be subject to the following performance
conditions and targets:
• Adjusted EPS - threshold target of 3% p.a. growth over
3 years with full vesting at 10% p.a. growth
• The aggregate cash flow range is £953m to
maximum £1,053m
• Relative TSR - relative position in FTSE 50-150
• Threshold is median relative position
• Maximum is upper quartile relative position
Malus and clawback provisions apply.
Awards are subject to performance over a three year
performance period.
Performance below threshold results in zero vesting. From
the threshold level the amount of the award vesting rises
from 25% to 100% of maximum opportunity for levels of
performance between threshold and maximum.
2018 awards will be subject to a CROCE target performance
range of 9.7% to 10.7%.
Malus and clawback provisions apply.
Shareholding guidelines apply to executive directors as set out
on page 76.
The Company operates different performance measures
for the PSP and the CIP as it considers it important that the
incentives drive performance in different areas. This has been
the case since the CIP was introduced and is well understood
by management.
Bonus targets are considered to be commercially sensitive,
and disclosure of such may provide an unfair advantage to the
Company’s competitors. However targets, and the corresponding
level of bonus earned, will be disclosed retrospectively, in the
relevant reporting period.
68
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
For Non-executive directors
Fees and
Benefits
• Non-executive director fees policy is to pay:
• A basic fee for membership of the Board
• An additional fee for the chairman of a Committee and the Senior Independent Director to take into account
the additional responsibilities and time commitment of the role
• The Non-executive chairman receives an all-inclusive fee for the role. The Group also pays part of the
employment costs of the Chairman’s assistant
• A minimum of 25% of Non-executive Director and Chairman fees is 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
• Non-executive directors’ fees remain unchanged in 2018:
• Chairman – upon appointment on 7 November 2017 it was agreed that the Chairman’s fee will be fixed
at £320,000 for a period of three years. His fee will next be reviewed with effect from 1 January 2021.
The previous Chairman’s annual fee was £270,000 p.a.
• Non-executive basic fee - £57,511 (2017: £57,511)
• Chairs of Audit and Remuneration Committees - £17,000 (2017: £17,000)
• Senior Independent Director - £12,500 (2017: £12,500)
• Chair of Health & Safety Committee - £10,000 (2017: £10,000)
• Non-executive fees will be reviewed at appropriate intervals.
Remuneration elsewhere in the Group
In 2017 the Group launched its Group Employee Consultation
Forum which gives voice to a representative cross section of
colleagues representing each of our four business divisions, in
relation to a broad range of matters, but with a strong focus
on remuneration topics. The Forum will help inform the design
of new initiatives and raise areas for consideration (including
areas of concern) in relation to remuneration issues. The Forum
complements existing mechanisms by which colleague views on
issues are sought; examples include business’s Managing Director
listening groups, regional and business consultation forums as
well as engagement surveys which are undertaken annually and
which allow colleagues to provide feedback on employee reward.
The Group’s ‘MyPerks’ Google community delivers feedback on
the Group’s benefits arrangements from a membership of around
1,800 community members.
The Committee takes into account remuneration packages
available to all colleagues when considering executive pay. As
with many companies, senior management participate in a wider
range of incentives than the majority of colleagues. The Group
believes that it has to operate on this basis to attract and retain
high-quality managers, but ensures that a significantly higher
proportion of reward for this group of colleagues is based on
variable incentive outcomes.
All colleagues are eligible for a competitive remuneration
package that includes basic pay, bonus, pension and the Group’s
comprehensive ‘MyPerks’ benefits offering. To provide the
Group’s colleagues easy access to their benefits the Group
operates an online benefits platform which can be accessed
through work or home computers, mobile phones or tablets.
This platform is open to all employees of the Group and it
provides detailed information about all the rewards and benefits
that are included in the MyPerks scheme as well as specific
access to colleague rewards, flexible benefits (where employees
can ‘trade’ some of their benefits in favour of others or elect
to increase or decrease their benefits to suit their lifestyle or
circumstances), discounts, advice and guidance.
Over 24,000 colleagues are active members of a Group pension
scheme. Under the defined contribution scheme contribution
rates made by the Group range from 1% to 20% of qualifying
earnings with all employees able to maximise company
contributions to at least 6% of qualifying earnings. The defined
benefits schemes are closed to new members. The Group
recognises that many colleagues find the pension environment
complex. Consequently one of the key aims of the Group’s
financial wellbeing programme, launched in 2017, is to provide
a broad range of financial education and guidance including, but
not limited to, retirement provision.
The Group’s Sharesave scheme continues to be a great success.
In 2017 6,290 colleagues took up the invitation to participate on
either 3 or 5 year contracts committing to savings contracts of
£31.4m. Plans maturing in 2017 delivered gains of approximately
£1.9m shared across 2,658 participating colleagues.
69
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Audited information
Single Total Figure of Remuneration
Executive Directors
John Carter
Tony Buffin
Alan Williams1
Non-executive Directors
Ruth Anderson
Stuart Chambers2
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Robert Walker3
Total
Notes:
Salary
2017
£000
Salary
2016
£000
Benefits
2017
£000
Benefits
2016
£000
Bonus
2017
£000
Bonus
2016
£000
Pension
Pension
Buy-out
Buy-out
2017
£000
2016
£000
2017
£0006
2016
£000
690
533
500
75
68
75
68
70
58
259
2,396
683
528
-
69
-
69
64
67
57
280
1,817
47
29
20
-
-
-
-
-
-
-
44
25
-
-
-
-
-
-
-
-
888
572
536
-
-
-
-
-
-
-
289
182
-
-
-
-
-
-
-
-
96
69
1,996
471
1,577
2,226
431
305
1,024
LTI
2017
£0004
890
687
LTI
2016
£0005
1,272
954
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
173
133
125
-
-
-
-
-
-
-
171
134
-
-
-
-
-
-
-
-
1,024
-
-
-
-
-
-
-
-
-
Total
2017
£000
2,688
1,954
2,205
75
68
75
68
70
58
259
7,520
-
-
-
-
-
-
-
-
-
-
-
Total
2016
£000
2,459
1,823
-
-
69
69
64
67
57
280
4,888
1. Alan Williams was appointed as CFO from 3 January 2017.
2.
Stuart Chambers was appointed Chairman on 7 November 2017 having been appointed Non-executive Director and Chairman Designate on 1 September 2017.
Between 1 September 2017 and 7 November 2017 he was paid one-third of his chairman fee (£106,666 per annum).
3. Robert Walker retired on 6 November 2017.
4.
5.
6.
LTI reported for 2017 for John Carter and Tony Buffin include LTI awards vesting in March 2018. The value of these awards has been calculated based on the average share
price for the last quarter of 2017 of £15.16. Further details are provided on page 72.
LTI reported for 2016 for John Carter (£1,312k) and Tony Buffin (£982k) were reported on an estimated basis using the average share price of the final quarter of 2016 of
£14.20. They are restated here to reflect the actual share prices on vesting (PSP £15.10, Co-investment Plan £15.18 and Deferred Bonus Share Plan £14.80). The figures
have also been restated to remove non-performance related elements which had already been disclosed in the single figure in the 2014 Annual Report.
This relates to awards made to compensate Alan Williams for awards forfeited on leaving his previous employer. Further details are provided on pages 73 to 74.
Explaining the single figure table
Benefits
Benefits for 2017 for John Carter, Tony Buffin and Alan Williams include private medical insurance and the provision of a company car
and fuel (or allowance alternative).
70
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Audited information
Single Total Figure of Remuneration
Executive Directors
John Carter
Tony Buffin
Alan Williams1
Non-executive Directors
Ruth Anderson
Stuart Chambers2
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Robert Walker3
Total
Salary
2017
£000
Salary
2016
£000
Benefits
Benefits
2017
£000
2016
£000
Bonus
2017
£000
Bonus
2016
£000
690
533
500
75
68
75
68
70
58
259
2,396
683
528
-
-
69
69
64
67
57
280
1,817
47
29
20
-
-
-
-
-
-
-
44
25
-
-
-
-
-
-
-
-
888
572
536
-
-
-
-
-
-
-
289
182
-
-
-
-
-
-
-
-
Pension
2017
£000
Pension
2016
£000
Buy-out
2017
£0006
Buy-out
2016
£000
LTI
2017
£0004
890
687
LTI
2016
£0005
1,272
954
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
173
133
125
-
-
-
-
-
-
-
171
134
-
-
-
-
-
-
-
-
-
-
1,024
-
-
-
-
-
-
-
Total
2017
£000
2,688
1,954
2,205
75
68
75
68
70
58
259
7,520
Total
2016
£000
2,459
1,823
-
69
-
69
64
67
57
280
4,888
-
-
-
-
-
-
-
-
-
-
-
96
69
1,996
471
1,577
2,226
431
305
1,024
Annual bonus for 2017
The tables below provide a summary of the performance achieved under the annual bonus for 2017:
Director
John Carter
Tony Buffin
Alan Williams
Maximum Bonus
Opportunity
180%
150%
150%
Actual Bonus
(% of salary)
128.6%
107.2%
107.2%
Actual
Bonus
£887,776
£571,674
£535,995
All bonus earned in respect of 2017 performance is included in the annual bonus column in the single figure table.
Half of the bonus earned is deferred as shares for three years.
Bonus earned is based upon achievement of the following Group financial targets:
Performance Measure
Weighting
Targets
Plan
(50% bonus)
105% Plan
(85% bonus)
Maximum
(100% bonus)
Actual
Performance
Pay-out
(as a % of
maximum)
EBITA
LAROCE
60%
£370m
£389m
£409m
£380m
69.1%
20%
9.5%
n/a
9.9%
10.1%
100%
Business Strategy
20%
The Committee assessed performance against a number
of strategic targets which were set at the start of the year.
A summary of performance is provided on page 72.
50%
71
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Area
Measure
Summary of Performance
Committee’s Assessment
People
Stay Safe and
Colleague
engagement
Customer
Colleague
engagement
Overall
customer
satisfaction
Multi-Channel
Online sales
growth
Stay Safe strategy deployment with effective action plans
and measures as achieved across the Group and were
audited as satisfactory. All branches have implemented
risk assessment plans and the substantial majority have
completed improvement plans.
Colleague engagement, as measured by the Group's
engagement surveys, exceeded the industry average but did
not exceed the ambitious internal target range.
Overall customer satisfaction score is measured by overall
trading account growth in each business. Both General and
Contract Merchanting Divisions delivered overall trading
account growth.
Overall year-on-year growth for online sales in Wickes,
Toolstation, Plumbnation, Tile Giant, Travis Perkins,
Underfloor Heating and Insulation Giant exceeded target
with particularly strong performance in Travis Perkins,
Insulation Giant and Toolstation.
Met at around target
Met at around target
Met at around target
Exceeded
COGS/GNFR*
Savings
Annualised
benefit
Annualised savings from COGS and GNFR programmes
were on target and in line with the Committee's expectation.
Met at around target
IT
Delivery of
key strategic
programmes
Achievement against three major IT programmes namely
core systems, HR/payroll and multichannel programmes.
A number of significant milestones have been successfully
delivered and progress has been made, but at a slower pace
than originally envisaged.
Met in part
*Cost of goods sold/Goods not for resale.
Long-term incentive plans (‘LTIP’)
The long-term incentive figure in the single figure is made up of the following plans:
John Carter
Tony Buffin
Performance Share
Plan
Co-Investment
Plan
Deferred Share
Bonus Plan*
£339,126
(20,629 shares plus
£26,451 cash in lieu
of dividends)
£262,365
(15,940 shares plus
£20,762 cash in lieu
of dividends)
£550,523
(33,447 shares plus
£43,565 cash in lieu
of dividends)
£425,430
(25,847 shares plus
£33,666 cash in lieu
of dividends)
£nil
£nil
Total
£889,649
£687,795
The value of shares vesting has been calculated with reference to the average price over the last quarter of 2017 of £15.16.
* Deferred Share Bonus Plan amounts included in the long-term incentive figure comprise shares deferred from the bonus award granted in March 2016 and vesting in 2018
which are subject to performance. The performance conditions for these awards were not met and the awards lapsed.
72
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Performance share plan
The following table sets out the performance targets, achievements and vesting levels for the Performance Share Award granted in
2015 and vesting in 2018 in respect of performance period ending on 31 December 2017:
Measure
Weighting
Threshold
Maximum
RPI +3% pa
RPI +10% pa
Actual
-7.2%
Adjusted EPS
Growth
Relative TSR
Aggregate Cash
Flow
Total Vesting
40%
20%
40%
Median
£901m
Upper quartile
Below median
£996m
£1,070m
Vesting
0%
0%
40%
40%
Relative total shareholder return performance was measured against companies ranked 50-150 in the FTSE index on the date of award.
Co-investment plan
The following table sets out the performance targets, achievements and vesting levels for the matching awards granted in 2015 and
vesting in 2018 in respect of performance period ending on 31 December 2017:
Measure
Weighting
Threshold
Maximum
Cash Return on
Capital Employed
(3 year average)
100%
9.08%
10%
Actual
10.72%
Total Vesting
100%
Alan Williams' buy-out arrangements
On leaving his former employer Alan Williams forfeited outstanding incentives under his deferred bonus and performance share plans.
The Committee determined that it was appropriate to ‘buy-out’ these incentives. The buy-out awards were structured as far as possible
to be on a ‘like-for-like’ basis with awards he forfeited in accordance with the Group’s remuneration policy.
Deferred bonus shares
Alan Williams was made an award of 39,900 shares to compensate him for deferred shares forfeited, which were awarded in 2014 and
2015 in respect of bonuses earned. 24,583 (61.6%) shares vested on 2 December 2017 and the balance of 15,317 (38.4%) shares will vest on
4 December 2018. These shares are subject to continued employment and have no further performance conditions (reflecting the terms of
the forfeited awards).
These awards have been included in the single figure table based on the value of these shares at the date of award (share price £14.88).
73
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Performance share plan
Alan Williams was made an award of 51,584 shares. This award was to compensate him for performance share awards forfeited, which
were awarded in 2014 and 2015. In determining this amount the Committee applied an assumed vesting rate of 80% based on an
estimate of vesting for these awards at his former employer. In addition to this discount applied these buy-out awards are also subject to
the achievement of stretching role-specific performance conditions as outlined below.
As a condition of this award, Alan was required to purchase shares in the Company with a value of at least half the award using his own
funds and retain these shares for the vesting period.
27,548 shares will vest on 15 March 2018 with the remaining 24,036 shares due to vest on 15 March 2019. Vesting of these awards
is subject to continued employment and the achievement of stretching objectives regarding the strategy and operation of the finance
function in relation to major technology change.
The Committee assessed that Alan had ensured that the future operating principles and the operating model of the function were fully
defined, a target organisation design was complete and an implementation plan was established and underway. Alan has demonstrated
that he had successfully built on the foundation laid by his predecessor in ensuring the future fitness of the function through a range of
transformational activities. In addition, Alan led an important piece of work preparing for the new ERP environment. The Committee was
satisfied that good progress had also been made in this area.
Aside from these specific objectives Alan has also taken on additional accountabilities within the Group including responsibility for the
Group Strategy and Business Development functions.
On this basis the Committee determined that the first half of the award should vest in full.
The portion of the buy-out that vests on 15 March 2018 has been included in the single figure table on the basis of the average share
price for the last quarter of 2017 of £15.16. The value disclosed also includes an amount of £12,465 to reflect the dividend equivalents
accrued since award giving a total value of £430,011.
Directors' pension entitlements
In lieu of pension contribution, gross cash allowance of 25% of salary was paid to John Carter and Alan Williams. Tony Buffin received
25% of salary paid as a mix of pension contributions to the DC scheme and a cash allowance.
Pension value in the year from company contributions
to DC scheme
Pension value in year from cash allowance
(Salary Supplement in place of Employer pension contributions)
Total pension benefit accrued in 2017
Share interests awarded during the financial year
Performance share plan
John Carter
£000
Tony Buffin
£000
Alan Williams
£000
n/a
173
173
10
123
133
n/a
125
125
Date of Award
Type of
Award
Basis
% Vesting at
Lower Target
Face
Value
Performance
Period
John Carter
Tony Buffin
Alan Williams
15 March
2017
Performance
Shares - nil
cost option
150%
of Salary
25%
£1,028,610
(69,127 shares at
£14.88 p/share)
£769,921
(51,742 shares at
£14.88 p/share)
£719,999
(48,387 shares at
£14.88 p/share)
1 January 2017
to
31 December
2019
On the same date John Carter, Tony Buffin and Alan Williams were also awarded 442, 2,016 and 2,016 market value options
respectively under the HMRC tax-advantaged CSOP element of the PSP with a face value of £6,577, £29,998 and £29,998
respectively and an exercise price of £14.88 (the market value on the date of award). These awards are subject to the same
performance conditions as outlined below for the PSP award. If the options vest they are exercisable until the tenth anniversary of grant.
74
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Performance share plan awards are subject to the following performance measures:
Measure
Weighting
Target Range
Vesting Range
Adjusted EPS Growth
40%
Aggregate Cash Flow over
the performance period
Company TSR Relative to
FTSE 50-150 Index
Co-investment plan
40%
20%
Lower target - 3% per
annum over the vesting
period
Maximum target - 10% per
annum over the vesting
period
Lower target £866m
Maximum target £958m
Lower target - median
performance (top 50%)
Maximum target - upper
quartile performance
(top 25%)
No vesting below lower target
Lower target - 25% vests
Maximum target - 100% vests
Pro-rata vesting between these points
Date of
Award
Type of
Award
Basis
% Vesting
at lower
target
Face
Value
Performance
Period
John Carter
Tony Buffin
Alan Williams
30 March
2017
Matching
Shares - nil
cost option
Up to
2:1 matching
of shares
purchased
25%
£681,795
(45,152 shares at
£15.10 p/share)
£526,839
(34,890 shares at
£15.10 p/share)
£493,951
(32,712 shares at
£15.10 p/share)
1 January 2017
to
31 December
2019
Co-Investment Plan matching awards are subject to the following performance measure:
Measure
Weighting
Target Detail
Matching Range
Cash Return on Capital Employed
(CROCE)
100%
Lower target 8.3%
Maximum target 9.3%
The Co-Investment Plan matching awards are described on page 66.
0.5:1 matching at lower target
2:1 matching at maximum target
Pro-rata matching between these points
Deferred share bonus plan
Shares awarded during 2017
Half of the bonus earned in respect of 2016 performance was awarded as deferred shares as follows:
John Carter
Tony Buffin
Date of Award
Face Value
Number of shares*
Share price**
15 March
2017
£144,511
£90,761
10,117
6,354
£14.284
£14.284
*Shares vest on the third anniversary of award.
**The share price used to calculate the number of shares awarded was the last 30 days of the Company’s financial year.
75
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Half of the bonuses earned in 2017 will be issued as deferred shares as follows:
Type of Award
Basis
John Carter
Tony Buffin
Alan Williams
Shares
50% of 2017 bonus
Shares vest three years from grant.
Alan Williams’s buy-out awards
Face Value
£443,868
£285,837
£267,998
As noted on pages 73 to 74 Alan Williams was granted certain awards on 16 March 2017 to compensate him for awards forfeited on
leaving his previous employer. As a condition of the Performance Share Plan award Alan was required to purchase Travis Perkins shares
from his own, personal funds to at least half of the value of the award granted and to retain these shares for the award’s vesting period.
Type of Award
Basis
% Vesting at Lower
Target
Face Value
Performance Period
Deferred share buy-out
– nil cost options1
Performance share
plan buy-out – nil cost
options2
Compensation for
deferred share plan
awards forfeited in
respect of 2014 and
2015
Compensation for
performance share
plan awards forfeited
in respect of 2014
and 2015
n/a
£573,002 (39,900 shares)3
n/a
See footnote 2
£740,796 (51,584 shares)3
See footnote 2
1. 4,583 shares vested on 2 December 2017 and the balance of 15,317 shares will vest on 4 December 2018.
2. 27,548 shares vest on 15 March 2018 with the remaining 24,036 shares vesting on 15 March 2019. Vesting of these awards is subject to continued employment and the
Committee's assessment of the extent to which stretching role-specific objectives over these periods have been achieved.
3. The value of these ‘buy-out’ awards were calculated based on the average Greencore and Travis Perkins share prices between the date on which Alan’s appointment was
announced (20 September 2016) and 3 January 2017 when he joined (Travis Perkins £14.36 and Greencore £2.52).
Alan Williams was granted options over 1,518 shares on 20 September 2017 under the all employee Sharesave (SAYE).
Payments to past directors
No payments were made to past directors.
Payments for leaving directors
No payments for loss of office were made during 2017.
Director’s shareholdings and share interests – executive directors
Formal shareholding requirements (not voluntary guidelines) apply to executive directors and senior executives. The Committee may decide to
scale back or withhold participation in long-term incentives if the requirements are not met or maintained. Executive directors are required to hold
shares valued at two times annual salary within 5 years. As at 31 December 2017 John Carter shareholding was 7.1 times salary, Tony Buffin held
4.6 times salary and Alan Williams held 2.9 times salary based on the average share price for the last quarter of 2017 (£15.16).
Executive directors shareholdings are illustrated in the chart below:
y
r
a
l
a
s
f
o
%
800
700
600
500
400
300
200
100
0
76
John Carter
Tony Buffin
Alan Williams
Actual shareholding (% of salary)
Shareholding requirement (% of salary)
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Director’s shareholding and share interests as at 31 December 2017 was as follows:
Executive
Director
Beneficial
Owner
Conditional
Shares Granted
Under LTI
Plans1
Unconditional
Shares Granted
Under LTI
Plans2
Unvested
Options Subject
to Performance
Conditions3
Vested but
Unexercised
Options
Total
Interests
Interests
Qualifying
Towards
Shareholder
Requirement4
John Carter
315,711
295,812
Tony Buffin
155,507
226,901
Alan Williams
94,080
132,683
17,266
11,678
16,835
1,245
2,016
2,016
14,574
9,384
644,608
323,435
405,486
160,480
-
245,614
94,080
1. Includes awards made under Deferred Share Bonus Plan (subject to a share price performance test), Unapproved Performance Share Plan,
Co-Investment Plan and buyout awards subject to performance conditions.
2. Includes awards made under Deferred Share Bonus Plan (which are not subject to a performance condition),
Sharesave and buyout awards not subject to performance conditions.
3. Market value options awarded under the HMRC tax-advantaged CSOP element of the PSP. These awards are subject to the same performance
conditions as outlined below for the PSP award.
4. Interest qualifying towards shareholding requirement comprise shares held at 31 December 2017 by the executive and their spouse/partner and
53% of the value of any share options or awards which have vested but have not been exercised.
There were no changes in executive directors’ share ownership between 31 December 2017 and 27 February 2018.
During 2017 the following awards vested and were then exercised:
Vested & Exercised
Price per Share
John Carter
Performance Share Plan
Performance Share Plan
Deferred Share Bonus Plan
Deferred Share Bonus Plan
Co-Investment Plan
Tony Buffin
Performance Share Plan
Deferred Share Bonus Plan
Deferred Share Bonus Plan
Co-Investment Plan
Alan Williams
Buyout Award
28,442
415
14,572
6,776
35,120
22,299
5,007
9,384
27,138
24,583
15.18
15.06
14.80
14.80
15.18
15.04
14.88
14.80
15.04
15.34
Director’s shareholding and share interests – non-executive directors
Non-executive Director
Ruth Anderson
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Stuart Chambers
Robert Walker*
Beneficial Shareholding
(as at 31 December 2017)
Beneficial Shareholding
(as at 28 February 2018)
3,573
1,639
8,653
6,845
1,463
519
82,636
3,690
1,756
8,760
6,960
1,552
840
n/a
*Shares shown on the date stepped down from the board.
A minimum of 25% of Non-executive Director fees is paid in shares. Between 31 December 2017 and 27 February 2018 Non-executive
Directors’ share ownership increased due to the payment of a portion of their fees in shares.
77
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
No compensation is payable on termination of the employment
of non-executive directors, which may be with or without notice.
Outside appointments
Travis Perkins recognises that its executive directors may be
invited to become non-executive directors of other companies.
Such non-executive duties can broaden a director’s experience
and knowledge which can benefit Travis Perkins.
Subject to approval by the Board, executive directors are allowed
to accept non-executive appointments, provided that these
appointments will not lead to conflicts of interest, and they may
retain the fees received. John Carter was appointed a non-executive
director of McCarthy & Stone on 1 October 2017. He earned and
retained fees of £13,650 during 2017. Tony Buffin has been a
non-executive director of the Dyson family business since 2014.
Tony earned and retained fees of £42,000 during 2017 (£40,000
2016). Alan Williams held no external appointments during 2017.
Funding of equity awards
Executive incentive arrangements are funded by shares
purchased in the market. Entitlements under the HMRC approved
all colleague Sharesave scheme are satisfied by newly issued
shares. Where shares are newly issued, the Company complies
with Investment Association dilution guidelines on their issue.
The current dilution usage of all share plans is c.6.4% of shares
in issue. There is no dilution due to discretionary executive plans
as shares are purchased in the market to satisfy these awards.
Where shares are purchased in the market, these are held by
a trust in which case the voting rights relating to the shares are
exercisable by the Trustees in accordance with their fiduciary
duties. At 31 December 2017 the Trust held 1,216,331 shares.
Performance graph and table
For comparative purposes the FTSE 350 index has been selected
as this is the index of which the Company was a member during
the reporting year.
Unaudited information
Service contracts
Each of the executive directors has a service contract, 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 Director 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.
Details of the Group’s policy on payments in respect of loss of
office are provided in the Group’s Directors’ Remuneration Policy
on pages 77 to 85 of the Annual Report & Accounts 2016.
The dates executive directors service contracts were entered into
are as follows:
• John Carter – 1 January 2014
• Tony Buffin – 8 April 2013
• Alan Williams – 3 January 2017
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 Annual General Meeting or at the
Company’s registered office. These appointments expire on
the following dates:
Director
Expiry of appointment letter
Ruth Anderson
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Stuart Chambers
2018 AGM
2018 AGM
2018 AGM
2020 AGM
2018 AGM
2021 AGM
In accordance with best practice, the non-executive directors
stand for re-election annually.
Total Shareholder Return
Total Shareholder Return
Travis Perkins plc
FTSE 350
900
800
700
600
500
400
300
200
100
0
Jan
2009
Dec
2009
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
TSR was rebased to 100 from 1 January 2009
78
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Historic CEO pay
Single Figure Remuneration
(£000)
Annual Bonus Payout
(% of maximum)
Vesting of Share Options
(% of maximum)
Vesting of Performance
Share Plan (% of maximum)
Vesting of Co-Investment
Plan (SMS)
(% of maximum)
2009
2010
2011
2012
2013
2014
2015
2016
2017
£1,412
£1,423
£1,938
£3,506
£2,044
£2,634
£2,360
£2,575
£2,688
100%
100%
75.9%
27.0%
62.9%
89.0%
31.9%
23.8%
71.5%
0%
-
-
-
-
-
-
-
-
-
0%
0%
80.0%
37.4%
44.8%
96.8%
54.0%
40.0%
0%
0%
51.0%
100%
0%
0%
44.2%
97.0%
100%
Data for 2014-17 relates to John Carter, earlier data relates to the previous CEO, Geoff Cooper.
Change in remuneration of the Director undertaking the role of CEO
Percentage Change
in Salary Earned
(2017 full year compared to
2016 full year)
Percentage Change
in Bonus Opportunity Earned
(2017 full year forecast compared
to 2016 full year)
Percentage Change
in Taxable Benefits Received
(2016/17 tax year compared to
2015/16 tax year)
CEO
Comparative
Employee Group*
1.0%
1.15%
47.7%
5.8%
2.8%
17.1%**
* Comparator group is all colleagues within the Travis Perkins General Merchanting Division. This division is the largest division within the Company, 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.
900
800
700
600
500
400
300
200
100
0
2016
840
242
62
Tax
Distribution
Capex
Corporation
Employee
Remuneration
111
to
Shareholders
** Based on a matched sample across the two periods.
Relative importance of spend on pay
900
800
700
600
500
400
300
200
100
0
2017
+5.0%
882
-6.2%
227
Capex
+1.8%
113
Distribution
to
Shareholders
-9.7%
56
Corporation
Tax
Employee
Remuneration
900
800
700
600
500
400
300
200
100
0
2016
840
242
Capex
111
Distribution
to
Shareholders
62
Corporation
Tax
Employee
Remuneration
900
800
700
600
500
400
300
200
100
0
2017
+5.0%
882
-6.2%
227
-9.7%
56
+1.8%
113
to
Shareholders
Distribution
Capex
Corporation
Employee
Tax
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 indicator of wider societal
contribution facilitated by the Company’s operations and
is the actual amount of corporation tax paid in the relevant
reporting periods.
79
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Fees are charged on a time and materials basis. During the year
Deloitte was paid £45,800 for advice provided to the Committee.
In addition John Carter (CEO), Alan Williams (CFO), Deborah
Grimason (Company Secretary), Carol Kavanagh (Group Human
Resources Director), Helen O’Keefe (Deputy Company Secretary),
Jon Erb (Director of Group Finance) and Paul Nelson (Group
Head of Reward) have assisted the Committee in its work and
attended Committee meetings where appropriate. No individual is
involved in setting their own remuneration.
Responsibilities
The Remuneration Committee is responsible for developing
and implementing the remuneration policy 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. The Committee also oversees the
administration of the Company’s share plans. The Committee’s
terms of reference are available on the Company website
(www.travisperkinsplc.co.uk) or from the Company Secretary.
Governance
Remuneration Committee and consideration by the
Directors of matters relating to directors’ remuneration
At the end of the year the Committee comprised Coline McConville
(Chair), Pete Redfern, John Rogers and Christopher Rogers, all of
whom are independent non-executive directors. Robert Walker
served on the Committee until his retirement on the 6 November
2017 and was replaced by Stuart Chambers from 7 November
2017. John Rogers served on the Committee until 25 May 2017.
Christopher Rogers joined the Committee on 26 May 2017.
Deloitte was appointed by the Committee in December 2015,
following an interview process, to provide independent advice on
executive remuneration.
Deloitte are founding members of the Remuneration Consultants
Code of Conduct and adhere to this Code in its dealings with the
Committee. The Committee is satisfied that the advice provided
by Deloitte is objective and independent. The Committee is
comfortable that the Deloitte engagement partner and team
that provides remuneration advice to the Committee do not
have connections with the Company that may impair their
independence. The Committee reviewed the potential for
conflicts of interest and judged that there were appropriate
safeguards against such conflicts.
Deloitte provided 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 mainly in the
area of digital strategy, innovation, operating model design and
change management.
80
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Key items discussed in 2017 meetings
In 2017 the Remuneration Committee formally met four times, with additional conference calls as required. The Committee discussed
amongst others the following matters:
Month
January
Key Issues Considered
• Review of 2016 performance against targets and considering annual and long-term incentive outcomes
• Review of 2016 performance against targets and determining annual and long-term incentive outcomes
• Annual bonus and LTIP targets for 2017
• Directors' salary review 2017
February
• Share plan rules
March
November
• 2016 Directors' Remuneration Report
• Committee governance
• Remuneration arrangements for Alan Williams
• Annual bonus targets for 2017
• Committee governance
• Salary review 2018
• Review of remuneration trends and issues
• Review of 2017 performance against targets and considering annual and long-term incentive outcomes
• Format for Directors' Remuneration Report 2017
• Committee governance
• Group consultation forum
December
• Directors' salary review 2018
Shareholder voting
At the last AGM the following resolutions in relation to remuneration were put by the Company:
Resolution
To receive and approve the Directors’
Remuneration Report
To receive and approve the Directors’
Remuneration Policy (2017 AGM)
Votes
For
%
For
Votes
Against
%
Against
Votes
Withheld
183,963,042
98.23%
3,313,812
1.77%
1,555,812
183,055,598
96.97%
5,725,210
3.03%
51,858
The Director's Remuneration Report has been approved by the Board of Directors and is signed on its behalf by:
Coline McConville
Chairman of the Remuneration Committee
27 February 2018
81
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Travis Perkins plc Annual Report & Accounts 2017
Governance & Remuneration
NOMINATIONS
COMMITTEE
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Dear Shareholders,
Nominations Committee highlights
In 2017, the Committee was mainly focussed on the succession
of the former Chairman, Robert Walker, which led to my own
appointment. I joined the Group on 1 September 2017 and took
over as Chairman on 7 November 2017.
The Nomination Committee’s purpose is to ensure that the
Board and its Committees comprise individuals with the skills,
knowledge and experience to maximise the effectiveness with
which they discharge their duties. Reviewing the composition of
the Board and ensuring appropriate succession plans are in place
to meet the needs of the business will be a key focus for me and
the Committee over the coming year.
Stuart Chambers
Chairman
27 February 2018
82
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration • Interviews of those candidates by a selection of members of
the Board
• Following selection of the proposed candidate, interviews with
the remaining members of the Board and the taking up of
detailed references
2018 objectives
In 2018 the Committee will be focussed on:
• Reviewing the skills and experience needed on the Board and
making plans to fill any gaps
• Continuing to review the pipeline of executive talent below
the Board
• Planning for the succession for the Chairman of the
Audit Committee
• Planning for the succession of the CEO
Board diversity
It is the Group’s firm belief that having Executives and
Non-executives on the Board who are diverse in experience,
nationality and gender provides us with different perspectives,
which promotes a healthy culture with a good balance between
challenge and support and minimises the risk of ‘group-thinking’.
This does not just make good commercial and business sense,
but it is positive for the Group’s colleagues and its customers
as well.
Job specifications, search processes and selection criteria are
also focused on appointing candidates that meet the criteria for
the role and who offer different perspectives. Therefore, diversity,
including gender diversity, is actively considered, and will continue
to be so. The Board is committed to appointing the best people
and ensuring all employees are able to develop their careers
within the Group regardless of their background, gender, age or
ethnicity. The Group believes that diversity should be considered
broadly and not just focusing on one element such as gender
and the Group therefore does not believe it is appropriate to set
targets in this area.
The Group currently has two female Board directors (22%) and
three women on its operating executive (27%). Further details
of the Group’s workforce diversity are set out in the Our People
section on pages 41 to 43.
The Nominations Committee Report has been approved by the
Board of Directors and is signed on its behalf by:
Stuart Chambers
Chairman
27 February 2018
Role of the Committee
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 undertakes a broader role.
The Nominations Committee comprises all the Non-executive
Directors and is chaired by Stuart Chambers, the Chairman of the
Board, other than when it is dealing with matters in relation to the
chairmanship of the Company. The Chief Executive and Group
HR Director are invited to attend when appropriate.
The Committee operates under formal terms of reference
which are available on the Group's corporate website:
www.travisperkinsplc.co.uk
Activities in 2017
The Committee held five formal meetings and a number
of ad hoc meetings and conference calls during the year.
The principal matters discussed were:
• The appointment of a new Chairman
• Current and future Board composition and senior management
requirements in light of the business strategy
Process for appointments
The Committee guides the Board in regularly assessing whether
there is an appropriate balance of expertise and skills on the
Board. A rigorous selection process precedes the appointment
of all Directors by the Board, ensuring that appointments to the
Board are made on merit and assessed against objective criteria.
A description of how appointments are typically made to the
Board is set out below. This process was followed in connection
with the appointment of Stuart Chambers as Chairman of the
Board of Directors.
The Committee oversees on behalf of the Board, and advises
the Board on, the identification, assessment and selection
of candidates for appointment to the Board. The process of
appointment includes:
• The preparation of a role description in light of existing and
required capabilities for the role and the Board
• The engagement of independent recruitment consultants who
have no other connection to the Company. Spencer Stuart
was used in the selection process for Stuart Chambers during
the year
• The preparation of a ‘long list’ of potential candidates which
takes into account diversity considerations and the outcome of
the Committee’s latest review of the composition and skill sets
of the Board
• The selection of a shortlist of suitable candidates meeting the
Committee’s criteria
83
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017
Governance & Remuneration
DIRECTORS’
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
The Directors present their annual report and audited accounts for the year ended
31 December 2017. The Corporate Governance statement on pages 53 to 57 forms part
of the Directors’ Report.
Business review
Directors conflicts of interest
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 or she has, or can have, a direct
or indirect interest that conflicts, or possibly may conflict, with the
Company’s interests.
The disclosable interests of Directors at 31 December 2017,
including holdings, if any, of spouses and of children aged under
18, are contained in the Directors’ Remuneration Report on pages
76 to 77.
Directors’ indemnities
Article 141 of the Company's Articles of Association permits the
Company to indemnify any person who is or was a director of
the Company, or of any associated company, in respect of any
liability incurred in relation to the affairs of the Company, or any
associated company, to the extent the law allows (including in
connection with any associated company's activities as trustee
of an occupational pension scheme). The Company maintains
directors’ and officers’ liability insurance which gives appropriate
cover for legal action brought against its directors. The Company
has granted indemnities to its directors and directors of
associated companies to the extent permitted by law and these
remained in force in the year ended 31 December 2017.
A review of the Group’s position, developments, activities in the
field of research and development and future prospects can be
found in the Strategic Report on pages 4 to 48. Whilst the Group
operates predominantly in the UK it does have a few branches
in the Isle of Man and the Republic of Ireland and its associate
company Toolstation Europe has 23 branches in The Netherlands
and France.
Information to be disclosed under LR 9.8.4R
Listing
rule
Detail
9.8.4R (1-2)(5-11)(14)
Not applicable
9.8.4R (4)
9.8.4R (12)
9.8.4R (13)
Long-term
incentive schemes
Dividend waiver
Dividend waiver
Page
reference
66
134
134
Board of directors
The names of the Directors at 31 December 2017, together with
their biographical details are set out on pages 50 to 52. All of
these Directors held office throughout the year with the exception
of Stuart Chambers who joined the Board as Chairman designate
on 1 September 2017 and replaced Robert Walker as Chairman
on 7 November 2017. 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 results
of the formal evaluation of their performances described on
page 56, the Chairman confirmed on behalf of the Board that
all Directors continue to be effective in, and committed to,
their roles.
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
all Executive Directors and Non-executive Directors will seek
re-election at the Annual General Meeting.
84
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration
Greenhouse gas emissions reporting
Details of the Group’s greenhouse gas emissions can be found in
the Environmental Report on pages 46 to 48.
Close company status
The close company provisions of the Income and Corporation
Taxes Act 1988 do not apply to the Company.
Results and dividends
The Group results for the year ended 31 December 2017 and
dividends for the year ending 31 December 2017 are set out in the
income statement and note 12 respectively on pages 96 and 124.
The final dividend will be paid on 11 May 2018 to those shareholders
on the register at the close of business on 6 April 2018.
Balance sheet and
post balance sheet events
The balance sheet on pages 98 and 99 shows the Group’s
financial position. No important events have occurred since the
balance sheet date.
Principal risks and uncertainties
A review of the Group's principal risks and uncertainties can be
found in the Strategic Report on pages 33 to 39.
Financial risk management
Details of the Group’s approach to capital management and the
alleviation of risk through the use of financial instruments are given
in the Financial Review on pages 23 to 31. Specific quantitative
information on borrowings and financial instruments is given in
notes 22 and 23 on pages 136 to 141 of the financial statements.
Substantial shareholdings
As at 31 December 2017, 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:
BlackRock, Inc
Harris Associates L.P.
OppenheimerFunds, Inc.
Sprucegrove Investment
Management Ltd
TIA-CREF Investment
Management/ Teachers
Advisors, LLC/ Nuveen
Asset Management , LLC
Number
12,591,774
12,689,670
12,656,752
12,006,659
%
5.00
5.04
5.02
4.76
10,368,460
4.11
Between 31 December 2017 and 26 February 2018, the following
notifications were received by the Company:
Substantial Shareholders
Number
OppenheimerFunds, Inc.
12,391,080
%
4.91
TIA-CREF Investment
Management/ Teachers
Advisors, LLC/ Nuveen
Asset Management , LLC
9,874,450
3.92
Employees
Statements on employee matters are contained in the section of
the annual report entitled Our People on pages 41 to 43.
Details of the number of employees and related costs can be
found in note 7 to the financial statements.
The Company is committed to equality of opportunity and
recognises the benefit of diversity within its workforce. Its
approach to the matter of diversity on company boards is set
out in the Nominations Committee report on page 83 and in the
section of the annual report entitled Our People on pages
41 to 43. 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 and
fairly 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. Further details are available in
the section of the annual report entitled Our People on pages
41 to 43. All employees with more than three months' service
are eligible to participate in the Company's Sharesave and
Buy As-You-Earn plans. Details can be found in the Directors'
Remuneration report on page 69.
Modern slavery
The Group recognises the harmful impact that Modern Slavery
and human trafficking has on society and is committed to
eliminating this criminal activity from the business and supply
chain. The Group produces a slavery and human trafficking
statement each financial year. The latest statement is available on
the Group's corporate website www.travisperkinsplc.co.uk
Political donations
The Group has a policy of not making donations to political
parties. The Group did not give any money for political purposes
nor did it make any donations to political organisations or
independent candidates or incur any political expenditure during
the year.
Auditor
KPMG LLP is the Company’s auditor at the date of this report,
having been appointed in 2015. Resolutions will be proposed
at the Annual General Meeting to re-appoint KPMG LLP as the
Company’s auditor, and to authorise the Audit Committee to fix
the auditor’s remuneration.
85
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration The rules governing the appointment and replacement of board
members and changes to the Articles of Association accord
with usual English company law provisions. The powers of the
Company's Directors are set out in the Company's Articles of
Association. In particular, the Board has the power to issue shares
and to purchase the Company’s 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.
The Company does not have agreements with any director or
employee that would provide compensation for loss of office
or employment resulting from a takeover except that provisions
of the Company’s share schemes and plans may cause options
and awards granted to employees under such schemes and plans
to vest on a takeover.
The Directors' Report has been approved by the Board of Directors
and is signed on its behalf by:
Deborah Grimason
Company Secretary and General Counsel
27 February 2018
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 they ought to
have taken as a director in order to make themselves 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 2017 the Company had an allotted and
fully paid share capital of 251,994,708 ordinary shares of
10 pence each, with an aggregate nominal value of £25,199,470
(including shares owned by the Travis Perkins 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 19 to the financial statements.
As at 31 December 2017 the Travis Perkins Employee Share
Ownership Trust owned 1,216,331 shares in the Company 0.5%
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.
86
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration STATEMENT
OF DIRECTORS’
RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEMBER 2017
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:
• Select suitable accounting policies and apply them consistently
• Make judgements and estimates that are reasonable
and prudent
• State whether the financial statements have been prepared in
accordance with IFRSs as adopted by the EU
• Assess the Group and parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
• Use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do so.
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 such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, a directors’ report,
a directors’ remuneration report and a corporate governance
statement, which comply with that law and those regulations.
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.
3. The annual report and financial statements taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Declaration
We consider that the Annual Report and Accounts, when taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position, performance, business model and strategy.
The Statement of Directors' Responsibilities has been approved
by the Board of Directors and is signed on its behalf by:
John Carter
Chief Executive
27 February 2018
Alan Williams
Chief Financial Officer
27 February 2018
87
Governance & Remuneration Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration 88
Travis Perkins plc Annual Report & Accounts 2017Governance & Remuneration FINANCIAL
STATEMENTS
Independent auditor’s report
90
96 Financial statements
103
Notes to the financial statements
Main image:
Arkadiusz Stachowicz and Robin Leacy – BSS, Magna Park
From top left to bottom right:
Jordon Berry – CCF, Leeds
Warren Sedgwick – Keyline, Telford
Weronika Narbut– Travis Perkins, Staples Corner
89
INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF TRAVIS PERKINS PLC
1. Our opinion is unmodified
Basis for opinion
We have audited the financial statements of Travis Perkins plc
(“the Company”) for the year ended 31 December 2017 which
comprise the Group and Company Income Statements, the
Group and Company Statements of Comprehensive Income, the
Group and Company Balance Sheets, the Group and Company
Statements of Changes in Equity, the Group and Company Cash
Flow Statements and the related notes, including the accounting
policies in note 2.
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 2017 and of the Group’s profit for the year
then ended;
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
• the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and
as applied in accordance with the provisions of the Companies
Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the
IAS Regulation.
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is consistent with our report to
the Audit Committee.
We were appointed as auditor by the shareholders on
28 May 2015. The period of total uninterrupted engagement
is for the three financial years ended 31 December 2017. We
have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited by
that standard have been provided in the last three years.
Overview
Materiality:
Group financial statements
as a whole
Coverage
£17m (2016:£17m)
5% (2016: 5%) of Group
profit before tax adjusted
for impairment of intangible
assets and exceptional items
as disclosed on the face of the
income statement
94% (2016: 96%) of Group
profit before tax adjusted
for impairment of intangible
assets and exceptional items
as disclosed on the face of the
income statement
Risks of material misstatement
vs 2016
Recurring risks
Recoverability of
Wickes and Tile Giant
goodwill and of the
Parent Company’s
investment in Wickes
and Tile Giant
Recognition of
supplier income
and recoverability of
respective receivables
Valuation of inventory
90
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. We summarize below the key audit matters in decreasing order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from
those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for
the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to
that opinion, and we do not provide a separate opinion on these matters.
Recoverability of Wickes and
Tile Giant goodwill and of the
Parent Company’s investment in
Wickes and Tile Giant
(Goodwill: £707 million;
2016: £707 million)
Refer to pages 58 to 63 (Audit
Committee Report), page
110 (Critical judgements and
key sources of estimation
uncertainty) and pages 125 to
128 and 131 to 132 (financial
disclosures).
The risk
Our response
Forecast based valuation
A worsening in the UK economy,
fall in consumer confidence,
the impact of cost price inflation or
being slow to respond to changes
in customer buying behaviours
impacted the performance of certain
Group businesses in a manner that
the related goodwill and investment
balances could become impaired. In
particular, in the Consumer division,
performance in the Wickes and
Tile Giant businesses has been lower
than forecast. The headroom has
decreased year-on-year and the
value in use is sensitive to certain
assumptions, such as discount rate,
forecast revenue growth, profit
margins and maintenance capital
expenditure.
The estimated recoverable amount
is subjective due to the inherent
uncertainty involved in forecasting
and discounting future cash flows.
Our procedures included:
• Historical comparisons: Assessing the reasonableness
of the budgets by considering the historical accuracy of
previous forecasts.
• Our sector experience: Assessing whether assumptions
used, in particular those relating to forecast revenue
growth, profit margins and maintenance capital
expenditure, reflect our knowledge of the business and
industry, including known or probable changes in the
business environment.
• Benchmarking assumptions: Challenging, using our
own valuation specialists, the key inputs used in the
Group’s calculation of the discount rates by comparing
them to externally derived data, including available
sources for comparable companies.
• Sensitivity analysis: Performing breakeven analysis on
the key assumptions noted above.
• Assessing transparency: Assessing whether the
Group’s disclosures about the impairment test
appropriately reflected the risks inherent in the
valuation of goodwill and investments in subsidiaries.
Our results
• We found the resulting estimates of the recoverable
amounts of Wickes and Tile Giant goodwill and of the
Parent Company’s investment in Wickes and Tile Giant
to be acceptable.
91
Financial Statements The risk
Our response
Recognition of supplier income
and recoverability of respective
receivables
Refer to pages 58 to 63
(Audit Committee Report),
page 109 (Critical judgements
and key sources of estimation
uncertainty) and pages 29 and 30
(financial disclosures).
Subjective estimate
As a result of the wide range of
products and suppliers to the Group,
there are a significant number of
complex and varying purchase
agreements within the businesses
specifically involving fixed price
discounts, volume rebates and
customer sales support.
We consider the risk relates to the
calculation of the income receivable,
including the recoverability of the
year end receivables from suppliers in
respect of these agreements.
The risk is driven by the complexity
of this calculation across the range
of products and divisions and the
estimation relating to the collection
rate of this income, including
recoverability of the amounts
outstanding at the year end.
Our procedures included:
• Tests of details: Agreeing a statistical sample of the
total amount of supplier income recorded in the year,
including amounts outstanding at the year end, to cash
received or credit notes raised.
• Historical comparisons: Assessing the success rate
of supplier income collection in previous periods for a
sample of balances outstanding at the date of signing
the audit report, including agreeing the calculation of the
amount accrued to contractual agreements.
• Third party confirmations: Comparing a sample
of supplier receivable balances to the third party
confirmations and challenging management’s
explanations of variances, if any.
• Assessing transparency: Considering the adequacy of
the Group’s disclosures about the degree of estimation
involved in the recognition of supplier income and
recoverability of respective receivables.
Our results
• We consider the amount of supplier income recognised
and the recoverability of respective receivables to
be acceptable.
Valuation of inventory
Complex calculation
Our procedures included:
(£806 million;
2016: £768 million)
Refer to pages 58 to 63 (Audit
Committee Report), page 110
(Critical judgements and key
sources of estimation uncertainty).
The impact of supplier rebate
accounting as described in the
supplier income recognition risk above
and complicated overhead allocation
systems make inventory cost
accounting an area which had one
of the greatest effects on our audit
and on the allocation of resources in
planning and completing our audit.
• Accounting analysis: Evaluating the appropriateness
of the methodologies applied in determining product
cost and critically assessing the respective calculations
(including the allocation of rebates attributable to
inventory at the year end as described in the supplier
income recognition risk above).
• Data analytics: Recalculating the inventory at year end
from the full year’s product cost database (including
overheads).
• Tests of details: Recalculating product cost for a
statistical sample of inventory balances, including
comparing respective underlying data to the purchase
documentation.
Our results
• As a result of our work, we consider the valuation of
inventory to be acceptable.
In addition we continue to perform procedures over goodwill of groups of cash generating units as well as those identified in the Key
Audit Matter above. However, following stronger than anticipated performance during 2017, we have not assessed the recoverability of
goodwill other than that allocated to Wickes and Tile Giant to be one of the most significant risks in our current year audit and, therefore,
it is not separately identified in our report this year.
92
Adjusted Group
profit before tax*
£330.6m (2016: £364.7m)
Group Materiality
£17.0m (2016: £17.0m)
£17.0m
Whole financial
statements materiality
(2016: £17.0m)
£9.1m
Range of materiality
at 17 components
(£0.8m to £9.1m)
(2016: £1.0m to £12.8m)
Adjusted Group PBT*
Group materiality
£0.5m
Identified misstatements
reported to the Audit
Committee (2016: £0.5m)
*adjusted for impairment of intangible assets and exceptional
items as disclosed on the face of the income statement
Group revenue
Adjusted Group profit before tax*
92%
(2016: 93%)
93
92
Group total assets
87%
(2016: 86%)
86
87
94%
(2016: 96%)
96
94
Full scope for group audit purposes 2016
Full scope for group audit purposes 2017
Residual components
3. Our application of materiality and an overview
of the scope of our audit
Materiality for the Group financial statements as a whole was
set at £17 million (2016: £17 million), determined with reference
to a benchmark of Group profit before taxation adjusted for
impairment of intangible assets and exceptional items as
disclosed on the face of the income statement (‘Adjusted Group
profit before tax*’) of £330.6 million of which it represents 5.1%
(2016: 4.7%).
Materiality for the parent company financial statements as a
whole was set at £9.1 million (2016: £12.8 million), determined
with reference to a benchmark of company total assets, of which
it represents 0.2% (2016: 0.3%).
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.5 million,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the Group’s 67 (2016: 64) reporting components, we
subjected 17 (all UK based) (2016: 17 (all UK based)) to full scope
audits for Group purposes.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The remaining 8% of total Group revenue, 6% of adjusted Group
profit before tax* and 13% of total Group assets is represented by
50 reporting components, none of which individually represented
more than 4% of any of total Group revenue, adjusted Group
profit before tax* or total Group assets. For these residual
components, we performed analysis at an aggregated Group
level to re-examine our assessment that there were no significant
risks of material misstatement within these.
The Group audit team instructed component auditors as to
the significant areas to be covered, including the relevant
risks detailed above and the information to be reported back.
The Group audit team approved the component materialities,
which ranged from £0.8 million to £9.1 million, having regard
to the mix of size and risk profile of the Group across the
components. The work on 2 of the 17 components (2016: 2 of the
17 components) was performed by component auditors, and the
rest, including the audit of the parent company, was performed
by the Group team. The Group team performed procedures on
the items excluded from adjusted Group profit before tax*.
The Group audit team visited all 17 (2016: 17) component
locations subject to full scope audits to assess the audit risk and
strategy. Telephone conference meetings were also held with
these component auditors. At these visits and meetings, the
findings reported to the Group audit team in more detail, and
any further work required by the Group audit team was then
performed by the component auditor.
93
Financial Statements
4. We have nothing to report on going concern
• the disclosures describing these risks and explaining how they
We are required to report to you if:
• we have anything material to add or draw attention to in relation
to the directors’ statement in note 1 to the financial statements
on the use of the going concern basis of accounting with no
material uncertainties that may cast significant doubt over
the Group and Company’s use of that basis for a period of at
least twelve months from the date of approval of the financial
statements; or
• the related statement under the Listing Rules set out on
page 87 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
are being managed and mitigated; and
• the directors’ explanation in the viability assessment on
page 31 of how they have assessed the prospects of the Group,
over what period they have done so and why they considered
that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
Under the Listing Rules we are required to review the viability
assessment. We have nothing to report in this respect.
5. We have nothing to report on the other information
Corporate governance disclosures
in the Annual Report
The directors are responsible for the other information presented
in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
We are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider that the
annual report and financial statements taken as a whole is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy; or
• the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
eleven provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
• we have not identified material misstatements in the strategic
We have nothing to report in these respects.
report and the directors’ report;
• in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
• the directors’ confirmation within the viability assessment on
page 31 that they have carried out a robust assessment of
the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency and liquidity;
6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
94
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 87,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud, other irregularities or error
and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our sector experience, through discussion with the Directors
and other management (as required by auditing standards) and
inspection of minutes of the Group’s Stay Safe Committee and
the Group’s regulatory and legal correspondence.
We had regard to laws and regulations in areas that directly affect
the financial statements including financial reporting (including
related company legislation), taxation and pension legislation.
We considered the extent of compliance with those laws and
regulations as part of our procedures on the related annual
accounts items.
In addition we considered the impact of laws and regulations
in the specific areas of health and safety and employment law.
With the exception of any known or possible non-compliance,
and as required by auditing standards, our work in respect
of these was limited to enquiry of the directors and other
management and inspection of regulatory and legal
correspondence. We considered the effect of any known
or possible non-compliance in these areas as part of our
procedures on the related annual accounts items.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit. This included communication from the
Group to component audit teams of relevant laws and regulations
identified at Group level, with a request to report on any
indications of potential existence of non-compliance with relevant
laws and regulations (irregularities) in these areas, or other areas
directly identified by the component team.
As with any audit, there remained a higher risk of non-detection
of irregularities, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls.
8. The purpose of our audit work and to whom
we owe our responsibilities
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.
Greg Watts (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
27 February 2018
95
Financial Statements Income Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
The Group
Pre-
exceptional
items
£m
6,217.2
409.0
(16.6)
-
392.4
-
0.7
(28.4)
364.7
(77.1)
287.6
286.2
1.4
287.6
2016
Exceptional
items
£m
-
-
-
(292.0)
(292.0)
-
-
-
(292.0)
18.5
(273.5)
(273.5)
-
(273.5)
Pre-
exceptional
items
£m
6,433.1
380.1
(12.3)
-
367.8
(2.2)
0.7
(35.7)
330.6
(63.5)
267.1
265.9
1.2
267.1
2017
Exceptional
items
£m
-
-
-
(40.9)
(40.9)
-
-
-
(40.9)
7.8
(33.1)
Total
£m
6,433.1
380.1
(12.3)
(40.9)
326.9
(2.2)
0.7
(35.7)
289.7
(55.7)
234.0
(33.1)
232.8
-
1.2
(33.1)
234.0
93.1p
92.2p
46.0p
Total
£m
6,217.2
409.0
(16.6)
(292.0)
100.4
-
0.7
(28.4)
72.7
(58.6)
14.1
12.7
1.4
14.1
5.1p
5.0p
45.0p
Revenue
Notes
4
Operating profit before exceptional
items and amortisation
Amortisation of acquired
intangible assets
Exceptional items
Operating profit
Share of associates’ results
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
5(d)
5(a)
9(a)
9(a)
10(a)
11(a)
11(a)
12
All results relate to continuing operations. Details of exceptional items are given in notes 5d and 10.
Notes
4
5(d)
9(c)
9(c)
10(a)
The Company
2017
£m
328.2
308.3
(10.5)
297.8
0.6
(48.9)
249.5
12.2
261.7
2016
£m
338.8
317.7
(19.0)
298.7
0.6
(44.3)
255.0
10.6
265.6
Revenue
Operating profit before exceptional items
Exceptional items
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
All results relate to continuing operations. Details of exceptional items are given in note 5d.
96
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
Statements of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2017
Profit for the year
Items that will not be reclassified subsequently to profit and loss:
Actuarial gains / (losses) on defined benefit pension schemes
Income tax relating to items not reclassified
Notes
27(h)
10(b)
Items that may be reclassified subsequently to profit and loss:
Cash flow hedges
Other comprehensive income / (loss) for the year net of tax
Total comprehensive income / (loss) for the year
All other comprehensive income is attributable to the owners of the Company.
The Group
The Company
2017
£m
234.0
90.8
(17.1)
73.7
-
73.7
307.7
2016
£m
14.1
(86.9)
16.5
(70.4)
0.1
(70.3)
(56.2)
2017
£m
261.7
2016
£m
265.6
-
-
-
-
-
-
-
-
0.1
0.1
261.7
265.7
97
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements The Group
The Company
Notes
2017
£m
2016
£m
2017
£m
2016
£m
13
14
15
16(a)
16(b)
16(c)
17
25
17
23
18
1,539.2
1,528.3
387.1
932.0
20.3
-
9.5
30.4
-
360.8
929.5
11.5
-
9.1
8.3
-
-
-
0.2
28.2
-
-
0.1
16.9
3,814.3
3,805.4
4.5
-
1.9
4.4
-
1.8
2,918.5
2,847.5
3,849.1
3,828.6
816.3
1,130.2
-
276.8
2,223.3
5,141.8
768.0
1,059.3
1.7
250.5
2,079.5
4,927.0
-
407.9
-
226.8
634.7
-
387.6
1.7
185.9
575.2
4,483.8
4,403.8
Balance Sheets
AS AT 31 DECEMBER 2017
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Interest in associates
Investment in subsidiaries
Investments
Other receivables
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
98
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements Equity and liabilities
Capital and reserves
Issued capital
Share premium account
Merger reserve
Revaluation reserve
Own shares
Other reserve
Accumulated profits
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Retirement benefit obligations
Long-term provisions
Amounts due to subsidiaries
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Current tax liabilities
Short-term provisions
Total current liabilities
Total liabilities
Total equity and liabilities
The Group
The Company
Notes
2017
£m
2016
£m
2017
£m
2016
£m
19
21
21
21
21
21
21
22
23
27
24
25
22
23
26
24
25.2
543.4
326.5
15.7
(15.3)
(4.9)
1,958.0
2,848.6
11.7
25.1
528.5
326.5
16.8
(8.7)
-
1,760.1
2,648.3
7.3
25.2
542.3
326.5
-
(15.3)
(4.9)
738.8
1,612.6
-
25.1
527.4
326.5
-
(8.7)
-
587.0
1,457.3
-
2,860.3
2,655.6
1,612.6
1,457.3
612.1
4.9
28.3
17.1
-
61.0
723.4
6.2
1.2
621.1
-
127.3
21.2
-
45.8
815.4
6.9
-
1,453.6
1,348.3
44.5
52.6
1,558.1
2,281.5
5,141.8
43.8
57.0
1,456.0
2,271.4
4,927.0
557.1
4.9
-
-
559.0
-
-
-
2,287.4
2,368.4
-
-
2,849.4
2,927.4
-
1.2
20.6
-
-
-
-
19.1
-
-
21.8
2,871.2
4,483.8
19.1
2,946.5
4,403.8
The financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on
27 February 2018 and signed on its behalf by:
John Carter
Director
Alan Williams
Director
99
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2017
The Group
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l
l
o
r
t
n
o
c
-
n
o
n
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
t
s
e
r
e
t
n
i
y
t
i
u
q
e
l
a
t
o
T
25.0
518.9
326.5
18.4
(0.1)
(15.5)
(1.4) 1,918.1
2,789.9
5.9 2,795.8
At 1 January 2016
Profit for the year
Other comprehensive income
for the period net of tax
Total comprehensive income
for the year
Dividends
-
-
-
-
-
-
-
-
Issue of share capital
0.1
9.6
Realisation of revaluation reserve
in respect of property disposals
Depreciation adjustment
on revalued asset
Deferred tax rate change
Tax on share based payments
(note 10c)
Reserves adjustment
Own shares movement
Credit for equity-settled
share based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.8)
(0.2)
0.4
-
-
-
-
At 31 December 2016
25.1
528.5
326.5
16.8
Profit for the year
Other comprehensive income
for the period net of tax
Total comprehensive income
for the year
Dividends
-
-
-
-
-
-
-
-
Issue of share capital
0.1
14.9
Purchase of own shares
Realisation of revaluation reserve
in respect of property disposal
Depreciation adjustment
on revalued asset
Tax on share based
payments (10c)
Option on
non-controlling interest
Arising on acquisition
Foreign exchange
Own shares movement
Credit for equity-settled share
based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.8)
(0.3)
-
-
-
-
-
-
At 31 December 2017
25.2
543.4
326.5
15.7
100
-
0.1
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6.8
-
(8.7)
-
-
-
-
-
(19.2)
-
-
-
-
-
-
12.6
-
-
-
-
-
-
-
-
-
-
1.4
-
-
-
12.7
12.7
1.4
14.1
(70.4)
(70.3)
-
(70.3)
(57.7)
(57.6)
1.4
(56.2)
(110.5)
(110.5)
-
1.8
0.2
-
(1.1)
(1.4)
(6.8)
17.5
9.7
-
-
0.4
(1.1)
-
-
17.5
-
-
-
-
-
-
-
-
-
(110.5)
9.7
-
-
0.4
(1.1)
-
-
17.5
1,760.1
2,648.3
7.3 2,655.6
- 232.8
232.8
1.2
234.0
-
73.7
73.7
-
73.7
- 306.5
306.5
1.2
307.7
-
-
-
-
-
-
(113.0)
(113.0)
-
-
0.8
0.3
15.0
(19.2)
-
-
0.1
0.1
(4.9)
-
-
-
-
-
-
(4.9)
-
3.2
0.2
0.2
(12.6)
-
15.6
15.6
-
-
-
-
-
-
-
-
-
-
(113.0)
15.0
(19.2)
-
-
0.1
(4.9)
3.2
0.2
-
15.6
(15.3)
(4.9) 1,958.0 2,848.6
11.7 2,860.3
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2017
i
m
u
m
e
r
p
e
r
a
h
S
r
e
g
r
e
M
e
v
r
e
s
e
r
517.8
326.5
£m
At 1 January 2016
Profit for the year
Other comprehensive income
for the period net of tax
Total comprehensive
income for the year
Dividends
e
r
a
h
S
l
a
t
i
p
a
c
25.0
-
-
-
-
-
-
-
-
Issue of share capital
0.1
9.6
Own shares movement
Tax on share based payments
(note 10c)
Credit for equity-settled share
based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 31 December 2016
25.1
527.4
326.5
Profit and total comprehensive
income for the year
Dividends
-
-
-
-
Issue of share capital
0.1
14.9
Purchase of own shares
Own shares movement
Tax on share based payments
(note 10c)
Options on non-controlling
interest
Credit for equity-settled share
based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 31 December 2017
25.2
542.3
326.5
The Company
i
g
n
g
d
e
H
e
v
r
e
s
e
r
(0.1)
-
0.1
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
s
e
r
a
h
s
n
w
O
(15.5)
-
-
-
-
-
6.8
-
-
(8.7)
-
-
-
(19.2)
12.6
-
-
-
r
e
h
t
O
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4.9)
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
421.5
265.6
y
t
i
u
q
e
l
a
t
o
T
1,275.2
265.6
-
0.1
265.6
265.7
(110.5)
(110.5)
-
(6.8)
(0.3)
9.7
-
(0.3)
17.5
17.5
587.0
1,457.3
261.7
261.7
(113.0)
(113.0)
-
-
(12.6)
0.1
-
15.0
(19.2)
-
0.1
(4.9)
-
15.6
15.6
(15.3)
(4.9)
738.8
1,612.6
101
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
Cash Flow Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Operating profit before amortisation and impairment of goodwill
and other intangible assets and exceptional items
380.1
409.0
308.3
The Group
2017
£m
2016
£m
The Company
2017
£m
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of internally generated intangibles
Other non cash movement – share based payments
Other non-cash movements - other
Losses of associates
Gain on disposal of property, plant and equipment
Operating cash flows before exceptional cash flows
Increase in inventories
Increase in receivables
Increase / (decrease) in payables
Payments in respect of exceptional items
Pension payments in excess of the charge to profits
Cash generated from operations
Interest paid
Current income taxes paid
One-off income tax payments
Total income taxes paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Proceeds on disposal of property, plant and equipment
Development of computer software
Purchases of property, plant and equipment
Interest in associates
Investments
Acquisition of businesses
Net cash used in investing activities
Financing activities
Proceeds from the issue of share capital
Purchase of own shares
Net movement in finance lease liabilities
Debt arrangement fees
Repayment of loan notes
Decrease in loans and liabilities to pension scheme
Gain on settlement of swap contracts
Increase in sterling bonds
Dividends paid
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of year (note 18)
102
102.0
12.6
15.6
0.2
-
(30.6)
479.9
(47.0)
(106.3)
76.8
(20.2)
(11.3)
371.9
(27.6)
(57.2)
-
(57.2)
287.1
0.5
113.9
(48.1)
(179.0)
(11.3)
0.3
(9.7)
97.6
7.5
17.5
0.2
1.1
(18.0)
514.9
(5.7)
(83.3)
93.9
(11.6)
(13.5)
494.7
(22.6)
(62.2)
(42.5)
(104.7)
367.4
0.4
42.9
(30.8)
(197.5)
(4.6)
(1.1)
(3.2)
(133.4)
(193.9)
15.0
(19.2)
(7.0)
-
-
(3.2)
-
-
(113.0)
(127.4)
26.3
250.5
276.8
9.7
-
15.9
(2.4)
(123.1)
(113.2)
16.8
300.0
(110.5)
(6.8)
166.7
83.8
250.5
2016
£m
317.7
0.1
-
6.0
-
-
-
323.8
-
(118.0)
(1.9)
-
-
203.9
(21.4)
-
-
-
0.1
-
6.9
-
-
-
315.3
-
(7.9)
(100.8)
-
-
206.6
(26.8)
-
-
-
179.8
182.5
0.6
-
-
(0.2)
(11.3)
(10.8)
-
(21.7)
15.0
(19.2)
-
-
-
-
-
-
(113.0)
(117.2)
40.9
185.9
226.8
0.4
-
-
(0.1)
(4.6)
(5.6)
-
(9.9)
9.7
-
-
(2.4)
(123.1)
(110.0)
16.8
300.0
(110.5)
(19.5)
153.1
32.8
185.9
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements Notes to the financial statements
FOR THE YEAR ENDED 31 DECEMBER 2017
1. GENERAL INFORMATION
Impact of new standards and interpretations
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 166. The nature of the Group’s operations
and its principal activities are set out in the Strategic Report on
pages 4 to 48.
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, available
for sale investments and contingent consideration arising
from business combinations 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.
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:
• Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures
• Amendments to IAS 40: Transfers of Investment Property
• Amendments to IFRS 2: Amendments to clarify
the classification and measurement of share-based
payment transactions
• Amendments to IFRS 9: Prepayment Features with
Negative Compensation
• IFRIC 22 – Foreign Currency Transactions and Advance
Consideration
• IFRIC 23 – Uncertainty over Income Tax Treatments
• Annual improvements to IFRS 2014—2016 cycle
• Annual improvements to IFRS 2015—2017 cycle
Based on their initial assessments, the Directors anticipate that
adoption of these Standards and Interpretations in future periods
will not have a material impact on the financial statements of
the Group.
• IFRS 9 – Financial Instruments
The new standard introduces a principles-based approach
to the classification and measurement of financial instruments,
a new impairment model and changes to hedge accounting.
It will be effective from 1 January 2018. The Directors have
completed their assessment and based on the Group’s current
financial instruments and hedging strategy there will be no
material effect on the financial statements.
• IFRS 15 – Revenue Recognition
IFRS 15 – Revenue from Contracts with Customers, which
supersedes IAS 18 – Revenue, will be effective from 1 January
2018. The new standard provides a single model for revenue
recognition based on when identified performance obligations
are satisfied. The revenue recognition model now focuses on the
transfer of control rather than the transfer of risks and rewards.
The Directors have completed their assessment of the impact of
the new standard. Based on the current operating model the new
standard will not have a material effect on revenue recognition, as
the point at which revenue is recognised at present is consistent
with the passing of control under IFRS 15.
The new standard will require the value of inventory expected to
be returned, which currently forms part of the customer returns
provision, to be reclassified from other payables to current assets
in the balance sheet.
103
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements • IFRS 16 – Leases
Going concern
In January 2016 the IASB issued IFRS 16 – Leases. It was
endorsed by the European Union in October 2017 and will be
effective from 1 January 2019. This Standard will have a material
effect on the Group because the value of the operating leases it
has entered into will be included in the balance sheet in future
(see note 29). The Group has made progress in its project
to determine the effect of this new Standard and implement
the processes and systems necessary to comply with its
requirements.
Given the complexity of the Standard and the volume of leases to
which the Group is a party, this project has not been completed
at the date of these accounts. However, based on an analysis of
all the Group’s material leases the Group’s initial estimates are
that the implementation of the standard will result in net debt that
is broadly consistent with lease adjusted net debt as currently
disclosed in note 33.
The estimate above is based on the assumption that the Group
applies the Standard retrospectively with the cumulative effect
of initial application recognised on the date that it occurs and
with the right-of-use assets measured as if the Standard’s
requirements had been applied at the commencement date
of each lease, but discounted using the Group’s incremental
borrowing rate at the date of initial application. The Directors have
not concluded on which transition option will be adopted.
The Directors are currently of the opinion that the Group’s
forecasts and projections show that the Group should be able
to operate within its current facilities and comply with its banking
covenants. The Group is however exposed to a number of
significant risks and uncertainties, which could affect the Group’s
ability to meet management’s projections. The Directors believe
that the Group has the flexibility to react to changing market
conditions and is adequately placed to manage its business
risks successfully.
Detailed considerations of going concern, risks and uncertainties
are provided in the Annual Report on pages 56 and 33 to
39 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 twelve months from the date of signing these accounts.
For this reason, they continue to adopt the going concern basis
in preparing the financial statements.
104
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial 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
Group, services comprise tool hire and kitchen and bathroom
installations. Tool hire revenue is recognised on a straight line
basis over the period of hire. Revenue from the installation
of kitchens and bathrooms is recognised when the Group has
fulfilled all its obligations under the installation contract.
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, material pension scheme curtailment gains
and the effect of changes in corporation tax rates on deferred
tax balances.
Supplier income
Supplier income comprises fixed price discounts, volume rebates
and customer sales support.
Fixed price discounts and volume rebates received and
receivable in respect of goods which have been sold are initially
deducted from the cost of inventory and therefore reduce cost
of sales in the income statement when the goods are sold.
Where goods on which the fixed price discount or volume rebate
has been earned remain in inventory at the year-end, the cost of
that inventory reflects those discounts and rebates (see inventory
accounting policy).
The Group receives customer sales support payments that are
made entirely at the supplier’s option, that are requested by the
Group when a specific product is about to be sold to a specific
customer and for which payment is only received after the sale
has been completed. All customer sales support receipts received
and receivable are deducted from cost of sales when the sale to
the third party has been completed, i.e. when the customer sales
support payment has been earned.
Supplier income receivable is netted off against trade payables
when there is a legally binding arrangement in place and it
is management’s intention to do so, otherwise amounts are
included in other receivables in the balance sheet.
Other promotional arrangements are not significant.
Customer rebates
Where the Group has rebate agreements with its customers,
the value of customer rebates paid or payable, calculated in
accordance with the agreements in place, is deducted from
turnover in the year in which the rebate is earned.
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 Payments
Where a business combination is achieved in stages, the Group’s
previously held interest in the acquired entity is 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 and is
then reviewed at least annually 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 carrying value subject to being tested for impairment
at that date. Goodwill written off to reserves prior to 1998 under
UK GAAP has not been reinstated and would not be included in
determining any subsequent profit or loss on disposal.
Liabilities for contingent consideration are classified as fair value
through profit and loss.
105
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 2. SIGNIFICANT ACCOUNTING POLICIES
continued
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.
The directly attributable costs incurred for the development of
computer software owned by, and for use within the business, are
capitalised and written off over their estimated useful life, which
ranges from 3 years to 10 years. Interfaces are amortised over the
lower of the remaining estimated useful lives of the systems they
operate between. Costs relating to research, maintenance and
training are expensed as they are incurred.
Amounts paid to third parties in respect of the development of
assets not controlled by the Group are expensed over the period
where the Group receives the benefit of the use of these assets.
License fees for using third-party software are expensed over the
period the software is in use.
No amortisation is charged on assets in the course of construction.
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 retained earnings.
Leases
Finance leases, which transfer to the Group substantially all the
risks and benefits incidental to ownership of the leased items,
are capitalised at the inception of the lease at the fair value of the
leased assets or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between
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.
A sale and leaseback transaction is one where the Group sells an
asset and immediately reacquires the use of the asset by entering
into a lease with the buyer. The accounting treatment of the sale
and leaseback depends upon the substance of the transaction
(by applying the lease classification principles described above)
and whether or not the sale was made at the asset’s fair value.
For sale and finance leasebacks, any profit from the sale
is deferred and amortised over the lease term. For sale and
operating leasebacks, generally the assets are sold at fair
value, and accordingly the profit or loss from the sale is
recognised immediately.
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 to their value. 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 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.
106
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements Inventories
Derivative financial instruments and hedge accounting
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 irrecoverable.
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.
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 non-equity funding
are recognised in the income statement over the life of the facility.
All other borrowing costs are recognised in the income statement
in accordance with the effective interest rate method.
Trade payables
Trade payables are measured at amortised cost.
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 derivative 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 transfer to a market
participant 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 as effective
hedges are marked-to-market at the balance sheet date, with any
gains or losses being taken through the income statement.
Foreign currencies
Financial assets and financial liabilities
Transactions denominated in foreign currencies are recorded
at the rates ruling on the date of the transaction.
At the balance sheet date, 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.
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 derivative financial instruments.
107
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 2. SIGNIFICANT ACCOUNTING POLICIES
continued
Financial assets and financial liabilities at FVTPL
Financial assets and financial liabilities are classified as FVTPL
where the financial asset or the financial liability is either held for
trading or 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 being sold or
disposed of 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
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.
• Is a derivative that is not designated and effective as a
Taxation
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 rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability,
or where appropriate a shorter period, to the net carrying amount
on initial recognition.
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from net profit as reported in the income
statement because it excludes items of income and expense that
are taxable or deductible in other years and it further excludes
items, which are never taxable or deductible. The Group’s liability
for current tax is calculated using tax rates that have been
enacted or substantially enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used
in the computation of taxable profit. This is accounted for using
the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable 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 based on tax laws and rates that have been enacted
or substantially enacted at the balance sheet date. 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 within equity.
108
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
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. Remeasurement 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. Remeasurement 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 to
which the Group is unconditionally committed, discounted using
the IAS 19 (revised 2011) discount rate.
Employee share incentive plans
The Group issues equity-settled share-based payments to
employees (long-term incentives, executive share options and
Save As You Earn). These payments are measured at fair value
at the date of grant using 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 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.
Some financial information is produced by finance systems that
were first implemented by the Group over 30 years ago, which
as the business has grown, have been amended to cope with
significantly higher transaction levels and more complicated
ways of doing business. This has made the systems unwieldy
and frequently requires management to make judgements about
the accuracy of information calculated by those systems in
areas such as supplier income, inventory and goods received not
invoiced accruals.
The Directors believe that the following items are critical due to
the degree of estimation required and / or the potential material
impact the judgements may have on the Group’s financial position
and performance.
Supplier income
The overwhelming majority of supplier income, in excess of
85% by value, is determined by reference to fixed price discounts
on actual purchases with approximately 4% being volume rebates
that are subject to stepped rebate targets, the rebate percentage
increasing as values or volumes purchased reach pre-agreed
targets. However, because the agreements with suppliers are
almost entirely coterminous with the Group’s financial year
end, by the year-end the Group knows whether those targets
were reached.
Approximately 80% of supplier income is receivable during
the year as it is earned and settled monthly, although some
agreements may also stipulate quarterly, bi-annual or annual
payments, with only two of the arrangements not being co-
terminous with the Group’s statutory year-end. Therefore the
key estimates relate to the total value of rebates and fixed price
discounts still to be received at the year-end and the amount to
be set against the gross value of inventory. These are determined
using established methodologies and in the case of collectability,
management’s knowledge of the parties involved and historical
collection trends.
Other supplier income relates to customer sales support received
in respect of sales of specific products to specific customers
which is included in the income statement when the relevant sale
occurs, i.e. when all conditions for it to be earned have been met.
At 31 December 2017 the supplier income amount recognised
in other receivables and trade payables was £354m
(2016: £324m).
109
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 3. CRITICAL JUDGEMENTS AND KEY SOURCES
OF ESTIMATION AND UNCERTAINTY
continued
Cash generating units
In the Directors’ judgement, 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 or distribution network in the Group is a cash
generating unit (“CGU”). Impairment testing of property, plant
and equipment is carried out at individual branch or distribution
network 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 estimates concerning discount rates,
future cash flows and the future development of the business
that are consistent with its corporate 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 other 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
twenty-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. The Directors have applied risk-based
adjustments to cash flows 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
other 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
difference between actual inflation and the actual increase in
pensionable salaries is greater than that assumed, or if long
term interest rates are lower than assumed, or if the average life
expectancy of pensioners increases, then the pension deficit
could 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.
Inventories
In determining the cost of inventories the Directors have to make
estimates to arrive at cost and net realisable value.
The Group has entered into a large number of rebate and fixed
price discount agreements, the effects of which have to be offset
against the gross invoice price paid for goods. As explained in
the section of this note setting out the estimates made in respect
of supplier income, the calculation of the value deferred into
stock is complicated due to the number, nature and structure of
the agreements in place. However, the Group has a well tested
methodology that is consistently applied. The Directors believe
that the £210m deduction from the gross invoice cost of stock
(2016: £199m) is appropriate.
Furthermore, determining the net realisable value of the wide
range of products held in many locations requires judgement
to be applied to determine the likely saleability of the product
and the potential price that can be achieved. In arriving at any
provisions for net realisable value the Directors take into account
the age, condition and quality of the product stocked and the
recent trend in sales.
110
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 4. REVENUE AND OTHER INCOME
Sale of goods
Sales of services
Management charges
Dividends from subsidiaries
Dividend receivable
Other operating income
Finance income
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 associates
Operating profit
Add back exceptional items
Add back amortisation of acquired intangible assets
Adjusted operating profit
Profit on disposal of properties
The Group
2017
£m
2016
£m
6,250.6
6,049.9
182.5
167.3
-
-
-
-
-
-
6,433.1
6,217.2
5.6
0.7
5.7
0.7
The Company
2017
£m
2016
£m
-
-
4.5
323.4
0.3
328.2
-
0.6
-
-
8.4
330.4
-
338.8
-
0.6
6,439.4
6,223.6
328.8
339.4
The Group
2017
£m
6,433.1
2016
£m
6,217.2
(4,527.5)
(4,365.4)
1,905.6
(1,239.7)
(374.0)
29.4
5.6
-
326.9
40.9
12.3
380.1
(29.4)
350.7
1,851.8
(1,403.1)
(369.9)
17.0
5.7
(1.1)
100.4
292.0
16.6
409.0
(16.6)
392.4
The Company
2017
£m
328.2
-
328.2
-
(30.4)
-
-
-
297.8
10.5
-
308.3
-
308.3
2016
£m
338.8
-
338.8
-
(40.1)
-
-
-
298.7
19.0
-
317.7
-
317.7
2016
£000
130
595
175
55
187
1,142
111
During the year the Group incurred the following costs for services provided by the Company’s auditor:
The Group
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
Additional fees payable to Company’s auditor for the prior period audit
Fees paid to the Company’s auditor for other services:
Audit related assurance services
Other services
2017
£000
130
670
135
59
61
1,055
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 5. PROFIT continued
A description of the work of the Audit Committee is set out in the Audit Committee report on pages 58 to 63, and includes an
explanation of how auditor objectivity and independence is safeguarded when the auditor provides non-audit services.
Operating profit has been arrived at after charging / (crediting):
The Group
The Company
Movement of provisions against inventories
2017
£m
1.1
2016
£m
4.1
Cost of inventories recognised as an expense
4,526.4
4,361.3
Pension costs in administration expenses
Pension costs in selling and distribution costs
Depreciation of property, plant and equipment
Impairment of goodwill and acquired intangible assets
Impairment of investments
Amortisation of internally generated intangible assets
Staff costs
Gain on disposal of property, plant and equipment
Rental income
Hire of vehicles, plant and machinery
Other leasing charges – property
Amortisation of acquired intangible assets
Exceptional restructuring costs
Auditor’s remuneration for audit services
b. Adjusted operating margin
7.7
19.2
102.0
-
-
12.6
853.0
(30.6)
(5.6)
49.8
196.2
12.3
40.9
0.8
8.7
16.8
97.6
231.3
4.1
7.5
814.5
(18.0)
(5.7)
46.3
194.0
16.6
56.6
0.7
2017
£m
2016
£m
-
-
0.1
-
0.1
-
10.5
-
15.9
-
-
-
-
-
-
0.1
-
-
0.3
-
0.1
-
19.0
-
16.0
-
-
-
-
-
-
0.1
General
Merchanting
Contracts
Consumer
Plumbing
& Heating
Unallocated
Group
2017
£m
2016
£m
2017
£m
2016
£m
2017
£m
2016
£m
2017
£m
2016
£m
2017
£m
2016
£m
2017
£m
2016
£m
Revenue
2,109.5 2,073.4 1,369.0
1,266.7 1,589.1
1,518.2 1,365.5 1,358.9
-
- 6,433.1
6,217.2
Segment result
200.6
196.2
81.3
60.0
79.4
59.6
(3.5)
(198.3)
(30.9)
(17.1) 326.9
100.4
Amortisation of
intangible assets
Exceptional items
Adjusted
segment result
Property profits
Adjusted segment
result excluding
property profits
Adjusted
operating margin
Adjusted segment
margin excluding
property profits
-
-
-
11.3
6.3
-
6.3
9.7
5.0
-
5.0
36.4
1.0
5.3
40.9
232.3
-
-
-
12.3
16.6
2.3
40.9
292.0
200.6
207.5
87.6
76.0
84.4
101.0
38.4
39.3
(30.9)
(14.8)
380.1
409.0
(18.0)
(13.6)
(1.9)
0.3
(1.9)
-
(7.6)
(3.3)
-
-
(29.4)
(16.6)
182.6
193.9
85.7
76.3
82.5
101.0
30.8
36.0
(30.9)
(14.8) 350.7
392.4
9.5% 10.0%
6.4%
6.0%
5.3%
6.7%
2.8%
2.9%
8.7%
9.3%
6.3%
6.0%
5.2%
6.7%
2.3%
2.6%
-
-
-
5.9%
6.6%
-
5.5%
6.3%
Segmental information including the definition of segment result is shown in note 6.
112
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
c. Adjusted profit before and after tax
Profit before tax
Exceptional items
Amortisation of acquired intangible assets
Adjusted profit before tax
Profit after tax
Exceptional items
Amortisation of acquired intangible assets
Tax on amortisation of acquired intangible assets
Tax on exceptional items
Effect of reduction in corporation tax rate on deferred tax
Adjusted profit after tax
d. Exceptional items
Impairment of goodwill, other intangible assets, tangible fixed assets
and investments
Branch closure programme
Supply chain restructure
Central and divisional restructuring costs
Write off of amounts previously held in current assets
The Group
2017
£m
-
12.0
19.1
9.8
-
40.9
2016
£m
235.4
16.5
29.6
4.3
6.2
292.0
The Group
2017
£m
289.7
40.9
12.3
342.9
The Group
2017
£m
234.0
40.9
12.3
(2.1)
(7.8)
-
277.3
The Company
2017
£m
10.5
-
-
-
-
2016
£m
72.7
292.0
16.6
381.3
2016
£m
14.1
292.0
16.6
(2.9)
(15.1)
(3.4)
301.3
2016
£m
19.0
-
-
-
-
10.5
19.0
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.
The Group
2017
In August 2017 the Group announced that, following a comprehensive strategic review of the Plumbing & Heading division, it would
reduce capacity, integrate the CPS and PTS businesses, overhaul the division’s customer proposition and create a dedicated Plumbing
& Heating supply chain. In accordance with the accounting policy stated in note 2 the total cost of £40.9m has been treated as
exceptional. The exceptional items consist of the following:
• £12.0m of property, redundancy and other costs associated with the closure of 46 branches
• £19.1m of costs arising from the separation and rationalisation of the Plumbing & Heating supply chain. The costs comprised
property-related costs, redundancy and reorganisation costs and inventory write-downs
• £9.8m of central and divisional costs including people-related, consultancy and other restructuring costs.
2016
Due to economic uncertainty and market conditions, the prospects for each business in the Plumbing & Heating division were
reassessed and the Group determined that it was appropriate to impair the carrying value of assets in the division. In addition the
performance of the Group’s small tile business was expected to fall below previous expectations. Accordingly an impairment charge of
£235.4m was made in the income statement, an analysis of which is shown in note 13.
113
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
5. PROFIT continued
In October 2016, as a result of the economic uncertainty, the Group announced a number of branch and distribution centre closures
together with other cost reduction measures. In accordance with the accounting policy stated in note 2 the total cost of £56.6m was
treated as exceptional.
The Company
The Company impaired the carrying value of investments in subsidiaries by £10.5m (2016: £19.0m).
6. BUSINESS AND GEOGRAPHICAL SEGMENTS
As required by IFRS 8, operating segments are identified on the basis of internal reports about components of the Group that
are regularly reviewed by the Chief Executive to assess their performance. 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. The operating segments of the Group are aggregated into four divisions, the reportable segments of the Group,
based on shared economic characteristics and similarities in their customers and products.
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 trading is eliminated.
Contracts
Consumer
2017
General
Merchanting
£m
£m
Plumbing &
Heating
£m
1,365.5
(3.5)
-
-
-
(3.5)
-
(3.5)
592.3
(317.8)
274.5
3.6
1.0
8.8
Unallocated
Consolidated
£m
-
(30.9)
(2.2)
0.7
(35.7)
(68.1)
(55.7)
(123.8)
£m
6,433.1
326.9
(2.2)
0.7
(35.7)
289.7
(55.7)
234.0
326.7
5,141.8
(795.1)
(2,281.5)
(468.4)
2,860.3
2.3
230.4
-
0.1
12.3
114.6
£m
1,589.1
79.4
-
-
-
79.4
-
79.4
1,544.6
(403.6)
1,141.0
57.3
5.0
26.4
Revenue
Segment result
Share of associates
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Segment assets
Segment liabilities
Consolidated net assets
Capital expenditure
Amortisation of acquired
intangible assets
Depreciation and amortisation
of software
2,109.5
1,369.0
200.6
81.3
-
-
-
200.6
-
200.6
1,811.0
(441.5)
1,369.5
152.9
-
67.5
-
-
-
81.3
-
81.3
867.2
(323.5)
543.7
14.3
6.3
11.8
114
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements General
Merchanting
£m
2,073.4
196.2
-
-
196.2
-
196.2
1,661.5
(388.5)
1,273.0
123.9
-
-
54.3
Contracts
Consumer
2016
£m
1,266.7
60.0
-
-
60.0
-
60.0
831.4
£m
1,518.2
59.6
-
-
59.6
-
59.6
1,526.4
(255.9)
(409.0)
575.5
14.6
6.3
-
11.8
1,117.4
56.2
5.0
21.6
22.5
Plumbing &
Heating
£m
1,358.9
(198.3)
-
-
(198.3)
-
(198.3)
613.1
(332.5)
280.6
9.1
5.3
213.8
9.0
Unallocated
Consolidated
£m
-
(17.1)
0.7
(28.4)
(44.8)
(58.6)
(103.4)
294.6
(885.5)
(590.9)
-
-
-
-
£m
6,217.2
100.4
0.7
(28.4)
72.7
(58.6)
14.1
4,927.0
(2,271.4)
2,655.6
203.8
16.6
235.4
97.6
Revenue
Segment result
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Segment assets
Segment liabilities
Consolidated net assets
Capital expenditure
Amortisation of acquired
intangible assets
Impairment of goodwill
and acquired intangibles
Depreciation
During 2016 an impairment loss was recognised in the Consumer and Plumbing & Heating segments in respect of goodwill and other
assets totalling £235.4m.
Unallocated segment assets and liabilities comprise the following:
Assets
Interest in associates
Financial instruments
Tangible fixed assets
Investments
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
Unallocated corporate liabilities
2017
£m
20.3
-
0.2
9.5
276.8
19.9
326.7
(4.9)
(44.5)
(61.0)
(28.3)
(618.3)
(38.1)
(795.1)
2016
£m
11.5
1.7
0.7
9.1
250.5
21.1
294.6
-
(43.8)
(45.8)
(127.3)
(628.0)
(40.6)
(885.5)
115
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 7. STAFF COSTS
a. The average full-time equivalent monthly number of persons employed (including executive directors)
Sales and distribution
Administration
The Group
2017
No.
25,979
1,774
27,753
2016*
No.
25,478
1,761
27,239
The Company
2017
No.
-
64
64
*Restated. During the year the Directors identified a discrepancy in the way that the Group’s average monthly number of persons
employed was calculated. As a result the 2016 disclosure has been increased by 2,583.
b. Aggregate remuneration
Wages and salaries
Share based payments (note 8)
Social security costs
Other pension costs (note 27m)
8. SHARE-BASED PAYMENTS
The Group
2017
£m
772.9
15.6
64.5
26.9
879.9
2016
£m
736.3
17.5
60.7
25.5
840.0
The Company
2017
£m
7.9
6.6
1.1
0.1
15.7
2016
No.
-
50
50
2016
£m
9.1
6.0
0.9
0.2
16.2
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 (%)
2017
2016
Executive
options
1,487
1,488
29.2%
3.0
0.1%
2.9%
SAYE
1,434
1,185
28.4%
3.3
0.1%
3.1%
Nil price
options
1,487
-
31.0%
2.9
0.2%
2.9%
Executive
options
1,785
1,847
23.4%
3.0
0.5%
2.3%
SAYE
1,569
1,342
28.2%
3.4
0.1%
2.6%
Nil price
options
1,797
-
23.7%
2.9
0.5%
2.3%
Volatility is 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.
A description of the share schemes operated by the Group is contained in the remuneration report on pages 64 to 81.
116
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements SAYE options were granted on 20 September 2017. The estimated fair value of the shares under option at that date was £8.9m for the
Group and £0.1m for the Company.
Shares were granted under the share-matching scheme on 30 March 2017. The estimated fair value of the shares under option at those
dates was £5.1m for the Group and £2.8m for the Company.
Shares were granted under the performance share plan on 15 March 2017 and 24 August 2017. The estimated fair value of the
shares under option at those dates was £8.2m for the Group and £3.8m for the Company.
Shares were granted under the deferred share bonus plan on 15 March 2017. The estimated fair value of the shares at that date
was £0.8m for the Group and £0.6m for the Company.
Shares were granted under the Wickes and Toolstation long-term incentive plans on 15 March 2017. The estimated fair value
of the shares at that date was £0.5m for the Group and £nil for the Company.
The Group charged £15.6m (2016: £17.5m) and the Company charged £6.9m (2016: £6.0m) 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
2017
Number of
options
Number
of nil price
options
Weighted
average
exercise
price (p)
2016
Number of
options
Number
of nil price
options
Weighted
average
exercise
price (p)
1,384
1,532
1,248
1,197
1,486
1,314
5,578
3,007
(1,545)
(1,209)
2,756
5,580
393
(362)
(793)
1,478
3,330
395
1,345
1,266
906
1,194
1,384
1,087
5,782
(1,401)
(1,078)
2,275
5,578
354
2,946
(250)
(545)
856
3,007
408
In thousands of options
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 1,539 pence (2016: 1,573 pence).
Details of the options outstanding at 31 December 2017 is as follows:
The Group
2017
SAYE
Executive
options
Nil price
options
Executive
options
2016
SAYE
Range of exercise prices (pence)
433-2,018 818-1,616
Weighted average exercise price (pence)
Number of shares (thousands)
Weighted average expected remaining life (years)
Weighted average contractual remaining life (years)
1,670
292
1.1
8.0
1,296
5,288
2.4
2.8
-
-
3,329
1.2
8.0
201-1,958
657-1,616
1,697
292
1.0
7.5
1,376
5,286
2.1
2.6
Nil price
options
-
-
3,007
1.0
7.6
117
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
8. SHARE-BASED PAYMENTS continued
If all 0.3m outstanding executive options vest and then are exercised on the date of vesting, or in the case of SAYE all 5.3m shares are
acquired on the first possible day 5.6m of shares will be issued for a consideration of £73.4m in the years ending 31 December:
31 December
2018
2019
2020
2021
2022
Options
SAYE
No.
m
0.1
0.7
Value
£m
1.4
10.7
No.
m
0.1
1.3
Value
£m
1.0
18.2
No.
m
0.1
2.3
Value
£m
1.6
27.2
No.
m
-
0.2
Value
£m
-
3.2
No.
m
-
0.4
Value
£m
-
4.9
The table above shows theoretical amounts. For the Company to receive the cash indicated in the periods shown, the following
must occur:
• All performance conditions on executive share options must be fully met
• Options must be exercised on the day they vest (option holders generally have a 7 year period post vesting to exercise the option)
• The share price at the exercise date for SAYE options must exceed the exercise price and every holder must exercise
• All option/SAYE holders must remain with the Company, or leave on good terms
If none of the requirements are met then the Company will receive no consideration.
The number and weighted average exercise price of share options is as follows:
The Company
2017
Number of
options
Number
of nil price
options
Weighted
average
exercise
price (p)
2016
Number of
options
Number
of nil price
options
Weighted
average
exercise
price (p)
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
1,543
1,541
1,240
1,591
1,297
1,412
1,613
60
(17)
(12)
2
31
64
5
1,279
(136)
(411)
103
502
1,337
102
1,481
1,569
1,274
-
1,592
1,543
909
64
(8)
(15)
-
19
60
4
Details of the options outstanding at 31 December 2017 is as follows:
The Company
2017
SAYE
Executive
options
Nil price
options
Executive
options
2016
SAYE
Range of exercise prices (pence)
433-2,018
818-1,616
Weighted average exercise price (pence)
1,251
1,103
Number of shares (thousands)
Weighted average expected
remaining life (years)
Weighted average contractual
remaining life (years)
22
1.3
11.1
41
2.5
3.0
-
-
1,330
1.3
11.2
743-1,958
657-1,616
1,837
1,427
17
0.7
10.6
43
2.5
3.0
1,195
(81)
(242)
-
407
1,279
30
Nil price
options
-
-
1,279
1.1
11.1
118
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 9. NET FINANCE COSTS
a. Finance costs and finance income
Interest on bank loans and overdrafts*
Interest on sterling bonds
Interest on obligations under finance leases
Unwinding of discounts - property provisions
Unwinding of discounts - SPV loan
Other interest
Other finance costs – pension scheme
Net loss on remeasurement of derivatives at fair value
Finance costs
Net gain on remeasurement of derivatives at fair value
Interest receivable
Finance income
Net finance costs
The Group
2017
£m
(4.1)
(21.0)
(0.8)
(0.7)
(2.4)
(0.7)
(3.1)
(2.9)
(35.7)
-
0.7
0.7
2016
£m
(6.1)
(16.1)
(0.6)
(0.3)
(2.4)
(1.2)
(1.7)
-
(28.4)
0.3
0.4
0.7
(35.0)
(27.7)
* Includes £1.5m (2016: £1.4m) of amortised finance charges. In 2016 an additional £0.5m of arrangement fees on bilateral loans was
charged directly to the Income Statement.
The charge caused by the unwinding of the discounts relates to the property provisions and the liability to the pension scheme
associated with the SPV (note 27).
b. Fixed charge cover interest
Interest on bank loans and overdrafts*
Interest on sterling bonds
Interest on obligations under finance leases
Unwinding of discounts - SPV loan
Interest for fixed charge ratio purposes
The Group
2017
£m
(4.1)
(21.0)
(0.8)
(2.4)
(28.3)
2016
£m
(6.1)
(16.1)
(0.6)
(2.4)
(25.2)
* Includes £1.5m (2016: £1.4m) of amortised finance charges. In 2016 an additional £0.5m of arrangement fees on bilateral loans was
charged directly to the Income Statement.
119
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
9. NET FINANCE COSTS continued
c. The Company
Interest on bank loans and overdrafts*
Interest on sterling bonds
Interest payable to Group companies
Other interest
Net loss on re-measurement of derivatives at fair value
Finance costs
Net gain on remeasurement of derivatives at fair value
Interest receivable from Group companies
Interest receivable
Finance income
Net finance costs
The Company
2017
£m
(3.9)
(21.0)
(20.5)
(0.6)
(2.9)
(48.9)
-
-
0.6
0.6
2016
£m
(5.7)
(16.1)
(21.6)
(0.9)
-
(44.3)
0.3
0.1
0.2
0.6
(48.3)
(43.7)
* Includes £1.5m (2016: £1.4m) of amortised finance charges. In 2016 an additional £0.5m of arrangement fees on bilateral loans was
charged directly to the Income Statement.
120
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 10. TAX
a. Tax charge in income statement
The Group
Pre-
exceptional
items
£m
2017
Exceptional
items
Total
£m
£m
Pre-
exceptional
items
£m
2016
Exceptional
items
Total
The Company
2017
2016
£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
64.9
0.4
65.3
(2.1)
0.3
(1.8)
(7.4)
-
(7.4)
(0.4)
-
(0.4)
57.5
0.4
57.9
(2.5)
0.3
(2.2)
74.4
(3.7)
70.7
2.6
3.8
6.4
(11.3)
-
(11.3)
(7.2)
-
(7.2)
63.1
(3.7)
59.4
(4.6)
3.8
(0.8)
(12.2)
0.2
(12.0)
(0.2)
-
(0.2)
(10.9)
(0.1)
(11.0)
0.6
(0.2)
0.4
Total tax charge
63.5
(7.8)
55.7
77.1
(18.5)
58.6
(12.2)
(10.6)
During 2016, following a change in legislation, HMRC issued a payment demand for £52.5m of unpaid tax relating to historical tax
disputes. As shown in the cash-flow statement, the Group made one-off tax payments of £42.5m. The remaining £10m was settled by
allocating against the outstanding amount of £10m, historical tax overpayments that were already held by HMRC.
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 for the Group and Company are as follows:
Profit before tax
Tax at the UK standard corporation tax rate
Tax effect of expenses / credits, that are not deductible / taxable, in determining
taxable profit
Depreciation of non-qualifying property
Impairment of goodwill
Impairment of intangibles
Share based payments
Deferred tax rate change
Property sales
Prior period adjustment
Tax expense and effective tax rate for the year
The Group
2017
2016
£m
289.7
55.8
1.2
2.5
-
-
0.9
-
(5.4)
0.7
55.7
%
19.3
0.4
0.9
-
-
0.3
-
(1.9)
0.2
19.2
£m
72.7
14.5
0.8
2.6
42.7
0.5
3.9
(3.1)
(3.4)
0.1
%
20.0
1.1
3.6
58.7
0.7
5.2
(4.3)
(4.7)
0.3
58.6
80.6
The tax charge for 2016 includes an exceptional credit of £3.4m arising from the reduction in the rate of UK corporation tax effective on
1 April 2020 from 18% to 17%.
121
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 10. TAX continued
The Company
2017
2016
Profit before tax
Intercompany dividends
Loss before tax and dividends received
Tax at the UK standard corporation tax rate
Tax effect of expenses / credits, that are not deductible / taxable, in determining
taxable profit
Impairment of investments
Prior period adjustment
Share based payments
£m
249.5
(323.7)
(74.2)
(14.3)
(0.1)
2.0
0.2
-
%
19.3
0.1
(2.7)
(0.2)
-
Tax credit and effective tax rate for the year
(12.2)
16.5
b. Tax charge in the statement of comprehensive income
£m
255.0
(330.4)
(75.4)
(15.1)
(0.1)
3.8
(0.3)
1.1
(10.6)
%
20.0
0.1
(5.0)
0.4
(1.5)
14.0
In addition to the amounts charged to the income statement the following amounts relating to tax have been recognised in other
comprehensive income:
Deferred tax:
Items that may not be reclassified:
Deferred tax rate change on actuarial movement
Income tax relating to items not reclassified
c. Tax credited directly to equity
The Group
2017
£m
2016
£m
The Company
2017
£m
2016
£m
(17.1)
(17.1)
16.5
16.5
-
-
-
-
In addition to the amount charged to the income statement and other comprehensive income, the following amounts of tax have been
recognised in equity:
Current tax:
Excess tax deductions related to share based payments on exercised options
Deferred tax:
Share based payments
Tax rate change impact on revaluation reserve
The Group
The Company
2017
£m
0.4
(0.3)
-
0.1
2016
£m
1.1
(2.2)
0.4
(0.7)
2017
£m
0.2
(0.1)
-
0.1
2016
£m
0.4
(0.7)
-
(0.3)
122
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
11. EARNINGS PER SHARE
a. Basic and diluted earnings per share
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to
equity holders of the Parent Company
2017
£m
232.8
2016
£m
12.7
Weighted average number of shares for the purposes of basic earnings per share
250,100,896
249,073,416
Dilutive effect of share options on potential ordinary shares
2,468,248
4,029,146
Weighted average number of ordinary shares for the purposes of diluted earnings per share
252,569,144
253,102,562
Earnings per share
Diluted earnings per share
93.1p
92.2p
5.1p
5.0p
978,010 share options (2016: 280,952 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 exceptional items and amortisation of acquired intangible assets
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 acquired intangible assets
Tax on exceptional items
Tax on amortisation of acquired intangible assets
Effect of reduction in corporation tax rate on deferred tax
Adjusted earnings
Adjusted earnings per share
Adjusted diluted earnings per share
2017
£m
232.8
40.9
12.3
(7.8)
(2.1)
-
276.1
110.4p
109.3p
2016
£m
12.7
292.0
16.6
(15.1)
(2.9)
(3.4)
299.9
120.4p
118.5p
123
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
12. DIVIDENDS
Amounts were recognised in the financial statements as distributions to equity shareholders as follows:
Final dividend for the year ended 31 December 2016 of 29.75p (2015: 29.25p) per ordinary share
Interim dividend for the year ended 31 December 2017 of 15.50p (2016: 15.25p) per ordinary share
Total dividend recognised during the year
2017
£m
74.7
38.3
113.0
2016
£m
72.5
38.0
110.5
The Directors are recommending a final dividend of 30.5p in respect of the year ended 31 December 2017.
Dividend cover of 2.4x (2016: 2.7x) is calculated by dividing adjusted earnings per share (note 11) of 110.4p (2016: 120.4p) by the total
dividend for the year of 46.0p (2016: 45.0p).
There are no income tax consequences in respect of the dividends declared, but not recognised in the financial statements.
The dividends for 2017 and for 2016 were as follows:
Interim paid
Final proposed
Total dividend for the year
2017
Pence
15.50
30.50
46.00
2016
Pence
15.25
29.75
45.00
The anticipated cash payment in respect of the proposed final dividend is £76.9m (2016: £74.6m).
Distributable reserves
The distributable reserves of the Company approximate to the accumulated profits of £740.5m. When required the Company can
receive dividends from its subsidiaries to further increase distributable reserves. In 2017 the Company received £323.7m of dividends
from its subsidiaries (2016: £330.4m).
124
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 13. GOODWILL
At 1 January 2015
Recognised on acquisitions during the year
Impairment charged to the income statement as an
exceptional item
At 1 January 2016
Recognised on acquisitions during the year
Transferred between segments
Impairment charged to the income statement as an
exceptional item
At 1 January 2017
Recognised on acquisitions during the year
At 31 December 2017
The Company has no goodwill.
Cash generating units
The Group
General
Merchanting
£m
Contracts
£m
Consumer
£m
466.4
172.9
829.5
1.8
-
468.2
1.9
10.4
-
480.5
-
480.5
8.1
-
181.0
-
(10.4)
-
170.6
7.8
178.4
2.1
-
831.6
-
-
(20.9)
810.7
-
810.7
P&H
£m
348.0
10.4
(99.0)
259.4
-
-
(192.9)
66.5
3.1
69.6
Total
£m
1,816.8
22.4
(99.0)
1,740.2
1.9
-
(213.8)
1,528.3
10.9
1,539.2
The Directors consider that each branch or distribution network 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 table analyses goodwill and intangible assets with indefinite
useful lives by CGU grouping.
125
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 13. GOODWILL continued
CGU grouping
Contracts:
CCF
Keyline
BSS Industrial
TF Solutions
General Merchanting:
Travis Perkins
Consumer:
Tile Giant
Toolstation
Wickes
Plumbing & Heating:
City Plumbing Supplies
Plumbnation
FPC
Underfloor Heating
National Shower Spares
Other
Intangibles with
indefinite useful life
(note 14)
£m
-
-
49.3
-
-
-
-
162.5
-
-
-
-
-
3.5
215.3
2017
Goodwill
£m
43.6
100.2
27.8
7.8
Total
£m
43.6
100.2
77.1
7.8
479.5
479.5
5.8
103.4
701.5
51.5
1.7
2.9
10.4
3.1
-
5.8
103.4
864.0
51.5
1.7
2.9
10.4
3.1
3.5
1,539.2
1,754.5
Intangibles with
indefinite useful life
(note 14)
£m
-
-
49.3
-
-
-
-
162.5
-
-
-
-
-
3.5
215.3
2016
Goodwill
£m
43.6
100.2
27.8
-
Total
£m
43.6
100.2
77.1
-
479.5
479.5
5.8
103.4
701.5
51.5
1.7
2.9
10.4
-
-
5.8
103.4
864.0
51.5
1.7
2.9
10.4
-
3.5
1,528.3
1,743.6
126
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
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 an impairment may have occurred. The recoverable amounts of the goodwill and other non-monetary assets
with indefinite useful lives are determined from value in use calculations. The key assumptions for the value in use calculations are
those regarding the discount rates, growth rates and like-for-like market volume changes which impact sales and therefore cash flow
projections and maintenance capital expenditure. Management estimates pre-tax discount rates that reflect current market assessments
of the time value of money and the risks specific to the 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 other than detailed in
the table opposite. The key variables applied to the value in use calculations were:
• Cash flow forecasts are risk-adjusted and were derived from the most recent board approved corporate plan updated for changes in current
trading conditions
• The sales market volume assumptions underlying the cash flow forecasts are the Directors’ estimates of likely future changes based
on 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 pre-tax discount rate is calculated by reference to the weighted average cost of capital (“WACC”) of the Group. For 2017,
the pre-tax discount rate ranged between 8.3% and 8.6% (2016: 9.6% to 11.1%), 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.
The reduction in pre-tax discount rates in 2017 is the result of share price volatility having been elevated in 2016 following the Brexit vote.
• For 2017, cash flows beyond the corporate plan (2021 and beyond) have been determined using a growth rate of 2.0%, which is the average
long-term forecast GDP growth outlined in the Economic and Fiscal Outlook report produced by the Office for Budget Responsibility.
The Directors believe this is the most appropriate indicator of long-term growth rates that is available (2016 growth rate: 2.1%).
Sensitivity of results to changes in assumptions
Whilst management believe the assumptions are realistic, it is possible that a further 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
127
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
13. GOODWILL continued
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 corporate plan 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. Following changes in City Plumbing Supplies in 2017, the CGU is no longer
sensitive to impairment.
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 following tables. The sole market value adjustment is the average annual change incorporated in the
corporate plan of each CGU grouping.
CGU Grouping
Headroom
Like-for-like market volume
(Average per annum)
Discount rate
Long-term growth rate
Assumption
Sensitivity
Assumption
Sensitivity
Assumption
Sensitivity
Wickes
£191m
0.5%
(1.9%)
8.6%
10.0%
2.0%
0%
An increase in maintenance capital expenditure of £1m per annum will reduce headroom by £18m.
2016 impairment and sensitivity of results to changes in assumptions and impairment
Sensitivity of results to changes in assumptions
CGU Grouping
Headroom
Like-for-like market volume
(Average per annum)
Discount rate
Long-term growth rate
Wickes
£291m
0.5%
(4.4%)
10.0%
11.3%
2.1%
(1.9%)
An increase in maintenance capital expenditure of £1m per annum will reduce headroom by £13m.
Assumption
Sensitivity
Assumption
Sensitivity
Assumption
Sensitivity
In 2016 the Group recognised an impairment charge in respect of goodwill and other intangible assets of £231.3m and £4.1m in respect
of tangible fixed assets. The 2016 impairment charge is analysed as follows:
Cash generating unit
F & P
PTS
City Plumbing Supplies
Solfex
Tile Giant
Bathrooms.com
Acquired
brands
£m
Acquired
customer
relationships
£m
Tangible
fixed
assets
£m
9.9
2.5
-
0.9
-
0.7
14.0
3.5
-
-
-
-
-
3.5
0.1
3.9
-
-
-
0.1
4.1
Goodwill
£m
-
-
188.9
4.0
18.8
2.1
213.8
Total
£m
13.5
6.4
188.9
4.9
18.8
2.9
235.4
The only significant CGU where an impairment was recognised in 2016 and where reasonably possible changes to key operating
assumptions could have generated a materially different impairment charge is City Plumbing Supplies. The impact on the impairment
charge recognised in 2016 of a 1.0% change in each assumption, all other assumptions remaining the same, is shown in the table below.
CGU Grouping
Like-for-like market volume
(Average per annum)
City Plumbing Supplies
Change in
assumption
0.5%
Impact
£3.0m
Discount rate
Change in
assumption
1.0%
Long-term growth rate
Change in
assumption
Impact
(1.0%)
£4.5m
Impact
£6.6m
128
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
14. OTHER INTANGIBLE ASSETS
Cost or valuation
At 1 January 2016
Additions
Transfers between categories
Disposals
Reclassifications from tangible fixed assets
At 1 January 2017
Additions
Transfers between categories
Reclassifications from current assets
At 31 December 2017
Amortisation
At 1 January 2016
Charged to operating profit in the year on acquired
intangibles
Charged to operating profit in the year on internally
generated intangibles
Reclassifications from tangible fixed assets
Impairment charged to the income statement as an
exceptional item
At 1 January 2017
Charged to operating profit in the year on acquired
intangibles
Charged to operating profit in the year on internally
generated intangibles
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Brand
£m
306.1
-
-
-
-
306.1
-
-
-
306.1
47.2
2.4
-
-
14.0
63.6
2.1
-
65.7
240.4
242.5
The Group
Computer
software
£m
Customer
relationships
£m
Assets under
construction
£m
40.8
13.6
7.9
(0.1)
5.2
67.4
14.3
9.0
3.1
93.8
15.5
1.0
7.5
2.4
-
26.4
1.1
12.6
40.1
53.7
41.0
147.6
-
-
-
-
147.6
-
-
-
147.6
74.3
13.2
-
-
3.5
91.0
9.1
-
100.1
47.5
56.6
14.2
17.2
(7.9)
-
(2.8)
20.7
33.8
(9.0)
-
45.5
-
-
-
-
-
-
-
-
-
45.5
20.7
2017
£m
215.3
37.7
253.0
Total
£m
508.7
30.8
-
(0.1)
2.4
541.8
48.1
-
3.1
593.0
137.0
16.6
7.5
2.4
17.5
181.0
12.3
12.6
205.9
387.1
360.8
2016
£m
215.3
37.7
253.0
Cost of brands with an indefinite useful life (note 13) (net of impairment losses)
Cost of brands being amortised (net of impairment losses)
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, Primaflow, Underfloor Heating and certain product related brands the Directors have decided it is appropriate to amortise their
brand costs over their estimated useful lives. The useful lives of those brands being amortised range from 10 to 20 years with the remaining
lives ranging from 1 to 11 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 and the impairments
recognised in 2016 are shown in note 13. 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 1 to 7 years. The Company has no intangible assets.
Assets under construction consist of software being developed for use by the Group, which is not yet ready to be used. No amortisation is
charged on assets under construction.
129
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 15. PROPERTY, PLANT AND EQUIPMENT
The Group
Freehold
£m
Long leases
£m
Short leases
£m
Cost or deemed cost
At 1 January 2016
Additions
Disposals
Reclassifications to intangible
fixed assets
At 1 January 2017
Additions
Additions from acquired business
Disposals
Reclassifications from current assets
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charged this year
Impairment charged to the income
statement as an exceptional item
Disposals
Reclassifications to intangible
fixed assets
At 1 January 2017
Charged this year
Disposals
Reclassification from current assets
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
453.8
68.5
(24.0)
(0.8)
497.5
63.9
0.8
(78.0)
-
484.2
47.7
6.0
-
(7.8)
-
45.9
5.0
(3.5)
-
47.4
436.8
451.6
37.4
0.4
-
-
37.8
-
-
(2.3)
-
35.5
13.7
0.7
-
-
-
14.4
1.0
(1.8)
-
13.6
21.9
23.4
162.5
27.0
(6.0)
0.8
184.3
25.3
-
(6.1)
-
203.5
69.6
12.5
-
(1.8)
-
80.3
11.9
(1.4)
-
90.8
112.7
104.0
Plant and
equipment
£m
706.4
107.9
(39.1)
(2.4)
Total
£m
1,360.1
203.8
(69.1)
(2.4)
772.8
1,492.4
93.1
0.3
(34.2)
10.6
842.6
380.0
78.4
4.1
(37.8)
(2.4)
422.3
84.1
(29.0)
4.6
482.0
360.6
350.5
182.3
1.1
(120.6)
10.6
1,565.8
511.0
97.6
4.1
(47.4)
(2.4)
562.9
102.0
(35.7)
4.6
633.8
932.0
929.5
The Company
Plant and
equipmen
£m
0.7
0.1
-
-
0.8
0.2
-
(0.7)
-
0.3
0.6
0.1
-
-
-
0.7
0.1
(0.7)
-
0.1
0.2
0.1
The cost element of the fixed assets carrying value is analysed as follows:
At deemed cost
At cost
The Group
The Company
Freehold
£m
Long leases
£m
Short leases
£m
20.8
463.4
484.2
3.9
31.6
35.5
-
203.5
203.5
Plant and
equipment
£m
-
842.6
842.6
Total
£m
24.7
1,541.1
1,565.8
Total
£m
-
0.3
0.3
Included within freehold property is land with a value of £176m (2016: £149m) 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:
The Group
The Company
Long leases
£m
Short leases
£m
3.7
0.8
0.6
5.0
Plant and
equipment
£m
18.0
14.1
Total
£m
22.3
19.9
Total
£m
-
-
2017
2016
130
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 16. INVESTMENTS
a. Interest in associates
Equity investment
Loan facility
Dividends received
Share of losses
The Group
The Company
2017
£m
1.2
27.0
(0.3)
(7.6)
20.3
2016
£m
1.2
15.7
-
(5.4)
11.5
2017
£m
1.2
27.0
-
-
28.2
Travis Perkins plc holds a 49% investment in The Mosaic Tile Company Limited, a 49% investment in Toriga Limited and
a 49% investment in Toolstation Europe Limited. There is no impairment in the carrying value of the investment in and loan
to Toolstation Europe because the future profitability forecasts fully support the current carrying value.
The Group’s share of associates’ assets, liabilities, income and expenses are as follows:
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Net assets
Group share of net assets (49%)
Goodwill
Carrying amount of investment in associates
Income
Expense
Net expense of equity accounted investments
Group share of revenue (49%)
Group share of net expense (49%)
The reconciliation of investments in associates is given below:
At 1 January
Additions to investments
Dividends received
Share of losses
At 31 December
The Group
2017
£m
20.6
(10.9)
3.8
(1.3)
12.2
6.0
14.3
20.3
40.5
(45.1)
(4.6)
19.9
(22.1)
The Group
2017
£m
11.5
11.3
(0.3)
(2.2)
20.3
2016
£m
1.2
15.7
-
-
16.9
2016
£m
12.6
(8.1)
1.8
(0.6)
5.7
2.8
8.7
11.5
30.3
(32.8)
(2.5)
14.9
(16.0)
2016
£m
7.9
4.7
-
(1.1)
11.5
131
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
16. INVESTMENTS continued
b. Investment in subsidiaries
Cost
At 1 January
Additions
At 31 December
Provision for impairment
Net book value at 31 December
The Company
2017
£m
2016
£m
3,855.8
19.4
3,875.2
(60.9)
3,714.9
140.9
3,855.8
(50.4)
3,814.3
3,805.4
During the year the Group acquired 75% of the issued share capital of National Shower Spares Limited and 77.5% of the issued share
capital of TFS Holdings Limited, see note 28 for further details.
In 2016 the Group recognised an impairment charge in respect of some plumbing and heating businesses (note 13) and its tile
businesses. The associated impairment was recognised on the Company’s investments.
During 2016 100% of the issued share capital of Wickes Building Supplies Limited was transferred to the Company from
Wickes Holdings Limited, a susidiary undertaking, for its carrying value of £125.0m.
A full listing of all related undertakings is provided in note 38.
c. Investments
Available for sale investments at fair value:
Investments in property entities
Shares held in invested entities
Loans receivable at amortised cost:
Loans to property entities
Loans to invested entities
The Group
The Company
2017
2016
£m
3.7
1.0
1.3
3.5
9.5
£m
3.4
1.0
1.3
3.4
9.1
2017
£m
-
1.0
-
3.5
4.5
2016
£m
-
1.0
-
3.4
4.4
The investments in property entities represent minority holdings in property owning entities that acquired properties from the Group in
2006 and 2015. These investments present the Group with an opportunity to generate returns through both income and capital gains.
The Directors consider that the carrying amount of these investments approximates to their fair value. The Group provides loans to one
of the property entities totalling £1.0m and charges interest at rates of between 10% and 12%.
132
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
17. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Allowance for doubtful debts
Amounts owed by subsidiaries
Other receivables
Prepayments and accrued income
Non current prepayments
Trade and other receivables
The Group
2017
£m
764.0
(11.0)
753.0
-
291.4
85.8
1,130.2
30.4
1,160.6
2016
£m
709.2
(21.6)
687.6
-
290.5
81.2
1,059.3
8.3
1,067.6
The Company
2017
£m
2016
£m
-
-
-
-
-
-
407.9
387.6
-
-
407.9
-
407.9
-
-
387.6
-
387.6
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 57 days (2016: 57 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 to their fair values. The business
has provided fully for all receivables outstanding for more than 90 days beyond agreed terms. Trade receivables which have been
outstanding for less than 90 days and that are not considered recoverable are specifically provided for. 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.
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
2017
£m
21.6
(22.5)
11.9
11.0
2016
£m
23.9
(14.5)
12.2
21.6
In determining the recoverability of 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 £46.2m (2016: £44.3m)
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.
133
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 17. TRADE AND OTHER RECEIVABLES continued
Ageing of past due but not impaired receivables.
Days overdue
0 – 30 days
31 – 60 days
61 – 90 days
The Group
2017
£m
26.5
11.4
8.3
46.2
2016
£m
27.8
11.1
5.4
44.3
Included in the allowance for doubtful debts are specific trade receivables with a balance of £2.0m (2016: £1.1m) where the customer
has been placed into liquidation. This includes amounts in respect of uninsured receivables from Carillion plc. 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.
18. 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 to their fair value.
19. SHARE CAPITAL
Ordinary shares of 10p
At 1 January 2016
Allotted under share option schemes
At 1 January 2017
Allotted under share option schemes
At 31 December 2017
The Group and the Company
Issued and fully paid
No.
249,814,722
989,958
250,804,680
1,190,028
251,994,708
£m
25.0
0.1
25.1
0.1
25.2
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.
20. OWN SHARES
At 1 January
Acquired
Re-issued
At 31 December
The Group and the Company
2017
No.
729,680
1,295,639
(808,988)
1,216,331
2016
No.
1,318,532
-
(588,852)
729,680
None of the own shares have been allocated to grants of executive options. 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 reissued.
134
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 21. RESERVES
Details of all movements in reserves for both the Group and Company are shown in their respective Statement 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 arose from property revaluations in 1999 and prior years
• 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 the potential exercise of the put options held over the non-controlled
shareholdings in TF Solution and National Shower Spares.
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.
135
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 22. BORROWINGS
A summary of the Group’s objectives, policies procedures and strategies with regard to financial instruments and capital management can
be found in the Strategic Report on pages 27 to 30. At 31 December 2017 all borrowings were denominated in Sterling (2016: Sterling).
a. Summary
Liability to pension scheme
Sterling bonds
Finance leases (note 22d)
Finance charges netted off debt
Current liabilities
Non-current liabilities
b. Analysis of other borrowings
Borrowings repayable
On demand or within one year
More than one year, but not more than five years
More than five years
Gross borrowings
Unamortised fees
Borrowings repayable:
Gross borrowings repayable in more than five years
Unamortised fees
The Group
2017
£m
33.7
562.6
27.5
(5.5)
618.3
6.2
612.1
618.3
2016
£m
34.5
566.0
34.5
(7.0)
628.0
6.9
621.1
628.0
The Company
2017
£m
-
562.6
-
(5.5)
557.1
-
557.1
557.1
The Group
2017
£m
6.2
16.7
600.9
623.8
(5.5)
618.3
The Company
2017
£m
562.6
(5.5)
557.1
2016
£m
-
566.0
-
(7.0)
559.0
-
559.0
559.0
2016
£m
6.9
22.3
605.8
635.0
(7.0)
628.0
2016
£m
566.0
(7.0)
559.0
136
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
c. Facilities
At 31 December 2017, the following facilities were available:
Drawn facilities:
£250m sterling bond
£300m sterling bond
Undrawn facilities
5 year committed revolving credit facility
Bank overdrafts
The Group
2017
£m
262.6
300.0
562.6
550.0
30.0
580.0
2016
£m
266.0
300.0
566.0
550.0
30.0
580.0
The Company
2017
£m
2016
£m
262.6
300.0
562.6
550.0
30.0
580.0
266.0
300.0
566.0
550.0
30.0
580.0
The Group’s £550m banking agreement with a syndicate of banks runs until December 2020. The disclosures in note 22(c) do not
include finance leases, loan notes, or the effect of finance charges netted off bank debt.
d. Obligations under finance leases
Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
After five years
Less: future finance charges
Present value of lease obligations
Less: Amount due for settlement within one year
(shown under current liabilities)
Amount due for settlement after one year
The Group
Minimum
lease payments
Present value of minimum
lease payments
2017
£m
7.0
18.4
7.8
33.2
(5.7)
27.5
2016
£m
7.2
19.8
17.4
44.4
(9.9)
34.5
2017
£m
6.2
16.7
4.6
27.5
-
27.5
(6.2)
21.3
2016
£m
6.9
21.0
6.6
34.5
-
34.5
(6.9)
27.6
The average loan term for properties held under finance leases is 49 years (2016: 48 years) and the average borrowing rate
is determined at the inception of the lease is 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.
137
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
22. BORROWINGS continued
e. Interest
The weighted average interest rates received on assets and paid on liabilities were as follows:
Assets:
Short term deposits
Liabilities:
Unsecured senior notes
£250m sterling bond
£300m sterling bond
Bank loans and overdrafts
2017
%
0.3
-
3.0
4.5
1.1
2016
%
0.5
5.9
3.0
4.5
1.3
In October 2016, to manage the risk of interest rate rises, the Group exited its fixed-to-floating swap contracts which had swapped the
£250m principal of the sterling bond maturing in 2021 into floating rates.
The £300m sterling bond issued in May 2016 is maintained at a fixed coupon of 4.5%.
In respect of income earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest
rates at the balance sheet date. All assets and liabilities reprice within six months.
Assets:
Short term deposits
Liabilities:
£250m sterling bond
£300m sterling bond
f. Fair values
The Group and the Company
2017
2016
Effective
interest rate
£m
Effective
interest rate
£m
0.52%
215.0
0.39%
184.5
4.38%
4.5%
262.6
300.0
562.6
4.38%
4.5%
266.0
300.0
566.0
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 23c.
g. Guarantees and security
There are cross guarantees on the overdrafts between Group companies.
Travis Perkins Trading Company Limited, Wickes Building Supplies Limited, Travis Perkins (Properties) Limited, Keyline Builders
Merchants Limited and Travis Perkins Plumbing and Heating LLP are guarantors of the following facilities advanced to Travis Perkins plc:
• £250m sterling bond
• £300m sterling bond
• £550m revolving credit facility
• Currency derivatives (note 23)
The Group companies have entered into other guarantee and counter-indemnity arrangements in respect of guarantees issued in favour
of Group companies by several banks amounting to approximately £22m (2016: £22m).
138
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 23. 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:
Designated as fair value through profit and loss (FVTPL)
-
1.7
-
1.7
Loans and receivables (including cash and cash equivalents)
1,326.0
1,228.6
230.3
185.0
The Group
2017
£m
2016
£m
The Company
2017
£m
2016
£m
Available-for-sale
Financial liabilities:
4.7
4.4
1,330.7
1,234.7
1.0
231.3
1.0
187.7
Designated as fair value through profit and loss (FVTPL)
1.2
-
1.2
-
Borrowings (note 22a)
Deferred consideration at fair value through equity
Trade and other payables at amortised cost (note 26)
618.3
628.0
557.1
559.0
4.9
-
1,241.9
1,124.9
4.9
20.4
1,866.3
1,752.9
583.6
-
18.4
577.4
Loans and receivables exclude prepayments of £116.2m (2016: £89.5m). Trade and other payables exclude taxation and social security
and accruals and deferred income totalling £220.4m (2016: £223.4m). 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 strong credit ratings considers its impact
to be immaterial.
c. Fair value of financial instruments
Financial assets and financial liabilities designated as FVTPL comprise foreign currency forward contracts and are measured using
quoted forward exchange 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)
139
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
23. FINANCIAL INSTRUMENTS continued
There were no transfers between levels during the year.
Included in current assets
Level 2
The Group
The Company
2017
£m
2016
£m
2017
£m
2016
£m
Foreign currency forward contracts at fair value through profit and loss
-
1.7
-
1.7
Included in liabilities
Level 2
Foreign currency forward contracts at fair value through profit and loss
Level 3
Deferred consideration at fair value through equity
1.2
4.9
6.1
-
-
-
1.2
4.9
6.1
-
-
-
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 when appropriate. 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. At 31 December 2017 no interest rate risks were hedged (2016: none).
e. Currency forward contracts
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$75.8 m (2016: US$63.0m). The fair value of these derivatives was
£1.2m liability (2016: £1.7m asset). These contracts are not designated cash flow hedges and accordingly the fair value movement has
been reflected in the income statement.
140
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
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 instruments that settle on a net basis and the undiscounted
gross cash 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.
0-1 year
£m
1-2 years
£m
2017
2-5 years
£m
5+ years
£m
Total gross settled - foreign exchange forward contracts
(57.1)
-
Net settled
Deferred consideration at fair value through equity
Total derivative financial instruments
Net settled:
Borrowings
Other financial liabilities (note 26)
Finance leases (note 22d)
Total financial instruments
Total gross settled and total derivative financial
instruments - foreign exchange forward contracts
Net settled:
Borrowings
Other financial liabilities (note 26)
Finance leases (note 22d)
Total financial instruments
g. Interest rate sensitivity analysis
-
(57.1)
-
(1,241.9)
(7.0)
(1,306.0)
(4.9)
(4.9)
-
-
(4.4)
(9.3)
0-1 year
£m
1-2 years
£m
(49.5)
-
(1,124.9)
(7.2)
(1,181.6)
-
-
-
(5.5)
(5.5)
-
-
-
-
-
(14.0)
(14.0)
2016
2-5 years
£m
-
-
-
(14.3)
(14.3)
Total
£m
(57.1)
(4.9)
(62.0)
-
-
-
(596.3)
-
(7.8)
(596.3)
(1,241.9)
(33.2)
(604.1)
(1,933.4)
5+ years
£m
Total
£m
-
(49.5)
(600.6)
-
(17.4)
(618.0)
(600.6)
(1,124.9)
(44.4)
(1,819.4)
A sensitivity analysis has 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.
At the 31 December 2017 the Group had no floating rate liabilities. There was £215m on short term deposit at 31 December 2017.
A 1.0% increase / decrease in interest rates, with all other variables held constant, would have the following impact on:
• Profit before taxation for the year ended 31 December 2017 would have increased / decreased by £2.2m (2016: increased / decreased
by £1.8m) due to the short term deposits;
• Net equity would have increased / decreased by £1.8m (2016: increased / decreased by £1.5m)
141
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
24. PROVISIONS
At 1 January 2016
Additional provisions charged to the income
statement
Utilisation of provisions
Unwinding of discount
At 1 January 2017
(Release) / charge to income statement
Charge to income statement - exceptional
Utilisation of provisions
Unwinding of discount
At 31 December 2017
Included in current liabilities
Included in non-current liabilities
The Group
Property
£m
Insurance
£m
Exceptional
£m
13.1
7.4
(4.4)
0.2
16.3
(0.9)
17.8
(5.4)
0.7
28.5
11.4
17.1
28.5
28.4
9.4
(8.9)
-
28.9
7.5
-
(7.4)
-
29.0
29.0
-
29.0
4.2
56.6
(27.9)
-
32.9
-
11.6
(32.3)
-
12.2
12.2
-
12.2
Other
£m
0.2
-
(0.1)
-
0.1
-
-
(0.1)
-
-
-
-
-
Total
£m
45.9
73.4
(41.3)
0.2
78.2
6.6
29.4
(45.2)
0.7
69.7
52.6
17.1
69.7
The Group has a number of vacant and partly sublet leasehold properties. Where necessary provision has been made for the residual
lease commitments after taking into account existing and anticipated subtenant arrangements.
As set out in note 5, in 2017 the Group recognised an exceptional charge relating to the transformation of its Plumbing & Heating
division. The exceptional provision relates to the exceptional charge, excluding property and inventory amounts. In 2016, the Group
established exceptional provisions as a result of reorganising parts of its branch and distribution networks.
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 insure itself using policies with a high excess 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 claims against it where the
final settlement date is uncertain.
The following table details the Group’s liquidity analysis of its provisions. The table has been drawn up based on the undiscounted net
cash outflows.
0-1 year
£m
1-2 years
£m
2-5 years
£m
5+ years
£m
11.4
29.0
12.2
52.6
10.0
28.9
18.3
0.1
57.3
5.0
-
-
5.0
2.0
-
4.4
-
6.4
10.6
-
-
10.6
3.0
-
8.2
-
11.2
1.9
-
-
1.9
3.0
-
3.2
-
6.2
Total
£m
28.9
29.0
12.2
70.1
18.0
28.9
34.1
0.1
81.1
2017
Property
Insurance
Exceptional
2016
Property
Insurance
Exceptional
Other
The Company has no provisions.
142
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 25. DEFERRED TAX
The following are the major deferred tax liabilities and assets fully recognised by the Group and movements thereon during the current
and prior reporting periods.
(Asset) / liability
At
1 Jan 2016
Recognised
in income
Capital allowances
Revaluation of
property
Share-based
payments
Provisions
Property assets
acquired
in business
combinations
Brand
Pension scheme
asset
Deferred tax
£m
2.6
8.0
(8.5)
0.3
7.5
61.2
(9.8)
61.3
£m
(1.2)
-
2.1
5.6
(0.9)
(8.6)
2.2
(0.8)
Recognised
in other
comprehensive
income
£m
-
(0.4)
2.2
-
-
-
(16.5)
(14.7)
The Group
At
1 Jan 2017
Recognised
in income
£m
1.4
7.6
(4.2)
5.9
6.6
52.6
(24.1)
45.8
£m
(0.7)
-
0.1
(0.4)
(0.5)
(2.3)
1.6
(2.2)
Recognised
in other
comprehensive
income
£m
-
-
0.3
-
-
-
17.1
17.4
At
31 Dec 2017
£m
0.7
7.6
(3.8)
5.5
6.1
50.3
(5.4)
61.0
At the balance sheet date the Group had unused capital losses of £40.6m (2016: £43.0m) 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. £38.7m arose prior to the Group acquiring Wickes the remainder arose in PTS in 2015.
Those businesses own no assets that may generate a future capital gain against which the losses can be offset.
Other than disclosed above, no deferred tax assets and liabilities have been offset.
(Asset) / liability
At
1 Jan 2016
Recognised
in income
Share-based payments
Other timing differences
£m
(2.8)
(0.1)
(2.9)
£m
0.6
(0.2)
0.4
Recognised
in other
comprehensive
income
£m
0.7
-
0.7
The Company
At
1 Jan 2017
Recognised
in income
£m
(1.5)
(0.3)
(1.8)
£m
(0.1)
(0.1)
(0.2)
Recognised
in other
comprehensive
income
£m
0.1
-
0.1
At
31 Dec 2017
£m
(1.5)
(0.4)
(1.9)
143
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
26. OTHER FINANCIAL LIABILITIES
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Trade and other payables
The Group
The Group
2017
£m
1,065.9
54.6
176.0
157.1
2016
£m
940.2
71.8
184.7
151.6
1,453.6
1,348.3
The Company
2017
£m
-
-
20.0
0.6
20.6
2016
£m
-
-
18.4
0.7
19.1
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.
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.
144
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 27. PENSION ARRANGEMENTS
Defined benefit schemes
The Group operates four final salary schemes being The Travis Perkins Pensions and Dependants’ Benefit Scheme (“the TP DB
scheme”) and the immaterial Platinum pension scheme (“the TP Schemes”) and the “BSS Schemes” being the BSS Defined Benefit
Scheme (“the BSS DB Scheme”) and the immaterial 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. The assets of the TP DB schemes are held separately
from those of the Group under the control of the schemes’ trustees. Employees are entitled to start drawing a pension, based on their
membership of a scheme, on their normal retirement date. If employees choose to retire early and draw their pension, or late and defer
drawing their pension, then the amount they receive is scaled down or up accordingly.
The TP schemes are 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 every three years. A full actuarial valuation of
the TP DB scheme was carried out on 30 September 2014. The IAS 19 valuation has been based upon the results of the 30 September
2014 valuation, and then updated to 31 December 2017 by a qualified actuary. The present values of the defined benefit obligations, the
related current service costs and the past service costs for the scheme were measured using the projected unit method.
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 30 September 2014. The present value of the defined benefit obligation, and the related current service cost and past service
cost, were measured using the projected unit method with a control period equal to the future working lifetime of the active members.
In June 2010, an agreement was reached with the Trustees of the TP DB scheme to fund £34.7m of the funding deficit using a
Group-controlled special purpose vehicle (“SPV”). The pension scheme is 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.
The TP schemes and the BSS schemes expose the Group to actuarial risks such as investment risk, interest rate risk, longevity risk and
salary risk. A summary of the risks and the management of those risks is given below.
Investment risk
The present value of the defined benefit liabilities of the schemes is calculated using a discount rate
predetermined by reference to high quality corporate bond yields. If the return on scheme assets is below this
rate it may create a plan deficit. Following a review of the investment strategy, a derisking exercise is currently
being undertaken with a higher proportion of the largest two pension schemes’ assets being invested in
gilts and corporate bonds (‘liability driven investments’). Currently the schemes have investments in equity
securities, secured finance assets, bonds, debt instruments and real estate. Due to the long term nature of the
scheme liabilities the trustees of the pension funds previously considered it appropriate that a reasonable portion
of the scheme assets should be invested in equities.
Interest risk
Longevity risk
A decrease in corporate bond yields will increase the schemes’ liabilities, but the effect will be partially offset by
an increase in the return on the schemes’ bond and gilt assets.
The present value of the liabilities of the schemes is calculated by reference to the best estimate of mortality
of pension scheme members both during and after their employment. An increase in the life expectancy of the
schemes’ members will increase the schemes’ liabilities.
Salary risk
The present value of the defined benefit schemes’ liabilities is calculated by reference to the future salaries of
scheme members. As such an increase in salaries of scheme members will increase the schemes’ liabilities.
The investment strategy for the UK scheme is controlled by the Trustee in consultation with the Company. The scheme assets do not
include any of the Group’s own financial instruments.
All fair values are provided by the fund managers. Where available, the fair values are quoted prices (e.g. listed equity, sovereign debt
and corporate bonds). Unlisted investments (e.g. private equity) are included at values provided by the fund manager in accordance with
relevant guidance. Other significant assets are valued based on observable inputs such as yield curves.
The liability driven investments, which comprise fixed interest and index-linked gilts, futures, interest and inflation rate swaps, repurchase
agreements and liquidity funds, are all daily priced and traded.
145
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 27. PENSION ARRANGEMENTS continued
a. Major assumptions used by the schemes’ actuaries at the balance sheet date:
Rate of increase in pensionable salaries
Rate of increase of pensions in payment post 2006
Rate of increase of pensions in payment 1997 - 2006
Discount rate
Inflation assumption - RPI
Inflation assumption - CPI
At 31 December
2017
At 31 December
2016
2.50%
2.20%
3.15%
2.55%
3.25%
2.25%
2.65%
2.25%
3.30%
2.65%
3.40%
2.40%
The methodology for setting the discount rate has been revised to better reflect the credit risk of the defined benefit schemes.
The yield curve, which includes bonds with an average AA rating, now excludes bonds which are sub-sovereign or issued by universities.
We estimate that the change in methodology increased the discount rate by 0.1%. The sensitivity of the defined benefit schemes to
changes in the discount rate are disclosed in note 27(k).
In respect of longevity, the valuation adopts the S2PA 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 liabilities at 31 December 2017:
Member age 65 (current life expectancy) - TP Schemes
Member age 45 (life expectancy on reaching age 65) - TP Schemes
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
TP
Schemes
£m
2017
BSS
Schemes
£m
Male
Years
22.0
23.3
22.0
23.3
Group
£m
Current service costs charged to operating profit in the
income statement
Past service gains from settlements
Net interest expense
Total pension charge
(7.0)
(2.6)
(9.6)
(1.5)
(8.5)
(1.6)
(4.2)
(3.1)
(12.7)
Female
Years
24.7
26.2
23.8
25.3
2016
Group
£m
(8.7)
-
(1.7)
(10.4)
The Directors have agreed with the Schemes’ Trustees to pay £10m more than ongoing contributions in 2018 to reduce the deficit in
the BSS schemes. In addition the Company has agreed to pay voluntary excess contribution of £1.5m to the BSS schemes and £2.3m
to the TP DB schemes. These contributions can be stopped at any time with one month’s notice at the Company’s sole discretion. In
addition, the triennial valuation of the BSS DB Scheme and TP DB Scheme, as at 30 September 2017 are currently being undertaken
and will be finalised in 2018. This could change contribution rates, but in the absence of any change in 2018, the excess of funding over
the on-going service contributions is expected to be between £10.0m and £13.8m in total for the Group.
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.
146
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
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 (continued)
2017
TP
Schemes
£m
BSS
Schemes
£m
Group
£m
TP
Schemes
£m
2016
BSS
Schemes
£m
Group
£m
Fair value of plan assets
1,128.9
324.3
1,453.2
1,076.9
291.5
1,368.4
Present value of defined benefit obligations
(1,122.3)
(350.0)
(1,472.3)
(1,138.6)
(357.1)
(1,495.7)
Gross actuarial surplus / (deficit)
Additional liability recognised for minimum
funding requirements
Gross pension asset / (liability) at 31 December
Deferred tax asset
Net pension liability at 31 December
6.6
-
6.6
(25.7)
(19.1)
(61.7)
(65.6)
(127.3)
(9.2)
(9.2)
-
-
-
(34.9)
(28.3)
(61.7)
(65.6)
(127.3)
5.4
(22.9)
24.1
(103.2)
In finalising the 30 September 2014 actuarial valuations the Trustees of the two material defined benefit schemes reached agreement
with the Company that in order to eliminate the funding shortfalls at that date the Company would pay recovery plan contributions to
each scheme. Amounts receivable by each scheme from 1 January 2018 are as follows:
• TP DB Scheme – nil
• BSS DB Scheme - £10.0m p.a. payable in monthly instalments until 1 September 2021
The Company has agreed to make voluntary recovery plan contributions of £2.3m per annum to the TP DB Scheme and £1.5m per
annum to the BSS scheme both paid in equal monthly instalments until September 2023. These contributions are not contractual and
can be stopped at any time with one month’s notice at the Company’s sole discretion.
Gross pension (liability) / asset at 1 January
(61.7)
(65.6)
(127.3)
2017
TP
Schemes
£m
BSS
Schemes
£m
Group
£m
Restriction of asset recognised
Additional liability recognised for minimum funding
requirements
Current service costs and administration expenses charged
to the income statement
Net interest expense
Contributions from sponsoring companies
Return on plan assets (excluding amounts included in
net interest)
Actuarial gain arising from changes in demographic
assumptions
Actuarial (loss) / gain arising from changes in
financial assumptions
Actuarial (loss) / gain arising from experience adjustments
(Increase) / reduction in minimum funding
requirement liability
Gross pension asset / (liability) at 31 December
TP
Schemes
£m
2016
BSS
Schemes
£m
Group
£m
34.4
(34.4)
(35.5)
(1.1)
-
(34.4)
(0.2)
(0.2)
(6.7)
-
8.3
(16.5)
(16.7)
(52.0)
(52.2)
(2.0)
(1.7)
13.9
(8.7)
(1.7)
22.2
-
-
-
-
-
-
(61.7)
(65.6)
(127.3)
(7.0)
(1.5)
7.0
(2.6)
(1.6)
13.9
(9.6)
(3.1)
20.9
56.7
24.2
80.9
154.5
29.8
184.3
20.2
6.6
26.8
-
4.8
4.8
(2.2)
(4.9)
-
6.6
1.1
(1.7)
(1.1)
(6.6)
(9.2)
(9.2)
(34.9)
(28.3)
(255.5)
(80.1)
(335.6)
1.9
36.0
(61.7)
4.5
17.2
6.4
53.2
(65.6)
(127.3)
147
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 27. PENSION ARRANGEMENTS continued
d. Major categories and fair value of scheme assets
The major categories and fair values of scheme assets at the end of the reporting period for each category are as follows:
At 31 December 2017
At 31 December 2016
TP
Schemes
£m
BSS
Schemes
£m
TP
Schemes
£m
BSS
Schemes
£m
(288.3)
1.3
(88.9)
2.5
-
3.6
-
4.1
123.5
106.7
336.3
115.1
620.3
73.1
15.3
25.6
39.5
28.2
99.3
39.6
184.2
19.9
-
-
555.0
184.5
131.7
130.1
108.1
46.7
18.5
83.2
24.3
73.4
-
0.5
-
4.7
1,128.9
324.3
1076.9
291.5
2017
£m
84.8
31.8
7.9%
10.9%
2016
£m
189.3
39.3
20.7%
15.9%
Group
£m
1,161.3
44.3
184.3
1.3
(0.9)
22.2
0.2
TP
Schemes
£m
2017
BSS
Schemes
£m
Group
£m
1,076.9
291.5
1,368.4
28.1
56.7
-
(0.8)
7.0
0.2
7.6
24.2
0.4
(0.1)
13.9
0.1
35.7
80.9
0.4
(0.9)
20.9
0.3
2016
TP
Schemes
£m
BSS
Schemes
£m
913.8
34.8
154.5
-
(0.9)
8.3
0.1
247.5
9.5
29.8
1.3
-
13.9
0.1
(39.2)
(13.3)
(52.5)
(33.7)
(10.6)
(44.3)
1,128.9
324.3
1,453.2
1,076.9
291.5
1,368.4
Level 1:
Repurchase agreements
Cash
Level 2:
Poolied investment vehicles
Equities
Secured finance
Corporate bonds
Diversified growth fund
Liability driven investments
Level 3:
Property
SPV asset
Other
e. Actual return on scheme assets
TP Scheme
BSS Schemes
f. Movements in the fair value of scheme assets in the current period
At 1 January
Interest on scheme assets
Return on scheme assets not including interest
Foreign exchange
Administration expenses
Contributions from sponsoring companies
Contributions from members
Benefits paid
At 31 December
148
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
g. Movements in the present value of defined benefit obligations in the current period
At 1 January
Service cost
Interest cost
Foreign exchange
Contributions from members
Experience adjustments
Actuarial gain arising from changes
in demographic assumptions
Actuarial (loss) / gain arising from changes
in financial assumptions
Benefits paid
At 31 December
2017
TP
Schemes
£m
BSS
Schemes
£m
Group
£m
2016
TP
Schemes
£m
BSS
Schemes
£m
Group
£m
(1,138.6)
(357.1)
(1,495.7)
(879.4)
(283.0)
(1,162.4)
(6.2)
(29.6)
-
(0.2)
(4.9)
(2.5)
(9.2)
(0.4)
(0.1)
(1.7)
(8.7)
(38.8)
(0.4)
(0.3)
(6.6)
20.2
6.6
26.8
(5.8)
(33.4)
-
(0.1)
1.9
-
(2.0)
(10.5)
(1.3)
(0.1)
4.5
4.8
(7.8)
(43.9)
(1.3)
(0.2)
6.4
4.8
(2.2)
39.2
1.1
13.3
(1.1)
52.5
(255.5)
(80.1)
(335.6)
33.7
10.6
44.3
(1,122.3)
(350.0)
(1,472.3)
(1,138.6)
(357.1)
(1,495.7)
h. Amounts recognised in the statement of other comprehensive income are as follows:
Return on scheme assets (excluding amounts included
in net interest)
Actuarial gain arising from changes
in demographic assumptions
Actuarial losses arising from changes
in financial assumptions
Actuarial gain arising from experience adjustments
(Increase) / decrease in minimum funding
requirement liability
Re-measurement of net defined pension liability
i. Reconciliation of asset ceiling / additional liability
At 1 January
Interest expense
Change in asset ceiling
At 31 December
2017
TP
Schemes
£m
BSS
Schemes
£m
Group
£m
TP
Schemes
£m
2016
BSS
Schemes
£m
Group
£m
56.7
24.2
80.9
154.5
29.8
184.3
20.2
6.6
26.8
-
4.8
4.8
(2.2)
(4.9)
-
69.8
1.1
(1.7)
(9.2)
21.0
(1.1)
(6.6)
(9.2)
90.8
(255.5)
(80.1)
(335.6)
1.9
36.0
(63.1)
4.5
17.2
6.4
53.2
(23.8)
(86.9)
2017
TP
Schemes
£m
BSS
Schemes
£m
-
-
-
-
-
-
(9.2)
(9.2)
Group
£m
-
-
(9.2)
(9.2)
TP
Schemes
£m
2016
BSS
Schemes
£m
(34.6)
(16.5)
(1.4)
36.0
-
(0.7)
17.2
-
Group
£m
(51.1)
(2.1)
53.2
-
149
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
27. PENSION ARRANGEMENTS continued
j. Maturity profile of obligations
The weighted average duration of the schemes’ liabilities are:
TP Schemes – 19.8 years
BSS Schemes – 19.8 years
The maturity profile of the defined benefit obligations for the schemes are as follows:
2017 – 2026
2027 – 2036
2037 – 2046
2047 – 2056
2057 – 2066
2067 – 2076
2077 – 2086
k. Sensitivities
TP Schemes
%
BSS Schemes
%
17.0
24.5
24.7
19.6
10.7
3.1
0.4
16.6
25.1
25.3
19.8
10.4
2.6
0.2
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 2017 is given below.
Assumption
Discount rate
Increase of 0.1%
Inflation
Decrease of 0.1%
Increase of 0.1%
Decrease of 0.1%
Longevity
Increase of 1 year
Decrease of 1 year
l. Defined contribution schemes
TP Schemes
£m
BSS Schemes
£m
22
(22)
(13)
14
(37)
33
7
(7)
(6)
6
(11)
10
The Group operates two defined contribution schemes for all qualifying employees. The pension cost, which represents contributions
payable by the Group, amounted to £17.3m (2016: £16.8m).
m. Pension scheme contributions for year
The total charge to the income statement disclosed in note 7 of £26.9m (2016: £25.5m) comprises defined benefit scheme current and
past service costs of £9.6m (2016: £8.7m) and £17.3m (2016: £16.8m) of contributions made to the defined contribution schemes.
28. ACQUISITION OF BUSINESSES
On 13 October 2017 the Group acquired 75% of the issued share capital of National Shower Spares Limited, a leading online retailer
of shower spares, for total cash consideration of £2.7m. On 28 April 2017 the Group acquired 77.5% of the issued share capital of TFS
Holdings Limited, an air conditioning and refrigeration distributor, for total cash consideration of £7.8m.
All acquisitions were accounted for using the purchase method of accounting. The net assets acquired totalled £2.8m and £10.9m of
goodwill and a non-controlling interest of £3.2m have been recognised. The goodwill represents the benefits from forecast growth and the
assembled workforces. A non-current liability of £4.9m has been recognised in respect of put options on the non-controlling interests.
For the period from acquisition the combined revenue and operating profit for the above acquisitions total £12.6m and £1.4m respectively.
If the acquisitions had been completed on the first day of the year, group revenue would have been £6,443.5m and group operating profit
would have been £327.8m.
In 2016 the Group acquired 100% of the issued share capital of W. Gaunt Limited and T&T (Sussex) Plant Hire Limited for total consideration of
£3.2m, all satisfied by cash. The net assets acquired totalled £1.3m and goodwill of £1.9m was recognised as a result of these transactions.
150
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
29. OPERATING LEASE ARRANGEMENTS
The Group has entered into a significant number of property operating leases for its trading sites, the commercial terms for which tend
to vary. The leases, at inception, are typically 25 years in duration, although some have lessee only break clauses of between 10 and 15
years. No leases place any commercial restriction on the Group’s ability to conduct its business in the manner it sees fit (for instance
restrictions on dividends, debt levels or further leases). No lease has clauses that link rental payments to performance, for instance
turnover leases and no lease contains contingent rent clauses.
All leases include rent escalation clauses setting out the basis for future rent reviews. Typically these are based on open market
conditions or are linked to RPI or CPI. The Group has a small number of leases that are subject to fixed reviews, but these are
not material.
There are no significant pre-emption rights in any of the Group’s leases.
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 equipment operating leases recognised in income for the year
Minimum lease payments under property operating leases recognised in income for the year
2017
£m
34.7
196.6
2016
£m
35.5
194.0
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under noncancellable
operating leases. The table below sets out the lease commitments of the Group as they fall due up until the end of the existing leases
and do not include the effect of possible lease renewals:
Within one year
In the second to fifth years inclusive
In the sixth to ten years inclusive
In the eleventh to fifteenth years inclusive
After fifteen years
b. The Group as lessor
2017
£m
200.8
668.2
585.6
255.1
122.4
2016
£m
194.2
656.2
532.0
252.4
127.8
1,832.1
1,762.6
The Group sublets a number of ex-trading properties to third parties. Property rental income earned during the year in respect of these
properties was £5.6m (2016: £5.7m).
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
30. CAPITAL COMMITMENTS
Contracted for but not provided in the accounts
2017
£m
5.6
14.6
14.1
34.3
2016
£m
5.2
15.1
15.4
35.7
The Group
2017
£m
46.4
2016
£m
14.9
The Company
2017
£m
-
2016
£m
-
151
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
31. RELATED PARTY TRANSACTIONS
The Group has a related party relationship with its subsidiaries, its Directors and with its pension schemes (note 27). 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 of the Directors, and the details of their interests in the
share capital of the Company are provided in the audited part of the remuneration report on pages 70 to 77.
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
Post employee benefits
Share-based payments
2017
£m
14.2
0.4
10.9
25.5
2016
£m
10.9
0.2
4.2
15.3
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 £20.5m (2016: £21.6m)
• Levying an annual management charge to cover services provided to members of the Group of £4.5m (2016: £8.4m)
• Receiving annual dividends totalling £323.7m (2016: £330.4m)
Details of balances outstanding with subsidiary companies are shown in note 17 and in the Balance Sheet on pages 98 and 99.
Other than the payment of remuneration there have been no related party transactions with directors.
The Group advanced a total of £11.3m (2016: £4.7m) to all the Group’s associate companies in 2017. Operating transactions with the
associates during the year were not significant.
152
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 32. NET DEBT
a. Movement in net debt
Cash
and cash
equivalents
Finance
leases
The Group
Unsecured
senior US$
notes and
sterling bonds
Term loan
and revolving
credit facility
and loan
notes
Liability to
pension
scheme
Exchange
and fair value
adjustments
on derivatives
hedging net
debt items
At 1 January 2016
Cash flow
Exchange movement
Fair value movement
Finance charges
movement
Amortisation of swap
cancellation receipt
Discount unwind on
liability to pension
scheme
At 1 January 2017
Cash flow
Finance charges
movement
Amortisation of swap
cancellation receipt
Discount unwind on
liability to pension
scheme
£m
(83.8)
(166.7)
-
-
-
-
-
£m
18.6
15.9
-
-
-
-
-
£m
106.2
(110.0)
-
-
0.8
-
-
£m
391.0
191.2
(3.6)
(16.5)
0.6
(0.7)
-
(250.5)
(26.3)
34.5
(7.0)
-
-
-
-
-
-
(3.0)
562.0
-
0.8
-
-
-
0.7
(3.4)
-
31 December 2017
(276.8)
27.5
(2.2)
559.3
£m
35.4
(3.3)
-
-
-
-
2.4
34.5
(3.2)
-
-
2.4
33.7
£m
(20.0)
-
3.5
16.5
-
-
-
-
-
-
-
-
-
Total
£m
447.4
(72.9)
(0.1)
-
1.4
(0.7)
2.4
377.5
(36.5)
1.5
(3.4)
2.4
341.5
153
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements The Group
2017
£m
276.8
(612.1)
(6.2)
(341.5)
9.5
33.7
(5.5)
2016
£m
250.5
(621.1)
(6.9)
(377.5)
12.8
34.5
(7.0)
(303.8)
(337.2)
The Group
2017
£m
341.5
1,524.8
1,866.3
1,524.8
2,860.3
4,385.1
2016
£m
377.5
1,506.4
1,883.9
1,506.4
2,655.6
4,162.0
42.6%
45.3%
32. NET DEBT continued
b. Balances at 31 December
Cash and cash equivalents
Non-current interest bearing loans and borrowings
Current interest bearing loans and borrowings
Net debt
Finance leases arising from the implementation of IAS 17
Liability to pension scheme
Finance charges netted off borrowings
Net debt under covenant calculations
33. LEASE ADJUSTED GEARING
Net debt
Property operating lease rentals x8
Lease adjusted net debt
Property operating lease rentals x8
Closing net assets
Lease adjusted equity
Gearing
154
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 34. 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 and related items*
Net cash outflow for acquisitions
Net cashflow for investments
Amortisation of swap cancellation receipt
Discount unwind on liability to pension scheme
Cash impact of exceptional items
One-off income tax payments
Interest in associates
Shares issued
Purchase of own shares
Decrease in fair value of debt
Movement in finance charges netted off bank debt
Special pension contributions
Free cash flow
The Group
2017
£m
(377.5)
(341.5)
36.0
113.0
201.5
9.7
(0.3)
(3.4)
2.4
20.2
-
11.3
(15.0)
19.2
-
1.5
11.3
407.4
2016
£m
(467.4)
(377.5)
89.9
110.5
185.8
3.2
1.1
(0.7)
2.4
11.6
42.5
4.6
(9.7)
-
(20.0)
1.4
13.5
436.1
* Expansion capital expenditure includes £22.1m (2016: £8.3m) in relation to the development of cloud-based software classified as
a non-current prepayment (note 17).
Net debt is reconciled to the financial statements in note 32(b).
35. LEVERAGE RATIOS
a. The adjusted ratio of net debt to earnings before interest, tax and depreciation (“EBITDA”)
Profit before tax
Net finance costs
Depreciation and amortisation
EBITDA
Exceptional operating items
Adjusted EBITDA under covenant calculations
Net debt under covenant calculations (note 32c)
Adjusted net debt to EBITDA under covenant calculations
The Group
2017
£m
289.7
35.0
126.9
451.6
40.9
492.5
303.8
0.62x
2016
£m
72.7
27.7
121.7
222.1
292.0
514.1
337.2
0.66x
155
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 35. LEVERAGE RATIOS continued
b. Adjusted ratio of net debt to earnings before interest, tax, depreciation and operating lease rentals (“EBITDAR”)
Adjusted EBITDA under covenant calculations
Share of associates’ results
Adjusted EBITDA
Net debt
Property lease rentals x8
Lease adjusted net debt
The Group
2017
£m
492.5
2.2
494.7
341.5
1,524.8
1,866.3
2016
£m
514.1
-
514.1
377.5
1,506.4
1,883.9
Lease adjusted net debt to adjusted EBITDAR
2.7x
2.7x
c. Fixed charge cover
Adjusted EBITDAR
Property operating lease rentals net of rent receivable
Interest for fixed charge calculation (note 9)
Fixed charge cover net of rent receivable
The Group
2017
£m
685.3
190.6
28.3
218.9
2016
£m
702.4
188.3
25.2
213.5
3.1x
3.3x
156
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
36. RETURN ON CAPITAL RATIOS
Group return on capital employed is calculated as follows:
Operating profit
Amortisation of acquired intangible assets
Exceptional items
Adjusted operating profit
Opening net assets
Net pension deficit
Net debt before exchange and fair value adjustments
Exchange and fair value adjustment
Goodwill amortisation and impairment
Tax on impairment of goodwill and intangibles
Opening capital employed
Closing net assets
Net pension deficit
Net debt
Closing capital employed
Average capital emploted
2017
£m
326.9
12.3
40.9
380.1
2016
£m
100.4
16.6
292.0
409.0
2,655.6
2,795.8
103.2
377.5
-
-
-
42.4
467.4
(20.0)
(235.4)
3.8
3,136.3
3,054.0
2,860.3
2,655.6
22.9
341.5
103.2
377.5
3,224.7
3,136.3
3,180.5
3,095.2
157
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 36. RETURN ON CAPITAL RATIOS continued
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
2017
£m
380.1
95.3
475.4
3,180.5
1,524.8
4,705.3
2016
£m
409.0
94.1
503.1
3,095.2
1,506.4
4,601.6
Lease adjusted return on capital employed
10.1%
10.9%
37. REVENUE RECONCILIATION AND LIKE FOR LIKE SALES
2016 revenue
Like-for-like revenue
Network expansion
Trading days
2017 revenue
General
Merchanting
£m
2,073
24
2,097
20
(8)
Contracts
Consumer
£m
1,267
106
1,373
1
(5)
£m
1,518
45
1,563
34
(8)
Plumbing &
Heating
£m
1,359
28
1,387
(16)
(5)
Total
£m
6,217
203
6,420
39
(26)
2,109
1,369
1,589
1,366
6,433
Like-for-like sales are a measure of underlying sales performance for two successive periods. Branches and stores contribute to
like-for-like sales once they have been trading for more than 12 months. Revenue included in like-for-like is for the equivalent times
in both years being compared. When branches close, revenue is excluded from the prior year figures for the months equivalent to the
post closure period in the current year.
158
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements
38. RELATED UNDERTAKINGS
The registered office of all subsidiary undertakings is Lodge Way House, Lodge Way, Harlestone Road, Northampton NN5 7UG
except for companies with a superscript where the registered office is given after the list of subsidiary companies and investments.
Active subsidiary companies (100% ownership and UK registered)
Benchmarx Kitchens and Joinery Limited
Built for Trade Limited
CCF Limited
City Plumbing Supplies Holdings Limited
Connections (AML) Limited
Hunter Estates Limited
IJM Enterprises Limited
Keyline Builders Merchants Limited1
PlumbNation Limited
Primaflow Limited
PTS Group Limited
Rudridge Limited
Solfex Limited
T&T (Sussex) Plant Hire Limited
The Cobtree Scottish Limited Partnership1
Tile Giant Limited
Toolstation Limited
Travis Perkins (Properties) Limited
Travis Perkins (PSL 2015) Limited
Travis Perkins Acquisitions Company Limited
Travis Perkins Finance Company Limited
Travis Perkins Financing Company No.2 Limited
Travis Perkins Leasing Company Limited
Travis Perkins P&H Partner Limited
Travis Perkins Plumbing & Heating LLP
Travis Perkins Trading Company Limited
W. Gaunt Limited
Wickes Building Supplies Limited
Wickes Developments Limited
Wickes Properties Limited
Dormant & non-trading subsidiary companies (100% ownership and UK registered)
A. Warren & Sons Limited
A.M. Supplies (Pumps And Controls) Limited
Actionbridge Limited
Ahed Limited
Angelery Limited
B. & G. (Heating & Plumbing) Limited
Baird Lindsay Limited1
Basic Partition Systems Limited
Basildon Heating Services Limited
Birchwood Group Holdings Limited
Birchwood Products Limited
Blyth & Taylor (Hants) Limited
BMSS Limited
Bondco 909 Limited
Bonham Lilley Timber Limited
Border Building Supplies Limited
Boston (2011) Limited
Boxbrook Holdings Limited
Brasscapri Limited
Brassware Sales Limited
British Steam Specialties (International) Limited (The)
British Steam Specialties Limited (The)
Broombys Limited
BSS (UK) Limited
BSS GPS Trustee Limited
Builders Mate Limited
Builders Traders Limited
Bulwell Timber Company Limited
Burt Boulton (Timber) Limited
Buywell Building Supplies Limited
C & C Building Supplies (Marple) Limited
C & G Building Supplies Limited
C.H. Crees and Son Limited
Carmichael Browne Associates Limited
Central England Supplies Ltd
Chandler Forest Products Limited
Chinnor Plumbing Supplies Limited
Christie & Vesey Limited
City Plumbing Supplies (Poole) Limited
City Plumbing Supplies (Salisbury) Limited
City Plumbing Supplies (Scotland) Limited
City Plumbing Supplies Limited
Cobtree Nominees Limited
Commercial Ceiling Factors (Midlands) Limited
Commercial Ceiling Factors Limited
Contract Supplies (North East) Limited
Coppas Controls (UK) Limited
County Hire Services (Wollaton) Limited
County Landscape Products Limited
Curran Sawmills Limited - The11
D.W. Archer Limited
Direct Building Supplies Truro Limited
Direct Heating Spares Limited
Domestic Heating Supplies (Warrington) Limited
Downpatrick Timber Slate & Coal Company Limited5
Dyfed Building and Plastic Supplies Limited
E Fletcher (Timber) Limited
E. Salisbury Limited
Edwards & Company (Longfield) Limited
Elecnation Limited formerly Malden Timber Limited
Elias Wild & Sons Limited
F W Darby & Co (Tunbridge Wells) Limited
Fishguard Building Supplies Limited
Floorsystems Limited
Flortek Limited
Four Oaks Timber and Joinery Supplies Limited
Fry & Pollard Limited
Garratt Timber Supplies Limited
Gisowatt UK Limited
Graylin Limited
Greenwell Building Supplies Limited
Grundy & Pilling Limited
Hardleys Timber & Building Supplies Limited
Harris of Stirchley Limited
Harrison Trenery Limited
Harvey Building Supplies (Scotland) Limited
Heatek Labone Cadel Limited
Heatstall Limited
159
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 38. RELATED UNDERTAKINGS continued
Dormant & non-trading subsidiary companies (100% ownership and UK registered) continued
HT (1995) Limited
HTG (1996) Limited
Hunter Limited
IJM Holdings Limited
Index Timber & Building Supplies Limited1
Instox Limited
Ivco Process Valves Limited
J & B. Labone Limited
J T Stanton & Co., Limited
J.H. Walker & Co. (York) Limited
James Ladd & Sons Limited
Jayhard Holdings Limited
Jayhard Ltd
John Clements (Builders Merchants) Limited
John Dove & Co. Limited
John H. Turner & Lisney Limited
Joseph Spark & Son Limited
K X Company Limited
KA Venture Limited
Kelmar (Plumbing & Heating Supplies) Limited
Keyline (CML) Limited
Kisling Limited
Lord Street Building Supplies (Leigh) Limited
M & H (North East) Limited
M G Bailey (Building Materials) Limited
Malden Timber (West) Limited
Manor Building & Plumbing Supplies Limited
Manor Copper Supplies Limited
May & Hassell (Cumbria) Limited
May & Hassell (North West) Limited
May & Hassell (Scotland) Limited1
May & Hassell Limited
Mayalls Limited
MD (1995) Group Limited1
MD (1995) Limited
MD (Park Street) Limited
MD-DOR3 Limited
MD-DOR4 Limited
Monteith Building Services Limited1
NAGS Building Supplies Limited
Nailnole Limited
Neptronik Controls Ltd
Newcastle Tile Centre Limited
Norman Mackenzie (Building Supplies) Limited1
O J Williams (Merchants) Limited
P.C.P. Harris (Builders Merchants) Limited
P.C.P. Harris (Holdings) Limited
Plumbstall Limited
P.T.S. Plumbing Trade Supplies Limited
Passmore Drywall & Insulation Limited
Peck & Goodwin Limited
Peckham Timber and Builders Merchants Limited
Plasterers & Builders Merchants Limited
Plumbing Parts Limited
Price & Brown (Heating) Limited
Price Tool Sales Limited
Primaflow (Birmingham) Limited
Property Newco Two Limited
Proawarm Limited
R A Thomas (Joinery) Limited
Renpye Limited
160
S & M Bathrooms Limited
S & M Builders Merchant (Batley) Limited
Sandell Perkins + Newmans Limited
Seales McLean Limited
SES Southern Limited
Sharpe & Fisher (Properties) Limited
Sharpe & Fisher Limited
Shires Timber Co. Ltd
Simmons of Stoke-on-Trent Limited
SLBM Systems Limited
Smiths Building Supplies Limited
Spendlove C. Jebb7
Spendlove C. Jebb Holdings Limited
Stearns (Shipton Green) Limited
T Butt & Son Limited
T J Willets (Timber) Limited
Tavistock Building Supplies Limited
Taylor Building Supplies Ltd
Terant Supplies Limited
The BSS Group Limited
The Yard Building Supplies Limited
Tile Beta Limited
Tile Delta Limited
Tile Giant Holdings Limited
Tile HQ Limited
Tile It All (UK) Limited
Tile Magic Holdings Limited
Tile Magic Limited
TP Directors Ltd TP
TP General Partner (Scotland) Limited1
The Yard Building Supplies Limited
Tile Beta Limited
TPG Management Services Limited
Travis & Arnold Limited
Travis Perkins Bridge Properties LLP
Travis Perkins Capital Partner Limited
Travis Perkins Financing Company No.3 Limited
Travis Perkins Installation Services Limited
Travis Perkins Marketing Company Limited
Travis Perkins Quest Trustees Limited
Tricom Group Limited
Tricom Supplies Limited
UGS Limited
UGS South East Limited
Vaner Holdings Limited
W.A. Hawke & Son Limited
W.H. Newson & Sons Limited
W.H. Newson Holding Limited
W.S. Shuttleworth (Maidenhead) Limited
W.S. Shuttleworth (Slough) Limited
W.S. Shuttleworth (Timber) Limited
Water Street Home Improvements Limited
Whittaker & Co. (Builders Merchants) Limited
Wickes Limited
Wickes Group Trustees Limited
Wickes Holdings Limited
Wickes Retail Sourcing Limited
William Bird Holdings Limited
William Bloore & Son Limited
Zenith Plumbpoint Limited
Travis Perkins plc Annual Report & Accounts 2017Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements Other subsidiary companies
Company Name
BSS (Ireland) Limited3
City Investments Limited4
Travis Perkins Hong Kong Limited10
Travis Perkins Sourcing (Shanghai) Ltd11
National Shower Spares Limited
TFS Holdings Limited
Tools & Fastener Solutions Limited
Underfloor Heating Store (The) Limited
Investments
Company Name
Bombala Limited2
The Mosaic Tile Company Limited2
Toolexpert Benelux BV8
Toolstation Europe Limited9
Toolstation Europe BV10
Toriga Limited
Toriga Energy Limited
Independent Construction Technologies Limited6
P H Properties Limited6
Staircraft (Midlands) Limited6
Staircraft Integrated Solutions Limited6
Registered Offices (Not Lodge Way House)
Registered
Ireland
Jersey
Hong Kong
China
UK
UK
UK
UK
Registered
UK
UK
Netherlands
UK
Netherlands
UK
UK
UK
UK
UK
UK
% Ownership
100
100
100
100
75
78
78
55
% Ownership
49
49
49
49
49
49
49
15
15
15
15
Status
Active
Active
Active
Active
Active
Active
Active
Active
Status
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
Active
1
2
Suite S3, 8 Strathkelvin Place, Kirkintilloch, Scotland, G66 1XT, United Kingdom
Project House, Armley Road, Leeds, England and Wales, LS12 2DR, United Kingdom
3 White Heather Industrial Estate, South Circular Road, Dublin, 8, Ireland
4 Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey
5
Tughans, Marlborough House, 30 Victoria Street, Belfast, BT1 3GS, United Kingdom
6 Staircraft Building, Dunns Close, Nuneaton, Warwickshire, CV11 4NF, United Kingdom
7
8
9
107-127 Grosvenor Road, Belfast, BT12 4GT, United Kingdom
Touwbaan 40, 2352CZ Leiderdorp, Netherlands, Netherlands
16-18 Whiteladies Road, Clifton, Bristol, BS8 2LG, United Kingdom
10 Suite 2401, 24/F, China Insurance Group Building, 141 Des Voeux Road, Central, Hong Kong
11 Room 5702-Q, 1486 Najing W Road, Jing an District, Shanghai, China
161
Financial Statements Travis Perkins plc Annual Report & Accounts 2017Financial Statements 162
SHAREHOLDER
INFORMATION
164 Five-year summary
166 Other shareholder information
Main image:
Shannon Boswell – Toolstation, Wellingborough
From top left to bottom right:
Christopher Cheetham – Tile Giant, Shrewsbury
John Fergson – Travis Perkins, Shrewsbury
David Harris & Warren Sedgwick – Keyline, Telford
163
Five-year summary
Consolidated income statement
Revenue
Operating profit before amortisation
and exceptional items
Amortisation
Exceptional items
Operating profit
Share of associates’ results
Exceptional investment income
Net finance costs
Profit before tax
Income tax expense
Net profit
Basic earnings per share
Adjusted earnings per share
Dividend declared per ordinary share (pence)
Number of branches at 31 December
(Includes branches of associates)
Average number of employees (FTE)
Consolidated cash flow statement
Cash generated from operations
Net interest paid
Income taxes paid
Net purchases of investments, property and plant
Interest in associates
Acquisition of businesses net of cash acquired
Proceeds from issuance of share capital
Purchase of own shares
Dividends paid
Bank facility finance charges
Movement in finance lease liabilities
Repayment of unsecured loan notes
Increase / (decrease) in loans
Net increase / (decrease) in cash and cash equivalents
Net debt at 1 January
Non cash adjustment
Cash flow from debt and debt acquired
Net debt before exchange and fair value adjustments
at 31 December
Free cash flow
164
2015
£m
2014
£m
2013
£m
5,941.6
5,580.7
5,148.7
2017
£m
6,433.1
380.1
(12.3)
(40.9)
326.9
(2.2)
-
(35.0)
289.7
(55.7)
234.0
93.1p
92.2p
46.0p
2,076
28,117
2017
£m
371.9
(27.1)
(57.2)
(112.9)
(11.3)
(9.7)
15.0
(19.2)
2016
£m
6,217.2
409.0
(16.6)
(292.0)
100.4
-
-
(27.7)
72.7
(58.6)
14.1
5.1p
120.4p
45.0p
2,053
27,352
2016
£m
494.7
(22.2)
(104.7)
(186.5)
(4.6)
(3.2)
9.7
-
412.6
(18.0)
(140.6)
254.0
-
-
(30.5)
223.5
(55.8)
167.7
67.8p
124.1p
44.0p
2,028
26,943
2015
£m
350.3
(19.7)
(47.8)
(247.1)
(3.5)
(26.0)
10.0
-
(113.0)
(110.5)
(100.2)
-
(7.0)
-
(3.2)
26.3
(377.5)
(0.5)
10.2
(341.5)
407.4
(2.4)
15.9
-
80.5
166.7
(467.4)
17.1
(93.9)
(377.5)
436.1
(3.9)
(2.7)
(40.8)
106.9
(24.5)
(375.2)
(8.3)
(59.4)
(467.4)
316.6
384.0
(17.6)
(23.3)
343.1
-
-
(21.7)
321.4
(62.7)
258.7
105.9p
119.0p
38.0p
1,975
25,441
2014
£m
310.2
(15.0)
(49.9)
(134.1)
(2.1)
(15.7)
14.3
-
(81.1)
(2.6)
(2.5)
-
7.0
28.5
(347.6)
(54.2)
(1.9)
(375.2)
254.7
347.6
(17.9)
-
329.7
-
9.4
(26.5)
312.6
(47.9)
264.7
109.9p
103.6p
31.0p
1,939
23,583
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)
239.6
Travis Perkins plc Annual Report & Accounts 2017 Shareholder Information Travis Perkins plc Annual Report & Accounts 2017Shareholder Information Consolidated balance sheet
Assets
Non-current assets
Property, plant and equipment
Goodwill and other intangible assets
Derivative financial instruments
Interest in associates
Other receivables
Investment property and other investments
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets
Capital and reserves
Issued capital
Share premium account
Merger reserve
Own shares
Other reserves
Accumulated profits
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Retirement benefit obligations
Long-term provisions and other payables
Deferred tax liabilities
Current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Tax liabilities
Short-term provisions
Total liabilities
Total equity and liabilities
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
932.0
1,926.3
-
20.3
30.4
9.5
816.3
1,130.2
-
276.8
5,141.8
25.2
543.4
326.5
(15.3)
10.8
1,958.0
2,848.6
11.7
929.5
1,889.1
-
11.5
8.3
9.1
768.0
1,059.3
1.7
250.5
4,927.0
25,1
528.5
326.5
(8.7)
16.8
1,760.1
2,648.3
7.3
849.5
2,111.9
22.5
7.9
-
7.8
761.8
986.9
-
83.8
4,832.1
25.0
518.9
326.5
(15.5)
16.9
1,918.1
2,789.9
5.9
689.3
2,223.6
609.9
2,223.7
21.2
1.7
-
3.6
742.7
931.8
-
108.3
4,722.2
24.9
510.5
326.5
(28.5)
16.8
1,827.5
2,677.7
-
9.3
7.3
-
3.1
687.7
822.9
-
79.8
4,443.7
24.7
498.0
326.5
(40.6)
16.7
1,689.9
2,515.2
-
2,860.3
2,655.6
2,795.8
2,677.7
2,515.2
612.1
4.9
28.3
17.1
61.0
6.2
1.2
621.1
-
127.3
21.2
45.8
6.9
-
411.4
-
52.2
7.4
61.3
139.8
-
440.0
0.5
97.5
7.8
66.7
43.5
-
1,453.6
1,348.3
1,235.5
1,255.2
44.5
52.6
2,281.5
5,141.8
43.8
57.0
2,271.4
4,927.0
90.2
38.5
2,036.3
4,832.1
71.6
61.7
2,044.5
4,722.2
421.6
4.5
71.4
22.6
61.3
5.8
1.8
1,218.1
73.2
48.2
1,928.5
4,443.7
165
Shareholder Information Travis Perkins plc Annual Report & Accounts 2017Shareholder Information Other shareholder information
FINANCIAL DIARY
Trading statement
Ex-dividend date
Record date
Annual General Meeting
Payment of final dividend
SHAREHOLDER COMMUNICATIONS
27 April 2018
Company Website
5 April 2018
6 April 2018
27 April 2018
11 May 2018
Travis Perkins plc Annual and Interim Reports, results
announcements and presentations are available on the Investor
Relations section of our website at www.travisperkinsplc.co.uk
The website also carries a range of information about the Group
and its principal brands, products and services which can be
accessed via the “Our Businesses” section.
ANNUAL GENERAL MEETING (“AGM”)
Annual Report
The Annual Report and Financial Statements 2017 is published
on our website at http://www.travisperkinsplc.co.uk/investor-
relations and a hard copy has been posted to shareholders who
have requested it in paper copy format. All other shareholders
have been notified of its availability on the website, either in writing
or by email.
A paper copy is available by writing to the Company Secretary at
the Company’s registered office Lodge Way House, Lodge Way,
Harlestone Road, Northampton NN5 7UG or you can email your
request to cosec@travisperkins.co.uk
Electronic Shareholder Communications
The Company prefers that you receive your shareholder
communications electronically. This is a much faster,
environmentally-friendly and cost effective way to communicate
with you. If you have received a hard copy of this report, or
notification of its availability by post and would like to receive fully
electronic communication, please register your preference on the
shareholder portal at www.travisperkins-shares.com
The AGM will be held on 27 April 2018 at 12.30pm at
Northampton Rugby Football Club,
Franklins Gardens,
Weedon Road,
Northampton.
NN5 5BG.
The notice for the meeting is enclosed with this report.
REGISTRARS
For Information about shareholdings, dividends and to report
changes to your address, bank details or any other account
information please contact the Company’s registrars:
Link Asset Services
The Registry,
34 Beckenham Road,
Beckenham,
Kent.
BR3 4TU
Email: enquiries@linkgroup.co.uk
Telephone: +44 (0) 371 664 0300*
You can view and manage your shareholder account online via
the shareholder portal at www.travisperkins-shares.com You will
need to register to use this service and to do so you will require
your unique investor code (IVC), which can be found on your
share certificate or dividend confirmation.
Dividends
It is more secure to have your dividends paid directly into your
bank account than by cheque. If you do not already have your
dividends paid directly into your account and would like to do so,
you can do this on the shareholder portal or you can contact Link
and they will send you the relevant form to complete.
*Calls will be charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate;
lines are open 9.00am to 5.30pm, Monday to Friday.
166
Travis Perkins plc Annual Report & Accounts 2017 Shareholder Information Travis Perkins plc Annual Report & Accounts 2017Shareholder Information SHAREHOLDER SERVICES
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 think you have been 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.
The Company’s registrars, Link, provide a number of other
services that, as a shareholder, might be useful to you:
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 is not your intention you may
wish to consider merging the accounts into one single entry.
Please contact Link who will be pleased to help you.
Dividend Re-Investment Plan (“DRIP”)
This is a scheme which allows you to use your dividends to buy
shares in Travis Perkins. For any shareholders who wish to
re-invest dividend payments in the Company, a facility
is provided by Link Market Services Trustees Limited in
conjunction with the Company’s Registrar. Full details are
available by calling from Link on +44 (0) 371 664 0381*
Alternatively, you can sign up for this service on the shareholder
portal at www.travisperkins-shares.com (by clicking on ‘Manage
your account’ followed by ‘Dividend payments’ and following the
on screen instructions).
SHARE DEALING SERVICES
Share dealing services are available from the Company’s
Registrar. For on-line dealing - log on to www.linksharedeal.com
For telephone dealing - call +44 (0) 371 664 0445 (Calls are
charged at the standard geographic rate and will vary by provider.
Calls outside the United Kingdom will be charged at the applicable
international rate; lines are open 8.00am to 4.30pm,
Monday - Friday).
These services are only available to private shareholders resident
in the EEA, the Channel Islands and the Isle of Man. Further
details including costs are available at www.linksharedeal.com
* Calls will be charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate;
lines are open 9.00am to 5.30pm, Monday to Friday.
167
Shareholder Information Travis Perkins plc Annual Report & Accounts 2017Shareholder Information Above:
Colleagues – Travis Perkins, Salthouse Road
George Brown – Keyline, Telford
A
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1
7
Travis Perkins plc,
Lodge Way House, Harlestone Road,
Northampton. NN5 7UG
01604 752424
www.travisperkinsplc.com
The paper and board used in the production of this
publication are all FSC accredited.
The printing process used in the production of this
publication was carbon neutral and used vegetable
based inks.
Designed by Design Print & Digital
part of Travis Perkins plc
JB1929192 03/18